Why are volatile foreign markets

From Jim Jubak

The Japanese market has already started to grow this week for many reasons. Expect more of that in 2013, as investors flit from market to market.

On Jan. 16, Japan's Nikkei 225 index fell by 2.6%. It was doubly surprising.

Firstly, it was surprising, because on the Tokyo Stock Exchange has been on a roll-25.6% from 14. by 15 January and 9.4% from Dec. 21 to Jan. 15. And secondly, because of the "cause" section drop was a series of absolutely harmless comments is a member of the Japanese Parliament (which pointed out that it was not just for the weaker Japanese consumers) and two members of the Cabinet of Prime Minister Shinzo Abe, (who said that a weaker Yen is not good for all Japanese companies).

That was enough to send Japanese stocks by 2.6% on the day?

Welcome to the wonderful world of hot money, 2013styl. So far this year, we are looking at a market that has no confidence that the trend now is going to be the trend in the next moment. And the market is, therefore, constantly sloshing toward opportunities minutes or from the possibility that the trend reached a peak. I think these will make sloshes emerging markets--with their smaller market capitalization than in the us, Europe or Japan--especially volatile. And because they are markets that is going to best in 2013, which is for some very complicated position to investors.

Let's get a little more detailed look at what happened in Japan and then see how these dynamics related to the rest of the global stock market.

Assembly in Japan is the yen.

There really isn't anything else is very excited. Japan's economy is in recession, and the World Bank predicts that gross domestic product will increase by 0.8% in 2013 and 1.2% in 2014. The economy is functioning below capacity, with the output gap (the difference between the full capacity of the economy and the odds, running now) for 5 to 7%. Debt-to-GDP ratio amounts to 240%, the highest in the developed world, and the Government in just 100 yen for every 200 yen spent, with tax revenue on 24leté low. The ageing of the population – 23% are expected to be older than 65 in 20 years, up from 12%-and shrinking forecasts fall to 90 million in 2050 from 128 million people.

Jim Jubak

A little black humor about demographers in Japan: the current trend, in 600 years, there will be 450 Japanese left. And I will be much poorer for it. Japan's unemployment rate of 5% is low by international standards but high in comparison to its unemployment rate before 1991 2% to 3%. Average annual salaries decreased every year since 1999 and now 12% of all. About 34% of the workforce is now working part-time or contract jobs, up from 20% in 1990. In 2009, according to government statistics, 15.7% Japanese, including 14% of children and 21% of older people, lived below the poverty line.

It is obvious that you put money into Japan profit from medium-or long-term trends. (It will be in the long term, given the extraordinary modesty of past generations of Japanese savers; the country is still sitting on 19 trillion savings).

However, putting money into Japanese stocks--especially those Japanese exporters--in the short run due to a fall in the yen and a projection of continuing decline. Only decreased by 14% against the US dollar since October. It is not just swing a small thing when Toyota Motor (TM), that any deviation 1 yen against the US dollar produces 397 million dollars in annual profit for the company. In Nissan Motor (NSANY) shift from recent 89.21 Yen to the dollar and 2012 average 79.82 yen per dollar is a 34% increase in profit.

Not surprisingly, shares of auto exporters, Mazda Motor (MZDAY) are up 114% to 16 January 2013 from 30 October 2012. And it's no wonder that the global money chasing so far began to despise the Japanese shares. Cash flow in place of Japanese investment funds is positive in October for the first time in two months.

The problem, however, is that almost all put money in Japan is also asking, "when will this end?"

The yen, which closed at 88.31 to the US dollar on January 16, could easily go to 90, or with more difficulties, 95 or even 100. But the trend will not last forever. The main force pushing back against Abe's Government campaign to weaken the yen. Any decline in the value of the yen against the dollar increases Japanese account for dollar denominated oil and natural gas. Every decline in the Yen takes another bite out of already stressed Japanese workers and consumers. Regardless of how Abe's Government be willing to debt on debt to weaken the yen and boost the Japanese growth, its capacity to do so has its limits. And it is the knowledge of these limits, which gave power to the movement of stock prices in Tokyo, a relatively mild comments about the cost of a weak yen.

And, of course, because the money that was pouring into Japanese stocks to take advantage of a declining appetite really has no faith in Japanese shares, or the Japanese economy in the medium term, it has no loyalty to the Japanese markets. Whereas the smallest signs that short-term party is over, the money starts to look in another hot market.

I think that the decline in the yen--and thus a rise in Japanese equities — might be coming to an end in the next few days or weeks? So what China rally? It's time for a global money do not show to Hong Kong and Shanghai?

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