Wednesday, February 25, 2009

Japan's Put Option

For the first time since the developed world began its painful deleveraging process, a nation has openely entertained the idea of direct intervention into the equity markets by way of outright purchases of stock. The Japanese certainly can not be faulted for feeling a bit dissatisfied with the way things have turned out over the past two decades. During this time frame, the Nikkei has fallen from 40,000 to a mere 8000, and real estate prices have remained consistently negative. With the importance of the equity markets insofar as bank capital requirements and a littany of insurance company obligations, we are not surprised that the Japanese have apparently reached a breaking point. The question is, however, at what point will other nations follow the lead of the Japanese and institute radical policies of stock market interventionism. When, we ask, will the Great Bernanke himself begin "pulling the lever" in a desperate act aimed at bolstering the equity markets? Nothing would surprise us at this point, however, allow us to emphasize the reality that to date, every Government action has been anticipated and met with a more resilient and powerful Market action. Caveat Emptor. Sphere: Related Content

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