Cheese

Eyes grew wide this week as once again the Bank of Japan was forced to wade into the soft play to stop market participants from pushing too hard on the upper band of their self-imposed ceiling. More buying. More manipulation. The Central Bank now owns an epic, and never-seen-before, 56% of the domestic market. And given the apparent appetite of some po-faced investors to test their resolve, are likely to end up owning a whole lot more. Or let the belt out another couple of notches. Whilst it’s generally believed that such moves run against the current vogue for tightening the taps on global monetary policy, one big name in the soft play of Sovereign debt has suggested that Kuroda et al are actually contributing to the big rug pull of liquidity; as the current policy is pushing domestic investors to rapidly sell down their massive pile of foreign assets. Specifically treasuries. This, said the big name, is happening ‘under the surface’. All eyes on the yen, then. As markets generally hissed air this week, there was also a reminder of the woe playing out in housing, where sales and mortgage application data landed with a thud. In short: OFF. A. CLIFF. Buyer demand, crucial in the context of keeping realtors in shiny suits and Paco Rabanne, is the lowest level in 28 years; lower even than the great 2008 brouhaha. The high Kurumba in rates is clearing rinsing the market, and affordability remains stretched. Either post-tax pay packets need to go up – a lot – or house prices need to come down. And just on the consumer, whilst data shows retail spending continues to surprise to the upside coupled with evidence of some wet-lipped buying of stocks; credit card balances are rising, savings have plunged and household debt in Q4 last year had its largest quarter on quarter increase in two decades. Something of a mixed bag then. And get this: such is the reliance on debt that a firm called Wisconsin Cheese, which as you might have guessed sells cheese and assorted goodies in Wisconsin, is apparently offering a buy-now-pay-later scheme for hungry customers. Offering credit for cheese, is not an obvious sign of a boom-boom economy. And they are probably not alone. In the context of last year’s rapid rate hikes only just starting to come through – when the FED is not even done pushing the marbles around – the tide may well be going out on the consumer. Let’s hope the much written about pandemic stash of cash under the mattress means there are plenty of pants on show if it does. Walmart this week lowered guidance. “There’s just a lot we don’t know” rasped top dog Doug McMillon. Indeed there is. Which explains why sell-side strategist’s year end forecasts are about as wide as they have ever been.