Turning Japanese

July 22 - 26, 2013

AMERICAS

Markets:   It was a choppy market last week, including gains (and new highs) coupled with large losses. Gold prices certainly helped to make a mark; on Monday, gold had its largest single day gain in more than a year. 

The TSX global gold sector is still down 35 per cent year-to-date, but it earlier had been down about 50 per cent, while the price of bullion is only down 20 per cent so far in 2013.

Despite these gains,  gold and silver are expected to remain relatively weak in 2013 and 2014.  

Mixed earnings reports and concern over China's economy - weak manufacturing data, together with signs that the planned industrial overhaul will continue as planned (and cause a major economic slowdown) - increased investor caution and moved market's lower towards week's end. The S&P gained 0.1% on Friday, leaving it flat for the week. 

Companies: Amazon reported a quarterly loss of $7mn, despite an increase in sales of 22%. This translated into a 2 cents per share loss, compared to the 6 cents per share gain analysts had predicted. Its brings to light questions around the company's ability to generate profits long term, and investment strategy. The company is known for periodic investment splurges, recently looking into becoming a same day grocer and TV provider.   

 International: Japanese elections for the Upper House take place on Sunday. Shinzo Abe's Liberal Democratic Party is expected to win a majority of seats. If this comes to pass, Abe will be able to implement economically desired, but socially difficult,  structural reforms. 

Nomura says the government’s ability to implement new policies over the next six months “will be a litmus test for whether Abenomics can actually pull the Japanese economy out of deflation”, a problem plaguing Japan for nearly two decades.

Also, consumer prices in Japan rose 0.4% in June, suggesting deflation may be coming to an end.  

Otherwise: The Financial Times published a very cool digital image of trades on the Nasdaq. Each circle represents a purchase or sell order, and it is used to see patters emerging in the market. Look at Stamen design for further graphics revealing the trading day. 

Also, researchers finally tested the Prisoners Dilemma on real prisoners. While obviously there are questions around the experimental design, it seems prisoners were more co-operative than initially thought.  

EMEA

The Royal Baby is exciting news, but one must wonder what real impact it will have on the economy, if any. While tourism seems possible (although not particularly plausible) in country purchases, such as champagne and party food should be accounted for. All said in done, this is unlikely to have a meaningful impact. Particularly if products are important from elsewhere. I haven't had British champagne... have you?**

Another enticing story in Britain this week was the disconnect between the Church of England and Archbishop Welby. A day after the Archbishop of Canterbury revealed his plans to take on the payday lender he describes as “morally wrong”, The FT revealed the Church invests in one of Wonga’s key financial backers.  The church, which claims to have a strong ethical investment policy that explicitly bans companies involved in payday lending, invests in Accel Partners, the US venture capital firm that led Wonga’s 2009 fundraising

Also, Jane Austen is coming to a ten pound note near you (or near me, at least). Mark Carney chose Jane Austen as the next face to appear to appear on the currency. 

*Turning Japanese by The Vapors reflects the turning point associated with the upcoming Japanese elections.  

**Its funny because Champage is a region in France, so you'll never be able to.