THE WEIRDEST REDEMPTION WE’VE EVER SEEN: Available now with Citibank ThankYou Points…
Make $588,100 in purchases and this could be yours! Our Washington sources inform us that CIA operatives are off to the drugstore in search of Vanilla Reloads.
MOMENTUM PREPAID VISA OFERING 6% ON SAVINGS ACCOUNT: A prepaid card we’ve never heard of before called Momentum Visa is offering 6% interest on savings accounts. It’s an FDIC-insured product, so no worries there, but the downside is limited availability: you can only get the card by buying one in stores, and according to the store locator the card is only available in CA, AZ, FL, PA, HI, IA, KS, LA, MO, NM, OH, and VA. Which is actually covers a significant percentage of the nation’s population, though unfortunately not PFD. The maximum amount you can have is $5,000, so that’s an easy $300 assuming Momentum keeps the rate for a year. Which, of course, is not a given. (H/T: Fatwallet Financial)
HAVE YOU EVER NOTICED THAT VANGUARD DOESN’T OFFER PROMOTIONAL BONUSES?: Vanguard is now managing $2 trillion in assets. Surprisingly they’ve done this without ill-conceived marketing promotions–when’s the last time you saw them offer frequent flyer miles for opening an account? It’s almost as if well-managed companies that look out for their customers can succeed without gimmickry. (H/T: Barry Ritholtz)
A BUG IN SEARCH OF A WINDSHIELD: John Mauldin is out with his 2013 forecast. For those of you who don’t read his newsletter, we highly recommend it as it’s both informative and entertaining. He thinks that this will finally be the year things get rough for Japan, financially speaking:
Japan now has a breathtaking 230% ratio of government debt to GDP (the last estimate I have seen), and it is growing at 10%-plus a year. The government will borrow almost 45% of its budget this year. Has there ever been a more clear disaster in the making? Yet shorting the Japanese bond has been called “the widow-maker.” I think it was Soros who once quipped that you can’t call yourself a global macro trader until you have lost money shorting JGBs (Japanese government bonds)…
Why now and not sometime during the past ten years? I see a number of factors coming together this year:
1. The Japanese had a 15%+ savings rate in 1990. That is now down below 1%. (Exact numbers are difficult, because Japanese data on this topic has severe lags, and thus my number is an extrapolation but a reasonable one, I think.) Due to the nature of their retirement system, they have channeled the vast bulk of these savings into JGBs. When the savings rate goes negative or is no longer sufficient to buy all the issued debt, the choice will be to monetize the debt or cut spending. The latter choice does not appear to be part of their national conversation. Cutting spending by the amount required will mean a serious recession and further deflation, an option the new government explicitly rejects.
2. Both the trade deficit and the current account have recently turned negative. The vaunted Japanese export machine seems to have hit a wall, and this will limit options in controlling the price of the yen, even if the government wants to. Understand, inflation targeting is also currency-valuation targeting. They clearly want the yen to devalue. I have been writing for years that the yen would eventually be 125, then 150, then 200 to the dollar. It has been 300 in my lifetime, and unless the Japanese change direction, there is no reason it can’t get there again. This means that Mrs. Watanabe will see her energy bills double. This will call into question the Japanese decision to close their nuclear energy plants – something that Abe is already reconsidering.
…When your debt and deficit are as massive as Japan’s, the only way to resolve the issue is to inflate away the debt or willingly enter into a depression. They obviously think they can control both the debt and inflation.
As always, the whole thing is worth a read.