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December 6, 2005

The sun has risen, Tues., Dec. 6, 2005, 8:36 AM

There was a sunrise, but I missed it.

In 2Q04, during my introduction as the Trader Wizard, I selected the Japanese equity market as being the one to watch for significant out-performance. Key to my thinking was (i) the clean up of the bank debts (ii) a change from secular deflation to inflation in real estate, and (iii) my belief that China would sooner or later revalue, which would help Japanese exporters, where Japan has a trade surplus with China.

Yes that was a spectacularly successful call. But that's not the end of the story. The other side was probably the biggest mistake I have made in the past year. I completely ignored the Japanese currency. As you know, I was focused largely on the Japanese ETF (AMEX: EWJ) that trades in USD.

So while EWJ was bouncing along sideways to slightly up, and I was telling readers that I couldn't see much happening there, yada yada, the Japanese equity markets in Tokyo (Nikkei and TOPIX) were red hot.

It's not that I was not warned. A couple readers did seriously question why I was not catching the rally in the USD vs. JPY (Yen). I could say with bad humor that I am totally color blind (which is true) and I have great difficulty seeing a difference in primary red vs. green (arrows); but that would be a cop out. The truth is I missed it because I was so focused on gold, thinking that as gold would escalate, the USD would drop.

Then early in the year, when I was early in calling the gold and USD uncoupling, I still did not pay attention to the JPY and the Nikkei and TOPIX priced in JPY.

All of which goes to show that one person can do so much analysis and decision making on his own.

Trading is not about any one of us. It is however about all of us. And if we are going to beat this market, it will take all of us. Therefore, I am going to increase my efforts to develop an international e-community. More on that later; but I will leave a few pictures to show what was happening in the real world while I was wrapped up in my own.

Here is the MarketWatch story on the record weakness of the Yen priced in Euro and the extreme weakness of JPY (Yen priced in USD):

Here is a chart of the collapse in the JPY:

Here is a chart of the Nikkei index, which is now a moonshot:

Here is a chart of the EWJ, which broke out in August, which I did not note until November:

On the weekend I made a comment that the Bombay Index was toppy and one of my concerns was the extreme drop in the Rupee (INR) vs. the USD. It is a fact that the JPY has declined relatively more.

My concern this morning is that I am no longer publishing commentary for a few people. You know that I work 100 pct on my own, but there are now too many of you (1 million hits a week) to be irresponsible.

Yesterday by this time of day I had already published six articles. I also had written an article on gold for ADVFN and sketched out one for TraderDaily.com. But the name of the game should be quality, not quantity.

Yes, I can produce five articles an hour; but I'd rather produce a single gem. And that's the point. I don't want to be so busy doing so many things at once that I miss the really big episode worth covering here.

Today I will write less, but by the end of the day I will write something about how you and I can work better together as an e-community. I promise: the benefits will be stunning.

Posted by Posted by Bill Cara on December 6, 2005 08:36:56 AM | Category: Japan

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