FED BS & the Yen-Carry-Trade Ticking Time Bomb

Wow, it took over one day before the Fed came out to do damage control on Bernanke’s Congressional double speak Wednesday that set the markets on a correction.
Fed’s Bullard Wants Faster Inflation Before Tapering QE
“Before I am in favor of tapering I would like to see some assurance that inflation is going to move back towards target,” he said.
U.S inflation fell to a two-year low of 1.1 percent earlier this month, at the sharpest pace since December 2008 due to the dip in the oil price. The fall led to speculation that the Fed would stay on its very easy monetary policy path, despite divisions among policymakers.
http://www.cnbc.com/id/100763999
It is all part of the Yen-Carry Trade wind down.
Banks are scrambling to kick the can down the road, but a some point the road comes to and end.
Japan is still in upheaval, due in large part to the impending Yen-Carry-Trade wind down.
http://www.seeitmarket.com/wp-content/uploads/2013/04/Carry-Trade-041013-1024×539.png
Now for the first time since 2004-2007, the speculative diffusion of a revived Yen carry trade is underway. Much has been made of the carry trade’s return in recent days, but flows out of the JPY began basing and then quietly mounting beginning in late-May/early-June 2012.
http://www.seeitmarket.com/reviving-the-yen-carry-trade-15001/
House of cards about to collapse?
Will it be first deflation with a quick whipsaw to hyper-inflation?
Is the coming financial collapse going to be inflationary or deflationary?  Are we headed for rampant inflation or crippling deflation?  This is a subject that is hotly debated by economists all over the country.  Some insist that the wild money printing that the Federal Reserve is doing combined with out of control government spending will eventually result in hyperinflation.  Others point to all of the deflationary factors in our economy and argue that we will experience tremendous deflation when the bubble economythat we are currently living in bursts.  So what is the truth?  Well, for the reasons listed below, we believe that we will see both.
The next major financial panic will cause a substantial deflationary wave first, and after that we will see unprecedented inflation as the central bankers and our politicians respond to the financial crisis.  This will happen so quickly that many will get “financial whiplash” as they try to figure out what to do with their money.  We are moving toward a time of extreme financial instability, and different strategies will be called for at different times.

http://www.zerohedge.com/news/2013-05-23/will-it-be-inflation-or-deflation-answer-may-surprise-you

Nikkei price over last year graph.
http://finviz.com/futures_charts.ashx?t=NKD&p=d1

First cards to collapse: Utilities and REITs.

Futures heading back to yesterday’s low.
Looks like it couldn’t hold the 1654 to 1666 PRZ.
Looks a lot like a bear flag.
http://futures.tradingcharts.com/intraday/ES/63
Nikkei Futures Resume Plunge
http://www.zerohedge.com/news/2013-05-24/nikkei-futures-resume-rout
Keeping an eye on Bonds vs SPX.
http://stockcharts.com/h-sc/ui?s=AGG:$SPX&p=W&yr=2&mn=0&dy=0&id=p53512735501&a=301391750
Reversal could come mid to late next week according to my VIX wave forecast.
Rogue algos are now hitting the market.
Keep a close eye on if this continues.

A former insider at the World Bank, ex-Senior Counsel Karen Hudes, says the global financial system is dominated by a small group of corrupt, power-hungry figures centered around the privately owned U.S. Federal Reserve.
The network has seized control of the media to cover up its crimes, too, she explained.
In an interview with The New American, Hudes said that when she tried to blow the whistle on multiple problems at the World Bank, she was fired for her efforts.
Now, along with a network of fellow whistleblowers, Hudes is determined to expose and end the corruption.
And she is confident of success.
http://www.thenewamerican.com/economy/economics/item/15473-world-bank-insider-blows-whistle-on-corruption-federal-reserve


DB