Is Toyota Motor Corp Signaling A Failed Japanese Economy?
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As we all know, the Bank of Japan is printing money at an alarming rate. The Japanese Yen has plunged against every major currency including the U.S. Dollar since late 2012. This was when the Japanese joined Ben Bernanke and the Federal Reserve and began diluting their currency. Now it should be noted that the Nikkei 225 Index topped out in December 2013 and has struggled to get back to that level despite the continued money printing. This type of action in the Nikkei 225 Index is problematic for a country drowning in debt.
Toyota Motors Corp (NYSE:TM) is arguably the best Japanese company in the country. Toyota is a global brand that has been reporting record sales recently. Now we all know that a weaker currency will boost exports and this has certainly helped Toyota Motors Corp's bottom line, but the stock price is now making lower highs on the charts. Lower highs on a price chart are not a sign of strength for a stock. Toyota Motors Corp stock topped out in July 2013 at $134.94 a share. Today, the stock is trading around $116.50 a share. This is once again a problematic sign for the Japanese economy when the best company in the country is struggling to catch a bid.
Japan is the world's third largest economy behind the United States and China. If the world's third largest economy fails to inflate and recover it will affect the rest of the global economy in a major way. This country could be a ticking time bomb for the global economy. After all, the current Japanese Yen carry trade has been fueling stock markets in the United States and Europe. Basically, the large financial institutions short the yen and buy S&P 500 Index futures contracts with the proceeds. If this carry trade ends what is left to prop up the markets? That is the trillion dollar question that every trader and investors should be asking themselves. So for now, everyone better keep their eyes on the Japanese Yen, and Toyota Motors. In my humble opinion, when the Japanese stock market crashes the party is over for the global stock markets. Until then, party on my friends.
Nick Santiago
InTheMoneyStocks