The Economy

In absolute terms, the yen is shit. ... the physical currency shouldn't be worth the paper its printed on. Even with the BOJ tightening up a little. In relative terms, though, I think this has to be the beginning of a regime change (although I am usually wrong, because I can't predict what kinds of insane, destructive interventions these central banks are ever going to embark on rather than allowing any amount of unwinding and pain to happen).

By November for you? ... it will all depend on what each of the central banks are doing. If the U.S. panics (not saying the Fed will do this, but who the F knows what they will ever do?) and eases 50 basis points in September, it will absolutely create a bloodbath in Japan UNLESS they have slammed on the brakes and decide to sacrifice their currency some more, although at what point do even Japanese people revolt? I am now starting to wonder if there could be a George Soros type of event coming up where someone could conceivably break the Bank of Japan.

This is what pisses me off, though. ... capital markets shouldn't trade entirely on the distortions that price-fixing authorities around the world enact, in order to enable debt creation for the politicians they serve. And worse, the people whose ability to earn and save and invest (without having to gamble on what the price-fixers will do to blow bubbles) who have been killed by what is now the norm, don't get how insane this all is.

 

It's still premarket, not even 7:45 am on the east coast. ... The VIX, which is a volatility index, is at 51 right now.

They had pounded volatility down to a flatline if it was a heart rate monitor. The VIX was below 11 just 2 weeks ago, which is absurdly low -- like not a care in the world, can I please have some more Nvidia stock at 75 times earnings, maybe some more bitcoin at $70K?

A 50 on the VIX is the beginning of panic, closing in on the levels we got in March, 2020 when there was some turnoil.

 

VIX over 64 now as the sell off intensifies premarket. The order flow smells and feels like fear and some panic. It's such a contrast to where we were as recently as a few weeks ago.

 

The Kabuki dance is so predictable. Austin Goolsbee (Fed governor) on CNBC right now trying to stem the panic without saying he has everyone's back. He usually doesn't play this role. He frankly sucks at it. He was trying to talk around an emergency rate cut, a lot of bullshit about "We're forward looking" thinking the hint hint would get things moving. ... It was the interviewer, Steve Liesman, pushing him that got him a bit more on the message he was supposed to convey and the S&P futures just rebounded 40, 50 points while he is spitting out his word salad. Although I think it is just reflex. ... they do this every single time when markets start to correct, it used to be Jim Bullard's job to talk things back up.

 

And. ... not lasting.

Jim Bullard used to know how to do this. They could use him back. Or they should have brought out John Williams, even though he acts like hes too dignified to play this role. Goolsbee is a fucking clown.

 

That was a waste. His job was the wink at the monkeys watching and hint that the plunge protection team is on it / some accomodation is coming to keep the party going. ... and he didn't know how to do it.

 

Buy the dip.

Seriously, it was fun all morning (I have had CNBC on in the background since 4 am) listening to the bubble riders they bring on day after day come on -- Tom Lee, Jeremy Siegel, Dan Ives, etc.

 

I multitask. ... but I have actually been really busy with this. I was up late last night because of it and then up early. ... I barely look at what I am typing when I post as is, and I was pretty busy.

FWIW, if anyone is genuinely interested, this premarket summary actually does a decent job of explaining the carry trade unwind that is going on.

https://www.zerohedge.com/markets/b...its-56-japan-suffers-worst-point-drop-history

Good morning and welcome to a global market meltdown, sparked by last week's catastrophic BOJ decision to hike rates by 0.15bps which in turn crushed the $20 trillion yen carry trade, sent the yen exploding higher and wiping out trillions in highly levered investments, leading to a cascade of selling and forced liquidations which has resulted a historic market crash in Japan and a rout everywhere else.

...

Turbulence in Japan, where the central bank started to raise interest rates as the Fed looks to cut in a historic mistake that has already wiped out trillions in value, is also having ripple effects across global markets of various asset classes. This is due to moves to reverse carry trades, in which investors had borrowed at lower rates in Japan to fund purchases of higher-yielding assets elsewhere, and nowhere has this been felt more than the yen: the USDJPY is down a record 20 big figures from 162 just a few weeks ago to 142 this morning, tumbling more than 3% since Friday.

“With yen carry trades now being unwound quickly, not only has the Japanese currency notably broken its depreciation trend against all major units, but risk assets that those trades were financed with are also being sold off,” wrote Asymmetric Advisors strategist Amir Anvarzadeh, in a note to clients.

Back to the US, looking at the premarket, it's a tech rout for understandable reasons: many of the best performing stocks were direct beneficiaries of the leverage afforded by the carry trade and sure enough, all the Mag 7 names are crashing: NVDA -9.3%, AAPL -8.6%, TSLA -7.4%, MSFT -4.5%, AMZN -3%, META -6%, GOOG -5% and Semis are under pressure.

“In these sorts of scenarios, investors need to be careful,” said Ben Barringer, an analyst at Quilter Cheviot. “When sentiment begins to sour, the falls become more extreme than perhaps they should be. The next few weeks is likely to be a volatile one for tech stocks as this new environment plays out.”

 

FWIW, also, I don't agree wiht the "catastrophic decision" stuff in what I posted. ... The BOJ's mistake isn't what it did last week, it's a long period before that, which backed it into a corner to where it was forced to try to defend its currency last week. Same thing with the Fed's "historic mistake." People only see "mistake" when the consequences of decisions from long ago finally start to feel painful.