Investing General Discussion
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Blazin
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Perma bears have been hoping and praying this would matter for a few years now
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Synj
Dystopian Dreamer
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Jysin
Bronze Baronet of the Realm
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Khane
Got something right about marriage
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Sanrith Descartes
I was forced to self-deport from the /pol thread
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So, its strictly an arbitrage play. Its not about the Yen, per se.
You borrow truckloads of Yen in Japan at what was close to zero percent interest. You then convert those yet to dollars and invest it in the US market. The conversion rate to the dollar doesn't matter as the basis has always been calculated in dollars. You cash out your winnings and then pay off the loan back in Japan while banking the profits.
The bear wet dream is the entirety of the Carry Trade needs to be unwound resulting in lots of selling in the US markets. The reality is this isn't the case. It just makes the trade less profitable. Will some unwinding be done? Sure. I think the bigger impact will be as the carry trade fades so will those investments in the US market from Carry Trade bucks.
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Jysin
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I mean, there is precedent. August of last year we had a very deep dive in the overnight specifically linked to the Yen carry trade. It's not a nothing burger when it can move markets this much:
SPY Mon Aug 5th 2024
More detail from Grok:
On Monday, August 5, 2024, US stock markets experienced a significant overnight gap down, widely attributed to the rapid unwind of the yen carry trade following the Bank of Japan's interest rate hike on July 31 and the subsequent sharp appreciation of the yen over the weekend. This event amplified global risk-off sentiment, exacerbating declines that originated in Asian markets (particularly Japan, where the Nikkei fell over 12% that day).The overnight gaps (calculated as the percentage change from the previous Friday's close on August 2 to Monday's open on August 5) for major US indices were as follows, based on their tracking ETFs:
SPY Mon Aug 5th 2024
More detail from Grok:
On Monday, August 5, 2024, US stock markets experienced a significant overnight gap down, widely attributed to the rapid unwind of the yen carry trade following the Bank of Japan's interest rate hike on July 31 and the subsequent sharp appreciation of the yen over the weekend. This event amplified global risk-off sentiment, exacerbating declines that originated in Asian markets (particularly Japan, where the Nikkei fell over 12% that day).The overnight gaps (calculated as the percentage change from the previous Friday's close on August 2 to Monday's open on August 5) for major US indices were as follows, based on their tracking ETFs:
- S&P 500 (via SPY): -3.99% (closed at 532.90 on Aug 2; opened at 511.64 on Aug 5)
- Nasdaq Composite (via QQQ): -5.36% (closed at 448.75 on Aug 2; opened at 424.71 on Aug 5)
- Dow Jones Industrial Average (via DIA): -2.67% (closed at 397.13 on Aug 2; opened at 386.52 on Aug 5)
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Sanrith Descartes
I was forced to self-deport from the /pol thread
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The 200d is a hair under $270 now. I dropped another buy order at $270 for today.
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Sanrith Descartes
I was forced to self-deport from the /pol thread
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My thought is this one is a little more telegraphed with the new PM being elected. I don't see a massive OMFG unwind reaction.
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Some of my best trades were from that August 2024 drop. I'd take another opportunity like that.
Aprils tariff drop was less productive for me because it seemed so much more like a "real" problem than the yen carry drop that I didn't get in as aggressively.
Aprils tariff drop was less productive for me because it seemed so much more like a "real" problem than the yen carry drop that I didn't get in as aggressively.
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Gravel
Mr. Poopybutthole
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Sure, that makes sense. And yeah, the loss on lower yield bonds could hurt. But those bonds aren't all maturing at the same time. And I can't imagine the entire global financial system was borrowing Japanese bonds to invest in global markets. If that were the case, there'd be tens of trillions of dollars (USD) of outstanding Japanese bonds. And that's preposterous.
In fact, as much as we like to say all the wealth in consolidated into the hands of the super wealthy, the bulk of it still belongs to the top quintile and not solely the 0.01% (which is why we dunk on retards saying if we tax the billionaires at 100% it'll pay for about a week of expenditures).
And like you said, it's not going to wipe out everything. US markets just this year are up like 17%. Japanese bonds increasing 1.5% wipes out less than a 10th of the profit. Whoopity doo.
Sanrith Descartes
I was forced to self-deport from the /pol thread
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You are focusing on bonds. Just like the US, govt bond rates impact borrowing rates. They aren't buying bonds, they are borrowing yen and/or doing currency swaps. According to Grok its 4-5 Trillion in US dollar equivalents when you factor in leverage and derivatives. I'm too busy atm, the dig in and verify Grok's numbers so it could be totally made up shit.
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Jysin
Bronze Baronet of the Realm
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NVDA US Senators said to plan bipartisan effort to block advanced chip sales to China; Act would seek 30-month delay in export licenses; Would prevent sale of H200 and Blackwell chips - FT - Source TradeTheNews.com
Blazin
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Trying to objectively look at this, and I think I'm depending too much on feels to take this trade. There are short term things I like, the flush and go was a great sign, today even shorter time frame we broke yesterday's low but didn't fall apart.
But when looking at the daily chart there isn't much of a signal to trust a long yet.
This has the look of the first decline of a bear market that could last longer than a few weeks. More time we spend below 200d the concern mounts. I wanted to play it for a snapback that says 'Nope we aren't done going up' but that would be a strong move to recapture 200d. When it takes too long bad things begin to happen. Momentum is now your enemy. Even if we are at the beginning of a larger decline odds would still favor a check back and failure at the 200d...
But when looking at the daily chart there isn't much of a signal to trust a long yet.
This has the look of the first decline of a bear market that could last longer than a few weeks. More time we spend below 200d the concern mounts. I wanted to play it for a snapback that says 'Nope we aren't done going up' but that would be a strong move to recapture 200d. When it takes too long bad things begin to happen. Momentum is now your enemy. Even if we are at the beginning of a larger decline odds would still favor a check back and failure at the 200d...
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