John Rubino is a former Wall Street financial analyst and author or co-author of five books, including The Money Bubble: What to Do Before It Pops and Clean Money: Picking Winners in the Green-Tech Boom. He founded the popular financial website DollarCollapse.com in 2004, sold it in 2022, and now publishes John Rubino’s Substack newsletter.
There are more interesting ideas than time in which to consider them. So here’s a new series that bundles bite-sized explanations and suggestions into a quick weekend read.
The Yen Carry Trade
The “carry trade” is making headlines without, in many cases, being adequately explained. Last week The Kobeissi Letterfixed that with a concise (if a bit technical) summary:
For years, investors would borrow Yen at ultra low rates, such as ~0.4%, and use these Yen as a form of leverage. Investors could convert these Yen to US Dollars or other currencies and get *almost* free margin. Low rates made this possible.
The wide spread between rapidly rising rates in the US and other countries and negative rates in Japan made it possible. However, as the BOJ began raising rates, this resulted in an unwinding of the carry trade. Especially as rate cuts are beginning in the US and EU.
As a result, the Japanese Yen strengthened and the USD/JPY currency pair just hit its lowest level since December 2023. You now receive 142 Yen for every US Dollar compared to 160 Yen for every US Dollar a few weeks ago. But here’s why this is the key point:
As the Yen strengthens, many of these Yen carry trades are being “margin called.” Suddenly, the era of “free” Yen loans is coming to an end. As these margin loans are called, the underlying assets are being sold and crashing equity markets. The carry trade is unwinding.
The solution to this problem is not as simple as it may seem and may require a separate thread. This is a vastly different situation than previous market downturns. For now, we are trading the volatility.
Immigration
Everyone should watch this video. If you watch this and you’re still for mass migration because you think you’re a humanitarian, I’m pretty sure you’re a lost cause. You can’t save the world by importing the 3rd world into your country.pic.twitter.com/66aZqNovBJ
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