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Yen Carry Unwind And Shift Into Dollar Carry Extends, US Stocks Decoupling From Dollar Weakness
The dollar pain continues as the dollar drops below the 90 Yen support level.
Surprisingly despite the dollar weakness, there is no capital flow into domestic risky assets (10 Years are well bid). In fact, the bid in HY, the latest risk casualty of bubble psychology, is weakening. Is the carry trade now financing safer/foreign assets? If so, is yield chasing finally over?
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A de-coupling of the reverse correlation between stocks and dollar would surprise, and crush, an awful lot of investors.
Why? I don't get it.
People who are looking for a bounce in the dollar are going long the dollar and hedging by going long the stock market. They will get slammed both ways.
I have been planning on a temporary strengthening of the dollar when the market swooned. Assumed the dollar and UST would gain for awhile, then I'd make the inflation play. Looks like we could be skipping over the "flight to safety" in dollar and treasuries. The really big problem is it could signal a simultaneous fall in all US assets.
Nowhere to run to baby, nowhere to hide.
Are people now heeding Schiff?
His Peso call on the USD this morning was a classic.
On a somewhat related note, I came across this article on the globe and mail website yesterday which tries to perpetuate the usual "get your money out of savings and low-risk instruments to chase yield" meme directed towards retail investors.
http://www.theglobeandmail.com/globe-investor/personal-finance/why-savin...
Taking a gander at the ensuing comments, I don't think too many people are biting this time around- the article and author get an absolute and near-unanimous thrashing!
Here's a similar column from a personal finance columnist in the WSJ advising people to put emergency money into blue chip stocks.
http://online.wsj.com/article/SB1000142405297020448830457443318190693552...
This is the game the government has played with savers for the last decade. You get nothing for a safe investment, put your money at risk. A lot of people who have been burned before are no longer biting.
This is bad if true. This was not supposed to happen, at least not yet. Many people are betting on a flight to USTs and the dollar when the next panic hits, the above chart would seem to disprove that theory. The fleeing of all US assets is the indicator of the final collapse. Could it be that it is coming much sooner than most think? Time will tell but the ironic and cruel nature of the universe would suggest that it is entirely possible that it will catch everyone off guard and by surprise.
The chart is a soundbite. The smart money is slowly going into treasuries in preparation for an equity and commodity crash. March 2009 redux.
I think this is a preview, a warning shot if you will, by the financial community to Congress to show them what will happen if the debt ceiling is not raised: everything in the United States loses value, assets and currency. Hopefully this correction CAN happen sooner rather than later or else it will happen irrevocably.
The Japnese government has effectively given the green light to yen appreciation, at least for now anyway.
http://www.bloomberg.com/apps/news?pid=20601101&sid=adM8pgff4LNw
They backtracked and tried to jawbone it down yesterday. But it was too weak, and people now have taken the new PM's word that BOJ won't intervene against it.
I yen for yen.
perhaps appropriate to quote the late and great Warren Zevon:
"send lawyers, guns, and money
the shit has hit the fan."
USDZAR interesting, that thing will go into melt up if de-risking comes back.
The other trade that would have a huge unwind is the Nasdaq 100, that's where all the hot performance chasing money is. The NDX managed to get back to pre crisis 2006 levels at one point!
We having been watching this... that the unwind of the recent trend (especially the last 6-8 weeks) of selling the dollar, buying all other asset classes against it, will be the trade that will hurt the most managers. Remember (by some sentiment readings) 97% of the market is bearish the dollar. From a contrarian standpoint, those are not good odds for dollar bears (short term). Sentiment, seasonals, cycles, and technicals are all arguing for a reversal of recent trends. The last few days has only been a warning flag. Stay nimble and be patient. Good luck everyone.
Um, when have they not? Thats a better question. The whole idea to the fed is that of a centralized planned market manipulator.
Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.
good articles; good articles 4 slow news day ..http://www..
hat tip: financial news & opinion updated daily
DXY flat market flat. Yawn.
Have a look at the Topix Banking Index. Nomura
just had to raise USD6.5 Bio. worth of equity, and
the market looks terrible. If this Index manages
to break the lows, then my expectations are that
Japanese Investors will rather sell foreign assets
than buy them. Maybe they have already started
with it. We had several up moves in the Yen crosses
during this month. Even against CHF, the Yen is
strengthening. Maybe one has to wait for a break
below 130 in EURYen and USDYen below 87 to
get things going. But a strong up move in the Yen
will certainly not be good for equities. The XLF
is trading around 14,70, if it doesn't hold that level
it would mark a fake out. So maybe the SPY USDYen
divergence will stop once the Yen really starts
to break out. We need to watch this Japanese Banking
index closely since it will certainly put pressure on
Financial stocks Indices around the world.
TOPIX Banks Exchange Traded Fund (1615)
Goldman and Bank of Amerika run the markets along with Geithner, and beagle boy Ben. There is no free markets, only welfare capitalism and socialism for capitalism.
good articles; good articles 4 slow news day ..http://www..
hat tip: financial news & opinion updated daily