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Is This The 6-Sigma Catalyst That Cracked Japanese Stocks?

Tyler Durden's picture




 

Many are still wondering who (or what) stole the jam from the Japanese stock market's doughnut just three short days ago. Some blame an out-of-control bond market; others fear members of the BoJ recognizing they have blown the bubble too big too soon; still more fear the jawboning on JPY devaluation that has seemingly about-faced recently. The reality is - none of these were surprises or new to the marketplace. But in this world of free-flowing totally fungible central bank liquidity, we suspect the following chart is the real answer. Simply put, the S&P 500's bubble just couldn't keep pace with the Nikkei 225's and with USDJPY unable to support the relative price appreciation difference - the six-sigma richness of Japan to the US was just too much. Two-and-a-half months of 'outperformance' undone in 3 days leaves the question - is it over?

 

 

While CME positioning shows futures traders the most net short the JPY (against the USD) since 2007 (recently making new lows)...

 

...it seems traders (perhaps to avoid telegraphing their intentions to the broader market) are furiously hedging their short JPY positions in the 'Mrs.Watanabe-exempt' FX options market. As the following chart of USDJPY risk-reversals (a simple way of visualizing the market's preference for hedging upside vs downside), the options market is decidedly less confident at Abe's ongoing success.


 

... and if USDJPY drops back to the levels implied by the options market, then the Nikkei has a long way to fall still (and we suspect European sovereigns, US bond-like-stocks, and High yield credit).

Charts: Bloomberg

 

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Mon, 05/27/2013 - 20:10 | 3602269 Schmuck Raker
Schmuck Raker's picture

Kevin Henry's fault.

Mon, 05/27/2013 - 20:36 | 3602322 knukles
knukles's picture

Hey!  I like jelly donuts!

Mon, 05/27/2013 - 22:54 | 3602615 prains
prains's picture

Ken  Lay was CEO of a criminal enterprise called ENRON and their crimes were aided and abetted by Anderson Accounting

Mon, 05/27/2013 - 20:30 | 3602272 GoldForCash
GoldForCash's picture

Down Down...Up. Down Down Down, Up....Down Down Down , Up....Down
Down
Down
Down
Down
Down
Down
Down
Up,Up,Up

Mon, 05/27/2013 - 20:15 | 3602281 Everyman
Everyman's picture

That my friends is the sound of air coming out of a balloon.

 

http://www.youtube.com/watch?v=F1z6W5eZbjI

Mon, 05/27/2013 - 20:17 | 3602285 exartizo
exartizo's picture

Why Kuroda?

Original lyrics by exartizo

(Sing to “My Sharona” by The Knack)

Oh why is the Nikkei done?, the Nikkei done
When you gonna give up that QE Kuroda?
Oh things are sad in the land of the rising sun, rising sun
When’s the Nikkei coming off it’s lows Kuroda?

Never gonna stop
Print it up
Such a dirty mind
Always print it up
In the hope of inflation signs
Why Why Why Why Why Whoa
Why Kuroda?
Print a bigger dose huh
Will ya huh?

Print enough to get to those highs Kuroda
It’s no mystery inflation’s what we hope to see
Running up to 2% on the strength of those lies Kuroda

Never gonna stop
Print it up
Such a dirty mind
Always print it up
In the hope of inflation signs
Why Why Why Why Why Whoa
Why Kuroda?

When we gonna get free, get free?
You know its just a matter of time Kuroda
Is it destiny? destiny?
Or is it just a game in your mind Kuroda?
Never gonna stop
Give it up
Such a dirty mind
Always print it up
In the hope of inflation signs
Why Why Why Why Why Whoa
Why Kuroda?

Why Why Why Why Why Whoa
Why Kuroda? [x4]

Mon, 05/27/2013 - 20:32 | 3602304 buzzsaw99
buzzsaw99's picture

karaoke night at zh!:

 

bernanke-o i need you

sunday fx futures press

the red phone rings

bernanke-o i need you so

could you help me in purple yen,

assorted credit cards razor lights,

you bring it all to prove

you're on the move and vanishing

bernanke-o i need you so

bernanke-o i need you so

the edge of night distract yourself

obstacles don't work

homogenize, centralize

it's just a quirk different ways to see you through

all the same in the end

peculiar star that's who you are

do you have to win?

http://www.youtube.com/watch?v=YEkGqb2wu5k

Mon, 05/27/2013 - 20:38 | 3602328 Divine Wind
Divine Wind's picture

 

 

Japan is really advanced. They don't go to the beach. The beach comes to them.

- Gilbert Gottfried

Mon, 05/27/2013 - 21:24 | 3602427 1C3-N1N3
1C3-N1N3's picture

Mic check, testes testes 1...2......3?

(sung to "Vitamin R" by Chevelle) http://www.youtube.com/watch?v=MnkV6qdjUWw

 

Some will gain, many won't
Papering over all our ills
Bring it down, we've had enough
Pick and choose which "market" kills

Buying in, buying moar
Suffer now or suffer then
Not high enough, they want to shear
Need to shear

Muppet sheeeeeeeeeeep
(Buy it, you scum)
Muppet sheeeeeeeeeeep
(Buy it, you scum)

Well if they're printing it (printing it)
Then they're spending it (spending it)
And defrauding all of the world
The first thought of (first thought of)
Being ethical (ethical)
Makes the banksters all want to hurl

After all, what's the point
'Cause levitation is possible
If you're a sheep, fleeced and gone
There's time for this and so much more

Atypical, this fuckin' world
A prison yard of their design
To never cope, or never care
Just buy-buy-buy, you

Muppet sheeeeeeeeeeep
(Buy it, you scum)
Muppet sheeeeeeeeeeep
(Buy it, you scum)

Well if they're printing it (printing it)
Then they're spending it (spending it)
And defrauding all of the world
The first thought of (first thought of)
Being ethical (ethical)
Makes the banksters all want to hurl

Over and over a slave
Became over and over a slave

Mon, 05/27/2013 - 20:19 | 3602288 fonzannoon
fonzannoon's picture

so they just have to let the Nikkei take a breather and get it back in line with the S&P. I see the Topix just went positive. I guess it's mission accomplished. We can wind down another long weekend of waiting for the big frickin thing.

Mon, 05/27/2013 - 20:28 | 3602298 Dr. Engali
Dr. Engali's picture

I think I'll spend one more night in the matrix and ignore this shit.

Mon, 05/27/2013 - 20:30 | 3602305 fonzannoon
fonzannoon's picture

Smart move Doc. Enjoy.

Mon, 05/27/2013 - 20:37 | 3602326 knukles
knukles's picture

Whaddya mean that wasn't where I was supposed to plug in my dinky?

Mon, 05/27/2013 - 20:31 | 3602308 bks
bks's picture

As of right now, the Nikkei 225 is up 35% for the year.   You guys remind me of my brother-in-law.  Every year at Thanksgiving he ranted about the collapse of fiat currency.   He died in 1998.  Am I allowed to say this stuff at ZH?

 

    --bks

 

 

Mon, 05/27/2013 - 20:33 | 3602311 fonzannoon
fonzannoon's picture

It's one thing to prepare for the collapse of the currency. It's another to sit here with sticks in your eyes waiting to see it happen in real time. With that said, like Doc, I am outta here. Enjoy the show tonight.

Mon, 05/27/2013 - 20:37 | 3602325 I think I need ...
I think I need to buy a gun's picture

agreed

Mon, 05/27/2013 - 20:36 | 3602323 nmewn
nmewn's picture

So, whats that 35% after taxes, time & fee based accounting & commissions...in yen? ;-)

Mon, 05/27/2013 - 20:46 | 3602346 chump666
chump666's picture

What we saw was two markets getting a take down, the JGB and stock market at the same time.  That is like a warning shot.  The flows went into JPY, they had no where else to go, and the USD crosses.  Just the way the market works in real time.  Point is, QE is a flop. 

In the old market days, bond vigilantes could mess with rates and then play with stock prices. China is the biggest bond vigilante of them all.  They could easy sell a ton of USTs and send the 30yr mortgage rate to 'bust that market' levels.  No problems.

This is war.

Mon, 05/27/2013 - 22:29 | 3602540 buzzsaw99
buzzsaw99's picture

the n225 is up 35% and the yen is down 33%. So after fees and commish you would have made .025% just like you would have holding the usa 2y note. CONGRATS!

Tue, 05/28/2013 - 00:24 | 3602748 disabledvet
disabledvet's picture

"they don't get out much" so "mission accomplished indeed." they feel a lot wealthier...just don't buy that cheeseburger at McDonalds. God help you if you want corn syrup with that soda pop as well. we'll see if prices are about to fall dramatically in the USA...consumption has been down 5 years now and i think pricing power is WILTING. same is obviously true in Europe as well. "surplus production" bitchez. GLOBALLY. "not everything problem has a rich foreigner waiting to jump in and pump it up."

Mon, 05/27/2013 - 20:36 | 3602324 chump666
chump666's picture

I think the money printers have been served on bond vigilantes (China) messing with Abe's brain. 

Huge buying on the Nikkei. 

Mon, 05/27/2013 - 20:42 | 3602334 WTFUD
WTFUD's picture

Not a market guy really so can anyone tell me why asx is up ay .24% on a volume of 60 million traded shares and nikkei up say .78% on a volume of 56 thousand shares. Waassat all about? Noticed similar for last few trading days. cheers anyone!

Mon, 05/27/2013 - 20:51 | 3602357 ChaosEquilibrium
ChaosEquilibrium's picture

Anyone have a stable link(site) for live streaming Nikkei?.....ALL my sites are giving garbage(probably by design):0 Thanks

Mon, 05/27/2013 - 21:01 | 3602383 pfairley
pfairley's picture

Dear Author,  What are "US bond-like-stocks" ?   If you really have interesting ideas,they are often hard to read...  in plain english....inventing obscure terms is a bad idea.

Mon, 05/27/2013 - 22:28 | 3602536 long-shorty
long-shorty's picture

high earnings predictability, low cyclicality, low debt/equity, dividend payers.

you good now or do you still need for TD to explain it to you with a bonus snarky remark?

Mon, 05/27/2013 - 22:40 | 3602566 ILLILLILLI
ILLILLILLI's picture

Yes, prain Engrish, preeze...

Tue, 05/28/2013 - 00:28 | 3602753 disabledvet
disabledvet's picture

"bond like stocks" are debt instruments (almost all junk) that have moved even higher and faster than equities. "frothy" is an understatement. just listened to a great piece on Saturday on "COVENANT LIGHT" bonds. no, this is not CONVENT light...but it might as well be. "you cross your fingers" when you do those deals. these things are no different than equities...as soon as you sign them the value of the debt can start dropping like a stone...sure you get the yield...but these are some real duds of a business and more than like you'll never see your money again.

Mon, 05/27/2013 - 23:48 | 3602693 ken
ken's picture

Hey guys! When does the yen go up in strength past 100? When the Nikkei falls again? I guess massive and continuous devaluation could prevent that...so I should sell the shiite out of the rest of my yen holding, NOW? Or should I wait? I've rescued my principle, but I still have some of my shiite in the market there.

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