Presenting The US&PJPY 500

Tyler Durden's picture

EM is fixed? Fed will un-Taper? Earnings will recover? Money on the sidelines? We've heard it all this morning as why stocks are recovering modestly... the real fun-durr-mental reason, of course, is in the chart below: behold the US&PJPY or, alternatively, USDSPY.

Still think it's a market of stocks?


Or just a marginal-liquidity JPY-carry-fueled ponzi?

One good thing to come out of this centrally-planned abortion: instead of 8 monitors to follow "stuff" traders now just need one small screen to track the USDJPY - that shows everything you could possibly ever need.

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nope-1004's picture

#2 all the way.  Of course Liesman would opine that some of those 50 million foodstampers just called their broker to buy FarceBook.....lmao.

hedgeless_horseman's picture



Of course there is a correlation, but don't ask her to explain it.  People just often look like their dogs.

buzzsaw99's picture

the ass end is a better match still

dontgoforit's picture

Whoa!  Caught between a sweat & a shit!

FieldingMellish's picture

You are being cruel to the dog. Question is... which one is the dog?

Shad_ow's picture

There's a lady who's sure all that glitters is gold
And she's buying a stairway to Heaven
When she gets there, she knows if the stores are all closed
With a word she can get what she came for
Ooh-ooh-hoo, hoo-ooh-ooh-ooh-ooh
And she's buying a stairway to Heaven

There's a sign on the wall, but she wants to be sure
'Cause you know sometimes words have two meanings
In a tree by the brook there's a songbird who sings sometimes
All of our thoughts are misgiven

Ooh, it makes me wonder
Ooh, it makes me wonder

There's a feeling I get when I look to the west
And my spirit is crying for leaving
In my thoughts I have seen rings of smoke through the trees
And the voices of those who stand looking

Ooh, it makes me wonder
Ooh, really makes me wonder

And it's whispered that soon, if we all call the tune
Then the piper will lead us to reason
And a new day will dawn for those who stand long

And the forests will echo with laughter

therover's picture

Does anyone remember laughter ?

hedgeless_horseman's picture



And a new day will dawn for those who stand long

But shorts all will perish with fire?

Herd Redirection Committee's picture

"If there's a bustle in your hedgerow, don't be alarmed now

Its just a spring clean for the May Queen"

And reversed?

The.Harmless.Who's picture



I want to know which Judas voted you down Hedgeless!  


Off with his head for he bears the mark of the zionist beasts!


p.s. The mark could be "QE" - possible no? 





Real Estate Banksta's picture

If my dog had a face like yours, I'd shave his ass and make him walk backwards.

digitlman's picture

I still would like a solid Everyman®'s explanation of what the USDJPY carry trade is, and how it occurs, and the impact.


I am too stoooooopid to get it on my own.


Thanks in advance.

101 years and counting's picture

easy.  short yen, buy stocks.  a weak yen props USD/JPY.

john39's picture

I think the difficult thing for people to understand is why the Japanese would allow themselves to be used in this manner.   I think the answer is simple.  they are a conquered nation (as most of us are), and their leaders serve the international overlord's in their quest for global rule.

FieldingMellish's picture

Perversely enough, this means the Japanese are "winning" the currency war - at least against the USD. All currencies are passengers in a burning plane stuck in a nose dive. They all seem to think that running to the front of the plane is the solution. The USD can't get his seatbelt undone because he is too fat.

101 years and counting's picture

its done on purpose.  central printers conspire to rig the "markets".  they're not winning anything.  judging by their wretched economic numbers, it seems they're taking it up the ass for the good of the top .1%.

FieldingMellish's picture

Yes, the top 0.1% of asset owning Japanese are "winning" because their stock market is making new highs. Nothing but the top 0.1% matters so its all relative as to who is "winning". No one cares about economic reality anyway.

Herd Redirection Committee's picture

The rising stock market is actually for the cronies (highly leveraged) of the 0.1%, not for the 0.1% themselves.

Ness.'s picture

*Extra Credit*  Always, and I mean ALWAYS, lever up to the hilt and sell gold into the thinest markets hoping you get the worst possible price.  

Cursive's picture


Individualism or independent thought are not traits of most people/socieities, even less so of the "orderly" Nipponese society.

Cannon Fodder's picture

So what will put an end to this then? How long can it go on?

FieldingMellish's picture

Buy X sell Y, get paid to carry X. In this case X is SPY paying dividends and paid for in USD. Y is yen, as always.

Orly's picture


And, don't forget that the "carry trade" is synonymous with "risk." You're not going to take a risk if you think markets are going to tank.  In fact, you'll do the opposite and hunker down.  That is why buying SPX (high risk..) follows the USDJPY (carry...) with such a high correlation.

It will be a key tell that when there is a de-coupling of the U/J movement from SPX movement, it will be a very obvious warning sign that this is really the breakdown in global stock markets.  And that is because the U/J also has a high correlation to moves in the yield of the US 10-year Treasury.  That makes sense because if it is "risk-off," people buy bonds, sending the yields lower.

So when the bond markets start to buy up and yields fall without a commensurate fall in SPX, it is a signal to get short equities.  Bonds are almost always right and the equity markets lag behind the moves.


OC Sure's picture

Orly, you are describing the risk on/ risk off correlation. What about the trade off between the yield on Blue Chip stocks vs. Grade A long bonds, aka, the yield gap. Once upon a time, this was the correlation. Do you still think that that correlation still exists and maybe the risk on/risk off trade is a relatively new phenomena that is symptomatic of the "enomomy" on high-octane dope? I guess the risk off/ risk on trade is of  a shorter duration and the yield gap is over a longer time period? Or, come to think of it, maybe the ro/ro is the impetus and prerequisite of the more obvious yield gap signal?

Orly's picture

Please allow me to preface this with the acknowlegement that I am no bond whiz by any stretch.  I do charts; what many people here would call "voodoo."

Anyways, it is clear that the phenomenon you describe was the actual intent of the Fed in instigating QE.  If it were not the actual intent, the the most glaring side effect of the programs is to have investors chasing yield, pumping the equity markets to inflate the wealth no avail whatsoever, it turns out.

So if the differential between Blue Chip yields (by this I am assuming you mean dividends, which have also dried up recently...) and high-yield (junk...) bonds became distorted by the blunt instrument that is the Fed policy, it was either by intent or by circumstance.  Either way, the Fed seemed to be okay with it for quite a while, given that they did four or five quantitative easing programs.

Now, I think the Fed has noticed that they are indeed distorting markets such that savers like widows and orphans are no longer receiving any yield whatsoever and to have them go out and chase yield wasn't working.  Those people are conservative for a reason and are not about to change their spots any time soon.

Over this past summer, junk bond yields were hovering around the levels that would normally have been seen in a Blue Chip stock portfolio just a few short years ago but are not seen now.  Bank interest is non-existent.  Recently, ZeroHedge showed an ad for "high-yield" savings accounts that were paying 0.20%, I believe.

In sum, I would say that the proper ratio to safety and high-risk yield is still there and can one day return to normal but it has been the Fed and its ugly hammer that have beaten and distorted the market so as to make it unrecognisable.  It will return to normalcy but not without some pain on all sides.



Addo:  And Grade A long bond yields have also been suppressed and distorted through the same mechanism, especially those for Euope, which has seen back-door support from the Fed for years now.  Can anyone think of any other reason the Euro hasn't acted "normally" if not for money flows into the Eurozone, implying a Fed put on the Euro?

OC Sure's picture

Thanks. I'm an Edwards&Magee junkee too as I understand that the fundamentals are already staring at us in the face as identified in the trend (then there are all the repetitive tricks that the same old dogs keep repeating over and over again).

I think that is it. The traditional yield gap, while it is probably working on the same principle that it always has, is just nearly undefinable, or indiscernable,  anymore because of all the money printing. I can't seem to locate the true rate.

...Not sure about your Euro question.

Grande Tetons's picture

The Yen is a lepper with warts. Nobody wants to touch her. The USD is the pretty girl with fake tits. 

Hope this helps. 

Ponzi Pontiff's picture

You know the problem with fake tits?

No, me neither.

Unprepared's picture

By the time you decide to taper, the bubble is ready to burst?

Liquid Courage's picture

Had a gf with a set of the enhanced ones, so I speak from experience.

Look good ... feel bad. And actually only look good in clothes.

Oh yeah, and ... they're FAKE ... FUGAZI.

Herd Redirection Committee's picture

I call them 'bikini tits'.  Look great in a bikini.  W/o, not so much.

Tall Tom's picture

The Girl that has fake tits is also a fake. They are more interested in image rather than anything truthful and real. They are just a projection of dishonesty and of low self esteem.


I feel sorry for women whom have opted to disfigure their bodies in that fashion.


Now if you want that then knock yourself out.


As for me I will aspire to the truth as that is where the real beauty actually is.

wmbz's picture

"The USD is the pretty girl with fake tits"

Along with heavy late night pancake make-up. When the make-up wears off on the pillow case she is "wolf-ugly".

OC Sure's picture

"The USD is the pretty girl with fake tits.

Implants are real.

buzzsaw99's picture

the yen is cheap and easy to borrow. japanese bonds pay jack shit. borrow yen, buy the n225 and s&p, make huge profit.

LostAtSea's picture


Here's a couple of simplistic examples of the USDJPY carry trade:

1.  A Japanese person with some extra dough wants to convert his deppreciating YEN so he can buy US Stocks.  So he sells his YEN for USD and then buys US Stocks.

2.  An investor uses the so-called 'carry-trade' by selling Yen/buying USD (buys the USDJPY in the Forex market for example).  If he keeps the trade open overnight, he'll have to pay interest on the JPY borrow, which is almost 0, and earn interest on anything he invests the USD in, stocks for example that pay dividends, or bonds that pay interest, etc.  Of course there's risk in this trade, in that if the exchange rate USDJPY goes south, he'll loose money if he closes the trade. 

Here's how the corelation between stocks and USDJPY can happen, at least in my mind:
The USDJPY starts to go south, so the carry-trade investor wants to close his position, but to do so, he'll need to sell his investment (in stocks, bonds whatever).  This puts downward pressure on the investment vehicle of choice, which seems to be stocks right now.  This correlation can't go on forever, can it?  I suppose someday, after a volatile uncoupling, it may swtich to being a USDJPY / bond correlation or something else, or not.



RUTHLESS's picture

Lost, your explanation #2 seems like the best one...I have done that trade many times when Yen-Carry first became pupular years ago...I invested the short-JPY proceeds in US Trsy bonds

Real Estate Banksta's picture

You borrow in yen due to the low interest rates and likelihood of inflation (pay borrowings back in cheaper yen). Then you invest the borrowed proceeds in a higher yielding asset and collect the spread.

At least that's my understanding, but what do I know. I just lend money on commercial RE in the states.

Lewshine's picture

The Fed continues to prove there isn't a financial dilema in the universe that cannot be improved in a day, by merely lying about it.

Hope through damnation!

Stoploss's picture

Why yes, and don't forget gold moves twice inverse of that index!!

Rainman's picture

Casablanca rally ! ... Round up the usual suspects !

youngman's picture

Maybe Japan won WWII  afterall....

NaiLib's picture

Albania revisited.