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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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Thu, 01/30/2014 - 12:52 | 4384354 GolfHatesMe
GolfHatesMe's picture

I'm going with #2

Thu, 01/30/2014 - 13:03 | 4384384 nope-1004
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.

Thu, 01/30/2014 - 13:07 | 4384395 hedgeless_horseman
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.

Thu, 01/30/2014 - 13:07 | 4384398 buzzsaw99
buzzsaw99's picture

the ass end is a better match still

Thu, 01/30/2014 - 13:11 | 4384400 WarriorClass
WarriorClass's picture

Don't be late, Wall Street is a go-go!

Thu, 01/30/2014 - 14:05 | 4384556 dontgoforit
dontgoforit's picture

Whoa!  Caught between a sweat & a shit!

Thu, 01/30/2014 - 13:12 | 4384404 FieldingMellish
FieldingMellish's picture

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

Thu, 01/30/2014 - 13:53 | 4384514 Shad_ow
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

Thu, 01/30/2014 - 14:00 | 4384538 therover
therover's picture

Does anyone remember laughter ?

Thu, 01/30/2014 - 14:08 | 4384552 hedgeless_horseman
hedgeless_horseman's picture



And a new day will dawn for those who stand long

But shorts all will perish with fire?

Thu, 01/30/2014 - 14:16 | 4384594 Herd Redirectio...
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?

Thu, 01/30/2014 - 19:27 | 4385867 The.Harmless.Who
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? 





Fri, 01/31/2014 - 00:56 | 4386850 Real Estate Banksta
Real Estate Banksta's picture

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

Thu, 01/30/2014 - 12:53 | 4384357 MickV
MickV's picture

Uh..... B?

Thu, 01/30/2014 - 12:53 | 4384360 digitlman
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.

Thu, 01/30/2014 - 12:57 | 4384365 101 years and c...
101 years and counting's picture

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

Thu, 01/30/2014 - 13:02 | 4384383 john39
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.

Thu, 01/30/2014 - 13:06 | 4384393 FieldingMellish
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.

Thu, 01/30/2014 - 13:43 | 4384491 101 years and c...
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%.

Thu, 01/30/2014 - 13:50 | 4384506 FieldingMellish
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.

Thu, 01/30/2014 - 14:18 | 4384600 Herd Redirectio...
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.

Thu, 01/30/2014 - 13:08 | 4384396 Ness.
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.  

Thu, 01/30/2014 - 13:11 | 4384403 Cursive
Cursive's picture


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

Thu, 01/30/2014 - 13:12 | 4384405 TheRideNeverEnds
TheRideNeverEnds's picture

How about short gold buy e-minis?

Thu, 01/30/2014 - 13:14 | 4384411 Cannon Fodder
Cannon Fodder's picture

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

Thu, 01/30/2014 - 12:58 | 4384369 FieldingMellish
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.

Thu, 01/30/2014 - 13:14 | 4384412 Orly
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.


Thu, 01/30/2014 - 14:03 | 4384550 OC Sure
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?

Thu, 01/30/2014 - 15:13 | 4384820 Orly
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?

Thu, 01/30/2014 - 15:40 | 4385000 OC Sure
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.

Thu, 01/30/2014 - 12:58 | 4384370 Grande Tetons
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. 

Thu, 01/30/2014 - 13:12 | 4384408 WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

Your clarity is overwhelming.

Thu, 01/30/2014 - 13:15 | 4384413 Ponzi Pontiff
Ponzi Pontiff's picture

You know the problem with fake tits?

No, me neither.

Thu, 01/30/2014 - 13:42 | 4384480 Spastica Rex
Thu, 01/30/2014 - 13:41 | 4384481 Unprepared
Unprepared's picture

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

Thu, 01/30/2014 - 13:43 | 4384486 Liquid Courage
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.

Thu, 01/30/2014 - 14:48 | 4384720 Herd Redirectio...
Herd Redirection Committee's picture

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

Thu, 01/30/2014 - 15:14 | 4384863 Tall Tom
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.

Thu, 01/30/2014 - 13:27 | 4384448 wmbz
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".

Thu, 01/30/2014 - 14:13 | 4384578 OC Sure
OC Sure's picture

"The USD is the pretty girl with fake tits.

Implants are real.

Thu, 01/30/2014 - 13:04 | 4384387 buzzsaw99
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.

Thu, 01/30/2014 - 14:25 | 4384618 LostAtSea
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.



Thu, 01/30/2014 - 15:28 | 4384934 RUTHLESS
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

Fri, 01/31/2014 - 01:05 | 4386866 Real Estate Banksta
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.

Thu, 01/30/2014 - 12:57 | 4384367 Lewshine
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!

Thu, 01/30/2014 - 12:59 | 4384371 Stoploss
Stoploss's picture

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

Thu, 01/30/2014 - 13:00 | 4384374 Rainman
Rainman's picture

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

Thu, 01/30/2014 - 13:00 | 4384378 youngman
youngman's picture

Maybe Japan won WWII  afterall....

Thu, 01/30/2014 - 13:01 | 4384380 NaiLib
NaiLib's picture

Albania revisited.

Thu, 01/30/2014 - 13:33 | 4384463 Cannon Fodder
Cannon Fodder's picture

How so?

Thu, 01/30/2014 - 14:33 | 4384647 RiverDrifter
RiverDrifter's picture

I learned all I know about Albania from Cheers....sing it, Sam



Thu, 01/30/2014 - 13:00 | 4384382 Jason T
Jason T's picture

fascinatingly pathetic


bots bitchez

home economy!

Thu, 01/30/2014 - 13:04 | 4384390 OwnSilverPlayMusic
OwnSilverPlayMusic's picture

If Shinzo would just print another few quadrillion yen we'd all be rich!

Thu, 01/30/2014 - 13:08 | 4384397 Cursive
Cursive's picture

You mean, all this time, it was just a video game?  The whole thing?

Thu, 01/30/2014 - 15:17 | 4384894 Tall Tom
Tall Tom's picture

Yeah. The Universe is just a hologram and digital. It is a simulation.

Thu, 01/30/2014 - 13:17 | 4384402 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I said this a year ago if they tapered it would be Abenomics in for the stick save to prop up the stock market to cover the FED's ass. They are just redirecting that printer now to make up for lost flow because they got no choice with the Marxists breathing down their necks setting up the Occupy part 2 (but this time they got one of their one in as Mayor of NYC to sabotage Wall Street's influence of the NYPD in protecting their asses this time around) class warfare income inequality attack that is going to let loose on Wall Street the second they Stock Market tanks blaming Capitalism and using Wall Street as the poster boy to direct the anger and violence at.

The Japanese have been tagged to fall on the Hari Kari money printer knife to buy the FED some more time.

Thu, 01/30/2014 - 13:12 | 4384410 Yen Cross
Yen Cross's picture

    usd/spy. That's a good one!

Thu, 01/30/2014 - 13:44 | 4384492 Unprepared
Unprepared's picture

aka. NSA

Thu, 01/30/2014 - 13:17 | 4384416 Spungo
Spungo's picture

So basically the stock market will crash if the yen ever gains value against the dollar. That's exciting.

Thu, 01/30/2014 - 13:22 | 4384428 Money_for_Nothing
Money_for_Nothing's picture

So if US stocks crash then Yen situation becomes a short squeeze. Then Abe-enomics is all-for-naught? Twofer for the Fed?

Thu, 01/30/2014 - 13:39 | 4384430 Ham-bone
Ham-bone's picture

just chart yen/gold and you will see a near 1/1 inverse relationship since '09.

Since Yen began it's big devaluation in '13...GLD gold holdings have been puked out from 1350 tons now down to 792 tons...with likely another 5 or 10 tons coughed up today.  Another 10% devaluation of the Yen and GLD holdings should be halved again.  The faster they print, the more worthless gold becomes.  Interesting.

Comex has 222 tons of which 11 are available for delivery.  LBMA is apparently only full of bare shelves.

Gold scrap sales has collapsed by 80% since the peak in '08...from 880 tons to less than 200...

Gold is apparently trash.


Thu, 01/30/2014 - 13:38 | 4384475 swissaustrian
swissaustrian's picture

Maybe somebody is shorting gold in usd with a jpy carry funding?


Thu, 01/30/2014 - 14:06 | 4384544 Ham-bone
Ham-bone's picture

In theory this works shorting the price of gold while going very long the physical asset...

Comex deliverable gone from 3 million oz to 375 k oz in '13...GLD lost 500 of it's 1350 tons...LBMA pretty well cleaned out...all the non-mining scrap sales have collapsed...mining prduction flat at best and at/near/below the all-in cost of production...So available supply @ these prices is collapsing and assuming Yen devaluation continues unabetted, soon the shorting will no longer have a correpsonding physical asset available with which to pair off long against.  Simply another 10% Yen devaluation and nearly all available physical supplies are gone or unavailable (non-deliverable).  This is coming @ us is quite obvious and nearly every obvious trade is what are we looking at???

Thu, 01/30/2014 - 15:59 | 4385074 Tall Tom
Tall Tom's picture

The price of Gold is not the price of the Physical Metal. It is the price of owning a Paper Contract. As the inventories of Deliverable Gold are depleted then one can only expect that the price of a Paper Contract, which is impossible to be honored, will decline.


The real VALUE of any non performing contract is Zero. This is true regardless what asset class that we are writing about. The Toxic Sub Prime Mortgage Backed Securities became worthles as people stopped paying their mortgages. They produced no income and did not fulfill what was promised. So nobody in their right mind wanted a non performing contract. So what is to be expected? The prices collapsed.


Likewise the price for a non performing contract for delivery of Gold will become worthless as the World becomes aware that there is not enough deliverable Physical Gold available for delivery from COMEX and LBMA. That is the reason behind the price decline. I expect the Paper Gold price to decline even more rapidly as the stocks of Deliverable Gold are diminished. It will accelerate.


This, of course, is counterintuitive for those who understand the Economic Laws of Supply and Demand. But there is a CONFUSION of terms as Paper Gold is NOT Physical Gold. Far too many confuse the two as one, identical, the same thing, while the reality is far from that case.


Remember at the start of the Subprime Mortgage Crisis when BNP Pariabis stopped trading in the MBS back in August, 2007?


On August 9, 2007, the French bank BNP Paribas froze redemptions for three investment funds, citing its inability to value structured products.


Likewise there will be an inability to value Paper Gold Contracts and the COMEX and the LBMA slide into irrelevance. And the price for Paper Contracts will decline to ZERO as the World desparately searches for a Price Discovery method to value Gold.


In this case the Bundesbank has taken on the role, that BNP Paribas took in exposing the Subprime Mortgage Crisis, exposing that the Emperor Has No Clothes.

Thu, 01/30/2014 - 13:23 | 4384432 chirobliss
chirobliss's picture

IB just raised E-mini margin by 5%.

Thu, 01/30/2014 - 15:02 | 4384806 Haager
Haager's picture

Oh, due to expected increase in volatility? I miss those rollercoaster days, they were fun at least.

Thu, 01/30/2014 - 13:25 | 4384441 Music101
Music101's picture

Don't worry... just follow KARL DENNINGER'S STOCK PICKS in the VIDEO BELOW -- MUST SEE:

Thu, 01/30/2014 - 13:26 | 4384443 adr
adr's picture

But because of this lunacy Japanese car companies have brought in record profits this year thanks to the weakening Yen and the QE fueld US car market 

Thu, 01/30/2014 - 13:45 | 4384497 Unprepared
Unprepared's picture

So if we introduce a global (fixed exchange rate) basket currency, it means the stock market would have reached a permanent plateau?

Thu, 01/30/2014 - 14:17 | 4384593 Conax
Conax's picture

Well this is clear as mud.  The Japs print, debase the yen, we get cheap paper gold and higher stawk prices.


This is why I went into engineering, too stupid for high-as-a-kite finance.

Thu, 01/30/2014 - 14:16 | 4384596 amadeusb4
amadeusb4's picture

FINALLY! A useful article on ZH. Maybe you're getting your mojo back, Tyler. It's basic stuff most traders know, but still.... baby steps are important.

Thu, 01/30/2014 - 14:22 | 4384612 Liquid Courage
Liquid Courage's picture

When Richard Russell talks ... I listen. Can't post the article:

© 2014 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

So here's the link. Well worth a look.

Thu, 01/30/2014 - 15:40 | 4385008 withglee
withglee's picture

From the link: 

I see the Federal Reserve and its fiat money as the single greatest enemy of the US.  Which would you rather own, a gold-backed yuan or a debt-backed Federal Reserve note?  That's the question the world will be faced with.”

No successful and fair Medium of Exchange (MOE) can be backed by gold. There is nowhere near enough of the stuff with just 1oz per human on Earth. This doesn't just apply to deadbeat USA. It applies to any MOE, the Chinese Yuan included. China is right to accumulate gold in place of the Federal Reserve Notes and Treasuries they hold, which are worthless right now except for some exceptionally bad accounting. But they will never (be able to) back a currency with what they hold, even if that became all the gold that exists.

Thu, 01/30/2014 - 16:13 | 4385167 Tall Tom
Tall Tom's picture

Any Paper Currency in the World will not be trusted after it melts down. Trust and confidence in anything represented by paper (Stocks, Bonds, and Commodities) will have been totally eroded POST COLLAPSE.


It will take GENERATIONS in order for trust and confidence to be reestablished....if it ever is reestablished.


If you do not hold Physical Gold and Physical Silver it will be very difficult to conduct transactions in a Post Collapse Society. There will be a lot of barter.


In order to adapt to this reality you will have to abandon any hope of returning to normalcy as it will not happen. You will have to learn to barter your Goods and Services for that others have that you may need.


The reset is not going to be fun. Most likely those with Gold and Silver will end up much poorer with a massive decline in their Standard of Living. Those without Gold or Silver will end up DESTITUTE...without anything but their skills. Labor will be cheap. So will Human Life.


That which approaches is horrendous. It is survivable. But it does not diminish the horror and shock that awaits most people.


Perhaps it is better to let them fantasize and sleep. I look at the nightmare unfolding, daily.

Fri, 01/31/2014 - 10:17 | 4387584 withglee
withglee's picture

Weimar Germany came back in a remarkably short time. About a year.

Thu, 01/30/2014 - 14:44 | 4384688 q99x2
q99x2's picture


Thu, 01/30/2014 - 18:06 | 4385082 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Three card IV 20B QE Monti Drip Taper trick with the Y connector for the hose hidden under one of the shells.



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