Yen

If so, then any entity or investor who is using aggressive leverage in US Dollars will be at risk of imploding. 

By monetizing more than the entire Japanese budget deficit, the BOJ is running of out willing sellers. Without those, Japan's QE, just like that of the ECB, will grind to a halt. Better yet, this creates a vicious loop, because with every passing month, the inevitable D-Day when the BOJ has no more TSYs on the offer gets closer, which in turn will force those who bought stocks to sell in anticipation of the end of QE, and to seek the safety of bonds themsleves, in effect precipitating the next inevitable Japanese stock market crash.

While many continue to debate if what with every passing day increasingly looks like a global recession, one from which the US will not decouple no matter how many "virtual portfolio" asset managers claim the contrary, there are those who without much fanfare are already taking proactive steps to avoid the kind of fallout that the markets have hinted in the past month of trading, is inevitable. Some such as Calstrs: the nation's second largest pension fund with $191 billion in assets (smaller only than Calpers), which as the WSJ reports is "considering a significant shift away from some stocks and bonds amid turbulent markets world-wide."  According to the WSJ, it will move as much as $20 billion, or 12% of the fund’s stock  portfolio, into other assets, including Treasurys.

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"Something happened  The August turbulence in global markets has produced significant shifts, including a 6.6% fall in equity prices. The currencies of emerging market countries have depreciated substantially against the G-4, while emerging market borrowing rates for sovereigns and corporates have moved higher. Global oil prices have been whipsawed as have G-4 bond yields. The speed and magnitude of these movements is reminiscent of past episodes in which financial crises emerged or the global economy slipped into recession. However, nothing appears to be breaking."

The stability of global capital markets, the ECB meeting and US employment data are highlights.   Risk seems to be greater than discounted that Sept rate hike is still a distinct possibility.

Iif there is one currency in the world that “deserves”, so to speak, ultimate execution it is that of the Japanese. The Bank of Japan has done more than any other central bank for far longer to kill it, but like any horror movie villain it seems immune to any reckoning or even the laws of financial sense. In the bigger picture, that is as much a damning indictment as a tale of orthodox resilience. It shows that monetary redistribution is nothing but a trap, an incredibly narrow and locked economic existence that can and will be permitted by any sustained apathy.

Dollar recovered from the exaggerated panic at the start of last week.  Outlook is still constructive.  Here is an overview of the technical condition of currencies, bonds, oil , and S&P 500.  

"There’s no flying beams of light, no 'pew! pew!' sound effects. But it is nonetheless a working laser cannon, and it will take your drone down."

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It goes until the “big one” shows up “out of nowhere” because everyone studiously ignores these events as if they can’t possibly be what they so obviously are: continued warnings. It is impossible to say what the final turn will be, as you can’t predict the level of “necessary” liquidations going too far because liquidity supply is totally hidden and derivative. The fact that one central bank after another continues to fall victim to the same connecting degeneration is cause for still deeper pause and reassessment, but that isn’t any fun for the bull bubble and the “easy money” mindset. In any case, when the yen functions as the last resort bid of safety, you can pretty well assess just how messed up everything got – and start to make some determination about just how close to the precipice.

Overnight's start attraction was as usual China's stock market, where trading was generally less dramatic than Thursday's furious last hour engineered ramp, as stocks rose modestly off the open only to see a bout of buying throughout the entire afternoon session, closing 4.8% higher, and bringing the gain over the last two days to over 10%. This happens as China dumped a boatload of US paper to push the CNY higher the most since March, strengthening from 6.4053 to 6.3986, even as Chinese industrial profits tumbled 2.9% from last year: this in a country that still represents its GDP is rising by 7%. Expect much more Yuan devaluation in the coming weeks.

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