The Japanese Carry Trade is Ruining the Stock Market

The Japanese Carry Trade is Ruining the Stock Market

Oh, Pokeballs. I don’t think anybody came back from Thanksgiving thinking all of a sudden we would have a tank to start the day in markets. And that’s kind of exactly what we’re seeing. And it all sort of started right around here. What happened here? Like did just some whale sell or what’s going on? Uh let’s put it this way. The Japanese are back and the problems that we feared two weeks ago have just really come to fruition. I’ll explain. Uh, quick reminder, yes, today is Cyber Monday. That means we are having a massive price increase on the Meet Kevin Alpha Report and the House Hack AI membership tonight at 11:59 p.m. So, that means yes, you have one final chance to use that coupon code to get in, just like everybody does these days. And that’s it. Let’s not talk about this anymore. You already know about it. Meet Kevin.com. Houseack.com. That’s it. Let’s focus instead on what happened. So folks, it’s the Japanese carry trade. Yes, it is back. Now, two weeks ago, what contributed to selling was the following. And I wrote this down just to try to simplify it a little bit. Look at this. JPY strengthening equals a risk moment. Now, the JPY was not actually strengthening. uh two weeks ago the JPI why was weakening but it was weakening because you had a uh well essentially government in Japan that said hey we’re going to stimulate we’re going to just kind of keep cranking the money printer and the bond market is like no no stop and they’re like we’re still printing money over here cuz Japan is trying to stimulate their economy you know they had the last decade you know that for a very long I mean you could have invested in Japanese stocks in the 80s and you may have just broken even like last month crazy that’s that’s a very long period of time and you’re talking 40 years up to 40 years in some cases here depending on when you bought in Japan right uh so Japan has been trying to stimulate growth but now they’re going a little overboard and they’ve had you know new elections and all of a sudden their new government is like yes yes yes more print and it turns out that their prior government was actually less kind of kooky with the money printer than the new government. So you have on one hand this political atmosphere that has shifted from man we thought the last guy was stimulative. Now we’re really seeing the money printer run the money stimulus running. Okay. The money printer is just a euphemism for we’re going to do whatever we can to fiscally promote spending. So using government via stimulus checks or sector stimulus or whatever to get people and businesses to spend money on goods and services, right? That’s how you get the economy to hopefully move. Now, the bond market uh as of a couple weeks ago was going, “No, no, this this is not going to end well. This is this is bad.” And the way this plays out is you end up seeing the JPY weaken. So if you type into Google USD to JPY, uh you’ll end up seeing and you go over the last year here, you could see that the JPY has actually been weakening. Now this I know is ironic. You just have to think about it as when you type in one US dollar, how many JPYs are you going to get? Right? So $1 has been buying more JPYs for well especially here in October quite quite a a surging amount which basically means the JPY has been weakening. It weakens when a country doesn’t care and they print more of their currency. Exactly. So they print more of their currency, the Japanese yen you loses value. Okay, makes sense. Now why all of a sudden do we care about this? Well, we care because if we go down to the five-day chart, oh crap, it’s reversing. See that tank here? Now, why would it be reversing? Well, there’s only one reason it would be reversing, and it’s because the Bank of Japan is now hawking to us. That’s exactly what the bond market was worried about two weeks ago. So, two weeks ago, you had the bond markets going, “No, no, no, no, no. This money printing isn’t going to end well.” bond markets basically face palming going no no you’re going to force the Bank of Japan to raise rates and so markets started sort of pre FOMOing like fear of the crash maybe those are the wrong words sort of anyway I I’m not going to unberry myself out of that analogy they were pre-Japanese carry trade selling because the bond market’s like yo this is coming uh it’s just a matter of time before the bank of Japan hawks to us Get ready for it. Okay, so last week in the US stock market, we didn’t really have a lot of news. We basically confirmed thanks to John Williams and Mary Dailyaly that we were going to get a rate cut in December. We got the Fed yapping that we thought we would get. We got it right before the blackout window. Yes, Jerome Powell talks later today, but it’s mostly going to be a memorial service. May maybe maybe I’ll cover it. I I haven’t even decided yet. I I always cover JPAL. Come on. But anyway, uh, so now you have the Bank of Japan flipping. And by flipping, I literally mean the Bank of Japan is saying, “Hey, we’re going to discuss rate cuts.” And not only are we, sorry, rate cuts. I’m so thinking about Jerome Pal right now. We’re going to discuss rate hikes. Okay? When you raise rates, what happens? You strengthen the currency because more people then want to buy that currency because they want that higher yield. In a weird way, Japan, if they keep raising rates, might end up being in a place where they actually end up having the highest rates in the world. Not anywhere close to that happening right now. I’m just saying that’s the trend. Japan is raising rates and the rest of the world is gutting rates, right? But that’s because they’ve been trying to stimulate their economy. They’ve had the opposite problem. So, uh, the Bank of Japan, uh, uh, basically Bank of Japan governor, uh, gave, uh, their clearest hint yet of a possible BOJ interest rate hike. Uh, this, uh, is, uh, has led to the highest 2-year yield since 2008. Uh, in Japan, the 2-year yield is frequently seen as a proxy for, uh, Fed policy. You could kind of see that in the United States as well. So if you type in like US 2year Treasury, we usually think it’s where Fed policy is or should be. And so when recessionary fears, for example, spike in the United States, the 2-year plummets very very quickly. The long end usually follows. Uh but anyway, here our our our 2-year has been slowly and gradually coming down over the last uh you know, well about 2 years here. And that’s because we’ve been getting into that slow decline in the Fed funds rate in the United States, right? Those 25 basis point cuts. The two years roughly following that uh in the United States. If you look at the 2-year uh Treasury in Japan, uh you’ll get to see a little bit of that suddenenness uh of uh and the opposeness of Japanese policy. Ready? Look at this. It’s up. That’s what you would expect, right? We’re cutting rates and they’re raising rates. So, the 2-year, you can still see it’s only 1%, right? But people believe this could actually, if they really unleash the stimulus and inflation, genie, this could end up going to 3 or 4%, which many think will break the backs of markets if we went that high. I mean really right now they’re only worried about a 25 basis point increase but you could actually inverse uh the desire for people to buy or get these these higher yields basically uh in Japan uh which also creates weird complexities if you’re actually investing in the bond market. I’m not saying invest in this because this only goes up when the value of those bonds goes down. Super complicated. But just to keep it simple, okay, if you’re waking up going, “Yo, what the heck? Why all of a sudden are we seeing some red in the US market?” It’s because of those hawkish comments from the F uh Japanese uh Fed. You can see that spike right here in the 2-year. Makes a lot more sense to see the suddeness here. That’s why Bitcoin dropped. Now, that signals concern again of the Japanese carry trade. Remember the carry trade is basically when if people are worried that it’s going to become more expensive to repay their Japanese debt because all of a sudden the JPY is weakening, they might try to get ahead of that weakening and sell their stocks ahead of time. Could that have contributed to the 3-we selloff we had in early November? Yes. Is that what’s contributing to a sell-off right now where the Q’s are down 89 basis points, you’ve got Meta down 14. Uh, I mean, it’s not major. I mean, you know, Hood’s down 4%. It’s going to hurt a little bit. You know, it’s a little bit of a sting, right? Tesla’s down 13. I mean, yeah, it sucks, but obviously we’ve had a nice little recovery last week. So, to some extent, we’re also just giving back some of that. The question is, is it possible though that this then extends because people like, oh my gosh, now we’re going to get the hike at the Bank of Japan and now all of a sudden you get more uh Japanese investors who are a critical source of liquidity in the United States. Crazy interconnected global environment. Uh do they start dumping uh their US exposed stocks because now they’re getting hit on both ends. they’re getting hit a at uh you know falling US stock values self-fulfilling and b Japanese carry trade issues. Yeah, sure. It’s totally possible. So, we need to monitor that situation. And I I personally think the easiest way to do it is just go USD to JPY. If you just type those letters in, you’ll see this. If you go down to 5day, you’ll be able to monitor this. If this stabilizes and doesn’t keep tanking, then maybe it’s just not that bad, right? Okay, great. You get your 25 basis point hike. Big deal. You move on. So, monitor this chart. Welcome to Cyber Monday again. Houseack.com, reinvest.co or the same company, right? And of course, meet Kevin.com. Uh, got that out of the way at the beginning of the video, but if you hadn’t yet understood, basically, if you have any issues, by the way, joining, just email us at [email protected]. Me Kevin membership gets you the reinvest course. It drops tonight and all of the other courses. So once you’re in the membership, you get all the courses and the reinvest course that’s dropping tonight, which is kind of cool. Uh and then of course the house hack artificial intelligence that’s releasing this month. You can get that lifetime access before the massive price increase once Cyber Monday ends. We are jacking up the prices bigly because honestly the price for both of these products is way too low. So thank you so much for watching. We’ll see you in the next one and good luck out there. Why not advertise these things that you told us here? I feel like nobody else knows about this. We’ll we’ll try a little advertising and see how it goes. Congratulations, man. You have done so much. People love you. People look up to you. Kevin Praath there, financial analyst and YouTuber. Meet Kevin. Always great to get your take.

⚠️✅💎 Meet Kevin Membership & Alpha Reports: https://MeetKevin.com 💎 ✅ ⚠️
⚠️🔥 Reinvest AI & HouseHack Startup: https://househack.com 🔥⚠️ BLACK FRIDAY COUPON IS BlackFriday25
🔥⚠️ (Read any solicitation paperwork before investing; investing involves risk – this video is not a solicitation).
🤯💥 Life Insurance Sponsor: https://metkevin.com/life💥🤯
😇 Affiliates and Paid Promotions 😇
▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀
➡️ Life Insurance Sponsor: My favorite life insurance you can get in as little as 5 minutes! https://metkevin.com/life
➡️ Webull Sponsor: My favorite stock app for charting and trades! https://metkevin.com/webull
➡️ HSA Sponsor: Tax Deductions via a Health-Savings Account: https://metkevin.com/hsa
➡️ My 360-Camera Sponsor: https://metkevin.com/360x
*See terms and conditions at affiliated webpages. Offers are subject to change. These are affiliated/paid promotions.
➡️ Best banking app: https://meetkevin.com/bank
➡️ Best Travel Credit Card: https://meetkevin.com/capitalone

🥰 SOCIAL MEDIA & DISCUSSIONS 🥰
▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀
Twitter / X: https://twitter.com/realMeetKevin
Tik Tok: https://www.tiktok.com/@realmeetkevin
Instagram: https://www.instagram.com/meetkevin

🚀 COURSE INQUIRIES 🚀
▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀
Email staff@meetkevin.com for course requests or support.

➡️ SPONSORSHIP INQUIRIES ➡️
▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀
Email meetkevin@creatorsagency.co for sponsorships.

📝 LEGAL DISCLAIMER 📝
▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀▀
This video or description does not constitute personalized financial, legal, real estate, investment, or other advice (we don’t know your situation, so it’s impossible to provide you personalized advice). Therefore, evaluate your own suitability. Assume any referenced product or service is a paid promotion, though Kevin does his best to let ya know if a mention is paid or unpaid. While Kevin’s experience with a product or service may be good, your experience may suck – Kevin can’t be responsible for that; so be warned & conduct your own diligence. Any mention of stocks or analysis may be reliable as generic information today, but not tomorrow or even hours later. Recognize businesses and people change rapidly. Therefore, the accuracy of information cannot be guaranteed. Additionally, any mention of being a pilot, flying a jet, or showing or commenting on aviation is solely incidental to part-91 flight operations Kevin Paffrath is taking for his own purposes. Any videos of FAA-related or aviation-related content are solely incidental to flights that would have occurred regardless of video content, though some may see the aircraft Kevin flies as an advertisement for the products and services, investment strategies, or wealth strategies Kevin promotes. Kevin Paffrath is licensed with the California Department of Real Estate under 01893132. His broker is House Hack, license 02236137. House Hack does business as Reinvest and/or HouseHack. Reinvest AI may make mistakes and is not guaranteed to boost your net worth.