Japan is buying MASSIVE Amounts of Junk Credit
Japanese banks have been bulking up on US junk corporate credit for the last year, driven entirely by an increasingly difficult reach for yield. That means overlooking dangers and risks which in other less distorted times would have been taken more seriously. The end result is a large and growing distortion in a key part of the credit markets.
Eurodollar University’s Money & Macro Analysis
Bank of Japan Financial System Report October 2019
https://www.boj.or.jp/en/research/brp/fsr/data/fsr191024a.pdf
VanEck Looking Beyond AAA Rated CLOs Pays Off
https://www.vaneck.com/us/en/blogs/income-investing/looking-beyond-aaa-rated-clos-pays-off/
Deutsche Bank What impact is ‘higher for longer’ having on the CLO market in 2024
https://flow.db.com/trust-and-agency-services/what-impact-is-higher-for-longer-having-on-the-clo-market-in-2024
Bloomberg A $1.3 Trillion Fund Pool for Junk-Rated US Firms Has Unlikely Lifeline: Japan’s Banks
https://www.bloomberg.com/news/articles/2023-04-20/the-1-3-trillion-clo-market-grows-more-dependent-on-japan-banks
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36 Comments
Vibes of synthetic CDO's, The Big Short is strong here.
You make it sound more complex, CLOs are risk to the moon. They are CDOs wrapped in dogshit wrapped in alien shit.
credit crunch and chasing yield seem to run into each other every day but sometimes it turns into a panic, good analysis
They are better off buying non-investment grade bonds tied to sovereign credit, to earn higher yields. Credit ratings have history and precedent when being assigned to countries.
Mr Satan said the reeeee
Amazing video, you work for 40yrs to have $1M in your retirement, meanwhile some people are putting just $10K into trading from just few months ago and now they are multimillionaires
Jeff "I cherry-pick data to fit my failed thesis" Snider. Debunked!
History doesn't repeat but it does rhyme…. Buckle up…
Not the first time a large Japanese Corp has tried to hide losses and try to save face and basically go into gamble mode and hoping things will turn around. Now it seems like this move is a gamble that the US will lower rates and things will work out.
Might not another reason be that corporate junk tends to higher rates and so won't get beat up so badly if treasury yields go up?
The US Fed, IMO, is in a 'catatonic' state being afraid to change anything lest it adversely affect the present 'status quo' of the US economy, more narrowly the US stock market, at least until the US presidential elections.
The Japanese banks know they will make a killing selling this used toilet paper to the Fed. Powell and the boyz will be buying everything in the next crisis.
kickin the can … (theres no cliff)
When the Japanese come in, get OUT!!!
Watching ur videos from Brazil 🇧🇷 Thank You!
they are preparing for another huge US bail-out
Japan is a slave to the USA
They've shown it time and again
They'll literally sell their own country to prop up Wall Street
Thanks Jeff.
Smart, when companies cannot pay japan owns all us companies…
1. I suspect Powell's pivot in December of last year, where he went from higher for longer to "we will start cutting soon and probably cut at least 3 times in 2024",… helped put Nochu as well as other banks in this position.
2. If you scroll down the May 22, 2024 presentation you showed to the appendix, you and kackling George will see that Nochu has a long history of investing in CLO's, or at least since 2020 during the pandemic. They seemed to have survived.
3. That presentation says they invest solely in the triple A tranches. That's not exactly junk.,.. although they could have moved down the risk profile lately.
4. I couldn't easily find what companies' debt are included in these CLOs.
That would be worthwhile information to look into against macro economic scholar George's and similar sky is falling claims
"wow they're betting on junk,.. ha ha ha"
questioning a 100 year old bank's investment acumen..
5. I suspect the debt in these things act like bonds in that when yields come down, the bond prices appreciate. I'm not sure how that translate to the investors of a CLO.
Might also be something look into.
No,… never mind,.. I'm sure scholar George has done all of this homework.
Japan isn't trying to "build" anything. The BOJ is biding time, meeting government/pension obligations, and waiting to shed 30% of the population in the next 5-7 years. The Japanese actually built too much in previous decades. They have been managing the contraction and are doing pretty d*mn well all things considered. Life in Japan is awesome.
I find it interesting you assume all these institutions actually are just accidently negligent.. I think we have enough evidence to infer it's criminal collusion
Has anyone looked at the history of AAA vs lower rated bomd ACTUAL defaults? My guess is the rating system is flawed.
Only problem in this presentation is having to listen at 2x speed because he speaks so slowly. 😀
There is a big push in Japan to get people enrolled in Shin(New)-NISA, which is a tax-free investment account.
農林中央金庫 Norin Chuo Kinko
Japan needs to join the brics
So they're relying on credit ratings issued by the same agencies which brought us the GFC. Smart.
The USA has two sister wives and they are Japanese & British. I don't see any way this ends without Japan, UK, USA all becoming part of one system.
It was the rating agencies that triggered the rmbs problems in 2008 in the first place. Rapant fraud.
thanks Jeff
Wowie..Papa san what could possibly go wrong…..?
Perhaps they're buying this as a hedge? Lmao if BRICS fails and US futures skyrocket they need to be in that shit. Japan's markets lead the US markets and I've never seen them buy in like this so it will be interesting😂🎉
Great Jeff
To really understand Japan, you need to understand the name of their country is Nippon, and they told us that, but we laughed and made nipple jokes so they realized ero-no-jutsu was our weakness
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The smart money knew Japan was going to spiral months and months ago, where were you?