Idea for Macro:
- Currencies lead stocks. Get the dollar right, and you get most things right. Few things are above the dollar in hierarchy of economic cycles.
- I have been following and studying the dollar for a while, in ideas like this one:
- However, there is another currency of great importance - the Yen.
- Japan's Central Bank is the creditor of the world, possessing zero-negative interest rates for over 20 years.
- The Yen Carry Trade is when investors borrow yen at a low interest then purchase either US dollars or currency in a country that pays a high interest rate on its bonds. These traders earn a low-risk profit. These traders may even invest the US dollars or EM currencies into higher yielding assets of that nation.
- The Yen is the first currency that investors would demand before a new bullish cycle.
- However, there is a finite amount of liquidity in each carry trade cycle, and once it is spent, it must inevitably be renewed. I believe we are at the end of such a cycle:
Just ask yourself why is there such dollar demand, if indeed there was lasting inflation expectations and too much liquidity?
Nikkei:
- Nikkei's recent enormous rally left me scratching my head at first. It had been in a year long bear market, erased all of its losses of the year in 2 weeks in a rally which saw a multi-year top, then lost it again just as fast. Can anyone explain why? I think I can now.
- I think Nikkei's last huge rally was actually the unwinding of the Yen Carry Trade, which would send the yen crashing and Japan's stock market to consequently rise.
- Each global crash is first preceded by an inexplicable blowoff top in Nikkei (effects are pronounced after 1999, when Japan introduced zero interest rates). Yen carry trade unwind. We are very close IMO:
- As of now, the Yen had a similar structure before the 2018 and 2020 crash. The cycle is, buy up/borrow yen for the Yen Carry Trade, buy US/EM equities, until the liquidity is all spent. Then when it's spent, unwind for US dollars (and bonds with said dollars), crash equities while buying up the yen, repeat. A great bear always follows the Yen Carry Trade Cycle.
- The Yen is a good indicator of global liquidity, as all liquidity must first flow through there.
- Also, specifically to the yen - JPYUSD. It should be bought as equities suffer a drawdown, in preparation for the next cycle.
The Princes of the Yen are making their move.
GLHF
- DPT
- Currencies lead stocks. Get the dollar right, and you get most things right. Few things are above the dollar in hierarchy of economic cycles.
- I have been following and studying the dollar for a while, in ideas like this one:
- However, there is another currency of great importance - the Yen.
- Japan's Central Bank is the creditor of the world, possessing zero-negative interest rates for over 20 years.
- The Yen Carry Trade is when investors borrow yen at a low interest then purchase either US dollars or currency in a country that pays a high interest rate on its bonds. These traders earn a low-risk profit. These traders may even invest the US dollars or EM currencies into higher yielding assets of that nation.
- The Yen is the first currency that investors would demand before a new bullish cycle.
- However, there is a finite amount of liquidity in each carry trade cycle, and once it is spent, it must inevitably be renewed. I believe we are at the end of such a cycle:
Just ask yourself why is there such dollar demand, if indeed there was lasting inflation expectations and too much liquidity?
Nikkei:
- Nikkei's recent enormous rally left me scratching my head at first. It had been in a year long bear market, erased all of its losses of the year in 2 weeks in a rally which saw a multi-year top, then lost it again just as fast. Can anyone explain why? I think I can now.
- I think Nikkei's last huge rally was actually the unwinding of the Yen Carry Trade, which would send the yen crashing and Japan's stock market to consequently rise.
- Each global crash is first preceded by an inexplicable blowoff top in Nikkei (effects are pronounced after 1999, when Japan introduced zero interest rates). Yen carry trade unwind. We are very close IMO:
- As of now, the Yen had a similar structure before the 2018 and 2020 crash. The cycle is, buy up/borrow yen for the Yen Carry Trade, buy US/EM equities, until the liquidity is all spent. Then when it's spent, unwind for US dollars (and bonds with said dollars), crash equities while buying up the yen, repeat. A great bear always follows the Yen Carry Trade Cycle.
- The Yen is a good indicator of global liquidity, as all liquidity must first flow through there.
- Also, specifically to the yen - JPYUSD. It should be bought as equities suffer a drawdown, in preparation for the next cycle.
The Princes of the Yen are making their move.
GLHF
- DPT
Comment:
Each time the Yen reaches the trendline, global markets run into trouble. We have been under the trendline for quite some time, and now may be dropping to an even lower trendline. With each drop of GDP growth to a lower trend, so does this liquidity cycle:
Comment:
Another Liquidity pool is the Eurodollar market. This needs to collapse before a certain crash, and it is indeed pointing down into 2022. UMR will cause this. We will have a choppy bear market into 2022, before the "Big One" in Dec 2022:
Comment:
When the Eurodollar market reverses, the stock market does usually enter either an immediate bear market (like 2015), or a choppy top, so I think we will have a sizable correction to kick things off before 2022:
1. currencies dropping together with equities
2. Yen reversing and spiking up, while dollar plummets (dollar being sold for yen). Comparing to AUD, JPY's rise is lasting
3. Dollar spikes
4. Dollar reversal signals end of drawdown: