“Never stop asking questions and seeking answers.” – Said Nvidia CEO Jensen Huang
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
(JAPANESE LONG RATES: A RIPPLE THAT COULD BECOME A GIANT WAVE)
May 21, 2025
Hello everyone
For many years, the Bank of Japan (BoJ) has set its 10-year government bond yield near zero through relentless buying. The upshot of this is that it owns over half of all Japanese Government Bonds (worth around $8.8 trillion).
So, what’s happening now…
This yield curve control policy has now begun to fall apart. Long bond yields are spiking, suggesting the BoJ is losing its grip on the far end of the curve.
The BoJ is in an uncomfortable situation.
Japan’s government debt sits at over 260% of GDP…
If they raise rates, that could tip the economy into recession.
If they keep rates low, that could risk inflation spiralling out of control.
Is this a big deal…?
As long rates rise, Japanese institutional investors are increasingly incentivised to repatriate capital, taking advantage of more attractive domestic yields.
That is a problem for global markets: Japan is the largest foreign holder of U.S. Treasuries (~$1.1 trillion). If they start selling, U.S. long-term yields could move significantly higher, setting off a feedback loop that tightens global financial conditions.
Should yields continue to surge, Japan may be forced to unwind foreign asset holdings to defend its domestic markets and currency – causing ripple effects across the USD, U.S. bond yields, and global risk assets.
We cannot just say this is a yield spike and turn the page. This is a warning from the second-largest holder of U.S. debt, with the backdrop of the world’s most indebted developed economy facing a demographic implosion.
Japan’s path is unsustainable.
Stop. Listen to the eerie silence coming from the bond desks.
Something is shifting on a deeper level.
QI CORNER
Cheers
Jacquie
Global Market Comments
May 21, 2025
Fiat Lux
Featured Trade:
(DECODING THE GREENBACK),
(BRING BACK THE OLD ASSET ALLOCATION RULES)
(TLT), (JNK), (HYG), (REIT), (BKLN)
If you want to impress your friends with your vast knowledge of financial matters, then here are the Latin translations of the script on the back of a US dollar bill.
“ANNUIT COEPTIS” means “God has favored our undertaking.” “NOVUS ORDO SECLORUM” translates into “A new order has begun.”
The Roman numerals at the base of the pyramid are “1776.” The better-known “E PLURIBUS UNUM” is “One nation from many people.”
The basic design for the cotton and linen currency with red and blue silk fibers, which has been in circulation since 1957, carries enough symbolism to drive conspiracy theorists to distraction.
An all-seeing eye? The darkened Western face of the pyramid? And of course, the number “13” abounds.
Thank Freemason Benjamin Franklin for these cryptic symbols and watch Nicholas Cage’s historical adventure movie “National Treasure.”
The balanced scales in the seal are certainly wishful thinking and a bit quaint if they refer to the Federal budget.
Study the buck closely because there are soon going to be a lot more of them around, thanks to a deficit that is rising to record levels daily.
What Did You Really Mean, Ben?
“What to do about asset allocation” is the one question that I get every day, which I absolutely cannot answer.
The reason is simple: no two investors are alike.
The answer varies whether you are young or old, have $1,000 in the bank or $1 billion, are a sophisticated investor or a basic beginner, in the top or the bottom tax bracket, and so on.
This is something you should ask your financial advisor if you haven’t fired him already, which you probably should.
Only advisors who read the Diary of a Mad Hedge Fund Trader should merit your attention. At least they’re going the extra mile trying to figure things out.
Having said all that, there is one old hard and fast rule, which you should probably dump.
It used to be prudent to own your age in bonds. So, if you were 70, you should have had 70% of your assets in fixed income instruments and 30% in equities.
When bond interest rates were plumbing the depths at a 0.32% yield during the pandemic low, bonds were shunned by all advisers. In fact, the (TLT) was one of the best short plays I have ever executed.
But you know what? Time heals all wounds. Maybe it is time to go back to the old rules. With a 4.50% for ten-year US Treasury bonds, 7.5% for junk, 8.8% for senior loan ETFs, and 15% for some REITS, maybe fixed income doesn’t look so bad after all. And they are all about ready to take off with the Fed ready the start cutting interest rates in the coming months.
Just thought you’d like to know.
Allocation: Are You Him?
Or Him?
“Incentive structures work, so you have to be very careful about what you incent people to do because various incentive structures create all sorts of consequences which you can’t anticipate,” said Apple founder Steve Jobs.
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Mad Hedge Biotech and Healthcare Letter
May 20, 2025
Fiat Lux
Featured Trade:
(HEALTHCARE’S FALLING KNIFE)
(UNH), (CI), (CVS), (LLY), (VRTX), (SGRY), (AAPL), (AMZN)
