BONUS EDITION The Hot Money Unwind

You’ve seen a big three days in global markets.

It started on Friday, with a key decision by the central bank of Japan to raise interest rates.

This is not something you’ve come to expect from Japan. Certainly not the ‘carry traders’.

They’ve become accustomed to borrowing Yen heavily at near-zero rates…in order to then buy things like US Treasury Notes and tech stocks for an easy return.

Now, in a single afternoon, those borrowings ($4 trillion worth) just got a lot more expensive.

There’s a double hit to follow, too. US unemployment numbers came in a lot higher.

All of a sudden, the chances of US rate cuts seem much more likely.

Triple whammy: tech is coming off, too. Warren Buffett seems to think so. Last week he sold over half of Berkshire Hathaway’s Apple holdings.

The easy money Yen carry trade doesn’t seem so easy anymore.

Japan’s stock market was down 6% on Friday. It fell a further 6% today, triggering the market circuit breaker. South Korea halted trading too.

Look, this could be a flash correction. Or is it something bigger…and more contagious?

I got Greg Canavan and Ryan Dinse on an impromptu call to discuss.

Here’s what they had to say:

Let us know what you think at letters@fattail.com.au

Cheers,

James Woodburn,
Publisher, Fat Tail Investment Research