Asian Markets Are Hemorrhaging With Losses, Spearheaded by a Surge in the Yen

Things are starting to get sporty. Let me highlight a few points of concern.

No one is talking about the record amount of Chinese debt coming due in the second half of 2016, amounting to 2.1 trillion yuan, most of which is poorly rated crap. Secondly, the yen is inching closer and closer to that magical 100 v the dollar. If in fact the yen continues to climb and hit 100, look for markets to get fucking RAMSHACKLED.

As we speak, Asian markets are getting smoked. The NIKKEI is is leading the pack down the sewer, off by 2.1%

Japanese bonds are spiking again, pushing rates further into negative territory. The Japanese 10yr is now -0.2% and rates are negative all the way to 15 yr durations.

Here is that yen movement, pernicious and amazing all at the same time.

The House of Saud looks like they are moving towards a credit event.

One other thing no one is talking about is the widening of credit between periphery countries of Europe (PIIGS) and Germany. Portuguese-German bond spreads have widened to 336bps. If it gets over 400bps, your local CNBC anchor will discuss it.

Lastly, safe havens, GLD, Bitcoin (I can’t believe I said that) and SLV are soaring, higher by 1%, 3% and 1.5% respectively. Crude is lower by 1%.

Oh yeah, I almost forgot, the BOJ didn’t further degenerate itself tonight, which is disappointing those who like bad policy moves. Many believe this is the reason for the jarring move in the yen. The truth is, they had it coming.

“The BOJ will have to take bold action to arrest the strengthening yen and if it tries something in line with what it did before, there’ll be disappointment,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “With the Brexit vote ahead, the BOJ couldn’t move this time because the result on June 23 may erase the impact of whatever it did now.”

Sleep tight.

MKM Partners is out with a study tonight, showing which ETFs have outperformed during drawdowns. I’ll expand on this in a moment– after I show you their little chart that probably took them 16 hours to build.

When I was managing money, for 19 long and incredibly monotonous years, I’d often have issues with hedging accounts. Some people don’t like to short and others can’t do it because of the account type, such as retirement accounts. Some advisors raise cash and sit around like assholes, waiting for an explosion to the downside to get back in. Because they’re not members of the hall of gentlemen, Exodus, they often buy too early and end up messing everything up.

But there are ways to skin a cat. Since FINRA pretty much banned the purchase of leveraged/inverse ETFs, unless a client sends in a signed statement, UNSOLICITED, stating he’d like to partake in the FAZmobile adventures, there’s truly very few places to go.

The easy and obvious choice is TLT. When markets sell off, people buy bonds. But even when markets go up, people are buying bonds for the yield. This is truly a great time for bond traders. Another obvious choice is UUP, the U.S. dollar. King Dollars reign supreme, especially when everyone else is getting their asses kicked.

That MKM chart selected VXX, but that’s horseshit. I once made millions of dollars long VXX, back during the flash crash. It just so happened I was undergoing an endoscopy on that day, because I was paranoid and thought everything was cancer. The markets fucking collapsed while I was under general anesthetic and I had about 20%+ of my book long VXX. You can read about it here. That trade ended up great, but then I was trounced and left for dead the following year and the year after that, in my feeble attempts at repeating greatness.

Greatness is fleeting, like two ships passing in the middle of the night. If you’re fortunate enough to repeat it, consider yourself a lucky man.

Bottom line: VXX sucks.

Aside from levered ETFs, the main places to hedge are UUP, SLV, GLD, TLT and on occasion HDGE, which is a poorly managed short ETF. Most investment banks will permit the purchase of it. Check with your asshole compliance officers for approval. Over the past week, HDGE was up 4%, not too shabby considering the SPY was down 2%.

In Exodus, the ETF section breaks down the numbers. It’s especially helpful to isolate by timeframe and ETF type. The top performing leveraged ETFs, over the past week, have been UVXY (+44%), TVIX (+41%) and VIIX (+21%). The best non-VIX performer was DRIP and DWTI.

Bitcoin has taken a defensive posture. GBTC, the only publicly traded Bitcoin play, was up 16%.

Zero coupon bonds have ripped, ZROZ, higher by 2.3%. And, munis, MHD, were higher by 1.6%.

That’s pretty much it. Take those hedges off when markets get oversold and try not to miss the inflection point rally. The best way to ensure participation is via sector ETFs or buying a basket of large cap, heavily traded, stocks.

According to the U.S. Treasury, China has been selling U.S. equities, ad hoc, to the tune of 38% or $126 billion worth from July of 2015 until March of 2016.

My first reaction is China needed to raise dollars in order to deal with the money that has been fleeing from within its borders. But maybe it’s more than that? Maybe, just maybe, THEY ARE IN POSSESSION OF A FUCKING CRYSTAL BALL.

Or, perhaps the CFR informed them that stocks were to be liquidated and to board the ark. It’s noteworthy that their $1.4 trill treasury holdings only shrunk by 2% over the same time period.

“Selling some of its equities is a reasonable way of raising the cash needed to finance the big drawdown in reserves,” said Setser, a former deputy assistant secretary for international economic analysis at the Treasury.

Switching to selling stocks allows the PBOC to retain safer, more liquid assets such as Treasuries that it can unload easily in times of turmoil. Two rounds of declines in the yuan in the last 10 months spurred market volatility worldwide and led investors to monitor China’s reserves as a measure of how much of its war chest the country was burning through to combat capital flight.

Dumping equities may prove to be a savvy move, considering that the S&P 500 Index has gone 13 months without a new high on a closing basis. China, which more than doubled its holdings of U.S. stocks during the bull market that began in 2009, wouldn’t be alone among government-affiliated sellers of investments abroad. Sovereign funds from Qatar to the United Arab Emirates and Russia have been liquidating assets since crude began tumbling in 2014.

“The Chinese, or other people for that matter, are taking the view that sitting in U.S. equities is presumably quite risky, and I’m not surprised they’re shifting,” said Fredrik Nerbrand, global head of asset allocation at HSBC Bank Plc in London. “This seems like more of a generation of cash more than anything else, and probably a de-risking of their portfolio.”

Bear in mind, the Chinese still own about $200 billion in stocks. Vanguard, the largest owner of U.S. stocks in the world, has a little upwards of $370 billion invested. I’d consider one of the largest owners of U.S. stocks, liquidating to the tune of 38%, a significant event.

He likened asset prices to a cat at the top of a tree and Janet Yellen the fireman trying to rescue it.

There was a sundry of bearish bullet points in this one, almost of the bear p0rn varietal. Hey, fuckers, don’t get mad at me for posting all of this dire, grim, and world ending stuff. I am merely the middle man, passing along this ‘apocalyptic candor’ for you to digest, as you close on that great big mortgage of yours that will likely end up in foreclosure in exactly 2 years hence.

Dracula in a bow tie is up in this motherfucker.

Maybe in Princeton, where fucked up hovels sell for $500 per sq ft, there is an overshoot on the Fed’s inflation target, or my local Whole Foods that I share with Mr. Blinder. Other than that, I’d like to remind the good Vice Chairman that the deflationary vortex, consisting of $10 trillion in negative yielding bonds, is coming for him and it’s going to eat his face, while he’s still alive.

Sorry, I really digressed there for a minute.

Blinder is sounding extra hawkish in this video, especially greasy for someone who should be relaxing and enjoying his quasi-retirement.

I challenge anyone to refute anything said in this video. Bear in mind, none of this means stocks will trade down, or at least the piece of shit ones that you own. Michale Contopoulos wants all of you to BEHOLD and to view the glorious magnanimity of the ark, the only place left in the world to park cash and receive a yield.

Say hello to Mr. Yen, Mr. German Bund and Mr. Crude Oil.

Markets will be dictated by the direction of the above three. We need the yen to weaken, the bund yields to rise, and crude to spike higher or stabilize. Go draw some fancy lines on your charts and figure it out.

Over in Exodus, mastery continues, unabated. My gold positions are ripping higher and TLT continues to impress. Did I mention that it was flagged oversold just a short while ago, nailing the call to the precise day?

It’s impressive that the yen didn’t soar against the dollar today, after spiking, initially, by 0.7%. But the core issues still persist. Moreover, the singular institution (The Federal Reserve) that has been the safe keep of this market and global stability since the recovery of 2009 has been reduced to a fucking laughing stock. I knew Janet Yellen was a moron of the first magnitude the second I laid my eyes on her.

In summary, I am long TLT with 25% of assets and gold and gold miners with another 25%. The rest is in cash. I am bearish because it is my belief that we’re at a tipping point. If I’m correct, I will save many of you a fortune. If I am wrong…fuck, you know “The Fly” never loses.

I’m not fucking around. This will be my best call ever.

How can anyone buy this stock on this bullshit? The company was, obviously, rejected by Symantec–who opted to get ripped off by Bain Capital instead.

The stock is down in the 80% range and has hired the sociopaths from Morgan Stanley to help sell them to anyone who is stupid enough to buy them. So, in order to get the juices flowing again, they leak this moronic statement.

FireEye Inc. rebuffed takeover proposals from multiple parties earlier this year after hiring Morgan Stanley to field interest, according to people with knowledge of the matter.

The cyber-security company turned down at least two suitors that made offers below its expectations of $30 or more per share, the people said, asking not to be identified because the discussions were private.

What does that mean, ‘below its expectations of $30 or more’? I could’ve bid $3 for the company and have been included in this pump press release.

Listening to her speech is an exercise in futility.

Just a little side note before I delve into the yen. I said hello to a neighbor who recently had a baby. I asked him if he and his wife were going to add to the family, so to say, quizzing whether or not they had plans for another baby. His response to me was a bit surprising. He said ‘as soon as her period comes back, we are going to have another baby.’

The fuck?

The yen is trying to go down vs the dollar, now off just 0.06%, from -0.6%. This is good news for the samurai who enjoy to play suicide games with money in Japan. Overall, markets continue to churn, now higher by 56.

Crude is off by 1.3% and gold is higher, as well as bonds, so there’s that.

Yellen is now saying ‘every meeting is live.’ How can she say this with a straight face?

I’m done.

This is utterly and fantastically ridiculous. The Fed and their overpaid talking heads have been menacing the markets for months, threatening the world with the specter of a rate hike. Everyone knew that they were full of shit. But because they were so consistent with their menace, people started to believe maybe they were serious, them and their dot plot. Lo and behold, one little bad jobs number and the Fed surrendered everything they believed in.

The Fed Dot plot that was released last year, a plot and a scheme of sheer stupidity, is now at 3%–down from the original target of 4.25%.

The result of all of these eggs being smeared on their faces is the yen gaining by 0.55%% vs the dollar. The euro higher by 0.7% v the dollar. Gold is up 0.4% and bond yields are dropping and crude is down 0.5%

Equities are churning and have gone nowhere.

Bottom line: All eyes should be on the Yen. The Fed has become singularly irrelevant and are a joke, unlike the Bearded Fed of Dr. Benjamin Bernanke. On a more serious matter, watch those negative interest rates dive deeper.

ALL EYES ON THE YEN.