CARRY TRADE CARNAGE

I actually had a heckler on twitter challenge me on the carry trade relationship to stocks.

Japan is sinking, as if one of their state of the art nuclear reactors melted down. The yen carry trade unravel is in full suicide mode and bankers are eating their shirts tonight.

US futs are getting hammered, now down more than 8.

Track NIKKEI at top of iBC, along with futures and other fine things.

Here’s a live stream of CNBC. Shhh, don’t tell anyone.

Call me Perma-Long. I’ve walked this path before and it always ends the same: major melt up, punching the clocks off the faces of bears.

I will most likely sell everything tomorrow, being that I just made that declaration today. But, at this moment in time, I feel as if the sell off is shallow and the yen will soon start to tumble again.

God save us if gold becomes a safe haven. Like I said in a pervious post, I don’t know where the money is going. When stocks sell off, indadvertedly, dollars are purchased via money market accounts, which sends the dollar higher. But we’ve been getting hit with the dollar and bonds lower. It makes no sense.

Coffee was down 5% today. Over the past 2 years, coffee is down nearly 65%! God damn it, why wasn’t I looking at that, then buying GMCR, SBUX and SJM too?

Same goes with corn. When corn was up, chicken prices soared, hurting the shares of PPC, SAFM and BWLD. Now look at them.

The good news, from a macro point of view, input prices are markedly lower. Cocoa and sugar getting hit is good for HSY. The pressure is coming off of our corporations. Now if only oil can take a 40% hit, maybe FRO can live a little. 67% of FRO’s expenses are fuel. The shipping industry needs that Brent crude price to get hit hard.

I don’t feel like blogging after watching, for the second consecutive day, big gains whither away. Yesterday my 2% gain reduced to nothing, a flat day. And today, for the ultimate punch to the scrotum, a very early 2% gain has morphed into a 2% loss.

Unlike past market routs, there isn’t any place to hide. This is unique, in that regard.

Everything is lower, even the dollar.

Something has to give. I don’t know where all of the money is going; but I am unable to track it, so far.

Of course this happens after I jump back into the market, 100% invested.

Let the dreadful drawdowns begin.

FXY up, SPY down.

All eyes on the yen carry trade.

Click here for intra-day correlation chart.

The after party has begun. It might last all day.

I’m in for a few blocks under $6.

Please go home and be sure to take your stuff with you.

The higher rates go (TLT), the higher the anxiety. Therefore, rallies are sold.

I am sure the whipsaw will continue.

Bring your own $100 bills.

Markets have decided to stop going lower. Bernanke was seen extinguishing his blunt on someone’s face this morning.

Prepare for hedonism.

And, finally, let’s hope it lasts.

There has been a major dislocation in the FX markets in recent weeks. Ask our currency expert, Forex Kong.

The result of these disruptions have led to lower stocks in Asia, flat in the US, however. There is a lot of fear, stemming from Thailand to Turkey. Yet, US markets have been blowing marijuana smoke in the faces of prognosticators.

A very interesting trend, that has be in place for more than 2 years now, is the brutal bear in commodities. Jim “the bowed tie” Rogers is completely without penis now, lollygagging like an idiot in the orient–teaching his spoiled brats mandarin.

There isn’t money to be made in corn, even though central banks are printing money ad nauseum. Why is that? Everyone has so much money, shouldn’t they be buying farms?

I don’t know how we got hoodwinked into believing the inflation myth. There isn’t wage inflation, just the asset variety. The money that is being made available by the fed is being used to purchase stocks and real estate, evidenced by the facts.

Coffee is down 60% over the past two years.

Natural gas is down almost 60%.

Coal and uranium are off by more than 45%.

Silver, lithium, nickel, sugar, cotton, copper and cocoa are all down more than 25%.

These aren’t corrections, but annihilations.

The above chart is of the yen. It is the cog that keeps the risk train  rolling. Banks borrow yen to buy assets. When the yen goes lower and the asset they’ve purchased rises, they make money. However, if the yen starts to go up while assets are flat to down, forced sales happen. This is a very simple explanation of how the yen carry trade might hurt global markets. It’s real. Be scared of it.

Overall, currencies have been all over the place, with most of the strength found in two risk off currencies: Swiss Francs and Japanese Yen.

In my opinion, the commodity trade isn’t coming back. It can be traded; but forget about CLF hitting all time highs again. US markets will continue to rise, if housing keeps its upward trajectory and the Fed and Bank of Japan keep reflating. We can survive without the Fed and BOJ, but there will be a period of adjustment, which means stocks will trade lower. Eventually, we’ll get off the Fed’s crackpipe, but only after employment has improved.

They told you 6.5% is their mark. Why don’t you believe them?

Buy the dips, unless the yen carry trade unravels. If that happens, buy VXX in size.

Serious volatility is scaring the plebs out from their positions. I, on the other hand, am up 0.4% thanks to IMMR and AMBA. But there are dislocations in the credit markets, municipal and sovereign. Also, the REITs continue to get blasted and commodities are death.

Below is a chart of the yen, which looks to be breaking out–not a good sign for global liquidity, a source of funds for just about everyone.

Here are the REITs.

My risk appetite index is at new lows.

The dollar is getting slaughtered, all the while TLT is going lower. That makes no sense at all.

Italian and Spanish bonds are creeping higher again.

If I wasn’t inclined to talk my book, I’d suggest being cautious here. With mysteries abound and the market good and fat, one is bound to get killed. On the other hand, volatility has been dead for some time now and whenever the market looks like it’s ready to rollover, Ben Bernanke rolls the bears into his philly blunt and smokes them.

For now, I am 100% invested.