Japan *JUST* Crashed the *GLOBAL* Stock Market.

why are markets absolutely collapsing

what is this Japanese carry trade we're

going to talk about that and explain it

in this video so you fully understand

the Japanese carry trade everybody keeps

talking about and why Japan could be

leading markets to crash in America of

course it could also be that we are now

under an imminent threat of an Iranian

and Hezbollah Leed attack against Israel

which threatens to be larger than

anything Israel has ever seen before

with Israel now warning that Israelis

could be without power for 3 days as

they face a multi-pronged attack

expected to begin within the next 24

hours if not tonight then tomorrow

night just crazy world that we're in or

is it just that the US might be going

into a recession or D all of the above H

well in this video we're going to start

by talking about the Japanese carry

trade and trying to explain it

now let's be clear right at the start

the Japanese stock market ain't doing

too well just in the last 12 hours the

Japanese Market well let's just put it

this way their topics index circuit

breaker hit no more trading for a period

of time bond market circuit breaker hit

no more trading for a period of time

South Korea in sympathy for what's going

on in Japan just decided you know what

nobody's allowed to sell after The

Cosby's down

4.6% zoom in on Japan for a moment nay

down over 65% the Nay 225 Nintendo

stocks down 11.3% but who cares about

Nintendo what are the banks doing in

Japan oh the second largest bank in the

country down 15.5% the largest bank in

the country like the equivalent of a JP

Morgan down

12.2% well at least Gold's up real gold

not digital gold because bitcoin's down

11% at the down 21% in the overnight

trading app Robin Hood you could look at

Tesla down 6% Apple down 6.9% Nvidia

down 6.75% and all Futures are red LED

by no joke small caps and NASDAQ 100 and

you've got the S&P down 1.42% Dow future

is also down 77% so this just a quick

little rundown on what the heck is going

on here this is a lot of pain why what

is going on well let's start with the

carry trade let's explain this so

everybody knows that the entire world

has been facing a lot of

inflation except for Japan they've

basically stagnated since the 90s and

they've faced issues of too much

deflation maybe they're not having

enough babies maybe they're not having

enough

Innovation who knows but they did not

have the inflation problem of the rest

of the world this meant that while Japan

Japan was actually lowering rates and

had negative interest rates everyone

else was Raising interest rates now this

does something very interesting because

when interest rates go up in let's say

the United States it becomes more

attractive to buy the 10-year treasury

bond so for example if the 10year

treasury is trading for

3.76% just like it is now and the

Japanese 10 years trading for

82% which Bond would you rather have the

10year debt paying you 3.7% guaranteed

and backed by the full faith and credit

of the US or the Japanese 10e paying you

just

82% it's a no-brainer an absolute

no-brainer you're going to buy the US

Bond and if you have any other currency

you're going to sell that other currency

you're going to go buy US Dollars and

you're going to go invest in that us

bond this creates a lot of selling

pressure on currencies like the Japanese

Yen so the Japanese Yen goes down in

value which enables something unique

called the carry trade okay now you're

going to have to roll with me on this

one because it's a little complicated

but I'm going to make it as simple as

possible okay here's an example of what

a carry trade looks like and and let's

just start extremely simple let's just

say right now you want to take on a

margin loan on stocks in America

it might cost you

65% in the US but what if you could go

to Japan and in Japan you could borrow

at

1.5% oh well that's a lot more desirable

why don't I go borrow in Japan and then

go invest that money in either us

treasuries which are literally yielding

more than what I'm paying on my debt or

how about mag six stock or mag s stocks

whatever you want right mag 6 mag 7 the

biggest stocks in America buy some

Nvidia buy the diot some Tesla whatever

this is essentially an Arbitrage of

interest rates that's what this all

comes down to now how does this go wrong

well first of all to understand how it

goes wrong let's understand how it goes

right let's say I borrow oodles and

Boodles of money in Japan and that

oodles and nooodles just to make math

simple right now we're just going to

call it $11,000 I go borrow $11,000 or

I'll call it ,000 Yen uh $1,000 worth of

Yen that's what we'll call it

$1,000 uh worth of uh Japanese Yen and

I'm going to take that money and I'm

going to use it to go buy us assets well

if the Japanese Yen keeps going down in

value it's actually going to be a lot

cheaper for me to pay off that money

like let's say I take that ,000 and I

put it into us treasuries over here well

every single year I'm getting my 3 or 5%

yield on money markets or treasuries

maybe even a little bit more so maybe

let's say over here I've all of a sudden

after a year got 1,050 bucks and the

Japanese Yen fell 20% in value so I

actually only have to pay back $800

worth of Yen over here this is great I

picked up 50 bucks very cheaply in

America so I'm plus 5050 over here and I

can now pay that Yen back with $200

fewer dollars so I pick up $200 over

here let's go baby I just made 250 bucks

25% chit Ching investing on the fact

that the Japanese yen is going down and

guess what the Japanese Yen usually goes

does like what is the Japanese Yen

usually do well because they're facing

deflation and stagnation it's usually

either stable

or it goes down with the exception of

very rare cases the Japanese Yen usually

just loses lots of money it's just kind

of unfortunately the way it's worked so

for example if you pull up the US uh to

uh Japanese Yen valuation over here you

can see there are very rare cases where

the Japanese Yen spikes once over here

in '95 over here in 2011 you can see

over here the Yen's actually been

plummeting so it's actually made the the

carry trade more desirable I mean you've

dropped 27% in the value of the Yen so

that example I just gave on the iPad

over here this has been printing money

it's been absolutely minting minting

minting yeah to close this door I here

the children again hold on a sec double

I got two two sound doors over there

let's close this stuff anyway so you've

been printing money doing this carry

trade because the Japanese y just go

down down down so people keep adding to

their bets adding to their bets adding

to their bets adding the bets okay cool

like you're winning that's wonderful

like Kevin what's wrong with this ah yes

yes there has to be a downside of any

trade right of course there is so let's

say you decided to take your $1,000 over

uh in Japan so you're going to borrow

$1,000 worth of uh Japanese Yen okay

so we take our $1,000 over here $1,000

worth of Japanese Y and now what we're

going to do is we're going to invest

that into the dip on Tesla okay and

let's just say we bought Tesla just for

Giggles because this could be anything

okay you're like man Tesla's going to

the Moon baby I'mma buy it at

270 and then of course you know Elon rug

pulls you and you know delays the robo

taxi event whatever okay we we don't you

put any placeholder there this is not a

Tesla video is could be anything it

could be Nvidia at darn things down like

25% from its peak you know it could be

Tesla obviously you're going to be down

about 30ish per it does not matter what

it is or you have a leverag position

doesn't matter what it is let's go with

you buy Tesla at 270 okay you know what

forget even what price it is you just

put $11,000 into Tesla stock right here

because you borrowed $1,000 worth of Yen

you put it all into Tesla stock but wait

a minute

if you put $1,000 into a broker in

America why are you just going to use

$11,000 come on man reg te margin 50%

down I get to buy

$2,000 of Tesla with

$1,000 of a deposit right that is a

typical margin Loan in America so now I

borrowed the money cheap over here the

money that I borrowed very cheaply in

Japan I'm now going to leverage again in

the US Stock Market but why was this

matter I mean the Japanese currency

keeps devaluing everything should be

fine oh but wait then all of a sudden

Japan says hey look everyone we finally

got it up let's raise interest rates

because inflation is finally moving up

uh what yes this is exactly what Japan

did last week they raised interest rates

25 basis points and they were already at

positive so they just went up another 25

BPS and what happens when countries

raise their interest rates that's right

their bonds become more desirable

especially since Japan is now going up

and everybody else is cutting so you're

getting more of a yield in Japan so what

all of a sudden happens to the value of

the US dollar when yields go down oh the

dollar goes down the Japanese Yen goes

up which exacerbates the spread because

you're going in both

directions and so oh over the last month

so over the last 30 days the Japanese

Yen has appreciated

10% o o oh but wait a minute I borrowed

$1,000 worth of Yen over here how many

dollars do I need now to repay that loan

in Japan well now because it's 10% more

expensive I need

$1,100 to repay my loan in Japan no

problem no problem what's my Tesla stock

doing oh God it's down

30% and I'm on margin

oh okay so just to make math a little

fun here actually the example I did is I

went with 35% so let's assume it's down

35% that's down

$700 on

$22,000 so that means all of a sudden I

have

$1,300 left over here but wait a minute

I'm such a dgen i also borrowed over

here so I actually only have $300 of

equity $300 of equity out of the

$2,000 of stock I bought is

15% oh who's that calling oh it's Mr

margin calling a now you get liquidated

sure you get your $300 back but you got

liquidated which contributes to more

selling pressure in the United States

oh no but wait a minute bro now I only

have $300 left and I have to pay an a an

$1,100 loan off in Japan and now Japan

is going hey bro margin's calling and

you're like what why because sir you

have $300 of collateral left on the

$1,100 loan you just took out because we

could see what you did with your money

we want our money back you're at margin

levels and you're like okay guess I'm

filing BK and getting host boom now you

have to either borrow more from

somewhere else to pay off that $1,100

loan or you're defaulting and you're

destroying the banks which now it

totally makes sense why the banks are

collapsing in Japan well their stock

valuations are collapsing because they

are getting burned over here on their

debt as well so they burn us in our

stock market and they get and they burn

the banks over over there now how big is

this trade well nobody really knows

Kathy Wood thinks it could be as much as

10% of the United States stock market

that's massive like as much as1

trillion of Leverage in all risk assets

risk assets crypto stocks doesn't matter

okay this is always funny because I talk

about this in my course member live

streams and people are like oh you know

sometimes people are like oh but Kev

crypto is not a a a risk asset like it

is the definition of risk asset why do

you think gold is up and bitcoin's down

11% right now your boy Kevin by the way

uh let's just say this is not an

advertisement or anything but I've been

talking about this for for a couple

weeks now since probably since about

July 11th like everything really hit the

fan but um on on the fund I manage we're

NE we're like 5% short Bitcoin I wish I

had more short Bitcoin right now because

that's going to do really freaking well

tomorrow remember if you want any might

buy sell alerts or anything

meetkevin.com you can learn everything

in the courses I'm building your with

you should be part of the course member

live streams because we talk about this

kind of stuff on a daily basis or even

chat in our Discord server uh but anyway

what is next well maybe Japan can just

print more money right and they could

sort of solve this issue right well so

far the uh Japanese cabinet is saying

they're watching Market moves with a

sense of urgency and uh don't worry

share prices are determined by

determined by a variet of forces and um

yeah we're just going to keep

watching that doesn't really inspire a

lot of confidence so what about the

money printing part Kevin like when when

are they just going to turn the printer

on again and make all this pain go away

ah okay well in order to understand that

we have to consider what Japan's debt to

GDP is and compare it to where everybody

else is in the rest of the world so we

have a lot of debt in the United States

we know a little over 100% here Japan's

debt to GDP sits around 263

per. that is higher than Venezuela and

it takes the number one spot for being

the most indebted country in the world

as it compares to GDP that's pretty

pathetic so I don't think they're

turning on the money printer anytime

soon because they freaking

can't add to this the fact that an

attack by Iran is likely imminent and

add to this that people are pricing in

re recession fears in America and you've

got a whole heck a lot of uncertainty

now does that necessarily mean that the

United States stock Market is going to

sell off on Monday well the Futures

Market says so but that was during the

Japanese stock market open maybe cooler

heads will prevail and everything will

be hunky dory in the morning everything

will start going up again we'll have a

nice little rebound and maybe we'll open

up to just a little byy the dip

opportunity and nothing else to see here

everything's fine or things will

completely panic and everybody will take

every opportunity at a bounce just to

sell more stock because this is a

sinking ship and everybody sees the exit

over there well according to a poll I

ran on X the ladder doesn't seem to be

the big priority in fact according to a

poll I ran on X which you should follow

me there at real meet Kevin with

6,761 results 44.6% of you said yes

Kevin by the dip 34.3% of you said I'm

holding and only 21.2% of you suggested

that you were selling also when I

suggested that Bitcoin might be a risk

asset somebody replied to me and said

but Kevin they're investing in Bitcoin

for the

tech right that's going to help save you

in these Market moves it won't anyway so

I'm curious what do you all think what

are you all going to do I will make the

argument that probably the safest

investment right now is Cash followed by

treasury bonds which might continue to

collapse in yields now you might be

thinking oh but Kevin the Federal

Reserve is going to come bail us out

right well this is where you have to ask

yourself what does the FED care more

about avoiding recession or avoiding

inflation H see I ran that poll as well

and the vast majority of people said oh

the the FED wants to avoid a recession

and to that I

say I'm out of a drink you're wrong the

FED cares way more about destroying

inflation because inflation ends

countries recessions are healthy so

buckle up buckle up the FED ain't coming

to bail you out anytime soon now if you

want to know exactly what I'm trading

make sure you're part of those courses

over at Meek kevin.com always make sure

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Clan I don't know what yall waiting for

we got a great Clan going on here okay

the mkk I mean the MKC it's great come

join thank you so much for watching and

we'll see you all in the next one

goodbye and good luck by the way if any

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life see you all

bye these things that you told us here I

feel like nobody else knows about this

we'll we'll try a little advertising and

see how it goes congratulations man you

have done so much people love you people

look up to you Kevin P there financial

analyst and YouTuber meet Kevin always

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