저자: Kevin · 외국인
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BOJ/연준 환율 개입(rate check) 가능성과 엔 캐리트레이드 청산 위험을 경고하는 영상. 2024년 8월처럼 나스닥이 13~16% 급락할 수 있으며, 일본 금리 상승과 미 국채 수익률 압력이 맞물려 있다고 주장. 일본 총선(2월 8일)과 감세 공약이 변동성 촉매. 헤지 전략으로 TLT 풋, 금·은, 트레일링 스톱, 분산 투자를 제시하고 자사 부동산 AI 앱·멤버십 홍보를 함께 진행.
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from the governor of the BOJ and that put very much the carry trade wind of the so-called carry trade. Holy smokes, I may have bought Japanese tea. But I'll be transparent. I was not expecting Japanese tea in financial markets because that's literally what we're facing right now to the point where even the Federal Reserve is starting to panic.
Let's just put it this way. See this picture on screen here? This is a prelude to our Federal Reserve intervening because of this stuff that has not happened since 2011. 14 years it's been since we've seen that form of coordinated intervention by our Federal Reserve with the Japanese central bank. So why is this happening again and what does it mean for our money?
Well, that's exactly what we're going to talk about in this video because frankly, when you look at the data, there's some setups that are a little weird. For example, data from the USF uh the US CFTC, the Commodity Futures Trading Commission. They deal with options and forex. Okay? They showed that leverage funds lifted their net short positions by 35,000 contracts in the week to January 13th.
The biggest weekly increase since May of 2015. The first rise in bearish positioning in the last 5 weeks at the same time as the yen is at the lowest level since 2024. Now, wait a second. Let's put together some of these dates here just to show you why this matters to you. Because you might be wondering, Kevin, like, I don't got a lot of time, okay?
I'm a busy man. You talk too much, Kevin. Like, just get to the point. Okay, fine. I printed it on a shirt to make it a little bit more obvious for people. Okay, look. The last time this happened where we had the lowest level in the yen since July of 24. The last time we had this kind of fall, what happened?
The NASDAQ 100 crashed 13 to 16% in about a 4-week period. In addition to that, the last time we had the Federal Reserve intervene with the Japanese currency, we were in the midst of what people feared was a double dip recession in 2011. And guess who was profiting from all those movements at the time?
Your boy Scott Bessett. Remember Scott Bessett? He used to work as a former chief investment officer at Soros Fund Management. The guy made a career leading to the bankrupting at one point, well the breaking of the Bank of England in 1992 and a bet against the yen in 2012 taking advantage of exactly these types of currency issues.
You might be saying, Kevin, what does Scott Besset at the Treasury have to do with the Fed intervening? Ah, it's where, while it's a little complicated, it makes all the sense in the world. See, even though the New York Fed might be carrying out these dollar rate checks, what you have to know is it's not actually the Fed that is guiding this or leading this.
Now the Fed can through open market operations, but usually the Fed is just a pawn on the chessboard in this case. When it comes to this sort of treasuries and currency management, the Treasury Department is usually the one that guides these forms of interventions. Scott Bessett wants everything possible to make sure we have calm in markets and we don't lead to some form of doomsday selloff that leads to layoffs and subsequently a recession and the death of Donald Trump's policies which of course would just lead to the last two years of President Trump's administration being focused on none other than impeachment which I'm not saying I'm advocating for that.
I'm not here to make a political opinion on Trump. I'm just saying that's what they're fearful of because we just saw Ted Cruz, which again, this is not to be political, say exactly that. And yeah, I mean, some people are a little upset by all these little green squares right here. These green squares, uh, they all represent all of the money that Donald Trump has made in his first year in office over a billion and a half dollars.
Of course, a lot of people are like, "Ah, well, you know, he's got his right to get a free $400 million jet from Qatar or Yugpole people on a $336 million windfall via a memecoin." Or how about $65 million from Melaniacoin? Or what about lawsuits he settled under threat that uh the FTC won't approve mergers with uh news companies?
H well, again, this is not a political video. So, it's just to say they don't want the green to end. They they don't want the flag to fall on the floor. So, they got to keep the market propped up. All right. So, we know that going in. That's obviously my opinion. They want to keep the market propped up.
But I think we can all agree with this right now. What does this actually mean, though? What is a rate check and why does it matter for our money? That's what we're going to talk about in this video because in this video, we're going to break down what's going on. Japanese carry trade situation, how all this stuff works.
It's it's a lot with currency, but I'm going to make it as simple as possible. I'm going to explain why I keep holding up this piece from the Financial Times because that is important catalyst dates for you. Then, as we get towards the end of the video, I'll talk a little bit about hedging and likely outcomes, like what do we actually think is going to occur and is this an opportunity and what should we expect in the market in 2026?
So, we'll go through all of this. Quick reminder, January 28th is my birthday. That means we've got an expiring coupon code coming up for Reinvest AI and the Meek Kevin Alpha Report. Go to meet Kevin.com or househack.com to check those out. Now, getting started. A raid check is basically when a central bank goes, "Hey yo, uh if we needed to buy a bunch of uh Japanese yen right now or start offloading a bunch of treasuries to help them facilitate this, you know, you got any inventory?
Uh you know, what are you guys pricing at?" It's kind of like, you know, there's no like swipe up on Weeble for these people. They actually have to get on the phone and call bankers and put together what are called big block trades. Just think of it kind of like you swiping up on Robin Hood. Institutions don't give a fly an F.
They're making all their money on the spread between the bid and the ask. That's what Citadel makes all their money from with well a lot of their money from with Robin Hood, right? But it's so small it doesn't matter. So, it gives opportunities for market makers to sit there and always have a stock available or an option available for you to buy or sell because it's relatively small money compared to what they have, which is billions to trillions of dollars cuz they're the government and they're rich institutions, right?
In order to make 80 160 billion trades on currencies or on bonds, you got to pick up the phone. You ain't swiping up. So Vessence got to start working to figure out all right folks what are we going to do here? This sends an early warning sign to markets that hey maybe y'all should stop shorting the Japanese yen because we're about to prop it up.
So this is where this weekend on well Friday actually we saw this instant drop in the US dollar and relative to the dollar the yen jumped instantly because people are like we might hit a short squeeze here. That's not really the biggest concern though. The biggest concern isn't the short squeeze. It's that we end up having deja vu of 2024.
If you remember August of 2024, we had the carry trade unwind. The carry trade is explain that in just a moment, something that could get hurt by this flow. If Japan sells the dollar, buys yen, it strengthens the yen. But when we strengthen the yen, we hurt all the hedge funds and life insurance companies and traders, probably not like your Japanese grandmother, probably institutions that are using 10 to 20x leverage and these people get margin called.
That's bad. So, as a quick refresher, what the heck is the carry trade? because it'd probably be useful to understand that in this context so we could actually talk about, you know, why the blowup is bad. We'll spend a brief moment on this, then we'll get into some more of these practical realities of what's happening today.
Now, what's the problem with squeezing short sellers? If you strengthen the yen, why is it bad? Let it happen. It's not going to affect us in America, is it? It probably will. Here's the thing. American hedge funds or institutions as well as Japanese life insurance companies. Typically not just your Japanese grandmother sitting around trying to trade stocks at home.
It's usually institutions. They've had the capability of borrowing really cheap in Japan for 30 years. Look at this chart. For 30 years, you have had the opportunity to go into Japan and borrow in Japan at half a percent, 1%, 1 and a.5%, 2%, whatever. This is the Japanese 10-year yield. It's half of what the US 10ear yield is.
Well, roughly. We're about 4.23 right now, so a little less than half. But the point is, you could borrow really cheaply in Japan and then go invest in American treasuries or the stock market. Just as a quick example, if you go borrow, let's say, let's call it a million dollars. Okay? So, you go borrow a million dollars in Japan and you borrow those as a million yen, we'll call them.
Uh, so 1 million borrowed in Japan, you convert that to US dollars. You go invest that into US treasuries or US stocks and you make 5%. You profit the difference. That's the whole point with that 1 million. The problem is what happens when that original 1 millen because now the Bank of Japan and the Federal Reserve are going to try to strengthen the yen and now there's a short squeeze in the yen.
So the yen gets more expensive. Well, now all of a sudden, if the yen gets 10% more expensive and you have to go back to Japan and pay off your $1 million or should I say 1 million yen loan in this case dollars. Try to skip the conversions here. Well, now all of a sudden you owe 1.1 because all your assets are over here in the United States.
So when you come back, you actually got to bring $1.1 million back to pay off that $1 million loan because the currency appreciated, got more expensive for you to pay off your debt. Best case scenario, the Japanese currency keeps going down because it makes you cheaper to pay off your debt. But that's not what the Bank of Japan or the Federal Reserve want to do right now.
They want to prop up the yen to kind of stop that bleeding and the keep stability and let the yen well the Japanese government keep printing money. It's all designed to keep the Ponzi going. Problem with this is you lead to what's called a yen unwind. So you borrow then you invest in high yield stuff like US treasuries or stocks.
You collect the difference. However, eventually when the yen rises because of intervention or otherwise, you're going to have to sell because you get margin called or you just think the cycle is over. Now, what do I mean when I say the cycle is over? Well, this is what people consider the ticking time bomb.
Now, I don't want to be, you know, Mr. Doomer here and say, "Oh, it's definitely a ticking time bomb." But the days of this cheap money are coming to an end. So the way to think about this is as for 30 years America the American stock market has had this massive tailwind. It's kind of like imagine we're you know sailing a sailboat and somebody's been behind us for 30 years blowing us our sailboat.
Well that's great. That's a tailwind supports our markets. But that wind is about uh to end. That wind is supported by money printing in Japan. But as money printing gets more expensive and dilutive in Japan, it doesn't make sense anymore to take the money and borrow in Japan at let's say 3 or 4% to invest in the United States and earn 3 or 4%.
Because now you're taking on the currency risk and you're not really getting compensated to do that. So this 30-year tailwind is starting to evaporate. The 30-year infinite money glitch is coming to an end. Now, some people call it a ticking time bomb, that it's going to happen all at once, but that's exactly what Bessant wants to try to avoid.
He's trying to avoid a sudden rush for the exits, if you will. Think about this. If the yen strengthens, traders could panic who are carry traders, right? They sell everything, stocks, bonds, whatever they have in foreign assets, and they repatriate or go back to Japan to reby the yen. The problem is that act of rebying just increases the value of the yen even more.
As you increase the value of the yen even more, you make those margin calls for people who haven't gotten out yet even worse. That's how you get a vicious cycle of contagion. And so the faster you dump the dollar, the faster you avoid more losses. If everybody thinks that rapidly, you get a market crash or at bare minimum a lot of volatility.
So that's a quick look at the mechanics. And this has happened before. It happened in August of 2024 and it could happen again. Remember in August of 24 we saw the market dump by about 16% 13 to 16% depending on where you measure from uh between uh the beginning of July and mid August. Now can this happen again?
And that's the fear that yes because the United States rarely gets involved. unique that the Federal Reserve is thinking about getting involved now, probably again because of guidance from the Treasury Department. So, Donald Trump's administration and Besset have together hinted that they actually want a weaker dollar.
Some people call this the Mara Lago accord. It's basically a way of saying, look, if the dollar is cheap relative to Chinese currencies, maybe people will buy our American crap rather than us buying all their stuff. That's classic Donald Trumpism Trumpism. He wants people to buy America. He wants people to build in America.
So if you weaken the dollar, you help this. But by weakening the dollar, there's always a ramification. And this is what I think interventionists or central planners make mistakes on. They think if they can mess with markets, dare I say manipulate markets to try to accomplish what they want. Oh, let's make America great again.
Let's make America more affordable. Let's lower the dollar. The more you do that and participate in doing that, the more you increase the risk of a carry trade blow up because you're squeezing these these institutions and hed hedge funds out. Now, you might be thinking, "But who cares? Just people in Japan, right?
That's the point." No, it's actually often people in America, American hedge funds that are going over there, borrowing over there. And so this is where things can become systemic because you have to understand this, the largest holder of American debt, which is also why Besson is really involved, Japan by a lot.
Now, European countries together are probably the largest actual holder, which you know is why Greenland and Davos wasn't exactly good because you started seeing funds in Denmark dump US treasuries and a lot of talk that maybe it's time for other countries in Europe to start diversifying away. That's not great because that European issue increases yields in the United States, makes everything more expensive.
cars, business loans, homes, credit cards, you get the idea. Higher rates, breast down growth. So, you've got Europe driving rates up, Trump tariff inflation driving rates up, geopolitical concerns driving rates up, which is exactly why we're seeing gold and silver go up. all those issues together. Add to all of this the desire by Donald Trump to make America great by getting people to manufacture in the United States leads to this Mara Lago accord which leads to potentially the carriage trade unwinding which it is unwinding.
It's just a matter of is this is going to happen all at once or slowly and peacefully, right? This could happen in a big shock like the tailwind's going away. We know it's going to unwind. The nature of it unwinding has been going on for two years. That's not a big deal. This and the Fed's intervention is what makes it a big deal now because we're coming up to a big inflection point where this might all speed up really quickly.
But again, Basson and Trump wanting to weaken the dollar just accelerates the selling of potentially these US Treasury bonds, which also again drives US rates up. So, as you can see, so far a lot of the things that Trump is doing are driving yields up. He is basically single-handedly destroying people who are going long US debt while at the same time increasing promises for deficit spending, which just drives up yields even more.
This is why we have what are called bond vigilantes. This is how the Liz Trust government collapsed. The market came in and said, "That's crazy. We're going to dump bonds. Yields skyrocket and she's out faster than a lettuce head can rot." Yeah, that actually happened. Anybody see that live stream? The live stream of the lettuce head rotting faster than her administration collapsed.
That's what happens. The bond market's very, very powerful. It can send a very strong signal to governments. And that's exactly why Bessant is all over this because he's shaking in his boots as he should be because guess who would get fired if all of a sudden the market crashed. Um Scott Besson, right?
Scott Besson is the man at the Treasury Department. Donald Trump is allergic, in my opinion. I want to be clear. I want to try to separate my my opinion from fact. My opinion is Donald Trump is allergic to the market going down and he's likely to fire good old boy Scott Bessant if he doesn't manage this correctly.
This is exactly why people fear what people say is the ticking time bomb. The ticking time bomb really looks like this. If or like the fact that intervention is happening at all or being talked about happening, right? It's not happening right now, but we think that intervention could have happened on Friday.
We'll know more. this week week if it happened in Japan and it may be about to happen from the Federal Reserve because of demands from the Treasury Department. If that's actually happening, then it's an indication to us that the problem of the carry trade cycle is probably about to get worse. This is unusual and rate checks put us, you know, halfway, I mean, again, we haven't seen rate like this sort of rate intervention in 14 years.
It puts us pretty dang close to full-on intervention, right? So, hey, we're watching foreign exchanges closely. There are strong warnings. Hey, we're going to do rate checks. This is where we are right now. Stealth intervention is where maybe on on Friday, Japan already started intervening. We don't know.
But full intervention is when they publicly announced together that they are intervening. That problem, that intervention is a problem for the carry trade and that creates that systemic risk where all of a sudden stocks go down, bonds go down, wealth gets crushed, you get into an AI winter because of capex drive drying up, no funding for GPUs, then you get layoffs and the cycle repeats.
Now, I'm not here to be doomer about this and I'm going to explain exactly how to hedge and sort of my opinion on the reality of all of this. So, we could speak normally about what we think about this. But some things to pay attention to. A lot of folks right now suggest that the number to watch is going to be60.
If you look on Friday, we hit 159 and all of a sudden it tanked. This has led some people to believe that the intervention has already started or it could just be the messaging of intervention happening. But that this happening right here, this line going down leads people in the carry trade again, the hedge funds and life insurance companies to get nervous, which then potentially leads to this if we get contagion.
Now, if we have a stable unwind and a nice slow grind down on the carry trade issue, that's fine. Then we slowly bleed this out. But it does mean we have less of the Japanese money printer supporting our stock market over the near- term. So, it basically is what I'm trying to say is a giant money printer that has been supporting us for the last 30 years is shutting down.
I think that's an easy way to look at this. I got it right. Where's our money printer? Right here. Here's our money printer. Look at this. The Japanese money printer is shutting down. And really, I think this has been going on for more than 2012, mostly because of the carry trade opportunity, but the money printing has been going on between this range.
So, the money printer goes burr. The Bank of Japan prints unlimited yen. Rates are rates are at zero or negative. Free money for everyone. Global asset prices go up because the Japanese are chasing yield. But again, not just them. It's also Americans who are going to borrow in Japan, hedge funds, right?
This has been a smart trade, right? You can't blame them for doing it. You can borrow at 0%. Why? Or or half percent. Why would you pay four or five or 6% over here? Problem now is we're actively hiking. The yen is strengthening and the carry trades are becoming unprofitable. This is the return of reality.
This is that negative tailwind going away or that positive tailwind going away. Now all of this gets worse over the next couple weeks because of this. So what is this? Okay, so in case you don't know, there's a snap election coming up. The snap election is a catalyst for us even in America. The current prime minister, PakaI, is promising tax cuts, fiscal stimulus, expanding debt, and her goal is to drive up wages.
You just don't have enough people in Japan who are skilled for the jobs that are needed. So you actually do drive up wages artificially and too rapidly, which isn't good because it leads to inflation. You lead to too much inflation, the bond market says, "Uh uh uh, all of a sudden we're going to see a spike in yields and you're back to a Liz Trust moment, which isn't great.
But between now and then, people dump the yen because they don't want to get diluted thanks to all the money printing. That's why the Bank of Japan wants to step in. Now, to try to get to like a bottom of that, Fidelity, an investor, a fund manager at Fidelity International, Mike Riddle, says giant Japanese investors are getting increasingly incentivized to sell their overseas holdings and bring the money back home.
And this is starting to hurt longerdated global bonds everywhere else in the world. It's not just bonds, it's also assets. That's why also per the Financial Times, you have an economist from Neora Research here saying that this spending in Japan will eventually drag the economy down because everything's getting more expensive in Japan.
And these snap elections that are being held on February 8th are going to be an opportunity for the Japanese people to choose between Tekkai, if she wins, you're going to get more stimulus, more spending, yields up because of the bond vigilantes going, "Oh no, this is not sustainable." And then what?
Well, potentially again more intervention required, Japanese carry trade unwinding more because now yields are going up, carry trade's dead. How quickly it happens matter. February 8th is a catalyst date. But markets are going to react between now and February 8th because they don't want to be caught off guard.
We don't know who's going to win in Japan. And so people prepare. They hedge against this. Talk about hedging in just a moment. If the opposition to Tekkai wins, well, then you'll probably have more rate increases and this goal to control spending, which is probably going to slow down growth in Japan.
Uh, and the goal is that rates can eventually come down. But first, they got to prove that they can bring inflation down, which could take years. So really, no matter which way you slice it, that Japanese carry trade could actually get worse before it gets better. And this is kind of the warning that you see in America as well, where people say, you know, we also have some pretty crazy debt in America.
Maybe that's why our long-term bond yields, the 10-year for example, keeps going up. And yeah, it's true, but it's nowhere near as bad here as it is in Japan. Look at Japan. Japan, compared to the United States, which is right here, the United States at 124% debt to GDP. So our debt is about 24% more than our GDP.
Japan has debt that's about d well it's more than double their GDP. So that's because they've been money printing for 30 years. It's crazy, but it makes sense. So how do you hedge against this? Now I want to be clear, this is not personalized financial advice, but this is how often people will hedge against this.
So, first of all, we know that bonds aren't safe, stocks aren't safe, and short-term volatility spikes between now and the election and the complete unwinding eventually of this carry trade. Both bonds and stocks suffer over time from the unwind of this carry trade. The problem is trying to time it, and that's hard because just because you're taking the tailwind away doesn't mean good earnings in the US can't prop up the economy.
So, in my opinion, that does make buying like SQ or puts on TLT or puts on the Q's in a NASDAQ 100 a little harder to time. And that's where I really like Warren Buffett's quote when he talks about cash as a position, right? Warren Buffett says that cash is really a call option on everything. It gives you that optionality and it makes sure that you don't get margin called.
Now, there's more than that though. You could also diversify. This is always an easy way to do it. The problem is bonds are probably a disgusting thing to diversify into right now geopolitically what you're seeing in Europe and otherwise. So, it's a tough time to advocate for buying bonds. It's actually feels like a better time to sell bonds, right?
Because of a lot of this Trump interventionism that's just hurting long-term yields. So, bonds don't seem like a great choice. Cash is wonderful, but it's freaking boring. And people don't want to hear buy cash or or or you know hodddle cash. They want something to invest in. That's where I personally like diversifying into what I think are fundamentally inexpensive stocks through the volatility.
You know, I've talked about a few of these uh like as an example. One of the ones uh I have I have a list of 11 stocks in our alpha membership. We've been talking about this a lot uh in the alpha report which we release every day before the market opens. And in it, we have a list of our top 11 stocks.
One of them is a long bet on this company called Figure, which we bought at IPO, and it's done phenomenally. You know, it's basically doubled since IPO, which is fantastic. It ran as much as 78 bucks before having a little bit of sort of, you know, euphoric pull back. Uh, you know, so much euphoria here.
It's come back a little bit, but it's still at a double in this position, which is freaking remarkable. Now, that doesn't mean everything can always double like this, but I actually think that you'll see more opportunities to enter a stock like this, which I think long-term has a lot of potential. Not personalized advice, of course, because of the volatility coming up.
So that means strategically for me I want to sit kind of like I'm sniping cash ready and then if there are good dips that come because of this carry trade drama boom snip in those dips but I might be in a different situation than you. My startup has 30% of its money in cash myself. I have no personal debt.
My startup has no bank debt. These are all very important. So they give us the opportunity to kind of sit there and snipe because we've been raising cash for years. Oh, this makes sense because there are a lot of reasons to, you know, make sure you're prepared for a potential rainy day. That doesn't mean you always want to sit around 100% in cash because then you're going to miss out.
And that's also why we've been diversifying over to this. I'm going to show you a live example of this because a lot of people have been asking for it. They're like, "Kevin, how does this thing actually work?" So, this is actually the software super early beta version of what we're creating. And you go in, you throw in zip codes, you know, for whatever you want.
And as you throw in zip codes for this app, which is available now, you can download it. Just go to reinvest.co househack.com. Same thing. You could download it as well. But anyway, if I then go to deals, so I pop in a zip code, I go to deals, it'll show me deals rate ranked basically by what's most likely to make me a lot of money.
Now, we're still early in this beta. That's because we don't have the net worth boost feature in the app yet, but that creates an exciting opportunity for people to get in on this early. So, if you want to get in on this early, in my opinion, go to househack.com, consider buying the app. We do have a fund raise going on.
So, if you're looking to diversify away from some of the craziness of the stock market, remember, you can consider diversifying over here. Read the offering circular. But we did briefly extend the fund raise extension uh until February 6th at 11:59 p.m. I will personally be investing an additional $1 million into this funding round.
And I personally couldn't be more excited about this app, which is actually like live now. We're really excited about it because we can go through and look at opportunities sorted by where the most money is to be made. In my opinion, this streamlines like imagine this. If you could snipe deals across the United States in real estate, be like, I can make the most money on that house and that house with a snap of your finger, it's kind of invaluable practical AI.
It's actual visionbased intelligence that is helping us pull this off, which is really cool. So, diversifying is obviously one strategy, but what's another thing that we could potentially look at? Well, I've got a list. So, there are a few things to look at. We talked about cash. We talked about diversification.
Those are I don't really want to say they're the more boring ones, but they're potentially a little bit more boring. Here's sort of a list. So, I call it the hedging playbook, right? Bonds aren't safe. Stocks aren't safe. I When we say stocks aren't safe, I just want to be clear to say that stocks are probably going to have some down bouts.
That doesn't mean they're not safe. It just means you have to be careful about your exposure to them. Puts on TLTQs, those could be a short-term insurance policy. Donald Trump really killed the idea of calls on TLT, for example. Gold, I would only be interested in gold and silver at this point at $5,000 and silver at 100, which we've been calling also in our alpha report.
If you want to join the alpha, you could do that meek.com. Those I think you want to set trailing stops for. Uh we'll talk about trailing stops in just a moment. And then of course um you know watch for Japanese traders dumping our capex trades in America. That could be Oracle, that could be Nvidia, that could be Intel, whatever.
And if you have cash, buy the dip and diversify. That's the goal is diversification by the dip. Now, what do I mean when I talk about trailing stops? Because, you know, a lot of people have been asking me, Kevin, like, how do I actually pull that off? So, let's talk about that. Trailing stops are a way to essentially automate your exit.
The number one thing people get wrong on this though is they set their spread too low and they just get stopped out right away. They never reby and they miss the upside. That's a downside of this trailing stop. Second downside is it expires. Usually, depending on your broker, have to renew it every 30, 60, 90 days.
Basically, the way this works is you set a stop. So you might, let's say you get in over here at $100, the blue line, and then you say, "Hey, if the stock goes down by 15%, sell." Okay? So now all of a sudden the stock rallies to let's say 115, $150, and then the stock moves down to 127.5. Boom. You sell because there's a potential reversal to the downside.
Now you're still up 27.5 because you trailed up. You just basically put a floor. So, if there's for some reason some kind of move to the downside, you could get out. It doesn't mean you stay out. It just protects you from potentially larger losses more rapidly. Unless, of course, you just have a one-day drop and things bounce back and you're not quick enough.
Risks with everything. Right now, what do we practically think of the bottom line of all of this? Okay, so here are some notes from institutional investors. Institutions are paying attention. They literally say, and I quote, "Watching Japanese bond yields. While geopolitical tensions simmer on the back burner, a rise in Japanese bond yields is a potential threat to the global rally in risk assets as Japan is a key source of global liquidity.
This week's selloff in bonds, which also push yields higher in the US, were triggered about the fiscal deficit, about this lady's plan to suspend consumption taxes for 2 years and the snap elections on Feb 8th. In other words, it's a catalyst shift. It's a moment. We expect the Bank of Japan to intervene.
Now, they published this before we saw a note that the United States Federal Reserve was thinking about intervening as well. And this is just a hint because of that rate check. Okay, that's cool. But that piece being published before that information is kind of critical because it means ah crap this could actually be getting worse before it gets better.
That's not great. So that's why I say buckle up, right? Buckle up for that volatility. Diversify. Okay. Big fan. Now what else? They also say that Japanese pension funds are all are generally overfunded. In other words, the pension funds should be okay. We do though expect a rise of volatility ahead of this election.
They don't think the risk of like a big market selloff contagion is high, but it's possible. It's possible because if Bessant and Japan mismanage this and they cause a short squeeze, the carry trade gets amplified rapidly. Now, so far, while the market is paying attention to the Japanese carry trade, Bank of America's global uh you know, fund manager survey indicates it's not exactly the highest of risks.
According to fund managers, you can see in January 2026, fund managers only gave Japanese government debt a 9% concern. Whereas private equity or capex of AI actually had a higher concern. Both of those together at 29% and 35 or sorry 39% and 35% that's a lot that's 74% had a much higher likelihood of causing quote what is the most likely source of a systemic credit event but I think what they forget is that the Japanese carry trade unwinding could trigger a pullback in private credit which triggers a pullback in capex.
So it's not one of these, it's all of these that you have to be careful of. This is why we talk about it. It's not like it's just one thing. It's all of them. And you have to know we are going through a cycle of regime change. Look at this very closely. This is what I mean by regime change. These are global central bank rates, right?
The US is right there at 3.5. Japan's at 75. Everybody is cutting. Everybody's going down except for Japan. Japan is going up. That is why the carry trade will come to an end with Japan. Now it's just a matter of is it going to be orderly or not? And since we've just seen the biggest weakening in the yen in months, the case for intervention is rising, which again leads to that short squeeze combined with US Treasury problems, expect volatility.
Again, I'm not here to say that all of a sudden we're one out of 10 on the Bear Bull scale. Sell everything, run for the exits. I'm here to say that this is a risk factor that's going to lead a lot of people to go, "Oh, damn. I didn't think the Japanese had that much impact on the United States." But again, when I say Japanese, it's confusing because it's not the Japanese.
It's the Japanese and American hedge funds and pension funds and other institutions plus obviously some traders who are taking advantage of the carry trade. Now, we will have a game plan every single morning that the market is open. We've got a big coupon expiration coming up for the membership at meetke.com.
Uh that is going to be on January 28th. That's when we'll have a coupon expiration. That is also when we'll have a coupon expiration for the reinvest AI. So if you want that real estate artificial intelligence, it's out now or that Meet Kevin membership, go to houseack.com, go to meet Kevin.com, get that software, join. You can get lifetime access right now. .
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