Wall Street Borrowed Japan’s Money Runs Dry
Hello Trader, A large slice of the tech rally over the past few years was bought with borrowed money. The money didn’t come from here. It came from Japan. That arrangement started wobbling a few weeks ago. The pundit class has already decided it means a crash is coming. I’m going to explain how the trade works in plain English. You’ll see the one time it actually broke the market, why I think this time runs the other direction, and how I’m positioned into next week. Here’s the mechanic. Japan has kept interest rates near zero for decades, so borrowing Yen is cheap. A trader borrows Yen, converts it to Dollars, and buys something that pays more than the loan costs. That gap is the profit. Traders call this the carry trade. It gets better when the Yen falls. You borrowed in a currency that’s losing value, so the loan