Today, no one is immune to the global stock market crash.
The Nikkei plunged 12.4%, the biggest one-day drop in history; The cumulative decline in the last three trading days is 19.55%, completely erasing the gains since the beginning of this year.
Korea's stock market fell to a halt, and then dived after restarting, with the index at one point -11.1%.
TW, Viet Nam, Indonesia, India, Australia......
What's even more difficult to top is that not only the stock market has fallen, but also safe-haven assets such as gold and silver, crude oil, grain, sugar, cotton, and virtual currencies have all fallen!
The only ones that are strong are the yen and the Switzerland franc, which are known for their safe-haven properties.
Especially the Japanese yen.
Since July 11, the dollar has fallen more than 12% against the yen.
Back then, after the Plaza Accord, the dollar fell by only 20% against the yen in three months, which is far less exaggerated than it is today.
No matter how you look at it, it's not good.
Everyone knows that the yen has raised interest rates.
01
Where the hell does the money go?
In the last two decades, especially after 2008, the whole world has been printing money like crazy.
One of the most important goals is to raise the inflation rate and avoid falling into vicious deflation.
But here's the strange thing: other economies are printing money, and prices are rising significantly; Only Japan, where prices have remained basically unchanged, has been deflationary for a long time.
According to the simplest mathematical logic: commodity price = monetary quantity / commodity quantity.
In recent years, Japan's population has not changed much, and the amount of demand for goods that can be seen as has not changed much.
Since the price has not changed much, it can only mean that the total amount of money circulating in Japan society has basically not changed.
Then the question arises: where did all the so many yen that had been printed for so many years go?
First of all, it is necessary to clarify the fact that the so-called lost 30 years are actually the 30 years in which Japan have made a lot of money overseas.
The most typical is the national foreign exchange speculation.
According to the Bank of Japan's capital circulation data survey, Japan's household capital investment in foreign exchange accounts for 63% of the comprehensive settlement between the yen and foreign currency, which is much stronger than that of financial institutions.
Japan's foreign exchange market generates 35%-40% of the world's retail foreign exchange trading volume, and countless people desperately lend yen through zero or even negative interest rates, and use the money to buy dollars.
Then wait for the dollar to rise and the yen to continue to depreciate, and then convert back to the yen to complete the arbitrage.
In the same way, you can play more money.
As we all know, since 1990, Japan has entered a 20-year bear market, and funds staying at home can only be trapped.
Taking advantage of the free convertibility of the local currency, all investors are borrowing money frantically and investing overseas to hedge the risk of asset shrinkage.
From 1996 to 2022, the scale of Japan's overseas investment increased eightfold, becoming the "world's largest foreign net worth country" for 32 consecutive years, which is why there is a saying that "Japan will be recreated overseas".
According to the Ministry of Finance of Japan, by the end of 2023, Japan's domestic GDP was 591.5 trillion yen, and its external net assets were 471.3061 trillion yen, a year-on-year increase of 12.2%.
It has been the world's largest creditor country for 33 consecutive years.
Why so much growth?
It is because of the long-term depreciation of the yen that the valuation of their overseas assets has risen for a long time when converted into yen.
In the context of the export surplus to deficit, this set of operations not only protected the domestic economic fundamentals, but also helped Japan smoothly through the entire deflationary cycle.
Why is the yen a safe-haven currency? It's because of this set of gameplay.
Japan Jin Notoy, Foreigner Noh Toy.
Whenever a good investment opportunity arises outside Japan, international capital borrows a large amount of yen, and then converts investment income into assets such as US dollars and euros, increasing leverage to pursue high returns; When there is a risk event, it will operate in reverse, convert cash into yen, and make a low return.
No matter how you operate, you can make money.
This kind of arbitrage behavior has been repeated many times in history, from the subprime mortgage crisis to the European debt crisis to United Kingdom's Brexit, international funds will pour into Japan, pushing up the yen exchange rate in a short time.
When they leave, the yen will be sold off in large quantities and immediately depreciate.
How?
For example, when China's real estate was booming, the interest rate on Japanese yen borrowed by international investment banks was only about 0.5%. And by converting these yen into dollars and lending them to Chinese real estate giants such as Evergrande and Vanke, you can directly charge 5%-10% interest.
Is there a cooler business than this?
In addition to institutions, ordinary people also play flowers.
As long as you know how to operate, you can borrow Japanese yen and exchange it for other currencies at 0 interest rate.
Then, whether it is arbitrage, you can buy bonds or speculate on stocks, and the cost is lower than directly using US dollars or RMB to directly operate.
It's the same today.
Seeing that the yen is rising and international capital is eating big meat, we definitely don't want to watch it.
With such a heavy and certain macro market, you have to participate in everything, and it is good to make some cigarette money.
There are no yen ETFs in China, and there are almost no short-selling channels, index ETFs and the like, so there is nothing to look forward to in the short term.
The only thing that ordinary people can access is small amounts of foreign exchange.
A word of caution here: don't trust any so-called forex platform!
In addition, it is illegal to speculate on foreign exchange! Illicit! Illicit!
Say the important thing three times.
However, as ordinary people and small retail investors, we can still use part of the deposit to make a difference, according to the regulations:
The annual foreign exchange purchase quota for Chinese residents is US$50,000, which is applicable to tourism, business and investment income.
50,000 US dollars, which is about 360,000 yuan.
For most people, that's enough.
Especially when the current market environment is a bit crazy, it is reasonable to allocate some funds to foreign exchange, at least the risk is less.
How does it work?
Take China Merchants Bank, which is the most commonly used as a payroll card, as an example, open the bank APP - Wealth - Cross-border Finance - Foreign Exchange Purchase - Select Currency.
Then check the application form that pops up, and then select the purpose of the funds and the amount of exchange, and the handling fee is about 4‰.
When I reacted last week, the yen was only around 0.47 against the yuan, and today it has soared above 0.5.
It's still pretty cool.
If you have a U.S. stock account, it's even cooler.
Whether you are bullish or bearish, there is a corresponding yen ETF directly, and there is no need to exchange currency at all.
For those who like to pay attention to the macro, this product should not be too friendly.
For now, it should be okay to go long the yen in the short term.
What about the long term?
When to go long and short?
02
The yen must die
As we all know, the strongest stage of Japan's economy was the 70-80s.
Correspondingly, that period was also the period when the yen was least valuable.
After World War II, United States set an exchange rate of 1:360 for Japan. In the 80s, as Japan reached its peak, this value was still around 260.
In 1985, after the United States, Japan, Germany, Britain and France signed the Plaza Accord, which forced the yen to appreciate, the dollar fell all the way from more than 300 to about 80 against the yen.
The exchange rate is rising, the purchasing power of everyone is rising, and the nominal GDP is rising, which is really cool.
However, as a major exporter, the yen is becoming more and more valuable, which means that Japan's goods are becoming more and more expensive, and the competitiveness of exports is gradually fading, and Japan companies are suffering.
It wasn't until Shinzo Abe's "water release economics" was officially implemented that Japan really began to vigorously suppress the exchange rate.
From 2012 to 2015, the dollar quickly rose from 75 to 125 against the yen, and the yen depreciated by a small half.
Correspondingly, Japan's nominal GDP naturally fell sharply.
However, Japan companies were able to save their lives.
What is the result of the survival of the enterprise? It is to preserve the national employment rate.
Why is the job market in Japan so hot recently? The declining birthrate is one thing, but the reasons for this cannot be ignored either.
Yes, Japan's GDP is still declining during the period of nominal GDP decline, including 2023, when the stock market is soaring, but the employment rate in Japan is rising.
This is very counter-intuitive, but it is true.
Over the past 20 years, Japan has been the least obvious deindustrialized country in the developed world.
In many high-end manufacturing areas, Japan is still known to be the strongest in the world.
This means that Japan companies and the Japan market are still very dependent on exports.
If you want to export well, the currency can't be too valuable.
According to Japan's Daiwa Securities, for every 1 yen depreciation of the yen against the dollar, the profits of all listed companies on the Tokyo stock market will increase by 198 billion yen.
For example, for every 1 yen depreciation of the yen against the U.S. dollar, Toyota's profit increases by about 48 billion yen, Honda's profit increases by about 10 billion yen, and Uniqlo's profit increases by about 1.2 billion yen......
More importantly, the depreciation of the yen does not prevent everyone from continuing to borrow yen.
It can not only speculate on assets in other markets, but also speculate on the stock market of your own country.
For example, Buffett's funds to buy Japan stocks are basically all borrowed.
Why can Japan's stock market rise for 10 years after 2011? It is thanks to the depreciation of the currency.
Why has the Japan stock market risen faster and faster in the last two years? It is because of the interest rate hikes in other currencies that the depreciation of the yen has accelerated.
It is clear that Japan itself wants to devalue its currency.
But, would anyone else want to?
It is obvious that from 2021 onwards, one of the two ends of the yen seems to have failed.
In the past two years, there has been an epidemic, a war, and deglobalization, and in such an extreme macro background, according to the previous logic, there should be a large amount of capital to push up the yen.
But has the yen risen? Not at all.
Except for a brief rise for a few days after two disguised interest rate hikes at the end of 2022 and the end of 2023, the yen has been running wild on the road to depreciation.
The safe-haven attribute seems to be dead.
Why have other safe-haven assets generally been speculated at sky-high prices this year? This may be one of the reasons.
Whether it is the Japan stock market, United States technology stocks, virtual currencies or other popular assets, they are actually inflated, and countless people follow suit.
If you continue to fry it up, it's not impossible.
But there is a question that needs to be understood: why does big capital make money with the whole people?
The real predators are unlikely to pursue any value investment like ordinary investors.
There is always only one law of their faith: the harvest.
You must retreat first and smash a big hole, and then enter the bottom.
Where to retreat? The Japanese yen is the best option.
This can also be seen from other aspects.
Think about it, how do we buy dollars?
It is the central bank that first collects the renminbi and then transfers the US dollars from the foreign exchange reserves to personal accounts.
By the same token, when individuals and major financial institutions borrow heavily against yen and exchange for other currencies, the Bank of Japan's foreign exchange reserves should be reduced; Whenever foreign capital buys yen, Japan's foreign exchange reserves should grow substantially.
Looking at the chart below, the scale of Japan's foreign exchange reserves has basically not changed much in recent years.
What does this mean? It shows that the yen has not flowed into the international market too much, and whether it is borrowing yen to sell or buying yen, it has always been relatively balanced.
That's weird.
Or the question: where the hell does the money go?
In a corner that most people don't see, there may really be an institution/group that replaces part of the central bank of Japan and buys yen indefinitely.
The more you depreciate, the more you buy.
When the external economy overheated, the Bank of Japan contracted its monetary policy, and cooperated with it to inject a large amount of yen, which was converted into dollars and bought other markets.
It is thus parasitic in the Japan economy, reincarnation after reincarnation, infinitely blood-sucking.
03
End
Whether it is conspiracy theories or objective viewing, Japan's interest rate hike is playing with fire.
On the one hand, as mentioned above, the appreciation of the yen hinders the healthy development of the economy, and in the long run, the gains outweigh the losses.
On the other hand, there is the imminent question, what about debt?
At the end of 2023, Japan's debt size was 1,286.45 trillion yen.
And how many M2s are there in Japan? 1,260 trillion yen.
Although the debt of the United States is also greater than M2, the dollar is the world's currency, is the yen?
A 10% appreciation of the yen is equivalent to a 10% increase in debt. I couldn't afford to pay it back, but this time it made it even worse.
Once the Japanese debt becomes a rotten debt and the credit of the Japan government collapses, then those who go to take over the yen now will be harvested, including the Bank of Japan itself.
Therefore, for Japan, the interest rate hike must be moderate, and the current situation is obviously not acceptable to them.
In the future, measures will be taken to prevent the yen from appreciating, and it is better to continue to depreciate.
Here's what they think.
I think that in those years, with the strength of Japan's industry, if it were not strangled by Europe and the United States, it would inevitably run all the way, and there was no so-called lost twenty years.
However, the invisible hand is existence.
Once Japan behaves too strongly, history will surely repeat itself, and it will definitely be hammered again.
Just like the story back then.