Saturday, January 30, 2016

The Lying Game: 100% RISK

What happens when all global risk assets fall at the same time? We're going to find out...

Japanese Central planners said they had no plans for negative interest rates, therefore hedge funds had raised their Yen longs (Dollar/Yen shorts) to four year highs. At which point they got monkey hammered on Friday. 

Via ZH: Jan. 21, 2016:

Fast forward to Friday:

"Governor Haruhiko Kuroda on Friday called time on that spurt [of Yen strengthening], announcing a negative deposit rate that none of 42 economists surveyed by Bloomberg predicted"

Which brings up the obvious question, in the global currency wars, which other Central Bank lies every day that their currency will not be devalued? China.

This is the Chinese Yuan (red) with oil.
What we see is that the PBOC controls the currency for a while at an enormous cost to currency reserves, then they let it float in 100% correlation with global risk markets, at which time shit breaks, then they control it for a while longer. Right now, we're in a "control" phase. 

The Central Bank Lying Game visualized
"The Yuan is stable. Today"

The key takeaway, is that EVERYTHING RISK is 100% correlated and wants to go lower and will...Central Banks are now resorting to lying in order to trick the markets. Friday was about the BOJ luring shorts into the Dollar/Yen to a four year high and then forcing them to all panic cover at the exact same time. A one and done strategy for asset levitation.

A most dangerous phase.