Sunday, January 31, 2016

The Biggest Short

Deja Vu of 2008, Wall Street is going ALL IN betting on global financial collapse.  

China Capital Outflows Rise To Estimated $1 Trillion in 2015
China's currency reserves extend slump 

ZH: Jan. 31, 2016

"Kyle Bass’s Hayman Capital Management has sold off the bulk of its investments in stocks, commodities and bonds so it can focus on shorting Asian currencies, including the yuan and the Hong Kong dollar."

Yuan devaluation speculators just got a MASSIVE boost from the Bank of Japan on Friday...

"China will have no choice but to further devalue its currency as CNYJPY rose 75% from 2011 to 2015 and fell by only 12% since June. Further devaluation is inevitable and its impact on global markets will be negative, including the rising yen."

Meanwhile, as I showed earlier, a bet against Yuan is a bet against commodities:

"Every 1% drop in currency leads to 0.6% loss in raw materials"

Also helping the one-way bet is the relentless weakening in the Chinese economy...

Jan. 31, 2016

In summary, global speculators are going ALL IN against the Yuan which goes down or remains "stable", but can never go up. It is a one-way bet. However, it's the one-way bet that is directly correlated to every risk asset on the entire planet. So when it gives way, so does everything else...

Yuan with S&P:

Aside from U.S. stocks and commodities, the closest longer-term correlation I can find is to Aussie/Yen. So, basically the Yuan is devaluing in line with global carry trades, meaning that Yuan devaluation speculators will get paid sooner rather than later...Because via competitive devaluations, Central Banks are now competing for who can obliterate Globalization the fastest...the Bank of Japan just accelerated Yuan outflow by making China less competitive.

"RISK OFF" Visualized
"The Yuan is stable"
Yuan (red) with Aussie/Yen (black):