The Yen Carry Trade: Is The Worst Behind Us?
Joe Saluzzi, Partner at Themis Trading joined Benzinga's Premarket Prep team to give his outlook on the stability of the markets after last Monday's volatility involving the Yen carry trade.
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00:00What were your customers saying during last Monday?
00:03Let's take us back a week from today.
00:04Were people calling like nervous?
00:06Were people nervous about this carry trade?
00:08Like how big it can get?
00:09How ugly this can get?
00:10Or was it more like calm, you know, natured here?
00:13What were the institutional customers saying?
00:15Yeah, you know, we did not hear any panic.
00:17We did not hear any, you know, calls like that at all.
00:20I've yet to meet a yen carry trader, by the way.
00:22I don't know if you guys have met one.
00:24That's what I was wondering.
00:25Is everybody, all these institutions just, you know,
00:26loading up on free yen and just investing in NVIDIA.
00:29Is that what's happened here?
00:31Who are these yen carry traders?
00:32Where do they live?
00:33Where are their mansions?
00:34I want to see who these people are, but no, not at all.
00:37I, we didn't, you know, our clients, you know,
00:39they range from, you know, hedge funds to big mutual funds,
00:41to pension funds, and so all the entire gamut.
00:44And we did not hear any panic calls.
00:46You know, we certainly were trading.
00:48It wasn't anything like a panic type style trading,
00:51or let's just say, you know, 2008, 2009,
00:53which was a whole different world.
00:55I mean, this is nothing
00:55like the great financial crisis, right?
00:57But, you know, people are concerned,
00:59and obviously there was more things going on
01:01than just that carry trade,
01:02and, you know, whether it's geopolitical,
01:04and, you know, what's the Fed going to do?
01:06And this is an ongoing story.
01:07There's no end point here.
01:09This continues.
01:10This week, we'll hear more economic numbers.
01:12We'll get CPI, PPI.
01:13They'll talk about next week at Jackson Hole.
01:15It goes on, right?
01:17The story goes on,
01:18and until we see something, you know, rapidly deteriorating,
01:21no, I think there's, in fact, this is a normal correction.
01:23And the guys at Bereni and Associates,
01:26they put some really good numbers out,
01:27and the average correction since 1980 is 13.6%
01:31in the last 90 days,
01:32so we're kind of right in the middle of it.
01:34So do you think the worst is behind us here, Joe?
01:36Like, what are your thoughts?
01:37You know, we won't hold you to it,
01:38but, you know, we are a stock calling show,
01:40and we try to call the overall market here.
01:43Do you feel like last Monday, the worst is behind us here,
01:45or do you think, you know, this all, you know,
01:47comes to roost here again,
01:48and maybe this carry trade was only the tip of the iceberg?
01:52I don't, yeah, I didn't see anything big news, you know.
01:55Was there a, if the banks were involved,
01:57if there's a big, major credit crisis going on,
02:00that's a whole different story, right?
02:01That's something we've got to really, you know,
02:03we all lived through 08 and 09,
02:04and it's still fresh in my memory.
02:06So anything like that, I'd get very nervous.
02:09You see, you're looking at credit spreads,
02:10junk bonds, things like that,
02:11but no, I don't see any of that.
02:13So I think it's an average correction.
02:14I think, yeah, maybe have a little dip again,
02:17go check down those levels,
02:18and maybe go a little bit low,
02:19but I don't think you've got anything more
02:20than an average correction going on right now.
02:22So, you know, and then we'll see
02:23what the economic numbers show,
02:25what earnings show, and all that.
02:26We're just back in the same trend,
02:27so nothing out of the ordinary.