What If ???

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I chuckled when I read a headline on Zerohedge yesterday: “What if the Crash is as Rigged as Everything Else?”  Charles Hugh Smith is one of my favorite financial writers and an excellent analyst, so I have no quibbles with his reasoning.  It’s sound, as always.

But, given that we forecast last March the USDJPY’s decline to its SMA200, the effect it would have on stocks, and the reasons why TPTB would not only allow it but actually make it happen, I’m still shocked that so few analysts are picking up on the fact that of course it is!

We have several new members over these past few days, so it probably wouldn’t hurt to recap.

  1.  the yen carry trade has driven the vast majority of stocks’ gains since 2011.
  2.  Japan can’t continue devaluing the yen w/o repercussions, chiefly higher import prices
  3.  SPX hit very heavy Fib resistance at 2138 in May (the Last Big Butterfly)
  4.  the only path past 2138 is further yen devaluation
  5.  because it will cost them, Japan needed to be sufficiently encouraged/threatened
  6.  crashing the oil market was the carrot, the very real risk of an equity trap is the stick
  7.  the BOJ will eventually give in and expand QQE and/or further depreciate the yen

With NKD off 18% from its highs (about 2.4% of Japan’s GDP given the BoJ and GPIF holdings) on Monday, they no doubt felt sufficiently threatened. It has since recovered almost half of those losses, but is still languishing below its own SMA200.  Did they get the message?  Or, will another leg down be required in order to drive home the point?2015-08-27 NKD daily 0642USDJPY has been returned to the safety of the .618 Fib at 120.11 (trips below it produce sell-offs, trips above produce rallies.) But, it hasn’t regained its SMA200 — and, obviously, won’t until further easing and/or yen devaluation commences.

2015-08-27 USDJPY daily 0642Our analog from March has done an excellent job of foretelling all of these events.  It has conveniently explained why.  But, it doesn’t explain “who.”

In speaking with an old college friend who cut his teeth at Goldman and is one of the more savvy Wall Street guys I’ve ever met, it occurred to me that we may never know who the players are who have orchestrated the entire scheme.

I’m fairly certain the Fed is at the center of it.  I think the sheer size of the moves precludes one or two hedge funds getting together to manipulate the USDJPY, ES, CL, ZN, etc. on their own.  That raises the question of the BoJ.

Abe and Kuroda have been quite open about their efforts to prop up their stock market.  As discussed in Japan’s Equity Trap, there’s ¥80 trillion ($666 billion at 120 yen/USD) at stake between the BoJ and GPIF.  That’s over 13% of Japan’s GDP and almost 17% of Japan’s aggregate public market cap in those two government coffers alone.

But, are they both in on the plan?  Do they have the Diet’s approval, or are they pulling a Hank Paulson — acting bewildered and frightened for the country’s future in order to secure government and corporate approval for the next round of yen decimation?  It’s hard to say.

And, I’m not sure it matters.  Either way, it’ll happen.  And, it’ll be further proof that the crashes are just as rigged as everything else.

Now, on to today’s forcast.

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