TheBRRR’s Thoughts

GM.

The global asset meltdown accelerated this weekend.

Japan’s Nikkei stock index broke all records today posting a single-day 12% loss.

The Nasdaq fell by as much as 7% in the premarket but has since bounced since the US open, currently sitting down 2.5% since Friday’s close.

Bitcoin was down by as much as 19% since Friday but currently sits roughly 10% lower, trading around $54,500 currently.

The root causes of the action can be boiled down to a few core reasons:

1. Yen soaring 8% vs USD, after Japan raised interest rates from 0% to 0.15% last week
2. Iran signaling retaliatory strike on Israel
3. US recession fears after surprisingly bad employment data

We’re not adjusting the BRRR’s portfolio amidst the volatility, as we think the worst of the ove is over.

However this morning’s bounce provides an opportunity to do a few things if required:

1. Consolidate portfolio to the fastest horses - assets (within the same asset class) showing relative strength in this morning’s initial bounce are likely to continue to outperform the other assets within its asset class. If you have clear losers, ditch them for the fastest horses, which are now discounted.

2. Reduce risk - we think this will look foolish over the medium & long term, but this morning’s bounce has been fairly strong and provides an opportunity to sell healthily off of the lows. don’t do this expecting to buy back lower (a fool’s errand) - do this because you need liquidity.

We’re already seeing economists clamoring for emergency action from central banks, like this Wharton econ prof calling for 75 basis points as early as this week.

We think China will be the first in line to unleash liquidity, now that the dollar has weakened. The US will likely follow shortly after.

Unwinding Japanese Carry Trade Nukes Global Markets

WHAT HAPPENED

• Global markets crashed on Monday, driven by Japan's historic point drop due to the BOJ's unexpected rate hike last week.

• The Nikkei 225 plummeted 12.4%, marking its worst point drop ever.

• U.S. futures opened deep in the red, with the Nasdaq 100 set for its biggest opening drop since March 2020.

• Nasdaq futures dropped 7% before paring losses to 2.5%.

• The VIX spiked above 62, indicating extreme market volatility.

• Emergency rate cut odds have surged to 25%, reflecting market expectations for aggressive monetary policy easing.

• Global markets are reeling from the unwinding of the yen carry trade.

WHY IT MATTERS

• The BOJ's rate hike has triggered a massive sell-off, highlighting the fragility of highly leveraged positions.

• Japan's crash signals broader global financial instability, affecting U.S. and European markets.

• The elevated VIX suggests continued volatility, potentially leading to more margin calls and forced liquidations.

• The tech sector, previously buoyed by AI and semis, faces a significant correction, reflecting investor concerns over valuations and future growth.

Zerohedge

Big Tech Nukes As Global Risk-Off Event Continues

WHAT HAPPENED

• Massive Market Wipeout: The seven most valuable U.S. tech companies lost a combined $1 trillion in market value at the start of trading on Monday.

• Nasdaq Plunge: The tech-heavy Nasdaq was down more than 2.5% following its steepest three-week slide in two years.

• Key Stock Declines: Nvidia fell about 6%, Apple over 4%, and significant drops in Amazon, Meta, Microsoft, Alphabet, and Tesla.

WHY IT MATTERS

• Tech Sector Reversal: This marks a significant shift from the tech sector's recent highs, driven by overinvestment concerns, particularly in AI.

• Economic Data Impact: Poor economic data and recession fears have triggered a broader market selloff, extending beyond tech stocks to global markets.

• Nvidia’s Volatility: Once the world’s most valuable company due to its AI capabilities, Nvidia’s valuation dropped below $2.5 trillion from a peak above $3 trillion.

Additional Insights

• Global Market Impact: Japan's Nikkei 225 fell 12%, its worst day since 1987, exacerbating global market fears.

• Cryptocurrency Hit: Bitcoin dropped 11%, leading a broader selloff in cryptocurrency and related stocks.

• Earnings Reports: Amazon, Alphabet, and Microsoft provided weak guidance, contributing to investor jitters.

• Goldman Sachs: Warned of AI overinvestment with little to show for massive expenditures.

• Nvidia’s Earnings: The company, set to report earnings later this month, has seen revenue growth over 200% for the past three quarters.

CNBC

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The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.ll