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Japan stocks plunge as much as 7% as Asia shares extend sell-off
- Incerto 2y agoLong overdue. This 'everything bubble' needs to end. The sooner, the better.
- pier25 2y agoCan you elaborate?
- next_xibalba 2y agoSome investors and economists have been saying for several years that there is an "everything bubble" that inflated in the ZIRP era–stocks, bonds, real estate, art, etc. Asset prices completely detached from their underlying intrinsic value. The belief is that zero interest rates have caused the inflation, and with the end of ZIRP, prices will collapse. Earliest reference to the term I can find dates back to 2017. To my knowledge, Jeremy Grantham, a famous investor, is the most prominent advocate of this theory.
- frankharv 2y agoDon't forget about our upcoming AI-Bubble-boom-bust. To be deflated tomorrow morning around 9AM Curbs kick in around 9:00:01
- TheAlchemist 2y agoNot OP, but it's very simple - by historical standards, everything is crazy expensive, especially in the stock market, but not only (housing...). Home price to median household income ratio is at all time high - current generations have to work almost twice as long to pay a house, compared to their parents. S&P price / earnings ratio is around 27 now and it's been above 20 pretty much all the time since late 90s. In the past it was hovering between 10-20 usually - here is a chart: https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio We have huge companies (the famous MAG 7) with PERs above 30. Given their scale, it's pretty much impossible to grow enough to reduce this PER significantly, unless we discover another planet with eager customers, or solve poverty worldwide. So while they do make a lot of cash, if you were to buy the whole business, you would need to wait 30 years for it to pay back for itself... I know people stopped thinking like that, and just hope the 'price will go up' and there will be a greater fool willing to buy even higher. But at some point, the music will stop, although nobody knows when though. And if you look at the history of when the music stops for the markets, it's not pretty.
- s1artibartfast 2y agoThere's nothing magic about the number 20 that makes it better than 30. The number it's just based on the marginal value of capital at the time. If there's enough capital built up and few enough opportunities, the per can go arbitrarily high.
- Jensson 2y agoCheaper is better, having to pay more for productive assets isn't a good thing.
- s1artibartfast 2y agoIt's a lot more complicated than that. There are advantages to having Capital chasing investments and high pER. As a thought experiment, consider what factors would have to be true for extremely cheap assets, say a PER of 1.
- laidoffamazon 2y agoPeople that missed the boat want the boat to sink
- csomar 2y agoThe Nikkei has only broke its last high from the 90s recently. When you consider inflation, it’s far from bubbly.
- kristianp 2y agoHowever, when share prices go backwards, governments start stimulating the economy, lowering interest rates, spending and increasing debt. Asset prices rise again and debt, both government and private continues to increase.
- rrrrrrrrrrrryan 2y agoWell in a downturn debt usually gets cycled from private holdings to public holdings. After the economy rights itself, governments should be eager to unwind their positions, but this doesn't always happen. The Fed has been doing some quantitative tightening for a while, and if we're now entering a proper recession, we'll soon get to see if they reloaded enough bullets.
- zug_zug 2y agoThere's no such thing as an "everything bubble." All prices are relative. An everything bubble would basically be inflation which wouldn't justify moving any assets. You only need to move between assets when one is inflated relative to another (e.g. stock vs real-estate)
- bamboozled 2y agoIsn't this just a little bit irrational? It's caused by the fact the bank of Japan put up their interest rate by 0.25% last week? The second rate hike in years. Japanese are extremely cautious and change isn't something they deal with on a frequent basis (Japan moves very slowly) so I think this freaked people out. I guess it might signal the end of the government prioritizing corporate profit over the well being of the populace, at least for a few years? Low interest rate, means the Yen would weaken further, which is great for major Japanese companies who deal heavily in exports. Any sign of this changing and it looks like investors run for the hills. What else could be the cause ?
- voiceblue 2y ago> Isn't this just a little bit irrational? Welcome to planet Earth. Hope you enjoy your stay. Leave us a review and don’t forget to fill out the survey!
- bamboozled 2y agoFair play :)
- deleted 2y ago[deleted]
- DarkmSparks 2y agoYen carry trade is unwinding, things could get very messy.
- tru3_power 2y agoI read a lot of reports stating that this trade is north of 20 trillion dollars. Do you know how this number is calculated? Or if it’s possible to identify other large risks like this? Seems pretty insane to me as someone not in finance.
- DarkmSparks 2y ago
- trte9343r4 2y agoBitcoin is down 10%, Ethereum 20%. I am afraid it is not just Japan.
- monero-xmr 2y agoTo be honest, crypto is a rounding error compared to the movements we are observing in traditional markets. It has a very high psychological presence but its market cap is still essentially zero
- trte9343r4 2y agoIt trades 24/7 and moves very fast. It is a good way to check recent events.
- bdcravens 2y agoThere was a time (prior to the massive drops during the pandemic) that BTC almost always moved in the opposite direction from the stock market.
- wslh 2y agoWhen the market was less diverse or not even a "perfect" market. Now you have ETFs where institutions and people can access BTC in a full US compliant way.
- bitcoinlol 2y agoIt is as good as wind direction. It is instead a finger on the pulse of the scamosohere. It will crash at 10 minutes past the next SBF saga. Until then it is influenced by Paolo Ardoino and Micheal Saylor, Texas Grid Subsidies and now maybe Donald Trumps bid for election. Disclosure: am a coiner.
- ikt 2y agoYep, can add Australia to the list as well: Live updates: ASX plummets more than 3pc in worst two-day performance since 2022 after recession fears spook Wall Street https://www.abc.net.au/news/2024-08-05/asx-markets-business-news-live-updates/104182912 https://www.abc.net.au/news/2024-08-05/asx-markets-business-...
- uncivilized 2y ago[flagged]
- laidoffamazon 2y agoCertain people on this forum have an inflated view of their own understanding of the world while lacking epistemic humility. That means the sky is falling no matter what the news is. I’m not going to take “recession” talk seriously from people that thought we were already in one.
- uncivilized 2y ago[flagged]
- mensetmanusman 2y agoGDP ~= population * productivity/worker I’m surprised people aren’t factoring the population collapse in even more.
- lotsofpulp 2y agoThe opposite of this is factoring in devaluation of currency. There is no guarantee of a sudden collapse in a given time period. It could just be a slow deterioration of quantity and quality of products and services being produced, with uneven effects across different businesses.
- cko 2y agoStock markets are often uncorrelated with their country's GDP growth / decline.
- dilawar 2y agoThis explains many confusing things about Indian markets. Is there a place/book you recommend I can learn about it a bit more?
- cko 2y agoThere's papers that I haven't read or analyzed but I just trust the summary. https://rpc.cfainstitute.org/en/research/cfa-digest/2015/10/whats-growth-got-to-do-with-it-equity-returns-and-economic-growth-digest-summary https://rpc.cfainstitute.org/en/research/cfa-digest/2015/10/... I also listen to some trustworthy YouTubers like Plain Bagel and Ben Felix.
- kombookcha 2y agoThis reminds me of a lovely joke about two economists on a desert island creating an economic miracle of GDP-per-capita growth by repeatedly paying eachother to eat sand.
- lm28469 2y agoGDP is mostly a useless metric.
- dukeofdoom 2y agoJust so happens I watched this guy (Ian Caroll) yesterday predicting a global market crash. He was explaining that Banks are leveraged 100 to 1 in derivative trading. Eg. Goldman Sachs is sitting on 50 trillion in derivative trades (bets on stock prices) but has less than 1/2 trillion dollars in assets. It's the biggest bubble ever. 1 Trillion is equal to 1,000,000 Million. https://x.com/i/status/1819797005977125036 https://x.com/i/status/1819797005977125036
- freeqaz 2y agoWhy did the yen strengthen relative to the dollar because of that? I find that confusing.
- JackYoustra 2y ago- Interest rates up is a market reflection of more scarce capital - more competition for capital leads to cheaper shares (hence the lower share price) - and larger desire for foreign investment / less capital outflow to higher yielding / more capital scarce markets - less capital outflow means fewer yen going out to be transacted for foreign currency (lower forex yen supply) and more investment going into the economy (higher forex yen demand) - lower supply, higher demand, holding dollar steady (partial equilibrium) leads to higher yen relative to dollar
- gostsamo 2y agoraising the interest strengthens the currency which decreases the export potential of the country which pushes down the export oriented companies.
- ptero 2y agoYen jumped because Japanese central bank raised interest rate from abt 0 to 0.25% and this caused unraveling of pretty massive carry trade. Carry trade is borrowing money at low interest rate (yen) and converting it into safe money yielding more (dollar). This is not as trivial as borrowing at 0% and investing at 5%, you also need to construct hedges against currency moves (to a certain point), so the profit margin can be low. While 0.2% was a small change, a lot of funds who borrowed yen and converted into dollars started losing money. They wanted to close some trades so needed to buy yen (since they borrowed in yen and have to repay in yen to close the loan). This made yen rise and positions of more funds (who now have to repay more dollars to close yen loans) even more unprofitable as their currency hedges become very expensive. So more funds wanted to close carry trade positions. And so on. This is not the only process that drove yen up, but it's a significant one.
- SenHeng 2y agoInterests rate went up from 0.1 to 0.25%. The BoJ chairman said in the Q&A afterwards that he sees them raising rates above 0.5%, possibly by year end. The BoJ is also cutting back on the number of government bonds they're buying by half, from 6 trillion yen to 3 trillion yen each quarter. The yen strengthened a lot in the past 2 weeks, from $1 / 160yen to $1 / 143 yen. This likely triggered a lot of margin calls, exacerbating the drop. Basically, it was an aggressive and unexpected move. > If Ueda's goal was to change his dovish image, he was clearly successful. "He sounded very hawkish today," said Hideo Kumano, chief economist at the Dai-ichi Life Research Institute. "He has made the market think more rate hikes are on the way." > Only 26% of market players expected a rate rise, according to a survey of 181 bond investors conducted by Nikkei affiliate QUICK on July 23-25. Most investors expected a rate increase to take place either in September or October. source: https://asia.nikkei.com/Economy/Bank-of-Japan/Bank-of-Japan-raises-interest-rate-to-0.25-open-to-further-hike-this-year https://asia.nikkei.com/Economy/Bank-of-Japan/Bank-of-Japan-...
- hiddencost 2y agohttps://archive.is/Bj149 https://archive.is/Bj149 Here's a NYT article about the Yen Carry Trade unwinding... In October 2008.
- theogravity 2y ago* 13% as of now, was 15% at its lowest