Key insights

• ⚠️ VIX crossing 65 indicates high market volatility
• 🔄 Potential cathartic moment and significant change in the market
• 💰 Increase in carry trade involving borrowing Yen and shorting Yen
• 📉 Yen's abrupt depreciation this week
• 📈 Bank of Japan's unexpected rate increase resulted in margin calls and asset selloffs
• 💵 Fed on high alert regarding inflation
• 📉 Prediction of potential job layoffs due to corporations losing pricing power
• 📉 Lowering interest rates might not prevent a recession

Q&A

• What impact will lower interest rates have on the market, and what is expected from AI proliferation?

  Lower interest rates are expected to trigger a market rotation towards a broader group of stocks. Additionally, productivity gains from AI proliferation are anticipated to drive the global economy. The current volatility can lead to new thinking and market rotation.

• Why is the Fed changing its stance, and what are the implications of lowering interest rates?

  The Fed is changing its stance due to increasing unemployment and a declining stock market. However, there is skepticism about whether lowering interest rates can prevent a recession, as consumers and businesses may wait if interest rates and prices are expected to decline.

• How might corporations losing pricing power affect the economy?

  Corporations losing pricing power may lead to consumer weakness and potential job layoffs as a strategy to salvage margins. Inflation is unwinding faster than traditional indexes show, which contributes to consumer weakening.

• What were the impacts of the Bank of Japan's unexpected rate increase?

  The unexpected rate increase by the Bank of Japan resulted in margin calls, asset selloffs, and potential carry trade unwind. There is uncertainty about the complete unwind of the carry trade, with JP Morgan suggesting halfway completion. The Fed is on high alert regarding inflation as a result of these events.

• Why has there been a belief of a rolling recession in the US and global economy?

  The belief of a rolling recession stems from the FED's decision to raise interest rates. This led to an increase in the carry trade involving borrowing Yen and shorting Yen to buy dollars for higher yielding assets. However, the sudden change in Yen's depreciation has impacted this trend.

• What does a VIX crossing 65 indicate?

  A VIX crossing 65 indicates high market volatility, making it the fourth largest measure of volatility in the last 40-50 years. It suggests a potential cathartic moment and significant change in the market.

• 00:00 High market volatility with VIX crossing 65 indicates a significant change in the market, potentially meeting a cathartic moment.
• 00:57 The US economy has been believed to be in a rolling recession as the FED raised interest rates. There was an increase in the carry trade involving borrowing Yen and shorting Yen to buy dollars for higher yielding assets. However, the Yen's depreciation abruptly changed this week.
• 02:00 The Bank of Japan's unexpected rate increase led to margin calls, asset selloffs, and potential carry trade unwind. JP Morgan suggests halfway completion. The Fed is on high alert regarding inflation.
• 02:53 Corporations losing pricing power may lead to consumer weakness and job layoffs.
• 03:38 The Fed is changing its stance due to increasing unemployment and declining stock market, but lowering interest rates may not prevent a recession.
• 04:43 Lower interest rates will lead to a market rotation towards a broader group of stocks. Productivity gains from AI will drive the global economy.