Japanese Bonds Were Destroyed in a Significant Move

I did say “expect the unexpected” and all the noise around tariffs with Greenland “at stake” should qualify.

Before jumping into that, let’s not miss one very important thing that happened before U.S. markets opened this week: Japanese bonds got destroyed!

This is a significant move in its own right.

Japanese bond buyers are “finally” going to be able to buy bonds with decent yields. It is difficult to ascertain just how many treasuries the Japanese financial system owns, but the presumption is that it is a large amount.

So far, this has been occurring with a weaker yen.

At some point, the “carry” trade (where people allegedly fund all sorts of assets using cheap Japanese yields) will have to shrink in size, putting at least some pressure on global markets. I think the importance of the “carry” trade is overstated, but it is worth keeping an eye on.

Yet another part of an investing landscape that is shifting globally.

Greenland

U.S President Donald Trump has expressed a keen interest in “controlling” Greenland. Currently, he is threatening tariffs against some countries in the EU until Greenland is sold to the U.S.

We have all grown accustomed to the "escalate to de-escalate" style of negotiations. That “should” happen this time, too.

So I am “buying the dip” on Tuesday morning.

Having said that, this time is also potentially different:

Basically requiring concession of sovereignty, of citizenship as a condition of trade is a big step. Never has even president Trump used trade tools to aggressively achieve a very clear geopolitical goal. This leaves people with the question: what’s next?
Both the U.K. and Europe thought they had trade deals negotiated with this team. Was Greenland a precondition for any of that? Judging by the reaction, the answer is no. So, is a deal a deal? Again, this leaves people with the question: what’s next?
On the face of it, some countries that were more “stubborn” with the president, like India, for example, have seemingly done better than those that “acquiesced.”

Basically we seem to be in a world where every negotiation is ongoing, subject to change and dares to go where no one has gone before (at least not in a long time).

I will play the “bounce” here, but will fade any move higher, as I’m increasingly worried that the new global playbook is to let the president pus and push again, and then start rolling him back. Not sure that is the playbook. Not sure Europe has the structure to do it. Not sure it will work. But any attempt would hurt markets.

What I Want to Buy/Sell

Buying the dip in tech, but will go back to underweight.

Want to own "production for security" names, but I'm also eyeing opportunities in Europe as maybe, finally, possibly, they too will understand that to be “sustainable,” you need to produce and have strong access to the things you need to live every day.

I am not selling bonds here, but I am not yet buying.