OH SH*T! Japan JUST Threatened to DUMP $1.2 TRILLION in Treasuries!

What if I told you that Japan is losing control of its bond market and is threatening to dump $1.2 trillion in U.S. Treasuries? Here's the frightening part. Global investors are maxed out to the long side and if this bond rout continues, it's risking unwinding the yen carry trade, which could erase the last two years of stock gains overnight. Stay tuned as I break down what just happened in the JGB market, why they're threatening to dump our bonds, and the one chart that proves the market could drop all the way back Plus at the end of the show, I'm going to show you exactly what you need to do right now to protect your money and profit from the unwinding of the biggest carry trade in history. Speaking of profit, on Christmas Eve we alerted our CTA Timer Pro subscribers to buy South Korean stocks and that ETF is up 19.28% in just 16 days and holding up today. We just rolled out some major improvements to our trading system that are driving bigger win rates, higher returns, and smaller drawdowns, but you need to lock in before the price goes up. Grab those links in the description below. Be sure to use the coupon code for your free 30-day trial. Stay tuned to the end of the show for more information. Now let's dive in because what just happened Japan has everything to do with your financial future. On Monday, Japan's Prime Minister Sanae Takahashi said she will dissolve parliament Friday and call a national election to seek voter backing for increased spending and a new security strategy expected to accelerate Japan's defense buildup. The snap vote will decide all 465 seats in parliament's lower house and mark Takahashi's first electoral test since becoming Japan's first female premier in October. The election will test voter appetite for higher spending at a time when rising cost of living is the public's top concern. This will force the banks of Japan to raise rates, perhaps bring back yield curve control, and all in a bid to strengthen the yen. If they are successful, then the global carry trade that has been underpaying the stock market will completely blow up. Now let's dive in because trillions of dollars of wealth is at stake and Japan just decided to pull the rug from underneath the markets. This is a $7.6 trillion dollar market that went from normal to chaos in hours. Everyone is glued to their screens after what initially looked like a routine pass of the 20-year bond auction that quickly turned into a meltdown. A move of this size is unheard of and what it's going to do is likely attract more short sellers that are going to push yields even higher. Because the issue here is the market is not buying it. Takahashi said she will manage the tax suspension without issuing additional government bonds to fill the gap, but investors are not convinced. Because they think these tax cuts will remain permanent and that the Japanese government will have no choice but to finance them with more debt. So you've seen the catalyst. It all started with a bad bond auction and more fiscal stimulus. But the risk is it could send U.S. yields soaring and that could push us right into recession and send stocks plunging. In response, U.S. yields jumped in overnight trading as long maturities led to losses with U.S. 30-year yields rise as much as 10 basis points to 4.94% and 10-year yields up 7 basis points to 4.3%. That's the highest level since September 3rd. We know President Trump and consumers desperately want rates to go down. They want to see borrowing costs drop. But what rising yields is threatening to do right now is choke out any hopes of the economy turning around. The problem is, it's bringing back the theme of sell America in a big way. Ron Tempe, the chief marketing strategist at Lazard Asset Management, said that yields on JGBs have reached levels that make investing in U.S. treasuries unattractive on a currency hedge basis. And what that means is Japanese investors are likely now to dump treasuries and bring their money back home, which will put upward pressure on U.S. yields. And the amount of bonds they could sell is big. We're talking $1.2 trillion in U.S. treasuries are held by Japanese residents, all of which could soon be dumped on the market again. What we're seeing here is U.S. debt that was once considered a safe haven is now being looked at as a source of uncertainty. But the real risk is about capital flight out of the U.S. and that move would send the yen higher and unwind the carry trade. And what that means is the stock market, as you'll see in a little bit, comes completely unwound. Now stay with me, because this is all about the yen. If Japanese investors bring their capital home, demand for the yen is going to jump as they sell dollars to buy yen. Here's how the carry trade worked. Investors bought low-yielding JGBs and borrowed against them. The loan cost was negligible. Then they converted that yen into dollars and bought U.S. stocks, bonds, crypto, you name it. They bought it all. And with JGB yields rising, the only way to keep that trade intact is to sell the yen, to keep it going down. The problem is, that trade is about to get reversed in a hard way as investors bring their money home. And the dollar? Well, it's going to come crashing down. The dollar fell to its lowest level in two weeks, and currency hedging costs climbed as President Donald Trump showed no sign to backing down his campaign for control of Greenland and threatened new tariffs on France. So the issue here is with hedging costs rising, and this is a big problem, it's incentivizing investors to dump stocks, bonds, crypto, you name it, everything, to bring their money back home to Japan. And if they do, the one trade that supported the stock market over the last two years is going to get unwound and I've got the chart to prove it. You don't want to miss it. Because now, the political elites are panicking here. Japanese Finance Minister Satsuki Katayama said, I'd like everyone in the market to calm down. Translation? Stop selling our bonds because you're going to break the government and there's nothing we can do to stop it. But we're panicking too. Treasury Secretary Scott Pescen said, I've been in touch with my economic counterpart in Japan and I'm sure they will begin saying the things that will calm the markets down. Not keywords, saying the things, meaning they don't have an answer to this or any way to stop it. And for the U.S., it's not just higher yields, it's a weaker dollar that threatens to push inflation higher at a time the labor market is weakening and workers are seeing their paychecks shrink due to inflation. But the real fear? You lose the stock market here and the economy goes with it. But the problem is everybody is long this market and that's setting up for a massive crash because whenever it's on one side, it tends to go the other direction. Again, I've got the charts to prove it. You don't want to miss out on that. Let's start with this because the S&P 500 is breaking down. Now decisive closed bullets, 15-day moving average risk, accelerating downside momentum. And that's the same setup from early 2025 that remains very much intact. The key thing about moving averages, particularly the 50-day, is when it trades above it, it's bullish, but when it trades below it, and consistently below it, it becomes very bearish. It's a major sell signal. But tech? They've already been leading the market lower here. The NASDAQ 100 is breaking below the wedge-like formation as investors dump dead-burdened tech companies ahead of Q4 earnings. But the problem here is it's investors. They're overly bullish. The AAII Investor Sentiment Survey showed bullets at their highest level since autumn of 2024, meaning they're all-in. And greed? It's high. We are in extreme greed territory, but closed last week with greed at the highest level since September. What this means is not only is everyone in, even the pros. Check this out because institutional investors are all-in with the Futures Index very long. And machines? Not to be outdone, they're long too. CTAs with medium to short-term trend signals remain heavily stretched long U.S., European, and Japanese equities. But the problem is, these machines are about to sell. Stock prices continue to drop. You can see the skew. The machines will soon sell into an illiquid market where everyone wants out. The bigger issue here is nobody has downside protection. According to the latest Bank of America Fund Manager Survey that covers 196 participants managing $175 billion, nearly half of the participants said they do not have protection against a sharp fall in equity prices, the highest level since 2018. And if we go back and look at prior times when fund managers were long without protection, it's set up for massive reversals in the stock market where they became for-sellers as the market went down in a hope to hold onto their gains and clients. But what about that one chart that ties it all together? Check this out. This is the Nasdaq 100 that's shown in blue against the dollar yen's spot rate in red. You can clearly see the lockstep correlation between the two. So if Japanese investors start selling U.S. assets, then dump those dollars for yen, the last two years of stock market gains are at risk for a major crash. So what I want you to see here is that everyone is long this market, there's no dry powder left to buy the dips, and when that happens, markets tend to go down and fast. Now you've seen why the political elites are panicking. It's not just about yields. It's about inflation, the economy, currencies, and more importantly, the stock market. And right now, consumer spending has been driven by the wealthy. We take the stock market away, and we're staring right down the barrel of recession. Now the real threat is if all that money starts flowing back to Japan and the yen starts to rally alongside rising yields, that carry trade that's been sporing U.S. equities over the past two years is going to get completely unwound. If you're looking to profit on that carry trade blowing up, it's not too late to act, but you can see right now, the clock is ticking down and fast. You want to diversify out of banks, technology, and cyclical stocks into defensives like utilities and healthcare. You also want to look at gold and silver, because they do really well when the banks go down. Now for the pros, and I'm only talking to those of you with the risk tolerance experience and the stomach, you may want to look to be tightly short banks and big tech here. You can see, it's all been propped up by the yen carry trade. And Jeffrey Gundlach, the bond king, unheard of advice, telling investors, minimum 20% of your portfolio in cash, and now you see why. Everybody is long, and you're going to need money to buy the dips. That's real wealth creation right in front of you. Now instead of cash, you may want to consider short-term treasuries. You may even want to look to be tactically long the yen if it starts to rally. Now we've been talking about the long bond for right now. You want to forget about that trade. You want to wait and see if the banks can absorb this delusion supply. If they do, it sets up some upside potential. But as of today, hang tight on that. So now you've got your roadmap to profiting on the biggest contrarian trade of 2026. It's the unwind of the yen carry trade that nobody said would happen. And you can see, it's starting right now. And speaking of turning risk into win, remember that EWY trailer mentioned at the top of the show? It's up 19.28% in just 16 days. And while U.S. equities are crumbling, it's holding up very well. And on top of that, we've got some amazing trades on the book. Let's talk about how you can swing trade your way to big profits in 2026. Because one of the key points about this trade is it had an expected win rate of 87%. How did we do this? How do we know that? Well, first, each and every day we look at the machine positioning across the broad equity, bond, currency, and commodity markets. And you can see the machines are poised to sell. But what they do is they trade based on threshold levels. We've gone through, we've optimized those levels, fully backtested them. So when one triggers, we know what its win rate is, what its expected return is. And what that means for you is higher returns, a better win rate, and a smaller drawdown. Those are the benefits of a fully optimized strategy. Now, my system is so easy to use. You're going to log in. You're going to scroll all the way down to the bottom, grab the latest reports. And in there, you're going to get an update on your existing trades. You're going to get all the recommended trades with full risk control levels and all the optimized trades generated by the report on both the long and the short side. So you get all the tradable signals. You get my opinions on the best trades, full risk control levels, a tracking of all open trades and returns, a weekly update. And here's the best part of all. Whether you're brand new to trading or you're a seasoned trader, we're so convinced that our system is better. We want your first 30 days to be on me. All you need to do, grab those links in the description below and use a coupon code for your free 30-day trial. And with that, I'm Steve Van Meter. Thanks for watching. Thanks for being fans. Bye now.