Yen Intervention, Leverage Checks, and Other Things To Think...

What have I told you? They're going to print... money...

---

Dear Fellow Traveler:

I’ll say one thing.

I’m glad I lived through Hurricane Ian. I’ve been watching people in Maryland lose their minds over the coming storm. There were stressful meat purchases at Wegman’s the other night… people just buying whatever meat was available.

They were selling rump roast and lamb… and who knows what else? By the time I got there, all that was left were massive T-Bone steaks… which I bought.

And then, I drove across the street to a Safeway, where there were maybe 15 people in the parking lot… and half were coming out of GameStop. There was more meat in that Safeway than I can describe. No one wanted to go to Safeway… they all wanted to buy out Wegman’s and then complain.

There’s been panic purchases of lithium-battery banks… I was buying an extension cord earlier, and a woman was screaming at a Harbor Freight employee for not having enough $999 wireless generators… because lord knows here kid is going to throw a fit when the batteries die.

I can already sense the moral panic building over this storm. Estimates sit at 200 million people in the path.

I’m just going to leave this here. This is the first major storm to hit U.S. energy grids in the post-AI data center era. What will they prioritize?

What sort of real strain are we facing?

Will we be talking about the grid in a week if we see a few southern states buckle under the strain of a several-day ice storm? What color boots will Anderson Cooper wear as he stands outside an emergency center? Who will get blamed (you only get three guesses, and the first two don’t count)?

Tomorrow, I’m going to talk about this as we head into the storm. I think we’re about to have a very big conversation about battery storage in America. And I’m not gonna be shocked if Generac (GNRC) stock continues its momentum all next week…

What else do I think?

---

Thing No. 2: Here Comes the Money Printer…

Loved seeing this pop up right before 3 pm today.

The Whispering Candle sent me this: “14:59 News Bot: NY Fed performed rate checks on USD/JPY with counterparties.”

Then, Reuters said… [emphasis mine]: “The yen was volatile on Friday, with two sudden spikes raising market speculation that authorities had conducted a rate check, often a precursor to intervention.”

I really hope my power is out Monday… because this is just gonna make me mad…

Rate checks happen when Japanese authorities call major banks and ask them:

“Kinki Osaka Bank-Son: At what price could we sell dollars and buy yen right now?”

No money changes hands. The message is really loud. This happens a few hours or days before there is a real intervention. It’s also a warning against speculators who are leaning short yen.

Here’s what happens… Japan sells dollars from its reserves and buys yen.

But when intervention happens, it’s a little different than what people

The Bank of Japan sets the policy…

But the FX intervention is executed by the nation’s Ministry of Finance.

The Bank of Japan only acts as the Ministry’s agent.

I’ll remind you that Japan started interventions back in July 2024… and then, starting in August 2024, their market crashed.

So… I ask you again… Are you paying attention to Japan?

I’ve spent 18 months talking about this… we're putting in massive effort and coordination right now. The FNGD and FAZ are screaming at us.

AIG is screaming at us.

And yet… we keep talking about the AI trade.

We aren’t close to home on this crisis.

And you need to… again… do an audit of your holdings right now.

---

Thing No. 3: It’s Gonna Require a Little “Fear”

I wrote in the Five Questions to Answer Article the following…

I was talking about who the marginal seller is in a stock… and said:]

This question exposes us to the risk of forced selling and indicates which positions are now vulnerable to non-discretionary exits.

Consider a stock that is widely owned by leveraged funds, sits in a large number of risk parity baskets, or serves as collateral for margin borrowing and/or repo funding. Yeah, that stuff gets crushed with funds hitting the limits of their risk analysis.

JKraus asked: “How do you evaluate that?”

Okay… I promised I’d get to this question… Here goes…

You want to look at who owns the stock, how it trades during market stress, and whether its price action reflects funding and volatility pressures rather than company-specific news.

So… think NVIDIA in August 2024 and April 2025. Think about all those stocks that meet the Buffett criteria where they’re owned by… EVERYONE. Leveraged funds, passive funds, and retail and value investors are looking for capital efficiency.

To determine the ones that are at risk…

First, examine the ownership profile. Stocks that are heavily owned by hedge funds, factor ETFs, and quantitative strategies are more likely to be part of leveraged portfolios. Full stop…

High institutional ownership alone is not the signal. The risk increases when ownership is concentrated among funds that trade frequently, target volatility, or run multi-asset strategies.

Second, observe how the stock behaves when markets become unstable.

If the stock sells off sharply during volatility spikes or broad risk-off moves, even when there is no fundamental news, it is likely being reduced to meet margin calls or risk limits elsewhere in the system. This type of selling tends to be fast, indiscriminate, and correlated with declines in other crowded assets.

Third, assess the stock’s volatility sensitivity.

Stocks that fall into risk-parity or volatility-targeting strategies often perform well in calm markets, but experience outsized selling when volatility rises.

The selling is mechanical, not discretionary, and often reverses once volatility subsides. As in… they become the buys when it’s time for momentum to return…

Finally, look for signs of flow-driven trading.

Focus on heavy options activity, unusually tight correlations with unrelated assets, or repeated appearances in “crowded trade” discussions…

All of this suggests the stock is being used as a vehicle for leverage or liquidity rather than held for long-term fundamentals.

I can explain more on video when I get a minute to think… but I’m leaving dinner now to go find motor oil… You know… the things that matter.

Stay positive,

Garrett Baldwin