Ep 154: MALWARE - Jonathan Wu explains how a tiny rate hike in Japan caused a global market crash

[00:00] I don't know, was that too like jolly? [00:01] I think it's... [00:04] I mean, we could say it's very sad what's happening. [00:08] Malware is a non-technical look at the tech news of the week. This is a podcast where we learn together about everything from crypto to AI to whatever comes next in tech. I'm Natasha Hoskins. I'm Dina Burke. And this is Boys Club. Wait, is it just Boys Club? It's just Boys Club. [00:28] The boys club podcast. No, no. [00:31] Just boy stuff. [00:32] Hi. Hey. What a week. What a week here at Boys Club. We are dropping some hats and talking about the global financial meltdown all in one day. We have range. Yeah, welcome to Malware. This is a [00:48] Tech news of the week and crypto news of the week. And this week, the news was all... [00:55] One thing. [00:56] which was that we're down bad we're down bad tremendously and yeah that was a dark monday [01:05] I'd say. ETH was down what, 25%? [01:08] 22% but that's just ETH. [01:11] That's just ETH. Totally. I'm just like, what's the big hits here? Totally. It was like a... I mean, I could... Oh, it's incredible. Everything was read. Everything. I actually sent you guys a tweet draft that I had. [01:24] which was the picture of all of the stocks, the global financial system, everything red. And then my tweet was, I need this L like I need a bullet in the head. And you guys said, no, don't tweet it. Don't tweet it. Not good. No. So anyway, we were we are all continuing to try and figure out what's going on. And then in amongst all that was a shining white light of

[01:54] the loveliest [01:55] humans wow what a kind he's so kind yeah so kind he's married to maggie love so she fires the sweetest couple like just their home must be warm and cozy full of love full of love full of love i love thinking about the two of them together now i'm like they're just a perfect couple so he's really smart and also able to translate a really complex topic into something really simply and you know we love that here at boys club so yeah i saw a tweet the other day that was like the [02:25] a very, very complex situation and being able to explain it simply and clearly. And that's exactly what happened today where I understood money for the first time and interest rates for the first time. And so it's deeply informative. And basically the TLDR is... [02:44] some interest rate [02:45] hike in Japan caused a... [02:48] Major... [02:49] of the entire financial system. And it's really interesting to hear about [02:55] all of the things that happened that caused that and are happening i think it's a continuing to happen yeah story certainly developing story here yeah enjoy [03:06] Hey, Natasha. So a question we get asked a lot is, what do you look for in a crypto platform? So let's talk about it. Well, Dina, I look for a secure, no fuss platform that I can dive into right away. That's why I love today's sponsor, Kraken. If you're waiting for the right time to get into crypto, Kraken makes it super easy and intuitive to get started. Plus, if you get stuck, they have an award-winning client support team that's available 24-7, along with a bunch of educational guides, articles, and videos to help you along

[03:35] to kraken.com backslash boys club and see what crypto can be not investment advice. Crypto trading involves risk of loss. Cryptocurrency services are provided to us and us territory customers by payward ventures, incorporated PVI DBA kraken view PVI's disclosure at kraken.com backslash legal backslash disclosures. [03:56] On the podcast today, we have Jonathan Wu, who is an investor at Asylum Ventures, which is a $55 million early stage fund in New York. And Jonathan was also the main character of Twitter on Monday, when he dropped a very viral thread about carry trades and the Japanese yen that seemed to maybe somewhat kind of explain the market meltdown that we lived through earlier this week. So we're going [04:26] hopefully patiently explain the thread to us and his thinking. So welcome to the show, first of all. Thank you. Glad to be here. We're excited to have you. Okay, so just to do some level setting for folks, this is a headline that hit earlier this week on Monday. [04:44] Why Ethereum price is down today? A 22% drop triggers massive market liquidations. I read somewhere that they were in the [04:53] billions, billion dollar ballpark. And of course, that's just the crypto market. That's not to speak to the traditional market at all, which also had, I think, one of the worst days in recent history. So

[05:06] You did a thread on the Japanese yen and carry trades. [05:10] I don't know talk us through it tell us what's going on here yeah man I mean the reason why I wrote the thread was because I myself was a little bit confused why a very very small interest rate hike by the Bank of Japan would like crash all assets like equities were down bad crypto was down horrible and I think that was a question everyone was wondering about because like if you think about the United States we've had like much more significant interest rate movement [05:35] And I think that's a really good question. And I think that's a really good question. I think that's a really good question. [05:51] You know, at the heart of it is something called the carry trade. [05:56] And what the carry trade is, is like basically a form of arbitrage where you like borrow money for some rate. So let's call it 0%. It's not exactly 0%. But let's say you could borrow money for 0%. So let's say I, you know, went to you, Natasha, and I was like, could I borrow a dollar? And you were like, sure, here's a dollar. [06:15] And I'm like, cool, when can I pay you back? You're like, [06:18] I don't know, like... [06:19] in a year and i'm like great how much will i owe you and you're like just the same dollar like no interest [06:24] I'm like, that's a pretty good deal for me, because as long as I make more than a dollar anywhere else, like it's basically free money. Right. Like I'm pretty I'm pretty much like locking in that that interest rate spread. [06:35] And so the carry trade has been going on. I mean, just any time there's a spread in interest rates, but in Japan for like a really long time. So Japan has had like close to zero interest rates since like 1999.

[06:47] and the reason why japan has had close to zero interest rates since 1999 is because they had like one of the worst asset bubble collapses ever in the 1980s so [06:56] It's funny, like during the rebuilding in World War II, after World War II, Japan became a global economic superpower. They, you know, think about famous companies like Sony and the Walkman and Japan led in microchips and... [07:11] was like a high tech at one point was the number two economy in the world. Kids in the United States and people were learning Japanese. Japanese culture started to seep into the United States, right? Like sushi restaurants became really popular. [07:24] Um, [07:26] And in the 1980s for a variety of [07:28] reasons that honestly I'm not an expert on and probably not worth getting into. Like they had a massive asset bubble collapse. And when you have this huge collapse in asset values, banks oftentimes get hurt really badly. Their balance sheets get hurt very badly. And it's it's much harder to create capital like credit and capital formation becomes a lot harder after that. [07:51] And [07:52] So as in an attempt to stimulate the economy, they tried a bunch of traditional measures. And in 1999, the Bank of Japan, [08:02] their central bank, the Japanese central bank, was like, okay, we're just going to reduce, we're going to make money free. [08:07] And so I think like the first important concept to note here is that an interest rate is basically just the price of money. And when like, it's hard to think about, it's like very counterintuitive because like money is the thing that things are priced on, right? But like money also has a price.

[08:25] which is how expensive it is to borrow it. And when you borrow money, you're actually creating money. So if I were to borrow a dollar from you, Natasha, like actually we're creating a new dollar, a dollar that never existed. [08:39] because basically like I now have a dollar and I owe you a dollar, but that dollar didn't really exist before. Um, [08:45] And that's how banks work and that's how credit formation works and that's actually how money gets like quote-unquote printed. It's not actually a printer. I feel like I just I feel like something just clicked for me that has never clicked for me. No, that's huge. I think people don't get that money printing is just borrowing. [09:01] Borrowing is the creation. Wow. Yeah. Okay. Great. Great. I'm really tracking. I'm really tracking. Okay. That's awesome. Um, it literally took me like, I don't know, forever. Like if it was like last year when I figured this out, because that's not the way they teach it to you in school. Yeah. They, and that's not the way we talk about it. Uh, in common parlance, we're like money printer go birds or like, Oh, someone literally just prints more dollars. Um, [09:22] but actually like money gets formed when you, when you borrow, um, [09:27] So since 1999, [09:30] Interest rates have been close to zero in Japan and the reason why cheap [09:34] money is good and it's and it spurs economic activity is because if it's really easy to borrow and it's cheap to borrow, well, then I can go invest, right? I can go build a new factory because it's like free to build. Like I if I if you gave me 100 bucks to build a factory as long as that [09:51] factory makes more than zero return like i've made money and so that's how an economy gets stimulated with low interest rates can i um ask a question here which is part of the story that i'm really fully not understanding is so you say that they didn't raise interest rates since 1999 which seems like an extraordinarily long time when i think about the u.s economy we're moving rates around all the time even after i mean when there was significant market crashes sure things will

[10:21] Thank you. [10:21] there's like a easing in that we do and i'm just wondering like how is it possible that they kept it at [10:28] no there has been some movement there has been some movement and there were other periods of like bubbly carry trades like in the early 2000s okay okay after the global financial crisis and so like there there have been other times where the interest rate moved um but generally i would say they've had um [10:43] a very dovish monetary policy. In other words, like, [10:47] Just free... Easy... [10:48] monetary easing, quantitative easing, right? Just making sure that [10:54] Capital is cheap. [10:55] It's really easy to form credit. And the reason for this is [11:00] And now it's worth talking about the relationship between interest rates and inflation. This is also extraordinarily counterintuitive. But like, let's talk about inflation and deflation. So inflation just means the price of things is going up and deflation means the price of things is going down. And it's worth talking about like how different actors act. [11:17] when these things happen. [11:19] So let's talk about like the economy, like the GDP. GDP is functionally the sum of all spending. [11:26] So more spending, there is more GDP. So when we say growth, like GDP is going up, that means like people are just spending more money. Like in aggregate, everyone's spending more money. [11:36] And so... [11:38] Like, let's talk about inflation and deflation as it relates to spending. [11:41] in inflationary times like the prices are gonna go up right and you expect inflation to happen like what is the behavior that you would expect like a consumer to take like let's say you were gonna buy a macbook today for a thousand dollars and tomorrow it's gonna be like 1200 because of inflation like what would you do you would buy it when it was cheaper yeah you'd buy it today you'd be like it's gonna go up by 200 bucks tomorrow so i'm gonna buy it today so um inflation

[12:11] you buy it, which increases demand, which might make it go up further, right? So there are these runaway effects. Now let's like flip the equation on its head, like with deflationary expectations, [12:21] Like if I think the price of things is going to go down tomorrow, then I'm not going to spend. I'm going to keep my money in my pocket. So for a very anemic economy... [12:29] which like needs growth, needs spending, right? If consumers are scared to spend because they're like, basically the price is gonna go down tomorrow, well, like that's very self-reinforcing. [12:40] Yeah. And so in order to fight that, [12:42] You basically want to drive you want to drive inflation. That's why these central banks want a target positive amount of inflation, because inflation encourages spending, which is encourages economic growth and continuity. Okay. [12:55] If people don't spend money, like, we're basically all hosed. Like, you know, because if I don't spend money, then the retailer doesn't get money, and then Apple doesn't get money, and then Apple can't pay its employees, and it's like a very negative thing. [13:06] "Doom Cycle." [13:07] So what happened after the asset bubble in Japan popped is like people were scared and capital formation was hard and they didn't want to spend money. And so the way to get inflation, one of the ways to get inflation, is to inject more money into the system. Because if there's more money chasing the same number of goods, prices have to go up, right? And that's why after COVID... [13:29] Inflation was so insane because the government like helicopter dropped like trillions of dollars on everyone. And so it's more money. [13:37] chasing and at that time a smaller number of goods because supply chains were really hurt so like I

[13:42] people weren't making as many things and there was way more money chasing them. And so we saw like nine, 10%, like crazy inflation numbers, right? It's like your rent was going to infinity. Like, you know, the cost of like consumer goods was infinity. Rolexes were infinity, like, you know, luxury cars, everything went up. [13:59] OK, so to go back, right, like the way to get inflation is to reduce rates and that's the way to fight deflation. And so for an anemic, slow growing economy like Japan, which has all kinds of issues, lots of old people, not enough, not enough innovation, no immigration. Right. [14:19] they needed to do this for a really long time. And that's why they were stuck close to zero interest rate and why this, [14:25] carry trades [14:26] started to open up when the U S started raising rates because we were close to zero rate or very, very low rate for a long time too. You might have heard of like the zero interest rate policy times, um, when like startups were worth infinity and, um, [14:40] And this was also the time when like everything, you know, assets were worth infinity, like consumer goods were inflation were going up in price. [14:50] That's the reason why this spread opened between the United States and Japan, because we were both low. [14:54] And then the US was like, whoa, we have all these inflation issues now. [14:59] to fight inflation we need to raise rates we need to raise the cost of capital reduce the money supply [15:06] And so then we raised Japan was like, we're not ready for that yet. Like our economy still sucks and inflation is not still not a problem because like we we still need.

[15:16] you know, [15:17] we still need to spur more inflation. Like people are still scared to spend money. So this spread, that's the carry trade. That's what opened up the opportunity. [15:26] Okay, okay, okay, okay. I think I'm tracking. Okay, so then basically what you're saying is then all these traders came in and started to execute on this idea of a carry trade. Can you talk a little bit more about that? And also, are they trading between... [15:41] Are they like just forex traders going between USD and the yen or are they taking the yen and buying other assets with the yen? [15:49] Yes, the latter. So they're not trading... [15:51] I mean, there is forex trading, of course, happening all the time. Directionality on whether you think the end is going to go up, the USD is going to go up. [15:58] But the carry trade specifically is borrowing in yen. [16:02] So if you borrow, if you go to Japan and you borrow money in Japan, they're like, here's free money. Here's like, I'm not going to make you pay an interest rate on it. Right. But then you could take it to the United States where we were, you know, we had raised rates significantly and you could buy U.S. treasuries for like four or five percent. And so you're like, OK, amazing. Like free money. Like I owe zero percent and I make five percent. So I make five percent on my money. Like I'm a genius. [16:32] Okay. [16:34] OK, and bad news starts to come when that rate is no longer-- when the rate goes up. When the rate goes up. Now, what's weird about it, and what was weird to me, and should be weird to everyone, is like, OK, but the spread that--

[16:48] like the spread, let's call it 5%, right? It wasn't exactly, but let's just say for all intents and purposes, it was like you borrowed for zero and you invested in something that gave you five. [16:58] um well the boj was like okay we're raising the rate from zero to 0.25 [17:03] Yeah. [17:03] It doesn't seem like a big deal, right? Like, it's like, okay, I was making five. Now I'm making 4.75. [17:11] I don't know. Why is that like causing the third highest volatility day in the last 20 years outside of like 2008? Yeah, COVID. Like, why did it ruin everything? [17:22] Okay, this is the counter intuition that like, I think that's why the thread went viral and like, [17:29] Um, [17:30] is like this is the complexity of macroeconomics. [17:35] When the interest rate goes up at all, right? [17:39] First of all, I think it's very shocking because [17:43] You mentioned this before, Dina. It's like, [17:45] it's not as if [17:46] um, [17:48] The Bank of Japan wasn't adjusting interest rates over the last 25 years, but for the most part, they weren't really indicating. [17:54] that they were going to ever go raise rates a ton. [17:58] Okay. And so the BOJ did two things. They raised rates, but they also were like, yo, [18:04] we're going to do everything it takes to like beat inflation. Now they started talking like Jay Powell talks in the United States, which is like, we're going to beat inflation. And like, [18:14] it's worth noting that Japan had actually returned to inflation because the Japanese economy had been doing better. And like, and so they were like exceeding their inflation target. Like,

[18:23] Japan finally saw the thing that they were trying to get after so many years, so much so that they were like, maybe we don't need zero rate anymore. Maybe we can raise rates a little and we can fight inflation. [18:32] That's the reason why it went up by 0.25%. [18:36] But like, that's very terrifying. [18:39] for a lot of reasons we'll get into. But it's like, it's not just the quantum of the, [18:43] interest rate increase, it's the directionality and the intent. It's like, hey, we're going to raise, but we might keep going. [18:49] So [18:51] So why then is the spread is narrowed just a little? Why did everything unwind? [18:57] Well, now we have to talk back. We have to go back to money. And now we have to go back to a new concept, like the yen to US dollar price. [19:08] Right. So the yen had been falling in value against the U.S. dollar. [19:13] So the USDJPY price, so in other words, how many yen can one US dollar get you, had gone to a high of like 162. That means for every dollar of... [19:27] American dollars, you could get 162 yen. [19:30] And it had gone up to 162 from like... [19:34] 100 a couple years ago. Like the yen has been losing value like [19:38] all the time. So, [19:41] The Japanese consumer was getting hit by a couple of things. Number one, inflation is really bad or getting worse. [19:47] But the worst thing is that their global buying power was going down. So it used to be that it only took 100 yen to buy a dollar worth of stuff from the United States. But now it takes 162 yen. So imagine if your employer pays you, like, whatever, 100 yen a year. You know, you could buy a dollar's worth of U.S. goods. But, like, now they pay you 100 yen a year. And you're like, I can only buy, like, 60 cents worth of U.S. goods. And Japan, you have to remember, is a really resource-poor country that has to import, like, everything.

[20:17] Right? Yeah. Like they don't they can't make anything. It's like a tiny island. [20:21] So for the consumer, they're bearing max pain. [20:25] They're like, I have no buying power in the global marketplace. And [20:29] If I'm a manufacturer, I have to import machinery. OK, well, the cost of the machinery keeps going up because the yen keeps getting weaker and weaker and weaker and weaker. [20:38] And part of the reason why the yen is getting weaker is because [20:41] the interest rate's so low, and so there's a lot of yen going out the door. And so there's more yen relative to dollars, right? And especially as U.S. interest rates went up, that restricts the U.S. dollar supply. Meanwhile, the yen supply is still really high. So then the yen keeps losing value against the dollar. Does that all make sense so far? Yeah. The main thing I'm struck by is like, what a shitburger. Like everything happened at the same, everything came together just perfectly [21:11] trends for this specific moment i think what's crazy is like the economic machine is very complicated and all the parts all rely on each other yeah and so it's like really hard to predict like what could break the system because like even just like a tiny interest rate rise it's like a butterfly flaps its wings in japan and eath goes down 22 and like why does that happen well it's because there's this ridiculously complex machine yeah and also there's a bunch of like fiat dgens

[21:41] And so I think not to overstep that as well. [21:45] Yeah, I think the image that it keeps coming up for me is just like a really heavy machinery and all of the little components and little gears and everything are all working together and perfectly aligned. And then like a little piece of sand gets in there. Correct. And it's all fucked. That's exactly basically what happened. So let's go back to the carrier trade unwinding, right? Okay, so interest rates go up a little bit. [22:10] Now, what happens to... [22:12] currency when interest rates go up. Well, there's a direct effect of like if the interest rate for your currency goes up, you want to hold it. You're more incentivized to hold it because before they were paying you zero to hold it. But now the yield has gone up. Right. We're familiar with this in crypto terms. Like imagine like if just like before I was holding yen and it wasn't doing shit for me and now I'm holding in. But at least it's paying me 25 basis points. So the incentive to hold yen goes up. [22:38] So on the margin, more people should want to hold yen now. [22:42] If more people want to hold yen and there's more demand for yen... [22:46] then the price of the yen will go up. [22:48] Right. If you think of the yen as a commodity and stop thinking about it as money for a second, people are paying you more money to hold yen. [22:54] So you're like, great, I'll hold more yen. I'll buy more yen. Price of yen goes up. [22:58] Okay, this is the part that is fucked for carry traders now. Because when the price of yen goes up, [23:05] Now, as a carry trader, let's say I borrowed like... [23:09] you know, for round numbers sake.

[23:12] 100 yen to borrow one sorry i borrowed 100 yen and then i converted it to one u.s dollars worth of assets so like i bought a dollar of u.s treasuries if the value of the yen goes up [23:24] Right? [23:24] Then I owe more yen. [23:27] I owe more yen. [23:29] Like... [23:30] For every dollar that... For every... [23:34] yen that i borrowed i owe more in us dollar terms does that make sense yeah it does make sense and all of a sudden it's like you're upside down on it right you're upside down so i was gonna make five percent over like a year with the carry trade right because i was borrowing with zero and i was getting five percent but if the value of the yen goes up by just five percent that's [23:52] Right. I'm wiped out for the year. Yeah. [23:55] But the value of the yen hasn't gone up by 5%. It's gone up by like 15% or like 10 or something like that. And so like a bunch of the people who were like, [24:04] great, like I'm making free money, are now all of a sudden underwater on their trade. [24:10] And like, [24:12] Badly. And by the way, if you were leveraging this trade using borrowed money to execute this trade, you're like crazy underwater. And if you use a ton of leverage and you were a complete degenerate being like 5% free money, why wouldn't I just 20x leverage that and get 100% free money, right? That's like the DGEN logic. [24:30] If I did that and I applied a bunch of leverage, then I'm getting liquidated. I'm a four seller. Like I need to pay back these loans. [24:40] And the way that I pay back these loans is I have to sell the assets that I borrowed to buy.

[24:46] So, [24:47] that's why there's this like sharp downward move because in order to pay back all the yen that i owe because i'm underwater i have to sell the assets so that's why like [24:57] Equities are being... [24:58] fire sold like cryptos being fire sold all these leverage traders are just dumping everything so that's the sharp move down that you saw wow so interesting and you are so great at explaining things like just a very generous way of approaching this which i for sure yeah really gifted truly if you weren't managing 55 million dollars i would say you should be a professor um [25:22] what keeps coming up for me dina is your tweet that i am [25:27] choosing to believe that this is all a huge marketing campaign for industry season three because it's devastating and it's awful but it's like an incredible story around all of these things that happen exactly what you said like a butterfly flaps its wing in japan and williamsburg freaks the fuck out because he goes down 20 in a few hours so anyway it's really interesting to see how all of these things sort of work together and have a ripple effect and i just really [25:57] Of course. I mean, like, it's so hard to figure out. It's so it's so unintuitive. And it just strikes me that like, one thing I've learned as an investor is if it's a no brainer, you're definitely getting fucked in some way. If it's so obvious, like if it's so obvious, right? It's if it's too good to be true, it is, is like, you know, that's what your parents might have told you. And like, what I've learned as investors, like, that's 100% true. Yeah, no such thing as a free lunch. We like to think in first order impacts, like, oh, the worst thing that can happen

[26:27] by 25 basis points like that's the worst thing that could happen right so how badly could i get fucked that's the first order impact but the second order and the third order impacts there's all this other like you can't peer that deeply into the machine unless you're such a thoughtful person and so like in general if on the surface of the machine you're like oh my god free money like you're missing something deep inside that machine [26:51] you [26:52] It's time for a more open, inclusive, and transparent financial system. A system that serves nearly everyone, everywhere, all the time. That's why we love today's sponsor, Kraken. Kraken is a crypto platform that provides a super simple on-ramp to the world of crypto with a 24-7 support team. Crypto transcends physical and imaginary borders. No matter where you are, you can send funds easily and quickly to almost any part of the world. Plus, forget about waiting times and waiting lines. You can send, receive, and trade crypto anywhere near instantly. [27:21] Okay, just really quickly as we wrap up, where do we go from here? What's next? Like what has happened? No crystal ball, I know. I mean, I have no idea. [27:51] about this and i'm not a macro investor right but i i we think about macro in terms of you know our liquid token allocation and when's the right time to you know have a good basis to to enter i think

[28:02] that the people... [28:04] um, who were leveraged to the tits got caught with their pants down. Right. And they, they were four sellers. Like they got fucked. Like they had to puke everything up. Right. Um, [28:14] But, [28:14] There are other people who are also maybe leveraged, maybe taking some risk. [28:19] And this week, I guarantee you, they were in a war room scrambling, being like, guys, we need to get liquidity. [28:26] Like those idiots are host, [28:28] Right? They're so fucked. [28:31] But like, if it goes further, we're next. [28:34] And so we're seeing this kind of quiet period where like, hmm. [28:37] Something big broke. [28:39] But it seems like maybe we're okay. Yeah. But like, [28:42] there's conference rooms in japan right now where people are freaking out and being like how do we unwind our positions right there are people who are exposed to this trade who aren't like force sellers but their risk management is all the alarms are going off and they're like how do we start unwinding the boj had to say like hey look we're not gonna we're not gonna keep going because you guys all freaked out so like we're not gonna ruin the world economy like you know there were [29:08] you know, very hurried phone calls that were made between countries potentially just being like, OK, we need to maybe stabilize a little. [29:14] But there are some folks here who are probably still in some pain. Now, to what degree this kind of like it's a little bit like when, you know, I forget which one came first, like First Republic went down. Yeah. [29:26] And then we were like, [29:27] oh, that was bad, you know, but, oh, they just had some, like, weird practices, and maybe it's just one small regional bank. And then it was like, oh, no, then SBB went down, right? And it took some time. It took some time because, like...

[29:39] They tried their best. They tried to shore up liquidity. [29:42] But the fear and uncertainty kept creeping in. And like then something else bad happens. And then, by the way, that was the extent of the damage. A couple more regional banks went down, but like the economy didn't. Like overall, it was resilient. So I think we're going to find out over the next couple of weeks, like, [29:56] Are there other shoes to drop? [29:58] Like, I don't know. And I think [30:00] What we're waiting for is for the Fed to do something. And I think what's scary to me about the Fed doing something is like in order to prop up asset prices, they need to cut interest rates. Right. [30:11] Right. That's how we know that relationship works. But if they cut interest rates, the spread on Japanese yields and U.S. yields goes down again. It goes down more. And if the spread goes down more than the people who are caught with their pants down or like about to be, [30:28] are going to be under more pressure. So if I'm one of those people who's exposed to this carry trade, [30:32] I'm definitely scrambling right now because [30:35] The Fed wants to cut. [30:37] like assets, you know, American, the American stock market is like cut, cut. You know, Kamala Harris needs a cut in order to like be president. Like there's all these pressures are like cut. [30:50] But if I'm a carry trader, like, that's going to put me under more pressure. So I got to scramble. So we're going to find out, like... [30:56] Are they, is there going to be enough liquidity? Are they going to be able to save themselves or something else going to break? [31:01] Well, if you're a carry trader and you're listening to this podcast, you've made some mistakes along the way. But I think our recommendation would be. If you're a carry trader and listening to this podcast, it makes sense that you're underwater.

[31:14] Someone is definitely listening to this being like, oh, wow. That's what happened. Wow. Oh, yeah. [31:22] Oh, my gosh. Well, this was so enlightening. And really, I really enjoyed it. And I thank you so much for your time. [31:31] again just like your generosity and approaching this conversation and um i hope this doesn't continue to happen but if as the story develops you're going to be our frontline reporter correspondent fantastic i can't wait thanks for having me [31:45] *outro music*