Cracks Everywhere: Japanese Yen, AI Stocks & US Bonds

**Dan Nathan** (0:00)
iConnections is the largest membership-only platform for the alternative investment industry, bringing together thousands of fund managers and allocators in one powerful hub. iConnections reimagines how the industry connects through its digital offerings and premier in-person events, empowering allocators and managers to meet, build relationships and do business anytime, anywhere. To explore more about iConnections, its events, and gain access to the members-only platform, visit iconnections.io.

**Guy Adami** (0:23)
Today's episode is supported by Astraeus. AI is only as good as the data beneath it, and most wealth firms run on a dozen disconnected systems, which makes real AI work impossible. Astraeus is the AI native operating system that unifies the foundation, so AI finally works across the whole firm.
Learn more at astraeuswealth.com/partnerdash with dash us.

**Dan Nathan** (0:51)
iConnections is the largest membership-only platform for the alternative investment industry, bringing together thousands of fund managers and allocators from one powerful hub. iConnections reimagines how the industry connects through its digital offerings and premier in-person events, empowering allocators and managers to meet, build relationships, and do business anytime, anywhere. To explore more about iConnections, its events, and gain access to the members-only platform, visit iconnections.io.

**Guy Adami** (1:16)
A warm welcome to a special Risk Reversal Podcast. Why is it special? I'll tell you why. I'm going to read because I don't want to mess it up. Joining me now, the great Peter Boockvar, CIO of OnePoint BFG Wealth Partners. By the way, on the backside, on the flip side, as they say, Dan and I spoke with Jin Hennig.
Jin is the Managing Director and Global Head of Medals at CME Group, so stick around for that. But obviously, I'm thrilled to be joined by Peter because the world that we currently find ourselves in, there's no better person to speak to than the great Peter Boockvar. Hello, Peter.

**Peter Boockvar** (1:49)
Hi, Guy. Thanks for having me as always.

**Guy Adami** (1:52)
Now, it's always great to see you and to talk to you, and you are on Fast Money on Thursday evening, and we had a brief conversation. Hopefully, we'll sort of amplify a little bit. The latest note that I saw, intervene, check one, follow with a red increase, fail.
That's obviously the Bank of Japan. In a world of endless screens and AI generated everything, the one thing that can't be copied is being there. I didn't know what that was. Then you told me that's in reference to the Live Nation, the first line of their earnings release, which by the way, we'll talk about, a stock that you guys own. But let's start with Japan and people are like, oh my, I can't believe we're starting with Japan. But as much as open AI and NVIDIA is sort of the epicenter of everything, sort of AI, Japan's, I think, is the epicenter of everything that's going on on the macro front globally.

**Peter Boockvar** (2:40)
It is. We have to remember that Japan is, the Bank of Japan is the architect of interest rate repression over many decades.
It was their idea to have the QE that Ben Bernanke and Mario Draghi decided to copy.
They had zero interest rates that was also copied as well. So we've seen this really tremendous shift in reverse with this rise in interest rates there that has been rather dramatic if you take a step back over a multi-year timeframe. So now we're at a point in terms of a few different pressure points. Pressure points in terms of the persistent inflation there that the BOJ is not responding to and is subsequently leading to a rise in long-term interest rates in addition to persistent weakness in the YADD. The reason why this matters for the rest of the world and to my earlier point is what happens in the GGB market doesn't stay in the GGB market because where their rates go has a huge influence on where European rates go and US rates go. Also, as the third largest creditor nation in the world with the net investment capital position of positive three and a half trillion, with 1.2 trillion of US treasuries, if the Yen were to reverse its weakness and actually start as well because remember, you're a Japanese investor, you're investing outside Japan, that Yen weakness, that other currency strength is benefiting your returns if you're not hedging out your exposure. If the Yen would start to rally, that can lead potentially to repatriation of foreign assets back to Japan, particularly out of Western sovereign bond markets where the JGB market may all of a sudden be more attractive and a Japanese investor does not need to take any foreign exchange risk.

**Guy Adami** (4:38)
That is a succinct way of sort of outlining the potential pitfalls of this entire thing and what I'll take you back to, and I did this to you on Fast Money. It was July, it was around the same time of year. It was July in 2024 It was a Thursday. A CPI print came out in the United States. The CPI print was soft. Dollar Yen at the time was trading at multi-year highs, around 161 In the blink of an eye, it was trading about 157 And by August or little sort of middle of August or so, it had cascaded lower and then everybody became an expert in the Yen carry trade. By the way, if you go back to August of 2024, there was a huge spike in the volatility index on the back of exactly that. History seems to be repeating itself. Now, whether or not the Bank of Japan intervene or not, I can't get a good handle on it. My sense is they did.