Prior to the last couple of weeks, there were four really big “safe haven” assets that were going up basically every single day as financial markets got more and more unglued.
They were: Gold, the Swiss Franc, US Treasuries, and Japanese yen.
None of them yield anything, all have a pretty fantastic history of storing and returning value. None are associated with unsound monetary regimes.
In the last couple of weeks, there’s been a shift. U.S. Treasuries and Japanese yen continue to hit brand new all-time highs. On the other hand, gold and the Swiss Franc have (to different degrees) collapsed.
So what separates JPY and UST in this environment?
Well, people have never really liked either. Generally, the investing community has argued for a while that they’re both wildly overvalued. Bill Gross the king of bonds was short UST for most of the year. If you tell the average person that you’re a bond bull—when yields on the 10-year are around 2%—you get a funny look.
The yen is the same way.
As you can see in this chart posted by @alea_, speculators are pretty overwhelmingly long dollars against the yen. Note that in every other instance here, speculators are mostly short the dollar, so this is pretty dramatic.
Meanwhile, unlike the yen, gold and the Swiss Franc have had serious bulls making the case that they’re, well, the gold standards in terms of safety. People are actually, and actively long those assets.
And thus it’s no surprise that when the going got tough, and investors were forced into liquidation mode, they sold what they were long (gold and Swiss Franc) not the assets that they were never really bullish on in the first place, Treasuries and yen.
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