🔔 Here Comes The Yen Intervention

• Yen In Freefall - Time to Intervene

• Twitter Takeover Technicalities

• Netflix Bearish Consensus Into Earnings

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Japanese officials are getting very uncomfortable with the recent yen weakness. USDJPY sliced through 128 earlier, and looks set for a move to 130 in no time.

Finance Minister Suzuki repeated his mantra that “Stability is important and sharp currency moves are undesirable”.

Then he took it a step further, questioning the merit of the weak yen policy...

Suzuki added “We will closely communicate with the U.S. currency authorities to appropriately deal with this issue.” and he'll meet with Janet Yellen on the sidelines of the G20 summit to do just that 👇

Any response is more likely to treat the symptoms rather than the causes, but it suggests that the speed of the recent moves has Japan's Ministry of Finance and the Bank of Japan sufficiently concerned to push back.

Structurally, there's not much they can do other than try and smooth out the volatility.

US yields keep on rising while Japanese yields are stuck below the 0.25% level (the BoJ has already been forced to step in and defend the yield cap), which drives traders to buy USD and sell JPY.

The weak yen is also making imports (even) more expensive, which just makes the problem worse.

Summing up, be on the lookout for further statements or actual intervention in the next few days, and don't be certain it'll be easy to get long from here.

130 is a level that's been flagged as a potential pain point for a while, and US 10y yields (which typically correlate with USDJPY) are also within touching distance of 3%...

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Random BRLJPY Thought

Purely sentiment based, two things have caught my eye. Every man and his dog knows about the weak JPY trade (although short positioning isn't stretched).

Does everyone know about the bald guy? 👇

When I see things like this, I wonder how much juice is left in that trade. Once it's on the "magazine cover"...

Then the carry on BRLJPY was mentioned, and I started to think about Mrs Watanabe's last love affair with Brazil, had a look at the chart and my visual bias kicked in too.

I'm not a big believer in fractals and more work is needed on this (any work is more than a five minute glance at a chart with some added crayons), but I am wondering how much further this pair can extend...

Twitter Takeover Technicalities

There's been a load of speculation about what Musk is actually doing with Twitter.

Nobody knows, but the number 420 keeps coming up, and what's the date tomorrow?

The above is from the excellent Matt Levine, who will send you a note (Money Stuff) to your inbox every day for free 👇

Annoyingly, it stays behind the BBG paywall if you don't get it sent to your inbox, but BBG usually offer a 1 month trial for 99c. His latest on Twitter's Poison Pill and the mechanics of coercive takeovers is well worth it.

Musk seems to have support from Wall Street if he decides to push ahead 👇

Netflix Bearish Consensus Into Earnings

Netflix earnings after the close, and everyone's worried about their guidance.

• Can they add more subscribers?

• Can they fend off competition from Disney+ & HBO?

Analysts expect Netflix to report:

• 2.6 million new subscribers in the first quarter

• Q1 EPS of $2.90

• Q1 Revenues of $7.93bn

Bank of America point out that "Since Q2 ’18, NFLX has traded down on 13 of 15 earnings prints."

"It’s inaccurate to even call it a COVID winner anymore... The stock has lagged the QQQ's by (-36%) since COVID began... Additionally, NFLX was first to acknowledge/predict that the subscriber blowout quarters (Q1-Q2 ’20) were a 'pull forward' .."

Solid points. But that also means Netflix is currently trading at a P/E of 31, down from 80(!) in Q1 2021 and approximately 5x forward sales. 👇

Trading at $337 it's right at the low end of analyst price targets too 👇

Netflix has also added close to 40 million subscribers since the pandemic hit, and their average reveue per member increased 7% YoY while they did it...

On top of that, a UK survey found that partly due to the cost of living squeeze, although households were "cancelling their streaming subscriptions in record numbers"  Netflix & Amazon Prime were “the last to go when households are forced to prioritise”.

Summing up, the risk/reward just isn't favourable to short Netflix into earnings. A lot of bad news (slower subscriber growth, Russia) is already expected. The stock's already trading at a discount to the other FAANG stocks (even Facebook/Meta ffs) and 50% down from the $700 high.

Barring disaster, Netflix could easily bounce to $425 post-earnings but consumers tightening the purse strings in a slowing global economy could spell trouble down the road.

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