JL Capital Advisory
Explore the Market with Array of Insights
Stay ahead in the ever-evolving markets. Dive deep into cutting-edge analysis of reverse carry trades, option greeks, forex trends, and global geopolitical shifts. Empower your financial strategies with clear, actionable insights tailored for today's complex landscape.
At JL Capital, we specialize in the intricate world of algorithms and quantitative finance. Our expertise is backed by a strong foundation in financial mathematics, crowned by a master's degree and a deep dive into the rigorous Chartered Financial Analyst (CFA) program. Our expertise extends to in-house research and proprietary trading software and research.
- Extensive experience in fixed income and equities trading at hedge funds.
- Developed and executed quantitative trading strategies at a proprietary trading desk.
- Deep knowledge of fixed income markets from roles at Interactive Data (ICE Exchange) and SecondMarket (NASDAQ Private Market).
- Led the design and development of complex systems for financial products as a lead software engineer.
- Hands-on experience with financial data platforms and market data integration.
Our passion for financial innovation drives us to navigate the complexities of modern markets with precision and insight.
Newsletter
Battle of Fed v. BOJ
Next week (9/18/2024) may be the most important week as the Fed may pivot and start cutting 25bps or 50bps. The recent rally in the bond market with the yield curve uninverted, shows a critical moment where equities will be headed to next. Before we look into Fed and BOJ, let’s first look at some of the issues going on with the U.S. market that’s making bond (as well as gold) market scream fire! First, real estate breaking down in some states. People who bought in 2022 are looking to sell at their previous bought price. But in 2022, interest rates were low. The housing prices reflected the low rates at the time. People who bought before will most likely unable to sell at their previous prices today due to higher mortgage rates. However, recently we have seen mortgage rates coming down but buyers are still not buying. If unemployment continues to tick up or underemployed, sellers will be lead to default. Secondly, small businesses are the backbone of US economy. With high interest rates, local mom and pop shop cannot pay high rent, due to higher mortgage payment rolled into. Small companies also cannot maintain high interest rates and if unemployment continues to tick up, the demand for their products or services will start waning. This may also lead to defaults or closure. The screaming in bond market leads the Fed to cut urgently.
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How Big is The Carry Trade 🇯🇵
On August 5, 2024, we saw a glimpse of the carry trade unwinding. No one knows exactly how big the carry trade is but we can examine public and private debt across the world. Let’s recall a reverse carry trade is where investors borrowed low yielding currencies and invest into high yielding currencies or assets. Private debt is the money owed by individuals, households, and businesses (like mortgages, loans, or corporate debt). It’s tied to personal or company finances. Public debt is what the government owes, usually through bonds or borrowing from other countries. It’s the national debt that’s funded by taxes and government revenues. Private debt affects individual economic activity, while public debt impacts the government's ability to spend and invest. What happens to Private Debt as carry trade unwinds?
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Milkshake Brings All the Boys to the Yard
On August 5th, 2024, we caught a glimpse of the reverse carry trade unwinding—a signal that the financial system’s deleveraging process is just beginning. The mainstream media might be eager to declare this unwind as complete, but let’s be real: it’s absurd to suggest that trillions of dollars in leverage have already been unwound.
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Reverse Carry Trade: It's not over.
As the U.S. teeters on the brink of recession, with an inverted yield curve signaling trouble, Japan is making strategic moves to strengthen the yen. The Bank of Japan (BOJ) has started raising interest rates, breaking away from the ultra-low rates that have defined its monetary policy for years, while the U.S. is heading toward a potential rate cut. Since August 5, 2024, the carry trade—driven by interest rate differentials between U.S. and Japanese yields—has been in the spotlight. With the BOJ hiking rates, we've seen a sell-off in risky assets, as investors unwind leveraged yen positions to cover the increasing cost of paying back yen. The interesting note is the chart of USDJPY and MAG7, SPY all exhibit similar paths.
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