In today’s issue:

• Weekly Wisdom - From Baron Rothschild…

• Market Musings - Sell in May and go away, or is there money to be made?

• Investment Opportunity - How to play the Yen carry trade unwind…

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WISDOM

MARKET MUSINGS

The grills are sizzling. Flights are packed. And poolside cocktails are back in fashion.

Every summer, the same phrase pops up like a bad penny:

"Sell in May and go away."

It sounds like something from a Wall Street time capsule—back when traders wore suspenders, CNBC didn’t exist, and nobody could check their portfolio from the beach.

But here’s the thing...

When I was running a hedge fund, we did notice the slowdown. Deals dried up. Investors ghosted. June through August was basically tumbleweeds in the capital-raising world.

So does that mean you should bail out for the summer?

1. https://ycharts.com/indicators/sp_500_return_annual

2. https://indexes.nasdaqomx.com/docs/FS_COMP.pdf

Not so fast.

Yes, if you zoom out on the data, summer can underperform.

But zoom in on years like 2020, and it’s a different story—those were some of the most lucrative months on record.

So the real question isn’t “Should I sell in May?”

It’s “Am I ready to pay 22% in capital gains tax just to try and time the market?”

Probably not.

Instead of trying to outsmart the calendar, a Shrewd Investor focuses on smart positioning:

✅ Hedge if it fits your strategy.

✅ Rebalance if you’re overweight.

✅ Wait for opportunity to knock.

Because if this summer does stumble…

You’ll want to be the one with dry powder, not the one chasing gains in September.

Shrewd Moves. Not Shiny Ones.

INVESTMENT OPPORTUNITY

The $1 Trillion Time Bomb No One’s Talking About

What happens when the “free money” taps turn off

Back in the day, there was a trade we all loved—and feared. We called it the widow-maker.

You’d borrow Japanese yen at next to zero percent interest, flip it into something that paid: U.S. Treasuries, Mexican debt, even Apple stock, and rake in the spread.

Easy money.

Right now, that trade is quietly breaking. Globally.

Over $1 trillion in yen-funded positions, much of it in rate-sensitive assets, now faces sudden currency risk.

And if you’ve got money in the market, it might already be hitting your portfolio... even if you’ve never owned a single Japanese stock.

Here’s what’s happening, and what you need to know.

Tiny Country. Big Ripple.

Japan makes up just 3% of global GDP. But for two decades, their central bank kept interest rates glued to zero.

That turned the Japanese yen into Wall Street’s favorite ATM.

Hedge funds, pensions, and asset managers borrowed over $1 trillion of yen and funneled it into high-yielding assets: U.S. bonds, emerging markets, high-flying tech. They made fortunes.

Now, the tide’s going out. And some are finding out who’s swimming naked.

The carry trade is unwinding.

• In October 2022, the yen spiked nearly 14% against the USD in six trading sessions, triggering almost $20 billion in hedge fund outflows.

• In March, Japan raised rates to 0.5%. There’s talk of 0.75% by summer.

Just like that, billions in “easy” profits vanished.

Some funds were forced to dump positions just to stay afloat. Forced selling. Margin calls. Quiet panic.

I remember 2008 all too well. A ton of funds had exposure to Brazilian debt, great yield, until the yen snapped back.

Within days, the currency losses wiped out two months of gains.

They had to unwind early, take the hit, and reallocate to survive.

The lesson? Borrow low, invest high sounds easy, until the market turns and the losses pile up faster than the gains.

History Repeats

• In 1997, it helped fuel the Asian Financial Crisis.

• In 2008, the unwind magnified the global crash.

• In 2020, it torpedoed tech stocks during COVID’s volatility spike.

Every time the yen strengthens, someone somewhere loses their shirt.

Could that someone be you?

You’re Exposed…

If you’ve been worried about market volatility lately, you’re not overreacting.

What’s happening under the surface might be far more dangerous than the headlines suggest.

• Over 60% of global EM bond funds use derivatives or leverage, many with indirect yen exposure through structured notes.

• If you’re heavily invested in growth stocks or U.S. tech, you're exposed. The Nasdaq dropped 12% during the last yen unwind.

• If your portfolio manager was riding Japanese leverage, it’s time for a serious chat.

This isn’t about fear. It’s about being first to the lifeboat.

What Smart Investors Are Doing:

• Cutting leverage. When volatility spikes, leverage kills.

• Hedging yen exposure.

  FX desks are buying 3-month USD/JPY 140-strike puts (when the pair was at 150). Others are rotating into short-duration yen assets that are less sensitive to rate spikes.

• Buying gold.

  In the 2022 unwind, gold jumped from $1,700 to $1,850/oz in 6 weeks. Some macro funds are reallocating 5–10% of AUM into GLD or physical gold.

• Rotating to safety.

Think U.S. blue chips, quality eurozone bonds, or even some underpriced Japanese exporters, who benefit when the yen strengthens.

Also, watch the Bank of Japan like a hawk.

If they hike again, and the Fed cuts? Get ready for fireworks.

Here’s the big picture:

When money’s free, the world feels safe. Predictable. Profitable.

But when the cost of capital rises, especially in places like Japan, it forces a reset.

That’s where we are right now.

This isn’t the end of the world.

But it could be the end of portfolios that got lazy, over-leveraged, or stopped paying attention.

We’ve all been lulled by cheap money before, myself included. But this is a moment to refocus, recalibrate, and make smarter moves together.

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The content provided in this newsletter is for informational purposes only and should not be considered as specific advice for any specific individual. The information is prepared by knowledgeable individuals and is not written by certified tax professionals or investment advisors. For personalized advice tailored to your unique financial situation, consult with a qualified tax professional, financial advisor, or attorney.