While scanning the news and market data, I found that the Japanese 10y government bond yield has reached another ATH, and I haven't seen a single report about it. This is also a key factor in tightening liquidity.

The repatriation of yen funds + the change in the demand structure for dollar financial products + the disintegration of arbitrage trading is a very frightening thing. When U.S. Treasury yields decline and Japanese interest rates rise, it will form a reversal of the cross-border arbitrage structure, which has a significant impact on global Liquidity.

Now all eyes are focused on whether the U.S. will cut interest rates. If the U.S. unilaterally opens the faucet wider while Japan tightens it, there will be no change in liquidity. Global liquidity is shifting from "extremely abundant" to "marginal contraction," and the first to be hit will be various risk assets, especially those with high leverage.

With the recent surge in put options for technology-weighted stocks, it seems that there is some unknown information spreading at the top level. Based on past experience, the long whip effect of information usually takes about 3 weeks to 3 months to reach ordinary investors. Perhaps in December, we may be able to capture some clues.

Historically, there have been many instances where smart money moves first. They do not directly sell stocks, but instead purchase Put options for hedging, including the following:

In the eve of the 2000 internet bubble burst, technology giants like Cisco, Microsoft, and Intel generally had a Put ratio exceeding 65%. At this moment, the Nasdaq index was still around the average, the celebration had not stopped, and no one realized that danger was about to come. In the following 3 weeks, the internet bubble burst, and the index fell by 78%.

Before the outbreak of the subprime mortgage crisis in October 2007, the Put ratio of financial stocks surged dramatically, with the Put ratio of Lehman Brothers and Bear Stearns reaching 70%. At that time, the VIX was below 20, and the entire market seemed oblivious. Six weeks later, the bubble burst, and the entire S&P 500 index fell by 58%.

Before the Chinese stock market crash in August 2015, Chinese concept stocks in the US market conducted large-scale hedging operations, with companies like Alibaba and Baidu seeing a surge in Put ratios. Two weeks later, on Black Monday, the Dow Jones plummeted by 1000 points.

During the COVID-19 pandemic in 2020, China was the first to experience an outbreak, and the Put ratio of cruise stocks and hotel stocks also surged. However, the overall US stock market continued to reach new highs until a rare stock market crash occurred in March, which Buffett remarked was a historic moment witnessed four times, with multiple circuit breakers.

Now everyone can observe some leading indicators. Only those who are perceptive can avoid harm when the real disaster occurs. We are all ordinary investors without first-hand information sources, and can only observe what the smart money is doing.