Warren Buffett has been here before. When everyone else was caught up in the frenzy, Uncle Warren sat back and watched the storm build. Now, as markets stumble and liquidity dries up, Berkshire Hathaway sits on a mountain of cash. It’s not an accident. It’s not luck. It’s patience. Buffett didn’t chase the hysteria—he waited for the inevitable, and here we are.
The stock market euphoria is fading. The delusion that stocks only go up has been shattered. The car loan market is cracking, with a record number of borrowers falling behind on payments. The banking system is looking shaky again. And yet, people still act surprised. This isn’t new. The cycle never disappeared—it was just masked by cheap money and blind optimism.
Japan is facing a crisis of its own. For decades, the Bank of Japan kept interest rates near zero, convincing itself that inflation would never return. That illusion is gone. Inflation is running at 4%, a level not seen consistently in Japan for over 30 years. The central bank has hiked rates, but just barely. Raising rates to 0.5% in this environment is like bringing an umbrella to a hurricane—it’s not going to be enough.
Bond markets are waking up. The 10-year Japanese government bond yield has pushed past 1.5% for the first time since the financial crisis. If Japan’s inflation stays persistent, 2.0% isn’t out of the question. That would mark a level not seen in nearly two decades. This is uncharted territory for Japan, and the markets are starting to feel the pressure.
The carry trade is in trouble. Traders have been shorting the yen for years, using it as a funding currency to chase returns elsewhere. But as Japan’s rates rise and the yen strengthens, those trades are getting squeezed. Some unwinding happened last year, but plenty of fresh bets were placed right back on. Now the tide is shifting again, and anyone still holding a short yen position is in for a rude awakening.
Meanwhile, Wall Street’s biggest players are hedging their bets. JPMorgan, once reluctantly bullish, is now throwing cold water on hopes for a big stock market rally in the second half of the year. Their 6,500 target for the S&P 500 remains, but even they admit it could take longer than expected. A market stuck between 5,200 and 6,000 doesn’t sound like the explosive recovery some investors are banking on.
The market is revealing what many refused to acknowledge. The easy money era is over. The cracks are widening. Buffett isn’t worried—he’s waiting. The real question is, who else is ready for what’s coming?
Sources:
https://x.com/CuriousDegens/status/1898053780148560049
https://x.com/great_martis/status/1898054178305720344
https://x.com/Barchart/status/1897967485221036501
https://x.com/leadlagreport/status/1898068233162244245
https://x.com/GlobalMktObserv/status/1897932901817188445