Japanese automakers face a potential Iran war and a rallying yen at the same time. That's the headline. Two separate bad things happening simultaneously. Groundbreaking stuff.
Let me explain this for the retail traders who just Googled "what is a yen." When Iran gets bombed, oil prices go up. When oil prices go up, nobody wants to buy cars. When the yen rallies, Japanese exports get more expensive. When Japanese exports get more expensive, nobody wants to buy cars. So we've got nobody wanting to buy cars for two completely different reasons. Efficient.
Toyota and Honda are sitting there watching crude futures and currency charts like they're monitoring two different terminal illnesses. Pick your poison: geopolitical chaos in the Strait of Hormuz or currency appreciation that makes your Camrys cost as much as German luxury sedans. Either way, your quarterly earnings call is going to be a massacre.
The best part is watching technical analysts try to chart this out. They've got their Fibonacci retracements and their Bollinger Bands and their Elliott Wave counts, and none of it matters because some guy in Tehran might push a button that makes all their patterns look like a toddler's crayon drawing. But sure, that ascending triangle on the weekly timeframe is definitely going to hold.
Retail traders are already planning their plays. They're going to buy puts on Japanese auto stocks, calls on oil, and somehow convince themselves they predicted this geopolitical nightmare with a momentum indicator they found on Reddit. They'll lose money in three different asset classes and blame manipulation.
The yen rally won't even help Japanese consumers buy cheaper imports because there won't be any imports if the tankers can't get through the strait. It's the rare economic scenario where everyone loses except the people selling volatility to idiots who think VIX calls are a hedge.
Photo by sina drakhshani on Unsplash
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