the risk-free sovereign

Visions of paradise on the pool floor. Crispy latex. I'm on their radar.

The Economist asks "Is Takaichi Sanae the most powerful woman in the world?”, and she sought to make their fetva true. Japan, the growth death spiral, high savings-rate, conservative country has suddenly discovered herself as a beautiful flower. Oh, you mean the inflation? Isn't that why we have the Plaza Accords? All this talk about Japanese bonds reminded me vaguely of the English rogue trader Leeson, who long time ago played in the walled garden of quantitative easing. Well maybe kiddie pool is better, as in in the 90s QQE packages were called 素水 “mamizu” — the origin of the eternal spring water of capital, of monetary stimulus. Thus *banking* on stability, he got fucked when the Kobe Earthquake tanked Asian markets, including Singapore. This then took down England's oldest bank. Oops.

Already a trillion dollars of risk-off positions on the yen carry trade stress tested markets with a mere quarter-point rate hike. Takaichi seeks to pump this further, bringing the LDP in a more populist and militaristic direction. Because of the cold-war defense architecture there is no departure from this increasingly prescient dilemma: either overturn Abenomics and promote a more populist fiscal policy, or promote a more aggressive foreign policy, both that put much more yield pressure onto the BOJ even if they refuse to acknowledge mark-to-market losses. The LDP has been under more pressure to perform than ever, and any option that keeps her fragile coalition together necessitates hitting up along the fractures of the military-economic order the US put in place post-Bretton Woods.

This forcing mechanism has the power to unwind things more rapidly than anyone expected, domestic political instability amplifying yield curve changes, trickling down to yen-dominated development loans all across Asia, and finally to the American financial system. The flight to risk of last resort, the global risk-free rate, underlies the entire private equity and credit VC ecosystem which denominated counter-party risks within debt, allowing higher risk-on positions by externalizing the risk across the entire alternative asset class of superannuation portfolios, sovereign wealth funds, and universal investors.

Leeson was an innovator in catastrophe.

In The Myth of Private Equity, presented by Jeff Hooke at Google, chalked up the concentration of funds into PE as a symptom of optimism bias and perhaps perverse incentives. That consultants and fund managers, with vested interests, were all too happy to market these more opaque instruments to public funds. A financial firm that has to do no public disclosures, any real regulatory transparency, that can make up their own accounting standards for performance somehow meets the auditing standards of these institutional investors. Yet with all these caveats, pension funds and other institutional investors - made hungry by either by their political and contractual retirement obligations or by chronic under-investment in other sectors due to over-financialization. Hence they park their assets in PE looking for optimistically higher returns and lower losses in a zero-interest environment.

We can see this same behavior-economic structure in other “risk-on” environments like gambling. In parimutuel betting this long-shot bias is well understood. Pricing of odds is explicitly on the distribution of bets within the group, not an objective, frequentist probability. Information markets update when beliefs updates, exposing prior beliefs. The prior in this case, the risk of pool solvency on the prediction platforms, is the probability of eventual clean settlement. Kalshi and Polymarket are best described as not even selling promissory notes, but scrips based on their evaluation of pool solvency. Returns are predicated on the regulation regime of the market-maker, the company itself. With this separation no longer existing even in legal fiction, we are actually looking at a type of risk that it's near impossible to price: redenomination risk.

Redenomination carries state-contingent nominal returns and has been used to explain the exorbitant privilege of the US dollar in international markets. Similar to the opaqueness of private equity, redenomination risk is systematic, and in the case of US sovereign risk, universal. Because of this risk-free basis, instead of being forced to reevaluate their obligations, institutional investors can just export, and thus trade away risk, to alternative, more opaque markets. And those markets in turn export their monetary policy to the ever more politically threatened and extra-constitutional US Federal Reserve. With these underdenominated assets, they build tautological market structures that import risks from counter-parties who themselves are incentivized by their mere existence. When these longshot outcomes are resolved in these opaque structures, it is a crystallization of these convenience yields.

The US-Israel intransigence in terms of treaty enforcement and military obligations beginning with Israeli Cabinet Resolution 563, which first formalized Israel's nuclear ambiguity through the deliberate collapse of a peace deal with Arab states in 1968 and ending with the 2026 U.S.-Iran Memorandum collapsing into extension quagmire erases the peace dividend to Japan. Japan and China, the counter-parties of first resort, with their financial repression have allowed Western countries to massively export both their post-War inflation and political instability. However, even with the severe financialization of America the monetary pressure was too much and eventually trickled into core categories like education, housing, and even vehicles.

Tesla, now SpaceX is a perfect example of both of these failures combining: strategic and industrial. Tesla only gained profitability from lobbying for massive subsidization via carbon credits, ostensibly to remain competitive against Chinese EV makers. However Tesla's likewise privileged introduction into the Chinese market lured it into being dependent on Chinese manufacturers and was the final technology transfer, culminating a process of flying geese developmentalism in the Asia-Pacific that started with in the 1930s.

This is the compression phase. Now in IPO filings, Tesla has lobbied for a low-float, rapid rollout of it's longshot assets via NASDAQ inclusion. Especially as Musk has marked down his stock compensation as a longshot at 0% of probability, he has even exported his tax liability to the market. This means he is knowingly giving himself maximum liquidity no matter how much the stock is compressed. Index fund managers and all rush in to grab a stock, facing essentially a call on their holdings. The success of SpaceX's IPO will be self-reinforcing, eating up more and more of the NASDAQ and forcing an even larger call.

Given a scenario where Japan faces stronger defense challenges by failed US foreign policy, unable to enforce treaties; Index portfolios are suddenly much riskier by inclusion of an non-seasoned stock, allowed by lobbied rule changes; and where Japanese monetary spending on military-industrial inflation to combat domestic inflation and autonomous US portfolio managers risk-off rebalancing works as amplifier. That's a hell of a knock

Hidden Error Account (喜喜喜喜喜)

The volatile swings of some Indonesian shares have earned them the nickname saham gorengan or “deep-fried stocks”, with their restricted floats and concentrated ownership contributing to rallies that can lift their tycoon owners into the ranks of Asia’s richest people almost overnight. https://www.ft.com/content/e96efe7b-5fd4-4a66-a898-b529b23e2642?syn-25a6b1a6=1

At issue in the equity market is a practice brokers have dubbed "goreng-goreng saham" or stock frying - where trading between related parties pumps up a stock's price. https://www.reuters.com/world/asia-pacific/indonesia-faced-with-state-meddling-stock-frying-left-behind-rush-emerging-2026-02-02/

https://openbooks.lib.msu.edu/advancedindonesian/chapter/1-5-fokus-struktur/ 3. Indicating Repetitive Action Reduplication is employed to indicate repetitive or repeated action or activities. Example: “memukul” (to hit) becomes “memukul-mukul” (to hit repeatedly).

https://en.wikipedia.org/wiki/Fritter#Indonesia In Indonesia, fritters come under the category of gorengan (Indonesian: fritters, from goreng "to fry")

https://en.wiktionary.org/wiki/goreng Verb: transitive, figurative, economics, finance, stock market, cryptocurrencies) to pump, a price of a certain share or cryptocurrency

https://en.wiktionary.org/wiki/goreng#Malay (Malaysia, colloquial) to cook up, to improvise, to wing, to make stuff up on the spot

https://en.wiktionary.org/wiki/fritter (intransitive, often with about, around, or away) To squander or waste time, money, or other resources; e.g. occupy oneself idly or without clear purpose, to tinker with an unimportant part of a project, to dally, sometimes as a form of procrastination. To break into small pieces or fragments.

https://www.oed.com/dictionary/refried_adj?tab=meaning_and_use#136106106 Merely reused or carried over with little or no change or improvement; rehashed.

https://id-wikipedia-org.translate.goog/wiki/Saham?_x_tr_sl=id&_x_tr_tl=en arrow, dart cosine

lot, share, portion lottery ticket share (of stock) https://en.wiktionary.org/wiki/سهم https://en.wiktionary.org/wiki/sine#English https://en.wiktionary.org/wiki/ज्या#Sanskrit a bowstring

(UK, historical) The longest part of a split tally stick formerly struck in the exchequer, which was delivered to the person who had lent the king money on account, as the evidence of indebtedness. https://en.wiktionary.org/wiki/stock#English

(Scotland, Northern England, obsolete) A piece or an item. https://en.wiktionary.org/wiki/steck#English

https://www.youtube.com/watch?v=nJtL9MBVj48 https://archive.ph/ZRemH

https://elmwealth.com/lessons-from-betting-on-a-biased-coin-cool-heads-and-cautionary-tales/ https://www.blocksandfiles.com/ai-ml/2026/05/11/dram-and-gloom-glut-cyclicality/5237714