Bessent says, 'I am the house now.' What that means for the yen - and U.S. stocks.

By Steve Goldstein

What matters for stocks is the secondary implication of the Treasury secretary's comments, observes Rich Privorotsky of Goldman Sachs

Treasury Secretary Scott Bessent told a group of business-school students in Texas that he is in possession of asymmetric information and is, in effect, the house. "Bet against me if you want."

Treasury Secretary Scott Bessent has never been accused of being a wallflower, but, speaking in front of Southern Methodist University's business school on Tuesday night, he made perhaps the most strident comment of his government career.

Bessent was speaking not just of the Treasury's recent intervention in support of the Japanese yen but also of American efforts to shore up the Argentine peso ahead of the last election.

"Whenever people say, 'Oh, well, the Treasury secretary is taking a risk,' well, it's my dream. I have asymmetric information. I am the house now," said Bessent, a former macro trader.

"So when we intervene with the Japanese yen, I have pretty good insight what the Japanese, what the Bank of Japan is going to do, what Japanese policymakers are going to do. Bet against me if you want."

So far, the intervention in foreign exchanges has been a success, while the public announcement that the Treasury would buy long-dated securities BX:TMUBMUSD30Y had only a momentary effect of curtailing yields. Bessent's intervention in the debt market was criticized by his mentor, Stanley Druckenmiller.

The U.S. dollar (USDJPY), which traded at nearly 164 yen before the joint U.S.-Japanese intervention, is now trading around 153 yen.

Rich Privorotsky of Goldman Sachs wrote in a note that the secondary implication of Bessent's comments is what matters to stocks SPX. The concern is that investors borrowing in the low-yielding yen to reinvest elsewhere - in what's called the carry trade - will have to pare or eliminate those bets as the yen rises.

"What happens as yen funded carry trades unwind back into Japanese bonds/equities?" asked Privorotsky. "The S&P and mega cap complex have felt strangely heavy without a great fundamental reason. Worth keeping in the back of the mind that some leverage/carry may simply be diffusing out of the system."

Related: Why a stronger Japanese currency could spell trouble for AI and technology stocks

"The casino analogy only works if yen weakness were speculative," added Paul Donovan, chief economist at UBS Global Wealth Management. "If the pre-intervention yen level were fundamentally driven, the better (if obscure) analogy is the U.K.'s 1992 exchange rate mechanism crisis. In that case, Bessent's should declare, 'I am Lamont.' "

Lamont was the U.K. chancellor who tried - unsuccessfully - to keep the U.K. in the European exchange-rate mechanism.

-Steve Goldstein

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09-09-26 0924ET