QE Cancelling Debt, Dominating Markets, Escalating Risk

 

For the first time in at least 5000 years we have driven interest rates below the zero marker

Negative yielding bonds used to be considered impossible.Now they are metastasizing beyond $13.4 Trillion along with central bank policies.

A quarter of the world economy already lives with negative interest rates!

QE is now cancelling half a trillion dollars of government debt per quarter

Don’t understand central banks? Their impact is now the biggest factor

Fundamental relationships suspended. Long term risk has exploded, while short term volatility has collapsed

This is what happens when central banks do too much. Most traders have given up with the Japanese “markets”

How central banks got it all wrong

As Central banks double down, manage risk not volatility, prepare for the endgame

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For the first time in at least 5000 years we have driven interest rates below the zero marker

“On a worldwide basis, more than a third of sovereign debt is already yielding less than zero percent.
There is not quite a bestseller, but a very substantial book called «The History of Interest Rates». It was written by Sidney Homer and Richard Sylla. Sidney Homer is no longer with us, but Richard Sylla is alive and well at New York University. So I called him and said: « Richard, I’ve read many pages but not every single page in your book which traces the history of interest rates from 3000 BC to the present. Have you ever come across negative bond yields?» He said no and I thought that would be kind of a major news scoop: For the first time in at least 5000 years we have driven interest rates below the zero marker. I thought that was an exceptional piece of intelligence. But I notice however that nobody seems to have picked up on it.”

Negative yielding bonds used to be considered impossible.Now they are metastasizing beyond $13.4 Trillion along with central bank policies.

http://www.zerohedge.com/news/2016-08-15/%E2%80%9Cit%E2%80%99s-surreal-negative-yielding-debt-rises-record-134-trillion

0816pcntBondsNegYield

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BOA Merrill Lynch

A quarter of the world economy already lives with negative interest rates!

Image result for negative interest rates

 

As Richard Duncan explains QE has now morphed into a government debt reduction plan that will simply enable them to do so much more as governments have begun to consider new fiscal plans to come to the “rescue” of the world’s collapsing economic growth.

QE is now cancelling half a trillion dollars of government debt per quarter

“Since the central banks have already cancelled so much government debt, the true level of government debt is much lower than is generally understood. That fact completely changes the policy options (and opportunities) open to our societies. It means our governments can afford to borrow and spend much more. I believe that is exactly what they are going to do.” – Richard Duncan

0816debtcancellation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QE Is Now Cancelling Half A Trillion Dollars Of Government Debt Per Quarter

Don’t understand central banks? Their impact is now the biggest factor

As the markets and the world economy have become hostage to an obviously failing central bank experiment it is well worth being clear about where this is going. The most remarkable part of this story is that rather than admit failure it is far more likely that the central banks are going to double up!

The investment landscape is so far out of the normal that if you don’t understand what central banks are doing you can’t possibly understand what is happening in the securities markets.

Fundamental relationships suspended. Long term risk has exploded, while short term volatility has collapsed

The chart below shows fundamental relationships have been suspended. Diversification has been altered. Long term risk has exploded, while short term volatility has collapsed. However, that is before the central banks double up again!

 

 

This is what happens when central banks do too much. Most traders have given up with the Japanese “markets”

“The elimination of the price discovery function leads to lost buying opportunities for investors and ultimately weakens the investment appetite,” the report said, calling it a “serious error” by the BOJ.

http://www.cnbc.com/2016/08/22/monetary-policy-has-nationalized-the-japan-stock-market-clsa.html

How central banks got it all wrong

“The reason why the underlying demographic, employment and economic trends are now becoming apparent is that credit growth is finally starting to fade: as King puts it “rock bottom yields have done little to stimulate loan demand.”

 

 

“This brings us to the punchline, because while the market is ready for a debt purge, “that’s not how central banks see things.” Instead, they remain dangerously obsessed with “potential.” To which King has a question: what do readers prefer: Growth = potential + debt crisis; or Growth < potential + deleveraging.

The conclusion follows: as central banks refuse to let the system delever, and instead as they “double up”, expect the distortions to get bigger still.”

 

http://www.zerohedge.com/news/2016-08-24/matt-kings-fascinating-explanation-how-central-banks-got-it-all-wrong

As Central banks double down, manage risk not volatility, prepare for the endgame

Image result for german interest rates 1920s

“the Fed has no endgame and the end objective seems to be preventing the S&P from having a 20% decline.”

“Three years ago on this stage I criticized the rationale of Fed policy but drew a bullish intermediate conclusion as the weight of the evidence suggested the tidal wave of central bank money worldwide would still propel financial assets higher. I now feel the weight of the evidence has shifted the other way; higher valuations, three more years of unproductive corporate behavior, limits to further easing and excessive borrowing from the future suggest that the bull market is exhausting itself.” –  Stanley Druckenmiller

http://www.zerohedge.com/news/2016-05-04/stanley-druckenmiller-blows-fed-bearish-reveals-his-biggest-currency-allocation

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