Harry Hindsight is the world’s greatest market trader – he’s circling round the opportunities presented by inflation and the risks its presents. He’s short bonds, credit, stocks, Brexit and the UK.
May markets are finishing on a dead-cat bounce - things could get more unstable through June. The outcomes in Ukraine are looking less favourable, and Europe will struggle with sanctions. The weakest link is unsurprisingly Italy. A bigger crisis in terms of famine will shortly become apparent in North Africa.
Two simple questions for Central Banks; what was their plan, and what is it now? The consequences of 14 years of monetary experimentation are upon us. From Macro to Micro, Boeing is a sad illustration of the consequences of central bank policy.
Central Banks and Politics will be the dominant theme this week/month/year. Politicians are anxious to show inflation and recession are not their fault. Blame Central Banks! The Politics of Blame has profound consequences for markets.
Why do we worry so much about debt, the dollar, inflation and growth, when the only really, really important things are Energy, Food and Commodities and how we pay for and get them?
The immediate financial market outlook is risk-off driven by Ukraine, followed by rising fears and concerns about inflation policy mistakes, wondering when to pick the bottom in the tech cycle to buy great ideas, why Boeing should be in jail, and longer-term concerns about where we are going in terms of transition.
Forget everything you think you know about inflation. It is not solely a consequence of “monetary phenomena”, but largely about the behaviour of crowds. That’s why it’s so dangerous to growth and markets.
Fraxious markets as stocks wobble, fears rise, energy prices spike; what’s to worry about? Preparing for inflation would be one thing – but being ready for opportunity is another!
The risks of Central Bank policy mistakes are escalating. Fixed Income markets are wising up to the potential of long-term stagflation/inflation. A bond correction will crush stock markets if/when real interest rates turn positive. Central Bankers will need to decide: intervene to save markets – continuing the current distortions, or let loose the dogs of market meltdown. Anyone for the last few choc-ices?
Who cares who replaces Angela Merkel? But the likely inability of the ECB to address the consequences of monetary experimentation and inflation in coming years could cause Germany’s coming generation of bland political nobodies to be superseded by something more populist and chaotic, creating all kinds of problems for Yoorp.