Friday, June 14, 2013


A real one I mean.  After the past couple of weeks it seems to me that it has become abundantly clear that financial activity, be it in debt or equities around the world are totally reactive to central bank movements or the hint of movements which smother all other factor which could effect markets.  Probably not a mind-altering revelation to anyone and certainly this is a phenomenon we have all seen before but never to this extent and magnitude and certainly never in the universal application of monetary pressures.  The sage warning of, "Don't fight the Fed," has been refined to, "Don't even think about it."

I suppose I could be sanguine about all this, but when there has been so much done with so little accomplishment, Little Paulie Krugman not withstanding, one begins to wonder what's it all about Alf, and whether if the lack of improvement has had its result in real, lasting damage.  The problem is the answer to that will not be known until it stops, but just the passing comment concerning "tapering"--the famous word invented it appears on May 22 by Ben Bernanke--is enough to send shutters down the spine of nations not to mention investors, financiers and politicians around the world.

The growth in the Japanese equity market which we have witnessed since PM Abe's hand picked central banker began to mimic the QE of the Fed has been wiped out in less than a month with the cataclysmic collapse of three days ago.  Emerging Market equities have been shattered, equity markets in Euroland are on their heels and our exchanges are a roller coaster ride at best.  Forget the bond or the FX markets; neither have been rational--whatever that means these days.   The IMF looks for lower growth while at the same time blaming the so-called Troika for the continued calamity that is Greece and is told, quite impolitely I thought, to shut up and go pound sand.  Brazil is hosting the CONAF Cup next week so all thoughts of a deteriorating economy and very real pressures on the REAL are forgotten but are there nevertheless.  With that decline, there is occurring a similar decline in Latin American markets, save for a few, while the rest of Asia, along with...or because of...Japan is in a sinking spell.  In short things are not looking good anywhere.

In other times this is where one could tern to one's central bank and ask for a wee bit of help.  Not today.  Increasingly, the belief that the quivers are increasingly empty is becoming a certainty and as a result The question of what is Plan B (or is it "C" by this time) is increasingly being asked.  Increasing, the answer seems to be that we have run out of plans.

It is not my intent to create a bleak picture but I am forced to say that it appears we, in the wonderful American phrase, beginning to whistle past the graveyard.  End of civilization?  Of course not.  But I suspect we are coming to a fairly important point in this cycle and from where I sit the medium term looks messy to say the least.  We have run out of monetary solutions.  Things are getting tired.
Some how, I fear that the Group of Eight Meeting may point this out in starker relief.  Not looking forward to next week.  Hope I'm wrong.

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