Thursday, June 16, 2016

Events That Could Make Soros* a Winner
Mohamed A. El-Erian outlines what he thinks could happen to enable the bearish market bets being made by George Soros* now ..  "The cascading decline in yields amplified the recent relentless flattening of yield curves -- often a sign of an impending recession, according to historical experiences (though in previous cases, without the degree of central bank involvement that has characterized this period). Still, despite selloffs on Friday, some equity markets, including those in the U.S., flirted with all-time highs and oil had a relatively solid week. These anomalies -- and many before them -- have fueled fears of trouble ahead. But past warnings have tended to fall on deaf ears, and understandably so. A winning strategy in recent years has been to bet on the ability and willingness of central banks to repeatedly intervene to repress financial volatility and boost asset prices -- often at levels that are well beyond what is warranted by economic and corporate fundamentals .. Greater risk aversion among market participants who -- acting on their confidence that central banks are prepared to continuously step in to ensure stability -- now have taken on significant mismatches of maturities, assets to liabilities, benchmarks or currencies in their search for higher returns. And this is occurring in markets that have tended to experience periodic bouts of relative illiquidity."
LINK HERE to the essay

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