Tuesday, August 23, 2016

Markets Are Broken
& Will Remain Broken
"A properly functioning market is a heterogeneous one: one where some investors are top-down, yet others are bottom-up; some invest long-term, others invest short-term; some look at fundamentals, others look at technical. That’s what makes for a two-way, continuous market. A market where all investors are forced to look at the same factor will inevitably be dysfunctional – grinding tighter today, yet prone to sudden reversals tomorrow when the inflows dry up. And yet anyone trying to hedge against such an eventuality inevitably underperforms. All that said, there do seem to be some cracks appearing. Central bank liquidity no longer refreshes all the parts it used to ... € credit spreads are rallying sharply, but only because the ECB is buying them directly; the same applies in £. Both the Euro Stoxx (-9% YTD) and the Nikkei (-13%) are struggling, ongoing QE programs notwithstanding. Inflation breakevens – the most direct reason for central banks buying risky assets – are falling further still.
Most doctors – & even patients – know that when a course of drugs seems not to be working, you don’t simply keep on doubling the dosage. 
This applies particularly when the patient, if no longer as sprightly as they used to be, is nevertheless doing more or less fine. The side effects of such a course are more likely to kill than to cure.
Yet this is what central banks now seem intent on doing. They have too much invested in their models to consider changing them. 
If all goes well, this should produce more of the same: ever tighter spreads; ever more hand-wringing over a stagnating global economy; ever greater dysfunction in markets. That is indeed our forecast."
- Citi's Head of Global Credit Strategy Matt King
link here to the article

1 comment:

Anonymous said...

EVERYTHING IS BROKEN.............American journalism is collapsing before our eyes

Donald Trump may or may not fix his campaign, and Hillary Clinton may or may not become the first female president. But something else happening before our eyes is almost as important: the complete collapse of American journalism as we know it.

The frenzy to bury Trump is not limited to the Clinton campaign and the Obama White House. They are working hand in hand with what was considered the cream of the nation’s news organizations.

The shameful display of naked partisanship by the elite media is unlike anything seen in modern America.

The largest broadcast networks — CBS, NBC and ABC — and major newspapers like the New York Times and Washington Post have jettisoned all pretense of fair play. Their fierce determination to keep Trump out of the Oval Office has no precedent.

Indeed, no foreign enemy, no terror group, no native criminal gang suffers the daily beating that Trump does. The mad mullahs of Iran, who call America the Great Satan and vow to wipe Israel off the map, are treated gently by comparison.

By torching its remaining credibility in service of Clinton, the mainstream media’s reputations will likely never recover, nor will the standards. No future producer, editor, reporter or anchor can be expected to meet a test of fairness when that standard has been trashed in such willful and blatant fashion.