Tuesday, September 13, 2016

Is This The Beginning Of 
The Bear Bond Market?
In his latest missive, Tim Price wonders if the entrance of 2 new euro zone issuers of corporate debt - Germany's Henkel & France's Sanofi - marks the end of the great bond bull run that started by in the early 1980s .. "By Friday of last week, the implications of an ugly slide across bond and stock markets may have led some fund managers and traders to soil themselves, or suffer heart problems, or both. By a happy coincidence, however, Henkel makes Persil laundry detergent, and Sanofi makes treatments for cardiovascular disease. So any affected 'investors' dumb enough to have bought those guaranteed loss-makers and then suffered immediate regret don’t have to look too far for a remedy." .. concludes: "Nobody can say with any degree of certainty what the probability of each of these outcomes is. On the basis that the probability of the third outcome is in any way higher than zero, there is a plausible case for owning real assets at sensible prices – in as much as they can be determined in a world of financial repression – over purely nominal assets that will be obliterated by a generalised loss of confidence in the system. It is time for central banks to start acknowledging their limitations, and doing so by acting and not talking about their future intentions. It is also time for investors to stop believing that central banks had the answers to begin with. Or as Ben Hunt puts it, 'It matters whether or not we call things by their proper names, because the words and the spells motivate human behaviour like nothing else. It matters whether or not we sleepwalk our way through our own fin de siècle, because the really bad people and the really bad ideas that periodically wreck our world can’t be wished away. It matters whether or not we become courtiers ourselves, because the courtiers always fall the farthest. The problem with magical thinking run amok and its perpetuation of a fantasy world is that sooner or later the dream of the delusional king becomes a real world nightmare for real world people. It’s time to wake up.'"

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