Juggling Dynamite

William R. White, the former chief economist of the Bank for International Settlements, warns of grave adverse effects of the ultra loose monetary policy. The former chief economist of the Bank for International Settlements is highly skeptical of the ultra loose monetary policy that most central banks are still pursuing. “It all feels like 2007, with equity markets overvalued and spreads in the bond markets extremely thin”, he warns. The whole interview can be read here.

As for all the ‘genius’ capital allocators who have been riding the QE/HFT liquidity wave and considering it investment prowess:

“When things start to move, the inventory for the market makers might not be there. That’s a particular worry in fields like corporate bonds, which can be quite illiquid to begin with. I’ve met so many people who are in the markets, thinking they are absolutely brilliantly smart, thinking they can get out in the right time. The problem is, they all think that. And when everyone races for the exit at the same time, we will have big problems. I’m not saying all of this will happen, but reasonable people should think about what could go wrong, even against a backdrop of faster growth.

The strengthening growth might be a mirage. And if it does not materialize, all those elevated prices will be way out of line of fundamentals.”

Here’s a point for pause:  not one of 72 economists surveyed by the National Association for Business Economics thinks that the US economy will contract this year.  Five years after the last big recession and wipe-out for risk assets (when pundits and advisers were near universally dour) the consensus now sees only further gains ahead. And with stock valuations only higher in 1929 and 2000 they may well be right: what could possibly go wrong from here?

All those hot Initial Public Offerings the past few months are a good sign right? Never mind that 75% of the companies sold to the public have zero to negative earnings, those nice investment bankers wouldn’t steer us wrong, now would they…

The sound quality of this segment is not the best, but the historic insight is worthwhile.

Writer and former investment insider Nomi Prins, on the longstanding personal and political ties between Washington and Wall Street that have enabled the concentration of global wealth and power into the hands of a few at the expense of the rest while sapping the strength of democracy, free markets and opportunity.

Here is a direct audio link