Juggling Dynamite

The business media is clamoring to post headlines designed to talk capital flows back into risk markets this morning. So far it is not working. It is not that economic news has suddenly become dramatically worse. The global economy has been weakening for the past three years, and pretty dramatically over the past 10 months. The problem is that undue faith in the magic of central bankers has encouraged many to whistle past the graveyard of contracting world demand. The gaping disconnect between stock prices and economic reality, has now set markets up for a period of profound disappointment. All best case scenarios have been fully priced in. And by best case, risk traders mean increasing monetary stimulus for evermore. Now anything less than best case is disappointing–the plight of over-promising.

With asset markets selling off across the globe this morning, the multi-trillion dollar question is whether US Treasuries (as a benchmark for other interest rates) are now breaking into a new cycle of higher rates, or whether yields will continue to be capped within a secular low rate theme caused by slow global growth after the credit bust. We are open to either outcome, but it seems most likely that low rates today are a secular theme that will be extended a while longer as the world languishes through this third global recession since 2000. We watch with great interest.

Source: Cory Venable, CMT Venable Park Investment Counsel Inc.

Pimco Co-Chief Investment Officer Bill Gross reacts to Ben Bernanke’s news conference and Fed statement Here is a direct link.

This long-term chart of copper reflects the leverage-fueled boom and busts since our secular bear began in 2000. The latest “QE bubble” for copper peaked in 2011 and since then Dr. copper has been beckoning still over-priced stock markets lower towards long-term support levels.
Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.