“I know of no country in which there is so little independence of mind and real freedom of discussion as in America.”
Happy birthday America! This morning’s intro-quote is over 170 years old – and I could only use it on a day when all good Americans will be on holiday. Extra points to anyone who can name the author sans Google.
Interesting markets y’day. European bonds were off to the races, perceiving new ECB head Christine Legarde as QE lower-for-longer dove who will continue to ease, ease and ease like Draghi. Bunds at -0.40%! Even Italian 2-year notes dipped below zero percent as the EU dropped threats to take action against the deficit. Some day we shall shake our heads in disbelief at that price…
In the States, the Dow hit a new high, and Trump tweeted it as a personal triumph. He is not so stupid as to mistake the stock market as a proxy for economic health – but he is making idiots of the American people by telling them it is. To keep up the illusion, he’s nominated new names to the Fed likely to toe his dovish line. Much comment on the private networks y’day about Trump’s latest nominations to the board – Judy Shelton being a particularly intriguing choice as Fed critic and gold standard advocate. For the Fed to lose credibility doesn’t just need Powell to surrender – packing the board will be just as effective.
The bottom line is financial assets remain absolutely distorted by QE asset inflation. While its been great news for the market, the real economy remains deflated. That’s what Jerome Powell and Christine Lagarde should be thinking about as they play with the monetary policy toolbox.
Meanwhile, back in the real world, the chance of achieving real returns are getting more and more difficult. I had the same conversation with 3 different fund managers yesterday. They all went along the lines of:
Bill: “Hi! What’s up, what you looking at..?”
Fund Manger: “Well I’ve got to buy assets, but yields are too low, spreads are too tight and market so thin. Any ideas?”
