Since The Fed stopped its money-printing extravaganza things have changed a little for the status-quo "believers"...
"Do they really think they would win such a war very quickly? That's impossible, especially in the Arabic world. There everyone is fighting against everyone... everything is far more complicated. It could take years or decades."
The news is filled with the everyday zigzags of those competing against each other for the Democrat and Republican Party nominations to run for the presidency of the United States. But one of the most important issues receiving little or no attention in this circus of political power lusting is the long-term danger from the huge and rising Federal government debt.
Here is the real reason why suddenly high denomination bank notes are the target: it is not because "drug dealers" and tax-evaders use them, but because between banning Europe's €500 bill and the US $100 bill, over half of all physical currency currently in circulation would disappear.
"...gold at $1,200 an ounce, what does that tell you? It tells you that in a flight to quality, in a safe haven, people have more confidence in gold than in bank deposits or paper money. I think things have gotten out of control."
- Bob Michele, Global CIO & Head, Global Fixed Income, Currency & Commodities Group"
In his latest communication with the outside world, Gundlach said that gold prices are likely to reach $1400 an ounce "as investors lose faith in central banks", Reuters reported. "The evidence that negative rates are harmful and not helpful has piled up to the point that the 'In Central Banks We Trust' mantra has finally been laid bare as a hoax,"
The key take-away: focus on owning income-producing assets, not a primary residence. Don't finance your assets with debt; finance your income-producing assets with savings and sweat equity, not borrowed money.
Negative interest rates act effectively as a hidden tax funneled directly to banks. They are inherently unhealthy. Currently, they could indicate also a measure of unease among two of the four most powerful central banks. If so, that could well escalate.
"It seems like too many people have seen the movie 'The Big Short' and are starting to think the movie heroes’ short strategy would translate to the ABS market. It’s not wise to believe everything you see in a movie and hit films are not the best source for trade ideas."
First, it was The BoJ's utter collapse from omnipotence to impotence. Then came the collapse of The Fed's credibility in the short-term. And now, in the most egregious example of total central bank failure - the 'market' has priced out any chance of a rate hike through 2018... and in fact, there is now a greater chance of a rate-cut (than rate-hike) into 2017.
Unfortunately, we remain stuck in the cleanup phase so long as economists and their ability to direct policy continue to suggest the Great Recession was anything other than systemic revelation along these lines; a permanent rift between what was and what can be. It is and was never about oil; only now that oil projects volatility into the dying days of eurodollar leverage.
Bottom line, our conversations with investors suggest yields in the 20 – 25% context could be attractive enough to draw in marginal capital – although several investors noted that is reasonable for triple C risk excluding commodities. In short, we're not there yet.