It appears that the world's central-scammers have finally gone too far. In a shockingly Zero-Hedge-ian statement, Reuters is forced to admit that "spooked by the end of a 30-year bond bull run and bouts of money printing which have pushed stock values out of kilter with economic reality," high-profile investors are turning their backs on financial assets and favoring real assets.
"Zero interest rates and negative interest rates and Europe and Asia are a huge signal that we are almost at the point where central banks have lost their tools to perpetuate a sense of confidence, that things are cyclical.... If you were to apply the Bretton Woods model for valuing money today, gold would be up to $15,000 an ounce..."
After yesterday the BOE failed to attract enough selling interest to fully cover its long-maturity QE operation, bond traders were sitting on edge for the results of today's latest "POMO" open market operation, which concluded moments ago, to see if it too would have a shortfall in supply. That did not happen, and instead as the BOE revealed moments ago, there was a substantial GBP 5.51 billion in gilts offered for sale to the BOE, resulting in a comfortable, oversubscribed coverage of 4.71x.
As first reported yesterday, in a striking development, the BOE failed to monetize all the longer-maturity gilts it had hoped to purchase on just the second day of its restarted QE operation, as it encountered something striking: an offerless bond market. Today Wall Street responds.
To quell any speculation that it may be easing off in its "inflation boosting" monetization efforts, moments ago the BOJ "leaked" what its September statement would be, and as Reuters reported the BOJ has "already prepared a preliminary outline of a "comprehensive" assessment of its policies due next month that will maintain a pledge to hit its 2 percent inflation target at the earliest date possible, sources familiar with its thinking said." The general tone would suggest that a tapering of the BOJ's massive stimulus program is unlikely.
Following yesterday's muted action which saw the S&P500 close unchanged, it has been more of the same listless trading overnight, with US equity index futures little changed as the Nikkei fell on the back of a stronger Yen, while government bonds rose and European stocks reversed early gains following the BOE failed bond monetization operation. Crude oil dropped for a second day after Saudi Arabia told OPEC that it pumped a record 10.67 million barrels of oil a day,
The biggest (unspoken of) bubble in the world, just got bubblier. Following the lowest 10Y China government bond auction yield since records began in 2004, a surge of foreign inflows (seeking yield) combined with domestic flight-to-safety from the increasingly default-ridden corporate bond sector has sent China's government bond yields to 2009 lows.
The Fed's interest rate policy has driven long-term return expectations for investors lower but pensions are slow to update their assumptions to reflect the current "reality"... when/if they do the consequences will be pretty scary
Thanks to the ongoing drop in the sterling, another fringe "Brexit benefit" has emerged. As Sky News reports, the slump in the pound since the Brexit vote has produced an immediate boost for UK tourism with flight bookings into the country up on last year, according to a new report.
“Radical monetary policy begets more radical policy... It seems to me, at some point, markets or voters will put a stop to this.” If and when that time comes, Grant notes that investors will be looking for physical stores of wealth, explaining "the case for gold is not as a hedge against monetary disorder, because we have monetary disorder, but rather an investment in monetary disorder."
It is not surprising that after one of the longest cyclical bull markets in history that individuals are ebullient about the long-term prospects of investing. The ongoing interventions by global Cental Banks have led to T.I.N.A. (There Is No Alternative) which has become a pervasive, and “Pavlovian,” investor mindset. But therein lies the real story...
Before this morning's ugly productivity data sent bond yields tumbling, 10Y Treasury yields had briefly surpassed the consensus analysts' forecast of 2016 year-end levels. Having seen the collapse of the massive net short position in the Treasury complex squeezed to its longest since 2014, as rates have risen in the last 3 weeks, so shorts have begun to gather pace once again...