A lack of volatility in the markets is dangerous, according to Saxo Bank's Chief Economist Steen Jakobsen, who says we need to know why the danger will be with us for some time. In this brief clip he warns, "...the world seems to think there is a stable permanent equilibrium which doesn't make sense if you think about it, unemployment is still rising, debt to GDPs are still rising, the Crimea situation is increasing in tension, not decreasing, The US still has a lot of stuff to do on social security and welfare spending…for two or three years down the road, with no activity, the world will fall into not only deflation, but also a recession." Jakobsen predicts that, year on year, world growth will actually be "a big fat zero" and therefore the markets are drifting into dangerous territory.
My longest used chart for fixed income – confirmation is coming soon…..30-year to 2.50 percent
Remember this trend has continued despite 100 percent of macro strategist thinking US rates will be higher in six months time – despite extreme low volatility & complacency – despite the so-called: Great rotation.
Of course it reflects deflation, lack of growth and extremely poor policy responses, which this morning was indirectly admitted by Fed chief Janet Yellen:
Yellen concerned Fed model offers distorted prediction on prices
Yes, the policy makers talk, but the market clearly disagree, especially the bond market.
Imagine if Russia/Ukraine “really” is at true geopolitical risk, if lowflation is not transitory, if growth does not come back again this year, if central banks have no alternative at zero bound, if European Central Bank chief Draghi is bluffing (as he often does)….., if China devalues…. ?
No, it will never happen. We have great diplomatic efforts being expended on Russia, central banks understanding the true economy and politicians who are committed and fully in line with the real economy, plus an extremely strong bank sector – The King is dead, long live the King….