As Bonds Are Proven Right Once Again, Is 400 The Next Stop For The S&P?
Once again it seems Japan has a lot to teach the Europeans and Americans of the unstoppable reality that bond markets again and again are "correct in the 'end'". As risky- and 'non'-risky-assets become more scarce (thanks to a central bank bid to monetize or collateralize any and all of it), so equity (and risk) markets become more and more distorted - temporarily suspending normal market relationships - until something triggers the reversion to reality. We discussed regime changes in detail regarding gold and bonds over the past 40 years in the past, but the US and European 'survival' tactics appear to be accelerated (and larger) versions of Japan's balance-sheet-recession-fighting game-plan. Their analog, therefore, provides defensible insight into the bond market's anticipation and equity market's inevitable confirmation that it's not different this time. The question we ask is this: "when TOPIX was at 1800, and JGBs implied it 'should' be 1000 (in 1999 and 2007) - how many people said it was 'different' then?"
Japan's 10Y JGB yield vs TOPIX - hope cometh slow and fadeth fast...
US 10Y vs S&P 500 - we have seen one 'hope' era fade back to bond's reality; will it occur again?
and will the German DAX (relative to Bunds here) also revert back to reality?
We assume the answer is 'but, but, but, it's different this time'...
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