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 [5] 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...
[6]
US 10Y vs S&P 500 - we have seen one 'hope' era fade back to bond's reality; will it occur again?
[7]
and will the German DAX (relative to Bunds here) also revert back to reality?
[8]
We assume the answer is 'but, but, but, it's different this time'...
Charts: Bloomberg