All This Market Calm Feels Like Mayhem

This is the most difficult, treacherous and damnable investing environment there’s ever been. As Bloomberg's Richard Breslow retorts, that’s what you hear on an almost daily basis. And certainly in monthly investor performance reports.

“The market’s in a dangerous bubble, now let’s talk about the following stocks you just have to chase because they’re cheap.”

We all know there are bubbles galore. That’s called received monetary policy wisdom. And every time they assure in speech or testimony that an end is conceivable something conspires to pull them back in.

The latest policy maker “do as I do, rather than say” was caused by today’s eyebrow-raising decision by the BOJ to follow last week’s big discussion on steeper yield curves with a business-as-usual purchase of super-long JGBs.

Investors who figured it was prudent to decrease duration and, perhaps, do Kuroda a solid in helping his latest policy twist were rewarded with a bull flattener, with 5s30s moving as much as 4bps. Have a nice day.

[Which, as the following chart shows, has crushed the banks once again... in a total policy failure...]

Therein lies the problem for building a portfolio.

We know the price of most assets are hopelessly distorted, yet prudence has had a very high price.

For too long a time, traders got by figuring they could front-run (trust) quantitative easing and disregard the rest. That game is getting long in the tooth as monetary policy runs out of gas and policy-makers are trying, unsuccessfully, to play it by ear. But what to do in response?

No one knows and, as a result, a lot of important assets are confusingly and maddeningly trapped in tight, uninformative ranges. No one wants to buy, no one can afford to sell and nobody’s happy.

U.S. 5-year Treasury yields have ground to a halt after a wild start to the year. USD/JPY, EUR/USD are boring. So’s gold. Oil’s ranges are narrowing. SPX and SHCOMP have flat- lined.

The only things moving are sideshows like Mexican peso, which have nothing to do with the global economy.