I think markets are heading for a collision. Capital is bleeding out of some countries and flooding certain others. It is a precarious situation that will not be abating anytime soon. New record low for the CHF 1Y bill at some ridiculous -ve number, record low in UST 10Y at 1.44%, new lows not seen since 2003 in all JGBs and not to mention Bunds,Schatzs, Scandi bonds, Dutch bonds and even Czech bonds….
But the have-nots are a crowded trade as well. This is a classic case of NATIONAL DISPARITIES which has led to World Wars.
Take a look at the table below.
How long more can Italy, Ireland , Spain and the likes continue to borrow money at those rates and expect to catch up with the rest ?
It looks like everything is spiralling out of control now. Debt/GDP all looking like jokes. Look at the 2 highest Debt/GDP developed countries… Singapore and Japan. Singapore has become inflationarily dysfunctional as its 10Y yield gravitates towards non existence.
Then look at the EM countries and their currencies. Brazil has strengthend 29% in a year, followed by India at 24% and the rest all at nice double digits.
Surely investors will be looking to take some profit soon. And if you ask me, the money will not be going home.
Something is going to give and I think it will be my head. Because I cannot feel the panic in the street today. I cannot see the end of the world tomorrow like the Hedonistic Markets expect. I can see my friends are not their usual selves. They trade for the day. I can see even strategists are not making sense.
Bernie, you understand right ? And looking at that table up there, Australia here I come.