Father Knows Best ? Not Always – Market Thoughts

Sometimes I wonder why life is so carefree for a child or teenager like my son.

And so I drew it out.

things you can control

For him, things that he can control, he really cannot be bothered about. Like to study a bit more and play less games. And things that matter to him, such as getting the new Xbox One, he has little control over. He has figured out that if he studies a bit harder and play less games, he may get the Xbox One but then he would not be needing it anymore because he would have no time for it.

As for the things that matter, Mommy knows best.

Yet as we grow older, things that matter start to accumulate. Be it the anger at having to wait at the Singapore-Malaysia border and that there is no “express” lane where you can pay your way through; feeling fat after drinking too many beers; or even the great CPF mystery that has gripped quite a few Singaporeans out there.

Reading some the various newsletters and reports out there, from Mauldin’s Thoughts from the Frontline to boutique letters from Otterwood Capital and to the big names like Roubini, Nassim Taleb, Marc Faber, Satyajit Das, Bill Gross and countless more, I feel their frustrations and anxiety that have accumulated over the years since the first controversy of QE.

Why should they feel so impassioned about the actions of the great and good central banks of the world ? For all of them qualify to sit on the Fed or IMF chair, if you ask me.

Even little old me went on my own little tirade over the past 2 years.

Me, back in 2012 : “I cannot imagine a more morbid subject to talk about at any dinner table than to suggest that our money is devaluing away as we eat, sleep and breathe. Yet it cannot be more than true in the relative value sense.

Inflation of goods is relative to deflation of money.” https://tradehaven.net/market/liquidity-the-game-of-money-and-how-to-win-currency-wars/

Christine Hughes Weekly Macro Insights 14 June 2014 : “The money we work so hard for and save, is being continuously eroded by central banks around the world. Typically, historically, these practices don’t end well..” (referring to the latest Chinese stimulus efforts that would potentially devalue the currency)

And on the other hand, why are the authorities i.e. the Fed and ECB etc, working out such abominable plans ? That supposedly like-minded and like-qualified figures in the economics arena find so repudiatory ?

In 2013, I felt a Crisis of Confidence but I was proven wrong as markets continued on their march back to a new normalcy. For 2014, I felt The Weight of Expectations which the market delivered with ease and into new record highs.

In June 2014, I have stopped barking up the wrong tree.

things you can control CENTRAL BANKSMake no mistake, nothing Bill Gross or Roubini or gang says matters to them.

Because back in June 2007, the world was a happy place.

”     June 28 (Bloomberg) — Most U.S. stocks gained and benchmark indexes were little changed after the Federal Reserve said the housing slowdown won’t keep the economy from expanding.
…     Fed policy makers held their benchmark lending rate at 5.25 percent for an eighth meeting after saying inflation remains their main concern. The economy will probably “expand at a moderate pace” even as home sales slow, they said.”

”     June 30 (Bloomberg) — The Standard & Poor’s 500 Index was little changed amid heightened concern that losses from loans to the riskiest borrowers will mount, while the Dow Jones Industrial Average gained, capping its biggest quarterly advance since 2003.
Bear Stearns Cos., Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. led financial firms to the second-steepest retreat among 10 industries in the S&P 500. BearStearns this week said it would spend $1.6 billion to bailout two hedge funds that made bad bets on bonds backed by
subprime mortgages.”

One year later in June 2008.
* `Decent’ Global Growth to Boost Stocks, BlackRock’s Doll Says
* Lehman Drops to Eight-Year Low on Speculation It Will Be Sold

And we have not looked back since and as each day passes, we realise the less control we have with currency markets rigging, stock rigging, interest rates rigging and even gold rigging.

Thus we revert back to the child in our disenchantment. Realising that too many things that matter are beyond our control, leaving it to policy makers to handle even as the limits of our imagination is challenged in this 6th Father’s day since Jun 2008 and the continuous rally that we have had without a decent correction since 2011.

I suspect that like in 2007, Father does not always know best. Heading into the FOMC next week on the 19th, and with all 3 major central banks off on their own tangents, the rift is starting to show and markets looking to tear up.

Struck by that dejavu feeling that I have said this before too many times, I will still be taking all cards off the table into next week. Because I do expect a correction like I said, although I am not sure how much. https://tradehaven.net/market/yes-it-will-crash-by-how-much/

And its always Murphy’s Law that at times when the last bear has given up, that the real bear shows up. Just like Fathers sometimes do not really know what’s best.

Happy Fathers Day to all !