Year of The Monkey Market Advice : To Tame That Monkey Mind
“Buddha described the human mind as being filled with drunken monkeys, jumping around, screeching, chattering, carrying on endlessly. We all have monkey minds, Buddha said, with dozens of monkeys all clamoring for attention. Fear is an especially loud monkey, sounding the alarm incessantly, pointing out all the things we should be wary of and everything that could go wrong…..It’s useless to fight with the monkeys or to try to banish them from your mind because, as we all know, that which you resist persists.” http://www.huffingtonpost.com/bj-gallagher/buddha-how-to-tame-your-m_b_945793.html
Enter the year of the Fire Monkey on the worst start for many a market veteran, not to mention market novices, on a all-hope-is-lost theme, resonating through every single asset class, even the inflated government bond prices are signalling plain despair and, surely, an impermanence about negative interest rates that does nothing except to challenge the mind to visualise loss in a new way – losing money daily is a way to keep money safe.
Yes, nearly all is loss (not lost) and the drunken monkeys are hard at work “screeching, chattering, carrying on endlessly”. And no one has anything constructive to say these days besides spreading fear, including the central bankers who cut rates to negative to decimate all market confidence and to prove that all their efforts to date have been futile, which means that the negative rates route is likely to be a flop on top of all the QF’s (Quantitative Fails).
The biggest challenge ?
Taming that monkey mind, which is nothing to do with religion or the book, and more to do with applying some rationality into the situation like a human who has evolved greatly from their monkey past.
Monkey Problem 1 – It All Links Back To China
Throw in all the factors that has led us to today – plummeting stocks, rallying currencies, failing credits, negative yields, oil and China. The dominoes are falling and there is no good news really if China does not pick up because the world cannot live without a booming China.
You see, if China picks up, which is something nobody believes in right now, then raw material demand can be expected which would drive oil and commodity prices higher, buffer expectations for the falling commodity producers and their bonds, spur growth expectations in her trading partners, bolster global inflation expectations (less need for negative rates), stabilise the credit market expectations, real estate prices and so forth.
Monkey Problem 2 – The R Word
Few reports have surfaced on the possibility of recession as most evidence points to the fact that there will not be one with Goldman Sachs predicting there’s just an 18% chance of a recession in the US this year. http://www.bloomberg.com/news/articles/2016-02-08/goldman-sachs-says-defy-mr-market-as-recession-risk-still-low …
China is still expected to deliver 6.5% GDP growth and we have just Russia and Brazil as major economies in a recession.
Secular stagnation is the current reality as we had said 6 months ago. https://tradehaven.net/the-secular-stagnation-reality-revisited/
Monkey Problem 3 – Shattered Confidence
The longer yields stay negative, the more confidence will be lost and Bloomberg has just pointed out that there is US$ 7 trillion negative yielding bonds out there and another US$ 9 trillion near zero yielders. http://www.bloomberg.com/news/articles/2016-02-09/world-s-negative-yielding-bond-pile-tops-7-trillion-chart
Despite all the new regulations and re-capitalisations, banking stocks have been hammered which is another blow to confidence in regulators who have over complicated the system with their rules that nobody has a clear grasp or understanding on.
And then there is little confidence left in China even by those who are vested in China. Monkey chatter all about on a shadow banking crisis, fudged economic data and zombie companies would amount to nought if nothing can be proven. All the meddling in the stock markets and arrests made with a criminal conviction rate of 99.9% makes the task of re-igniting the confidence engine a tall order.
Remember, it all links back to China.
Monkey Problem 4 – Terrorism, Disease, Wealth Gaps … and Aping Fear
Fear is diagnosed as the biggest problem we all face in the Monkey Mind and the biggest hurdle would be to un-Fear when there is much comfort in aping others in their panic, finding solace in being on the same boat or Planet of The Apes this year.
The question to ask is that if one has lost confidence in central bankers, why is everyone piling more than ever into their loss making/negative yielding bonds ?
The next question to ask would be if China is a basket case or continue to be a global driver of growth in her own way ? If not, which population of over 1.3 billion can we find to rev growth engines meaningfully without China’s help ?
Global population has increased by a billion in a decade but oil prices are back to a decade low and textbooks say we have about 50 years in supply left ?
There are many more questions from the monkey minds in us in this year of the Monkey but acting like apes will only turn back the evolutionary clock.
Good luck !