2016 into 2017 : Alice In Wonderland

Photo courtesy of Mr KC Kan, in HK

 “But I don’t want to go among mad people,” Alice remarked.
“Oh, you can’t help that,” said the Cat: “we’re all mad here. I’m mad. You’re mad.”
“How do you know I’m mad?” said Alice.
“You must be,” said the Cat, “or you wouldn’t have come here.”
Alice In Wonderland


You are not alone if you are feeling slightly lost, disoriented, breathless or thrown off your mental bearings after 11 ½ months of 2016.

Like a dear friend of mine, I have to admit my sense of reality and system of logic has been distorted and severely challenged, just watching global events unfold and market reactions, that I am beginning to feel like the world around me is part of a virtual reality simulation and at any moment, I could be waking up from this surreality.

Other friends who are not immersed daily in the humdrum volatility of the markets, confess to their sense of unease about life in general, though most choose the path of denial to continue as usual with a lavish enough holiday to end the year, for the sake of Facebook posts, maintaining calm.

After a peaceful existence in the civilised world, which held up well albeit the wars and conflicts elsewhere that we read about, we are now plunged into a world of massive economic uncertainty, social and political facades crumbling fast and the true colours of new world order glowing from beneath in cataclysmic glee.

It is exactly like the scene from Total Recall or the Truman Show where one is gripped by the realisation that their entire existence has been unreal, and everything about 2015 and before that was a cocoon of false reality and that, it will never be the same again.

Our Predictions for 2016 By The Ghost of Christmas Yet To Come, written this time last year.


2016 into 2017 : Alice In Wonderland


It has been a rebellion against the status quo and the central banks, a mental challenge living a lonely year in a mad world after taking the red pill. 2017 looks set to deliver hysterical and delirious laughs after plunging down the rabbit hole then electing to be led by clowns.


The 2016 Revolution

You take the blue pill, the story ends. You wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes.”
Morpheus to Neo in The Matrix

In an impalpable sense, 2016 has been a rebellion and a market revolution has ensued. Whether we like it or not, Brexit has happened, central banks have all but lost their street-cred, America has fallen and markets have descended into 2017 clinging to a new fanatical optimism or “happy high”, perhaps a potential healthy side effect of legalising marijuana.

Given that our drinking water already contains a potentially viral cocktail of prescription drugs (antidepressants, antibiotics, painkillers etc – more in some places than others, with London  and Ontario are lucky enough to have free cocaine, marijuana for the US should be a nice complement.

…. Against the Central Banks

Back in May, we really thought it was dangerous for G7 Finance Ministers to be irradiating their brains in Sendai during their meeting after all the mad decisions they have made.


2016 into 2017 : Alice In Wonderland 1
Source : https://tradehaven.net/sell-in-may-and-go-away-adage-or-old-wives-tale/

Just 700 rate cuts and over 650 since Sep 2008, central banks opened the Pandora’s box of negative rates and then with their bond buying programmes which led to a historic $ 13 trillion worth of negative yielding bonds in August 2016.

It’s surreal,” said Gregory Peters, senior investment officer at Prudential Fixed Income. “It’s clear that central banks are dominating markets. There’s a race to the bottom. Central banks are the main drivers of this, it’s not fundamental.


… Abolishing Cash ?

In 2016, the EU abolished the 500 euro note, India ditched their 500 and 1000 rupee notes recently and there is talk of the US 100 dollar bill and Australia’s too.

In September 2016, Fed’s Kocherlakota wrote that in order to achieve a free market, we have to abolish cash which sounds more like a penalty for holding money and legit robbery by the central bank.


2016 into 2017 : Alice In Wonderland 2


In February, we asked if holding cash was criminal ?

Since 2014, we have been struggling to rationalise in our heads.

  1. Is spending a lot more than you earn a good thing ?
  2. Is printing money the most efficient way to create Employment and Inflation ?

Source : https://tradehaven.net/market-views-negative-rates-pillow-talk-and-gold/

And we concluded that Obama has been unable to understand the complexities and repercussions of the actions of the central bankers.


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The 2016 Mental Challenge

Move over, Ice bucket challenge or Fire noodles challenge.

How about the mental trauma of watching the improbably made possible ?


2016 into 2017 : Alice In Wonderland 4

Source : HSBC


That should be enough to make zombies of anyone watching the markets.

“No wonder you’re having nightmares. You’are always watching the news.”
~ Total Recall, 1990

Albert Edwards :
Markets shrugged off the Brexit vote in a couple of days. They shrugged off Donald Trump’s election in a single day. They shrugged off the Italian referendum result in a couple of hours. Heck, in this mood they would shrug off an alien invasion of planet Earth,” he said. “But global political risk is now at such elevated levels that investors must surely be on another planet.

2016 into 2017 : Alice In Wonderland 5
Chart of S&P 500, ADXY Index, 10Y UST yields, WTI Crude and Gold for 2016.

The waves of refugees inundating Europe and parts of Asia, the terror incidents, the most important referendum of the UK and Europe – Brexit, followed by the improbable nomination then election of Donald Trump as the 45th president of the US, has left us numbed after an emotional roller coaster ride, which started with a collapse in global sentiments and crash in risky assets, central banks and doomsayers acknowledging a period of secular stagnation as we were challenged by the impossibility of Brexit and the possibility of a Trump presidency. And it is ending on a high, for interest rates, the USD, the developed stock markets and oil.

2016 Was a Lonely Year

Society polarised. It is estimated that 120,000 for Brexit voters have died since the referendum even as polls show that Hillary Clinton would have won by a landslide if only the young had voted although we cannot be sure of what is “real news” or “fake news” now.

But of polarisation, we can be sure of, in America.


2016 into 2017 : Alice In Wonderland 6


It’s A Mad World

So we had Election Stress Disorder before the elections which manifested itself in “difficulty eating, sleeping, conflict, internal anxiety” that resulted in “fight or flight” and now we have Postelection Anxiety and it is not going away anytime soon although it will make therapists rich !


2016 into 2017 : Alice In Wonderland 7

Source : Ian Bremmer on Twitter


It is the populists movement we have been writing about for the past 4 years that have risen, unseen, to haunt us since we started by writing Plutonomy, Plutocracy, Plutarchy ? Pluto is Not A Planet Anymore !

McKinsey’s latest report on the economic and socially corrosive impact of a future without hope for middle-class families explains what Piketty, Robert Reich, Joseph Stiglitz and more have been saying for years – negative opinions on their economic future and yet choosing to elect a billionaire demagogue in hope for positive change which has worked so far, as long as it remains on the drawing board.


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The feeling is at ground level as a little bookstore aptly sums up our future in their signage.

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Source : Bookloft


To expect an apocalypse?           

What about this viral post on Castro, who survived 600 assassination attempts and outlasted 11 US presidents, only to die in time before Trump ascends the throne?

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Or that David Bowie has abandoned the world and gone back to space ?

If anything, this summarises what shock has meant to the world and markets this year – Children in Aleppo too traumatised to cry.


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To fear is normal and denial is a natural response as democracy is apparently severely challenged.


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Tired of the way things were, the people wanted change and change has been served, chilled, shakened and stirred. So let’s send in the fanatics and the clowns !


To be continued ……