In the financial markets, we have always had two important components: investors and regulators. Today, we are seeing governments as significant market participants that impact global markets. Sovereign wealth funds and public pension funds around the world are now among the largest owners of publicly traded stocks and bonds. China and Japan alone represent $5 trillion in public funds out of an estimated total $30 trillion of investments owned by 160 countries. No doubt these are investors of great size that can crowd out individual and institutional investors.
Watch out! Negative interest rate policy is coming to the US sooner than later
Last August, Runnymede Capital warned our readers that a financial hurricane was coming. Over the past six months, the stock markets around the world tumbled and the US has followed suit in 2016. Our clients, who gave us permission to raise cash reserves, were fortunate and their assets were protected.
The Global Bear Market has Reached US Soil
You are probably aware that the US markets are off to their worst start in recorded history. However, many media commentators are bear market deniers and believe that there isn't a bear market at all. Stocks will go up forever. If there is a correction, deniers believe that the Fed will just restart its quantitative easing programs, and stocks will continue their ascent to infinity.
I'm sorry to tell you that if you look at the data, the global financial markets are already in a deep bear market, and the world central banks have been ineffective in printing their economies out of recession. Today, I believe that the US is being pulled down by international forces beyond our control. Therefore, the US economy is likely headed for recession in 2016. Let's take a quick look around the world to see the carnage.
They Say The Sky Is Clear, We Say Take Cover
Bubbles are the only things that matter. The rest of it is boring. You show up for work, markets are at normal levels, and there's not much you can do. It's all trivial. But in a great bubble you can get your clients' arses out of the way, and the money you can save can be quite legendary.”” – Jeremy Grantham
The financial services industry generally frowns upon market prognosticators. “”Stay the course,”” they say. This is especially true in recent years since passive investments have outperformed active ones. Admittedly, peering into one's financial crystal ball and voicing an opinion can be a risky endeavor. Besides the obvious risk of being wrong, another risk is being labeled a perma-bull or perma-bear. In article after article that I read, the media loves to turn to its favorite go-to bulls and go-to bears for an appropriate quote. Unfortunately, few individuals are permitted to change their minds and even fewer do it well.
At Runnymede, we do a lot of research, and our view is dynamic, not fixed. Ultimately, our market outlook is reflected in the positioning of our clients' portfolios.
The Fed: Asleep at the Switch
Fed’s Williams foresees up to five rate hikes this year. Is he clueless?
Many of the economic departments of the regional Federal Reserve banks conduct outstanding research on the economy. At Runnymede, I rely on them heavily for my prognostication on the economy as well as the stock market. The pity is the bosses at the Fed must not read their own research. Is it possible that the Chicago Fed's National Activity Index (CFNAI) is not part of the “data” that the Central bank is so “dependent” upon? CFNAI has missed expectations 9 of last 11 months and has been below 0 (contraction) for 8 months last year. In November the index missed expectations once again, tumbling to its lowest reading since May.
Will Kamikaze Kuroda crash the global financial markets?
Near the end of World War II, the Japanese conducted Kamikaze or suicide attacks, designed to destroy warships more effectively than was possible with conventional attacks, against Allied naval vessels in the closing stages of the Pacific campaign. About 3,800 kamikaze pilots died, and fortunately, only a small percentage of kamikaze attacks managed to hit American ships.
Is the Kamikaze behavior alive and well in the 21st century in Japan?