Simpleton-Leadership #3. ENERGY matters…”Fast is Smooth and Smooth is Fast”
-Priorities & Execution
“The best medicine is always “Fire Superiority”….Stand-Bye, Bust it! Head Shots Only…Shoot-Move-Communicate!!! Own the High-Ground! Never Give Up Real-Estate Taken, Once you Move...Own IT!
Words of Wisdom: Bill Blaine @ Morning Porridge
As trade hostilities heat up, and markets look increasingly jittery, the real issue remains just how dangerous the world is:
* It can’t help the US Fed is talking about buying up the short-end to fuel liquidity in US money markets – when money markets get sticky, the rest of the financial economy grinds to a halt.
* I’ve got my stock chartist pals telling me the major indices are poised for a tumble.
* I’ve got the stock pickers warning a correction will pull down good stocks (ie those firms with strong management, sound balance sheets, healthy cash flow and generous dividend policies) alongside the overhyped dross.
* My credit analyst buddies are concerned about how bubbly credit markets are. They see rising default rate indications, and that a possible “buyers strike” by bond market vigilantes is on the cards with risks so high and rates so low.
* A number of readers pointed out the problems of Pizza Express are largely due to its Private Equity owners leveraging it with debt to pay themselves massive dividends. No S**t Sherlock. It would appear one firm is hedged and is actively willing it towards default so it can pick up a windfall.
So where should we be investing?
About the only thing I’m pretty certain of is interest rates are unlikely to spike dramatically higher. They could rise modestly on , or we’ll see a buyer-strike, which will trigger a massive number of discrete credit defaults – ie Zombie companies going bust. That means diversification is critical – and I’d plump for secured pools of assets – which is right in my Alternative Investment Area.
HARD ASSETS!!! Perception Matters Unfortunately! TBDIt's Not about being Right, Bull or Bear...it's about Preserving Wealth! Unbalanced Environments, Distortions, is the Inverted/Flat Yield Curve Different this time...YES, because everyone knows about it Now! That changes Perception! Again What is your Pain Level? No Whining Allowed!
"by reducing short term interest rates and the consequent application of the covered interest rate parity relationship, the Central Banks are unknowingly encouraging the kind of speculation we discussed previously, i.e. external buying of the negative yielding assets and converting them to positive yielding assets through the exchange rate."
Moving West... more so than flight to safety, UST's are coveted bank balance sheet "lite" tools, due to LCR more balance sheet lite than holding cash. But due to FX hedged costs (especially JPY and EUR of late) many foreign investors only want to rent them in reverse repo. Nattering for another day? Indeed and moving West...
Investors have utilized financial alchemy to turn a low or negative yield bond through a hedged carry (via the FX rate) into a positive yielding asset. Search for yield in a "safer" asset resulted in a crowded "carry" trade, which is only one BIG reason why global sovereign yields have taken a dive, and some are now NIRP negative. It's not a mad, mad world, just a subverted, perverted and inverted QE, ZIRP, NIRP world.