Monthly Archives: January 2015

Don’t Worry, ECB Happy…

So, the latest 'bazooka' is finally unveiled and (surprise) it was ever-so-slightly higher than the number the ECB leaked to the market as a trial balloon this week - just to make SURE that the market's initial reaction was positive.

In the ensuing press conference, an interesting exchange happened between Draghi and a journalist.

Draghi was asked the following question (paraphrased slightly because I didn't take notes):

"Can we assume that this is everything left in your toolbox? Can we assume that the next move by the ECB will be to move to a tightening cycle?"

Drag's response was telling. He literally laughed in the guy's face. He said "I could make so many jokes but perhaps this is not the time for jokes".

QE will once again fail and they will resort to the only weapon they have left - more QE.

Which is lucky because, as Soc Gen has already pointed out, the 'bazooka' won't be enough:

"The potential amount of QE needed is €2-3 trillion! Hence for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3tn, not a mere €1tn."

"The potential amount of QE needed is €2-3 trillion! Hence for inflation to reach close to a 2.0% threshold medium term, the potential amount of asset purchases needed is €2-3tn, not a mere €1tn."

The response to failed QE programs is always the same; "They just didn't print ENOUGH money" and it is always impossible to disprove, of course, but by throwing in both their hat AND the towel, the ECB today brought the end of the era of supreme confidence in Central Bankers that much closer to a close.

Got gold?

From Tranquility To Volatility

OK... so the SNB didn't consult me before they made their move on Thursday so I didn't get a chance to write about it this week (I was already knee deep in Greece when the news hit the wires) but you can be sure there will be no prizes awarded for guessing the subject of the next edition...

However, on hearing the news, my first (and instinctive) reaction was "There goes the blind faith that markets had been placing in central bankers".

If I'm right, then the world which began on January 16, 2015 is going to look a hell of a lot different to that which we were living in on January 15.

This inconceivable monetary experiment in which we have all been coopted as lab rats was 100% reliant upon us having complete faith in central bankers.

They tell us that they have our backs and that it's safe to buy risk assets and we do just that. Simple.

Of course, that, like everything else, works until it doesn't and the SNB just became the first central bank to not only break a promise to us, but do so in a way that causes the maximum amount of pain to the maximum amount of people (witness the short CHF positioning below).

Believing completely in central banks is like having a pet alligator; everything is wonderful until, lulled by the fact that most of the time alligators just lay in the sun doing nothing, you forget just how dangerous an alligator is and it bites your leg off.

The SNB just let the alligator off the leash and I guarantee you that the wild ride in the CHF that we saw on Thursday is just the beginning of the volatilityCHF Futures Positioninig


The new Things That Make You Go Hmmm… kicks off with a look at the most recent set of numbers out of Japan - numbers which once again reinforce the folly of Abenomics.

As the savings rate turns negative for the first time since records began and wages continue to stagnate, I talk to Dr. Jim Walker (who has a few choice, non-consensus words for the course Japan is plotting), examine the Japanese aversion to immigration, find out why foreign investors have had enough of Japanese equities and revisit December 29, 1989 - when a young, bemused Englishman found himself standing on a desk 6,000 miles from home clapping and cheering a milestone that, 25 years later, remains untouched since...

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Don’t Panic!!! (Until Instructed To Do So)

It never ceases to amaze me that investors seem to need absolute confirmation from an organised body before they are prepared to countenance what is sitting right in front of their eyes.

Today we had markets falling significantly - why? Well supposedly because the World Bank has cut its forecast for global growth for 2014 and 2015.

Anybody to whom this is a revelation hasn't been paying attention.

It's quite clear that global growth has stalled and, as much as many people are determined to lay the recent weakness in the oil price at the feet of a group of geopolitical Machiavellian players, there is another reason why oil falls - always - and that is a slowdown in economic activity.

Now we see copper heading in the same direction and this is suddenly 'news' to people because the World Bank reduces its forecast for 2014 growth by 0.4%.

If this isn't a lesson to anybody who decries the value in contrarian investing principles then they aren't paying proper attention.

<clears throat>

US equities ARE hugely overstretched given the underlying economic situation in the USA. Gold IS hugely undervalued given both the supply & demand dynamics AND the wanton abandonment of monetary prudence. Most Government bonds are at utterly absurd valuations and WILL cause enormous losses and 'growth' in China is nowhere near 7%.

But don't take my word for it... wait for the World Bank to tell us...


Ming the Merciless from Flash Gordon










Having uploaded the first edition of my new Things That Make You Go Hmmm... there has been one issue which a few folks have experienced and that is the problem with Flash.

As I explained to a subscriber, for some reason, Apple hates Flash more than Ming The Merciless did.

Until my native app is finished and ready to do to Apple what the M25 did to London (I mean bypass it - not throw it into complete chaos), I have provided a direct download link for a PDF version of each edition just like it used to be in the old days pre-Mauldin Economics.

If anybody has any problems, please drop me a line and I'll send you a PDF.

Thanks for your patience