03/15/2016 - Paul Brodsky: Negative Rates Are A Negative Sign For Investors
Macro Allocation Founder & Chief Strategist Paul Brodsky thinks it’s time investors prepare for this unconventional world .. Brodsky notes it is irrational to expect economic expansion .. “After seven years of major exogenous monetary stimulus concluding in negative rates around the world, investors today would be irrational to expect an economic expansion in the coming years or even a mild recession followed by a garden variety expansion .. If we assume that high and rising global leverage (as measured by debt-to-GDP or debt-to-base money) will eventually crowd-out global consumption and demand growth, then we can also assume that the purveyors of money and credit will be able to selectively apply austerity within their economies.” .. Negative rates are a negative sign for investors .. “Negative sovereign yields and policy rates (NIRP) might be ringing the proverbial bell.” .. It is time to find value not just in stocks that have been overlooked & are at low valuations, but also time to project into the future & see stocks that are at unsustainably high valuations .. “Longs, shorts and arbitrage opportunities are presenting themselves clearly .. Prudence demands that wealth seeking investors (as opposed to those matching liabilities or trying to beat indexes) position themselves accordingly.”
