“There is a very simple lesson that when the markets finally break through the manipulation they move to price in deflation and not inflation. This is key because it means financial repression has failed.”Analyst Russell Napier

The Economist’s Buttonwood column described it as:

“Letting go of Daddy’s hand,” and cautioned, “[W]e may indeed get to see QE4 rolled out. Daddy might have let go of the market’s hand for the moment but he’s still close by.”

“That coinage nicely speaks to the juvenilisation to which markets have been reduced during six long years of:

• Financial Repression,

• Interest Rate Manipulation, and

• The Unprecedented Expansion of central bank balance sheets.

Only the asset purchases have abated (for now): the Financial Repression, one way or another, will go on. Whether the asset purchases have really disappeared or merely been suspended will be a function of how risk markets behave over the coming months and years.

And

“Although our crystal ball is no more polished than anyone else’s, we would not be surprised to see petulant markets rewarded with yet more infusions of sweets. Our fundamental views are clear:

• Bonds are already grotesquely expensive, yet may become even more (we’re not investing in “the usual suspects” so we don’t much care).
• Most stock markets are pricey – but in a world beset by QE (and prospects for more, in Europe and Asia) which prices can we really trust ?“

LINK HERE to the source article

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.