Wednesday, October 15, 2014

Markets comment

Today is one of those rare days when the markets completely tanked. The FTSE closed down over 2.8%, while the dollar sold off and gold rallied. Cyclical commodities also got whacked. All in all it's classic "risk off". One of the really scary movements was in US 10-year treasuries, which at one point today posted a yield decline of 34bps, the biggest decline in some five years.

Some analysts are pointing to soft economic data coming out of the US, which may have a grain of truth, but is really a case of scrambling about for a fundamental explanation when there might not be one, and because analysts can't bring themselves to say "Sorry, I don't really know". I would be inclined to look at the market structure and distortions willfully created by the authorities in response to the credit crisis, and hypothesise such fall outs are to be expected when governments and central banks create artificial stability, which in turn allows positions to get overly built up in one direction. Oh, and the artificial stability has come at a terrible price: monetary policy is relatively impotent against the next crisis, given that interest rates are so low. What's left is more unorthodox monetary operations, distortions and unintended consequences, as the authorities scramble about trying to find new ways to push the economic pain into the distant future. Bleak times.

PS - I am not invested in anything other than Tesco shares (bought after the fall-out as a long shot recovery play).

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