FYI: The “new normal” may be new. It’s hardly normal.
The “new abnormal” would be more apt, according to reports published this month by Ed Yardeni of Yardeni Research Inc. in New York and ING Bank NV’s Mark Cliffe in London.
“Dictionaries define ‘normal’ as regular, usual, healthy, natural, orderly, ordinary, rational,” Cliffe said Nov. 7. “It is hard to use those words to describe the current performance of the world economy and financial markets.”
Regards,
Ted
http://www.bloomberg.com/news/print/2014-11-24/new-abnormal-means-relying-on-central-banks-for-growth.html
Comments
>>>A few critical words from the article, IMO; of which, similar thoughts have been discussed here by fine members of this forum.
Cliffe at ING is less willing than Yardeni to lambaste central banks, noting it’s hard to say how bad a recession may have occurred without their aid. Still, he agrees that policy makers now find themselves having to keep an eye on markets as much as the economies when setting policy.
Witness how quick officials such as St. Louis Federal Reserve President Jim Bullard and Bank of Japan Governor Haruhiko Kuroda were last month to soothe anxious investors. The risk is that an era of monetary interventions leaves markets primed for volatility when policy makers do step toward the exit.
Officials “are clearly concerned that a sharp fall in asset prices might derail their efforts to foster economic growth,” said Cliffe. “That leaves ample scope for policy errors and sudden investor panics.”
Take care,
Catch
BY MIKE DOLAN Reuters.com
LONDON Mon Nov 24, 2014 12:31pm EST
Excerpts
A sustained rise in value of the world's reserve currency -- now widely expected -- would depress commodity prices and global inflation even further while tightening financial screws in slowing emerging economies and dragging on U.S. exports.
In the absence of an instant boost to global demand, this by itself could seed even greater easing, prompt the Fed itself to postpone its own rate rise and pump up assets even further.
As a result, investors have rarely been more comfortable betting on continued buoyancy of developed-world stocks and bonds and increasingly see it hinging on the sum of policy of the 'big four' rather than pivoting solely on the Fed's actions.
"Money is fungible. Money that is printed in Japan doesn't just stay in Japan," Franklin Templeton's star bond investor Michael Hasenstab told clients on Monday.
For some, QE needs to gain traction soon in the real economy because it is proving politically and socially divisive to date.
"QE was meant to flow into the economy in two streams -– the asset value side and the consumer side," said Saker Nusseibeh, chief executive at Hermes Fund Managers. "But it has just been pouring down into the asset side."
"We’ve had the largest QE in modern history and it’s only half worked."
Perhaps the hardest thing for many investors is that they know QE has distorted prices, they're not convinced of its success and yet they need to go with the financial market flow or risk losing money in real terms anyway in near-zero yielding cash deposits.
"If the price of money is wrong, it’s hard to price any asset class against it. It’s easy to see risk everywhere, but it’s hard to see what is a higher risk or a lower risk," said Aberdeen Asset Management CIO Anne Richards.
"There is a day of reckoning. I just suspect it’s not 2015."
http://www.reuters.com/article/2014/11/24/us-investment-qe-glut-idUSKCN0J81P720141124
Thank you.
Catch