Prepare For “Manias, Panics And Crashes”: An Ominous Warning From Bank Of America
Bank of America’s Michael Hartnett is back with another controversial note overnight, reminding readers that “it ain’t a normal cycle” for one overarching reason: central banks.
As Hartnett explains, the catalyst for bull in equity and credit markets since 2009 was the “revolutionary monetary policy of central banks” who, since Lehman, “have cut rates 679 times and bought $14.2tn of financial assets.” And, once again, he warns that this central bank “liquidity supernova” is coming to an end, as is “the period of excess returns in equities and corporate bonds, as is the period of suppressed volatility.”
Demonstrating how insane just the past year has been in markets, Hartnett reminds us that just eight months ago belief in debt deflation & secular stagnation induced lowest interest rates in 5000 years.
- On July 11th 2016 Swiss government could have issued 50- year debt out to 2076 at a negative yield (of -0.035%)…
- …and in 1989 the Imperial Palace in Tokyo worth more than all real estate in California…
- …and in March’2000 the market cap of Yahoo was 25X greater than market cap of Chinese equity market (MSCI)…
- …and in 2008 the combined assets of Iceland’s three biggest banks were 14 times the size of the nation’s GDP…
- …all manias, all over now.
While the current mania almost ended in early 2016, it was once again China that was responsible for the latest leg higher:
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