Rabobank: It’s A Depressing Idea To Admit We Have No Ideas
It is said that small minds talk about people, average minds talk about events, and great minds talk about ideas – and I would add the smallest of minds talk about themselves.
The smallest-minded market view is what your individual asset class did yesterday. For example, I see across Bloomberg that ‘equities went up’, ‘bond yields went up’, and ‘oil went up’. No joined-up thinking as to what this means jointly.
The small-minded market view is President Biden telling the CEO of Chevron he was “mildly sensitive” for pointing out to the government how the energy market actually works, as oil rises again.
The average-minded market view is that the White House may cut gasoline taxes for 4 July. Yet even an average market mind should also be able to see this would be bad economics because it won’t help supply, while boosting demand. But careful now, that’s an idea!
The great-minded market view it is to accept what this Daily –and many others– have stressed repeatedly: that to raise rates means huge pain (and I add: and US geopolitical gain); and to cut rates means huge pain (and I add: and US geopolitical loss). There are no good choices. So, cheering equities going up while bond yields and energy also do makes no sense.
However, as Tom Hardy says to Leonardo DiCaprio in ‘Inception’, “Dream a little bigger, darling.”
I recently underlined that central banks have *never* been in real control of inflation. Their inflation-fighting success –or ‘over-success’ pre-Covid, when inflation was “too low”– was *always* reflected the local and global political-economic environments, neither of which they set. One can go back over history to show that fact very simply with a long-run CPI chart for the UK, transposing different local and global backdrops on top.
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