“It’s Time To Hold Physical Cash”, Fidelity Manager Warns Ahead Of “Systemic Event”
As Jamie Dimon recently noted while discussing the perils of illiquid fixed income markets, the statistics around “tail events” can no longer be trusted.
In other words, 6, 7, or 8 standard deviation moves that in theory should only happen once every two or three billion years may now start to show up once every two to three months. Evidence of this can be found in October’s Treasury flash crash, January’s fantastic franc fuss, and last month’s Bund VaR shock.
Why is this happening? Simple. There’s no liquidity left and the idea of efficient markets facilitating reliable price discovery is an anachronism.
Today’s broken, “mangled” (to use Citi’s descriptor) markets come courtesy of: 1)frontrunning, parasitic HFTs, 2) the post-crisis regulatory regime which, to the extent it’s well meaning, was conceived by people who never had any hope of evaluating the likely knock-on effects of their policies, and 3) central banks, who have commandeered sovereign debt markets, leaving a trail of illiquidity and shrunken repo in their wake.
Meanwhile, equity and fixed income bubbles continue to inflate on the back on central bank largesse and the only two options for rescuing a highly leveraged world are writedowns and/or inflating away the debt.
So what is a savvy investor to do in this powderkeg environment? Simple, says Fidelity’s Ian Spreadbury: own gold, silver, and physical cash.
Via The Telegraph:
The manager of one of Britain’s biggest bond funds has urged investors to keep cash under the mattress.
Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds for Fidelity, including the flagship Moneybuilder Income fund, is concerned that a “systemic event” could rock markets, possibly similar in magnitude to the financial crisis of 2008, which began in Britain with a run on Northern Rock.
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