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Eric Peters: “This Is The Nightmare Scenario For The Next Fed Chair”
Eric Peters: “This Is The Nightmare Scenario For The Next Fed Chair”
While we will have much more to share from the latest weekend letter by One River’s Eric Peters shortly, we found the following section on inflation vs asset bubbles – a topic which BofA’s Michael Hartnett has been focusing extensively on in the past year and which serves as the basis for the “Icarus Rally” – particularly notable as it explains all of today’s comments from Janet Yellen and other central bankers, discussing why it is only a matter of time before inflation returns, as the alternative, as Peters’ explains, is a world in which yields simply refuse to go up, leading to a nightmare scenario for the next Fed chair, who will be forced to pop the world’s biggest asset bubble.
Excerpted from the latest weekend notes by One River CIO, Eric Peters:
“Why are we not experiencing deflation?” he asked. “How can the top five stocks in the Nasdaq reduce US GDP but we feel better off?” he asked. “Why are Americans buying no more cars today than in 1978 when our population is 100mm higher?” he asked. “Why compare today to a world of combustion engines when we have so many more interesting things to do without moving an inch?” he asked.
“And why do central banks create endless bubbles to restore an inflation rate from that ancient time?” he asked. “Why is that not the right question?”
“Global profits are rising, unemployment is falling, growth is up, wages too,” said the strategist.
“Yet bond yields seem unable to jump.” US 10yr bond yields are 2.27%, Germany 0.40%, Japan 0.05%. “The cyclical surprise is that the Phillips curve finally kicks in, just as everyone gives in.” US unemployment is 4.2%, a 17yr low. Germany 3.6%, a 37yr low. Japan 2.8%, a 23yr low. “And the biggest structural surprise is that technology has rendered wage inflation a phenomenon for the history books.”
…click on the above link to read the rest of the article…
Eric Peters: “We Are About To Reach The Top Of The Wall Of Worry… And Then Look Down”
Eric Peters: “We Are About To Reach The Top Of The Wall Of Worry… And Then Look Down”
Following up on Eric Peters’ contrarian comments about “technological disruption”, in which he said that “we should be careful not to overlook the possibility that today’s disruptive technology companies may be not much more than mechanisms to drive wages down to subsistence levels”, in the One River CIO’s latest letter, Peters reverts back to his familiar, macro self with the following brief allegory on recent events, which as always cuts through the noise to highlight what is important, in this case that “the chasm between policy and reality has never been wider” which he says “matters little, until you arrive at the top of the wall of worry. And then look down.”
Here are the choice excerpts from his latest letter:
“Absolutely,” answered Trump, as sure as sure can be. You see, the reporter had asked if Mexico would pay. She couldn’t help herself, we’re fixated by walls. We need them; to build, to topple, to scale.
They define us, give us purpose. Walls surround us, they’re everywhere, literally, metaphorically.
“We are showing that the world doesn’t have to go 100 years back in time,” announced Tusk, symbolically isolating America, while breaking down the wall that separates Europe and Japan.
“The deal is the birth of the world’s largest, free industrialized economic zone,” said Abe, shaking hands, the barrier surrounding his little island crumbling.
But of course, the most formidable walls exist in our delicate minds. Steel and stone structures all succumb to determined efforts to overcome them; the Iron Curtain, Berlin Wall, Great Wall.
But self-doubt is another matter entirely, a barrier towering above all others, the greatest obstacle ever created. In its shadow stands worry. But this wall can be climbed. And eight years into a historic bull market, we’re approaching the top.
…click on the above link to read the rest of the article…
