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The End Of The Invisible Hand And ‘The Hunt For Red October’
For years - actually, for the better part of a decade now - the usual suspects parroted an at best naive and at worst profoundly dishonest line about the impact trillions in central bank liquidity had on asset prices.
By "the usual suspects", I mean anyone who became caught in their own reality distortion loop in an era where logging outsized returns was as simple as buying an ETF and watching the money roll in.
To be sure, nobody with any sense of the market actually believes that central ban
“To be sure, nobody with any sense of the market actually believes that central bank asset purchases played no role in inflating the value of financial assets in the post-crisis world. As I’m fond of putting it, the idea that central banks deliberately gave everybody a free ride after 2008 is the furthest thing from a “conspiracy theory” there is. ”
Well said, as always H.
And this ridiculous assertion that the last 10 years had nothing to do with monetary policy still persists after what we’ve seen in the last year. Some sort of platitude of denial going on, a true “ reality distortion loop”
It’s very very funny to me:
at the slightest hiccup in equity market momentum comments on SA start to roll in bashing the Fed for being far too aggressive. If monetary policy’s effect on equity markets is so innocuous, why do they all bash the Fed at a moment’s notice?
I was suprised at how much panic was present in the comments of SA last month.
Either
1. We’ve got a bunch of millennials on SA who have never seen a true crash OR
2. People on SA are taking on far too much risk in their portfolios knowing that the Fed ultimately has their back,
I pick 2.
If I was 50% in NVDA, MU and AMD I would have panicked as well.
Or,,,,,,maybe a a bunch of 50 somethings that are working their azzes off trying to ramp up to retirement and concerned that if they don’t make hay now, the field is going to dry up. Careful, your glass tower may get hazy, start to relax, bend to the ground, become part of the earth, all the whilst you have your nose turned to the sky.
The FED needs to go on Amazon and investigate more modern tool boxes.
I agree with the articles premise, save one. Central Banks are not going to abandon the tact they have put themselves on in the past ten years. By flooding the market with capital central bankers believe, rightfully, that they staved off a replication of the Great Depression and the ensuing tumult and hardship which in no small way, culminated in a World War.
Until I hear from those very same bankers, that they have now shifted their fundamental beliefs that they will ever use their positions to fend off a financial crisis, I have to believe that they will always do so. I believe that they think, rightly or wrongly, that they have avoided and prevented financial armageddon, and that they will make sure they do so again, and do it way before it becomes as acute in those dark days of 2008.
“abandon the tact”? I think you would have used “tack” if you understood the metaphor you were trying to use.
Why thank you for your thoughtful insights into the concept. Very informative and helpful.
The definition of a financial genius is a person deluded with themselves in a rising market.
Kenneth Galbraith
QT pays a visit: https://www.youtube.com/watch?v=fWESB56wcxY