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Saturday Sanity Break, 31 March 2018 - Market gyrations

March 31, 2018

Massive market volatility surely marks a turning point in market sentiment.  It is worth listing the facts which make investors nervous.  The main fact is that markets have been strong for a long time and have reached a point where some downturn was required.  'It's time' if you like.

 

Other factors in no carefully thought about order include:

 

* President Trump's continual flow of tweets and changes of staff show a man with an hairtrigger approach to life and policy, a bit demented indeed.

* President Trump's tariff increases may, as optimists suggest, just be his clever negotiating for better deals for US trade, or it may signal the start of trade warfare that will make the world a less prosperous place.

* The punch up over Russia's poisoning of a major former spy and his daughter in London shows the fragility of world peace.  Add in North Korea's nuclear posturing, China's South China Sea takeover and Russia's threats on nuclear missiles armed with nuclear bombs and there are plenty of reasons why a nuclear war could break out, almost by accident.

* Will China's boom, already slowed, hit a speed bump due to its heavy (largely onshore) credit burden?  Will the USA economy's apparent speed up also slow as its enormous (largely offshore) credit burden finally implodes?

* Global monetary policy is being gradually tightened. Rising cash rates in the USA and some selldown of bonds purchased as part of 'Quantitative easing' adopted during the global crisis is being unravelled. Both cash interest rates near zero and powerful 'quantitative easing' boosted US bond and equity markets. Now similar actions in reverse will raise interest rates generally and exercise a steady deflationary effect on global equity markets.

 

Hard to see recovery of equity markets any time soon.  Henry knows one savvy bloke who recommends putting all one's investments into cash, and spreading cash balances across banks so as to be within the $250 K limit per holder during the GFC, when at the worst of the scary 'Great Recession' was running. 'This time Recession will be worse, much worse' says that guru.

 

Henry's view is there must be a global recession within 2 or 3 years.  When the US enters recession, Australia usually follows, as happened during our severe recession of 1990-91. But our current debt overhang will very likely make the next recession far worse.  It  would be wise to sell assets and repay debt, gentle readers.

 

Kulture

 

Fiona Prior sees the black, black comedy ‘The Death of Stalin’. More here.

 

Sporting life.

 

Footy on Good Friday and many shops open, what is the world coming to?  Adelaide beat Richmond, North Melbourne flogged St Kilda and no-one was struck down by a bolt from the blue.

 

Today Caaarlton! plays the Suns in Queensland and the coach has called for a more 'balanced' style of play.  Less all out attack and a bit more stern defence.  Then next week we face another old enemy, Collingwood.

 

Former Captain Smith has apologised and shed more tears about his foolish  behaviour in South Efrica.  This has already led to some strong support, especially when the list of trivial penalties for former players caught tampering with the ball.  Fair go, ICC and Australian counterpart.  It's ok to show we are tougher on our players than other nations, but surely not so much tougher than has produced one year (or in one case 9 month) suspension from all 'First Class' cricket.

 

Hopefully, the hard man Warner will win a legal appeal and those long serving clowns that run Australian cricket will get the push themselves.  If it was good enough for coach 'Boof' to quit, surely some long serving administrators should pay a price too.

 

Update: Caaaarlton! has faced the Suns and got soundly trounced.  Collingwood next Friday night provides an opportunity to show Richmond was no fluke, but being 3 zip down would suggest business as usual for an undermanned Caaarlton!. Henry watched final quarter of Hawthorn-Geelong game which showed what is needed to be an elite team. Scary really.

 

Mr Warner has spoken and managed a tear or two. But he refused to answer any hard question and is expect to appeal the harshness of his sentence.  And even if Smith and Bancroft do not appeal, relief for them will surely follow a reduced sentence for Mr Warner. 

 

Image of the week - Four Famous Economists

 

 

 

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