Tuesday, 12 June 2018 13:20

Breslow: "If You Ever Needed Proof That Central Banks Have Crushed These Markets, There You Have It"

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It's been a while since we featured the grouchy version of Richard Breslow, Bloomberg's  "Trader's Notes" author, who is back with a bang with his latest missive, explaining why "Ignoring Current Events Just Makes You a Slave" and why the mockery of centrally-planned "markets" has gone on long enough...

From Bloomberg's Richard Breslow

Ignoring Current Events Just Makes You a Slave: Trader’s Notes

This was billed as the most important week of the year for global markets. And we made it almost through Monday before “exhausted” traders were being advised to shuffle back to their safe rooms to get lost in watching the upcoming soccer matches. Boo hoo.

When in doubt, watch TV is one hell of an investment strategy. If you ever needed more proof that central banks have crushed these markets, there you have it. The belief that nothing matters other than an inconsequential rate hike some time over a year from now in euro land or whether the Fed will make the ever so bold move of raising the IOER by only 20 basis points speaks volumes. And it isn’t being complimentary.

It’s a truly bizarre construct to judge the import and implications of every event through the lens of whether green- pack Eurodollar futures jump or dump half a point. Especially when it’s intermingled for show with nonsense about demographic trends sure to produce a precise outcome 30 years from now. No wonder the smart money is investing in artificial intelligence programs that don’t listen to this tripe. G-7 and Korea aren’t yesterday’s news, unless day trading is your version of investing.

By far, the best thing any of the central bank meetings scheduled for this week could accomplish is to say, “here is what we are doing here and now, this is where we hope to get to and we are playing everything beyond that by ear.” Forward guidance is, we want to raise rates as soon as we can, subject to events. Period. Any idiot could have figured out quantitative easing. History will show that the real heroes are the ones who can get us out of this mindless mess. And from the look of things, it has never been more imperative.

Fed Chairman Jerome Powell is said to be less sensitive to “global headwinds” than his predecessors. If so, it will turn out to be a characteristic that redounds to his credit. If ever a market needed some tough love it’s now. The same should be urged upon ECB President Mario Draghi. At this point, whether emerging markets are taken aback by a faux hawkish Governing Council is their problem. Especially since, with the exception of certain well-advertised basket cases, the asset as a class may have disappointed but has hardly been beaten up.

How much warning about higher rates is required before it no longer dictates global monetary policy? Or before...

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