It’s probably a bit unseemly and disrespectful to liken the world’s learned financial regulators to a bunch of drug pushers. But it’s an analogy that works rather well. So let’s risk it, shall we?
First they hooked the Western world on the opium of cheap credit for everyone. Then, when the poor, dumb users inevitably overdosed on the stuff, back in 2007, it was hastily withdrawn. But our dealers remained in business, replacing that credit orgy with heady palliatives: budgetary stimulus and monetary largesse; methadone to credit’s heroin, if that’s not too distasteful a comparison for the financial pages.
And now, of course, we are left wondering what happens when the pushers finally abandon their lives of crime, go straight and take even the methadone away? This is probably the biggest question, and threat, hanging over equity as we move into 2010. For, if the global economy continues its ‘return to normal’, the New Year will probably see the drugs’ slow withdrawal, sooner or later. In the best of all possible worlds, there will be clear evidence before this happens that the users are ‘clean’ and that the financial world can stand up for itself, unaided by central banks, finance ministries and all.
We’re not there yet of course; nothing like it. As Rabobank glumly noted in its 2010 forecast: “this is a recovery that does not have a sustainable growth engine”. In other words, it’s still underpinned by those pushers to a great extent.
But a slice of research from another Dutch house, ING, gives us a clue as to what, right now, equity investors fear might occur once monetary purse strings are pulled tight in the U.S. and the zero-rate addicts of the world’s stock exchanges perforce go cold turkey once more....MORE
Thursday, December 3, 2009
Equities: "Fear of New Year Cold Turkey"
From the Wall Street Journal's The Source blog: