Friday, December 8, 2017

Société Générale's Albert Edwards Has Some Troubling News He Reluctantly Shares

From ValueWalk:

Albert Edwards Has A Friendly Reminder – “Financial Armageddon” Still Coming
There has been much teeth mashing regarding central bank unconventional monetary policy and the potential for a monetary devaluation amid forthcoming Fed rate hikes. Well known central bank critic Albert Edwards looks at the situation with his Societe Generale’s clients who, likewise,  “Many clients we meet have similarly apocalyptic views to our own but remain fully invested. They cannot see an immediate trigger for the financial Armageddon that they accept is heading slowly our way.. .” No one can see the trigger for what Edwards describes as “financial Armageddon,” but they recognize it is coming, he writes in a December 7 report, . But might the trigger be found within China rather than developed world central banks?
Fed rate hikes: Stop coddling the markets, say analysts
When futures anthropologists dissect what happened to modern financial society circa 2018 AD, they might consider a November 16 Wall Street Journal column by James Mackintosh. Titled “The Fed is Poisoning the Market. Here’s the Antidote,” the article asserts that central banks should stop worrying about what the market thinks. Central bank policy should just be executed, interest rates risen, without forward guidance or primary concern for communications:
…the Fed doesn’t need to even issue a press release about it, let alone hold a press conference. Let the markets find out that the overnight borrowing rate has gone up when it, well, goes up. Such talk is heresy for the modern central banker, and markets would hate it. But that is the point. Central banks have been coddling investors for years with transparency and forward guidance, to such an extent that the question of what policymakers will do has primacy over analysis of inflation and the economy.
To Edwards, this sums up the current market conundrum.
Markets are riding a euphoric high the likes of which have never before been witnessed. While Edwards didn’t mention bitcoin specifically, he did point to the inflation of asset bubbles without regards to fundamental value as a concern.

“The current situation is even worse than in the run-up to the 2008 crisis,” Edwards opined. “At least back then rate hikes did not lead to easing financial conditions the way they do now! The Fed?s desire to soothe the nerves of the financial markets has made a mockery of their tightening cycle.”...