Something dangerous is going on in the markets. Very sudden we see people flocking to risky assets. This goes very fast. Prudence is out. Risk is in. With interest rates at zero, Treasury bills close to zero, the FED mispricing assets of Fannie Mae/Freddy Mac, MBS-paper and municipal bonds, investors and fund managers are forced to hunt for far more risky assets in order to realize a decent return.
This deliberate plan to funnel money into risk can be dangerous if a situation is created where the fundamentals are ignored.
Unemployment is rising, tax receipts are going down, the bond market –except the artificially supported part – is still very illiquid, earnings will be tumbling and all economic statistics are imploding.
Once the flush of last year will be digested and the buyers buying the dip, the question arises: where will money come from to keep the momentum going.
Or as Bennett Sedacca, president of Atlantic Advisors, is writing:
Forcing money into risky assets is perhaps the most dangerous experiment ever done, and is so large in scale and so unprecedented that we have no idea how it will end. I expect it to end poorly and with hyper-inflation.
Having said this: it would be rather painful to miss the boat for the next couple of weeks/months, but the buyer beware … jump off when appropriate.
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This deliberate plan to funnel money into risk can be dangerous if a situation is created where the fundamentals are ignored.
Unemployment is rising, tax receipts are going down, the bond market –except the artificially supported part – is still very illiquid, earnings will be tumbling and all economic statistics are imploding.
Once the flush of last year will be digested and the buyers buying the dip, the question arises: where will money come from to keep the momentum going.
Or as Bennett Sedacca, president of Atlantic Advisors, is writing:
Forcing money into risky assets is perhaps the most dangerous experiment ever done, and is so large in scale and so unprecedented that we have no idea how it will end. I expect it to end poorly and with hyper-inflation.
Having said this: it would be rather painful to miss the boat for the next couple of weeks/months, but the buyer beware … jump off when appropriate.
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