Further to the post from a month ago..
http://www.capitalsynthesis.tech/international-equities-the-only-show-in-town/
Today was not about the European news flow. Today was simply a tiny portion of the wall of capital that is resting in cash and bonds entering the equity markets. Participants in cash are beginning to see the future and that future is all about a significant monetary expansion via debt monetization. Financial repression is the order of the day. Government and bank balance sheets are too weak to sustain any nominal downward pressure. Prices will rise and rise considerably as cash hoarding by corporates and individuals is at extreme levels. Bond yields are at the end of their three decade bull run. Equities markets have been thin and the asset class very unloved.
The developed world middle class’s expropriation will continue and increase its depth and velocity. Capital controls are to come.. The dollar, as the most liquid currency, fell the most today. But note, the pound took second spot as the worst currency to own in the world. International equities hedge these currency moves whilst also hedging a proportion of the monetary inflation. Many companies are at pe ratios of sub 5. Their earnings grow in line with the ‘real’ rate of nominal inflation which is always much greater than GDP growth or the ‘official’ inflation numbers.
The markets can be cruel and the volatility immense. It is irony not lost on those involved in monetary history that this volatility has driven private western participation in equities to the lowest levels since ww2.
http://www.capitalsynthesis.tech/households-increasingly-allocate-capital-to-bonds-cash/
But over time these monetary issues will drive much higher equity prices. There are very good fundamental reasons why this is so and will continue to be so. Ignore the market noise and stick, like glue, to the solvency issues and monetary issues that are in front of our noses.
Night guys.. im off for a well earnt dinner and drinks.. but i’ll leave you with a quote from Emmanuel Munyuki, CEO of the Zimbabwe stock exchange:
‘Negative interest rates and inflation has caused a stampede for assets, which had driven share prices to record highs, even in real terms.
It’s quite embarrassing because the exchange is supposed to mirror the reality of the economy. We have benefited from the distortion of the market’.
Rich
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