Fire Burn and Cauldron Bubble

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Avatar di Gianluigi Raimondi 18 Novembre 2019 | 13:30

A cura di Walter Snyder, Swiss Financial Consulting

The global economy is exposed to various bubbles that the Fed has been responsible for. The real estate market has returned to the bubbly state of 2007 as house prices have more than recovered. The stock market bubble is making thousands of share holders happy as share prices reach record high levels. The bond market has also frothed as interest rates have fallen.

The Fed has recently greased up the repo market with billions and billions, stopped QT, and more recently inaugurated non-QE QE, thereby increasing its balance substantially. Ms Lagarde at the ECB is most likely to continue the dovish stance of her predecessor, Mario Draghi, but will have to face a lagging German economy that is about to enter recession. The BoJ is so hopelessly mired in negative rates and huge balances that it is unlikely that Japan is going to undergo any major changes but will limp along as the global economy slows down. The PBoC will have to cope with tightening liquidity and the effects of the trade war on exports. Then there is the $15 trillion of negative debt hanging over the global economy with no exit plan in sight.

John Mauldin has termed the coming economic disturbances that will certainly occur, as the present situation is unsustainable in the long run, as the “Great Reset. We do not know when it will come, probably within two or three years, but one can reckon that it is definitely on the way. Investors should take care to protect their wealth by taking all the possible precautionary measures at their disposal. Readers of Wally’s Newsletter know that gold, gold shares, along with silver, real estate and diversification into currencies other than the US dollar can serve as hedges. Inflation is also on the way, so holding cash in fiat currencies may not be very wise when the crunch comes.

Investors may well wonder why they should worry about anything as the S&P and Nasdaq have in the last week reached new record highs thanks to the Fed lowering interest rates and pouring liquidity into the system. They should keep in mind that complacency and greed usually lead to unpleasant results.

Wally’s Newsletter has not been sent out the last few months because WWS Swiss Financial Consulting SA has been sending longer articles to Seeking Alpha. Searching for WWS Swiss Financial Consulting SA on www.seekingalpha.com will bring readers up-to-date on the most recent publications that concentrate on the US dollar, Forex, debt and uranium.

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