Investment Chart Kondratiev Wave

Investment Chart Kondratiev Wave

Tuesday, 5 June 2012

Overpessimism is back: reconnection of Nasdaq/Topix analogy

For a long time the collapse of the Nasdaq after March 2000 followed the collapse of the Japanese Topix since December 1989.

Since November 2011 there was a disconnect between Nasdaq and Topix lagged with a bit more than ten year. The Nasdaq went up, while it should have gone down according to the believers in the Japan scenario. They had to wait a bit, but now they are screaming victory: the Nasdaq will reconnect to the Topix movements ten year ago and so it will fall about 60% from now on before you can dream again of a big bull market.

The number of doom and gloom stories is exploding. They are emphasing now that the Japan scenario is now insanely overoptimistic for what we will see in the coming years. Sovereign bond yields are saying loud and clearly that there will be no growth in the world for the next 30 years, for decades you will not get positive real interest rates (as is priced in now). Never will the equity market go up structurally unless deleveraging has been finished enough and that will not happen in the next thousand years because governments have to pay for care and healthcare and trillions a quarter to keep the banking system a life. They don’t see a way out. The ICT-revolution is not leading to progress but decay. Governments were out of their mind when they privatised so much because governments are so much more efficient, not making profits.

Seriously, people proposed to buy put on bonds priced at zero % interest rates for short dated maturities, because interest rates have to fall deeply below zero and option models don’t take this into account and calculate too low prices for puts. It est prices for put at interest rates of zero are too low.

Soros with his speech how badly Europe is doing went viral. Everybody is saying this is the wisest thing they have ever heart about Europe (maybe with the exception of Reinhart/Rogoff). Patiently he explains the euro is a bubble that is going to implode. Italy and other PIGS voluntarily agreed to be downgraded to an Emerging Market that cannot lend in its own currency they can’t manipulate.

Hedge funds finally know it fors ure: the good old times are gone forever.

The retiring boss of the worldbank agrees totally now he is allowed to say what he really thinks.

Lombard Street Research was talking about:

The looming cliff for asset prices

It is abundantly clear, let us migrate to Mars.

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