Silence

The recent BoE intervention to “ensure” no insolvencies occurred as a result of the pound sliding which subsequently caused the $ to weaken…

The recent BoE intervention to “ensure” no insolvencies occurred as a result of the pound sliding which subsequently caused the $ to weaken and allowed equities to rally. Consensus is now leaning towards a subsequent intervention from the Fed/Fed pivot because of recent intervention from the BoJ and the BoE. It’s important to remember that the consensus is permeated with unheeding QE addicts.

The Fed’s reverberating message has been incredibly transpicuous to anybody with sound judgement. The problem is that there is an enormous absence of sound judgment in the market, but with the prolonged era of historically low interest rates, this was foreseeable. This period has generated a type of trader/investor in whom there is an astounding obstinance. Even in the face of cogent, and incontrovertible evidence, there seems to be no hope of conveying to them the simple message that is; the Fed will not pivot any time soon.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” — Charles Mackay

Mackay’s words display an unpleasant truth. In this case, the herd will most likely begin to come to their senses after the carnage in the global economy induces true panic.

“At some point this morning I was worried this was the beginning of the end,” said a senior London-based banker, adding that at one point on Wednesday morning there were no buyers of long-dated UK gilts. “It was not quite a Lehman moment. But it got close.” — FT

The music seems to have stopped globally. The BoE saved the UK from experiencing their Lehman moment while it appeared as if we were headed for a limit down day in US equities with the absence of any intervention. We live in a multipolar world where contagion is a legitimate concern in situations like these. And whenever CBs fixate on delaying short-term problems with haphazard solutions, the outcome is ultimately undoubtedly more severe than it should’ve been. Unfortunately, I don’t believe we’ll have to wait too long in order to see the outcome of inefficacious efforts to delay the inevitable collapse of the financial house of cards.