Possible? Yes

Stock Bubble Driven by Central Banks to Burst in 2014, Analyst Warns

Mr. Janjuah, who is co-head of macro strategy research at Nomura, sees a lot to worry about, and he sees central banks, including the Fed, at the center of the factors that eventually will bring woe to stocks.

“The major themes are unchanged–anemic global growth/mediocre fundamentals, what I consider to be extraordinarily and dangerously loose monetary policy settings, very poor global demographics, excessive debt, an enormous misallocation of capital driven by the state sponsored mispricing of money/capital, and excessive financial market/asset price speculation at the expense of any benefit to the real economy,” the analyst says.

Mr. Janjuah says markets are now priced entirely for good news, leaving them vulnerable to adverse developments. But the main driver of the coming bursting of the stock market bubble, as the Nomura analyst sees it, is a much delayed rebalancing of the global economy as central banks pull back from all of their aggressive stimulus activities.

Monetary policy settings are not dangerously loose. They are dangerously rudderless. No one knows what the “destination” is, in which case the “boat” is drifting with the currents and can land anywhere. Unfortunately, they are mostly bad possibilities!

4 thoughts on “Possible? Yes

  1. Oh – but when the monetary “boat” sinks instead of landing, it will be the fault of the passengers and those ever frightful things – the casino called capitalism and economic freedom, not the inflation-o-phobes at the central bank. People like these remind me of the Highlander movie – the longer this kind of ignorance goes on, the more the rich people hurt themselves with this kind of talk – and in the end, there can be only one.

  2. If stock markets crash because of tightening by the Fed and the PBoC, people like Janjuah will say that they should never have been “propped up” in the first place. Right outcome, wrong reason.

  3. That’s pretty good doomer-porn from Nomura.

    But Mr, Janjuah forgot the best line:

    “QE causes unforeseeable and unintended yet potentially catastrophic consequences for global financial markets and the world economy.”

    The real scare-talk is to say something is “unforeseeable.”

    Market Monetarists, I am afraid, do not fight fire with fire.

    No MM’ers writes. “Reducing QE now could lead to “unknown unknowns” that cripple intermediary institutions, and lead to catastrophic reductions in employment and output.”

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