February 20, 2012
Bob Janjuah, a noted investment strategist for Nomura International, has written an analysis, appropriately titled “Bob’s World: Monetary Anarchy,” wherein he offers his own unique take on the current state of the markets.
Janjuah’s report, which first appeared on
Zero Hedge, claims that we are in a bubble. What’s worse, according to his analysis, is the fact that the markets have also become so manipulated and rigged by policymakers that it’s near impossible to predict where things are headed.
He also notes that all over the eurozone, as well as in the U.S., the rule of law has been disregarded for the sake of “political expediency.” He warns that if this sort of behavior isn’t curbed or restrained, there could be long-term sociopolitical repercussions (i.e. the rise of totalitarian states).
Simply put, things look grim and a continuation of current economic and fiscal policies, mixed with a dangerous number of power grabs, will only lead to an increasingly dangerous situation.
His suggestion?
Invest in “gold, non-financial high quality corporate credit and blue-chip big cap non-financial global equities,” writes Gus Lubin of Business Insider.
This is his analysis (via
Zero Hedge, emphases added):
In no particular order, my takeaways are as follows:
1 – Greece (and the whole eurozone story) continues to lurch about, seemingly perpetually, from Farce to Tragedy…it seems that eurozone leaders may be about to pour even more taxpayer money down into the black hole that is Greece, primarily to help the banks in Europe, at the expense of perhaps a decade of suffering by the Greek populace. For my part, I am now consigning the Greece/Peripherals/Eurozone story to the box marked “self-serving political debacle” and from here on in I will simplify Europe as follows: Until, and unless, Germany signs up to full fiscal union, a eurozone breakup is likely. And depending on how long we can continue to “kick the can” down the road in order to protect the eurozone banks, the eurozone will be consigned to an extended period of weak growth, which in turn means ever decreasing debt sustainability. Ultimately this means that the end game will simply be more devastating for us all the longer we are forced to wait…
2 – I am staggered at how easily the concepts of Democracy and the Rule of Law – two of the pillars of the modern world – have been brushed aside in the interests of political expediency. This is not just a eurozone phenomenon but of course the removal of elected governments and the [installment] of “insider” technocrats who simply serve the interests of the elite has become a [specialization] in Europe. Many will think this kind of development is not a big deal and is instead may be what is needed. Personally I am absolutely certain that the kind of totalitarianism being pushed on us by our leaders will – if allowed to persist and fester – end with consequences which are way beyond anything the printing presses of our central banks could ever hope to contain. Communism failed badly. Why then are we arguably trying to resurrect a version of it, particularly in Europe? Are the banks so powerful that we are all beholden to them and the biggest nonsense of all – that defaults should never happen (unless said defaults are trivial or largely meaningless)?
3 – More broadly, with Mr Draghi now in situ, it is clear that I misread and misunderstood two things. First, I am simply stunned that our policymakers seem so one-dimensional, so short-termist, and so utterly bereft of courage or ideas. It now seems obvious that in response to the financial crisis that has been with us for five years and counting, we are being “told” to double up on these same policy decisions. The crisis was caused by central bankers mispricing the cost of capital, which forced a misallocation of capital, driven by debt/leverage, which was ultimately exposed as a hideous asset bubble which then collapsed, destroying the lives and livelihoods of tens of millions of relatively innocent people. Well now, if you listen to the latest from Bernanke and Draghi, it seems that the only solution they can offer up is to yet again misprice the cost of capital, in the hope that, yet again, through increased leverage/debt, we are yet again “greedy” enough to misallocate capital, which in turn will lead to yet another round of asset bubbles. Such asset bubbles are meant to delude us into believing that we are now “richer”. When – as they do by definition – these bubbles burst, those who have been suckered in will realise that their “wealth” is instead an illusion, which in turn will be replaced by default risk.
Secondly, I have clearly underestimated the ‘market’s’ willingness, nay desperation, to go along with this ultimately ruinous policy path. Personally, I think this is extremely worrying – the number of clients who tell me that they know they are being forced into playing a game that will end in disaster, but who feel they have to play along and who hope they will get out before it turns, is a depressingly familiar old tale. Some such folks hang onto the idea that Draghi/LTRO changed the asymmetry of risk from deeply negative to positive. Yet even these folks know that printing more money/more liquidity/more debt/more leverage is not a viable solution to our ills, and in fact will mean true supply side reform and the search for true competiveness and sustainable growth will be further cast aside, as the focus will be on the “easy gains” to be made in markets.
