Well, we can finally see where rising interest rates and inflation have taken their toll – emerging markets. Down 20% since mid May.

We can guess there’s probably some worried US Fed bankers right now. Worried that this turmoil will reach US equity market shores very soon.

So, it seems the only point for debate is whether they wait for this to happen and “suck up” a garden variety market correction, or not wait and roll back the quantative tightening/interest rate hikes immediately.

There can be no doubt that it will be the latter. Too much systemic risk to do nothing, a fact which can be seen clearly in the chart below. US Fed tightening usually ends up with an event.

And the other reason you can be sure of the return of monetary stimulus is highlighted in this next chart. They have to. The fact that the Europeans and Japanese never stopped tells you enough.

So… what does it mean for you?

It may mean that as soon as we see a reversal in policies those with overweight cash positions may wish to consider further deployment across current holdings.
And, for those with gold holdings, just be thankful and the attached is for your information. It’s from the always informative Ronald-Peter Stoeferle from Incrementum and their annual In Gold We Trust publication.

To those still undecided as to the value of including gold as part of a well-diversified portfolio, good luck.

It still amazes us that investors just blindly follow central bank rhetoric without insuring some part of their portfolio against the repercussions of a complete lack of collateral in a massively over leveraged financial system.

Even the great fence sitter (wasn’t always that way) John Mauldin penned in his latest musing, “we will endure increasingly damaging debt crisis that culminate in a coordinated global default- the great reset”, he calls it.
He goes on to say: “there are limits in how much leverage the world can handle, and I think we are already well beyond them, and that is before we have a global recession. The only question is how we will manage the collapse.”

Couldn’t agree more. Smart asset allocation across all sectors with an understanding of what you actually own if the music stops is essential.

Blind faith in central banks that have failed to apply any reform and do anything necessary to maintain a “status quo” since GFC is not a strategy.

These are same central bankers that never want to see a chart like this!!

It is probably nothing though!!!

For those without the time to go through the publication, here are a couple of extracts we hope you find interesting.

Oh, and about that China “miracle”? Check it below.

People’s Bank of China “doing their bit”!

Last Wednesday, the People’s Bank of China pumped a net RMB203.5 billion ($31.8 billion) into the financial system, the most since March 2017, according to Bloomberg. Analysts at OCBC Bank Singapore commented: “The higher-than-expected long term liquidity injection against the backdrop of rising default risk shows central bank’s intention to ease market concern about the credit risk.”

Ah yes, there’s that scary term again. Right on cue: credit risk… just as junk bonds have gone “main stream” again.