Have you noticed how more and more markets seem to be correlated again? I see articles daily over at ZeroHedge and other financial sites that indicate that more and more assets move together, that stocks seem to move almost exclusively like a flock, that the currencies all seem to move in reflection to the dollar. Of course, the dollar/gold mirror is the most obvious one. My question - isn't this a sign that somehow there is liquidity leaking out into the system? Didn't we see the exact same thing during the mad run-up after Bernanke started QE1? Isn't this evidence that right now, exactly NOTHING is happening except the dollar is falling like a rock? Even the bonds seem to indicate this, because if we view it from a strict demand/supply-perspective - wouldn't a massive wave of new dollars mean that demand for bonds (as all other assets) increased short-term?
I may have said so before, but I actually think that the US bonds are taking on a sort of "secondary currency"-role in the markets, meaning that it is now seen as an infinitely more marketable good than other asset-classes, which means that this is outweighing the fact that the real value of the bonds are falling with the dollar. With the five-year TIPS dipping below zero the other day, you sort of have to start wondering - are bonds living off the fact that they were once redeemable in dollars, just as dollars are living off of the fact that they were once redeemable in gold?
Are we in a bubble of non-redeemable fiat bond insanity??
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