Excerpted from Stephanie Pomboy's MacroMavens.com,
Putting it all together, the chart below overlays the simplest barometers of economic and financial duress (gold/copper) and risk appetite (stocks/bonds). It would be hard to find better proof that the canary in the coalmine is singing and that his song is landing on ears deafened by 6 years of BTFD behavior than this.
If it isn’t already, this image should sit framed on the desks of Ben Bernanke, Mario Draghi and Haruhiko Kuroda as a shining testament to their success in training investors to buy risk on any and every sign of weakness. It is a success made all the more impressive by the fact that, unlike dogs, sentient human beings are supposed to be above this kind of psychological manipulation.
Of course, central banks can’t take ALL the credit. The institutional investor framework provided a major assist. The positive reinforcement central banks provided to be ‘long’ risk was matched in equal measure by eviscerating professional punishment for failing to do so. The penalty for refusing to BTFD, after all, wasn’t simply a loss in short-term performance, but quite often a loss of career. The unsurprisingly upshot of all this is that we sit here today with institutional investors their most disinclined to take risk off the table while those risks are already higher than they were on the eve of the financial crisis … and rising fast.
Should the portents offered by the charts herein begin to bear fruit, 2008 would begin to look more and more relevant. As harrowing as the similarities to that episode may be, the DIFFERENCES are what will really shake Wall Street to the core. One difference particularly. With global policy rates at, near, or in some cases BELOW 0% and QE already well in progress in the major global economies, there’s precious little monetary ammunition left to fight whatever economic and financial foe awaits. Of course, one might reasonably wonder why that matters if it hasn’t accomplished anything in the first place! ‘One’ might. But central bankers won’t. Convinced of their own omnipotence they will do the only thing left—print, print, print.
As global central banks take turns clanging that bell, the BTFD impulse will eventually be sublimated to concerns that all of this naked currency debasement is accomplishing nothing… save perhaps the destruction of the entire fiat money regime.
via Zero Hedge http://ift.tt/1PmipON Tyler Durden