I feel like investors are doing the “Boogie In The Dark” when it comes to understanding this broken market.
What’s going on?
First, bond king Bill Gross (formerly of PIMCO then Janus-Henderson) has thrown in the towel after 50 years. His success at PIMCO was in the greatest bond bull run in modern history. But his Janus fund started near the peak of The Fed’s QE3 balance sheet expansion. Then his fund underperformed when The Fed started unwinding their balance sheet (and raising their target rate). Translation: The Fed got bond king Gross dizzy … and he retired.
And that brings me to the former New York Fed President William Dudley.
(Bloomberg) — Former Federal Reserve Bank of New York President William Dudley said he’s “amazed and baffled” at the attention the wind-down of the U.S. central bank’s balance sheet has been receiving from investors, pointing to other culprits as the likely cause of recent volatility in financial markets.
Amazed and baffled? Just ask Bill Gross about the importance of Fed’s wind-down.
Then we have the world’s largest pension fund, Japan’s Government Pension Investment Fund that lost 9.1 percent, or 14.8 trillion yen ($136 billion), in the three months ended Dec. 31. The decline in value and the rate of loss were the steepest based on comparable data back to April 2008. Domestic stocks were the fund’s worst performing investment, followed by foreign equities. Assets fell to 150.7 trillion yen at the end of December from a record 165.6 trillion yen in September.
But who helped break the market by distorting asset prices and returns? The Federal Reserve and other global central banks.
With so many uncertainties in global market (Brexit, trade wars, Venezuela’s meltdown, The Fed’s uncertain policy path, Italian debt crisis. etc., …
(Bloomberg) — Italy is preparing to sell as much as 1.8 billion euros ($2.1 billion) of state-owned real estate as it seeks to rein in soaring debt, people with knowledge of the plan said.
investors should hedge their risk exposure across markets … or move to cash or short-term Treasuries. In other words, take out some insurance.
Lastly, down in Virginia, we are suffering through yet another embarrassing governor (Northam) after McAuliffe and his electric call debacle.
Bye, bye Bill Gross. I can’t stand to see you go.