The Year Of The Red Monkey: Volatility Reigns Supreme
By Tyler Durden
Submitte dby Charles Hugh-Smith via PeakProsperity.com,
In the lunar calendar that started February 8, this is the Year of the Red Monkey.
I found this description of the Red Monkey quite apt:
“According to Chinese Five Elements Horoscopes, Monkey contains Metal and Water. Metal is connected to gold. Water is connected to wisdom and danger. Therefore, we will deal with more financial events in the year of the Monkey. Monkey is a smart, naughty, wily and vigilant animal. If you want to have good return for your money investment, then you need to outsmart the Monkey. Metal is also connected to the Wind. That implies the status of events will be changing very quickly. Think twice before you leap when making changes for your finance, career, business relationship and people relationship.”
(Source)
In other words, the financial world will be volatile. And few will have the agility and wile to outsmart the market-monkey.
For those who don’t believe in astrological forecasts, there are plenty of other reasons to anticipate sustained volatility in 2016 that strips certainty and cash from bulls and bear alike.
What’s the Source of Volatility?
Why are global markets now so volatile? The basic answer is as obvious as it is officially verboten: the global growth story is unraveling, and central banks and governments are desperate to re-ignite stagnating growth.
When solid evidence of flagging trade, sales and profits surfaces, markets drop. When central banks and states talk up monetary and fiscal stimulus, markets leap higher, as seven years of stimulus programs have rewarded those who “buy the dips.”
The relatively brief downturns and quick recoveries of the past seven years have led many to believe that this tug of war will resolve itself one way or the other in a few months. But the past seven years may not be a good guide to the next year or two: volatility might persist, month after month, with no clear resolution.
Indeed, the past 25 years may not be a good guide to the next few years, as there are no analogous periods of sustained volatility in recent history. Rather, the current period shares characteristics with each crisis and crash of the past 25 years, but combines all these causal factors in one overlapping series. This makes the present volatility unique.
Another causal factor is also unique to this era: after seven long years of zero interest rate policy (ZIRP), central banks have started pursuing an unprecedented policy of financial repression: negative interest rates (NIRP), in effect punishing savers for holding capital.
The uncertainties generated by these policies are fueling rapid cycling between selling and buying in both human and machine (trading bots) participants. Money managers fear losing capital in a crash, but are forced to seek yield in a zero or negative interest world.
No wonder volatility will reign supreme for some time to come: never before have all these causal factors been mixed together in a toxic brew …read more
Source: The Year Of The Red Monkey: Volatility Reigns Supreme
