Credit Bubble Bulletin
MAR 6, 2018
There are cracks - cracks in the U.S. and cracks spread globally. This week’s market gyrations suggest these interconnected fissures will not prove transitory. VIX traders on edge. Risk parity and the CTA community on edge. ETF complex?
Everything’s turned correlated. Hedges have become expensive, and the Treasury hedge isn’t working. The yen has taken on a life of its own. Central bankers playing coy. How long can all of this hold together?
This was never going to end well. It’s just that raging bull markets are willing to disregard so much. Fully inebriated by the bottomless libation of easy money, markets in speculative blow-off mode gleefully ignore about everything.
Over time, markets will disregard underlying vulnerabilities – or even be willing to conceive of them bullishly. After all, structural deficiencies ensure uninterrupted easy “money” and ever higher asset prices. Speculative leverage accumulates at compounding rates.