Pearls of Wisdom?

As the investment world and his dog await any change in language from Auntie Janet at the Fed’s FOMC monetary summary later today, there has been a chorus of comment and warnings about any US interest rate hike.

 First up is the perma-tanned somehow $US500K pa tax-free remunerated head of the IMF, Ms Lagarde, who aside of continuing to insist that the Greeks must pay their taxes, said, “volatility may increase if the Fed surprises investors.” Excellent value for money here then.

 Whilst on the subject of Greece, a presentation to UK law-makers yesterday by Bank of England official Alex Brazier included another pearl, “A bad outcome in these negotiations could trigger a broader reassessment of risk in financial markets,” which is nearly as useful as this 14-year “old lady veteran’s” academic paper of August 2006 which was full of economic clap-trap, including reference to a period of “Great Stability” and the benefits of the bank’s “Inflation Modelling,” a target that they have consistently failed to manage in the near decade of financial instability since.

So who are we to listen to?

Certainly not officialdom, whether it is political or an organ of it, such as Central Bankers or the IMF. They have a different agenda than most of us.

A good place to start is in the charts, as they don’t lie!

Our recent “Watching the No 2’s” reminded that it’s the market that decides on interest rate changes, not Janet, Alex or any other Central Banker, whilst a recent observation below reminds of the unintended consequences that can result from consistent market intervention/ manipulation, in this case by the ECB:

18 March 2015 Blog 1

An anomaly has appeared within the peripheral bond convergence of late and in particular the disparity evident between the 10-year bond yields of Portugal V Greece. Portugal, with total Debt to GDP of 359%, enjoys a yield of 1.6% pa, whereas the Greek debt to GDP is at 307% yet they have a penal rate of 10.6%.

Rather than “Pearls of Wisdom” the phrase “Reversion to the mean,” with guidance from the charts, appears to be far wiser.

 

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One response to this post.

  1. […] was nearly a year ago that “Pearls of Wisdom” provided some “tongue in the cheek” observations in respect the comments made by luminaries […]

    Reply

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