Markets in Euphoric State

Posted: July 7, 2014 in Uncategorized

When I first commented on Yellen election (US FED Chairman), I highlighed a potential issue.

From her comments and position on rates and unemployment, I wrote in December that the issue of such a dovish Fed Chairman is that she could keep QE/low rates for so long that risks creating “tail issues” – keeping rates for so long that provokes a fast backlash sparking a new crisis with interest rates out of control. Practically the FED losing credibility.

Now important institutions like the IMF, the Bank of International Settlements, The Office of Comtroller of Currencies (Not an error, it is a department inside the Treasury Office) are starting saying the same things.

US household assets allocated to equities is at 34% (equal to the peak in 2007) and the level of gearing in credit markets is very high.

This is not to say that the situation is about to explode. It is saying it could explode between now and end of 2015 (not a typo) – but if condition to not change it will explode in a new crisis (Eg historically the conditions present in the market that brought the 2008 crisis started to appear in 2003/04…but we are now way passed that point…somewhere in 2007/2008)

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