Tim Bond, the Barclays Capital strategist, is having none of this bearish pessimism that has gripped markets since Bill Gross said the US could lose its triple A status and Marc Faber invoked the Z-word when discussing the prospects for American inflation.
From Bond’s latest Global Speculations – “Upside down bulls”:
In the financial markets, interpretation often counts for more than fact. Indeed, after passing through the qualitative and emotional analytical filter, factual inputs can often emerge from the process as anti-facts. At present, many market participants still appear to be afflicted by the mood of depressive pessimism that became pervasive last year. Under this condition, market developments and economic data-points that an impartial analysis would usually construe as positive are being warped into negative signals. Signs of an economic recovery, somehow, end up being interpreted as signs of impending economic doom.
Nowhere, Bond says, is this truer than with the prevailing fuss about the dollar and US treasury yields.
The fact that both asset classes have been losing their safe haven status is an unambiguously positive development, confirming the revival of risk taking and a general acknowledgement that economic life will continue.
Why, the BarCap man asks, if investors are fleeing the US because of its towering debt burden and the threat of hyperinflation, is sterling going up? Frying pans and fires springs to mind. Similarly, why has the Yen been depreciating against the dollar?
The current rumblings of discontent smack more of the avoidance of cognitive dissonance on the part of inveterate bears, than any dispassionate analysis of the situation.
Full takedown of the bears available here.