This essay is full of contradictions and loose ends, so I might as well start with one in the title. This cycle is not over yet, and I am not sure that I have the definitive answer for when it will end. It is, however, well advanced with some themes and narratives. I am writing this in an attempt to make sense of and to explain, a world, which to my despair is increasingly devoid of reason. As a finance geek, I can’t get anywhere without first establishing the state of play in the economy and markets. The most salient feature since the financial crisis has been the unprecedented activism of monetary policy. In 2006, Alan Blinder described central banking in the 21st century. It is a brilliant paper but in dire need of an update given actions taken by policymakers since 2008. Central bankers were first called into action to prevent a collapse. The destruction in markets after Lehman’s failure showed that timidity or firmness in the face of moral hazard risk was impossible. Interbank markets were seizing up, banks were running out of liquidity, and the chaos quickly was spreading to the real economy. Decisive action was needed to avoid the situation spiralling out of control. Central banks had to take their role as lenders of last resort seriously.
Read MoreI am tempted to use one of the most tired clichés to describe the state of play in financial markets. In his famous book with the same title, Malcolm Gladwell describes a tipping point as "the moment of critical mass and threshold" at which point the parameters and rules of the game—in a market or environment—change radically. As I peer across markets and economies, I am starting to wonder whether we are getting close to just that. The eye of the storm is quite literally the U.S. where the layers of economic and political uncertainty are now so thick that I am not even sure where to start. The tinfoil hat scenario goes something like this. The devastation of hurricanes Harvey and Irma is worse than feared and become a stagflationary hit—negative supply shock and plunge in demand—but the call for decisive action in Washington and the Eccles building go unheeded. The debt ceiling bites right when the economy needs the flexibility the most and the Fed is caught between a rock and a hard place as inflation soars. Pyongyang uses the confusion to show that it means business by firing a missile towards Alaska.
Read MoreWeaker oil prices, a Fed rate hike, and Geert Wilders' anti-EU party swooping in as the second-biggest party in the Dutch parliamentary elections. You would have thought that these events last week would have been enough to scare investors. But headlines can be deceiving. Despite the weakness in oil, the price hit strong resistance at its 200dma, and snapped back in the latter part of last week. The tone of Mrs. Yellen's statement was just right to maintain markets' faith that the Fed will only gently push borrowing costs higher. In other words, risks assets wanted a dovish hike and decided that this is what they got. And finally, the key story in the Dutch elections was not that Mr. Wilders made headway.
Read MoreWhat a week it has been here in the U.K. The turmoil at Deutsche Bank was set to remain the topic du jour. But Prime Minister May's promise to trigger Article 50, and the remarkable party conference in Birmingham, took centre stage. Another Bashing Betty session ensued, which reached its zenith overnight Thursday as GBPUSD was pushed to 1.14 on some platforms before recovering to about 1.22-to-1.24. A fat finger, corporate hedges hitting "stops", or a systemic lack of liquidity; take your pick in terms of rationalisation. I think the whole thing is absolutely ridiculous, given that this is a G4 currency. The rhetoric by the new Tory doyens was startling, and as I type this, the back-pedalling has already started. In any case, I have a podcast about the whole thing, which you can listen to in this post. Elsewhere, the carnage in sterling is a nuisance to me. I am a GBP earner, and my portfolio is held in GBP. In short, foreign assets now look dreadfully expensive unless you start trawling for the turds of the turds.
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