Autumn dirge

Free capital, like free water, is never going to be used productively. So it should be no surprise that central bank largesse hasn’t translated into improved productivity and growth. All it has done is create an even larger mountain of debt. This is the locus of global financial instability. A day of bad things is to come. And the policy tools to fight the next crisis are simply not there. Yield curves will steepen as inflation expectations rebound. Equities will be as vulnerable as bonds. We are already positioned for this and remain negative on equities. The currency safe-havens will be the countries that won’t or can’t emulate the policies of the absurd e.g. ‘helicopter. That’s the euro and the Aussie and Kiwi dollars. Gold and other real assets in safe places will be the most dramatic winners.

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