Maven Musings

Who do you need
Who do you love
When you come undone?
--Duran Duran

Interesting interview with the always insightful Stephanie Pomboy of MacroMavens. Responding to concerns that central banks around the world are reversing ultra easy money 'quantitative easing' policies and, as in the Fed's case, initiating 'quantitative tightening,' Pomboy observes these anxieties are nothing new.

Ever since Alan Greenspan began employing monetary policy with the objective of stimulating economies and markets, investors have grown accustomed to the 'Fed put' and get nervous when it appears that central banks are reversing policies that backstop investment risk.

Stock declines just getting started? https://t.co/wCDUm8bFZa @MorningsMaria @FoxBusiness

— Maria Bartiromo (@MariaBartiromo) November 21, 2018

She thinks that stimulus provided by fiscal policy in 2018 (e.g., the Trump tax cuts) served to offset the increasingly hawkish central bank policies worldwide. Once the calendar turns to 2019, however, much of the one-off benefits of the fiscal stimulus will subside. Consequently, attention will once again refocus on the negative influence of monetary policy.

Pomboy notes that the degree of leverage in the economy has effectively lowered the threshold of pain related to rising rates. We're only at 3% on the 10 yr and already people are crying 'uncle' and pleading for lower rates from central banks.

She thinks that the stock market decline is "just getting started." She thinks that sudden downward forward earnings estimates reflect uncertainty about where growth will come from once the fiscal stimulus effects diminish.

At the end Maria asks Steph where investors can hide in case things get rough. When the Maven says gold, note the ridicule.

position in gold