Central Bank Revolution II:
By Ben Davies & Company at Hinde Capital
February 26 (King World News) - In the “Central Bank Revolution I,” we depicted how a new mode of monetary policy has been adopted by developed world central banks. Their new policy adoption is more of the same – that inflationist drug of bank reserve creation, only this time with heightened potency.
In this piece, the “Central Bank Revolution II - Chasing the Dragon,” we illustrate how the effects of central bank monetary policy, today, have already distorted the term structure so monstrously that assets have been driven to yields more akin to those of holding money. The yield grab has extended into riskier and riskier assets and structures, resulting in a diminished return profile that is not compensated for by the falling credit quality, and the heightened duration risk. The stage has been set for capital losses, as once again investors indulge in levered products, with suspect collateral value, and invest in plain vanilla assets with no margin of safety....