– Kyle Bass Warns “The Fed Is Backed Into A Corner… Equities Are My Biggest Liquidity Worry” (ZeroHedge, March 28, 2015):
While Kyle Bass is usually the smartest man in the room, among this crowd he is Einstein as he carefuly explains – while sitting politely during status quo interruptions – the real state of the world “the unintended consequence of QE has been to widen the income gap,” what is behind the Potemkin Village of the stock markets, how The Fed is “backed into a corner” of raising rates against their will, and why bond yields (at the long-end) will drop further. Currency wars are net positive, as Greg Ip suggests, and will not end well, as he concludes in one section, “why haven’t all the Yen left Japan already?”
“How many rich people do you know today that are poorer than they were at the peak in 06/07 (apart from Dick Fuld), I don’t think I know any.. QE has been distributive to the rich… but now that the world has started this policy it is unable to end it…
the next recession will be a hard one because the tools in the toolbox are not there to avert a severe downturn…”
“2015 will be +/-0% return in the equity markets”
[Re: crowded trades and liquidity] – where are the liquidity worries at the moment? Equities would be the toughest to exit.. it’s like a 5-lane highway going in and goat trail coming out… Brazil is great example”
What Tomorrow Will Bring…
He is spot on. All the tools to fight economic distress have been exploited; their potential power has been wasted. One need only look at Japan…..the government got into their stock market, and they are in great danger of the government owning the stock market…………….they are running into a wall thanks to too much government intervention.
Here, the FED has come to the realization the US debt level is unsustainable. The FED has been carrying the interest payments on the National Debt…..and they are beginning to realize they cannot do it forever. Cutting off QE was the first step………..but, there is no growth in the US real economy……….all the growth is on paper, and leveraged to the hilt.
I agree with this man. I don’t know how much longer it can go on.
I am of the opinion we are close to the end. There are so many things affecting the real economy making any potential for real growth unlikely.