Courtesy of Mish.
Australian newspaper “The Age” has an interesting interview with Gerard Minack, former Morgan Stanley strategist.
Minack is now out on his own, publisher of “Downunder Daily“. Minack says “I deliberately decided when I left to keep it balanced, not to start writing like Zero Hedge.”
Nonetheless, Minack is a bear who thinks Australia is in for some tough times, the price of iron ore still has plenty of room to fall, and the most important monetary policy act of the last four years was European Central Bank president Mario Draghi’s “whatever it takes” speech, but the eurozone will break up anyway.
Finally Minack calls “central bank credibility” the biggest bubble. Let’s take a look.
Cautionary Tale of Global Gloom
Please consider a few snips from The Bear is Back: A Cautionary Tale of Global Gloom.
Fairfax Media: How do you think 2014 panned out in investment markets?
Gerard Minack: People look at the S&P 500 and think it was a good year; it was a rubbish year for equities in US dollar terms. The S&P is the [2002 Olympics speed ice-skating gold medalist] Steve Bradbury of financial markets – the only one that has kept on skating while the others wobbled and fell over.
Aussie shares are in a full-blown bear market, in US dollar terms. Credit markets are starting to wobble, commodities have been smoked. After two years of broad-based gains in risky assets, we’re down to the last man standing.
Fairfax: What has supported the strong gains in asset markets up to recently?
GM: A couple of things. I think QE has been overrated, but six years of zero rates in the US is going to have an impact.
But for me the most important monetary policy act of the last four years by a mile was [European Central Bank president Mario] Draghi’s “whatever it takes” speech. In the two years before that, every time we hit a soft patch you reintroduced the tail risk of a systemic European banking crisis. And by taking that risk away all of a sudden the market became inured to macro weakness and started this two year re-rating. It was a pure valuation rally. From the late 2011 lows in global equities to early this year the MSCI All Country Index was up 65 per cent. Earnings over the same period were down, so we had a pure P/E-led rally….
