Bond markets: anachronistic sell-off - II

Sunday, February 04, 2018 // Written by Enzio von Pfeil

Friday's continued bond sell-off indicates a herd of sheep chasing a rearview mirror...

  1. Friday's stock market sell-off was precipitated by a bond market sell-off, as we all know.. The trigger for both sell-offs was the release of January's 2.9% incease in average hourly earnings   - which grew at their strongest pace since 2009.  The market's  fear of looming wage - price spirals is buttressed by record low unemployment figures.  So,  bonds crashed.
  2. Known anachronisms.  Readers know that we have harped-on  for some years  about how that trifecta of forces averts  inflation: globalization, automation and demography.
  3. Four more  reasons to mistrust besotted bond sellers First, Amazon  already accounts for 44 cents on every dollar spent on internet..  As pointed-put in yesterday's Saturday Financial Times (FT): big brands must  reduce prices because people increasingly know what they at paying for - courtesy of price comparisons readily available on the internet.  Secondly, key freight indicators suggest that global growth, whilst still strong, already has been waning since about 2H17.  So: whilst the Economic Time® remains healthy, just know that its momentum is on the wane, already. Thirdly, even if hourly wages are rising, it seems as if wages adjusted for productivity - unit labour costs - keep waning. Finally, because of increased job insecurity due to technology and anachronistic education, it is logical to assume that normal folk are saving more and more
  4. Investment implication. Let the bond sellers continue their momentum play. Then in a couple of weeks,  buy into undervalue government bonds and watch your portfolio prosper. 3
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