Bond markets: anachronistic sell-off - II
Friday's continued bond sell-off indicates a herd of sheep chasing a rearview mirror...
- 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.
- Known anachronisms. Readers know that we have harped-on for some years about how that trifecta of forces averts inflation: globalization, automation and demography.
- 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
- 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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