Liquidity Is the Only Easy Solution
CIGA Eric
Central bankers despite their best efforts are not in control of the markets. The futures might be soaring today, but infinite liquidity cannot turn distribution into accumulation in global equities or unemployment into employment for the US workforce.
Gross aptly suggests that Europe won’t escape its debt straightjacket for years. This is why the central banks have become increasing reliant on coordinated liquidity injections to maintain confidence within a crumbling monetary system.
Headline: Stock futures soar after central banks act globally
(Reuters) – Stock index futures soared on Wednesday as investors welcomed a coordinated action by major central banks to provide liquidity to the global financial system.
The Federal Reserve, the European Central Bank as well as the central banks of Canada, Britain, Japan and Switzerland agreed to lower the cost of existing dollar swap lines by 50 basis points starting from December 5.
The actions came as China unexpectedly cut its banks’ reserve requirements in hopes of boosting an economy running at its weakest pace since 2009.
S&P 500 futures jumped 33.2 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 269 points, and Nasdaq 100 futures added 58 points.
Source: reuters.com
Headline: Gross Says Europe Won’t Escape Debt ‘Straitjacket’ for Years
Investors should recognize that Europe’s problems are global and it will be years before nations in the region can escape from their “straitjacket” of debt, Pacific Investment Management Co.’s Bill Gross said.
With global growth likely stunted for years and interest rates kept artificially low, investors should consider risk assets in emerging economies such as Brazil and countries in Asia, Gross, manager for the world’s biggest bond fund, wrote in a monthly commentary posted today in the Newport Beach, California-based company’s website.
“Consider Brazil with its agricultural breadbasket and its oil. Consider Asia with its underdeveloped consumer sector but be mindful of credit bubbles,” Gross wrote in the note.
Source: bloomberg.com
