From the AFR in US interest rates:
Magellan’s Hamish Douglass…rattled out plenty of evidence for a rate rise – such as the fact that investors in Europe and the US are accepting negative or zero returns while nations like Mexico can raise funds for 100 years.
…”We believe is it’s likely that these transitory effects are moved past and the American economy can grow at over 4 per cent in nominal terms and the Fed will move rates to normal levels, a level that is fundamentally different to what markets are pricing at present.”
Note to self: sell Magellan’s Hamish Douglass. There is zero prospect of US “normalisation” which would be 4% or so. Even if we ratchet it down to a secular stagnation rate of 2% there’s no chance. If the Fed hikes then it’ll take no more than three hikes to blow up the global economy via collapses in emerging markets and China and a new wave of deflation will sweep the world, immediately dropping US interest rates.
Much better came from Macquarie Investment Management’s head of fixed income Brett Lewthwaite:
“The credit build up was so bad we had to go all the way to zero. This reliance on monetary policy is still there. We are still using this method to drive growth,” he said.
…He’s predicting a ‘sore tooth’ scenario where the Fed raises rates, but is forced to stop, and then tries again before pulling back.
Yep. Don’t get me wrong. I’d much rather live in Mr Douglass’s world but one should never confuse one’s ideology with reality when it comes to investment.
