“And on the pedestal these words appear:
‘My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!’
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away .”
(last part of Ozymandias, excerpted…by Percy Bysshe Shelley)
The central banks of the world are the Ozymandias of today. What they say, do, whisper, insinuate, etc., those are the crumbs that many observers watch, turn over, interpret, and base investment analysis upon.
It’s the central banks that have, with regularity, created the so‐called boom‐bust cycles of several genera ons. Oh sure, those cycles conveniently and falsely are a ributed to voluntary market forces, but are retraceable to central bank policies. It’s been a recurring pedal to the floor monetary policy for decades, then interrupted by “oops we went too far,” then some ghtening policies that have clearly marked the edges of market cycles. Then back to pedal to the floor to fix the prior busted bubble.
Well, over the past nine years the pedal has been to the floor, and only lately has any marginal li ing of that monetary ease been evident, and that being so trivial that it can be parsed in quarter percentage points and only by the Fed. Not the BOJ or ECB.
MSA argues that this process has buckled and bubbled now to the point of a final termina on. The game now has government debt (we especially watch U.S. T‐Bonds) in a situa on of long‐term technical breakdown. Europe and Japan are a hair’s breath behind this full breakdown. And this breakdown comes from levels of government debt (Western world especially) that is parabolically off‐the‐page versus a decade or two or three or four ago. Their game, their sense of control, as well as Wall Street’s sense of the CB control, is a pa ern that is highly unlikely to replay again. That’s MSA’s long‐term momentum assessment of government debt, hence our view of the inability of Fed, ECB and BOJ to play the game forever. What Draghi has to say in Jackson Hole next week, for example, will be the strands of a dying policy. The money game (monetary manipula on) is ending. It can loop up and down only so many mes, and then finally come untethered. MSA thinks that the past eight or nine years has been the last hurrah. Untethering comes next. That’s why we are watching the long‐term momentum trend behavior of T‐Bonds/Bunds/JGBs, as well as the emergent upturn in commodi es, an on‐the‐edge downturn in developed market equi es, and most important, the forex trend shi s that MSA expected and which are picking up steam. These will all fit together in an unraveling of non‐market trends that have been forced into reality by central banks in a coordinated fashion. The Ozymandian dream will end with the next burst bubble. A calmer market‐based reality will emerge on the other side. MSA sees it’s task as ming these macro‐trend events.
