Joy and Pain. Sweet and Sour. Love and Hate. To these famously oxymoronic combinations we can add Oliver Pursche's optimistic pessimism. The co-portfolio manager of GMG's Defensive Beta Fund sees an endless assortment of global economic nightmares moving towards us as a result of Central Banks around the globe trying to stimulate a both moribund and rapidly growing (!) world financial system.
Inasmuch as I've actually written columns openly encouraging investors to fight the U.S. Fed, I found the idea of an invincible Central Bank with dual but conflicting mandates as lunacy. Alas, Pursche observes that fighting the Fed is no longer a mano y mano battle. Just as the Super Friends banded together to fight evil, so it is the the World's Central banks have united as one. Inflation, deflation, speculation and stagnant growth have a new enemy. Call this force of justice "The Super Fed."
Pursche supports this idea, noting that bears are "fighting all the Central Banks, when they all have the same goal of basically price inflation and asset inflation to sustain at least the feeling of the wealth in the rich nations," he says. The global Super Fed is using their powers to create a world of Happy. Evil bears are an insidious enemy, constantly taking new forms and adopting fresh strategies to take markets lower the members of the Economic Hall of Justice are, at least for now, one step ahead of the darkness. The affably cynical Pursche regards shiny, happy market manipulation as bullish for the short term. "Probably through 2012 we're in good shape for the equity markets and commodity markets," he says with a grin.
Figuring out where we go after the 2012 elections is in Pursche's view, not only a waste of time but also impossible. Economic projections, he observes, rely on "gross assumptions about linear projections that aren't ever going to change over the next decade... we can't figure out the last 3 months without revising it." While not underestimating the Super Fed's ability to suspend markets and reality in the short-term Pursche isn't making long term bets on the sustainability of the union.
Put in terms I've used before: the sun is eventually going to explode condemning every living organism in the solar system to a fiery death, but it's a lousy short thesis. Similarly the global economic system is a ticking time bomb, designed not so much for sustainable economics but rather to create the illusion of health for enriched nations. Not all the super bankers in the world can keep us safe forever but they are trying to do so. Which is bullish for the next year, give or take.
How does that make me feel? Happy and Sad.
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- asset inflation
- Central Banks