“Who Could Have Seen This Coming?”
The comments below are an edited and abridged synopsis of an article by Sven Heinrich
Henrich says the Fed is reckless, irresponsible and unaccountable, and their liquidity actions are setting up investors for a disaster to come.
Each bubble has its voices, and in hindsight they offer testimony to how dangerous markets really were at the time, and how obvious the risks ignored were. Yet those risks were ignored by participants as momentum kept rolling on before the rug was pulled.
Nobody can tie price action to fundamentals, because there is no tie. Prices that are not tied to fundamentals are inherently a bubble, and consequently dangerous. One would think investment professionals would advise clients to reduce risk and take advantage of the strength to lock in some profits. But no, not in this bubble. Instead, embrace irrationality and proudly wear it.
As far as Henrich is concerned, we’re in the blow-off phase of this artificial bull run that ignores everything and is counting on any bad news to remain contained (coronavirus included).