Japanification

The world has record debt levels.

The problem is only getting worse not better.

The only way central bankers know how to deal with this situation is by continually injecting adrenalin (liquidity) into the system.

The world is on life support.

Japan has been on life support for 32 years. The scenario where the world becomes Japan is certainly not zero.

Japanification may happen.

Central banks have never been more interventionist.

The bond market is the compass for capital markets. This compass is broken.

In years gone by, you could count on the breathing in and breathing out of markets. The cycles were not predictable in timing, however they were knowable that they would eventually end. There are always those who overextend. They take risks they shouldn’t or simply fail due to competition.

The natural breathing in and out of markets seems to have ceased. The period of March 2020 was so brief, it was closer to hyperventilation than a normal breath.

Central bank intervention may mean we no longer have normal cycles.

As Warren Buffett stated on how to become wealthy:

“Close the doors. Be fearful when others are greedy and greedy when others are fearful”

The only problem is, that the fear needed for Warren and Charlie’s phone to ring didn’t happen last year and there is a possibility…