Alberto Gallo of Algebris Investments steps up to take his shot at the $64,000 (more like trillion) question in a report published this week “The Central Bank Bubble: How Will It Burst?”
Gallo manages the Algebris Macro Credit Fund described as “an unconstrained strategy investing across global bond and credit markets, and with lead responsibility for Macro Strategies” on the company’s website.
Gallo sets the scene as follows.
With a stock price surge of 13% after Amazon’s most recent quarterly filing, Wall Street analysts were reportedly “shocked” by the company’s rapid growth. The e-commerce juggernaut beat both quarterly revenue and earnings forecasts, and continues to trailblaze with a 34% revenue growth rate.
While the Fed may still be confused by the lack of inflation, if only in the "real economy", if not in financial assets, increasingly more analysts have realized that what the Fed has done is tantamount to blowing an roaring inflationary bubble, if largely confined to the realm of asset prices. And while we used a Goldman chart to demonstrate this divergence a little over a month ago...
... now it's JPMorgan's turn to undergo the proverbial epiphany.
As discussed last Friday, several notable surprises in the proposed GOP tax bill involved real estate, and would have an explicit - and adverse - impact on not only proprietors' tax bills, but also on future real estate values if the republican tax bill is passed. And, as the following analysis by Barclays suggests, they may have a secondary purpose: to slam real estate values in counties that by and large voted for Hillary Clinton.
Just two weeks after warning of the potential for an imminent 'Minsky Moment', Chinese central bank governor Zhou Xiaochuan has penned a lengthy article on The PBOC's website that warns ominously of latent risks accumulating, including some that are "hidden, complex, sudden, contagious and hazardous," even as the overall health of the financial system appears good.
The imminence of China's Minksy Moment is something we have discussed numerous times this year.