Hi David, I hope you are keeping well.

I noticed in a recent comment that you indicated current market conditions have similarities to the cyclical bear market of 2011 albeit perhaps worse because of higher valuations now. Today though, I was listening to a market strategist who expressed the opinion that central banks might be losing ‘their teeth’ ie the tools available to them are no longer working. This seems to fit in with what ‘Austrian’ economists (if that is an accurate term) & commentators like Bill Bonner & Tim Price have been saying would happen as long as I can remember. So if they are correct what do you think the factors are that will come to the rescue as say the ECB did late 2011 –assuming central banks no longer have the ammunition that they did?

Just In case of interest what I thought was a fascinating interview on the political & market dynamics of the oil price & the hole the Saudis seem to have dug for themselves. It’s on the RT website if you feel able to go there.

 

All the very best

David Fuller's view

I am well and thanks for an email of general interest.  While this is obviously a bear market, we should remember that increasingly bearish sentiment is a contrary indicator.  In other words, sentiment will be most bearish at the bottom.

We are not there yet but well on the way.  Yes, most central banks cannot lower interest rates much further but they have other tools, not least QE.  However, I think we are in a gradual transition period away from reliance on central banks for ever more stimulus.  In fact, leading central bankers are calling for more fiscal stimulus from governments.  Meanwhile, valuations among leading companies are improving and positive deflation, mentioned above, will be bullish for the longer term.

It is not often that I am sent a link to the RT (Russia Today) website, but I note the Audio followed the usual pattern: a reasonable discussion to suck the listener in, before drifting into propaganda.  The comments on $130 oil, described as being good for the global economy are absurd.