Two articles are doing the rounds. The first is a letter from Bridgewater hedge fund titan Ray Dalio, who has long believed the world is in a great deleveraging. He doubles down today and says the next ‘big’ Fed move will be more QE.
Here’s the crux:
the ability of central banks to ease is limited, at a time when the risks are more on the downside than the upside and most people have a dangerous long bias. Said differently, the risks of the world being at or near the end of its long-term debt cycle are significant.
That is what we are most focused on. We believe that is more important than the cyclical influences that the Fed is apparently paying more attention to.
While we don’t know if we have just passed the key turning point, we think that it should now be apparent that the risks of deflationary contractions are increasing relative to the risks of inflationary expansion because of these secular forces. These long-term debt cycle forces are clearly having big effects on China, oil producers, and emerging countries which are overly indebted in dollars and holding a huge amount of dollar assets-at the same time as the world is holding large leveraged long positions.
While, in our opinion, the Fed has over-emphasized the importance of the “cyclical” (i.e., the short-term debt/business cycle) and underweighted the importance of the “secular” (i.e., the long-term debt/supercycle), they will react to what happens. Our risk is that they could be so committed to their highly advertised tightening path that it will be difficult for them to change to a significantly easier path if that should be required.
Next is NYSE floor veteran Art Cashin at UBS. Some of his comments are mute because he talks about the potential for China to cut rates and that’s already taken place. He says to watch high yield closely and Jackson Hole.
Vice-Chair Stanley Fischer will be speaking later this week at the Jackson Hole conference. I think he will be addressing the problem of inflation and that it’s not growing in the pace they want it. That will give the world a hint that the Fed is not quite ready to raise interest rates.
There’s no one formula for trading success, but there are a few common denominators that I’ve tracked in my years of working with traders:
Remember that becoming a profitable trader is a journey, not just a destination. The perfect trader does not yet exist. Try to become a better trader each day and enjoy the progress you make. Concentrate on learning the craft of technical analysis and on improving your trading skills, rather than focusing solely on the amount of profit or losses in your trading.
