Blind Central Banks and Mindless Markets

5 thg 11, 2021

The Bank of England extended the series of disappointments for those who expected a change in the vector in the monetary policies of the leading Central Banks. Following the ECB and the Fed, the Bank of England said that inflation is temporary and does not require much intervention, since the problem will disappear by itself over time. This mantra has been repeated since summer and looks more and more ridiculous with each new portion of inflation data.

Take, for example, yesterday's data on manufacturing inflation in the Eurozone. Compared to last year, the price increase was 16% (!), Which is the highest in the entire history of observations. And the main thing is the 9 (!) Month in a row inflation growth. Nothing so temporary growth. Moreover, he is clearly not going to stop.

But we have what we have. As a result, the pound yesterday received a powerful blow in the stomach and fell apart. Taking into account the general shape of the country's economy (thanks to Brexit), with such a Bank of England nothing good shines for the pound. So while it is below 1.3620 in tandem with the dollar, it is not only possible to sell it, but also necessary.

Meanwhile, the US stock market continues its mindlessly insane growth. Given that the discrepancy between current prices and reality is clearly visible in market reactions to quarterly reporting for a number of corporations. For example, Moderna shares fell by almost 20% yesterday, and Peloton by 35%. That is, yesterday it was not a pity to pay $ 90+ for a Peloton share, but today it is no longer worth $ 60.

But an even clearer sign of insanity is yesterday's rally in electric car maker Nikola. Well, as a manufacturer - in its entire history, the company has not produced a single electric car. And the average, or the maximum quarterly income of the company for the last year is 0. Yes, zero. The company does not produce or sell anything. But it has a capitalization of 5.5+ billion. It only generates losses. And if last year in the same quarter the loss was less than 80 million, then this year it was almost 270 million. And against this background, shares rose 21.5% yesterday.