21 September 2016: Blunt

Policy measures of central banks are getting blunt. It is up to governments to take their responsibility for economic policy.

knifeWhat is even worse than the music of James Blunt? A blunt knife. The Bank of Japan (BoJ) changed its QE policy only slightly. Analysts had already concluded that the (positive) effects of previous policy measures were fading (if they have been in existence at all…). And now the BoJ must have come to the same conclusion. Driving interest rates even deeper into negative territory is not the way to go and probably even more harmful than not lowering them. It might also be the case that through its meager measures, the BoJ wants to signal that there is not much more that it can do. It is now (and it should be and has been for very long) up to the Japanese government to take its responsibility. Unfortunately, history has shown that governments are only prepared to close the stable door after the horse has bolted. We might be entering a new phase of central bank policy, which forces governments and politicians to take more responsibility for the state in which the world economy finds itself. Don’t rely on it that they are inclined to take up the gauntlet.

white-chapel-logo-smallAs we predicted in our blog post yesterday, markets barely moved Tuesday. Major US indices moved less than 0.1% on average. Volatility was slightly on the rise: the VIX added 2.5%. It is clear that investors were totally unsure where markets would go the upcoming days after the outcomes of the meetings of the central banks have sunk. Our UVXY ETFs suffered a small loss: -1.6%. Our return for the year is now at 279%. Return for the quarter is still above 10%. White Chapel is quite ‘bullish’ about more volatility coming up and advises us to stick with our  UVXY ETFs. So, our model did not give a signal at the end of yesterday’s trading session.

Accumulated capital at close of previous trading day

Return since start

Return this year

Return this quarter

$37,898

+278.98%

+278.98%

+11.6%

Our initial capital was $10,000 at 1 January 2016. Our average Annual Return is 549%.

aardbeiEvery Wednesday morning, Tim visits a market in his neighborhood to buy fresh vegetables and fruits. Strawberries are on the top of his shopping list in the summer months. During midsummer, there were days that Tim arrived too late at the market: strawberries had already sold out. But today he could be sure that he was on time. There were plenty of strawberries on sale during all of the market session. People are less eager to buy strawberries at the end of the summer. Market merchants even have an official term to refer to the phenomenon: it is called ‘aarbeienmoeheid’ in Dutch (strawberry fatigue). Personally, Tim is resistant to aarbeienmoeheid.