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“You can run but you can’t hide.”
                                          Joe Louis

Commentary & Analysis
Danger Will Robinson! An all-one-market-monster on the radar!

If you have kids or parents, you understand all too well that you can run from your genetics but you can’t hide. It seems portfolio managers who preach the good news of diversification have neither kids nor parents, which might explain a whole lot about their behavior.

We recently penned our updated case for deflation. One of our key premises was that financial market transmission of deflation into the real economy—through the self-feeding collapse of collateral values—is powerful and poised to happen again, as it did during the credit crunch. Its longer term effect could be even worse than last time because our illustrious governments and central banks are bumping up against a very high wall of diminishing returns from additional stimulus, not to mention their wherewithal to provide much more is waning big time.

Why is now a very dangerous time? Because it is all one market effectively; almost every asset class looks a bit alike, being resurrected from the same gene pool of liquidity. Thus, selling in one market will beget selling in another as the big boys rush to salvage cash.

Okay kids, here we go…take a look at the next page and see if you can find which of these markets is doing its own thing and which of these markets are kind of the same?

Did you guess which market is doing its own thing? Here is a hint: It’s the one all the smart people hate!