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It’s Starting To Feel A Little Bit Like 2006, Barclays CEO Warns - CNBC

It’s Starting To Feel A Little Bit Like 2006, Barclays CEO Warns - CNBC

Release Date:  Friday, January 26, 2018

“In morning trade on Thursday, gold jumped to its best level since August 2016 touching a high of $1,365.40 an ounce after comments from US Treasury Secretary Steven Mnuchin at the World Economic Forum in Davos Switzerland sent the dollar lower.

“But the metal reversed course in the afternoon after US President Donald Trump told CNBC that Mnuchin’s comments had been misinterpreted. ‘The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar,’ Trump said…

“Gold and the US dollar usually move in opposite directions and the greenback has declined sharply against major currencies since Trump's inauguration. The euro has gained 15% against the US currency, the British pound more than 13% and the Canadian dollar nearly 8% in little over a year.” (“Davos team propels gold price to 18-month high, Trump shoots it down.” Mining 01.25.18)

It’s Starting To Feel A Little Bit Like 2006, Barclays CEO Warns - CNBC
CEO of Barclays, Jes Staley, noted Thursday that financial conditions are somewhat reminiscent of the run-up to the global financial crash of 2008.

"’Asset values such as the stock market are at all-time highs, every major industry around the world last year grew by more than 20 percent, volatility is at an historic low. And almost even more concerning than that — a lot of what's driving that low in volatility is people are selling short volatility,’ he said, implying that traders are betting that volatility could push even lower.

"’So if you've got a lot of short positions at an all-time low level and something snaps, the velocity of recovery could be quite something to watch,’ he said.

“The most common measure used to assess volatility in the U.S. is the VIX index, which has been persistently at low levels for the past year. This means that investors are relatively calm about the economic backdrop. However, many wonder if this is the calm before the storm and a market correction is around the corner. Even more so when people are selling "a lot of" short volatility, which indicates they do expect nervousness to pick up in the future.

“Staley told CNBC that given the high level of debt across the world, in particular among emerging markets where dollar-denominated debt has grown dramatically, many economies could be at risk if there were sudden changes in financial conditions.

"’If interest rates were to move quickly, volatility was to move quickly it could be an interesting financial market in the next couple of years,’ he warned, earlier adding that ‘this feels a little bit like 2006.’

“With central banks raising interest rates, debt levels increasing, and with a pick up in volatility, borrowing costs would also grow and could ultimately hurt many economies. Staley also argued that global economic growth and monetary policy need to re-balance in order to prevent a distortion in the markets.

"’Global economic growth across the board is doing great at roughly 4 percent, unemployment rates in the U.K. and in the U.S. are at almost record lows. All that feels great,’ he said. But the current ‘incredibly accommodating’ monetary policy is going to be ‘built in everybody's equation,’ he added.” (“It’s starting to feel a little bit like 2006, Barclays CEO warns.” CNBC 01.24.18)

A Decision To Invest Today Has To Rely On The Belief That ‘It’s Different This Time,’ Says Billionaire Howard Marks - CNBC
On Tuesday, billionaire Howard Mars told his clients to stay “defensive or cautious” in the current market environment.

"’Most valuation parameters are either the richest ever … or among the highest in history,’ Marks wrote in a note to clients Tuesday. ‘In the past, levels like these were followed by downturns. Thus a decision to invest today has to rely on the belief that 'it's different this time.'

“On whether investors should be bullish or bearish in the current environment the investor added, ‘my answer today, as readers know, is that I would favor the defensive or cautious part of the spectrum.’
‘I'm convinced the easy money has been made,’ he said.

“’It appears many investment decisions are being made today on … belief that the overpriced market may have further to go, and FOMO [fear of missing out],’ Marks wrote. "Oaktree will continue to invest on the basis of value and its relationship to price, and to refrain from trying to time markets based on predictions regarding economies, markets or psychology. The 'melt-up' school says securities that already are highly priced may become more so. We'd never bet on whether they will or won't.’

"’There is a lot of cash on the sidelines. ... We're going to be inundated with cash,’ Dalio said. ‘If you're holding cash, you're going to feel pretty stupid.’” (“A decision to invest today has to rely on the belief that ‘it’s different this time,’ says billionaire Howard Marks.” CNBC 01.24.18)