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Big Bang Theory: The Failure Of Global Central Bankers - big bang

Can central planners arrest economic gravity?


Here's how that is playing out in macro markets via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:

"Being bearish on the big 3 global Equity indexes (Nikkei, DAX, and SP500) continues to pay off in long/short space (vs. Long TLT, XLU, GLD); this will not be highlighted by the bulls but the Nikkei closed down for the 4th straight session overnight = down -12.1% YTD (vs. DAX -8% YTD) and teetering on going back into #crash mode (-20% from July highs)"

Japanese equities are falling because of what McCullough has dubbed the #BigBangTheory. In other words, as McCullough says, the idea is that "central-market-planning (or QE)… could easily implode if the #BeliefSystem that humans can bend and smooth economic gravity crashes." 

In short, what happens when macro markets no longer believe in the omnipotence of central bankers and equities and currencies move in direct opposition to policymaker's intent?

That's a reality now. Here's a chart of (strengthening) Yen and (crashing) Nikkei post BOJ negative interest rates:

Big Bang Theory: The Failure Of Global Central Bankers - boj nikkei

It's happening in the Eurozone too. Despite ECB head Mario Draghi's best efforts to burn the euro, the currency is actually up 3.8% this year versus the U.S. dollar. Meanwhile, look at the year-to-date performance of European equities:

  • Germany's DAX: -7.9%
  • Italy's FTSE MIB: -12.7%
  • France's CAC 40: -4.8%

Big Bang Theory: The Failure Of Global Central Bankers - Draghi cartoon 03.09.2016

Watch out!