Puru Saxena's Contributions

The economies of the developed world are improving; their housing markets are on the rebound and unemployment rates are sliding. On the monetary front, central banks remain accommodative, interest rates are at historic lows and the yield curve is steep.

Well-known Hong Kong investor and money manager Puru Saxena joins the Financial Sense Newshour and explains how one of history’s largest bubbles is at the mercy of the Fed.

Monetary policy remains accommodative and housing is rebounding in the developed world. Consequently, business activity is improving and this is being reflected in the related stock markets.

Interest rates are near historic lows, credit is cheap and the prominent central banks are not planning to pursue tough monetary policies anytime soon. Consequently, the stock markets of the developed world are...

The world’s economy is growing at a tepid pace and the majority of central banks are pursuing expansionary monetary policies. Furthermore, the central banks of the developed world are engaged in unprecedented asset purchases and it appears as though this ‘stimulus’ will continue for the foreseeable future.

The world’s economic landscape is changing and after a disastrous decade, America is once again in the driver’s seat. Contrary to the 2000-2011 time frame (when the developing nations fared a lot better than America), the tide seems to have turned in favour of the world’s largest economy.

According to our methodology, Wall Street is currently in ‘correction mode’ and additional near-term selling pressure cannot be ruled out. At this stage, nobody can predict the duration or depth of the ongoing stock market correction.

According to our methodology, Wall Street is currently in correction mode and this is not the time to invest fresh capital in stocks. It is notable that although major US indices advanced on Tuesday and Wednesday, volume was very low and this warrants caution.

The ‘race to debase’ is on and the majority of nations are now involved in competitive currency devaluations. For instance, in addition to America, Euro zone and Switzerland, even Japan has now affirmed that it wants to weaken its currency.

The world’s major economies are struggling and their private-sector is deleveraging (paying off debt). If history is any guide, this deflationary process is likely to continue for several years.

On Thursday, the Federal Reserve initiated QE3 and this prompted a big rally in risky assets. As you know, we were expecting Mr. Bernanke to unleash ‘stimulus’ but even we were taken aback by the extent of the easing.

The world’s economy is passing through a low growth environment and this is in stark contrast to the first half of the last decade, when we had a global boom. Today, Europe is on the brink of recession, the US economy is growing at only 2% per year and it appears as though China is facing a major slowdown.

Europe’s debt problems are driving the world’s financial markets and investors are trying to figure out whether the single currency will survive. Furthermore, the mainstream media is currently awash with scary forecasts about the impending collapse of the Euro and many pundits are now predicting a Greek or Spanish default.

The world’s most influential central bank wants to inflate American asset prices; thus it is conceivable that the ongoing rally on Wall Street will continue for several months. Look. The Federal Reserve has made it clear that it will keep rates on hold until at least December 2014 and it is also buying US Treasuries across the entire yield curve.

The economies of the developed world are sluggish, unemployment is a real menace and debts are out of control (Figure 1). Nonetheless, the world’s stock and commodity markets are defying all logic and advancing in the face of adverse economic conditions.