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I founded and co-founded a couple of companies: Redington and mallowstreet; now I have launched a global initiative, Partnership for Change, which is working to improve healthcare, long term care, pensions & savings and technology for a rapidly ageing population. I write about issues of the day that touch me and make me think. Mostly about how to make things better.

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In the Event of Landing on Water…

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Another day, another pile up. CARNAGE in fact (and no, I’m not the Sun’s dramatic headline artiste).

 

Tell me: how else would you describe today’s asset destruction and further reduction in interest rates?

 

For your assistance, here are some data:

 

Equities:

FTSE        -4.7% to 5,041  (-14.5% year-to-date)

DAX       -5% to 5,164       (-25% ytd)

Dow       -4%                        (-7.8% ytd)

S+P        -3.9%                     (-10.8%ytd)

 

UK:

Gilts 10yr             -10bp to 2.31%  (-108bp ytd)

Gilts 30yr             -14bp to 3.51%  (-67bp ytd)

Swaps 10yr         -9.6bp to 2.49%

Swaps 30yr         -13bp to 3.30%

BEI 10 and 30yr  -5bp to 3.176%

UKTI 0.625% 03/40           -9bp to 0.33%

UKTI 1.25% 11/55             -8bp to 0.34%

 

Emerging Markets:

Brazil and Mexico bond yields 15bp and 19bp HIGHER

MSCI EM -6% today (biggest drop since Nov 2008)

 

Commodities:

Crude    -6.7%

Brent     -5%

Gold      -2.6%

Silver     -9%

Corn      -4.7%

Wheat  -3.7%

Sugar     -3.9%

 

Add it all up, and the inescapable conclusion is that the plane is falling out of the sky. Perhaps we will achieve the orderly sovereign defaults of which some have spoken, but – arise and take a deep draught of the Columbian Roast – that seems as likely as an orderly plane crash in the Pacific.

 

Those of you who regularly travel by air will be familiar with The Yellow Whistle (“for attracting attention”) and the Little Clear Plastic Tube you should use to top up the air gently in your life jacket immediately following the 550 mph vertical-descent, orderly landing on water.

 

Maybe, like me, as you listen to the cabin crew go through their futile paces, you cynically wonder how many times the whistle and plastic tube combo have been successfully deployed since the dawn of air travel circa 1902. (Begins with Z, if the question still troubles you.)

 

So, being as the airline folk all know the answer begins with Z, why, you might ask, do they persist with this time-wasting charade? On every flight globally? Each (virtually) pointless whistle / tube briefing is 120 seconds of life you and your fellow passengers will never get back.

 

I guess it’s designed to make everyone believe there’s a game plan; that someone is in control, that there’s a way out. It gets you to relax in your seat before take-off, knowing just how safe you’re going to be as you bob around in the warm, post-crash, clear water, blowing your yellow whistle and topping up the air through your little plastic tube.

 

Every time you hear of some fail-safe, new, QE related strategy, some innovative game-plan by the Fed to sell vast quantities of short-end bonds and buy long (aka Operation Twist), we’re all sitting through the Whistle and Tube briefing.

 

Accept it. There’s only one bit of the drill you’re going to need:

 

 

Brace, Brace!

 

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