“While Cyprus has been brushed away as a “storm in a teacup” and asset-gatherers stare blankly at their screens pointing at record highs to confirm the “market knows best”, it appears something rather important ‘broke’ that day (and hasn’t stopped breaking since). While we have discussed the rather glaring divergences between US equities’ exuberance and global equity markets and macro- and micro- data; supposedly theFed’s key indicator (the 5Y5Y forward inflation expectation) has reversed rather significantly. The last two times, forward inflation expectations dropped so significantly, the ECB launched LTRO and the Fed launched QE3. It seems the BoJ’s QQE is not having the effect perhaps they had hoped on inflation expectations. Will the Fed have to come to the rescue once again? And how will gold react to that?
Cyprus appears to have stolen the jam out of the reflation-game donut…
as one of the Fed’s key indicators (5Y5Y forward inflation) is diverging significantly… suggesting multiple compression (not expansion)
or moar money-printing…”
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