"More And More Market Participants Fear We Are About To Face Another WTF Moment"

Marvellous day yesterday. The 10-year US Treasury broke through the “You Shall Not Pass” 3% barrier and the dollar went up. Panic! It might be the end of the world, but I least I called it right! Relax… the sun still came up this morning.

I spent time y’day in the City and West End talking to journalists and clients, and picked up further clues as what’s been going wrong right through my 30 year plus career in finance. I’ve come to a stunning and shocking conclusion. People just aren’t as smart as we think. Folk get it wrong. Repeatedly. It was such a stunning moment of clarity I’m awarding myself one of my coveted “No Sh*t Sherlock” awards.

The business of markets is as much about economic forces as it is about watching the mistakes and behaviours of others. Definitionally, its mistakes that drive the most exciting market action!

Investors find themselves on the wrong side of little mistakes all the time – like the market waking up to major corporate changing the guarantees on its bonds, pushing bond holders down the capital ladder to make them more subordinated – as has happened with Softbank.

When the mistakes are so large and so egregious they have the capacity to cause a WTF “moment” – like we saw in 2007/08 when we realised unemployed bus drivers were unlikely to pay off massive mortgages, and over-levered banks stuffed to the gunnels with illiquid risk weren’t sustainable.

Such lightbulb moments occur infrequently – but often enough to define our careers. Based on my ongoing discussions, I sense more and more market participants fear we’re about to face another. This where it gets interesting – nobody can agree what its likely to be!

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