“Seven Signs Of A Deeply Dysfunctional Market” – Why Citi Is Also Warning Of “Surprising, Sudden, Intense” Tail Risk

Saturday, August 20, 2016
By Paul Martin

by Tyler Durden
Aug 20, 2016

In his latest letter, Elliott Management’s Paul Singer reached new levels of bearishness, warning that the “bond market is broken”, the loss of confidence from the failure of central bank actions “could be severe” and that “the ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense, and large.”

Overnight, one of the best credit analysts, Citi’s Matt King, followed up on Singer’s gloomy observations with a presentation showing seven signs why markets are deeply dysfunctional, highlighting the numerous “broken relationships” that have emerged as a result of central bank meddling, “from profits to political uncertainty, and spreads to standard deviations, traditional market relationships are being turned on their heads” and admits that “yes, it’s monetary policy we demonstrate is driving everything. And yet here too, there are worrying signs of what may become a breakdown.”

For the benefit of those who are still stuck trading in the “market” we present King’s entire must read presentation “Seven signs markets are deeply dysfunctional”, which we doubt will lead to smarter investing decisions, will at least provide some perspective on what we have dubbed since 2009, is a thoroughly broken market, something even the WSJ recently admitted.

Distortion breeds dysfunction

From Bill Gross’ dirty engine oil to Paul Singer’s broken bond market, investors are bemoaning a breakdown in normal market functioning. Cynics might say they’re apologizing for underperforming straight bond and equity indices – except that just about every market participant we speak to feels the same way, no matter what their asset class and no matter how stellar their returns. Just about the only people who aren’t convinced are the central banks.

The Rest…HERE

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