Posted By:Â Matthias Paul Kuhlmey
The German magazine, Der Spiegel, is running a very interesting cover story this week, entitled â€śHeimat.â€ť When I tried to explain to my wife what the article is all about, I l realized that there is no English word to translate Heimat. After doing some research, we acknowledge that HeimatÂ â€śis a GermanÂ word that has no simple English translation, denoting the relationship of a humanÂ being towards a certain spatial social unit. The term forms a contrast toÂ social alienationÂ and usually carries positive connotations. It is often expressed with terms such asÂ homeÂ orÂ homeland, but these English counterparts fail to encapsulate the true meaning of the word.â€ť
With further lack of words, let us attempt to explain the current market or market participants’ behavior â€” as good as we can (promise). Setting the scene: We have terrible job numbersÂ in the U.S. â€” meaning terrible(!) â€” about 50% under expectations, as reported last Friday (known as a â€śmissâ€ť in financial jargon); there is a continuouslyÂ deteriorating situation in Europe, with our beloved European Central Bank (ECB) Â preparing to buy European Sovereign Debt to ease markets; and, last but not least, we have seen a modest increase in Unemployment Claims, here at home.Â The Conclusion: Â It does not matter! The â€śSolutionâ€ť:Â Â As soon as bad news â€śhit the tape,â€ť the Talking Heads of the FED, ECB et al (Central Banks Unite) are not shy of words, even though they should choose them carefully. The “quick fix” is generously promised, and a bit of â€śhinting here and thereâ€ť gives investors the confidence needed.
Wait a minute, what is an investor, anyway? You would think a thoughtful person, studying balance sheets, and being in for the long run â€” but not so fast. Doing some research on this word, evenÂ speculators may as well be considered investors. And here is the dilemma: Central Banks, ever since the Credit Crisis of 2008/2009, have been facilitating the most significant liquidity injection ever experienced by modern society. The Bank of Japan (BoJ) and ECB have expanded their balance sheets to about 25% of respective GDPs, while the FED and Bank of England come in at around 20%. On this basis, we are not talking investing, but rather of a massive inflation trade in the making.
Without a more formal approach to investing (and now we are referring to the â€śreal thingâ€ť), there will be disappointment over the outcome, sooner than later. However, if you think all is â€śdandy,â€ť consider another great data point, as observed by Bloomberg: Â Apple stock’s price performance has accounted for 8% (!) of the Standard and Poor’s increase from March 2009 to this week. Fortunately, we do have an English word to describe our reaction to this â€” â€śSpeechless!â€ť