It might seems strange but apparently this is what is happening in Europe lately, despite the cost of borrowing has never been so cheap consumers are not buying anymore or at least not enough to continue feeding growth.
That's a real problem for the brainy professors in Frankfurt and we're all waiting to see what they will pull out of the hat this time in order to give some relief to markets and confidence to consumers; their solution will probably disappoint markets and we will assist in a big drop in indexes witch is not too bad for all the investors who bided their time in 2015 waiting for a good opportunity to enter the market. Money has never been so cheap but people is not borrowing anymore or maybe the ones that would like to borrow don't have an adequate income to sustain a loan or a mortgage; billions of Euro are thrown on financial markets every month by the ECB (and more will probably flow into markets after the March ECB meeting) with the result of sending to negative interests sovereign bonds that just 5 years ago where considerate almost junk.
Spanish and Italian bonds recently reached the club of negative interest and investors have to look further if they want to get a return on their investments, we are talking about bonds that will get to maturity in 7 or 10 years to get a return of 3 to 5 % on capital. Despite this unimagined abundance of money, all this liquidity doesn't make it to the real economy and it remains trapped in between banks; it is like the ECB keeps feeding the cow, but the cow is not hungry anymore.
What are all the talking heads saying and what where they predicting after the stellar 2015 we just had? Basically they where all wrong; when the price of crude oil dropped below 30 $ a barrel the wealthiest sovereign funds started pulling their money out of financial markets and world indexes dropped double digits.
Banks in Europe are facing new rules and their role of market maker, is coming to an end at least for the smaller ones and the result is an increase of volatility investors where not used to.
" The big winners of 2015 became losers in the first weeks of 2016 and the most hated stocks and sectors of 2015 are outperformers now. Mining is the sector that is giving a 10 % return so far this year" (The Wall Street Journal, March 1st, 2016, pages B5 and B7, The Worst Market: One without a story by James Mackintosh).
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