by David Kranzler
Investment Research Dynamics
The title quote is from Tad Rivelle, Chief Investment Officer of TCW (Los Angeles based fixed income management company), who manages one of the largest actively managed bond funds. He goes on to comment about the implications of the negative rate policy that has been implemented by Japan and the EU: “Credit markets look late cycle, manufacturing looks pretty late cycle and corporate profitability, as well. So the proliferation of negative rates may also suggest that central bank policy has reached exhaustion. It’s almost like negative rates are the last thing central bankers are trying to make it work.”
Many investors and market observers wonder why the Fed/Central Banks just can’t print money forever and drive the markets even higher. The answer can be found in the law of diminishing returns.