Marc Faber had this to say about the current market turmoil:
Investors don’t understand that markets are volatile, and that they have to be prepared to see stocks dropping 30% annually, and then rallying 20% annually and then dropping 30%. That’s gonna be the pattern, and whoever can’t live with that shouldn’t be buying anything at all.
Faber is right. This sort of volatility is nothing out of the ordinary. Get used to it (I never understand why there’s a brouhaha about a one day fall of 4.3%, but almost nothing said about the 4.9% cumulative fall from the prior three days).
There was one event this week, though, that deserves its own page in the history books. Bank of New York Mellon starting charging for deposits.
That’s right, for the privilege of depositing your hard-earned with BNY, you can pay them interest – 0.13% to be exact.
Unless you’ve got more than US$50m spare, the charge won’t actually apply to you, but it still reflects the extraordinary state of the world. The US Federal Reserve has primed, pumped and flooded the US economy with cash, yet unemployment hasn’t budged and the economy remains moribund.
It doesn’t seem to matter how much money he prints or how low interest rates go, punters keep putting it back in the bank. We’re about to find out whether Mr Bernanke is a ‘true money printer, or just an amateur money printer’ says Faber, who can smell QEIII ‘just around the corner’. Negative nominal interest rates suggest it won’t make any difference.
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