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The reason this recession is different is that it is a deleveraging recession ( depression kind ?). We borrowed too much (all over the developed world) and now are having to repair our balance sheets as the assets we bought have fallen in value (housing, bonds, securities, etc.). A new study by the McKinsey Global Institute found that periods of overleveraging are often followed by 6-7 years of slow growth as the deleveraging process plays out. No quick fixes.

The process of deleveraging from what is still a near-record debt overhang is going to take a long period of time and exact a toll on economic activity along the way.

As David Rosenberg says “ALL debt as shown in the chart above is going back to $60,000 in real terms, and if it’s going there, and we get a withdrawal of stimulus at any time, then the credit contraction is going to gain some serious momentum.  This is a big reason to be defensive and yield- oriented in the portfolio”.

And finally, FT in the Lex Column “it may be economically and politically sensible for governments to spend money on making life more palatable at the height of the crisis.  But the longer countries go on before paying down their debt, the more painful and drawn-out the process is likely to be.  Unless, of course, government bond investors revolt and expedite the whole shebang.”

So, who said this game was over ? Let´s see what Bond Vigilantes have to say…