The structure and the cash

The speculative market theme that seems to be emerging is a phenomenon that shouldn’t be surprising. Some commenters have discussed lockdown boredom as an explanation, some are pointing to the gap between the market and economy as a cause (and an effect), and then there is the disagreement among the very powers that be – the monetary chiefs seem to be looking at a slow and gradual recovery, just as the fiscals’ latest inactivity implies a quick and forceful rebound is already in the works – which stirs up speculative passions and motifs among the rank and file. In a world of guesses, speculation is the use case for the market product.

Another potential explanation, arguably less nuanced and for that reason possibly more likely, is that for savers there is no other choice but speculate. There is no interest paid on savings nowadays, there is no interest paid on risk-free debt, and when operating incomes start to take a hit the zeros where financial income had been thought to be gets noticed. It isn’t an analysis that takes a PhD from U Chicago to resolve. What’s more, it isn’t a narrow-based reality for the retail trade, it’s fairly universal. Even if it didn’t start that way, it’s gaining strength.

The risk in all of this is that a speculative frenzy can only go so far to substitute for steady income, and when some trigger happens that would cause arrows to start pointing down – it could be anything, even a brief miscommunication – the avalanche has the potential to wipe out a whole region, as it were, which may have magnifying consequences all around. This is a risk (only a risk, not a prediction), but the mitigating factors of it may not be the usual this time. Low rates and easy money, which have been typical so far, are already factored in.