Axel Merk - Risky Assets Don’t Appear Risky Anymore

On the Fed ending QE 3, or money printing, Merk says, “It’s wishful thinking. We have had this a few times and the market has had a little bit of a fit. The one thing that central banks have achieved is that they have compressed risk premiums, meaning risky assets don’t appear risky anymore. Junk bonds don’t yield anything anymore, and the stock market doesn’t appear risky anymore. If risk comes back into the market because the Fed wants to do an exit . . . means asset prices will have to plunge. . . . It’s just not possible to have a Fed exit without having a very, very severe recession. That’s not what the Fed wants.” Merk goes on to say, “Ultimately, asset prices do not reflect fundamentals.”