Worth reading from Steve Roach: “In the absence of interest-rate pressures, most believe that financial markets enjoy a Teflon-like immunity from any and all potential sources of adversity. I have my doubts. A number of potentially powerful macro forces are now in play that could challenge this conclusion — namely, a bursting of the US housing bubble, renewed dollar weakness, and a pro-labor swing of the political pendulum. Any one of these developments has the potential to derail a seemingly benign macro climate. A combination of them would be all the more destabilizing.

The risk is that investors are trapped in the past — aiming their defenses in the wrong direction. Such a possibility reminds me of the legendary Battle of Singapore in 1942. Convinced that the next war would be like the ones of the past, British military strategists positioned their fixed artillery for a classic invasion by sea. The Japanese, of course, invaded by land from the North — leading to what historians have called one of the largest and quickest capitulations in British military history and Winston Churchill’s worst disaster. Here’s where history may have something to say about increasingly complacent financial markets. No two endgames are alike.”

[ Zugzwang typically occurs when all the moves available are "bad" moves, dramatically weakening the moving player's position (Müller and Lamprecht 2001:22)]