The prolonged sell-off in risk assets across the globe will only abate if the U.S. Federal Reserve changes its path and begins to loosen its monetary policy once again, according to strategists at Deutsche Bank.

Chinese growth fears, stress in the U.S. energy sector and fragile balance sheets in European financial companies have all been credited in the last week for fueling the sell-off. However, there’s only one real cure for this current bout of weakness, according to a team of European equity analysts at the German bank, led by Sebastian Raedler.

Raedler said that U.S. high-yield spreads – the difference between investment grade and non-investment grade bonds – have risen above their 2011 peak and warned of the potential for a self-fulfilling “full default cycle.” He highlighted the stress had started with energy firms – that have been hit by the oil price plunge – but added that it wasn’t confined to this sector.

Let’s remember that after a dramatic several months the Fed raised its interbank lending rate by a quarter of  a percent and promised to hold off on other rate increases until the economy is stronger. Of course the Fed finished its quantitative easing program more than a year ago as noted in Bloomberg’s article, The Fed Eases Off.

It was the biggest emergency economic stimulus in history and now it’s over. The U.S. Federal Reserve’s once-in-a-lifetime program to buy immense piles of bonds, month after month, in an extraordinary effort to restart a recession-deadened economy came to an end in October 2014 after adding more than $3.5 trillion to the Fed’s balance sheet – an amount roughly equal to the size of the German economy. The bond-buying program, called quantitative easing or QE, had been controversial since its start in 2009, as had the Fed’s decision in 2013 to gradually reduce the monthly economic boost, a plan that became known as the taper.

As Deutsche Bank decides to blame the stock selloff on the Federal Reserve we have to wonder if they want have the Fed start printing money again or roll back a miniscule quarter percent interest rate hike? There are times when the market needs to take care of the market and this is probably one of them. We have written about how the economic situation in China resembles Japan in the late 1980’s. A economic miracle is revealed to be partly smoke and mirrors as too much industrial expansion fueled by bad loans acted like the man behind the curtain manipulating the Great OZ. The Chinese economy needs to adjust however painfully that happens and the world will feel some of the pain. Blaming the stock selloff and general economic malaise on the Fed is just short term distraction. In the meantime reread our article about how you can benefit from the coming Chinese economic collapse.

Should We Blame the Stock Selloff on the Federal Reserve PPT

When the investor reads the news he or she is always on the lookout for information that will provide an advantage in buying, holding, or selling investments. However, much of what is written attempts to provoke fear or greed or both. In a lot of “big picture” articles the author attempts to elicit a gut response from the reader that will keep him or her glued to the page and coming back for more.

The current articles that basically say that China is buying up lots of property and US assets sound very familiar as they mimic the articles at the end of the 1980’s when Japanese investors bought Rockefeller Center, Colombia Pictures, and the Pebble Beach Golf Course.

This is not to predict that the Chinese economy will go the way of the Japanese economy with a decade of stagnation but everyone has their problems, including China.

The point, when reading articles about other investors is not to be greedy or fearful but to look, dispassionately, for information and clues about what you can buy or sell to improve your own investment portfolio. If buying REIT’s is such a good deal that the Chinese are putting their money into them then maybe you should do a little research and invest too. If the Chinese have too much cash and are looking outside of their country for investments then maybe they know something that the West doesn’t know. If things are so great in China why buy assets in the West?

Regarding REIT’s they were introduced in China a couple of years ago and are popular so if REIT’s work at home (China) why not invest in REIT’s in the USA too?

The US has problems with it huge federal deficit. US monetary policy is often captive to dealing with the huge federal deficit and may lose flexibility therefore.

What to keep in mind when reading investment pieces about Chinese investments, monetary policy, federal deficits, and the like is that your are looking for information useful to you in your role as an investor. Getting worked up over politics is your right and mine in a democracy but getting worked up over politics, the investments of others, has little to do with finding and managing good investments for yourself. That includes Chinese investment in REIT’s in the USA or US investments in Chinese REIT’s for that matter.

Where the growth will be is where you want to invest. Where the stability will be is where you want to invest. If US monetary policy and the federal deficit have made it so bad for the USA investor, look offshore. However, if prospects and prices are so bad here then why are offshore investors buying REIT’s here instead of REIT’s there?