just in in-tray
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· Investors' focus remains on the still strong oil-led commodity complex with the charts indicating that risks of a parabolic move are growing before the final unwind. Still, if the issues raised by the commodities' continuing strength are the present subject of greatest focus, the credit crisis has not yet been entirely dismissed as yesterday's story though that is how the increasingly complacent bulls view it.
· A letter sent out by the SEC in March stated that Wall Street would have the discretion on how to value hard-to-value structured-finance products in Level 3 if the prices were deemed to be the consequence of a forced liquidation or a distress sale. This would seem a significant "get out of goal" card. It is also a reminder that the SEC has not been at all tough when it comes to monitoring risk taking on Wall Street.
· GREED & fear is not so convinced that systemic risks have been entirely removed in America. Nor is GREED & fear convinced that the American political process is willing to endorse entirely the current Washington preference for implementing socialism for rich people, and capitalism for poor people.
· One area where the market-clearing process continues to take its toll, and where federal regulators are not yet coming fully to the rescue, is mortgage-backed securities. Here all the evidence is that foreclosures continue to surge as Americans continue to walk away from their mortgages in record numbers.
· The best hope for the US$11tn US mortgage market is that the data on housing gets so horrible in the next three months, that it forces a significant bipartisan bailout package on the housing market prior to Congress' summer recess in August. Otherwise, the big legislative push is likely to come after the November presidential election when a most likely Democratic administration will implement measures which could well amount to further socialisation of the mortgage market.
· The Bank of England's effort seems more focused on relieving liquidity concerns rather than solving problems of solvency. It is not necessarily a positive for Britain's housing market if the BoE's adoption of this policy makes it less eager to cut interest rates aggressively.
· The ECB has continued to keep interest rates on hold even as it has continued to extend cheap funding to distressed banks within its regulatory orbit. GREED & fear is still expecting growing political pressures from the protesting PIIGS (Portugal, Italy, Ireland, Greece and Spain) in coming months. Macro investors should remain long the PIIGS spread trade.
· The past week has seen the first evidence that the PRC now wants to support the mainland A-share market. The Chinese authorities have announced new rules to restrict disposals of unlocked shares and have cut stamp duty for stock trading. China stocks are always in part driven by policy. GREED & fear also expects the policy towards residential property to turn more benign sooner rather than later.
· There seems very little difference between the two Democratic presidential candidates in terms of their policies. For both their instincts are to tax and spend. GREED & fear does not view this as bullish though investors should note that a comprehensive infrastructure stimulus still seems a sure bet for 2009, assuming a Democratic administration, which still seems to GREED & fear by far the most likely result.
· A move in America back towards what used to be called in Britain Fabian-style socialism would be a further move away from living by the market. By contrast, Asian countries continue to avoid the evils of the welfare state, primarily because of the strength of the extended family system. This is a structural positive for Asia which investors should not forget.
· GREED & fear's advice for investors in Asia is to not get too freaked out by the food-price scare. The Billion Boomer story is about investing in Asia's rising middle class. It is not about people who cannot afford a bowl of rice. The risk, if there is one, is clearly political instability caused by food riots.
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