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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 421.32-0.5%Jan 16 4:00 PM EST
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To: carranza2 who wrote (35702)6/12/2008 11:30:35 PM
From: TobagoJack  Read Replies (4) of 219431
 
just in in-tray

· Billyboy Ben continues to try to talk tough in terms of his proclaimed willingness to counter rising inflationary expectations. But GREED & fear believes there is zero possibility that the Fed is going to raise interest rates this year unless there is a complete collapse in the US dollar.

· The bear story on US financials is moving from structured credit write-downs to real losses on loans made. The centre of the storm in coming months is going to be the US$1.12tn home equity loan market, where only 5% of home equity loans are securitised. The junior lien mortgages are clearly much more vulnerable to the risk of default than conventional home equity loans.

· The securitisation machine remains broken in America. This trend clearly has bearish implications for the economy as well as for the revenues of financial service players. The more consumer-related loan portfolios deteriorate, along with other obvious problem areas such as commercial real estate loans, the more credit will be rationed.

· Treasury bond yields continue to diverge from falling financial stocks in both America and Europe. This reflects the inflation-driven scare caused by the continuing strength of the oil-led commodity complex.

· GREED & fear maintains the view that a real oil-led commodity correction is most likely to happen if the dollar stages a convincing rally where the US dollar index breaks 75 on the upside. It is quite possible that such a rally has begun. But GREED & fear would be more convinced that such a counter-trend dollar rally was now underway if the money markets were anticipating ECB easing as opposed to Fed tightening.

· While ECB chairman Trichet has of late raised the possibility of a further tightening move, the reality is that the data in Euroland shows an intensifying slowdown. This is a good opportunity for macro traders again to put on the "rising PIIGS spread" trade if they have not already done so. For the ECB's continuing tough anti-inflationary stance can only cause growing political tensions within Euroland.

· GREED & fear has not given up belief in CLSA's Capital Links story in Taiwan. Still fund managers should realise that the story for this year and next is likely to be one of incremental progress on the economic front, not a definitive one-off political deal ending the 60-year dispute between mainland China and Taiwan. This year is likely to see most progress made on direct flights and mainland visitors to Taiwan.

· The present view in Taiwan is that President Ma will use his first four-year term in office to demonstrate the economic dividends to be gained for Taiwan from opening up to China. Then if re-elected, Ma would be in an ideal position to do the definitive political deal with China formally ending the 60-year dispute.

· Relative-return investors should retain core positions in the Taiwan domestic stocks and trade around them. Taiwan does have the promise of progress on Capital Links to look forward to. This is a potential positive dynamic which other Asian stock markets do not enjoy this year.

· Retail investors in Taiwan have not yet returned with any great enthusiasm to the local stock market, despite the KMT victory and renewed hopes of direct links. As for foreigners, it is very likely most relative-return investors are still underweight this market given the structural underweight they have held for so many years.

· There is evidence of an intensifying slowdown in Australia and New Zealand. GREED & fear reiterates the view that Asia Pacific investors should be zero weighted in Australian financial stocks.

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