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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 382.95-0.8%4:00 PM EST
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To: Maurice Winn who wrote (55455)9/24/2009 7:27:59 PM
From: TobagoJack  Read Replies (2) of 217742
 
just in in-tray, per GREED n fear

· A giant sigh of relief is the most obvious sentiment on display at the 16th CLSA Investors’ Forum in Hong Kong this week. This poses again the question whether the relief rally is over as consensus has now swung firmly to the view that it is a cyclical bull market in America.

· If the US stock market can make it through the traditionally tricky seasonal period of September and October, it will be positioned for a melt up into year end as professional long only fund managers will be motivated to chase performance. In GREED & fear’s view the likely area of resistance will then be around the 1,200 level on the S&P500.

· At that sort of level GREED & fear would be happy to short the S&P500 on a naked basis. From an Asian perspective it would also then make tactical sense to reduce beta aggressively on a tactical basis while waiting to see how “decoupling” Asian performs in the context of the stress test provided by a proper US correction.

· GREED & fear’s short term tactical guess is that it is going to be much clearer in the first half of 2010 whether the American economy is really recovering whereas for now the market is still celebrating the inventory cycle. It is also likely to celebrate any month on month improvements in depressed US consumption data.

· GREED & fear’s fundamental view is still that the Western economy remains in a deflationary condition where there remains a significant risk of a liquidity trap. Investors need to keep a close eye on American bank lending data which continues to decline. If it really is a deleveraging cycle as GREED & fear thinks, then bank lending is not going to pick up sharply unlike in previous recessions.

· The bulk of securitisation activity in America remains concentrated in the government-backed “agency” mortgage backed securities market. It is certainly not impossible that securitisation “comes back” given the government rescue of a broken financial sector. Still for now GREED & fear will remain highly sceptical until presented with hard evidence to the contrary.

· The US consumption story is not just about leverage. It is also about psychology. The view here remains that the psychology of the American consumer has changed as the financially feckless baby boomers start to hit retirement age.

· The IMF is yet again doing the world a disserve by acting as a lobbying group for the securitised debt peddlers. It is true that the collapse of securitisation represents a massive deflationary risk for the global economy. But that does not mean that the answer is to allow a new free-for-all in securitisation.

· It remains amazing how few people are calling for the introduction of some modernised version of the Glass-Steagall Act separating the risky business of securities trading from the business of taking government guaranteed deposits. In GREED & fear’s view this is a fundamental issue that cannot be dodged.

· Hong Kong is as good a candidate as any in Asia for GREED & fear’s anticipated asset bubble. For now the residential property sector is climbing the proverbial wall of worry. The high end market is now being driven at the margin by mainland buyers.

· Clearly Hong Kong property will be vulnerable to periodic scares about renewed Fed tightening. Still in GREED & fear’s view any interest rate hike next year remains highly unlikely. It is clear that Billyboy is still much more focused on the deflationary risk.

· If the likely extended period of easy money in the West creates all the ingredients for an asset bubble in Asia, it is also the case that there will be efforts to tighten incrementally in Asia, if not dramatically. The recent correction in China A shares should be seen as a lead indicator of the correction which is likely to come sooner or later in the rest of Asia as and when the S&P500 corrects.

· GREED & fear’s guess is that the Reserve Bank of India will be the first central bank in Asia to raise interest rates. The Indian economy is growing healthily and the domestic demand driven nature of the economy means that its policy makers will be less concerned about external demand. GREED & fear would view any such tightening move by the RBI as a reason not to sell India, but rather to add on weakness.

· The launching of CLSA’s China Brands Index research report this month is extremely timely as China moves up the curve in terms of discretionary consumption, despite its wholly deserved reputation as an investment dominated economy.
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