more teaching for the day
just in in-tray, per greed & fear
· GREED & fear will continue to view any breakout of the S&P500 above the 1150 level as a false breakout. It is also the case that any further advance in US equities from here reduces the chance of a second round of aggressive quanto easing. Still the growing expectation of quanto easing is allowing the equity market to ignore bad news for now.
· One piece of policy-related US newsflow which could well generate more bullish excitement in coming weeks or months is any sign that President Obama will not repeal the Bush tax cuts when they are due to expire at the end of this year. This issue is unlikely to be resolved before the November mid-term Congressional election.
· British households are in no way prepared for the fiscal austerity that is supposed to be coming, while suspicion lingers whether the Cameron-Clegg coalition government is really going to be as tough as it has declared it will be.
· The leadership contest of Britain’s Labour Party shows the massive vested interests which will try to defend their privileges in the coming battle over the “cuts”. In GREED & fear’s view the correct strategy for the Cameron-Clegg Government is to mount an attack on the unjustifiable privileges now enjoyed by public sector employees such as regards pensions.
· GREED & fear still takes the view that this will ultimately prove to be a deflationary cycle in Britain, just as in Japan and the US. Still Britain is a sideshow relative to the continuing potential for Euroland to act as a catalyst for renewed risk aversion globally.
· Greece and Ireland aside, the fiscal austerity programmes are only just starting in the rest of Euroland. It is, therefore, way too premature to conclude that the political fallout will be manageable.
· The issue in 2011 will be whether the fiscal targets set by the Euroland governments will prove to be credible. GREED & fear suspects that they will not be because the economic growth assumptions behind those targets will prove to be too optimistic. The real issue will then become whether credible sanctions or exit strategies will be imposed on those countries which do not make it.
· If policy tightening and looming supply are short-term negatives for Singapore residential property, the long-term outlook remains for asset appreciation in the city state as Singapore will continue to attract high-earning foreign workers.
· From a financial services-sector standpoint, the main competitive niche continues to be in private banking. Singapore remains the main beneficiary of the rise in Asian wealth as well as of the severe damage done to Swiss-banking secrecy in recent years resulting in money being sent East.
· A feature of this year for Singapore has been the spectacular growth in tourism revenue, while the casinos are proving to be a success story. Other areas where Singapore still enjoys a competitive advantage globally include maritime industries and biomedical.
· While this week’s China property tightening measures may not kill the market, they are hardly bullish. The best hope for Chinese property stocks, and indeed for China outperforming in an Asia ex-Japan context, is a sharp decline in equity prices in the West which will scare Beijing out of its current socially driven focus on property tightening. But that implies lower share prices in the short term. In the meantime, the best property-related story in China remains those stocks geared to social housing.
· The news in North Korea this week that Kim Jong-il’s third son, Kim Jong-un, has joined the party’s Central Committee, and that the “Dear Leader’s” sister, Kim Kyong-hui, has joined the Politburo, is the clearest evidence yet of the succession path ahead. The issue for South Korea and investors is whether Kim Jong-il has agreed to pressure from China to pursue economic reform.
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