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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Snowshoe who wrote (28352)	1/24/2008 8:55:46 PM
From: TobagoJack	Read Replies (1) \| Respond to of 218441

just in in-tray (yes, my in-tray is busier than i am) Per Christopher Wood, CLSA • Logic and chart patterns suggest some near-term respite after recent partial capitulation. Ben Bernanke has duly panicked while GREED & fear suspects that the US authorities are desperately seeking some well-capitalised buyers for the two large debt insurers which remain in the eye of the storm. • Perceived resolution of the current concerns that the debt insurers are themselves going bust would prove to be a significant tactical positive since it would alleviate the near-term risk of a self-feeding vicious cycle leading to an ugly unwind of the US$45tn credit default swap market. This positive mood will be further enhanced if Billyboy actually tries to get ahead of expectations by cutting rates by a further 50bps at next week's FOMC meeting. • If there is likely further upside for financials in the near term, GREED & fear's view remains firmly that it is another bounce which traders should look to short aggressively the further that bounce extends. The stress test of the CDS market will come sooner or later as the securitised credit mess spreads with the slowing American economy. • GREED & fear still advises fundamental long-term investors to remain underweight Western financials. Market action is making it ever clearer that US growth is slowing and that there will be a knock-on impact around the world. GREED & fear continues to recommend investors in 2008 to continue to underweight cyclical stocks geared to external demand in both global and emerging-market portfolios. • GREED & fear continues to hope that the worst case for the MSCI AC Asia ex-Japan index will be a one-third decline to 458 from the all-time high of 687 reached in October. GREED & fear's guess is that a retreat to that level will come sooner or later if US and therefore global growth continues to slow, as anticipated here, and credit problems to intensify. • Corrections in Asia and emerging markets in 2008 are in the big-picture long-term buying opportunities, since this is the next bubble in the making. Long-term global investors who are not yet five times overweight Asia and emerging markets in a global equity portfolio should use any period of underperformance as an opportunity to increase weightings. • GREED & fear's favourite structural story in Asia remains India. But the favourite tactical story in 2008 remains everything to do with Hong Kong property. Interest-rate driven Hong Kong is the inverse of the cyclical trade in Asia GREED & fear is now wary of. • GREED & fear still believes that growing evidence of a slowing US economy, and related commodity weakness, is likely to go hand in hand with a rally in the US dollar. GREED & fear continues to believe that the euro, sterling and commodity currencies are most vulnerable to a dollar rally, with the Asian currencies least vulnerable. • As for the yen, it may even rally more than the dollar given that both are "funding" currencies. The resilience of the yen means that domestic Japan stocks are likely to continue to outperform in US-dollar terms when global stock markets are declining. • Betting that the ECB will be in rate-cutting mode before the end of 2008 remains one of the biggest "lay-up" trades in the world of finance, and certainly more clearcut than any short-term equity trade. The same applies for the Bank of England. • With Hillary Clinton still looking the most likely president from January 2009, the likelihood is that a formidable regulatory reaction is coming from a self-professed believer in bigger government; most particularly if taxpayer money is required to fund losses stemming from perceived market excesses. • Long-term investors should use any near-term spike to reduce exposure in cyclical areas globally, as well as to reduce any remaining exposure to Western financials. Fed easing is not going to be anything like as effective as normal in the context of the present securitised debt bust. Western government bond yields will most likely only bottom when Western financial stocks bottom.