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

To: gg cox who wrote (50570)	5/28/2009 7:14:33 PM
From: TobagoJack	Read Replies (1) \| Respond to of 218470

just in in-tray, GREED & fear · GREED & fear’s guess remains that the equity market countertrend rally will continue for now into the summer months. The main driver for any further rally globally will be the continuing need for professional fund managers to increase beta given the continuing reality that the vast majority of long-only and long-short managers have substantially underperformed equity indices so far this year. · Asia remains the prime area where new money wants to invest. The main driver for the Asian story so far in 2009 has been the ability of China’s command economy to defy last year’s predictions of an export-correlated collapse in domestic demand. But the Asian equity universe has also enjoyed the positive catalysts of the “Capital Links” story in Taiwan and India’s much better than expected general election result. · For the Asian story to continue to maintain momentum, the China story will have to continue to deliver. GREED & fear’s view is that this will remain the case in the immediate months ahead. There is also a potential catalytic event that could trigger a more explosive rally. The obvious candidate here would be a revival of the “through train” story where mainland investors would be able to invest in some manner direct into Hong Kong. · The increasingly positive vibe on Asia means if the equity rally on Wall Street is to roll over before the end of the summer, as remains the view here, then the likely trigger will be a belated realisation that the recovery in the US is likely to be L-shaped and not the hoped for U-or V-shaped. · GREED & fear’s view has long been that gold is a hedge against both inflation and deflation. The decision to re-include an investment in the 30-year Treasury bond this week reflects the strategic view that the world is now nearer the end than the beginning of the present countertrend equity rally while the US government bond market has already had a substantial correction since December. · US government bonds remain an attractive investment if it turns out to be the case that deleveraging remains the predominant trend in the American economy. · Further evidence of the current resilience of regional stock markets is the comparative ease with which the Korean stock market has so far dealt with this week’s barrage of North Korean nuclear test and missile launches. · The Seoul market has long since grown accustomed to saber-rattling from Pyongyang. But this time it is more interesting given the radical departure from “Sunshine” diplomacy pursued by the present Korean President, Lee Myung-bak. GREED & fear views this change in policy as entirely sensible given the dismal track record of efforts to appease the North. · The interesting point now is whether America and its main allies in Asia, in the form of South Korea and Japan, will up the pressure on the North by intercepting as threatened North Korean vessels suspected of carrying weapons of mass destruction. The likelihood remains that opposition from Beijing will prevent that sort of drastic move by the US. Still investors should not rule out completely the prospect of escalation on this issue. · A collapse of North Korea would actually prove to be a catalyst for a whole new multi year investment cycle in the Korean peninsula. For this reason it would be viewed by GREED & fear as very bullish; though the Korean stock market’s initial reaction to such a regime collapse would most likely be extremely negative creating a massive long-term buying opportunity. · One piece of evidence of the lack of inflation in the US is the declining rate of growth in earnings. Another sign of deleveraging is the continuing decline in US consumer credit. Now it may be that the bulls are right and that the American authorities will succeed in their undoubted fervent desire to kick start consumer releveraging. But a still sceptical GREED and fear would rather wait for the evidence. CLSA CLEAN & GREEN: Please consider our environment before printing this email. The content of this communication is subject to CLSA Legal and Regulatory Notices These can be viewed at clsa.com or sent to you upon request.