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

To: Snowshoe who wrote (62211)	3/25/2010 9:23:02 PM
From: TobagoJack	Respond to of 217764

just in in-tray, per GREED n fear · There still remains no consensus within Euroland about how to handle the Greek issue. Investors should assume for now that the euro continues to remain under pressure, and that the PIIGS spread continues to widen with Portugal as the next domino to fall. The most likely compromise or fudge at this point would be some form of a combination of both an IMF and a Eurozone emergency facility. Such an outcome would be euro bearish. · GREED & fear remains fundamentally suspicious of the durability of the US equity market’s rally because of the continuing view that the recovery is not normal. The continuing deleveraging trend in America has negative implications for the sustainability of economic growth once fiscal stimulus fades. · The best hope for the US economy remains a further pick up in capex. But GREED & fear remains unconvinced on consumption. The recent consumption pick up is not ultimately sustainable unless underlying income growth or wage growth revives, of which there is as yet scant sign. GREED & fear also remains unconvinced that the US housing market is fundamentally healthy. Rather it is being propped up by increasingly expensive federal government-driven intervention. · The situation is much grimmer for small businesses than large companies in America since the small business sector is continuing to feel the full impact of the credit crunch. Small businesses are obviously important from an employment perspective, and therefore also from a political perspective. · The healthcare legislation is important politically since President Obama now looks suddenly like a “winner”. If the jobs data go well for him in the next two to three months, Obama can gain more momentum than many now think possible in terms of the result of the mid-term November polls. If they do not, he will be politically incentivised to turn the screws on Beijing. · The Japanese precedent of the past 20 years continues to provide the best reference point to the question of how long and how far Western stock markets can rally if the recovery is not healthy. All four Japan rallies over the past 20 years failed because an economic recovery was aborted and Japan returned to declining nominal GDP growth. This remains the key fundamental risk for the deleveraging West. · The risk is that the US economy turns negative again, once the fiscal and inventory stimulus fades, if monetary policy does not get traction. The Japanese experience also shows that a pick up in capex alone is not enough to counter the deleveraging trend. · Those investors who do not believe in GREED & fear’s Western deleveraging liquidity-trap story can relax and continue to own equities; particularly Japanese equities which would be the biggest beneficiaries of the inevitable depreciation of the yen against the US dollar. · Still for those investors who share GREED & fear’s sceptical view, the critical timing issue remains when markets focus again on the “lack of normal”. For at that point equities will suffer but there will also be a corresponding recognition that short-term interest rates will remain low. Market attention will then again focus on the domestic story in emerging markets. · The Asian property story is not just about high-end luxury flats in Hong Kong, Singapore or Beijing. There is also another healthier story in terms of the growing mass demand for housing in countries like Indonesia. · The Reserve Bank of India’s tightening ahead of the next policy meeting on 20 April is a positive development since the RBI has been viewed of late as behind the curve and subordinating the central bank’s agenda to the interests of the Finance Minister’s “divestment agenda”. · The Indian stock market’s relatively benign reaction to this tightening move causes GREED & fear to add one more percentage point to the overweight in India in the relative-return portfolio with the money shaved from Korea. · GREED & fear has always viewed India as a better long-term equity story than China. For at some point China will have to pay the price of the mispricing of credit which is the consequence of its command economy banking system; though there is no reason why such a development is imminent. By contrast, India has no such issue. · The PRC’s decision to ask central SOEs whose core business was not in real estate to withdraw from the property sector is to GREED & fear a sensible response to the excesses posed by last week’s land auctions in Beijing. It should also be a positive for developers who will now have to compete with fewer non-industry buyers pushing up land prices to levels which threaten to render developers’ businesses unviable. · Former North Korean finance chief Pak Nam-gi has reportedly been executed for the recent confiscatory currency reform which appears to have backfired. A botched currency reform, which further encourages the holding of foreign currency, has certainly increased the chances of an implosion in North Korea. GREED & fear maintains the long-held view that a collapse of North Korea would provide a fantastic buying opportunity for Korean equities in the wake of the panic sell off that would inevitably occur as a result of such a development. 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