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

To: Secret_Agent_Man who wrote (63612)	5/13/2010 7:01:15 PM
From: TobagoJack	1 Recommendation Respond to of 217545

noble gold and strategic platinum are ready for bernanke we are not yet set, still needing more of both so let us hope forward volatility will offers more buying opportunities in the mean time, just in in-tray · The American precedent suggests that ECB President Trichet’s decision to abandon virtually every principle he has held sacred as a central banker should be bullish for risk assets just as it is obviously bearish for the euro. Still GREED & fear remains dubious that the US precedent applies exactly due to the fault line provided by the fact that monetary union is not accompanied by political union. · GREED & fear continues to believe that the political problems in Euroland remain formidable as German public opinion will inevitably be antagonised in the extreme by the fact that bad behaviour is being rewarded. The political fallout from the Greek crisis in Germany is already clear from Frau Merkel’s defeat in the North Rhine-Westphalia election. But that is just the beginning of the political storm that is to come sooner or later. · The other issue is whether the latest pledge of a €750bn credit line will crush risk aversion. The fundamental problem is that the Europeans are trying to solve a problem of too much debt by adding more debt. It remains highly questionable whether the latest European stabilization mechanism can survive real scrutiny. · The focus is likely to switch sooner rather than later to whether the weaker European countries can contribute their portion of the pledged funding. That will in turn increase focus in the core about how much of the burden they will be expected to bear. GREED & fear remains of the view that the whole package puts the EU and the European elite on a collision course with German public opinion. · The Europeans are still not prepared to deal with the realities of their extended welfare states. With the US heading in the same direction, it remains the case that the most likely end game of the Western authorities’ policy responses of recent years will be a systemic crisis of public sector debt. GREED & fear continues to believe that the negative dynamic will hit Europe first, then Japan and finally the US. · There is no reason to put the PIIGS spread trade back on now because the consequence of the past weekend’s package is that the rest of Euroland now risk becoming PIIGS. That is why the main macro trade conclusion is to remain short the euro. · The bullish behaviour of gold bullion over the past week suggests that more and more people now understand that the Bretton Woods fiat paper currency system is living on borrowed time. Gold’s action in US dollar terms has been all the more impressive so far in 2010 given that this has been a year of dollar relative strength in the paper currencies’ continuing “relative ugly” contest. Still the really dramatic performance of gold is in euro terms. · The risk contagion of late has been primarily confined to Euroland itself. This makes sense since the PIIGS government debt appears to be primarily held within Europe and not in America or Asia. Indeed the interconnected characteristic of Euroland government debt explains the scary nature of the collapse in European bank stocks last week as investors focused on the hard details of who owned what to whom. · Asia still faces the negative headwind of China tightening. The message for 2010 so far is that Asian and emerging markets risk continuing underperformance so long as China is perceived to be in tightening mode. This China tightening and the rising risk of a growth scare in China creates an obvious negative headwind for the commodity trade. · It is true that commodities could be viewed as hard asset beneficiaries of the Europeans’ decision to follow the Americans in the pursuit of monetisation. Still GREED & fear is much more comfortable playing this trade via precious metals which have monetary characteristics (i.e. gold and silver) rather than via the likes of oil and copper. The base case here remains that the commodity complex is now vulnerable to a China growth scare so long as Beijing is in tightening mode. · The investment in the trading company Mitsubishi Corp in the Japanese long-only portfolio will be reduced by 5ppts to 5%, while an investment in NTT DoCoMo will be initiated. · The five percent weighting in Japanese real estate in the global portfolio for US dollar-denominated pension funds will be removed in order to add to the longstanding gold bullion position. The European crisis has accelerated the price momentum of the gold bullion bull market. GREED & fear maintains the longstanding target that gold will reach US$3,360/oz by the end of this bull market. · GREED & fear admits that the US economy for now looks the relatively healthy part of the developed world, and that US capex and employment can continue to be in recovery mode for the rest of this year. Still the larger issue remains whether a broader releveraging will take place. The unfolding capex cycle is extremely narrowly focused on IT spending, while wage growth remains anemic in America. · Consumption in the US is being supported by both transfer payments and by the not insignificant fact that a growing number of people are living rent free in the sense that they are not servicing their mortgage while the banks have yet to foreclose on them. · The continuing lack of releveraging in America, and the related distress in Europe, is why GREED & fear still does not expect the Fed to raise rates in 2010. That said, GREED & fear will admit that America is more likely to raise interest rates than either the Europeans or the Japanese. · GREED & fear’s continued belief in the structural deleveraging cycle in America remains driven in part by the view that the housing market has not bottomed in a healthy fashion which, if true, implies a lack of a healthy recovery in house prices which is surely what is needed to precipitate consumer releveraging. Please consider the 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.