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

To: Canuck Dave who wrote (66214)	9/19/2010 6:18:58 AM
From: TobagoJack	Read Replies (1) \| Respond to of 218685

the following edit just sent from send tray The Great Recession has turned into the Great Debate as the markets have swung up and down unconvincingly over the past 3 months. There are equally convincing arguments for both price deflation (premised on debt deflation coupled with fiscal constraints and trade protectionism) and price inflation (premised on unconventional monetary measures and currency wars), and, given the already very low nominal cost of money, the markets instead react to every hint of change in governmental policies for the larger economies (i.e. possible policy mistakes driven by political considerations) that might determine a tip into either price inflation or price deflation. Whether we price inflate or price deflate is a matter of importance given that very few economic actors (monetary system / financial institutions, operating companies, individuals and governments) are systemically set up to thrive in a price deflation world. As consistent with our money management approach, our risk units have been lower than usual due to our 3 input factors (conviction, p&l and volatility). Nevertheless, we’re pleased that we have a positive return. No celebration, just important to be on the right side of the trade. Investment Outlook As stated earlier, there are few high conviction trades at the moment reflected by the S&P500’s broad range of 1050 to 1200. What are the catalysts to break us out of this range? A USA quantitative easing II would be very beneficial for Asia. Furthermore, China’s engineered soft landing looks even better than expected. The cynics would point out that the economic data are all engineered? Nevertheless, the August PMI and IP data in early September led to sharp rallies in risk on trades. We believe that Taiwan would be the best beneficiary of China recovery. For the past 50 years, Taiwan has been isolated politically and financially by its big brother. With last year’s KMT election to power, Taiwan finalized a historic trade agreements with China in June and started in August, new negotiations with Singapore to do the same. We believe there will be a new P/E expansion for this country. Taiwan Q1 and Q2 2010 GDP grew at 10% and 13%, respectively, compared to China’s 11.9% and 10.3%. China/HK are 40% of Taiwan’s exports. As a laggard, second worst performing Asian market YTD at -5%, and under-owned sovereign by international investors provide low downside risk. We expect economic activity will pickup after October as the forced shut down of the 2,000 largest energy consumption factories between July to October come to an end and that nation rebalances between the simultaneous imperatives of stability (employment, price inflation), growth, and reform. We will watch the Baltic dry index for early indications of policy change. While G7 sovereigns and its consumers continue to repair their balance sheets, there is little doubt that corporate balance sheets are doing great after Q2 numbers. Corporate default rates are expected to continue to decline and the survivorship bias should be very positive. The most attractive part of the capital structure in the New Normal economy may be in corporate bonds of long dated maturities, particularly junk bonds. We would look to add more aggressively here while remaining vigilant to the possibilities of policy mistakes (premature tightening of money supplies, dramatic currency and tariff-based protectionism, etc), in any one of the larger economies that could upset the financial markets. As we go to print, the BOJ has intervened in the fx market at USDJPY 83, rallying to 85.5, roughly in the amount of Yen 1 Tln. This compares to the last round of intervention of 12Tln back in Q1 2004. This latest round of intervention is led by Kan’s win in the DPJ, arm twisting the BOJ and with no coordinated support by the ECB or the Fed. Too early to suggest any success here and clearly the wind is not behind this move. Any pullback in SGD, due to $ buying is a buying opportunity as SGD has broken out into new strength. Lastly, as 10 year Tnotes rallied to 2.45%, there was great debate which asset class was right, bonds or equities which had also rallied. We shall continue to trade, almost minute by minute, as a reaction to economic data which we are no better soothsayers than the next; however, low rates are supportive for risk assets. Investment Committee

To: Canuck Dave who wrote (66214)	9/19/2010 6:27:52 AM
From: TobagoJack	Read Replies (1) \| Respond to of 218685

jack is trouble free, just sleeps, drinks, poops, and occasionally wanting to be held upright. erita is being the big sister, very caring for jack, even sharing one of two gold coins i bought with her piggy bank savings. that is caring, a 50/50 share :0) had fabulous 30-days birthday party at top rank chinese restaurant in town, lots of friendships, and one must be satisfied by such, full stop. i have not been fussed and can concentrate on work, because the work is all fun work, and the kids are cared for by all those around me, daytime nanny, night time nanny, wife, mom, in-laws, and familiar taxi drivers basing in the neighborhood on cell phone command, all blessings. it is very tough to leave hong kong, my friends from europe and america said last night at the party.