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

To: Canuck Dave who wrote (67199)	10/15/2010 6:34:40 PM
From: TobagoJack	Read Replies (3) \| Respond to of 217656

nuff said. moved on. to be wrong again. readying to buy move, so as to be right :0) in the mean time, just in in-tray, per fear n greed · The US employment data has clearly done nothing to reduce expectations of renewed quantitative easing. The data was not positive confirming the status quo of anaemic growth. Private nonfarm payrolls are still 6.6% below the peak level reached 33 months ago in December 2007, way worse than any previous post-1945 downturn. · The absurdity of quanto easing is clear from the correlated rally in all “risk” assets. The rally in commodity prices will push up input costs and therefore prove deflationary for ordinary people in the West. Indeed it is quite possible that current conditions lead to a repeat of the commodity price-driven phony inflation scare world markets last experienced in 2007 and early 2008. · Any repeat of such a scare will likely lead to an overshoot in commodity prices driven by financial investors in commodity indices and related “ETPs”, and a resulting violent sell-off. That sell-off will again likely be characterised by a violent rally in the US dollar as the carry trades are liquidated. · The looming argument between America and China is going to be two-way, not one way. The US will continue to bang on about the currency but Beijing will be quick to try and seize the moral high ground on any resumption of quanto easing. A further 4-5% renminbi appreciation against the US dollar in the next six to nine months is quite plausible assuming Washington does not overdo the jawboning. · GREED & fear is not expecting an imminent surge in protectionist actions from Washington. For that to happen pathologically optimistic Americans have to give up on their own economy which is not yet the case. Still that moment of fundamental disillusion is coming sooner or later, marked by clear evidence of a renewed decline in house prices and a renewed decline in employment. · There is no reason for the PRC to do anything to precipitate the seemingly inevitable economic confrontation with Washington. But the PRC will also want to make sure that it is not being seen as being pushed around by the US. This explains in large part the stance on the currency, though GREED & fear would also assume that the pace of appreciation will now pick up. · Investors should continue not to ignore the extraordinary news on America’s foreclosure system. Bank of America has now halted foreclosures in all US states in reaction to the growing political noise while some Congressmen are calling for a national moratorium on all foreclosures. This farce can only delay any fundamental recovery in the US housing market. · While Obama and the remaining apparatchiks around him will not say boo to renewed quanto easing, opposition can be expected from Congress if the Republican Tea Party candidates do well in the mid-term election. This will further highlight the extreme polarisation in American politics. And the Fed may then be constrained from doing the “shock and awe” quanto easing that many investors will want to see. · The next growth catalyst for Hong Kong will be to act as an offshore centre for the growing trading of renminbi denominated products. The momentum in renminbi deposit growth in Hong Kong is expected to continue, driven by recent liberalisation measures and the growing assumption that the pace of renminbi appreciation will now pick up. Investors should expect the launch in Hong Kong of new renminbi-denominated products such as renminbi ETFs and NDFs. · Still the growing “internationalisation” of the renminbi will be only incremental. This is because the PRC understands only too well the critical political point that it will lose control of the game if it allows total capital account convertibility. · The biggest beneficiary of quanto easing if implemented with ever greater vigour will, obviously, be gold bullion. The only pure way to own bullion is to own the physical metal itself and have it stored in a bank which is both financially secure and based in a jurisdiction which has a history of respecting the sanctity of individual private property. GREED & fear thinks that three jurisdictions look the most attractive. They are Hong Kong, Singapore and Switzerland. · Owning a gold ETF is not the best way to own gold. In a real panic for gold, which is what will happen if investors finally lose confidence in Western paper money, there will be a demand for physical gold. Those investors who will be best positioned will be those who have the ability to deliver physical gold into the market. · A strong support level for the US dollar index seems to be the March 2008 low of 70.6, compared with the current level of 76.5. Still the more risk assets rise from here the more they risk discounting more than the Fed is about to deliver in terms of quanto. With the US dollar now clearly the funding currency of choice for speculators, the American currency is likely to rally sharply come the next correction in risk assets. · With the euro now back at the 1.41 level against the US dollar, GREED & fear would advise the following trade for macro investors. That is to go long gold and short the euro. This is because in the next wave of risk aversion, gold is likely to perform much better than the euro; most particularly if the risk aversion is triggered by events in Euroland. 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.