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

To: Cogito Ergo Sum who wrote (69936)	12/23/2010 5:42:25 PM
From: TobagoJack	Read Replies (1) \| Respond to of 217858

the woman is lucky to not have lived during the time of the french revolution in the mean time, just in in-tray, per greed n fear · The S&P500 remains at post-Lehman highs and GREED & fear remains nervous about a correction. But the technical indicators long followed here are not sending warning signals. Rather the message is bullish which is one reason why GREED & fear is not reducing the beta of the long-only portfolios. · The ongoing noise from Brussels makes it clear that the final crescendo of the drama in Euroland lies in the future. There is going to have to be more market turmoil before the inevitable decisions are taken. It still seems likely that the end game will involve some form of German acceptance of collective fiscal responsibility and debt restructuring. · The ECB’s decision to double its capital base suggests that there is an understanding that there are losses that will need to be taken. Still, there needs to be more market panic for such decisions to be forced on the relevant authorities. All this suggests an opportunity for macro investors since it seems increasingly likely to GREED & fear that this drama is going to come to a head in the first half of 2011 and not in 2013 or later. · The moment some form of credible debt restructuring is agreed, in the form of a European version of the Brady Plan, a bid should come in for the euro against the US dollar and indeed against the Swiss franc which has been the major beneficiary of the systemic risks surrounding the euro. · For the moment the issue for investors is what will be the catalyst to precipitate the next market panic. But more turmoil is coming which is why the best hedge for those owning Asian equities remains shorting European bank stocks. · The past week has seen more evidence that mainland Chinese policymakers are not concerned about inflation. Still markets are likely to spend the first quarter of 2011 continuing to worry about inflation in China. The longer investors want to look into 2011, the less likely they are to be worrying about inflation in China or the rest of Asia and the more likely they are again to be worrying about renewed deflationary pressures in the West. · As for developed market equities, the best place to be remains in those companies whose revenue streams are geared to the emerging markets. But the only domestic story GREED & fear really likes in the West remains Germany and even there the final drama of Euroland’s crisis has the potential to hit resurgent consumer confidence, at least for a while. · South Korea’s “live-fire drills” this week and the lack of reaction from North Korea suggest that the North is hoping for a resumption of the six-party pantomime, or some variation of it, after the recent flurry of diplomatic activity. Still if Washington and Seoul decline to be pressured into more talks, the risk remains of further escalation from the North. · The risk of military escalation in the Korean peninsula has increased since the government of President Lee Myung-bak has now made it clear to the North Korean regime that it has changed the rules of engagement. · So long as China is willing to shore up the North via the provision of food and energy, it is not clear if Beijing really has any control over the North’s behaviour. For the Kim Jong il regime presumably calculates that China will continue to prop it up because the alternative is a collapse of the Pyongyang regime which would likely mean a united Korean peninsula coming under the control of a pro-American alliance. · The North Korean interest in launching the November attack was clearly to gain America’s attention. The ultimate goal is US acceptance of the North’s nuclear weapons programme. As for the investment implications, North Korea remains an impossible issue for markets to discount. It either does not matter at all or it is the only issue that counts. 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.