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

To: 2MAR$ who wrote (74824)	6/3/2011 6:52:02 PM
From: TobagoJack	1 Recommendation Read Replies (2) \| Respond to of 217774

just in in-tray per greed n fear · “Risk” has staged a bit of a comeback this week amid hopes of some semblance of agreement on Greece amongst the various Euroland parties. The word is now of a new €60bn “rescue” package. But GREED & fear remains unconvinced. · The previous leadership of the IMF has allowed that institution to engage in “soft credits” to the European periphery which has only served to delay the time when the Euroland classes are finally forced to focus on what is a solvency problem, and not a liquidity problem. · The longer Euroland dithers, the bigger the risk that internal forces within the PIGS start to revolt. At some point events will reach a crescendo in Europe and then there will be a liquidity panic which finally forces a more decisive policy response. · As for the timing of the “euro-quake”, the key tactical question for the markets is whether Euroland can maintain the present relative calm before the onset of the Euroland holiday season in July and August. The issue is whether more smoke-and-mirrors weaving and dodging can be agreed by the next meeting of EU finance ministers due to be held on 20 June. · GREED & fear advises investors globally to focus on the action of the major government bond markets globally, which have seen significant rallies in recent months. The rally in the US Treasury bond market has been sending an unambiguous message of stalling economic momentum. · If the decline in the 10-year US Treasury bond yield continues, in the face of the Fed’s pending move to stop buying Treasuries, it should be taken by investors as a signal that some form of QE3 is coming sooner or later. But the exact timing of a third dose of alternative monetary policy would clearly be accelerated by a euro-quake hitting the markets. · One reason why a euro-quake would precipitate the Fed move is precisely because GREED & fear still believes such an event would trigger a violent short covering rally in the US dollar. As regards the timing of a euro-quake, GREED & fear advises investors to start paying more attention to evidence of internal revolt coming from inside any one of the four PIGS. · The Reserve Bank of India remains a wonderful example of what a central bank should be. That is an institution whose primary concern is ensuring the safety and soundness of the local banking system. · One of the RBI’s continuing pre-emptive efforts to manage any sign of credit excesses in the system is the decision to remove non-banking financial companies from the privileged status of “priority sector”. That is a negative for the stocks affected but it is positive for the system as a whole. Another example of pre-emptive action is the RBI’s extremely conservative stance towards so-called “teaser” mortgages. · Mongolia still remains for now Asia’s best high beta story. The fundamental issue for this landlocked country is whether it will be able to develop the infrastructure, notably transport linkages, to take full advantage of its massive resource wealth. If it does, Mongolia will be to industrial commodities what Saudi Arabia has been for oil – assuming that the Chinese macro story remains on track. · For now the ramping up of mining developments remains on track. If coal is for now making the running, copper will take over in 2013 with the then anticipated commencement of production in 2013 of the Oyu Tolgoi (OT) field. Mongolia also is rich in gold, oil and assorted “rare earth” plays. But before all that kicks in the Mongolian story will have to navigate the inevitable noise of a general election due to be held in June 2012. · The macro challenge in Mongolia is the need to control inflation since the economy is exploding from a low base. Bank lending should grow by 50% this year with demand for credit surging in all sectors. · The Mongolia story is, for now, in full boom mode. But it is without doubt the Asian equivalent of the “Wild West” with the nature of the political system, society and culture making it much more akin to Central Asia than China. Still the odds definitely favour dramatic development over the next five years. 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.