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

To: SG who wrote (75825)	7/1/2011 12:58:50 AM
From: Haim R. Branisteanu	Respond to of 218647

Thank you SG, I appreciate your post

To: SG who wrote (75825)	7/1/2011 6:43:27 PM
From: TobagoJack	Respond to of 218647

just in in-tray From: M Sent: Fri, July 1, 2011 6:05:00 PM Subject: GREED & fear - 30 June, 2011 - On Europe's need for dollars Chris is turning dollar bullish like I am and for the same reasons.... M · As Greece continues to hog the headlines, one interesting consequence of the Euroland ruling classes’ protracted dithering is that global markets have begun to trade off events in Europe. This is just one more indication of the incredible mess that the Euroland project is now in. · GREED & fear has continued to assume that the Greeks will vote for austerity so long as they think they will get their next dose of dosh. But GREED & fear also continues to assume that there is no way the Greeks will actually implement the level of austerity demanded, most particularly in terms of the projected sale of €50bn-worth of state assets. · If the present fudge can be maintained then the next wave of deflationary panic can probably be deferred until the late summer or early autumn. · European banks’ increasingly acute need for dollar funding explains why any “euro-quake” is likely to lead to a violent US dollar rally triggered by deleveraging as borrowers of dollars are forced to liquidate their positions. Such a dollar rally would likely coincide with a further rally in the US Treasury bond market which would in due course create the market environment to allow Ben Bernanke to move on to QE3. · The best measure of the current “pop” in risk assets on the Greek vote for austerity will be whether such an equity rally can lift the 10-year Treasury bond yield convincingly above 3%. Remember equities and government bond yields remain correlated in what is still a deflationary world in the overleveraged West. · The latest French effort to pull off an organised re-profiling of French institutional investors’ exposure to Greek debt does not reduce Greece’s debt burden. Rather it is yet again a plan designed primarily to help the banks. · What is obviously long overdue in Euroland is a policy response addressing the Euroland issue as a whole and not just the short term emergency funding needs of a particular country. Such a response remains absent because the German political leadership is still not willing to address the fundamental reality. This is that if Berlin wants to keep the Euroland system in place in its current form it needs to pay for it by moving towards a system of collective fiscal responsibility. · Chinese Premier Wen Jiabao indicated last week that China inflation was under control. This should be taken as official confirmation of the view that Beijing believes headline inflation will peak with June’s data. It should also be taken as supporting the view that China has seen its last interest rate hike in this monetary tightening cycle. · The base case for now in China is that policy goes on hold in a world where current consensus growth assumptions remain credible. But in the event of a euroquake-triggered deflationary scare hitting world markets GREED & fear assumes that the PRC would move pro-actively to ease. · GREED & fear will remain overweight China and underweight Australia as sentiment on China will continue to swing from “too hot” to “too cold”. Still the one area in China where GREED & fear remains firmly of the view that activity is heating up is social housing. GREED & fear continues to recommend that investors own cement stocks and construction machinery stocks geared to this story. · This week has seen further confirmation of the growing collaboration between Malaysia’s Khazanah and Singapore’s Temasek. The long term story remains the potential on a ten-year view for the emergence of a low cost Shenzhen-style industrial hinterland to Singapore in southern Johor. GREED & fear will maintain the best (albeit high beta) quoted play on this theme, UEM Land, in the long-only portfolio. · Investors who want to hedge their investment in the long-only Asia ex-Japan portfolio should continue to do so by remaining short European financial stocks. Any further short term rally in European financials on misplaced euphoria about a Greek vote for austerity would signal an opportunity for investors, who have not yet done so, to put this trade on. · The investment in Philippine National Bank in the Asia ex-Japan long-only portfolio will be removed and replaced by an investment in Philippine property developer SM Development. The investment in State Bank of India will also be removed with 1ppt added to the existing investment in Astra International and 4ppts initiated in HDFC Bank. An investment in Indonesian bank, Bank Central Asia, will be initiated with the money taken by removing the investment in Sun Hung Kai Properties. · The weighting in Hong Kong in the Asia Pacific ex-Japan relative-return portfolio will be reduced by one percentage point to neutral with the money added to the existing overweight in Indonesia. 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.