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

To: 2MAR$ who wrote (76350)	7/14/2011 7:52:53 PM
From: TobagoJack	Read Replies (1) \| Respond to of 217651

just in in-tray, per greed n fear · GREED & fear’s base case remains that the Euroland crisis will lead to greater fiscal integration but it increasingly looks like it is going to have to take a real market panic to force the German-led core of Euroland in this direction. · The key issue to watch out for in Spain in coming months is the so far failed efforts to restructure the cajas. This is being delayed by a continuing failure to provide central government downside-risk guarantees which is what private sector investors in cajas will demand. More effective action on the cajas may have to await the result of the March 2012 general election when the current socialist government is expected to be defeated. · Italy has caught the market’s attention over the past week with a dramatic decline in bank share prices and a spike in the government bond yield. This surprises GREED & fear to the extent that while Italy has a total government debt to GDP ratio of 120%, it has a high savings rate and the debt tends to be self funded. · The message from the renewed jitters on Italy and Spain is that Euroland’s establishment does not have the luxury of time it thinks it has. Pre-emptive action over the past year could have confined emergency measures to the weakest links; namely Greece, Portugal and Ireland. Now that assumption looks ever more questionable. · A euroquake is the biggest risk for holders of risk assets right now, including of course equities. For such a panic is likely to lead to a violent short-covering deleveraging rally in the US dollar and a rally in the US government bond market. This will then set up the market action to justify Ben Bernanke moving to implement a third wave of quantitative easing. · There is one country where the next episode of quanto easing could happen even sooner than in the US. That is Britain. GREED & fear is convinced that inflation is likely to fall like a stone in coming quarters, once one-off price hikes fall out of the data. For credit growth remains weak as does income growth. · There will be growing pressure on the British government to re-think fiscal austerity. The same is likely to happen in the US in coming months despite the current political debate in Washington on the debt ceiling. This is because the US is heading for significant fiscal drag going into 2012 unless tax cuts and benefits are, yet again, extended. · China inflation should come down from here, with the one risk that pork prices are now surging as a result of porcine disease and tighter supply. Still GREED & fear would advise investors to move on from inflation scares to the greater likelihood of growth scares in China. · GREED & fear does not believe in a hard landing in China this year. But that does not stop investors worrying about such an outcome at some juncture as sentiment swings from “too hot” to “too cold”. This issue, combined with the euroquake risk and the end of QE2, all explain why GREED & fear remains tactically cautious on the commodity complex. · GREED & fear’s assumption continues to be that the credit multiplier in America is not gaining traction. Consumer credit, excluding federal student loans, has continued to decline. · The latest US employment data has highlighted yet again that the recovery is weaker in terms of job generation than any recovery since the 1930s. The anaemic employment data has also disappointed those who were earlier hoping that small businesses would start to take on more employees. While cost-cutting state and local governments continue to shed jobs. · Indian environment minister Jairam Ramesh has been elevated to cabinet rank as rural development minister. Environmental activism in terms of not allowing coal mining projects and the like has been generating a lot of noise as Delhi finally focuses on the recent worryingly sharp slowdown in infrastructure projects, and the questionable financial vulnerability of many private power projects as a result of soaring coal prices. That Prime Minister Manmohan Singh has finally moved on this front is at least a sign of official concern. · India’s infrastructure story could also do without more monetary tightening. In that respect a euroquake, like the Lehman bust in 2008, might actually do India a favour by bringing an abrupt halt to the RBI’s tightening cycle. · The investment in Kubota in the Japan long-only portfolio will be removed with 3ppts added to Japan Tobacco and 1ppt to Suzuki Motor. The investment in Ctrip.com in the Asia ex-Japan long-only portfolio will also be removed and replaced by Chinese internet company Tencent. The weightings in Hong Kong, Singapore and Australia in the Asia Pacific ex-Japan relative-return portfolio will be reduced by 1ppt each with the money added to Korea (2ppts) and Thailand (1ppt). 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.