This is one interesting morning for the financials markets - the main street and the politicians - I find it ironic that on the low-point of capitalisme we may have "deal" which will get us back to basic or at least back to non-crisis mode!
In my wording I believe and that's believe like going to Church this will bring policy-makers ahead of the curve rather than behind it - If they are smart enough to throw in more rate cuts we could have real nice Q4 on our hands.
Yes, you did read correctly! I am semi-bullish- the highest state in Steen Jakobsen's Nirvana training! I will however have to disappoint the ALL BULLISH crowd - the price for this Socialdemocratic Project is higher taxes, misallocation of capital, more regulation and a global recession, but twe saved the system.
The steps taken this week-end matches what I talked about all through last week: The all-in, no prisoners approach which says: LISTEN! We will do anything at any cost to get this going!
I was, as always, way too early in this call and even believing in it, but in the meantime the "best thing" to happen was that we moved the S&P500 into a cheap territory - or close to it - I like the fact that Jeremy Grantof GMO, a person who has been even more vocal than me was addressing the same issue in this week-end Barrons: Still Holding back http://tinyurl.com/3h548x
I found this nice link on Big Picture: 10 Bullish Chart, Indicators http://tinyurl.com/4yqstd
I will comtemplate the true costs to this all-in plan from the week-end - but it is a time of great opportunities and risk, but for now our main views are:
- Fixed Income: Curve steepning - Still more rate cuts are coming in Europe and the US. I personally think the last bubble to burst will be long-end US yields - lending US government at sub-7 is not a good long term deal. We are short 10y notes - and looking to put on steepners. We see Europe cutting 50-75 bps - USA 25-50 bps -considering High Yield funds - long -
- Foreign Exchange: Long EURJPY - and we have strong fundamental case for reversal of EUR higher again - despite rate cuts - the US dollar bid came from liquidity raising in short-term market & US Investors dumping their EMG exposure - we are close to turning point for US dollar strength.
- Commodities: Not involved- believe in 50% boom-bust cycle - close to initiating long positions
- Cash: 80% down from cyclical high 85% - will deploy some more if US open holds what the futures promises. Target to get 25% exposure within this week playing strong Q4