tirsdag den 20. oktober 2009

Ceteris Paribus - Investment Meeting...

Tuesday means Investment Meeting .....The conclusion became:

There is 60/40 chance of more of the same - market is committed to upside now, the standard protocol says:

  • Recession is over
  • Fed will remain on the sideline at least through 2010
  • Earnings will be coming back after Q2/Q3 - was cost reduction, inventory build - Outlook upgrades relative to downgrades: +20% - setting a very 'high bar' for Q4.... Market will be good in Q4 - it's final. (says consensus)

We are however slightly concerned about this chart:

Gold, US Dollar(Inversed) and Crude(click to enlarge)

The fact Bernanke mentioned: An Asian Bubble in his speech yesterday could mean some slight distress with the "bubble" in Gold, US Dollar and Crude. (Created by reserves accumulation in China)

Crude going above 80$ historically been negative, and above 100 $ key concern.

The old rule of thumb on oil vs. growht goes:

For every 10 $ price increase in Crude - GDP loss is 0.4% in OECD - going from 40 $ to 80 $ means loss of 1.6% growth....Ceteris Paribus.....

But.. the real interesting discussion was based on the discussion "core-inflation" / Taylor-gap which led us to following conclusion:

There is no way the "traditional" rates will go up - but how about TRADING MARGINS ?

Core-inflation never moves - 35% of the index is "rents" - it's the equivalent of having a stock market index where 35% of the index is in bonds!!!! Joke as a policy measurement.....but it's yet another of the Alan-I-will-cut-rates-as-soon-as-I-can-to-become-the oldest-most-incompetent-central-banker-in-history-Greenspan.......

PCE - Core inflation -mean around 1.8/2.0% for 15 years!

A hike in trading margin would serve the right political masters plus its an effective way of short-cutting the never ending global imbalances going on again.......

More on this tomorrow as I will submit on this web a speech I am giving at The Finance Lab on Copenhagen Business School: http://tinyurl.com/yg3tpom with plenty of charts and fun. Link will be posted tomorrow night.

For now:

We still believe top is in place - but the BULLS not going to walk away without a fight - the fact remains: It would be suicide not to be long this market for fund managers, but it could, very likely, also be suicide to be long the market now.. :-)Safe trading,


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