if you believe the market will tank soon and lets face it, it is impossible to predict, it is too late when it happens on the day. lets not talk and talk and talk and talk and talk and talk and talk so WHAT ARE YOU GOING TO DO NOW - EXACTLY -
thats why most will come in with earnings above expectations.... They under promise and over deliver, thats the only way to keep this market in rally mode.
I have a big terrorism concern. Been practicing on bridges in Iraq the last couple of days along with increased crude chemical attacks over the last few weeks. Remember when terrorism was a factor for a discount, every patriotic or religous holiday after 9/11 was sold off? Buying duct tape and plastic.... The exchanges are no longer a target as they have been replaced by electronic platforms. When was the last time you have seen m-16s deployed on wall street? Small scale disruptive terrorism is more of a concern than anything else. There is a long term methodical plan in effect to deploy this sort of massive economic disruption.
I believe that the yen and the unwinding of the carry trade is the big driver here. it is tied in to the liquidity crunch angle also, and is what is running the world economy and has been for many years now. the markets will continue to rally or stay high for as long as it is possible to borrow at 50bps in yen or a touch more in Swissie, sell the yen for anything else and buy assets yielding much more. for all the talk at the end of Feb about the Chinese stock market causing the falls, it was the carry trade that caused markets to fall. the simple maths of it is that there has to be the expectation that the assets being bought with the borrowed yen will continue to yield more than the loan in yen. when the yen begins to rally strongly, and looks like it will appreciate by more than the yield differential of high yielding long minus fixed rate low cost borrowing, people will sell. see the attached graph of usdjpy, the falls of may 06 and november 06 and end feb 07 have been directly linked to the so called unwinding of the carry trade. and every time people have taken a few days or a week and realised that the trade is still good, and just presents better levels to short yen. the world to me is buoyed by liquidity, in part from carry, which is a hangover from the past 15 year story in japan of deflation and fallen economy. it is too early for the bank of japan to raise aggressively, people need to realise that a hike of 25 bps twice in a year does not the end of the carry trade make.
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Bingo! The yen gets cheaper and cheaper against the USD, while the USD gets weaker against everything else. Strange, huh? Almost......seemingly orchestrated..... That and pitiful interest rates offered to fixed income investors mean the market will continue to rise. They are deflating the dollar while inflation rages, and then they're offering people 4.7% on a 3 year treasury. Is it any wonder why people think equities are the least worst alternative?
Exactly - any GTAA model looking to choose between global equities and global bonds will be long equities all day, against shorts on bonds. expected real rate of return on bonds is so low, with a stable macro environment and good corporate profits that equities are favoured on this expected real rate of return forward lookout model.
no regardless of you view the price action dictates higher market. i personally do not agree with the fundamentals of it but the receovery from february is not indictative of a market going down.