Tuesday, June 28, 2011

Mayhem

I have written about the upcoming mayhem in the past; there have been many proposed causalities.
Please read (or pretend to click on) here (Nov. 2010), here (Nov. 2010), here (Feb. 2010) and here (Nov. 2009).

The end of QE2 is approaching us. This shall be marked as a turning point in history. (Let's ignore the European debt rollover game for now). Somebody has to buy US treasuries if the US is to sustain its long-maturity yield-easing policy. A grinding of the world economy is approaching us where global trade should falter, but as said by many intellectuals in the past, 'there is a price for everything'. Russel Napier from CLSA came up with this new Doomy report called Solid Ground and predicting that the S&P500 can reach 400 soon enough. I will stick my tongue out (yes, tongue) and say that that is too crazy... I do see a crash and a massive unwinding of foreign exchange and carry trades. Napier isn't just picking this number outta thin air (well, he kinda is) but he is basing it on a large shortfall in demand for low-yielding US treasuries at even significantly higher yields from creditor nations. This is not a new theory, it has been proposed in the past indirectly by a few and directly by me *gloat* and a few others.

I don't know how this is going to play out in the equity markets, but I do know that the time for value investing is approaching us. Awaiting Mayhem (as I have been for the last 1.5 years or so). That's the problem with predictions you see, very difficult to arrive at a time period for events panning out.

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