rus1bus Wrote: ------------------------------------------------------- > Deflationary arguments: > > 1. Rising Unemployment (though at a reduced pace) > 2. Rising mortgage delequencies > 3. Declining consumer credit > > Inflationary arguments: > > 1. Increased liquidity due to low interest rates > 2. Investing in money market doesn’t make sense > for such low returns > > Combination of the 2 arguments suggests - > Deflation for Goods and Inflation for Assets > (Equities). > > If I were to take a position, I would continue to > ride the bull while it lasts, but stay away from > derivatives and leverage to reduce risk of being > caught offguard by bears. LT options may be suitable. low current interest rates, possibly higher future interest rates, vix is high historically, but low for future expected volatility in my opinion (ie. on the put side, if the rally were to die, it’d be fast and abrupt and on the call side, if the bull continues its slow grind, the prices move in one direction, limiting downside volatility). i’d be buying otm puts and calls at vix less than 20.
Hello Mister Walrus Wrote: ------------------------------------------------------- > Soddy - got any color on that? I don’t look at > international equities so much. Looks like you > might know something. It’s just my own feeling on the situation. I don’t think the rest of the years employment numbers will translate to good retail sales & consumer confidence in the run up to year end. This may be what convinces the masses it’s time to take a breather. I still think growth in developed equity markets for 2010, albeit at a much slower pace than this year, but I believe slow growth in developed world will again translate to faster growth in some areas of EM. Just my 0.02
soddy1979 Wrote: ------------------------------------------------------- > I’m still mainly equities for my personal > portfolio but I’ll be cash by year end. > > I’m thinking strong pull back in December/January. > The current plan for 2010 is back into Chinese, > Indian & Brazilian equities for growth coupled > with some solid developed world companies. I agree with this, although I am less sanguine on India than I am on China and Brazil.
Why is that bchadwick? I personally favor all three, giving India position 2 in that list or maybe 1 if you look at a really long time horizon.
Housing data was much weaker than expected and I hope this really is the start of the correction. The reason housing rallied last few months and sales were up last month was because most of these homes sold were below 250K where inventories have dried up now and we will continue to see a decline in home sales. Next month will be the real shock.
Blaze Wrote: ------------------------------------------------------- > Housing data was much weaker than expected and I > hope this really is the start of the correction. > The reason housing rallied last few months and > sales were up last month was because most of these > homes sold were below 250K where inventories have > dried up now and we will continue to see a decline > in home sales. Next month will be the real shock. my guess is that one blip in the rally’s confidence will not stop the momentum. i’m thinking two declines in a row would smack all the bulls upside the head though. didn’t cash for clunkers interfere with this a little bit? i mean, how many people/families end up buying a car and a home in the same month, especially when they are under financial uncertainty or distress?
Blaze Wrote: ------------------------------------------------------- > Housing data was much weaker than expected and I > hope this really is the start of the correction. > The reason housing rallied last few months and > sales were up last month was because most of these > homes sold were below 250K where inventories have > dried up now and we will continue to see a decline > in home sales. Next month will be the real shock. I don’t think inventory has dried up. There is a huge backlog of foreclosures that banks are reluctant to put on the market (I think they call it Shadow inventory, because everybody knows it’s there but it’s not really there yet 
). It takes on average 24 month from the time a borrower stops making payments to actual eviction. In normal time (before 2007) the process took about 6 month. The Feds are buying MBS to keep rates artificially low. The $8000 did help as well. (Helped the sellers really even though the buyers thought they were getting a great deal from the government, same as cash for clunkers helping the auto industry while the buyers felt it was a fantastic deal) It’s all manipulation that will not fix the underlying problem in my opinion.
soddy1979 Wrote: ------------------------------------------------------- > I’m thinking strong pull back in December/January. > The current plan for 2010 is back into Chinese, > Indian & Brazilian equities for growth coupled > with some solid developed world companies. > then bchadwick Wrote: ------------------------------------------------------- > > I agree with this, although I am less sanguine on > India than I am on China and Brazil. then Blaze Wrote: ------------------------------------------------------- > Why is that bchadwick? I personally favor all > three, giving India position 2 in that list or > maybe 1 if you look at a really long time horizon. I think India’s growth is more closely tied to resurgence in developed markets, whereas China’s and Brazil’s are less so. I think developed economies are going to take a long time to recover and therefore - while I think India will do better than the developed economies - I think China and Brazil will do better. China because people will still want to buy products from the cheapest source on the planet, and Brazil because they can sell raw materials to China while still having a pretty diversified exports base.
You make a few good points. However, I disagree with your comment on India’s resurgence being closely tied with developed countries. Now, while it is tied, China’s is far more dependent. China has much larger export ties with the US and other developed countries. India has a much more diversified economy with parts such as IT very correlated with developed countries. Brazil, on the other hand looks good to me but it is a commodity driven market which is bad when commodities get hammered and good in the long run because we will need these raw materials for growth in EM’s. I am excited about the credit boom in Brazil that will occur over the next few years( I know this sounds crazy at the moment). In short, I am a big backer of all three with India/China at number 1.
Reasonable people can differ on this. I am not as up-to-date on the domestic consumption side of the Indian economy as I would like to be, and am willing to alter my opinion based on learning more. I do think that the services side of Indian exports is more vulnerable to business cycles in the developed world than China’s manufacturing or Brazil’s commodity exports. As for China, it is true that China exports a ton to the US, but it’s not just the US. Chinese products are pretty much EVERYWHERE. So it is true that the juiciest margins have been made by selling to US consumers flush with credit they shouldn’t have, but even when these consumers are out of the picture, there are a lot of others in line behind them. Margins may decline, but I suspect growth will still be substantial. As for Brazil, a lot of the recent growth has been the expansion of the commodities sector, but don’t think that Brazil is just a commodity country (though in past centuries that’s what it was). Brazil has more industry than many people give it credit for. Take Embraer, for example, which competes reasonably with Boeing and Airbus.
Yes I think you are correct about not having enough information on India, because it really is more decoupled(comparatively) than China which does trade with everybody but is still roughly 70-80%(guess) dependent on developed countries. Furthermore, I think the Rupee will benefit from the cash inflows driving it stronger against the USD. The trade I really like is to invest money in Indian bonds at 9%, and convert it back at spot at a later date. Also, RIMM earnings just came out and were really bad, this may make some further inroads into the market tomorrow.
short for short term if we are looking at dec this year, i will go long s&p
I think today is an important day as to where we head from here.