Wednesday, March 14, 2007


Bull: "Rumours Of My Death Have Been Greatly Exaggerated"

sopskysalat said...
Weak retail sales, econ data.. new info of late payment of subprime borrower... sent the US equities into a tail spin again.It is very tough. Weak data give the carry trade fear of US lowering interest rates and also weak econ.Not an easy task.. Strong data sounds bad, weak as well... moderate better.

Pricechart said...
Is the bull going to shit?

a) Slowing US demand, largely expected, will cause the Fed to lower rates soon, markets pricing in the possibility of this being a trend rather than a one-off decrease, which will narrow the differentials. Sectors which were sold down in Japan were those reliant on US demand such as auto makers and electronics, which is to say that the selling is properly fundamentals motivated rather than a herd based mentality.
b) Narrowing of differentials, well not quite yet. Even with the data a rate cut is not going to come in rapid succession. Labour data out last Friday still indicate a pretty firm labour markets there, so it is still hard to draw hard and fast conclusions.
c) Investors need to be aware that if there was a real reversal of yen carry trade, you would see the yen dollar rate rising to 105 at least. What we are seeing are markets pricing in risk at every turn, and reverses happening every now and then, not a deluge.
d) Lower Fed funds rate, good. Corporate profits, still good. Last I heard, these two factors would assure for a good market place.
e) I'd expect markets to start diverging from here on because the recent ups and downs have gathered all markets as one. There is no doubt that there is sufficient liquidity swishing in the system. I think we should be seeing funds moving in directions where the action should be, rather than do a blanket move on all markets. This is probable because good funds will always look for alpha outperformance.

Bottomline, I am not too concerned over the mini selloff. Like Yus-baby said, another buying opportunity.

1 comment:

Rohan_888 said...

Credit-Suisse seemed to have joined the bandwagon of the "doom forecasters":

http://www.billcara.com/archives/2007/03/the_why_and_how_america_is_in.html

And Roubini, labelled as Eeyore:

http://calculatedrisk.blogspot.com/
"It's looking more and more like Eeyore was right."

http://www.rgemonitor.com/blog/roubini/

Interesting to follow the next 2 quarters, my money is on a recession in the US.