Time to Avoid the Stock Markets Altogether

Includes: DBC, FXI, GSG, PGJ
by: Enzio von Pfeil

Excerpts from Dr. Enzio von Pfeil's August 21, 2008, appearance on CNBC Asia:

  1. Asian stocks started the week in positive territory - have markets bottomed out? Where do they go from here to year end?
    • With it now received wisdom that the Economic Time™ is worsening globally, there is NO way that profits can improve: the excess supply of goods is pressuring turnover and margins.
    • Thus, look for the next downleg, probably around October.
  2. Stocks are at their cheapest valuations in more than a decade - are investors biting and is interest coming back to the market?
    • This is a valuation rally driven by smart traders.
    • Us fundamental guys who work on strategies and cycles are not joining this frenetic party.
    • Any blow up in Georgia will send everything reeling south.
  3. Commodity prices are easing – how much will that impact corporate earnings going forward?
    • It won’t, because corporations will have to lower their prices in order to keep market share.
    • Besides, I am not so convinced that commodity prices per se are easing.
    • Instead, you have seen a huge re-allocation of asset classes. The dollar gets bought, so up go stock markets and down go commodities.
    • However, China and India have not gone away, nor has El Nino or La Nina (agricultural prices), nor have oil fights (Muddle East and the next Cold War).
  4. Where do you see values sector and market wise?
    • This not the time to be clever.
    • Because of the horrible global Economic Time™, I would avoid stock markets.
    • Indeed, we have shorts on the American market, and particularly on the financial sector.
  5. Are there any other topics you'd like discussed?
    • Recent events in Georgia imply a re-surgence of the cold war. That has HUGE investment implications, which I am happy to discuss.
    • Also, now that the Fed is bailing out individual banks, watch its independence wilt, dragging the dollar down further.