Soos Global Cap...'s  Instablog

1) The media appears to be focusing first and foremost on this Sunday's Greek elections, understandably so. Just after that, they are turning periodically to the German reaction to calls for more immediate banking and fiscal union within the Eurozone. But away from these headlines, a deeper dig into the situation, shows quite a few 'devils in the details' of any road forward. This article by Marshall Auerback, Germany's Constitutional Conundrum, is certainly evidence of that and in turn, shows just how unlikely it is that there could be a non-chaotic road ahead.

So with the US equity market quite euphoric today on the hopes for QE3, I remain skeptical…and yes….defensive…..FYI….

2) Far less market relevant (near-term) but nonetheless quite important, today's ruling by Egypt's High Court is likely to be a bit of 'rain' on the 'Arab Spring'….(see this Washington Post article).

Add this into the mix of OPEC freezing production at current levels, P5+1 apparently striking out with Iran on nuclear talks, and Syria's now-called "Civil War" igniting tensions between the US and Russia, can't help but wonder if oil's bounce today might just be sustained…..plus some….. ….

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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).

Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.

This piece in the WSJ is noteworthy….on the one hand, EM has seemingly 'corrected' close to 20% since March so institutional investors are re-entering….on the other hand, it appears that money continues to come out of EM funds (some would argue that's the sign to get in when the 'retail money leaves'!). I've exited most direct EM exposure some time ago and am considering a reasonable re-entry point. (I say 'direct', meaning ETFs such as the chart below of VWO or other ETFs and companies specific to China, Brazil and other countries in Asia ex-Japan. Most of my current EM exposure is 'indirect', meaning US companies that do a significant amount of business in EM countries).

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The article's point about EM countries stimulating their economies is certainly a plus, but equally (imho) important is what happens in Europe in coming days/weeks.

This weekend's Greek elections are certainly one of the most visible and popular market catalysts that will likely be watched and reacted to with a vengeance in either direction come Monday. But beyond that, the debt situation of Spain and Italy will continue to be an albatross around the market's neck. It appears that France and Germany are increasingly divided on how to proceed…France desiring more banking and fiscal union sans the intense austerity demands, Germany unwilling to unite without a quid pro quo of austerity and more control of sovereign fiscal policies. Either way, one has to wonder about Germany's outcome in this…if they put up their money to guaranty the PIIGS in order to keep them in the Euro, that cost will be borne by German taxpayers, and only offset by the continued benefit that they get from a relatively undervalued Euro that in turn helps their exports. On the other hand, if they let some or all of the PIIGS go, much of Germany's export customers in those countries likely go away, as do many other export customers who now would be faced with a stronger Euro which would make German exports less globally competitive.

Bottom line? As much as EM country stimulus is a favorable development, with Europe still very much on the economic ropes, and with increasing evidence that the US economy has slowed, I'm patiently assessing my direct re-entry into EM….emphasis on 'patiently'….

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).

Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.

Disclosure: I am long VWO.

Additional disclosure: Positions may change at any time without notice.

Have a look at this piece that FactSet tweeted re Consumer Credit (they're named in the article).

Is this a good thing, consumer debt expansion? Normally one might say yes. But in this case, it might be a reflection of no longer being able to tap into the 'home equity' lines that were pretty easy to get pre-'08, and not much left in savings, therefore leading to a 'need' to borrow, not just a 'desire'! The expansion in student loans, too, looks a bit bubble-esque.

Anyway, no one cares about cerebral things like this right now, afterall….China eased….the Ben Bernanke will be talking this morning with the market expecting some hint at QE3 or the like, and Spain was able to auction off some debt this morning.

Question: Trust this bounce?

Answer: First consider some other questions: Are the monetary fixes the answers? Or are they nothing but liquidity provisions that help avoid a total chaotic shutdown of the financial system. Are the necessary fiscal adjustments, especially in Europe, but here in the US too, likely to be forthcoming? If not, are we then currently experiencing a 'buy on the rumor, sell on the news' event with regard to the monetary responses, which might be followed by market disappointment with fiscal policy responses?? Alternatively, could we get some form of FDIC in Europe or some form of Euro-wide-bond , which would be greeted enthusiastically by the market?

Either way, it might make sense to update the 'shopping list' of assets that have been bruised more than 10% since the selloff, and which might be good candidates for a rally on any sustainable bounce....or, if the bounce proves short-lived, which assets look ready 'for sale' at current levels.

You're welcome to visit our Public ChartList for a look at our 'radar screen' to see what we're considering on both fronts.

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).

Disclaimer: Please read and consider important information related to all communication made by Soos Global on this site by clicking here.