jeandit75

When Will the Market Turn Negative Again?

Actually the scenario on equities depend wether your view in the near term calls for inflation or deflation. If you know which one wins then you should be able to properly assess your equity and bond exposure.

The recent rally has been fuelled by a massive injection in liquidity by the central banks around the world and investors are expecting higher as a result of the inflated FED balance sheet.

However, where I think the market is wrong and this is why I have remained so bearish lately (not because I want it but) is the velocity of that money supply is nil. Banks are simply not lending money. Therefore, the mass of money is staying in the FED and banks balance sheets but is not flowing into the real economy.

The consequences are: the deflation will remain the biggest threat and deleveraging will continue for consumers and corporates. Once the market has realized that (and I may be a bit early in my call but who knows how to time these things) then they will fly back to safety which means buying US 10 years treasuries and selling equities. My gut feeling (for that is worth) is calling for the market to double bottom by September.

If you want a similar period of reference you have to look at the depression of the 30s or the big recession of the 1870s. You can't compare the current recession to the 90-91 or the 70s because they were different animals.

In short, the S&P 500 should be below 666 by September and probably much lower by 2010 if the deflation scenario materializes so let's hope that the market is right and that we have stagflation.

When Will the Market Turn Negative Again?

Actually the scenario on equities depend wether your view in the near term calls for inflation or deflation. If you know which one wins then you should be able to properly assess your equity and bond exposure.

The recent rally has been fuelled by a massive injection in liquidity by the central banks around the world and investors are expecting higher as a result of the inflated FED balance sheet.

However, where I think the market is wrong and this is why I have remained so bearish lately (not because I want it but) is the velocity of that money supply is nil. Banks are simply not lending money. Therefore, the mass of money is staying in the FED and banks balance sheets but is not flowing into the real economy.

The consequences are: the deflation will remain the biggest threat and deleveraging will continue for consumers and corporates. Once the market has realized that (and I may be a bit early in my call but who knows how to time these things) then they will fly back to safety which means buying US 10 years treasuries and selling equities. My gut feeling (for that is worth) is calling for the market to double bottom by September.

If you want a similar period of reference you have to look at the depression of the 30s or the big recession of the 1870s. You can't compare the current recession to the 90-91 or the 70s because they were different animals.

In short, the S&P 500 should be below 666 by September and probably much lower by 2010 if the deflation scenario materializes so let's hope that the market is right and that we have stagflation.

When Will the Market Turn Negative Again?

Actually the scenario on equities depend wether your view in the near term calls for inflation or deflation. If you know which one wins then you should be able to properly assess your equity and bond exposure.

The recent rally has been fuelled by a massive injection in liquidity by the central banks around the world and investors are expecting higher as a result of the inflated FED balance sheet.

However, where I think the market is wrong and this is why I have remained so bearish lately (not because I want it but) is the velocity of that money supply is nil. Banks are simply not lending money. Therefore, the mass of money is staying in the FED and banks balance sheets but is not flowing into the real economy.

The consequences are: the deflation will remain the biggest threat and deleveraging will continue for consumers and corporates. Once the market has realized that (and I may be a bit early in my call but who knows how to time these things) then they will fly back to safety which means buying US 10 years treasuries and selling equities. My gut feeling (for that is worth) is calling for the market to double bottom by September.

If you want a similar period of reference you have to look at the depression of the 30s or the big recession of the 1870s. You can't compare the current recession to the 90-91 or the 70s because they were different animals.

In short, the S&P 500 should be below 666 by September and probably much lower by 2010 if the deflation scenario materializes so let's hope that the market is right and that we have stagflation.