Whenever one of our peers declares that he is “at a loss for words” you can be certain that a veritable torrent of verbiage is set to pour forth. We – on the other hand – have more words than we can possibly find a home for. Speechless readers are welcome to borrow some of ours…
What we have not lost is the capacity for awe… We are awed at the idiocy of the respectable consensus, at their inability to spot fundamental shifts in the world around us, at their reliance upon ideologies which have repeatedly been shown to be bankrupt, at their expectation that tomorrow is going to be just like today, only better. Quite fortunately, the occasional bouts of hysteria to which our peers are prone allow those with a modicum of common sense – and the willingness at least to consider the possibility that the emperor is quite naked – to do very well trading against the consensus; think risk assets in October 2008… think Russia throughout most of the decade…
Thus, the present issue is intended as a statement of the obvious – an “obvious” which apparently continues to elude a large proportion of the chattering classes. We shall risk ruffling a few feathers to outline our views regarding the fundamental drivers that lurk in the background, somewhere behind our Bloomberg screens.
As always, we briefly outline our trading views – still constructive on the risk assets, but with the proviso that we are getting very late in the day for the global reflation trade, and that payback time is coming – the question of just how soon it will be remains a matter of conjecture.
Finally, we plant a couple of banderillas in the necks of a couple of the sacred cows still grazing amidst the truly dire Russia coverage by the Economist and the FT. Animal rights activists or believers in the Washington consensus as it applies to Russia may wish to skip this section altogether.
As we go to press, the market is correcting quite fiercely… typical!
T&B has butterflies – we could either go back and re-write the entire issue, a dreadful prospect given how long it takes us to write anything at all, or we can grit our teeth and assume that this is yet another head-fake and that markets will snap back. We shall go with the latter, and would expect to see some good buying opportunities after another day or two.
If we are correct (and our degree of conviction is necessarily only moderate), then besides providing some nice entry levels, the relative dislocation of asset prices we are now seeing will be a useful indicator of what to expect the day that the bear does finally lumber out of his cave and start slashing people. We are all living on borrowed time.
For the latest newsletter – in FULL (the above was just the entrée) – click on the link below: