About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, August 04, 2011

Don't Ask Me...

I did not see today coming. The blowouts in the "risk on" markets seemed all out of proportion to the
global economic environment as I see it. It is true that I have been 100% in cash since SPX 1344 on
7/27. I am very tempted to go long at some point in the days ahead, but there is a nasty, scared
"collective psyche" in the markets which I do not grasp. Besides, bottom line, the stock market is
not just oversold, but is signaling that it is moving into a sold out position. The bad news is that it
is not quite there yet and particularly so as regards volume. Since I cannot say with confidence
that this episode is a freakish short term emotional overload soon to blow over, I plan to bide my
time and see if there is something new to learn.

In yesterday's post on global economic supply / demand, I opined that the major central banks
should ease off the brakes as a sluggish global economy produces sufficient slack to lead to a
further reduction of inflation potential. I also claimed that this is a risky business and hinted that
just the right amount of monetary easing might be necessary to keep all financial speculators in
the commodities markets from piling back in on the long side and driving up costs and inflation
too rapidly. This type of thinking points to a conundrum  which could increase risk aversion
generally if enough players see it. But since the fear out there now may not be nearly so
sophisticated, I'll probably content myself with trying to understand the current, pressing worry
first.
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I think the Fed likes oil a lot better at $86 bl. than at the $115 we saw earlier in the year.

US investors have flipped off  the debt limit deal in dramatic fashion. With the gang of 12 from
Congress set to meet later in the year to cut spending, investors could be voting that down right
now.

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