I always find Crispin Odey's comments worth reading. Here is a link to his latest post (Bolding are mine):
Markets obviously perked up in September but is this the beginning of a much longer run? It is certainly feeling like it.
Remember the scenario that we believe will unfold is further continuous aggressive easing using any means by the authorities which will not end until we have a sea of inflation and bond and currency markets which are screaming 'NO'.
We are still in the foothills on this journey. The weak employment numbers out of the USA and the continuing trade deficit with the emerging markets has ensured near unanimity in the USA amongst politicians and the Fed that the US dollar must be allowed to fall against these currencies. Given that the emerging markets are hanging on to their peg, this means giving these countries a totally inappropriate monetary policy. In a raging boom, interest rates remain at zero, whilst monetary conditions remain wildly lax.
This year the bears have always had their turn. However it seems so dangerous to fight the regulators when everyone is in agreement that inflation is preferable to deflation. A world in which interest rates remain at zero even as inflation rises and economic activity plods along is the perfect environment for the equity markets.
At present the emerging market theme has dominated returns. Since September of last year the wider market has fallen back even as the 'Nifty Fifty' have broken out. I have nothing against backing the emerging markets. They can only thrive. However, given that ultimately I see heavy inflation in the Anglo-Saxon world, cheap real assets which are currently in a bear market, still stand out because I am being paid by them to be patient.
30th September 2010.
Can be found at:
http://www.odey.com/OurManagers/outlook.aspx?manager=CrispinOdey
No comments:
Post a Comment