Thursday 12 July 2012

Minutes to win it...

Buying equity anticipating post-meeting minutes to reflect one or two words in the right order is just about as useful as learning to balance 5 ping-pong balls on your nose. Failing to appreciate that the odds are stacked against the trade is similar to a bout of inconsolable hysteria after failing to bounce a dime into an open-necked bottle at 30 feet.

Hoping against hope that Germany will fund delinquent excess whilst Merkel teeters on the political abyss presumes that PIGS will fly in the middle of July..

There are some fearsome odds we seemingly ignore. $600 trillion approx. is the size of the global derivatives market. Romney vs Obama for the world's most important economy is a David vs David contest. Where's Goliath? Companies have retrenched, are retrenching and will continue to retrench extraordinarily large percentages of their work force. Consumer spending resilience under those conditions is probably ephemeral at best. Internal controls at the world's largest financial institutions are either lax or deliberately misleading. Global youth unemployment, the Arab spring and the Asian Tiger struck low with cat-flu virus are fairly strong signals that all is not well. When 27000 words of legislation regulate the planting of a cabbage, who can honestly claim surprise when the Europeans disagree to disagree?

If Buffett's form holds true, 'risk-on' is just around the corner; the music's stopped and the exit is jammed. Ping-pong anyone?

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