The DOW is about to break 13000 pts downwards, US$ is at all time low and inflation threatens. Think long term vs think short term. There is a world of difference.
There is little doubt that the day of reckoning for US markets will come because of inflation - the question is when not whether.
For long term investors many have gotten out already as this 7 good years is closing to an end.
But for short term investors, I paint a different picture. While the logic of the moves in the market is correct, the size of the moves is wrong. What do I mean?
Citigroup shares falling from $55 to $33? It is logical for citibank shares to fall but by more than 30%? Its losses of US$11B is relative assets of 2 trillion and earnings of $20B. The move is correct but the size is wrong.
We see much distortion in prices - $100 oil does it make sense? The Indian govt now directly buy oil fields and pump out the oil to supply to india for a total of $40. Yes oil should go up but is $100 too high?
The reason for extreme moves is the hedge fund money seeking short term returns. They bet trends and make short term trends go further than further than fundamentals justify. Very soon when profits get very fat on various sharp swings - US$, Crude Oil, stock futures short positions. They will take the profits and cause a stampede in the reverse directions.
Right now there is EXTREME risks as hedge funds push markets further to the edge. If the rubber band does not break it will snap back. This rubber band is robust because of sovereign funds & traditional mutual funds that invest in value.
Sovereign funds exceeds hedge funds as of today and it will be difficult for them to break the markets like they did during the Asian crisis.
I'm betting this rubber band will snap back very soon. HSI will snap back, STI will snap back and US$ will snap back.
This is a high risk short term bet which you should not bet your whole house on. I'm seeing risk as opportunity.....a different short term view...
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