- Q: How have you read the big rally that came into many global equity markets in early parts of January and do you think that’s now coming apart?
A: We were oversold when the S&P in the US reached 741 on November 21. We had a rally of around 25% and some markets rallied even more. We can still rally a bit more because there is a huge liquidity injection into the market by all the Central Banks around the world. But in general I feel it’s a bear market rally and that after this rally we will test the lows or exceed the lows again.
Q: Is that how you are seeing 2009 that the Q1 may not be too bad but by the time we get over that we go back and retest October lows for most markets including India?
A: The consensus is that 2009 will be better than 2008 and I do not think it will be much worse. I do not think we will drop another 50%. But the contrarian view would be to think that all the monetary and fiscal injections by government fail and that they run out of ammunition and the market will drift lower.
Q: In this kind of an environment since both those commodities have turned quite volatile crude and gold how would you map them for this year?
A: I do not think that gold will rise a lot in the near future because compared to the CRB (Commodity Research Bureau), a broad index of commodities gold is very overvalued as compared to nickel, copper and oil. In the near-term, industrial commodities which are more oversold than the stock market two months ago could rally somewhat.I would position myself as a trader in some commodities.
Q: You had mentioned earlier that you expect to see global markets go back to the lows we saw last year. Would you say there is a fear of overshooting that target and markets might actually see lows lower than what we saw in October?
A: Yes, I think that’s absolutely possible and likely. The global economy is in deep trouble. The big question is we are in depression but is this depression is going to be inflationary or deflationary? In both cases the markets will not perform particularly well because in a deflationary depression all asset prices will continue to go down. In an inflationary depression interest rates will go up and so on the both assumption equity prices are not particularly inexpensive.
You can watch the video clip here
... on one hand, he reckons the rally has legs.
ReplyDeleteOn the other hand, he says we are in a depression.
...
I find it really interesting how so many people are quoting the "6 month lag period" between the stock market and the economy.
...
Has anyone considered that maybe, JUST MAYBE, the stock market will only rebound once we can actually SEE light at the end of the tunnel?
It seems reasonable to me: bad economic data comes out, market falls.
This "6 month divergence" theory claims that bad data = market rises.
Which only seems to be occuring in Malaysia, really.
Funny.