If you believe in this story, a beta strategy, where you invest in liquid instruments as indices, should do well. I began the year firmly believing in this story, but as with any good story, there’s always a risk…
Please, click here to read this article in pdf format: january-20-2009
In my view, we have two forces today, shaping the market scene. These are “dimensional” forces. The first force or dimension is associated with capital flows. I will call this force the non neutrality of money. The non neutrality of money, as we wrote many times already, is evidenced by the fact that, when central banks inject liquidity, relative prices are distorted. This distortion depends on the markets that receive the liquidity first.
During 2009, the first market to receive this liquidity was the Agencies debt market (Fannie Mae, Freddie Mac). Consequently, the spread between Agency debt and Treasuries tightened violently, appreciating this debt vs. other assets. Another way of looking at this is by comparing it with the mainstream view, that money is neutral (implicit in Krugman’s and David Rosenberg’s works). The neutrality of money is expressed in the famous equation, called the exchange equation:
Money in circulation * Velocity of circulation = Price level * Output level
This is why economists like David Rosenberg or Krugman tell you that you should not worry about inflation (Price level), because even if Money in circulation grows, the velocity of circulation is low. They told you precisely that while markets rally, spreads compress or gold goes from $854/oz to $1,138/oz in the past twelve months. These same economists will now increasingly ask you to worry, because the rally is not justified by the output level vs. its potential level (whatever that is). And of course, they have been wrong since the whole inflationary process began, on an afternoon of Dec 5th, 2008, with the first purchase of Agency debt by the Fed.
Having said this, and back to my main theme, I see the non-neutrality of money shaping 2010, as follows:
Assumptions: a) The Fed will maintain a steady supply of liquidity (not touching policy rates) and b) the US fiscal deficit will not fall
With these assumptions and given the unwinding of quantitative easing by the Fed (i.e. will stop buy Agency debt by this spring), I expect Treasury yields to rise with a steeper curve. The steepness in the curve will be driven both by a compression in the front end, as well as a sell off in the long end (For those interested in the reasons, pls. write back. I’ll be happy to further elaborate and have your feedback). The rise in Treasury yields should compress corporate credit spreads. The impact of this compression can bring three consequences: a) Further debt refinancings; b) share buybacks with leverage, and c) capital expenditures. These three channels should provide further fuel to the equity rally, commodity prices, and finally, activity.
If you believe in this story, a beta strategy, where you invest in liquid instruments as indices, should do well. I began the year firmly believing in this story, but as with any good story, there’s always a risk, a “bad guy”. In this case, the bad guys are sovereign risk and political risk in every relevant currency zone. I thought these would become relevant later in 2010, but here we are, facing them in January.
These sovereign/political risks constitute the second force shaping the market scene that I referred to above. Tomorrow, I will elaborate on this second dimension: Time. Why time? Because these risks affect every monetary zone today, but with different degrees of “imminence” or urgency. The degrees of imminence affect the foreign exchange crosses, which define the second dimension.
Martin Sibileau
February 10th, 2012 at 2:33 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 10th, 2012 at 3:41 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 10th, 2012 at 4:05 PM
Links…
[...]Sites of interest we have a link to[...]……
February 10th, 2012 at 5:06 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 10th, 2012 at 5:06 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 10th, 2012 at 5:40 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 10th, 2012 at 6:52 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 10th, 2012 at 8:01 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 10th, 2012 at 8:24 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 10th, 2012 at 8:25 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 10th, 2012 at 9:20 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 10th, 2012 at 9:21 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 10th, 2012 at 9:42 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 11th, 2012 at 9:38 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 11th, 2012 at 10:14 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 11th, 2012 at 11:20 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 11th, 2012 at 11:28 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 11th, 2012 at 12:45 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 11th, 2012 at 1:15 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 11th, 2012 at 2:00 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 11th, 2012 at 2:42 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 11th, 2012 at 2:46 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 11th, 2012 at 4:40 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 11th, 2012 at 5:03 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 11th, 2012 at 5:03 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 11th, 2012 at 8:53 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 11th, 2012 at 8:56 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 11th, 2012 at 9:37 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 11th, 2012 at 9:41 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 11th, 2012 at 9:55 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 11th, 2012 at 10:00 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 11th, 2012 at 10:18 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 11th, 2012 at 10:25 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 11th, 2012 at 10:26 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 11th, 2012 at 10:57 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 12th, 2012 at 6:39 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 12th, 2012 at 7:15 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 12th, 2012 at 8:08 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 12th, 2012 at 9:16 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 12th, 2012 at 9:50 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 10:36 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 12th, 2012 at 10:40 AM
Links…
[...]Sites of interest we have a link to[...]……
February 12th, 2012 at 10:55 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 12th, 2012 at 12:12 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 12:17 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 12th, 2012 at 2:27 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 12th, 2012 at 3:07 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 12th, 2012 at 3:30 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 3:34 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 4:11 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 12th, 2012 at 4:46 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 4:50 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 12th, 2012 at 5:07 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 5:34 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 5:38 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 5:55 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 7:28 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 7:52 PM
Links…
[...]Sites of interest we have a link to[...]……
February 12th, 2012 at 7:56 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 12th, 2012 at 8:27 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 12th, 2012 at 8:55 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 12th, 2012 at 9:39 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 13th, 2012 at 3:10 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 13th, 2012 at 3:33 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 13th, 2012 at 3:37 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 13th, 2012 at 3:56 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 13th, 2012 at 4:03 AM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 13th, 2012 at 4:05 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 13th, 2012 at 5:04 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 13th, 2012 at 5:37 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 13th, 2012 at 5:46 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 13th, 2012 at 5:53 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 13th, 2012 at 6:52 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 13th, 2012 at 6:53 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 13th, 2012 at 8:22 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 13th, 2012 at 9:06 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 13th, 2012 at 9:08 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 13th, 2012 at 9:40 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 13th, 2012 at 10:22 AM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 13th, 2012 at 10:27 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 13th, 2012 at 10:54 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 13th, 2012 at 10:58 AM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 13th, 2012 at 10:59 AM
Links…
[...]Sites of interest we have a link to[...]……
February 13th, 2012 at 4:48 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 13th, 2012 at 5:17 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 13th, 2012 at 5:20 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 13th, 2012 at 6:19 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 13th, 2012 at 6:54 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 13th, 2012 at 7:17 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 13th, 2012 at 7:22 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 13th, 2012 at 7:34 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 14th, 2012 at 3:02 AM
Links…
[...]Sites of interest we have a link to[...]……
February 14th, 2012 at 3:07 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 14th, 2012 at 3:39 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 14th, 2012 at 3:44 AM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 14th, 2012 at 6:54 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 14th, 2012 at 7:24 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 14th, 2012 at 8:02 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 14th, 2012 at 9:10 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 14th, 2012 at 10:29 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 14th, 2012 at 11:06 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 14th, 2012 at 1:15 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 14th, 2012 at 5:20 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 14th, 2012 at 5:23 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 14th, 2012 at 5:25 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 14th, 2012 at 5:41 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 14th, 2012 at 6:08 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 14th, 2012 at 6:10 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 14th, 2012 at 6:16 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 14th, 2012 at 6:48 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 14th, 2012 at 6:52 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 14th, 2012 at 7:20 PM
Links…
[...]Sites of interest we have a link to[...]……
February 14th, 2012 at 7:45 PM
Superb website…
[...]always a big fan of linking to bloggers that I love but don’t get a lot of link love from[...]……
February 14th, 2012 at 7:59 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 14th, 2012 at 8:02 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 14th, 2012 at 8:31 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 14th, 2012 at 8:32 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 15th, 2012 at 3:20 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 15th, 2012 at 3:23 AM
Links…
[...]Sites of interest we have a link to[...]……
February 15th, 2012 at 4:40 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 15th, 2012 at 9:29 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 15th, 2012 at 10:24 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 16th, 2012 at 12:02 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 16th, 2012 at 2:13 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 16th, 2012 at 4:05 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 16th, 2012 at 5:00 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 16th, 2012 at 8:50 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 16th, 2012 at 9:47 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 16th, 2012 at 9:58 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 16th, 2012 at 10:35 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 16th, 2012 at 5:15 PM
Links…
[...]Sites of interest we have a link to[...]……
February 16th, 2012 at 6:27 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 16th, 2012 at 7:26 PM
Awesome website…
[...]the time to read or visit the content or sites we have linked to below the[...]……
February 17th, 2012 at 3:40 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 17th, 2012 at 8:08 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 17th, 2012 at 10:33 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 17th, 2012 at 11:28 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 17th, 2012 at 2:45 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 17th, 2012 at 3:13 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 18th, 2012 at 8:31 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……