liquidity and risk taking / Jeff Saut

great stuff from jeff saut! (headline for more!)

looks like in china (down 9% http://immobilienblasen.blogspot.com/2007/02/china-down-9-biggest-slump-in-10-years.html they have become a little more nervous )

zumindest in china scheint diese these heute einzutreffen.

....my firm believes liquidity certainly plays a role and currently the monetary base is exploding. Moreover, it is not just our money supply that is surging but Austrailia’s (+13% year-over-year), England’s (+13%), the Euro Zone’s (+9.3%), Korea’s (+10.3%), China’s (+16.9%), etc.

Yet as my firm has suggested, while liquidity is unquestionably a driver of asset classes, if investors are unwilling to take that liquidity and buy something with it asset classes go nowhere. Manifestly, you can throw all the liquidity you want at the markets and if investors have no “risk appetite” they will merely take said liquidity and stuff it in a money market fund.
We, therefore, have argued that investors’ risk appetite is the ultimate driver of asset prices and after the nearly unprecedented rally from July 2006 to February 2007, participants’ risk appetites are currently high. When this will change is unknowable, but change it will.

i´ve put up a chart from end of 2006 that meassiures risk taking. but you just have to look to the spreads, the latest action in the private equity sector, carry trade etc to see that risk taking is going into extra innings.....

ich habe hier einfach mal nen chart von ende 2006 genommen. man muß aber nur auf die spreads und die letzten wahnwitzigen private equity transaktionen, den carry trade etc blicken um zu sehen das hier wohl bereits die verlängerung läuft...

oils vs oils stocks / ticker sense + jeff saut

with oil and gas prices falling prices falling this cartoon is relevant.... but i doubt(and hope that the times of the hummer will come back.... but you never know....especially in the us......

denke der cartoon paßt bei den fallen enerfiepreisen ganz gut. ich bezweifle und hoffe aber das diese zeiten des hummer für immer erledigt sidn. bei den amis kann man das allerdings nie wissen......


thanks to scott brown from raymond james http://www.raymondjames.com/monit1.htm

The chart below shows the ratio between the price of the S&P 500 Energy stock sector and the price of crude oil per barrel. The ratio is clearly at its highest level in the past three years, meaning that oil stocks have not fallen as fast as the price of the actual commodity during the current decline. So either the stocks are due to play catch up, or the decline of oil is a bit overdone.

here is the take from jeff saut/raymond james http://www.raymondjames.com/inv_strat.htm

Clearly the new year’s price plunge has shaken the bullish consensus, yet our feeling is that it is going to take an eventual “shake out” below $50 per barrel to turn the crowd negative enough to give us the “footings” for a major bottom

As readers of these reports know, we have been shy of energy, and stuff-stocks in general, after having pared-back on those positions during their 2006 January-to-May parabolic upside blow-off. And even though we sold 25%-to-50% of each one of those positions, the declines from their respective highs for our remaining positions has hurt our overall portfolio performance. Still, perusing the long-term charts in preparation for this report suggests that while commodity markets are having their inevitable cyclical corrections, our belief in the secular bull case for “stuff” continues