Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Tuesday, 11 September 2012

Die Bear Die!

The first week of September has made bearishness deeply unfashionable and bears an endangered species. After all what’s not to feel upbeat about? Draghi unveiled the bazooka, Ben is about to discharge his again and the German Constitutional Court is widely expected to ignore the law. If three strikes were not enough, China unveiled a trillion yuan stimulus to keep its economy unbalanced.

As the last quarter approaches and underweight and underperforming fund managers desperately try to justify their fees, pessimism has been banished and pessimists subject to ridicule.

Additional vertical thrust has been provided by the usual momentum chasers and capitulating shorts.

For those who want to be millionaires, the big question is what to do?
  1. Buy
  2. Buy some more
  3. Sell
  4. Short sell
As for the lifelines: The audience is divided between A and B; your friend knows as much as you; and 50:50 gives A and C.

While you ponder this over, remember you can always walk away with your money.

Meanwhile two new facts to consider before answering:
  1. As pressure is lifted and Spanish bond yields return to “normal” levels, Rajoy wants the money but only if it doesn't come with preconditions. ECB’s “Italian mistake” now playing in Spanish theatre?
  2. As pressure mounts on Greece, it counterattacks by setting up a working group to tally how much Germany owes in outstanding reparations for Nazi war crimes. What if we just tear up the TARGET 2 bill and call it even?

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