Wednesday 30 November 2011

Waiting for Godot

Yesterday we suggested that the investors should not underestimate the power of the central bankers and politicians. We also said that the Pavlovian dogs like Zero Hedge or Mish will have to wait longer for the collapse of the world.

Sure enough, the latest press release: “The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.”

2011 is not same as 2008. There is more than enough liquidity in the market for TBTF Banks to play their shenanigans. So now their game is to wipe out the shorts. Next week they will squeeze the new bulls. Wash, rinse, repeat. 

A short term top is expected in the next few days. The “first of the month” effect will probably push the top in December. Then look for a dip by mid-December followed by a yearend rally topping at the end of December again.

I would rather not participate in this crazy up and down dance of the wolves. There is very little money to be made and more risk. A good bottom fishing opportunity will come by Jan 2012.  

As an investment policy in this volatile environment, we are committed to “Return of Capital”, not “Return on Capital”.

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