Start Buying the Dips

My hip had been giving me some trouble, but by now it was killing me, and I was agonizing on whether to cancel my June trip to Asia. However, that’s no excuse. I missed the first warning signs of problems and trouble to come.

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May 1, 2011

It seems to me the events of the last couple of weeks are mostly bullish not bearish for global equities. Fears of rising inflation whether core or headline have been an increasing and strengthening headwind for both developed and emerging markets. Particularly in the developing world, central banks have been tightening, but with negative real interest rates, most still remain behind the curve. Investors are worrying there is a lot more to come, although it was interesting that old fox, Jean Claude Trichet, said the strong euro presently argued against further ECB tightening.

At the same time whether because of bad weather, the Japan earthquake, or the Arab Spring, economic growth around the world has been slowing, and almost everyone is forecasting a “soft patch.” Government debt markets seem to think a “double dip” is not completely out of the question. How else to explain the rally in Treasuries? The hottest technician now says his favorite long is the 10-year Treasury bond.

What equity markets want is sustainable growth with low inflation. They don’t want yet to hear about central bank tightening! Thus the decline in oil, ...

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