The World Closes In on the US
US. Buyer beware. I stick with my stagflation view. So how can corporate profits rise if margins thin and turnover falls off with The Economic Time™ getting worse? This year, 10,000 jobs on Wall Street go! In particular, avoid banks.
Singapore. Buy. The Economic Time here is all right. Singapore wants to be a Southeast Asian financial hub even more, and will get that spot.
Thailand. Avoid. Politics are still fragile and the government's growth policies are not so growth-friendly.
Japan. Avoid. Ever thought why the BoJ is not raising rates? Surely because it also sees a fragile economy.
China. Sell right after the forthcoming Party Congress ends. It ends on Saturday, 21st October. Usually there is a market hangover during the week after it has ended, so prepare to eject latest on Monday, 23rd October. Then wait to buy back in at a cheaper price.
Currencies. Buy the Australian dollar: 60% of her exports go to China AND Aussie rates have further to rise, so you get a solid yield. Watch the yen: if Wall Street wobbles, the yen will shoot up as carry trades are unwound. Stay away from the US dollar: superpower currencies have to fail, and the Fed at this stage has to cut rates with Bailout Bernanke. Instead, next to the Aussie, buy the Euro and Sterling. We suggested some time ago that locals were piling OUT of the RMB - just as locals are. Instead, other Asian currencies offer more upside from a forex and thus from a stock market perspective.
We continue our advice some time ago to sell in October. The reason may sound stupid, but the reality is that big market falls have occurred in Octobers. Then there are also more fundamental reasons to worry.... but there also are profitable opportunities.... Besides, the dollar's demise must continue and that has plenty of good implications for Asian markets later on. Just because we are preserving profits in the short term has nothing to do with our overall bullishness especially on China, and thus on us, the water skiers off the back of the Chinese speed boat: Hong Kong, of course!