Strategic Ideas 12-24-2010

I am going to keep this page updated, and I think I should be able to keep the historical ideas in a viewable archive.

Core Observations 12/24/2010:

  1. The Euro does not breakup in 2011.  Sovereign debts are purchased by the ECB in quantity and do not cause inflation.   The solution deal for the Euro has already been discussed by 12/20/2010 and is nearly complete.
  2. Treasury Yields continue their trend lower, ending 2011 much lower.
  3. The stock market rallies in 2011.    Low rates plugged into the old fed model mean high P/Es, and high corporate profits keep the boom going.
  4. Japan has a huge rally in 2011
  5. All major stock markets rally – Germany, China
  6. The U.S. experiences a real recovery.  Hours worked creeps up to pre crisis levels, and hiring begins to excede minimum necessary 150,000/month
  7. U.S. Growth allows China to avoid a meltdown.
  8. U.S. and European banks are insolvent.  The recognition of these insolvencies have little real world consequences.  Is anybody still lending agains RMBS, anywhere in the world?
  9. U.S. Banks and the robo-signing scandal ends very badly for the banks.  Expect at least 1 full nationalization in 2011.  BoA is the obvious target, but JPM, Citi, and Wells all are suspect.
  10. Bears are caught in a conundrum thanks to the yield curve.  The worse they think it will get, the higher they push up long term yields. But the steeper the yield curve, the more bullish the interest rate environment becomes.

I’ll have more later today on this, I need to write some real posts.


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