Enzio's Clock

To follow.

--global markets preview for this trading week, on the back of positive US

jobs numbers

·        This is all very worrying, markets hopping up and down on the basis of (misunderstood) numbers

·        Some key data this week are

1.    Wholesale trade (Wednesday),

2.    Budget data (Wednesday)

3.    Jobless Claims (Thursday)

4.    Friday:

1.    retail sales

2.    consumer sentiment

3.    business inventories

·        Seems to me like these numbers will turn out to be “all right-ish” – good enough to justify buying in order to fortify a long position

·        Major markets are taking the cues from each other, e.g. if Shanghai drops so does America, and if America drops, so does Shanghai.

·        My guess is that markets will trade up this week off the back of those good employment data

·        However, then danger in all of this is delusionary thinking: a little like the “positive thinking” avalanche, any “good” number is used as an excuse to buy, while any bad number is used as an excuse to wait for the next buying “opportunity”.   I wonder what Harriett Beecher Stowe or Mr. Quimby, founders of the New Thought Movement, would have said to that…

-- expectations for China's NPC happening this week

·        China’s leadership appears to be splintering.

·        Whilst the Central Bank wants to rein in money-supply growth (see their hiking of reserve ratios some weeks ago),  the Ministry of Finance appears to want to keep spending

·        Just today we read that the Central Bank wants to re-value the RMB; however, I cannot see the political leadership, nor the Ministry of Finance condoning such a move

·        In Friday’s Annual Report to the National Peoples’ Congress, Premier Wen stressed populist measures designed to spread the wealth and promote social equity:

1.    reducing government interference

2.    allowing more press freedom to monitor the government and fight rampant corruption

3.    breaking-up of state monopolies in order to nurture competition

·        But the problem is that these are just words without content

1.    while Wen wants more equal income distribution (because China’s annual per capita income has reached that threshold level of $4,000(, the leadership is not pressing ahead with land reform in order to help farmers earn more

2.    Equally, despite feigning the desire for more equal income distribution between urban and rural citizens, the government is not abolishing the hukou system : it discriminates against “country bumpkins” by not allowing them equal access to jobs, education and medical care in the cities where they have lived and worked for years

3.    Despite calling for more press freedom, the press in Hong Kong wonders why, then, those editors promoting abolition of the hukou system were punished

4.    Despite Beijing’s wish to break-up monopolies, this will be dis-allowed at the local level, and

5.    Despite Beijing’s wish to cool the property market, it is local governments who are against killing this “golden goose” of revenue

-- your investment strategies at this tail-end of q1?

·        Mine are decidedly defensive, namely

o       Investment grade bonds

o       Stocks with a high yet sustainable dividend yield

o       The dollar (as I expect volatility to stay_

-- what sectors / asset class are you preferring ?

·        The same, boring recommendations, namely

o       Consumer staples

o       Utilities

o       pharmaceuticals

n     anything else to add?

n     I find it disgraceful that HSBC posts terrible profits, halves its dividend, yet increases its top managers’ bonuses

n     I am truly amazed that – globally – there has not been more of a shareholder revolt against such moral turpitude