The week of reckoning......

The week of reckoning......

Tomorrow will be critical event of the week with Portugal rolling over a relative small amount but with yield on 10 year exceeding 7% now it's more an issue of "confidence" in Portugal

The expected issuance tomorrow from Ministry of Finance, Portugal's web-site:


Watch this link for live updates on Portugal's 10 year yield during the next 24 hours:
Bloomberg: Portugal 10 Year Bond Yield

Meanwhile the confusion on where we are in the economic cycle continues: The Ivory Tower Investment Banks looking forward to their bonus' being paid out in February and March are bid through the roof for growth, some even thinks this is going be inflationary year! Quelle Scandale!

But.... I remain extremely sceptical this time of year - true the incoming data for December will probably be good, but it will also be tail-end of positive manipulation by both companies and government, so I expect data to be good but to be lower than expectations. Confused? You should be!

I am very bullish on Fixed Income from here as per earlier blog comments - this is first time in long, long time, while I still keep my extremely bullish year-end target of doubling of short-term US rates we need to revisit low-end of Q4 range in rates first on the combination of lower growth expectations but also "flight-to-quality" and finally the oversoldness of Fixed Income relative to equities.

The bullishness in stocks may be over soon - yes over! There is 50/50 chance though, that we need to move into early March before it really happens but I have had a few early warning signals lately:

SPX w. MFI channel


Note how the MFI - Money-Flow-Index has broken down, always the first warning signal!

Meanwhile in Freight-land - where we transport all this great global growth we are now at levels not seen since............drum roll ….... Low in stocks in mid-2008!

Meanwhile ----- The growth Asia currency of prefence: AUD is coming down hard.....


And in CONSUMER-land, THE consumer stock Wal-Mart brok down technically yesterday?



What is all means? I do not really know to be honest except there is more friction in the market than perception dictates - personally, I think this market is high on "guaranteed puts" on the market - Capital rules, BIS II+III, solvency et al all dictates the CREDIT CAKE will be smaller in 2011 and going into 2012,, meanwhile NO ONE is doing anything to attack the structural issues, can this continue through 2011 ? Maybe, but keep watching the marginal-cost of financing..........

I'm off to Germany for two days, back post the Portugal auction.