Global Macro Views-

Following the actionable stock and group presentation recently, I want to focus on other global macro views. Just few points affecting crude and interest rates.

Important to note how emerging markets have slowed down recently.


Thailand market collapse recently, Hugo factor in Venezuela leading to a market breakdown and finally lower crude’s impact in many commodity related markets.

Now as for the strong Crude run up and outlook ahead.



Here are my views:


Crude should attempt to stabilize in the first half of 2007 as energy stocks attempt to hold-in. I expect many managers to struggle on accepting an exit level for energy stocks and foresee many claiming to arguments such as "stocks are cheap”.


Evidence of slowing crude is visible by the summer 2006 peak. Clearly the truth behind the supply/demand story is doubted, questioned and seriously being examined by global investors. Again the charts and price showcase this point.


ACTIONABLE CONCLUSION: Not playing the recovery story, awaiting further corrections and may look to get involved following stabilization sometime in Q2.


The US dollar recovery is due for a bounce after being compressed for this past cycle. Slow recovery should continue and reversion from its underperformance versus gold’s . I fully understand that Washington dollar policy plays a big role and a currency call contains too many variables for a timely call. A though call on the dollar but someone has to make it. Anyway, things either go up, down or sideways. 1/3. (Clearly excluding time in this equation).


Similarly, US 10 year yield, should continue its recent recovery along with the dollar.. A run up from 4.40% to 4.77% probably did not receive much attention but “smart money” continues to visualize that upside move. How about the odds of FED raising rates early months of 2007? I am a buyer of that story. (curve ball). Not a consensus bet but makes sense to me.


ACTIONABLE CONCLUSION: Looking for an upside move in the dollar and yields, serving as a surprise fueling the pending correction.

Finally, Crude multi-year strength clearly benefited many US financials companies in the past 3+ years. (Especially brokers).Through my market observation, I continue to see strong correlation between energy and financials. Currently, I am seeing near-term recoveries as opportunity to bet on a downside.


In other words, I favor technology stocks and continue selling financials and energy. Therefore, the ties of "petro dollars" to other aspects of financial markets is viable on the charts and market behavior..


ACTIONABLE CONCLUSION: Long equity ideas from a broad market perspective appear less timely and at risk of pullbacks. Build in trades for short-term actions or low positions on long-term bets.


As for investment strategy: I am sticking with a slow energy and financial markets outlook while looking for a strong rotation into technology. In short, this past summer crude peaked, tech rebounded. A critical shift in the four/five year cycle and tracking these cycles are highly rewarding. Similarly, I like Wal Mart based on a recovering US dollar story- at least as a catalyst. These ideas should materialize later in the second quarter of 2007 and I believe have further sustainability.


Nevertheless, market correction is due in many asset classes and watching Q1 behavior very closely. Also, weakness in crude can lead to global instability and money coming off US bonds. Important to track these petro dollars and its impact on financial instruments. There is a link between “Petro dollars” and US treasuries. These are evident in the macro picture also tying to currencies. Emerging markets feel these points both in debt and equities. Even from US Equity perspective, understanding or acknowledging the macro view can enhance investment abilities.