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Michael Pinhorn - Telecommunications Consultant and Saleha Pinhorn (Languages) (Berkshire) (2009)

A brief update

Posted by jdavis on December 5, 2011

I remind clients that the bearish (insurance policy) holding is the Eclectica Absolute Macro Fund which is doing a sterling job for us.
The DB ‘short’ fund – to use a football metaphor (as my colleagues support a certain North London club whose name sounds, to me, like a comic I read as a boy – is more a substitute who we bring onto the pitch and put in the dugout from time to time, in differing proportions.  Client holdings of this fund are between a quarter and a third of the Absolute Macro fund, and less now as many clients reduced their holding last week.

As we saw, the US market rose sharply last week from 1160 to 1260.

It does appear that we are seeing strength in the US Dollar even while the manipulating central bankers take action to hold it down.  I remind you aswel that if the $ were to soar commodities and the stock markets would likely fall down hard.  It is up c 5% over the last 3 months vis-à-vis the major basket of currencies.

We may see a pullback this week into the EU summit on Thursday and Friday.  If that produces nothing for the markets to applaud, the Santa Claus rally may be extinguished and it could well be the start of the next leg down – which we expect to be much larger than the late Summer fall.  However, as there are technical and fund manager-specific reasons for a rise in December rather than a fall, we’re mildly more of the expectation that the week after this will be positive into January.  On verra.

No change is recommended to portfolios right now.

As I am saying, when discussing these issues at this time, all the politicians are trying to do is kick the can so that the crash doesn’t happen on their watch.  We are at the edge of an enormous precipice.  It does seem highly likely it will happen in 2012 or 2013 with 2012 the more likely candidate.

Once again, the markets are not the economy.  The real economy, globally, is probably in falling GDP now.  The EU is more probably likely so.  Similarly, the UK.

Sooner or later it seems likely the Germans will bow to extreme external and internal pressures and allow the ECB to change its rules and print vast sums of €uros.  This will likely bring down the value of the € and the $ will soar.  This would bring about the collapse in stock markets.

I would rather they didn’t print, the markets would fall anyway due to the recession.  All over, prices of goods and services would fall, making our costs of living much easier.  Businesses would run on lower costs and could employ people.  The economy would reboot after experiencing deflation in goods and services without us suffering a fall in our aggregate standard of living.  The only people hurt long term would be bankers and politicians.

But that is not going to be allowed to happen.



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