Still looking grim

I am not one of those perma-bears in the Marc Faber mould, but I have been short for the last few weeks (often at some cost to myself).... I'm sure I keep forgetting the mantra - THE TREND IS YOUR FRIEND!!!!!!!

In fact I am actually a believer that the worst is behind us, but the structural problems and the volatility still need to be dealt with and markets have simply run too far too fast.

Anyway, finally into a decent short position on the JSE Top 40 (J200) which looks like it still has some legs.

Reasons that I reckon you can stay short:
- Two bombs in Pakistan this weekend are likely to keep the whole area alert for more tension
- More US troop losses in Afghanistan - the US is caught between a rock and a hard place between Iraq, Iran and having to commit resources to Afghanistan which is becoming a real problem
- On the ALSI on Friday there was a decent downward move and with resources still under the whip, there could be more downside to come - ask yourself why stocks should move up now?

Faber
Speaking of Faber he was interviewed by Bloomberg recently and this is what he had to say:

“You cannot postpone the hour of truth forever,” adding “The next stage is for total breakdown of the financial system and for an economic and financial crisis that will bankrupt governments.”

Strategy wise he continued to beat the drum of buying Asian stocks and gold while selling down the US Dollar and the Pound - I can agree on the pound, I'm less sure on the dollar although I think in time it will be replaced as the global fiat currency.

Playing into this strategy I am still a buyer of the DBXJP and DBXWD exchange traded funds (ETF) and considering using the spreads account to short the pound... the question is what do you short it against? The Euro...? Not so sure.

The Privateer
There is an excellent piece in the latest copy of The Privateer talking about protectionism, trade tariffs, Obama and the Chinese.

Summing it up are these two paragraphs - sound familiar?:

Any student of the depression of the 1930s will be familiar with the “beggar thy neighbour” policies which did as much if not more than any other piece of economic insanity in turning a stock market crash into a decade-long global depression. The infamous “Smoot-Hawley” tariff act was signed into law by President Hoover on June 17, 1930. It did notbring US tariffs into being, what it did was to lift tariffs on 20,000 imported items to record levels to “protect” American business.

Eight months before the act was signed in October 1929, US and world stock markets had crashed. Six weeks before the act was signed, US stock markets had reached what proved to be the top of their post-crash rally. Within weeks of the passage of the Smoot-Hawley act, trade barriers in the form of tariffs and quotas went up across the world.