I have to admit it. I believed that the stock markets will run until mid 2012 and that we will have a recession in 2013, a long deep one. My basis of recommendation was that the US Treasury Yield Curve was still very steep. Stock valuations in terms of PE, PTB and EV/EBITDA was mid cycle.
Technicals looked very bad however. The austerity measures in EU and the US will drag the world's economy lower, together with Emerging Economies. The downgrading of US debt has forced investors to flee to safer haven; primarily in gold and EM debt.
I have downgraded my asset allocation to only 30% equities, 20% gold, 25% bonds, 25% CTAs...
We are either in the last stages of the bull or a bear market has already started. Charts of most major stock indices and commodities have been showing lower highs and lower lows. The VIX hit 43 this morning. We have witnessed the Dow falling by 550 points or 5.5% at some stage.
History never repeats, it rhymes.
