I started covering my shorts since last week, gradually taking profit of between 10 - 20%. Now I have 2 short positions and 5 long positions. On hindsight, I may have been too eager to see the rebound and was not patient enough to let my winners run. Nevertheless, markets have been heavily oversold and a short term rebound is imminent. Beyond that, it's very murky.
Marc Faber said that there is a 100% chance of a global recession in 4Q2012 or latest 1Q2013. That means stocks may have seen the highs for 2012 and any rebound will be an opportunity to exit rather than to buy more.
http://marcfaberblog.blogspot.fr/2012/05/100-percent-odds-of-global-recession.html
I tend to think that a recession may occur sometime in 2Q or 3Q2013. After the US Presidential election is over, the budget will be tightened. It will take two consecutive quarters of declining GDP growth before a recession is recognised. That's called a technical recession. Two consecutive YOY drops in US GDP may occur as early as 3Q2013 as well. This means that stocks may peak in 4Q2012 or 1Q2013. In any case, the ISM numbers in the US, PMI in China, India, Brazil and Russia are still rising. So this correction may not be as bad as in Aug 2011.
I went to London to look for some properties. Took the Eurostar from Paris to London. The mood in London is remarkably better than Paris'. In Paris, you can smell urine on the streets, in the metro stations, sometimes on the streets. The buildings in the inner city are very old, and looked like their are in dire need of a whitewash. They are all of the same height, which is the brainchild of Houseman. However, it also prevents regeneration of slums. Imagine a home dweller or a counsel flat living in prime property (near Champs-Elysee or Notre Dame) who refuses to move out. If it's a counsel flat, only the government can move them out. If it's privately owned, no developer can purchase the project and build higher, so that the city centre is more densely built. As a result, Paris is spreads out sideways. You cannot see spanking new residential and commercial buildings in the city centre. If you're an architect and aspire to design the most beautiful modern building, you have to head to London where they are building the Shard, the Gherkin etc.
France has very high corporate, personal and estate duty taxes. As a result, it drives the wealthiest and smartest away from the country, to Singapore, London and the US. If you're hardworking, intelligent and good at making money, why contribute 30 - 50% of your hard labour to the state, only to see it get paid out in unemployment benefits? So investments into France is very little because corporate taxes are too high. If you cannot attract investments and talent, employment opportunities will be poor. perversely, it attracts the poor, those who have little relevant skills into the country. You can see many people from third world countries who are wandering the streets, obviously on unemployment benefits. There are brilliant people from third world countries but France will fail to hold on to them.
It is a great pity that France is stagnant because they had huge advantages in terms of culinary skills (it has stagnated though). It used to produce very good cars, construct the most beautiful buildings etc. More later about London...
