I have been shorting stocks since 5 Aug 2011. I shorted the Direxion Triple US Small Caps from USD65. Today it is at 28. Not bad for 2 months' work. Chart patterns show that most stock indices are about to break down another leg by between 18 - 25% down. Credit spreads have shot up again.
It's not about the Euro crisis any more. It's the lack of growth. Something that QE cannot resolve. There is no fiscal stimulus left to pull the west out of the crisis. Deleveraging of households in the west is stalling consumption and the governments are too bankrupt to help. The western governments have in the past resorted to populist policies. They promised the electorates free stuff that they know will have to be borrowed in expense of future growth. Fiscal stimulus at this point, at least a massive one that will stave off a global recession, will lead to massive debt downgrades and debt to GDP levels that are unsustainable in future. Interest payments will kill off future GDP growth. Had the western governments been more prudent in the last decade, fiscal stimulus would have been viable. But not now.
Even if the Euro crisis is resolved, focus will shift to the recession in the US and EU. Also, another big unknown is the Chinese banking crisis. As much as 30% of bad loans can turn bad. There may be large scale nationalisation of Chinese banks. The nationalisation of European banks may be a foregone conclusion.
2012 could be a worse situation than 2008. It could be the biggest, longest and deepest recession the world has ever seen since the Great Depression. Continue to short. Continue to buy more CTAs like Winton and Man AHL Trend. It could be a very bad one.
Other than CTAs as you've mentioned, which is an alternative asset class, should we be looking at bonds in particular asian bonds as well as gold?
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