"To go against the advices of Rod Smyth from RiverFront and David Fuller from FullerMoney is a little bit foolish. Yet, I would not add a dime in these markets because America needs to raise this year $4 trillion in the capital market - $2.7 trillion in Treasury roll over and $1.3 trillion to cover this year's deficit. Europe needs to roll over more than €500 billion in the first half of 2012 alone. Under these circumstances, what will be left on the capital market for EM countries? If you have any doubts, read the late World Bank Report - http://blogs.ft.com/beyond-brics/?p=540791 - in which this crowding-out theory could very well put at risk the financing needs of the 30 EM countries."
David Fuller's view Thank you for this interesting email. The numbers you cite are sobering to the point of being mind-numbingly difficult for most of us even to comprehend. The debt crises and responses to them by governments and their central banks in the west are taking us down unfamiliar paths, with the risk of serious deflation on one side and unacceptably high inflation on the other side.
However, I mean no disrespect in suggesting that your view: "I would not add a dime in these markets…" which is held by many other investors, is a key reason why global stock markets have been recovering since last October. In other words, there is plenty of money on the sidelines and some of it is returning to the markets because perceptions have improved somewhat from the 'global collapse and depression' forecasts frequently heard in 2H 2011.
Additionally, since Austrian School methodology is not being applied by central banks, we can be reasonably certain that monetary policy will remain extremely accommodative for a considerable period. This is a tailwind for the shares of any companies which have balance sheets that are clearly much stronger than those of most governments. In a world of mostly low real interest rates, some of the excess liquidity will flow to equities with good earnings streams, especially if they also pay attractive dividends. Fullermoney has made these points repeatedly in recent months, as the Archives will testify.
Incidentally, Fullermoney does not advise, although we provide our views on a daily basis. With a global clientele, it would be a question of advice for whom? We think most investors do best when they have the tools and information to make their own considered decisions. The Fullermoney Global Strategy Service, with the help of our knowledgeable subscribers, provides some of that information. Our in-house speciality is behavioural technical analysis, which we teach and use to identify and monitor market trends.