Awaiting the Pittsburg G20 - walking a tightrope.

* How will the policymakers balance this one?

So, inflating assets to bring balancesheetrelief for the financialsector is the "thing". Sounds to me like this globalposition will need extremely close monitoring and riskmanagement. Problem is, there are essentially no efficient riskmanagement measures at this stage. Misallocations and "total" (state plus private) debt is simply too high. There is a limit as to how much can be offloaded to taxholders. That limit cant be too far off.



* Walking the tightrope
Simply put. If the measures succeed, assetmarkets will continue to rise. Once assetprices brings relief to the balancesheets, the creditplug becomes unstuck.


Once the credit plug becomes unstuck, monetary policy will have to become tight in order to dampen inflation. This will drag assetmarkets lower. Stagflation will become a problem to be solved. In past history, stagflationenvironments have been fought by tight monetary policy and lax fiscal ditto. Consumers purchasingpower will suffer heavily and governments tax revenues ditto.

If the measures do not succeed and economies roll back into recession, there will not be much ammo left to utilise. Then bad assets/debt will come back to bite hard, plunging equities below the 2008 November lows.

Right now we are in a sweet (temporary) spot. Very good balance will be required from here. The probability for success is very much dependent on emerging markets growth.


Markets, Corporates and households are currently trying to utilise (whenever available) as much credit as they can for investments, production, exports and consumption. Investors might join the rally, but I suggest they should be wary of believing the story. Currently, the consensusview is that we have seen the bottom.


* New positions and positionchanges
- Bought NCC stock, the realestatebuilder
- Took profit on my short Usd/Jpy spot



As usual, good luck



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