June 1st, 2009
06:00 PM GMT
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June 1st, 2009
09:49 AM GMT
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HONG KONG, China – If Rip Van Winkle awoke today from his 20-year slumber, imagine his take on this week’s events.

 He went to bed watching the bloody crackdown on democracy advocates in Tiananmen Square. He woke up to see U.S. Treasury Secretary Tim Geithner, hat in hand, assuring Beijing the U.S. dollar remains strong and China’s more than $750 billion investment in U.S. treasuries is safe.

 Other eye-openers as he drank his coffee and flipped through channels:

  •  General Motors, the largest corporation in the world in 1989, filing for bankruptcy.
  • In Germany – that’s right, Germany (“East” and “West” no longer apply) – the financial savior of car maker Opel, a piece of the GM empire, is a Canadian auto parts maker and Sberbank, the largest bank in Russia. Not to be confused with the Soviet Union.
  • The shocking second-place finish of YouTube sensation Susan Boyle on "Britain’s Got Talent."

 "What happened to all the Commies?" might be Van Winkle’s first comment. His second: "What’s YouTube?"

 Van Winkle would be most surprised by what passes as global threats these days. Sure, global warming, terrorism and "rogue states" with nuclear arms are bad. But for Mr. Winkle, what an improvement it must seem over the Cold War and the policy of Mutual Assured Destruction (MAD) between the U.S. and the Soviet Union.

 Now a Russian bank is buying a piece of GM. China bankrolls a large part of U.S. debt. The credit crisis must seem like a campfire chorus of "Kumbaya" to Van Winkle, as one-time adversaries snuggle together and trade assets.

 Twenty years ago, the chorus of "We Are the World" would still be fresh in Van Winkle’s mind. Better than any 80s pop song, the credit crisis reveals how true that has now become.



June 1st, 2009
09:44 AM GMT
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LONDON, England - The stock market rally off the March lows, has been nothing short of spectacular.

The FTSE All World Index has shot up more than 60 percent. At several conferences I've attended, the majority of those I've asked, seem skeptical that the rally can be sustained, and for many they wouldn't be surprised if the market retests its lows.

Some don't believe it will, that the forced selling by hedge funds and others is past. But a Barclays Capital survey shows that six out of 10 respondents think the current rally is a "bear market rally." The survey includes asset managers, international corporate customers, hedge funds, and central banks.

Furthermore, fewer than five percent of those surveyed believe there will be a "V-shaped" recovery over the next year. That is, a sharp downturn followed by a sharp rebound in economic activity.

The majority - nearly 70 percent - think either you get a "W-shaped" recovery, that is a temporary rebound followed by weakness, or a "U-shaped" recovery, which means growth remains anemic for sometime before you get a gradual recovery.

As I mentioned in my last blog, many of those I speak with believe a sustained recovery is at least 18 months or further away. The Barclay's Capital survey would seem to reinforce this view.

Any sharp set back in the market would of course be damaging to consumer confidence, further undermining the timing of any economic recovery.

The bulls will argue that markets always anticipate recovery. But what the professionals in the Barclay's survey, and my own informal polling suggest, is that this rally may be ahead of itself.

 What do you think - is this rally a bear market trap?



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