Tuesday, January 4, 2011

Market Update: Time to Get Net Short or Get Out of U.S. Equities and Commodities

The U.S. Federal Reserve confirmed our prior analysis, that the U.S. Economy has not recovered from the deep recession. While we have previously stated that a double dip recession is a foregone conclusion, we are now convinced that the U.S. economy is already well into the dip of recession and the Equity markets are massively overvalued. Accordingly, we have moved to a net short position in the U.S. Equity markets.

We see the volatility skew substantially weighted to the downside and as previously advised we see no fundamental economic drivers to sustain cash flows across U.S. Corporations in 2011. The market is substantially overvalued at the corporate and raw commodity price levels.

We see any price appreciation a purely speculation by trading houses and hedge funds.

Recommendation: Reduce capital at risk substantially or get "net short" the U.S. equity market and avoid Commodities outright. Commodities are not trading on demand fundamentals and are due for extremely volatile sell-off across the board.

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