It's a scam!

The market has found yet another reason to short equities. This time its the concerns over PIIGS! Isn't it amazing how the world has changed over the last 2 years (since the collapse of Bear Sterns). After a deep correction which lasted almost a year we did see some amount of recovery in the global only to challenged by the enormity of fiscal situation in Europe. A lot of people were concered about the "W" and it looks like the 3rd vector of this "W" is about to commerce.

However, PIIGS is a no less than a big scam in my opinion. The fiscal situation in developed Europe has never been good and yeah rome wasn't built in a day. The situation has been ongoing for about a decade now. Fortunately for Europe borrowings came cheaply until the recent squeeze of credit which led to rising borrowing and servicing to such an extent that it became impossible to continue with the fiscal deficits. I don't want to quote figures here because there is nothing new to talk about. I just had a pop on Bloomberg quoting almost a 10% fall for Dow Jones, and couldn't resist writing. I am sure the trading data would reveal something erroneous!

Jim Roger's yesterday said that it is time to short emerging markets and this may work for short- term. I believe the next big thing to happen now will be printing of currecies in the developed world ... my bet is long emerging market currencies and short the developed market one's( a medium to long term view). I believe that the big scam of building fiscal deficits for the sake of socialism is over for now and most of the European nations including UK will have to take tough measures to bring the situation in control. On Sunday, while having our morning meeting we were discussing the effect on Euro and today it touched a low of $1.26. I believe EUR has a bit more to do, with GBP to follow post the election results. USD will be next in line against the emerging market currencies. Commodity inflation is going to be back and I would now start to hold commodities than any other asset class given massive inking's by governments. Bring's me to the view that commodity exporting countries should do well one more time.

For the short term, emerging markets should suffer some bit of pain on the back of increasing govt. paper yields in Europe. Last rally (since March 2009) in the emerging markets has been fuelled by decent foreign flows which may be pulled out on the pretext of de-risking. However, in medium to long run this money should be back in the emerging markets. Europe is a "structural sell" at the moment and if USD loses its power so would be the US. Money in the long run always chases growth and I hope to see emerging markets doing well in times to come.

For now I wait for scamters to compensate .............