Pricing in the big one (sell) 2010

Markets like confidence, but that also makes them vulnerable to being tricked. As we saw with the massive rallies from 2008/2009 rallied 80 to 100 percent from lows (we all made money in 2009). The trick was to instill confidence into the makes via monetary and fiscal policy. The US Fed pushed money into the system by lowing interest and buying distressed debt and government debt, the attempt was to bring down the yields on the 10yr at 3.34, 20yr at 4.08, 30yr at 4.24 treasury notes that the market uses to price mortgage/credit rates. The Obama administration (and other goverments) threw money at the consumers via tax credits (cars, houses), stimulus etc. That caused the markets to think that a recovery has taken place, which somewhat occurred. In the sense a consumption type recovery occurred, but it seemed muted ( please refer to low US CPI Prepare yourself (and your portfolio) for a coming debt crisis and a Chinese hard-landing (crash) 2010 - (update 16)). Markets are now trying to digest a current correction that again has had a line drawn underneath falling assets, namely currencies and stocks as discussed in Amazing central bank intervention (FX markets), currency confidence appears to be one of the psychological tactics used by central banks. The theory may be that they can underpin falling currencies and talk up new stimulus issues (refer to the ECB and the 1trillion dollar EU bank bailout) and keep the markets stable (across the board, like a communist/socialist economic model). It has worked but with added volatility.

The currencies that seemed to have had heavy intervention have been the Korean WON, New Zealand Dollar, the EURO, Japanese Yen (selling down rather than up to stave of risk aversion buys) and the Australian Dollar. We had a attempt for the market/s to de-leverage which was halted after the slide in the EUR was imminently underpinned at 1.20/1.21

It should be priced in that a massive deflationary sell off of equities may be on the cards in 2010/2011.

Price in also China's insane property market imploding (refer to their stock market underpreforming in 2009). It will be like a A-Bomb going off on the markets.