Yves Lamoureux: We are asked if now is the right time to step up and buy Russian stocks (NYSEARCA:RSX). Many TV figures had proclaimed for many months that Russia was one of the cheapest market in the world.
This is true but today it is cheaper than ever. Those TV commentators are in hideouts.
There is more to buying stocks than just on the basis of cyclically adjusted earnings. We have demonstrated our love with a few emerging markets that carry a low CAPE number. Yes we do take it in consideration. However the macro picture is one of strain as stimulus is removed.
It would not matter how many times we have tried to convey our point but it goes unrecognized. The unwind of carry trades is accelerating a hard drop in money growth. While looking at the annual change rate it has gone negative. This is why we have turned very bullish on duration. We carry a 10% allocation to long strip Treasuries. We are probably the only forecaster that holds the view of 10 year bonds reaching 2.25% by summer.
We have looked at the Ruble. We think it can easily drop 10% to 15% more. Technically speaking it appears to have formed and inverted head and shoulder in a general sense. The recent break out would suggest therefore more pain for the currency.
Typical of the environment we are in is the fact that markets get oversold but keeps dropping.
This is something that we have often reminded people when gold was dropping. All market observers kept insisting that sentiment had reached bottom. They failed to read between the lines.
In a regime shift the range of sentiment gets shifted lower.