COTD -- Cross-Border Equity Portfolio Flows

Source

When fear and volatility enter the stock markets, investors are particularly quick to sell off their international investments in overseas stocks.

However, Ian Scott, Nomura's Global Head of Equity Strategy, argues that these types of sell-offs are often followed by sharp, rapid rebounds in those very same equities.

Scott notes that the current international equity flow metrics are unusually negative, which is an argument to buy.  At the current level, the only time it would've been too early to buy was during the Lehman Brothers crisis.

Once again, investors have responded to the crisis environment by pulling in their horns, and repatriation has, once again, been the prevailing response. The degree of flight from overseas stocks in the three months to October is on a par with the three months prior to the Lehman bankruptcy – things then subsequently deteriorated further, reaching a nadir in October 2008 – and the three months after the stock market crash in 1987.

As mentioned above, since the nature and timing of these past crisis periods is so different, comparisons are fraught, but one thing we can say here is that the impact on international investor sentiment has been pronounced and their behavior is on a par with that during some extremely stressed periods. History suggests that these occasions are good buying opportunities and the market typically recovers quickly. The exception was the Lehman bankruptcy, where investor deleveraging in international markets became more pronounced and took a further five months for stocks to bottom.

historical gold prices

Also, GREAT zerohedge guest post on Gold:

Is Gold Still the Answer for Investors?

Though late to the party as usual, the proverbial man on the street – along with members of mainstream media and Wall Street heavyweights – is finally waking up to the decade-long, 700% increase in the price of gold, joining a growing buzz around the monetary metal. From questions whether gold is in a bubble to predictions that soaring prices are just around the corner, one thing is clear: a new phase of awareness for gold is upon us. How far might it move before these troubling times are over?

The Big-Picture Economic Environment

Kicking things off, I would like to explore several themes in order to put the current economic situation in context.

Mohamed El-Erian

If you're going to listen to only one person, Buffet might be it, or this guy.



zerohedge's intro: Something tells us that Mohamed El-Erian is aware of the bulls' last bastion of "growth" and "decoupling"- the dip in Initial Claims below 400K. Even so, his appearance on Bloomberg TV was full of sound and fury, and some quite memorable soundbites, starting with this one: "Let me tell ou what I find most terrifying: we’re having this discussion about a risk of recession at a time when unemployment is already too high, at a time when a quarter of homeowners are underwater on their mortgages, at a time when the fiscal deficit is 9%, a time when interest rates are at zero. These are all conditions coming out of a recession, not going into a recession." The Newport Beach dweller is spot on: the situation is getting worse by the day, and the only option left is to do more of what has already failed so many times, and which only makes non-dilutable transitory monetary equivalents that much more attractive (with the mandatory liquidation which may bring them to triple digits first of course).