Saturday, September 22, 2007

Market watch: Play it again, Sam

It's a sense of Deja vu; the asset reflation theme is back in play. The way things are shaping up again is so familiar. Money is going to be cheap again as the decks get cleared for another round of global asset-price inflation. I call it the 'vaccine' syndrome: The poison and the cure are the same. Cheap money creates the problem and cheap money is the chosen way out of the mess.

The dollar's weakness and cheap money are both fuels that will stoke the commodity fire. Real estate prices too should rise, at least in theory. Commodity and realty stocks have already started responding in the last two sessions.

Realty is truly high beta so you will see very sharp swings, maybe even irrational ones but they have the baggage of high valuations and demand (and supply!)issues to grapple with. But the reflation trade is on and it may make sense to swim with the flow, at least for a while.

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