[DcifrThs]

not to take credit away from morgan stanley, but others (including myself) basically said this exact same thing a while ago.

i said i was neutral on equities since fundamentals were about neutral but flow and intermarket action were positive. add in risk factors and you'd get neutral to slightly negative.

global real yields are definitely still too low and i mentioned rates should be rising before they fall. so neutral equities & short bonds. the tougher call to make is the diff bets among developed world government bonds.

diff bets are extremely valuable since they are almost uncorrelated with each other (maaaayybe very lowly positively correlated in some instances) and almost certainly uncorrelated with all directional trades. thus they provide a good area to generate uncorrelated alpha streams.

europe, britain, japan, canada & the US are all likely headed higher with rates in the near term, however it seems europe & canada will move faster than the US, possibly along w/ britain while japan awaits stronger economic signals before pushing up rates again. so i guess that would put me in the long EURvUSA, long CANvUSA, very slightly long UKvUSA, long USAvJPN, long CANvJPN, long UKvJPN, long EURvJPN and neutral most other spread pairs (long as im using it here indicates that the spread between the two will widen as the first in the pair raises rates faster than the 2nd. in trading terms though it would mean being more short the first than the second. i didn't include australia b/c i forgot but i'd put AUS long v JPN, and US and slightly long to neutral vs. the others. one factor to watch here is the size of the carry trade to AUD assets)

back to the risky asset argument...given where we are, there are many factors that can lead to a sell off and very few that would lead to an extension of the rally. the post i made about global risk premia being squeezed suggested that now may be a time to move from risky assets to cash in active portfolios as a correction in asset pricing may be around the corner...especially with respect to credit spreads as an increase in risk aversion would affect those disproportionally more.

glad to see MS has jumped on the bandwagon [img]/images/graemlins/tongue.gif[/img]

[/brag]

please feel free to comment/correct anything i've stated above.

thanks
Barron