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For a few days last week, Crispin Odey, arguably the world's most bearish hedge fund manager, felt vindicated when the very structure of the market appeared to be disintegrating before our very eyes, when a relentless liquidation panic by vol-selling machines seemed unstoppable and humans could only watch in horror and pray that someone would step in and BTFD. Then abruptly as it started, the selling stopped and the relentless low-volume, central-bank mandated grinding levitation that has become the hallmark of this "bull market" returned and last week's correction is fast on its way to being relegated to the "crash" compost heap of the traders' collective subconscious.
Or maybe not.
Letter - Clients - Pick - Odey - January
In his latest letter to clients - who were pleasantly surprised to see a modest pick up in Odey's January performance - Crispin Odey wrote that there is one potential catalyst that will decide over the next few weeks that will determine whether the market slide is indeed over, or if what follows is continued risk asset pain, another market correction, and ultimately a recession: namely, whether investors, comforted by record high credit card balances and the promise of surging stocks, will retrench and start saving again after last week's stock market scare:
Whether the fall was the herald of more bad news to come out of financial assets, the next few weeks will tell. High asset prices have driven down precautionary savings. Will a fall in those assets be sufficient to cause savings to rise sharply – a classic reason for a recession – that is the question?
Logic - America - Savings - Rate - Time
The logic is simple: as we showed recently, America's personal savings rate recently dropped to near all time lows. While this has had a stimulatory effect on the economy - and boosted stocks - there is only so much "deferred spending" that US households can...
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