The Year 2007

For a year which had a remarkable number of blowups in the all important financial complex, for a year in which credit markets have remained frozen for half the year, one would have thought being in cash was a good strategy. WRONG. Everything is up. Nasdaq is up 10%, Dow 7%, S&P 5%, Hong Kong 39%, India by a similar amount, and what not. A smart person should have seen the policy responses from the Fed and ECB to the unfolding crises and taken appropriate positions. At least I made money in VWO.

How will the markets turn in 2008. It is a difficult guess. I think we have entered a phase in which "the sequence in which events unfold determines what events actually unfold." If the unemployment report in early Sep had come out with a -4K job gain (subsequently revised up), Fed might not have cut 50 bps, and the world would have been a different place.

One needs to be on the lookout for 2 things this year:
a) Will inflationary pressures cause the Fed to increase rates later this year?
b) Does China growth slow down post Olympics?

I am thinking of buying some Russia ETF. It is a play on oil.