A reader reacts to recent CC posts:

I was catching up with reading of CC blog yesterday. Is it all doom and gloom in the US and the UK? Surely there must be some good news out there? I know you don't like giving advice. But what sectors or countries are you focusing on?

Reply:
If you listen to our UK man, the world is ending. It is true that in the UK enough elements to cause economic unpleasantness are present. Similar tale in the US.

The key point is that these are unrealised menaces poised over the next two years to potentially (but not inevitably) cause big headaches rather than a simple cyclical, non-recessionary slowdown. The conundrum is how it all plays out - will the threats unwind gently or violently?

I don't know. But my feeling, based entirely on the manic depressive over-reactions of the markets, is that the economic (if not the stock market) unwinding may actually be much gentler than is assumed in the current fearful climate.

That's bar a demand shock in, say, China. The state has a thorny job to negotiate a successful slow down in infrastructural over-investment; and the property speculation this has sparked in Shanghai is itself enough of a danger before even examining any other overheated sectors.

On the other hand, there's a potential upside (in terms of import demand) from, for example, Japan should they manage to shake off their economic stupor. Indeed, with all the focus on China, Japan has been riding under the radar of many commentators despite its greater economic clout and significance.

Either way, by year end the economic picture looks set to have deteriorated enough to drag down stock markets below where they currently sit. To what degree remains to be seen. Right now, though, the US, UK and global economies are humming (and there's your good news).

As far as positions go, I'll admit only to a speculative punt taken this week on a regional US airline. They have been crucified by the oil headlines and look capable of bounce over the next couple of weeks as petrolhysteriaitis subsides.

But overall, cash is the king position.

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