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Markets...Reasons to buy ~ Open letter to the press

Tuesday March 4th 2014

Markets...Reasons to buy
Yesterday saw a dramatic move to the downside with the majority of developed and emerging markets enduring massive retreats. How curious that the first trading day of the first three months in 2014 has seen "Rivers of Red" flood the fortunes of finance!  Only China and Nigeria made headway.
Today we awake to hear that President Putin has ordered the troops on military exercise back to base. That is a welcome reduction in the tension and as a result we are enjoying the glint of green run back to equities as cash markets open and futures indicate how the US will trade later today,

However, the tension is not gone...Russia has troops spread across Ukraine's northern and eastern borders ...they could at any moment sweep in to launch an invasion. 
That said, financial investors have to deal with what is and work within a small locus of possibilities otherwise we would never do anything. Waiting for the ECB or the Payroll is bad enough as an excuse.Of course the situation in the Ukraine is serious; it is a potential tinderbox, but the sell off yesterday was a panic reaction. Trying to parallel 2014 with 1914 is nothing more than a curious, creative historical exercise. one has to expect, that with the power of globalisation to harm trade and the ability via satellite technology to have real time information...plus the weaponry that is available, sensible heads will prevail.
On that basis Spotlight Ideas looks at Monday's sell off as a wonderful opportunity to pick up cheap stock. The VIX at 16.52 has been seen many times before and it does herald a sustained retreat in equity asset values. One has to be booking the VIX at 22+ for several consecutive sessions for there to be a real risk.  Please our paper "Vicissitude and the VIX" from February 5th.
We are buyers of equity assets and make a preference for the cyclical sectors which have been improving steadily since June 21st last year (Spotlight Indices). This is a time when we sense that assigning a greater weight to "Specific Risk" is better than to "Market Risk".

Stephen Pope
Managing Partner ~ Spotlight Ideas
++ 44 7931 543 740
++ 441255 863612
SKYPE:   stephen.pope59
Twitter:  @pope_stephen

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