Thisyear,saysWallStreetveteranByronWien,investorsmayfinallyfocusontheattractivevaluationsofdozensofmedium-sizedcompaniesinamarketsellingatonequarterofits1989high。

NotethattheTSESmallIndextradesonaprice/bookratioof0。

77times。

Thatsgottomakeittheworldscheapestindex。

SellTreasuriesmakesperfectsensetoo。

ButinBritainyoucanswapTreasuriesforgilts。

USinvestmentgroupPimcoisalreadygettingstarted?

Thisweek,itsaiditwillbeanetsellerofgiltsthisyear。

Why?

Supplyanddemand。

Oneofthebiggestbuyersofgiltsoverthelastyearhasbeen–viaquantitativeeasing(QE)–theBankofEngland。

WithQEending,theprivatesectorisabouttohavetotakeuptheslack。

Andwhatalotofslackthereis。

TheDebtManagementOfficeexpectstoissuearound£190bnworthofgiltsin2010/2011,while,withanelectioninmind,GordonBrownhasbeenunabletoexplainexactlyhowhisgovernmentplanstoreducethespeedatwhichweareaddingtoournationaldebt。

Onthecurrenttrajectoryofborrowingandspending,saysPimcosheadofglobalportfoliomanagement,adowngradetotheUKscreditratingisnolongeraremotepossibility–itisamatterofwhen,notif。

Allthismeansyieldshavetorise(wewillhavetopaypeoplemoretotakeontheriskoflendingusmoney)andgiltpricesareboundtofall。

Sosellgilts,buyJapanseemslikeagoodtradeofthedecadetous。

ButIveanotherinmindtoo。

ThereisaconsensusthatthiswillbethedecadeoftheEast。

EverysinglepunditoutthereistalkingupAsiaattheexpenseoftheWest。

Imnotsosure。

China,thesupposeddriveroftheriseoftheEast,hasitsownproblems:hugecapitalmisallocation;agrowingassetbubble;anageingpopulation;toomuchsparecapacity;iffyexportmarkets;uncertainpropertyrightsandacorruptbureaucracy,tonamebutafew。

EveniftheChinesegrowthmiraclebothexistsandcancontinue,weknowGDPgrowthisntalwayscorrelatedwithstockmarketperformance,particularlywhenthestockmarketsinquestionarealreadyexpensive。

Soifyouwanttostickwiththeequitymarketsandfeellikehavingacontrariandecade,howaboutthistradeofthedecade:sellEast(exceptJapan),buyWest。

Moreonthisnextweek。

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