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Macro rotation in financial and economic activity: Where is the opportunity?

On Ideas in the Making

US markets delivered truly outstanding, amazing results last year. On average there was no better place to be invested, optimism reached new highs and everyone is convinced a recovery is in play, even though for some reason or another people still talk about how times are tough.

Those who own stocks have seen their assets go up incredibly from the insane market bottom that was 2009. 2011 saw another pullback and now 2013 has been crazy. But the question is, can the US continue to deliver such outstanding returns on investments? or even a better question is, was the insane returns justifiable? The US economy isn't substantially better, and defintely not 30% better, and the outlook is still somewhat hazy. Although most people would agree a modicum of a recovery is happening, real wages, unemployment and the like continue to improve rather slowly.

From a technical standpoint, US markets haven't touched their 200 DMA average in around 400 days, and haven't been below it for any significant amount of time since 2011. The markets experienced a pullback last few weeks, but have quickly readjusted. the question is will this adjustment go through? how far will we go? Noone knows the answers to this question, but in my opinion, a macro rotation is at play.

What do I mean by macro-rotation? I mean I a long term money flow cycle is slowly changing, and it will effect just about every kind of money flow imaginable. Bonds, equities, commodities, emerging markets etc.

It all starts with the falling of U.S. Hegemony. Last year We saw the number one indicator of the U.S. hegemony take on a massive reversal, that is the 10 year treasury yield began to break out of long-term decline. it is uncertain if the breakout will continue, but one thing is for sure, demand for U.S. treasuries is beginning to wane. At the same time, The US dollar index has also began to wane, even though there has been an insane amount of money tied up in he U.S. dollar the past couple of years as the dust settles around the world and investors consolidate.

Maintaining a diverse portfolio

On Sharplayer

As the UK football season draws to a close, a lot of advantage players worry that the next few months will be quiet ones in the sports world. Thats because 80% of sports advantage players make 90% of their wagers on soccer markets. Infact there is almost always a major sporting event running, creating value opportunities for the more diverse player.

This summer we'll see the Brazil World Cup, which should keep the football bettors busy throughout June, but we have to wait until September before the major European leagues get started again. Since becoming a full time gambler, I've found I have diversified the sports I wager on far beyond football. For example, I spent most of this morning creating a book for the Golf Players Championship which will take place this weekend. Then theres the snooker which has just finished, and several great tennis tournaments over the summer months. Add to this baseball, american football, ice hockey, and theres more than enough value to keep us ticking whilst our domestic teams take a rest.

This is another example of why it's important to continue to cast our nets wider than we find comfortable. Discovering opportunities in new sports is difficult, time consuming, and risky. However once you have established where the value presents itself and what the rule differences are between books, it's just another angle to add to your armoury.

I'm still negative for the month at the moment, but came very close to poking my head back into the green earlier today. Unfortunately this was followed by another bad variance swing, but at least we're only in 3 figure numbers again now (just). Hopefully we'll be out of this soon and back on track.

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