In this morning’s Asian Wall Street Journal, I came upon an opinion story entitled “A Suckers Rally?”  It was written by Mr. Andy Kessler – a former hedge fund manager, so the story was worth reading.  The central point of the article was that this rally in Wall Street was engineered by the U.S. government so that beleaguered American banks could raise new equity.  As you’ve probably been reading, since last year, U.S. banks – and some Europeans as well – have been struggling with tons of toxic assets which have effectively depleted a lot of their capital.  Without capital, banks are not able to take risks; hence, they can’t give out the much needed loans that the economy needs to finance its way out of recession.

The writer said that the U.S. Treasury and the Federal Reserve have adopted on a policy of “no more failures” and would be willing to pump out as much money as it takes to carry out this policy.  The underlying economy, however, remains lethargic to this day and any prospects of growth will be one which will not create new jobs. The money that’s coming out of the Fed, which is termed “Quantitative Easing,” will not go to “home building, coal-fired electric plants or auto factories.  They will just be going to the stock market” he said.

To some extent, I would agree with Mr. Kessler.  There is very little point in allocating a large portion of a portfolio to U.S. assets today because, as he claims and I believe him to be right, production in America will likely be stagnant for some time to come.  In short, value cannot be significantly created in those United States – Obama or Nobama.

Now let’s turn our sights on Asia and thePacific.  This region has been the source of practically everything the U.S. buys and consumes –  from coal and minerals, to auto parts and automobiles, to watches and apparel, to even back office services and imported physical health-care providers.  Doesn’t that tell you where houses will be built, coal-fired plants will be erected and where automobile plants be cranking out vehicles.  Even now, GM China is the only profitable unit of the once revered car company.

Yes, the rally in Wall Street may be for suckers, but this one in Asia ex-Japan, is for real.  The real suckers are probably the ones who are putting cash into the U.S.  The hard-nosed no nonsense investors are heading east.

The PSE index closed up 29.7 or + 1.32%.  The markets in the region except Australia are all up as well.

TEL was abig winner today closing at 2310.  To think it was just 2170 last monday.  It looks to me that TEL is benefitting from the big money move into Asia.  GLO was similarly strong at 870.  Pepsi (PIP) finally made its move closing at 1.30 after trading as hihg as 1.36 at mid-session.  PIP was 1.14 last Monday and 1.20 on Tuesday.

We’re seeing consolidation from some strong movers such as MBT, BPI and BDO while EDC, FPH and FGEN were well bid in late session.

I don’t want to make conclusions on who the suckers are in this rally.  It’s been pretty good to those who came in early in the trend.  I’ve always seen trends make their way through to sensible levels because that’s what a trend is, a move that everybody follows.  One must not forget, however, that at some point, you don’t make money by simply doing what’s popular.  One must realize that to consolidate gains, one must decide to move away from the crowd.  The smart investor should know when.

Have a good day.

7:45 pm Manila Wednesday

Looks like Hongkong reversed early gains to close down 0.55%.  Most European markets are also down. Dow futures pointing to a lower opening in Wall Street.  Perhaps many are reading Andy Kessler’s WSJ article.

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