PANTERA

*'Japan Inc. Is Back . . . China Scorched Earth'

*'Japanese stocks still have a 5 per cent earnings yield in a country with 10-year JGB's at 1.5 per cent. The massive 3.5 per cent equity risk premium compares with 2.2 per cent for the S&P 500. The Nikkei would have to increase another 33 per cent to 22000, to have the same risk premium . . . China's desire to increase capacity without regard for return on capital or rational credit allocation will inevitably destroy foreign businesses in the path of its production. We are long things China consumes (food, oil) and short those competing in their product markets (US autos, non-China steel production).'

VEGA

*'Stronger growth in Asia, particularly Japan and China, and Europe, predominantly Germany, could provide an important upside growth risk to our main US scenario by reinforcing global growth during 2006. . . Even if none of [our expected] scenarios are realised for an extended period, we believe implied volatility will pick up due to growing concerns the economy could go sideways and doubts about new Fed leadership.'

JOHN W HENRY

*'There are significant imbalances that may have to be rectified in the not-so-distant future . . . major changes in currencies because of current account excesses or financials because of the business cycle adjustments will always take time, which means that trends offering opportunities will likely appear as part of the adjustment process.'

PROVALUE GLOBAL DIVERSIFIED

*'Mortgage equity withdrawals in the US have recently seen it spike to $450bn (£254bn), equivalent to 3.7 per cent of US GDP . . That's a huge boost to private consumption that can't continue. What it doesn't mean, though, is that American consumers are stretchedto the limit . . The average American has net wealth equal to six years' earnings and that is much more than they hadin the 1980s: they are veryrich and not in imminentdanger.'