If anyone believed that the proceeds of the LTRO were meant to be spent buying bonds in the secondary market, they have misunderstood the raison d’etre of the LTRO.

Singaporeans are obsessive about real estate, much like Americans and Britons were before 2008 burst their bubble. However, while other countries’ housing markets have failed to recover fully, the housing markets of the emerging markets have rebounded and surged past old highs.

Forget about correlations. Here are the conditional probabilities between equity market monthly returns and hedge fund returns as represented by the MSCI World Equity Index and the HFRI Hedge Fund Index respectively.

In investing and trading, easy to identify strategies are rare. Asian convertible bonds in late 2008 are an example, the QE2 liquidity infused rally of 2010, the first LTRO rally, the rebound in RMBS in 2009, are others. The massive relief rally on early 2009 was harder to identify and caught most investors off guard.

The erratic path taken by macro economic data and by asset prices such as stocks, bonds, commodities etc are the confluence of long, medium and short term cycles. The long term cycle took a turn in 2008 and remains decidedly poor.