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Markets 'Trying to Catch Falling Knife': Fund Manager

Wednesday, 7 Sep 2011 | 5:20 AM ET

The current market volatility and uncertainty has made finding what to buy even more difficult, Pedro De Noronha, managing partner at Noster Capital, told CNBC.com Wednesday.

"There are three things you can do as an investor: buy something; sell something or not invest in something. This is the best time not to invest," he said.

"Trying to catch a falling knife is probably a very profitable endeavour if you can catch it close to the bottom, but, to some, you can wait and see where it crashes into."

Assets previously seen as safe havens, such as the Swiss franc and gold , fell Wednesday after the Swiss National Bank (SNB) announced Tuesday it was pegging its currency to the euro and putting a minimum exchange rate of 1.20 francs to the euro.

The euro zone debt crisis has come to the foreground this week, with Italy and Greece in focus.

"Either the Germans accept the notion that, without a euro zone bond backed by the strongest nations of the EU, the peripheral countries will have no way out, or we are going to have a problem," said De Noronha.

There are renewed concerns that the developed world is headed for a second recession in three years.

"The market is pricing in a decent chance of recession, and the data is 3-6 months behind," Domenico Crapanzano, head of European rates sales and trading managing director at Jefferies & Co, told CNBC Wednesday.

"The markets are telling you that's where we are going."

Markets Telling Politicians They've Had Enough
The markets are telling euro zone governments that they have had enough of changing policies on the debt crisis, Pedro De Noronha, Managing Partner, Noster Capital, tells Squawk Box.

De Noronha, whose fund was down by around 2 percent in August, said: "Events are moving too quickly. Governments keep changing the rules in the middle of the game.

"This is the time to be nimble and absorb the events that are coming. You don't need to be in the market all the time."

He added that he could come back into the market next month or next year, depending on events.

One event that could bring him back to the market would be a further round of quantitative easing in the US.

The markets are watching the US Federal Reserve for any hints that it might intervene in markets again, either through another bout of quantitative easing or through a twist-type operation, where it would sell shorter-dated Treasurys in its portfolio and buying longer-dated debt.

"The markets have finally said: 'Enough!'" said De Noronha. "We are not going to fall into the trap of constant austerity measures and then discovering six months later that you have lied about them."

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