Geoff Cutmore - Morning Thoughts

On Catching Knives, Pianos and Bouncing Safes

The markets have their own lexicon and volatile markets generate their own chapter of colorful metaphors. This last week we have been treated to exhortations not to catch falling knives, falling pianos or any other objects which would cause severe pain if diverted from their gravity-bound course.

My favorite from this week was a technical analyst who insisted "everyone knows its not a good idea to catch a safe until it has bounced twice."

These comments are interesting because they are the spear carriers of market psychology. Gone are recommendations to buy the dips and trade the momentum. The market mindset has changed. Sentiment is clearly fragile, but, and this is the critical point, not yet bearish. There is still too much money out there. I am mindful of our recent interview with the Norwegian state wealth fund which has in the past few months raised its weighting in equities and will continue to buy into this weakness.

Doesn't private equity still have tens of billions available to spend? At some point they will have to put it to work or give it back! This supportive dynamic for the market has not gone away even as credit facilities have contracted. OK, the industry may have issues shifting leveraged paper, but there is still business to be done.

Two themes that have come shining through in recent days in the interviews we have been doing on "Squawk Box Europe."

1. There will be some further disclosures of credit-related problems at banks, hedge funds etc. If this looks like affecting U.S. growth, the Fed will cut rates.

2. The smartest people are licking their lips hoping to buy some stuff at fire-sale prices. And interestingly, a lot of people are getting excited about tech again.

The key is still liquidity. But it is out there and is still looking for a cash-plus return.

Feedback welcome - here.