Sunday, June 13, 2010

What the blogs are saying June 13 2010

Japan's new PM warns country at the risk of collapse

"Naoto Kan, in his first major speech since taking over, said Japan needed a financial restructuring to avert a Greece-style crisis."Our country's outstanding public debt is huge... our public finances have become the worst of any developed country," he said."

My Notes: This is probably bullish. When politicians accept the problems, they begin to seek solutions. Usually, they are in denial.

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George Soros: Financial Crisis Has "Only Entered Act II"

There is no doubt George Soros is one of the brightest investment minds of the past few generations.
“The collapse of the financial system as we know it is real, and the crisis is far from over,” Mr. Soros said at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”

My Notes: Well, Mr Soros is far smarter than I will ever be. So we should be worried. The actionable part is: Avoid risk. Think long term.

The Chances of a "Double-Dip" are Essentially Nil

Early in the recovery many forecasters, concerned that the nascent expansion was fueled only by temporary inventory dynamics and short-lived fiscal stimulus, fretted over the possibility of a double-dip recession. Now, with the emergence of the sovereign debt crisis in Europe, that concern has re-surfaced. Certainly we recognize that the debt crisis imparts some downside risk to our baseline forecast for GDP growth. However, based on current, high-frequency data — most of which is financial in nature and so is not subject to revision — we believe the chance of a double-dip recession is small.

My Notes: Quite possible. But we have completely contradictory opinions from experts, so we have to wait and find out what actually will work out. Nothing actionable here, since people are bullish, looking to buy, anyway.

Wall street is too bullish, which may be bearish

Ritholtz,com reports a Barrons survey of 13 market analysts from top names like Deutsche Bank, UBS, JPMorgan, Oppenheimer, HSBC, Bank of America, Credit Suisse, Goldman Sachs, RBS, Barclays, Bank of Montreal, Morgan Stanley and Citigroup.

All 13 are bullish on the U.S. stock market forecasting gains between 8% to 26% for the year (over 2009).

Barrons says "What really caught our eye, though, is that not a single one of these worthies was bearish. Which strikes us, of course, as enormously depressing.”

My Notes: May not mean much. This is mainly a proof that most blog authors remain bearish. We should look at the charts, understand the risk, then trade or invest accordingly.

$34 Billion Asset Manager Says Market Prices Are Manipulated

•The US equity markets are meant to facilitate investors' allocation of capital to businesses, thus expanding production and improving the quality of life in America.

•The markets have strayed from this social purpose, and presently resemble casinos more than orderly markets. As a result, the economy is hindered, fewer jobs are created, and reasonable returns for true investors (not traders) are compromised.

•The property rights of creators of intellectual capital are being systematically and openly ignored by the exchanges and certain market participants. The order originator's hard work, ingenuity, and prospective returns are being taken and sold by those who did not create it.

•Whereas trading was once a means with which to match long-term buyers and sellers of businesses, trading has now become an end in and of itself.

My Notes: There is a lot of philosophy in this, but I agree with most of the contents. The stock markets, world over are beginning to resemble a casino. The purpose of the market was to help in capital formation and economic growth. Now, it is becoming a gambler's den. Pity.


Felix Zulauf is Mega-Bearish in Barron’s June Roundtable

Zulauf is mega-bearish, more so than I remember him being in either January's magazine or in any prior issue.

Why this is troubling is that Zulauf's been pretty damn good, better than most of the other Roundtable prognosticators, from what I remember of recent editions.

Basically, he's saying (paraphrased):

The pain in European states has been peripheral, now the contagion will penetrate into the bigger, more important countries.
The only real shot of a stock rally is when another stimulus is attempted or when more money is printed, but these efforts will produce only a temporary bump.
The potential upside for equities here is only 5%, the downside looks more like 20%-ish.
Even gold will correct because the party got too crowded lately, but it should be bought close to $1000 an ounce when that happens.
US Treasuries are a good bet for the intermediate term (2 to 3 quarters).
Blue chip stocks should only be bought if one's time horizon is 10 years or greater, anyone with a 1 to 3 year time horizon should watch from the stands.
The stock market will make a lower low than the March 2009 bottom after more attempts to stimulate fail. He notes that we are trading at 2 times book value now (1096 vs $500) and that stocks didn't bottom until they were trading at half of their book value during the Great Depression.

My Notes: What can I say? I am bearish on the markets expcting a corretion of the 2250 to 5400 upswing. We can see a higher high and then correct or maybe we are in a correction. Only time will tell. Following our charts makes it a bit easier.


sahil said...

Nifty looks good now n seems it wants to go up. But lets concentrate on US mkts as comparatively nifty looks overbought. It took many month for DOW to reach 11400 from 10000 n took few days to hit 9800 from 11400. Bear mkt range was arnd 8000. 11400-9800=1600. and 9800-8000=1800. So if Dow was to corrcet more on any bad news, how much time will it take to enter bear mkt? I think we havnt forgot 2008-09 yet. It takes no time for mkts to correct 10-15% in 2-3 trading sessions. doesnt matter what DIIs think n if retailers r bullish or bearish. What I knw is that we are not CHINA and I dont listen those who compare INDIA with china. If world mkts correct then FIIs will bring storm in our mkts too

Anuj said...

Thanks Sudarshan ji for big picture view of markets sentiment :)

Pi said...

Can you look at the charts of L&T and comment. Seems to me its breaking out of an ascending triangle. What would your analysis say? What should be targets/stops on a trade taken on LT?

many thanks,