The worst is yet to come
In this issue:
» Roubini predicts more trouble
» How will the Dollar perform this year?
» Indian infrastructure gets more money
» Cement industry to suffer in 2009
» ...and more!!
00:00 |
----------- Equitymaster Research -----------
Why buying some "about-to-go-bankrupt" companies
can be the best decision you ever make.
Read On.
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While Mr. Roubini may not be the only doomsayer in an economic environment riddled with uncertainties, what can be assumed with certainty by investors is that the end of the crisis is not very near. Opportunities for making long term profits have and will make themselves available during this period across asset classes and they only need to be cautiously identified. Although there is consensus amongst investment experts that the prices of varied asset classes have almost bottomed out and a rapid recovery is inevitable, the same will be subject to outcomes of several events that unfold over the medium term. Political outcomes, stimulus packages, government policies, earnings results and financial sector news from around the world will be the key defining factors.
00:46 |
The Infrastructure Investment Finance Company Ltd. (IIFCL) will accumulate Rs 400 bn for this purpose. It has already raised Rs 100 bn in tax free bonds and will raise another Rs 300 bn from the same. An investment of Rs 400 bn will stimulate further activity of Rs 600 bn taking the total impact to Rs 1,000 bn.
It may be noted that investments from the private sector has come down to a trickle. Hence, these steps are definitely welcome. Infrastructure building stimulates the core industries like steel, cement and engineering, which then trickles down to other industries. However, as it is so often in India, the key is not how good the plan sounds. It lies in how efficiently it is actually implemented.
01:22 |
In the stock markets, sometimes everything can crash everywhere. As it did in 2008. As per the Economist, the unique feature about currency markets is that no matter how the world economy performs, some currencies go up while the others go down. In other words, it is relative. The demand for a currency depends on investors' expected returns. That can be broken down to interest rates on offer and economy's growth rate.
Source: The Economist |
And what's the outlook for the dollar against other currencies? As per the Economist, the flight of capital from the emerging economies to US treasury notes (Uncle Sam's word is still trusted) is also expected to push the dollar up relative to emerging market currencies - Indian rupee, South Korean won and Brazilian real.
02:15 |
Of course, one should not get too carried away with market caps. Just because stock quotes are precise numbers, they do not necessarily measure the worth of a company or its promoter. With India gradually adopting more free market methods, the country's entrepreneurial energy is finally finding expression. Although the liquidity bubble mistakenly attached ridiculous market caps to this story, we believe it will be an equal mistake to write off India's businessmen.
02:43 |
03:00 |
03:31 |
While you may still struggle to give your verdict, some shrewd investors like Mark Mobius have already given theirs, and not surprisingly, they have chosen the first stock over the other. Curious to know what stock is that? Well, it's the emerging markets index and the second one being the S&P 500 index. Mobius feels that certain companies in emerging market economies like Brazil, China and India are at their cheapest in a decade and it is this cheapness coupled with their growth prospects that will make recovery in emerging markets faster than the recovery in the developed world. And Mobius is not alone in his view. There are some other big names that are of a similar opinion. "As value investors, this is the best time to be investing" is how Mobius chose to put it across. We dare say anything different.
04:12 |
04:25 |
Oil fell 5.2% to below US$ 42 a barrel, after the recent 14% gain, on concerns that a global economic contraction will hinder fuel demand. But with the stalling of the rally in crude and the strengthening of the dollar, gold declined in Asia reducing demand for the precious metal which is mostly seen as a hedge against inflation and as an alternative asset.
04:54 |
Today's investing mantra |
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