My knowledge is that, the markets will price in a recovery way before the actual economic recovery takes place.We know that indices are leading indicators. Once the worst is discounted, markets will rally from its lows anticipating that a bottom has been formed. This is what we currently see. For investorys this is an opportunity to make money. For a commoner; he can look at the index to asses future of the economy (even investors do the same). What ever tool we use to predict, visibility towards future is limited (you may be able to predict one year from here. Not more than that). So the current rally conveys something to us. Afterall, if all the known fundamentals are discounted in the prices, then it should be the unknown fundamental that moves the market. We need to make a clear distinction between 'bottoming out of markets" and 'actual economic recovery' as these two factors can differ in time.
By
Thomas Wilson, Analyst, ABN-AMRO
| 09 26 2009 07:47:48 +0000
Well...we saw the US markets rallying 70% plus from its March '08 lows without any major corrections. Though a 10% corrective decline was widely expected that did'nt materialized (we know that majority is always wrong). This indicates the strength of the rally. Money is waiting on its wings to enter the markets. My assumetion is that any decline will be viewde as a buying opportunity. Economic recovery will be slow ang gradual. But now it is clear that it has bottomed out. Unemployment will remain high even during the next one year and may hit 10%. This is mainly because of the inability of businesses to throw open new jobs. Firms are still slashing jobs and are reducing pays in order to survive (as a result of which employee eficiency index remains in green - firms are producing more at low cost). This will directly impact job rates and consumer spending. Added to this is the savings habit exhibited by US consumer. Though this is a long term positive, it has the effect of slowing down recovery in the retail segment. It was from housing segment that the entire problems atarted and now this sector is showing signs of recovery (though forclosures remain high). Single family home sales are likley to pick-up gradually and existing home sales are already on the rising (at the cost of lower prices). Dollar is a poor casuality of the crisis and is lilkely to remain weak in the short-term. We can remain bullish on the US ecvonomy.
By
Thomas Wilson, Analyst, ABN-AMRO
| 09 20 2009 18:59:02 +0000
The financial markets the world over has turned positive. Our sensex has almost doubled this year and the momentum seems to be in uptrend. Although the unemployment in USA is still rising but the rate of unemployment increase seems to be declining. The recovery may be quite slow and time consuming but the tiny green shoots are now visible. Warren Buffet is now optimistic and has started investing in his own style of value investing. His track record is so illustrious,it is worth lending an ear to his views.
By
Upendra Pratap Singh, Head/VP/GM-R&D, SAIL,Bokaro Steel Plant
| 09 18 2009 16:29:29 +0000
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I accept Thomas Wilson view, that any downside in the market is an opportunity to LONG TERM INVESTOR, the market is never for short term investors. If I am going to be a short term investor, then I should have the insider details for making profit but that’s not the case of Long term. Coming back to the debate, whether the US economy has bottomed out.. For the past two months, I really could see positive reaction from the HNI and FIIs in US, that doesn’t mean that it has bottomed out. Its just the gamble on the economy. A company which has been there for decades filed for bankruptcy and there can be many falling in that list. Does anyone know what are all the derivative types the bankers deal in US? Its highly unimaginable( like CDS ,Variance Swaps, Swaptions ,IRS and the list goes on.. They have a very complex derivative instrument which neither cannot be valued at ease or has liquidity. So there should be transparency in the valuation… Fed and ISDA has taken all the measures to provide transparency level. And those measures are just the positive sign for recovery and not for the conclusion that US economy has bottomed out..
By
sowmya , Chartered Accountant/CPA, Viteos Capital Market Services
| 09 25 2009 01:56:01 +0000
I think it is not true. It is only to chnage the mentality of the common public. General view is that nothing has changed much.
By
Amit Gupta, Manager, BANK LIMITED
| 09 22 2009 03:57:45 +0000
Day before yesterday the 91st Bank failed The Corus Bank with 7 bn assets and somebody gobbled it up immediately some of their operations and FDIC will be I think standing behind to get it up back in shape like they do to all the failed Banks. Now your questions why they didn't predict a recession? they did predict, Americans were predicting the recession 2 years before it happened, companies were laying off workers from then on, in US companies are the ones who first notice the recession when they see drop in their sales figures and they will take proactive actions to maintain the value of their stocks. One of them is laying off workers and seeing this the Academia picks up the news and then the journalists who give all sorts of analysis then finaly the recwssion arrives partly due to the panic caused by the reporting and rumours going around. Even Warren Buffet used to warn much earlier that the complex deriviatives which were running up to the tune of trillions of dollars like the CDS and structured debt were veritable cyclones which ultimately culminated in his predictions. So there was no scarcity for forecasts then only thing is Federal Reserve worries about the lving stndards of the people and they don't take proactive steps fearing loss of that and they act only when it happens. Fed Reserve has one of the most advanced forecasting methods run by ecpert teams but they are guided by certain welfare principles which prevents them from taking actions. Lots of people are involved you see in Investments and other kinds of committments which if one regulates then America looses its place as a freemarket economy based on welfare and freedom for it's people to invest and be happy.
By
Mathew Cherian, Research Associate/Analyst, Western Michigan University
| 09 18 2009 18:14:18 +0000
Though things are looking fine with US economy at least more corrections are expected. Being consumption led economy, with a low consumption plans to tackle deficit doesn’t look easy. Also bailed out behemoths giving away huge bonuses this year while unemployment is really becoming a big issue, is it as simple as it seem to be? Yes the worst is over, but had they done and are they doing enough?
By
Padmanabhan R, Articled / Audit assistant, Finance student
| 09 18 2009 17:33:47 +0000
my Eye is on the Dollar Index ... i am waiting For it to Form a Bottom and Than how the commodities & global equities market react , And mainly How the Rising inflation Will be controlled ... By June 2010 Expecting First Hike in Intrest Rate By Fed ... and Than will get an idea Of Economy of each country
By
Chirag Kabani, Technical Analyst , askchirag.com
| 09 18 2009 14:59:35 +0000
I think this was an extremely bad recession. Hence it is termed as the worst since the great depression. It will take time to get out. At least we have signs of things getting better. They could be even getting worse, we never know. At least the worst is behind us, and employment will be getting better. When business and consumers feel like they're safe enough to start spending, they will. Then business will begin to hire.
By
Rajyalakshmi K, Accounts Manager, Standard Chartered
| 09 18 2009 14:27:19 +0000
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