So we have a day when the auto bailout doesnt go through, asian and European markets sink, U.S market futures are down 3% and then, lo and behold, markets are up convincingly in the green. The resistance markets are showing is phenomenal. Neither a terrible unemployment report with 533000 jobs lost, the most since the 70's when expectations were at 340000 and a failed auto bailout that puts at risk 5 million jobs can hold back markets. These are sureshot signs that markets have bottomed out. Markets, however went up on some comments from the White House that the auto bailout would be funded from the TARP, which does not required congressional permission. I'm willing to bet that the big 3 will get the money they require one wayMind you, this does not mean the the mess in the U.S is over. Credit card defaults and auto defaults are next in line. Home prices are expected to decline in 2009 too and this could mean further liquidity contractions and writedowns. However, what this tells me is that markets are more or less convinced that policymakers are willing to do whatever it takes to get the economy back on track. The concern with doing whatever it takes, essentially flooding the economy with money, since reducing interest rates have not really worked, is that the dollar has to start depreciating at some point of time. This process has already started except against the Yen, which is more a result of the Yen carry trade i think. However, an unwinding of the Yen carry trade which leads to the appreciation of the Yen against the dollar happens when markets fall. This is not the case though. So not exactly sure whats happening on this front. Hedge fund deleveraging is more or less over I believe, or if it is happening, then it is more orderly.
About the Indian markets, we see the same resilience. Growth for 2009-10 has been pruned to sub 6%. IIP numbers came out -ve, the first time in 13 years and stunned everyone. Markets which were about 3% down at the time of the announcement stayed flat started moving up and ended up on a positive note. This -ve number is a positive for banks since it signals that RBI would have to be more aggressive when it comes to cutting interest rates. FII's have started buying in this market. I guess the reasoning is that India has above average rates of growth and should therefore attract FII money. However, the current rally is purely technical and I expect, it will go back down soon. However, I dont think it will go below 8500 anytime soon. In my opinion, this is a fantastic buying opportunity if you have a 1 year horizon. Oil is a great sector to invest in since I believe the worst is over for it. Banks and infrastructure will be good sectors to invest in.
These are interesting times and a great investment opportunity. If there is a time to make money, it is now..
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment