Have we all survived the worst of the hang- over derived from the implosion of global excesses that threw most of the world’s major economies into recession over the past 18 months?
Traders in our region who had the courage and the mandate to play the momentum that was spawned out of some pretty pathetic US banking results back in late January should at least have enough to pay the school fees...
So let’s maintain perspective and note that with China being one of the few countries where the IMF’s recently revised global forecasts for 2009/10 remain positive... about the only thing that is adding up at the moment is that China should be faring better than most. So where are we at when: GDP Forecasts down + Unemployment Rate Rising + Declining Profits+ Confidence smashed = New Bull market?
Hmmm... Well, we all know that markets lead recoveries and we will see upside before well before the numbers turn, but still... can a hangover from a party that big all be over in a month or two?
I would propose that whilst we all recover from the party and the federal banks clean up the mess I don’t think it’s a very good time for bravery in this market and remain convinced that there are still plenty of risks and average corporate earnings reports ahead of us yet with over 40% of the S&P 500 companies to report in coming weeks. The average consumer may have been given a Panadol but is still drunk if they think we are straight back to the good old days.
Most consumers remain very shy and discretionary retail franchises are really feeling the pinch. Advertising budgets are being slashed and /or redirected into on-line strategies which augers well for the savvy internet companies but not so well for traditional media. Consumers are buying cheaper foods, downgrading the car and taking the domestic holiday rather than the Greek Islands this coming season. They are saving at the time they should be spending and the winners will be the companies with the balance sheets and the brands that can still be there when the cleaning up and stimulus are well past and we are about to pop the next bottle of bubbly.
So as you clean up from the party and start to get your house in order be sure to remember to avoid companies who will need to raise cash. Remember that you’re more likely to fix the broken table yourself, use the old glasses, and that a cheap takeaway eases that hangover better than the degustation at Tetsuya’s. As for me....I’m still determining the amount of Tabasco for my Bloody Mary but I don’t need to rush.
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