Sunday, November 30, 2008

Weekend Reading, Nov 30.

The blog Global Economic Anaysis highlights many of the news headlines on current topics. Some of them are:

Japan’s Factory Output Falls as Turmoil Hurts Exports
LandAmerica Goes Bankrupt
Lead Falls to Two-Year Low as Auto Demand Slumps; Copper Drops.
Housing is bad enough, but wait — it'll get worse
China downturn deepens, European rate cut sought
Malls, hotels next victims in new mortgage crisis.
Woolworths Near Collapse, Risking 30,000 U.K. Jobs
Shopping malls are running on empty
Satellite Halts Hedge Fund Withdrawals, Fires 30 After Losses
FDIC adds 54 more banks to its 'problem list'
Survey says Texas manufacturing outlook is bleak

I think you get the idea. News in this blog is about recession and depression.

Well, there is one more news item in Bloomberg. This headline says:
Stocks in U.S. Climb; S&P 500 Index Posts Biggest Weekly Gain Since 1974

So, what's going on ?
Possibility 1. The Markets have already discounted the bad news. The bear market is over.

Possibility 2. The markets are going through a bear market rally, probably disconnected with the 'real' world. This happens often. (Example: the boom in real estate stocks in India. Since 2006 September, I have been saying on CNBC - "the real estate stock price boom cannot be sustained. Share prices are going up on the wrong premise that companies will buy land for pennies, then sell it for millions. The business model is flawed because land is a very sensitive issue in India. But, brokers and fund managers went on singing the praises of these stocks. They were completely out of touch with the Indian environment.)

My own understanding is that we are in a bear market rally. More details in my previous post, here


Junaid said...

Sir, you have talked abt Real estate Stocks....?!! Plz tel me is it good to go for Indiabulls real (considerng the charts) for the short term if their happens to be any rally in the markets..?? Waiting for your post.... Thnx.

Jagdish said...

Sir, Please kindly look at the charts of the Shanghai market for the last 6 months. It has given 3 rallies of more than 20 % each only to fizzle out after a few weeks. Bear markets only end when there is complete revulsion - something we all now feel about politicians (due to the Mumbai episode). Unless we detest stocks, markets cannot be said to have made a bottom and this process has to last min 6 months OR else you risk yourself to becoming a sucker.

BULLS said...

Hello Mr Sukhani,

Speaking about stocks from Real-estate Sector as a whole... Isn't it a good time to start nibbling at these stocks.

Agreed... May be, more bad news is still to develop & start flowing for this sector. Also, the slowdown is still sinking for these so-called real-estate companies. In fact, some selected real-estate companies are still in the denial mode to agree that the prices need to come down amid this current slowdown momentum.

But, moving ahead for investors with longer-duration, the stock prices of some of the premier real-estate companies are available @90% Discount from their established peaks. Agreed, these peaks were, anyways, irrational in nature... But, aren't current lows "throw-away" prices ? - just as irrationally we had real-estate highs, aren't current lows as much of irrational in nature ? Most (may be more than needed) of the unwanted exuburence of over-forth has flowed out of the glass now.

One more point i would like to make dear Sir... Just as we witnessed the current Global Bear Market way before the actual Recession set it; may be the stock prices of Real-estate stocks are near to their bottoms - way before the actual slowdown settles for these 'Concrete Giants'.

Doesn't Real-estate sector, as a whole, have a SPINE for a long haul journey to sustain for this Indian Economy for the greater times to come ?


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