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Archive for August, 2013


Posted On 25  Aug  2013  

Market Timing in Emerging Market Currencies and Assets

In this Weekends FT page after page is devoted to emerging markets. India takes the center stage with the INR sliding to new lows each day. Indonesia, Thailand, Brazil, South Africa all suddenly have their problems. Russia seems to be in better shape. In many cases the problems end up being similar. Countries borrow money in low interest currencies in relatively short duration and invest in longer term projects. Then be it the CHF, JPY or the USD, the currency appreciates and countries are in trouble. Now the USD is appreciating because with the US quantitative easing coming to an end and the US economy picking up international flows are moving back to the US first and then to Europe. Way too much money in terms of portfolio flows or leveraged foreign direct investment end up going to these countries in time of excitement and then it wants to leave


Posted On 17  Aug  2013  

Cape when used as measure of market froth could spill money into waste!

John Authers is always thought provoking. Today, Aug 17, 2013 in the FT he writes about the use of Cape as a measure of market froth. John tells us what Cape is: It is the cyclically adjusted price earnings ratio – it is the daily rolling ratio of Current Price divided by the Average of Earnings for the previous 10 years. John tells us the following: According to this measure stocks are selling at 23.8 of their 10 year earnings, compared with the long term average of 16.6. Implying that earnings over the next decade will be far below average. Cape has problems as John stresses. It doesn’t always predict when stocks are cheap and can miss out on the doubling of stock prices as it has done in the last ten years. Merrill’s Savita Subramamian has looked at 16 measures and all except the Cape suggest that stocks are


Posted On 14  Aug  2013  

Have confidence in European Markets!

In the European Edition of the FT today there are two reports on the European recovery story. Ralph Atkins highlights the results of a survey which suggests that European portfolio managers are optimistic. GDP data also came ahead of expectations and asset allocations to Europe are at highest levels since January 2008. But investors are less optimistic about corporate profits, but 88% of people surveyed expect economic strength in the eurozone. The second article by James Fontanella-Kahn urges caution, saying the growth is likely to be meager. The largest economy, Germany appears to be contributing the most to the European measures of growth. In Germany the investor sentiment indicator ZEW is at 42 in August from 36.3 in July, much above zero, which is the neutral point. So it appears that the economic scenario for each country is different. But what has happened to the stock markets  while these measures of


Posted On 12  Aug  2013  

John Authers analysis of the “Baffling recovery of profitless stocks”

In the FT today ( John Authers, is looking at market earnings for the different markets such as S&P 500, MSCI EAFE index, MSCI Emerging Markets which covers the rest of the developed world as well as the FTSE-Eurofirst 300.  Mr. Authers is trying to explain why markets have been performing well while earnings are not doing so well. He then looks at analyst’s reports: how bullish or bearish they are about future earnings and so on. He points out, “Globally, upgrades are only 42 per cent of changes in estimates. The rest are downgrades, and so earnings momentum remains downwards. Japan, where this ratio is 55 per cent for this year, is the only major market where upgrades outnumber downgrades. Emerging markets, at 33 per cent, have the most sluggish momentum.” In conclusion he says: “US companies are not generating that much in revenues but, over the past 12 months, they