Global Investing

The end of the end?

While nobody would be rash enough to predict the end of the economic downturn, there are certainly increasingly loud murmurs that the bottom of the stock market fall may have come.

Battered share prices have become so cheap that the pound signs are beginning to light up in the eyes of investors as they pile back in, and it’s smallcaps that are really shining. You only have to look at the numbers, companies like biotech firm Alizyme doubling at the end of last week and engineer White Young Green tripling.

What has happened of course is that as buyers come back to the market, they are finding a shortage of sellers, pushing up prices. Because the hardest hit shares are the ones that will bounce the hardest, it is the higher risk smaller end of the market that is seeing prices increase most steeply.

The FTSE’s Small Cap index has rocketed by a whopping 23 percent in the past month, dwarfing the 6 percent rise booked by the FTSE 100 in the same period. As long as there are no nasty surprises in company earnings this week, then we may well start seeing investor confidence trickle back.

from MacroScope:

Canada dresses up for bears

For all the designer drinks and gourmet foods - from raw oysters to sushi, and the sea of men in expensive suits and bejeweled women in elegant gowns, the setting seemed fit only for celebration.

But dressed as they were to the nines, investors attending "A Night with the Bears" at Toronto's upscale Elgin Theatre, were eager to hear the worst, on the edges of plush seats amid predictions of market doom from some of the continent's savviest
financial minds.

"I only wish we'd sold tickets," said a smiling Eric Sprott, arguably Canada's best known hedge fund manager and chairman at Sprott Asset Management Inc, as he looked out at the 1,500 or so crowd.

from Raw Japan:

Government stock rescue?

Japanese stocks are sinking towards levels unseen since 1982, sending alarmed government officials scurrying to come up with some way of propping them up.

MARKETS-JAPAN-STOCKS Officials are looking at steps to support stocks after the plunge, which has taken the benchmark Nikkei to within sight of a 26-year low hit last October.

That slices into the value of huge share portfolios held by Japanese banks and erodes their capital just when the economy needs them to boost lending.

The Dow: A long way down

U.S. stock indices hit an 11-year low on Feb. 23, as stocks continued their sharp decline from the peak of 2007. This chart looks at some key events that helped to drive stocks down over the last 16 months.U.S. stock indices hit an 11-year low on Feb. 23, as stocks continued their sharp decline from the peak of 2007. This chart looks at some key events that helped to drive stocks down over the last 16 months. Warning: This may cause post-traumatic flashbacks in some investors.1 – Oct. 9 2007U.S. stocks rose to record highs on speculation the Federal Reserve was on course to cut borrowing costs further to revive economic growth. The Dow Jones industrial average climbed 120.80 points, or 0.86 percent, to end at 14,164.53, a record.2 – Oct. 19 2007Caterpillar Inc.’s warning that the housing slump was infecting the wider economy sent U.S. stocks tumbling by the most in more than two months, in a drop that was made more unnerving as it marked the 20th anniversary of the 1987 market crash.The Dow fell 366.94 points, or 2.64%, to end at 13,522.02.3 – Feb. 5, 2008U.S. stocks suffered their biggest drop in nearly a year after the Institute for Supply Management’s non-manufacturing index data showed the worst monthly contraction in the services sector since the last U.S. recession and Standard & Poor’s warned it could cut bank credit ratings.The Dow had its biggest drop since the indicator was created in 1997, down 370.03 points, or 2.93 percent. Settling at 12,265.13, the index was at its lowest level since October 2001, aggravating fears that a recession was at hand.4 – June 6, 2008U.S. stocks extended losses as surging oil prices fueled inflation fears, adding to concerns sparked by a government report that showed the unemployment rate had its sharpest rise in 22 years in May.The Dow fell 3.13 percent to close at 12,209.815 – Sept. 29, 2008Stocks tumbled after the U.S. House of Representatives voted against a compromise bailout plan that would have let the Treasury Department buy toxic assets from struggling banks. House Republicans, in particular, balked at spending so much taxpayer money just before the Nov. 4 U.S. elections.The Dow fell 6.98 percent to 10,365.45 points.6 – Oct. 15, 2008Wall Street had its worst day since the 1987 stock market crash, as bleak economic data fed worries that efforts to unlock credit markets might not stave off a severe recession. Federal Reserve Chairman Ben Bernanke added to those concerns when he said the economy faced a “significant threat” from paralyzed credit markets.The Dow fell 7.87 percent to 8,577.91.7 – Dec. 1, 2008U.S. bank stocks suffered their biggest one-day decline in the current financial crisis, on expectations a deepening global economic slump would reduce employment, crimp access to credit and spur more writedowns.The Dow fell 7.7 pct to 8,149.09- Chris Sanders

Nowhere to hide

Shampoo, margarine and medicine – surely some things will be okay in a recession?

Unfortunately, the concept of defensive stocks is taking a big knock along with so much else this time round. Companies making the stuff are themselves no longer certain what the future holds.

Unilever’s decision to scrap its financial targets sent its shares skidding this week and raised the spectre that more companies may follow suit.

from MacroScope:

Hey Europe, stop acting so happy

Merrill Lynch economist David Rosenberg's views are well-known for bearing no resemblance to his firm's trademark bull, so when he says European clients seem too upbeat, what he really means is they weren't thoroughly depressed. The New York-based economist just got back from a marketing trip across the Atlantic and didn't find much common ground.

In particular, he said European clients seemed more concerned about inflation than the deflation that he sees coming, and they may have unrealistically high expectations for President Barack Obama.

"Unbelievably ... portfolio managers seem to think they are taking a bigger risk with their careers by missing the rallies than by missing the sell-offs," he wrote in a note to clients. "I can tell you that this is not a condition from a sentiment standpoint that terminates bear markets."

And the next Iceland is…

If there’s one thing you don’t want to be, it’s the next Iceland.

Since its currency, colossally indebted banking sector and economy collapsed in spectacular fashion in October, the country has become a byword for an economy that has truly hit the rocks.

Within weeks, banking problems and currency falls meant Hungary was being hyped as a “second Iceland”, at least until a joint International Monetary Fund and European Union rescue package restored some stability.

Bosses in the dark

Business bosses, it seems, are as much in the dark as the investors who buy stocks in their companies.

That is the worrying conclusion of a new survey from Booz & Co. 

After quizzing more than 800 senior managers, it found 40 percent doubted that their company’s leadership had a credible plan to address the economic crisis and an even higher number – 46 percent – were not sure that their top management could carry out the plan, credible or not.

Alarmingly, even at the CEO and board level, one third of those responding were sceptical of their own plans.

from MacroScope:

Political poster child?

George Alogoskoufis is a hardly a household name outside Greece and EU financial circles. But the newly sacked Greek finance minister could yet become a poster child for politicans struggling to fight off economic decline and banking industry collapse. His demise was in large part due to a public perception that he was helping out the banks but ignoring rising joblessness.

Greece, of course, is a special case at the moment, still recovering from riots over the police shooting of a teenager. But finance ministers, central bankers and other responsibles are probably not immune from Alogoskoufis Syndrome. Balancing the need to bail out the finance industry with rising economic misery among everyday people is not easy. Fat cats are not exactly in favour at the moment.

This could, indeed, come to a head later in the year. Investment cycles tend to recover before economic ones. So what happens when Wall Street, the City and the like start bringing in the money again just as unemployment lines start getting even longer?

2009 preview… from Goldman

Goldman Sachs is previewing the 2009 outlook from a light hearted perspective. “We hope readers take these thoughts in the spirit that they are meant and don’t take any offence at any of the contents,” reads the disclaimer.

The year starts with an interesting twist in the UK, where Chelsea Football Club releases a letter written to incoming US Treasury Secretary, Tim Geithner, asking whether if they signed David Beckham, would it make them eligible for TARP funds?

In February, Russian Prime Minister Putin declares that the American word recession would not be translated into Russian.