Really cool site

Just came across this really cool site that gives you GDP, inflation, interest rates etc for all countries in the world.

Just move your mouse over to the world map and you can see data for that country.

http://www.tradingeconomics.com/

US exports over the years

One of my friends told me that US is not an exporter and my statement in my earlier post regarding dollar devaluation is incorrect. Just wanted to indicate here on how US exports have been rising oevr the years. It is now the third largest exporter in the world.

Stay away from equities for a month

The US labour market seems to be only heading towards the doldrums, at least for the next 2 quarters. Manufacturing activity seems to be slowing down, retail sales are low and housing is in the worst mess in the history of US. The fed has accepted that things are not going the way they expected and have to soon take a decision on how to spur the economy.

My guess is that although everyone is talking of quantitative easing part II, but I do not think the fed can really repeat their act of printing trillions of dollars again. Debt as a % of GDP is at 117%, and research suggest any additional debt taken would definitely result in a double-dip recession. Obviously the fed cannot risk this.

The solution to this problem could be to improve trade balances of the economy of US. They can de-value the dollar to ensure exports become more competitive.

This may take a while to materialize and in the near term (one month) there seems to be no trigger on the upside. Even if a step like this is taken, it takes at least 6 months to show up in the figures.

The only trigger that can come is towards October when the upcoming festive season may see some buoyant spending.

Given that the savings rate is at a 6 month high again, the only reason I am not saying go short is because I believe this may prevent the markets from totally tanking. Also another interesting fact is that the yield on dow-jones is now higher than the yield on treasuries. Treasury seems to be the asset in favor, however as good news may start to pour in, money can soon return to equities.

Given the uncertainty I suggest just stay away from the markets for a month till some clarity emerges. Use the time to take a holiday and enjoy!

Some undiscovered ideas

Refer - www.extrapound.blogspot.com , to read on interesting mid/small-cap companies with potential to be tomorrow's large caps. Credit goes to my friend and colleague Nikhil Agarwal, a master at finding such stocks!

Want to stay ahead of the curve? start buying property stocks

The reason I say buy property at this point is:

1) This is the only sector that underperformed (apart from cement). When the index typically seems expensive, investors start to run to undervalued sectors, and property fits that bill.

2) Why is it undervalued? Well until now balance sheets of developers was a key reason why stocks were underperforming. Several analysts released reports on how developers will have shortfall of Rs160bn this year and since raising capital is difficult, stocks would not rise. I personally feel this bad news has bottomed out. As property prices have started rising sharply across the country, the demand for properties has started to pick up significantly. With rising demand, developers will have good pre-sales and cash inflows which will automatically strengthen balance sheet (chicken and egg story). Capital raising is not a concern as most large banks and NBFC's have once again started developer loans (HDFC and LICHF in particular). Property is a sector where investors start to enter only when property prices have moved up to an extent, which has happened.

3) If one looks at results of banks and NBFC's, all are showing spectacular growth in home loan sanctions and disbursements. Several leading banks/NBFC's have also introduced plans where if a customer gets a loan sacntioned by 31-July, they will get a teaser rate and can take discbursements after 2-3months. This clearly is a sign that if customers are taking loans, within next three months they will book properties.

4) Therefore I believe the underlying fundamentals will change over next one quarter and since market discounts the future, one must enter now and take advantage of the upcoming rally in the stocks.

Buy Gold if you are of the opinion that China is truly going to revalue its currecy

Recently China decided to de peg its currency from the US dollar and allow it to re-value, albeit to a limit of 1.5% a year. With this global markets rallied, commodities rallied with the hope that the trade imbalaces in the world would reduce and economic recovery can be faster. Keeping aside my thoughts that this is just a move based on political pressure before G-20, and the fact that US is not going to let them truly revalue as they may overpower the dollar.

However if you are amongst those who believe that China is talking the truth and will allow full revaluation over the next decade, what should you buy? Well, considering it is impossible to quantify which country will gain how much from the revaluation. I would say Gold is the asset class to be in for the simple reason that if the yuan is revalued, it could become a much stronger currecy than the US dollar (even the ADB has released a report stating the same). If that happens why will China keep its reserves in the US treasuries as they would become meaningless. The only other place where they can park money is in gold. They would shift all their trillions of dollars from US treasury to gold making it the asset class to be in!

With the FIFA 2010 world cup underway, I read a lot of analysis on how sentiment affects stock market during sporting events. Well with sentiment being something very difficult to quantify, I thought of presenting the returns of the stock market during the world cup. The table above showsthe average return during the event and 3 months after it.