Category: Your Money

Emerging powerhouses can’t save the world

Charlie Yeung participated 2007 Taiwan Orbis &...

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As fears mount that the developed world is shifting from slow growth to no growth, emerging markets seem to many economists better placed to weather the storm than they were during the great financial crisis of 2008/2009.

However, Rob Subbaraman, chief Asian economist at Nomura in Hong Kong, said the region would run into headwinds from slower exports to the United States, Europe and Japan. This was the main factor behind a cut in Morgan Stanley’s projection of 2012 GDP growth in Latin America, announced on Thursday, to 3.6% from 4.6%.

A clear worry is that while the economic fundamentals look better in many emerging economies than they did in 2008, policy makers generally have less leeway. India is especially constrained: the general government deficit has more than doubled since 2007 and wholesale inflation exceeds 9%. The government and central bank, which has raised interest rates 11 times since March 2010, are still forecasting growth of at least 8%in the financial year that began in April.

“There is now less policy room to respond to a significant deterioration in domestic or external demand than in 2008, but adequate measures are still available,” according to Stephen Green, head of China research at Standard Chartered Bank in Shanghai.

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The Golden Cross and the Death Cross

The Golden Cross represents a major shift from the bears to the bulls. It triggers when the 50-day average breaks above the 200-day average. Conversely, the Death Cross restores bear power when the 50-day falls back beneath the 200-day. The 200-day average becomes major resistance after the 50-day average drops below it, and major support after breaking above it. When price gets trapped between the 50-day and 200-day averages, it can whipsaw repeatedly between their price extremes. This pinball action marks a zone of opportunity for swing trades.

Caveat: Moving averages emit false signals during the “negative feedback” of sideways markets. Keep in mind these common indicators measure directional momentum. They lose power in markets with little or no price change.

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Weekly Market Comment (US) – Hussman

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A must read: http://www.hussmanfunds.com/wmc/wmc110815.htm

Short-term measures of market action became extremely oversold mid-week, and investors took the Fed’s latest statement as an occasion to launch a fairly typical “fast, furious, prone-to-failure” rally to clear those conditions. How could an economy already plagued by “moral hazard” possibly benefit from the belief that the Fed had provided a “backstop” for speculative risk-taking?

It is only that demand that has allowed inflation to remain low despite the massive expansion of government liabilities far exceeding GDP growth, and of misallocated credit that has produced losses rather than surplus output.

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Reliance Industries – Too big for India

NEW DELHI, INDIA - NOVEMBER 08: Indian Industr...

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Over the following four and a half decades Ambani took plenty more chances, making bets on vast projects and using brawn and guile to deal with officials and politicians. Today RIL is a conglomerate active in energy, refining and petrochemicals, with a market value of $55 billion, or a tenth of the worth of India’s stockmarket.

At the most recent AGM in June some attendees grouched about the stock price and low dividends; today, with the shares at 770 rupees, they might be grumpier still. Though RIL’s motto is “growth is life”, its valuation implies that the years of plenty are over. Of RIL’s main business lines, refining is chugging along, and the firm is investing to double the size of its petrochemicals unit.

An important factor may be that the pool of potential outside investors has shifted from Indian individuals to institutions and foreigners, who are typically sceptical about the long-term prospects of the refining and petrochemical industries, which have a lousy track record in most countries.

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