Surprise Shocks for US Earnings Mean Trouble for Asia 11 comments
-
Font Size:
-
Print
- TweetThis
Excerpts from Dr. Enzio von Pfeil's appearance on CNBC Asia:
- Comments on US earnings with Intel (INTC) and Johnson & Johnson (JNJ) - what do US earnings signal for Asian corporates?
- We have warned for some time that "surprise shocks" will rattle markets. There are two things that US earnings signal for Asian corporates:
- The "real economy" links - e.g. if US retail earnings fall, Asian exporters' earnings fall, and
- the far more important psychological links: if the US market falls, so do most others - and that meltdown, in turn, affects consumer psychology. Indeed, since the American market top of October 9, 2007, only Russia and Brazil have risen!
- But, with the domestic, internal demand in China and India remaining strong, there is plenty of muscle left in Asian growth.
- Delta (DAL) and Northwest (NWA) merger - is it a start to the consolidation phase in the global airline industry?
- No comment, as I am not an airlines specialist.
- Financial markets - how far to the bottom, and where on from there?
- Much further to go: the sub-prime mess has not played itself out:
- Accounting. All firms now have to report losses on a quarter-by-quarter basis, so they cannot "bunch" all losses into the first quarter of the year and thereby lead investors to believe that "the worst is over."
- Transparency. Just because American banks have been forced under the spotlight does not make them any worse than those non-American banks that have not been forced to reveal all. My hunch is that there are plenty of large, non-American banks sitting on toxic mountains.
- If we use history as a guide, the German and Japanese markets fell by 40% while their banks were cleaning-up their own balance sheets. Since the last market peak on 9th October 2007, the S&P 500 has fallen by about 15%, so there is another 25% or so to go. Assuming that financials are twice as volatile, my guess is that they will will fall another 40%-50% over the next two years.
- Asset allocation - is cash still king? What are some investment opportunities during these volatile times?
- Cash, non-US dollar currencies and commodities are king.
- Just don't keep your money as a time deposit in a wobbly bank: when the bank fries, the time deposit dies...
- Short-term bills are also fine.
- What sectors do you like, and what are the reasons behind them?
- I am not a stock market fan.
- The only attractive market is Taiwan due to the election results. China, the "growth miracle," has underperformed old-age-home Japan since the market peak of last October!
- Hence, my "sectors" are commodity-related: food, oil, base metals and the like.
- Any other topics you like to discuss?
- When I suggested that one buys short-term bills, some may wonder about bonds.
- I have very low bond exposure because we are careening into a US stagflation: you don't want to own long bonds when inflation is rising.
- Inflation is maddening, and is of cost-push nature: the weaker dollar is fanning imported inflation in America, commodity prices keep rising, and productivity is waning (so unit labour costs are rising). Central banks cannot control costs; they only can control demand.
Related Articles
|
Find People on SA
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largest
increase in followers
in the last 7 days-
1
David Fry
-
2
Philip Davis
-
3
Bill Gross
-
4
Tyler Durden
-
5
TraderMark
Fastest Climbers » -
1
-
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most activeSee all
Instabloggers.
Top Instabloggers » -
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
This article has 11 comments:
Obviously the past 6 months are a good predictor of the next 5-10 years...
Thank you Mr Petti for your disclosure! You are a great American
I am not sure what you are getting at about Pettis, but I assume that you mean to make some sort argument of guild by association with the recent Bear Stern mess. I suggest that such an argument is not warranted on factual or logical grounds. So the logical problem is that just because someone worked at Bear does not mean that that person is responsible for the problems that made Bear go belly up. You might argue that about the head of the company or some other major manager or partner involved in some crucial policy that lead to the failure, but to tar everyone there with that brush is simply silly, and foolish. Second, as far as I know Pettis has been in Beijing for some 4 or 5 years, so that should distance him from the recent problems at Bear.
If you read Pettis' blogs, you will see from the comments section that this character is an internet stalker....
Why not give all your money to your Dear EX Bear Stern master Mr Petti; while Mr Petti is still busy breathing filthy air in Shanghai. I am sure Mr petti will make 200% return for you guys!
I like to advise every reader here; Mr Michael Petti worked in Bear Stern before, the information is on this website seekingalpha.com/autho...
Thank you Mr Petti for your disclosure! You are a great American
China has many problems on its own; but it's very ironic the red communists do not mind Mr Petti (who is paid salary by the Chinese communist run school) being so critical of everything in China even the air he breathes every day.
Told us all to run last fall because things would be horrible.
Well it's been a god damn big fat yawn - I should have listened to you - LOL!