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Soner Kistak's  Instablog

Soner Kistak
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I am a PhD Candidate at EDHEC Business School. The best phrase to describe me is a continuous and humble learner. Disclaimer: The articles& instablogs reflect only my personal views, and they do not necessarily reflect the views of the institutions that I am or have been affiliated with.
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  • Stop Scaremongering: EUR is well and alive
    Most dictionaries would define the currency as anything that is generally accepted as a standard of value and a measure of wealth in a particular country or region.  This definition implies two significant functional roles for the currency: a) medium of exchange and b) store of value.. Although FX markets are always in a constant state of flux and we have tendency to analyse them with a short-term focus, a more precise picture can be obtained by taking a longer term approach. The topic which is hotly debated are EUR. Given the latest downward volatility in the currency, people are exaggeratingly talking about “the end of EUR” or “collapse of EUR” or “disentanglement of the common currency”. My humble response to these claims would be “EUR is well and alive”.
    When Robert  Mundell laid the theoretical ground for the development of EUR, his vision as well as the vision of the founding fathers of EUR, was to have a stable currency  that traded at par  with the USD. In this way, stability in commerce and trade between the two largest economic blocs would have been achieved.. This desired outcome was upset mainly by the depreciation in dollar value as of 2002. EUR went from 0.89 USD to 1.599 in April 2008. Secondly, if one compares the evolution of major currencies in terms of Gold, it can be clearly seen that the currencies which disappointed most in Gold terms are USD and GBP, whereas the CHF and Yen have done a comparatively better job in preserving value. On the other hand, EUR was somewhat in-between, but much better than USD and GBP in value preservation. Thirdly, EUR also made headways in being a global reserve currency. At the end of 2009, 27.4% of all International Reserve Assets were held in EUR. This certainly shows the respectability of the common currency in the eyes of world’s central bankers.
    I am not arguing that everything is fine with Europe and its common currency, but what I am clearly saying is that EUR project has been hugely successful, and the common currency is likely to continue as long as Germany and France are committed to the project.
     Of course, the common currency has some problems such as asymmetric shocks or different structural issues within member countries, however so does the US :  Surely, California and New York quite often face different macroeconomic trends. EUR will certainly better function if there will be more political cohesion and fiscal harmonization. In this sense, the current crisis might provide the much needed impetus to the European leaders to take some bold measures.
     
    Please note that the below charts are taken from Bloomberg on May 18 intraday.
    currencies measured in goldinternational reserve assetsEUR Historical evolution



    Disclosure: LONG EUR, USD,CHF
    Tags: EUR, Gold, Currencies, Crisis, Greece, Sovereign D
    May 18 1:22 PM | Link | Comment!
  • Top Dividend Achieving Stocks that will continue to deliver
    We all like high dividend stocks. They provide a reliable revenue stream, and they bring value to the portfolios particularly when interest rates are low. Having a high dividend yield is a certainly a very good trait, however it is not on its own sufficient for justifying an investment into a stock. In the below table, I compiled all the stocks focusing on consumer. In order to create a list of resilient stocks, the following selection criteria were applied:
    -          High Emerging Market Share
    -          High Dividend Yield
    -          Relatively low indebtedness
    -          A  P/E ratio which is reasonable
    -          Bluechip companies with good history
    The below table shows the list of stocks that are suitable for the current highly volatile investment environment. The high shares of emerging markets in their businesses would mean that they will not be impacted by the slowdown in the developed world. Moreover, their strong balance sheets suggest that they will continue to distribute dividends in a consistent manner.
     
     
    CompanyISIN CodeEmerging Market ExposureDividend YieldStrong Balance Sheet (Debt/ Assets Ratio)P/E RatioPeers P/EHome Market P/E
    Johnson& JohnsonUS478160104624%3.33%15%13.010.813.4
    P&GUS742718109132%3.09%27%15.717.713.4
    Coca-Cola US191216100750%3.26%24%15.216.713.4
    PepsiUS713448108123%2.89%20%15.316.713.4
    Mc Donalds US580135101724%3.12%35%15.218.1113.4
    3M US88579Y101030%2.44%21%14.813.913.4
    ColgateUS194162103945%2.55%29%16.519.213.4
    Wal-Mart US931142103915%2.30%24%12.820.2113.4
    UnileverNL000000935537%3.69%27%14.6716.1510.88
    Reckitt BenckiserGB00B24CGK7721%2.99%2%16.3618.1310.07
    NestleCH003886335035%3.09%21%15.4215.8211.46
     


    Disclosure: Long Unilever and Nestle
    Tags: CL, PG, WMT, MCD, NSRGY.PK, JNJ, RBGPF.PK, KO, PEP, Consumer Staples, High Dividend, Consumer, FMCG, Emerging Market Consumer
    May 12 1:47 PM | Link | Comment!
  • Attractive Goldman bonds

    Following last week's news on SEC allegations against Goldman, the prices of EUR-denominated bonds by Goldman have come down somewhat significantly. These bonds now represent a very attractive risk/reward proposition.For example, Goldman 2012 bond yields around 2.56, whereas Goldman 2015 bond yields a very attractive 4.26. These bonds are A rated.Apart from the reasonable rating, Goldman's PL forecasts indicate that the company will be making a net income of 8.7 bn EUR in 2010. The company definitely has the capacity to pay back its debt.
    Conclusion: Don't miss the opportunity





    Disclosure: Long Goldman Bonds
    Tags: GS, Finance, Investment Banking, Fixed Income
    Apr 26 3:05 PM | Link | Comment!
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  • cheap deals all around. Unilever and Boeing are worth looking at
    Mar 27, 2011
  • High Yield Emerging Bonds will be an interesting area to invest in 2010. 2009 has seen rate cuts which will likely stop in 2010 ZAR PLN TRY
    Dec 13, 2009
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