Emerging Market Equity Markets: Outlook brightening

Friday, November 14, 2008


The BRIC countries had a total of USD 260 billion in forex reserves at the time of the Russian debt crisis in 2000...today India by itself has more than that total. Total Reserves at the end of September totaled nearly $3 trillion...a substantial kitty with which to fight crisis and emergency situations.

Unless the global financial system comes to an end, and we all go into our separate corners to play for the foreseeable future, there will be a recovery. It may be V-shaped or U-shaped but there will be a recovery. I have lived through incredible debacles; this is not the first time that Citibank has gone bust...the LDC crisis did that in the 80's.

The entire equity base of the Canadian banks was wiped out at that time...of course, deals were made with government to provision over years while providing tax relief for the entire loss immediately. A steep positively sloping yield curve, wider than normal spreads between deposits and loans for a few years and all was healthy and sound...and it was all blown away by the commercial real estate implosion of the late 80's early 90's.  Anyone remember Canary Wharf and Olympia&York.

The fact is we are now coming to the most taxing phase of this global financial disaster...the 'there is no solution', 'things can only get worse', 'everybody take your toys and go home', utter investor despondency and depression phase.

I bought Citi at $9 in 1982...and after splits..it means I bought for $1.10....and of course with LDC having blown everything away..the end was nigh.  So, the next few months will be a paradise for picking up good companies with good prospects...and you will have lots of time to analyze and decide.  It is time to get to work...do your analysis...it is hard work but it will pay-off.
The longer the doomsayers prognosticate the better...because, when they stop...the rush will be on...and I hate line-ups.

Remember, equity markets are a marathon...not a 100 meter dash.



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2 Post Comments:

sharat said...

that maybe true, I bought pretty much after Mr. Buffet said the same things, and to be honest it is a long game, but that doesnt mean you can't be sick in between. As I have been more than a few times now.

Suppose you did the same thing when the Nikkei or the Nasdaq collapsed, there were and are some wonderful companies on those indexes, that have never recovered in price. You look at what the Nikkei has done since it peaked, that strategy would have been a disaster.

You cannot blame doomsday sayers for being acutely negative, but I agree I tend to take an opposing view when everyone says the end of the world is near, I cannot help myself, and when the worlds greatest investor says things are cheap, how can one disagree.

http://www.nytimes.com/2008/10/17/opinion/17buffett.html

that doesnt mean my stomach is not churning, and even if it is a long race some people just have to withdraw because they cant bear the pain, and you cannot blame them for doing so.

Lee said...

Sharat

Even after the nikkei and Nasdaq crashed, companies did not come to decent multiples as they are doing in India...Nikkei after crashing came to 20 times earnings...same with Nasdaq.

Nasdaq was dependent on 4 billion people buying 5 computers and all the software and gadgets to go with them...the leverage was incredible...Same with Nikkei...India is not levered...and the demographics are compelling...

But you are right...i think there will be some stomach churning times for the next few months at least.

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