Monday, October 6, 2008


THE BULLISH BEAR BLOG - Is now a year old.
And what a year it has been.
Since the Credit Crisis intensified in July-August 2007, the 'experts' have been reassuring us that things were under control, and that everything was going to be fine!!
While I was bearish on the prospects of the US Economy even a year ago, I underestimated the ferocity of the downturn. May be the delaying tactics of those in charge are no longer working.
The process of deleveraging in an interconnected financial web has been a DISASTER.
Regulators supervising undercapitalised institutions that underestimated risk, encouraged by the Monolines and Credit Rating Agencies ---> All estimating that home prices would rise forever.
Meanwhile, the currency markets are chaotic, as everyone scrambles for US Dollars! A safe currency they say! Well at the rate the bailout fiasco is going (with Bailouts III & IV to come I guess), things don't look all that good.
While the recent volatility in Gold prices has been startling, the long term story is intact. As I have said before, when all is said and done, GOLD will be the one true store of value. So if there is one permanent holding in anyone's portfolio this has to be it. Use the volatility to buy on declines.
Equity Markets in India, like the rest of the emerging markets have seen continued selling.
Large capitalisation stock are down over 50% in some cases, and the once 'Long Term India Investors' have vanished.
While I am still holding on to my core holdings, paper profits are evaporating.
At the same time its important to remember that India is not an export oriented economy, like some markets in the Asian region, so its worthwhile keeping an eye out for attractive buying opportunities in companies with strong fundamentals.
Its going to be a real test of conviction especially for those that were buyers in Indian Equities recently. For long term investors who are ready to sit out the storm, there will be plenty of buying opportunities.
A year ago, it was difficult to find value in Indian Equities. Today there is panic and that value has re emerged.
Tread lightly for now - and be selective while making a list of stocks you want to buy. Not every stock that has fallen is worth looking at. Midcaps and Small Caps may provide higher returns from current prices, but are going to find the going a lot harder in tighter credit markets.
Also consider the fact that the recovery when it comes, is going to be slow and hesitant, so theres going to be no easy money now.
Interest rate sensitives in the Financial, Real Estate and Auto sectors have had a really hard time as have the Metal stocks - as Metal prices have corrected globally.
Lastly, know your own risk appetite - Investment time horizon - and the extent of volatility that you can tolerate for your portfolio

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