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1    Confusion Persists but this Confusion to take markets even higher in the medium to longer term




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2    Confusion Persists but this Confusion to take markets even higher in the medium to longer term



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3    Confusion Persists but this Confusion to take markets even higher in the medium to longer term




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Confusion Persists but this Confusion to take markets even higher in the medium to longer term

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Dear All,

Though the confusion persists, giving the bears the chance to once again emphasize that markets have run ahead of themselves, a big correction is due and so on and so forth…But despite this pessimism, are markets falling, the answer is NO, developed markets either trade sideways or move higher.

Is conflicting news flow such as these given below creating confusion; might be YES, but I believe the bias is on the positive side. While the consumer might not have started spending; but it’s not as sluggish as it was three months back. To see an end of contraction for Germany & France GDP, I believe sets the tone for the other markets to follow the move.

I certainly believe the bottom has been seen at-least with respect to stock market way back in March, specifically March 9th 2010 (refer my article dated 10th March 2009, titled “OPTIMISM PLAY: BULLS ARE BACK ATLEAST FOR NOW WITH MARKETS TRYING TO FIND A BOTTOM ON THE BACK OF HOPE”. Asking this question makes more today on a day when Germany and France saw an end in Economic contraction and declaring that the recession has ended in both the countries, though the entire euro zone is still in negative territory.

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Confusion Persists but this Confusion to take markets even higher in the medium to longer term

  1. 1. 1 Confusion Persists but this Confusion to take markets even higher in the medium to longer term Confusion persists with conflicting data points BUT in my view this confusion will take this market even higher in medium to long term Whether US completely out of the economic downturn, I believe, NO, but the situation on macro front and sentiment wise, its’ looking much better. From the economic perspective, at-least more news-flow on various important data point is lesser bad than expected and is getting better. I certainly believe the bottom has been seen at-least with respect to stock market way back in March, specifically March 9th 2010 (refer my article dated 10th March 2009, titled “OPTIMISM PLAY: BULLS ARE BACK ATLEAST FOR NOW WITH MARKETS TRYING TO FIND A BOTTOM ON THE BACK OF HOPE”. Asking this question makes more today on a day when Germany and France saw an end in Economic contraction and declaring that the recession has ended in both the countries, though the entire euro zone is still in negative territory. Though the confusion persists, giving the bears the chance to once again emphasize that markets have run ahead of themselves, a big correction is due and so on and so forth…But despite this pessimism, are markets falling, the answer is NO, developed markets either trade sideways or move higher. Is conflicting news flow such as these given below creating confusion; might be YES, but I believe the bias is on the positive side. While the consumer might not have started spending; but it’s not as sluggish as it was three months back. To see an end of contraction for Germany & France GDP, I believe sets the tone for the other markets to follow the move. 1. GM CEO Sees 'Robust' Auto Sales in July, August GOOD 2. Ford Increases Production as Demand Rebounds GOOD August 14, 2009 3. Mortgage Rates Rise; May Dampen Loan Demand BAD 4. Business Inventories Fall More Than Expected, Down 1.1% GOOD 5. Overall Retail Sales Post Surprise Drop BAD Vinit Tulsyan http://vinittulsyan.wordpress.com
  2. 2. 2 Confusion Persists but this Confusion to take markets even higher in the medium to longer term 6. Jobless Claims Rise BAD 7. Walmart Profit Tops Forecasts GOOD 8. Walmart Same-Store Sales Edge Lower BAD 9. US Home Foreclosures set another record in July BAD 10. Recession Ends for Germany, France as GDP Rises GOOD 11. The World Is in Trouble’: Deutsche Bank Chief Economist BAD 12. Federal Reserve leaving short-term interest rates near zero on GOOD Wednesday, and saying economic activity was leveling out 13. NORDSTORM Q2 results in line but same store sales see BAD falling 14. Strong demand for treasury reflects economic uncertainty as a BAD for strong showing in Thursday's auction of 30-year bonds could Equity indicate that investors still aren't sure about the prospects for Markets economic recovery. Coming to our own market (Indian Market), I continue to believe that Indian markets will continue to move on the back of global news flows and the famous “DECOUPLING THEORY” does not hold true. I have been maintaining my stance since 10th March 2009, that “In my view, the Indian equity market, in wake of less news flows, will move largely on the back of 1) moves seen by global equity markets, and 2) global news flow or as events unfold globally especially US”. With reference to my article dated 10th March 2009, titled “OPTIMISM PLAY: BULLS ARE BACK ATLEAST FOR NOW WITH MARKETS TRYING TO FIND A August 14, 2009 BOTTOM ON THE BACK OF HOPE”, I continue to be more optimistic about global economy, and continue my stance that OPTIMISM on the back of FEAR will drive this market and take it even higher in the medium to short term. Why did the market move up today despite bad retail and foreclosures data? Vinit Tulsyan http://vinittulsyan.wordpress.com
  3. 3. 3 Confusion Persists but this Confusion to take markets even higher in the medium to longer term The world is out of recession as Germany & France declared that their economies are not contracting anymore. Every time there is a sell off there are buyers who step in, even though the sell off is not huge. Investors, market participant (who were left out from participating in this huge rally since March 09) feel that even a small dip in the market provides them the opportunity to enter the market at- least at a little lower price. The money is coming so fast because an investor who is let’s say sitting on a 15% move, is getting out and the other investor (who was left out) thinks, let me get in before it’s too late. What next in the immediate, medium & long term WALLMART has significantly underperformed the market since March lows (only up 8%), mainly due to the fact that when the economy is not doing good, investor park their money in those defensive stocks, but when the expectation moves towards recovery in economy, investors take their money out and put it somewhere else. It is often said that most of the investors have been left out mainly due to pessimism and money on the sidelines will buy on pull-backs, putting the break on a major sell-off. I continue to believe that our markets will be driven by the global news flow, especially US. Unlike our market, where we only have two major data (IIP and GDP data), which moves the market or provides direction to the market (though only for that very day), the US & European Market have data points flowing to markets almost every day. Some of these data points are very significant and some are not, but even when the data point is not so significant, investors and August 14, 2009 market participant try and make sense of it. The bottom-line, which I am trying to come, is that earning season has ended, which was unexpectedly better and now markets will try and find direction from the macro data points, fed statements, which will keep on coming till next earning season and GDP figure. Some of these data points might be good (better than expected), some might be in line, and very few below expectation, which will provide direction to the markets around the globe. Vinit Tulsyan http://vinittulsyan.wordpress.com
  4. 4. 4 Confusion Persists but this Confusion to take markets even higher in the medium to longer term The market might see some sell-off, but I do not think that the sell off will be extremely severe in nature, so after this earning season, and less of corporate news to flow, we might see markets either moving sideways (with an upward bias). But in the medium term (at-least till the next two earning season), I definitely see markets at much higher level than what they are today, due to recovery in consumer related macro data points; resulting in much lower inventory, production revival and a much better earning season. In the longer term, as the world comes out of the this worst economic down-turn in last 100 years, the market and environment will look much better than what it was before recession. I am definitely looking forward to invest (for a medium to longer term horizon) and am very hopeful that we are not going to see today’s stocks or index level. But with a caveat, that one has to remain cautious while trading in the short-term, because in my views, VOLATILITY will prevail and increase in the shorter term, as stocks around the globe react to every macro data points (whether they make sense or not, if these data points are not making sense, investor and market participants will try to make sense out of it but in my view with a more upside bias) Consumers are the tipping point of economic recovery and they are the engine, which drives the economy. And all the major macro data points, which will keep on coming in the due course of time is all related to Consumers, and if these data points are better than expected than in my expectation, the next quarter earnings will be something to watch for. And the coming earning season will be a real catalyst for the stock market to move upward as in my expectation, as employment scenario improves; translating into good Auto, Retail sales number; implying a better manufacturing scenario and increase in consumer spending. August 14, 2009 For the longer term, despite my extremely bullish expectation, I would not enter into cyclical (may be because I do not understand these sector) despite these sector fall in my investing theory of Consumption theme (refer my article dated March 22, 2009, titled INDIA & CHINA: “LOVE US, HATE US BUT CAN’T IGNORE US”. Vinit Tulsyan http://vinittulsyan.wordpress.com
  5. 5. 5 Confusion Persists but this Confusion to take markets even higher in the medium to longer term Excerpts from my article I would invest in industries which will give you some confidence when we talk about it and not just talk about the famous Indian growth story (now a past). I would focus on selecting opportunities within in education, healthcare, financial services, banking, media including internet, retail and telecom, select infrastructure stocks, heavy commercial vehicles stocks etc. these selected industries due to the fact that going forward these industries would become more of more of necessities, can achieve scale and not dependent on currency and outside world but would be driven by internal consumption which is supplemented and backed by largest and two of the highest middle class population in the world. Summary of My articles since March 10, 2009 Serial No. Article Title Dated OPTIMISM PLAY: BULLS ARE BACK ATLEAST 1. FOR NOW WITH MARKETS TRYTING TO FIND A 10th March, 2009 BOTTOM ON THE BACK OF HOPE HOPE: The rally lives on…BUT…they still are bear 12th March, 2009 2. market rallies FADING DARK CLOUDS…BUT…ITS’ STILL NOT 16th March, 2009 3. BRIGHT ENOUGH… August 14, 2009 FOMC SHOCKER… UNPRECEDENTED 4. CAMPAIGN…MASSIVE 19th March, 2009 QUANTITATIVE EASING… 5. INDIA & CHINA: “LOVE US, HATE US BUT Vinit Tulsyan http://vinittulsyan.wordpress.com
  6. 6. 6 Confusion Persists but this Confusion to take markets even higher in the medium to longer term CAN’T IGNORE US” 22nd March, 2009 THE 7US$ AND 6:1 (AGAIN 7) D/E RATIO PUSH FOR A 7% RALLY ON WALL STREET; BUT 23rd March, 2009 6. WHERE FROM NOW; IS IT A SIGN OF CHANGING TIMES? STRESS TEST: CAT OUT OF BAG: US FINANCIAL 7. INDUSTRY REPORT CARD: MORE POSITIVE 8th May, 2009 THAN NEGATIVE ELECTION 2009: GAME CHANGER FOR INDIA, CHANGE IN PARADIGM FOR INDIAN POLITICS, 8. 18th May, 2009 CORPORTES, ECONOMY, PEOPLE OR INDIA AT LARGE Confusion persists with conflicting data points BUT 14th August, 2009 9. in my view this confusion will take this market even higher in medium to long term *** Thanking You, August 14, 2009 Warm Personal Regards, Vinit Tulsyan http://vinittulsyan.wordpress.com Vinit Tulsyan http://vinittulsyan.wordpress.com

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