First things first - we are in a bull market. Anyone who says otherwise is someone who has missed the rally, and is desperately waiting for a correction to enter the market. Or, had invested at the bottom, only to cash out at the first up tick. Any market which moves more than 100% is certainly a bull market (check any text book if you may)- irrespective of the underlying reasons. It doesn't matter how much money the fed is printing, it doesn't matter where the inflation is. Price is king, and you made money if you were long. Else, the so called sucker rally has sucked you in it.
The world has seen decoupling in the past couple of years - decoupling of the economy from the markets. Economy is still broken, and thats why Roubinis of the world still make ominous projections about the world. Yes, there are good chances of a double dip, and good chances of world falling back into the abyss. Unemployment may remain at 10% for prolonged periods, emerging markets may see super-inflation. But, the Dow is not going back to 7000, and 666 would remain the magical S&P number for our generation. Markets have taken off, and by the time this liquidity is sucked, we would be out of recession.
There was much more quantitative easing than anyone imagined. How could one explain the lifetime high of Gold, Silver, Nifty, and thousand other uncorrelated securities at the same time. Add to it the super-inflation, and lifetime high of iPad/iPod/iPhone sales. We may be in deep shit, but we aren't out of purchasing power yet. In India, auto sales are an all time high, and we now have the second largest mobile subscriber base in the world. These are not signs of a bear market, but far from it. We have entered the next big bull run, and sooner we realize, the better it is.
Investors the world over are chasing for yield. Following the QE, their currency is poised to depreciate, and offers paltry interest rates. It natural that the money would flow to emerging markets - which offer appreciating currencies, as well as higher yields. This is what is happening all around - with funds flowing from developed economies to the emerging markets. The big question is - is this flow sustainable? And the bigger question is - what would reverse this situation?
As long as US is in recession, this flow would continue. And by no means, I foresee US coming out of slowdown over the next 12 months. To reverse this flow, we need either an over-heated emerging markets, or fast recovery in US/EU. The former is more likely, but for that happen, the sucker sitting on the sideline has to jump into it. Till now, even the mutual funds haven't jumped into it, forget the retail guy.
The world has seen decoupling in the past couple of years - decoupling of the economy from the markets. Economy is still broken, and thats why Roubinis of the world still make ominous projections about the world. Yes, there are good chances of a double dip, and good chances of world falling back into the abyss. Unemployment may remain at 10% for prolonged periods, emerging markets may see super-inflation. But, the Dow is not going back to 7000, and 666 would remain the magical S&P number for our generation. Markets have taken off, and by the time this liquidity is sucked, we would be out of recession.
There was much more quantitative easing than anyone imagined. How could one explain the lifetime high of Gold, Silver, Nifty, and thousand other uncorrelated securities at the same time. Add to it the super-inflation, and lifetime high of iPad/iPod/iPhone sales. We may be in deep shit, but we aren't out of purchasing power yet. In India, auto sales are an all time high, and we now have the second largest mobile subscriber base in the world. These are not signs of a bear market, but far from it. We have entered the next big bull run, and sooner we realize, the better it is.
Investors the world over are chasing for yield. Following the QE, their currency is poised to depreciate, and offers paltry interest rates. It natural that the money would flow to emerging markets - which offer appreciating currencies, as well as higher yields. This is what is happening all around - with funds flowing from developed economies to the emerging markets. The big question is - is this flow sustainable? And the bigger question is - what would reverse this situation?
As long as US is in recession, this flow would continue. And by no means, I foresee US coming out of slowdown over the next 12 months. To reverse this flow, we need either an over-heated emerging markets, or fast recovery in US/EU. The former is more likely, but for that happen, the sucker sitting on the sideline has to jump into it. Till now, even the mutual funds haven't jumped into it, forget the retail guy.
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