India: You Cant Reinvent, But the US can!
And so it is the US which will shine, while India can keep its rag-tag
demographics at home.
For an Economy growing at 7 per cent (Let's forget Chidambaram and his
sidekicks for a moment, with a 10 per cent inflation-once again GOI hog that WPI
is 7.6 per cent. Check the market, everything is Retailing atleast 10 per cent
higher than last year, and we still haven't passed thru the rise in Crude price
and the 5 per cent depreciation of the Rupee in just one week.
Where are the $ 310 bn in Forex Reserves-at YV Reddy's garage in Bombay? With
Gross Fiscal Deficit including that of the States, Fertiliser, Oil and Food
Subsidies, a trillion dollar economy that is India, adds $ 70 bn in
internal/external debt or the GOI prints more money and debases the Rupee.
I feel for such a ramshackle economy, that puts Sewage pipes atop existing
ones, and trenches in optical fibre with copper cables carrying power to homes,
in the same base, with broken roads, zero security and piles of filth and humans
bursting at the seam, a sub-par PE of 10 for the Sensex is just about right. So
out goes the Rs 1080 EPS forecast for FY09 through the window, and the PE
compresses from 17 to 9, and accordingly with the same earnings the Sensex
plunges by half to 8000-9000 by December 2008. How's that for a forecast?
What could shine? US for one-read on...
I'm getting a lot of hate e-mail these days. This onslaught is not entirely a
bad thing. It reassures me that my bet against the crowd is a wise one. I'm
bullish and have been steadily since the July 8, 2002 issue. In my Jan. 28
column I reiterated the upbeat outlook and reminded you that the fourth year of
a presidency only rarely delivers losses to stockholders.
Now, with stocks globally (as measured by the Morgan Stanley All-Country World
Index) down 8.6% so far this year, people are telling me I'm an idiot. Someone
posted to FORBES Web site, "Hi Ken. It's been an absolute pleasure watching you
vie for the 2008 Henry Blodget Award. Keep up the good work!"
Gloat for now, but please note that 2008 isn't over. I still think the year
will end in the plus column. And I'm never happier than when I'm alone.
My critics call me a perma-bull. They forget I called the last three
full-fledged bear markets right here in FORBES--reasonably well and better than
most--and mostly alone (June 15, 1987; Nov. 27, 1989; Feb. 19, 2001). I know I
may be wrong now. But I see what's happened since Jan. 1 as just a major
correction, very comparable to 1998, with a few things flip-flopped, as
described in my Feb. 25 column.
On Mar. 13 Goldman Sachs (nyse: GS - news - people ) demoted market strategist
Abby Cohen for having been bullish too long. That day marked the bottom of the
back half of what I think is a double-bottom whose first bottom was in January.
I see Goldman's move as bullish.
That once famous market timer Joe Granville materialized out of nowhere saying
that we are beginning a bad bear market. I'd bet against Joe any time. Gloomy
people are saying that we are in the midst of the worst financial crisis since
the 1930s. They said the same thing in 1998. Bullish!
You can't find a time in the 20th century when, less than five months into a
real global bear market, people were talking bear market and recession in any
visible numbers. But they always talk disaster during corrections. Check out
"Russian Financial Crisis" on Wikipedia. The second sentence says 1998 was a
"global recession … which started with the Asian financial crisis in July 1997."
Wrong. There wasn't a global recession then. There isn't one now.
An old saw says, "You should be fearful when others are greedy and greedy when
others are fearful." Clearly folks are fearful now. So you should be greedy.
Another saw: "Buy when there is blood on the streets." There's plenty of blood,
or at least depression, on Wall Street. So keep buying. As I've detailed in
recent months, the market should be led by its biggest stocks. Here are four I
like.
All my life General Motors (nyse: GM - news - people ) and Ford Motor (nyse: F
- news - people ) have tried to go bankrupt. It takes them a long time because,
even at this sorry task, they're not very competent. I have faith. They will
eventually succeed, which will benefit Toyota (nyse: TM - news - people ) (107,
TM ), the world's leading carmaker.
Toyota grows, increases profits and gains market share. It's cheap because
people fear weak auto sales, high-price oil, the economy, credit crunches, Japan
and their mother's shadow. But at less than 12 times likely earnings for the
Mar. 31, 2008 fiscal year and at 70% of annual revenue, you get one of the
world's great megacap stocks. Some firms can't get credit the way they did
before. AAA-rated Toyota can get even more than before. This is an easy ride.
Need gas money? Fear those rising oil prices? I doubt they will drop much
below $100 soon. So buy Britain's BP (62 , BP ). This firm discovers more oil at
lower cost than anyone. BP has 18 billion barrels of oil-equivalent reserves,
produces 4 million barrels daily and refines 2.8 million barrels in 17
refineries.
BP's internal operations make up one of the world's largest shipping
companies. It owns as many gas stations as the world has stocks. Brands include
Arco, AM/PM stores, Castrol, Wild Bean Café and Aral--Germany's largest gas
retailer--as well as BP. Hard to lose on this $200 billion market cap giant at
nine times 2008 earnings, 70% of sales with a 4.4% dividend yield.
The recent bank meltdown provides opportunity. If Bear Stearns (nyse: BSC -
news - people )' implosion left you on edge, just buy into the rescue firm that
is bailing it out (with help from the federal government): JPM organ Chase (46,
JPM ). You get America's third-largest bank, a great balance sheet and the best
bank chief executive. That's all at nine times 2008 earnings, a 3.2% dividend
yield and a $155 billion market cap.
It isn't surprising that Abbott Laboratories (nyse: ABT - news - people ) (55,
ABT )is one of the world's high-quality health care firms, selling prescription
drugs, medical components, test kits and health aids. What is surprising is that
it sells at below the industry's average price/sales ratio and at 15 times my
estimate of 2008 earnings. This recession-resistant stock offers a 2.4% dividend
yield.
Money manager Ken Fisher's latest book is The Only Three Questions That Count
(John Wiley, 2007).
Nothing in this article is, or should be construed as, investment advice.
Rohit
9868245473
No comments:
Post a Comment