Triple ‘A’ for Obaaamaaa!
By Fakhri H. Sabuwala
Friday, 5 August 2011, saw a near bloodbath at NYSE on the downward revision of the AAA rating of US debts by Standard and Poor’s. It was a deadly blow not only to the securities market but to the ego and pride of USA in general and that of President Barack Obama in particular. So much so that this young, smart democrat President felt the need to appear on television in an attempt to heal the wounds and restore the lost pride. Just about the time he was applying his healing touch the Dow Jones plunged further from -400 to -595 points! Ridiculing the credit rating agency for not comprehending the national economy and its culture, he mixed patriotism with economic realities which the market could not take anymore. Time he adds the triple A to his name and calls himself ‘ObaaaMaaa’!
After losing 500+ points on the Sensex count on 5 August 2011, our market lost some more on Monday. The world markets too played to the downturn tune and losing substantially on the downgrading of US treasury bonds from AAA to AA. The US markets nearly drowned and no amount of coaxing by Obaaamaaa could bring the third ‘A’ back. The US president must be wondering if his luck has run out. May be had used all of it in 2008 with his favourite catch phrase ‘yes we can’ which has nightmarishly turned into ‘hey we might’!
With the debt current crisis brewing over USA and Europe, it would be worth taking into account the views of global market pundits who have a large exposure in world markets and assess their comfort level.
Mark Faber: Sell on any and every bounce as the world economy is heading for a total collapse. This author of the 'Boom, doom and gloom' report fears that this crisis will be larger than that in 2008. Before such a collapse, there will be immense printing of paper money followed by a near war like situation. The collapse will mean no one wanting to hold on to any paper currency, security or even cash. Equities being an asset class means co-ownership of businesses may continue despite not being attractive any longer.
Mark Mobius: The turmoil may be acute in the developed economies but the emerging markets will be in much better health. It is their GDP, foreign exchange reserves and control over fiscal deficit which makes them very, very sweet spots for investors. This man who oversees equities of over $50 billion finds equities better and better in all this turmoil.
A further Quantitative Easing (QE) may save US from the double-dip.
Raamdeo Agrawal: Rather than join the crowd of sellers, it would be better to look at some industries, interesting ideas and select companies. While there may be a lot of fear in the market, what is really happening is the fall in commodities. This alone is a good reason for ‘teji’ to emerge in Indian equities.
Last but not the least the Indian markets are displaying a very, very strong resilience. This is evident thanks to the positive stance of many brokers on the growth of Indian Inc. The world crisis makes India look good in the global arena.
Be a selective buyer in blue chips and midcaps or wait a little more for small caps to find better values.