Monday, October 27, 2008 0 comments ++[ CLICK TO COMMENT ]++

A Bear Turns Bullish (Sort Of)

I have no idea if Krishnamurthy 'Nandu' Narayanan is just lucky or is actually talented. If you go by The Globe & Mail stories on the investment manager's thoughts over the last year or two, you would notice that he actually expected the credit bust. He had been bearish for a while--I believe he is primarily a short-seller but not sure--but seems to be bullish (at least on Canada right now):

The Smartest Man, when delivering his prophesies, did not sugar-coat them. “This could potentially make Long-Term Capital [the financial crisis of 1998] look like some kind of walk in the park,” he predicted. “The reckoning has started.” No soft landing this time: It could even be “like the Great Depression of this century.” He said these things not last week, not last month, but on July 26, 2007. That day, the Dow Jones industrial average closed at 13,473.


“I think we're ending the financial crisis now,” he said. “There will be countries, like the U.S., that will go into recession. But this need not be a global recession. And there are some encouraging signs on that front.”

If you have any macro inclination, one of the big calls right now is how bad the economic slowdown will end up being. I'm not as optimistic as Nandu and think the whole world is going to slow down. However, unlike many, I actually don't think the US economy will do that badly. My guess right now is that the US recession will be worse than the 2001 recession and more likely to be similar to the 1982 or 1974 recessions. What I see, though, is poor performance for investors. Don't ever forget that the stock market do poorly even if the economy is good, and vice versa. For instance, the economic slowdown starting in early 2000 was not that bad but US stocks were off around 30%.

Read the rest of the article for his general views. He seems to be bullish towards the cyclicals (such as commodities) and emerging markets with trade surpluses (such as Singapore, Malaysia, and Thailand.) He also seems bullish towards India whereas I think it is one of the worst emerging markets for the short to intermediate term (I don't like India because it is running fiscal deficits, has a current account deficit, has very high corruption, and the economic system is not very "free".)

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