1. There will be 5-6 lakh layoffs in textile industry. Textile stocks which are hot among investors in the early 90's are now completely lost the charm. That's why sector is very crucial for stock investment. Sugar is the best sector in 2006 and worst one in 2007 and gave good returns in 2008. Even good companies in bad sectors will underperform.
2. Shocking: For the first time ever, LIC suffered de-growth of 16% in gross premium income. Same is the story for other insurance players.
3. China's economic performance fell in October to its lowest level since it began compiling data in 2005.
4. Indian auto component industry's growth fell from over 20% in the last 6 years to a poor 6% in the last 6 months. Auto ancillary makers are announcing layoffs and production cuts. Tube Investments is bucking the trend. American car makers GM and Ford burnt $14.6 billion in the last quarter.
Economic statements:
1. India's GDP growth will fall to 7% level in this financial year - Chairman of Prime Minister's Economic Advisory Council Suresh Tendulkar. At last they are giving right statements.
2. "This year would be the worst in recent years for our economic development" – China PM Wen Jiabao.
China Government is trying to revive economy by spending on infrastructure projects which may help to create jobs. What Indian Government is doing to face the crisis and create jobs? China leadership at least recognised the problem. After five years of growth over 10 percent, China's growth rate has decelerated for five consecutive quarters, dropping from 12.6 percent in the second quarter of 2007 to about 9 percent the third quarter of this year.
China GDP growth in Q4 in 2007: 11%.
China GDP growth in Q4 in 2008: 5.8% (estimates). Just imagine the impact!
3. "Spending $150 billion over the next decade to boost energy efficiency (green energy) would help create 5 million jobs" – Barack Obama. Economy needs such investments from Government in these troubled times.
4. There will be huge rise in loan defaults and banking NPAs in 2009: Fitch Rating and Crisil.
5. "It's safe to say hospitals are no longer recession-proof," said David A. Rock, a health care consultant in New York. 62% of hospitals are reporting flat or declining admissions.
6. United States will go into deepest recession since 1982 – Goldman Sachs.
7. " I have said before and I will repeat again: It is not going to be quick and it is not going to be easy for us to dig ourselves out of the hole that we are in, but America is a strong and resilient country," – Barack Obama.
Positive Financial news:
1. India's 6 core Infrastructure sectors grew by 5.1% in September, 2008 (5.8% in Sep, 2007). It is 2.7% in August, 2008.
Core sectors growth in April-September, 2007-08: 6.9%.
Core sectors growth in April-September, 2008-09: 3.9%. Huge fall!
2. Lanco Infra is the sole bidder for 1,320 MW super critical power project in Patiala, Punjab. Many infrastructure players prefer cash contracts in these days.
Negative economic news:
1. Tata Motors is to shut down 2 commercial vehicle plants (Pune and Lucknow) for 6 days due to piling up of inventories and low demand.
2. New Telecom licenses are in trouble as analysts are predicting a big mess in future. Spectrum is a precious commodity but Telecom ministry gave it to Companies like Unitech, Swan and Videocon at cheap prices. They are now selling spectrum at very high prices to foreign Companies. This is the performance of our ministers when Government needs huge money to overcome liquidity crisis. "Left is right sometimes".
3. Telecom companies like Bharti Airtel and Idea need to play onetime fee for spectrum over 6.2 MHz. This decision will result in a huge dent in the bottom lines of these telecom majors.
4. Tata Steel is in further trouble as Corus will cut output by 30% and gave dismal outlook.
5. Shipping orders fell by 90% in October and sector is under deep crisis.
Global recession news:
1. American economy: Unemployment rate climbed to the highest level since 1994. Jobless rate rose to 6.5%. America reported biggest two month job losses in Sep-Oct since 2001. American economy lost 1.18 million jobs in 2008 and situation is expected to worsen further. Factory payrolls fell 90,000, the biggest monthly loss since July 2003.
Consumer spending fell at a 3.1% pace, the most since 1980. According to experts, American economy will deteriorate further in the next quarter. My mind is blowing away by these negative statistics. We have to see how Barack Obama will sail Americans through these troubled waters. Great leaders like situations like these.
2. Job losses in America: Jobless ranks zoomed past 10 million last month, the most in a quarter-century.
Job losses in August: 1,79,000.
Job losses in September: 2,84,000.
Job losses in October: 2,40,000.
3. Ford motors announced $3 billion loss. GM lay off 3,000 workers. Barack Obama pledged to save American auto industry. Will he succeed?
4. Surprise news: Healthcare is generally considered as immune to economic slowdown. But American hospitals are seeing big drop in paying patients as people are delaying their decisions on surgeries.
5. China economy: GDP will be worse than estimates as exports dependent economy is feeling the heat of global slowdown. Job losses are rising rapidly and Chinese leadership is trying their best to revive domestic consumption. But economy is slowing much sharply and more quickly than anyone anticipated. Real estate comes to standstill in China. Christmas orders are down by 20% in 2008.
6. Warren Buffett Company (Berkshire Hathaway) announced 77% drop in net profit in Q3. Company reported the longest streak of quarterly declines in at least 13 years.
Quarterly results analysis:
1. Champagne Indage: Good results. India's largest and oldest wine Company announced 40% increase in sales and 35% rise in net profit. Crisis and alcohol are inseparable. I am a strict teetotaller but as an investor, I prefer these companies. Company is expecting 75% top line growth in the next quarter. Company is on expansion mode in recent days despite credit crisis.
CMP: 146; P/E: 5.4; Book value: 177.
Note: Annual domestic wine consumption would grow 25% per annum to reach 9 million litres in 2012 – Assocham Survey.
Decent results: Torrent Cables, Kirloskar Pneumatic and Lloyds Metals.
Poor results: Freshtrop Fruits and Eicher Motors.
Investment ideas for long term investors:
1. Animation industry will grow to $1.16 billion by 2012 as against estimated $460 million in 2008. I have holdings in Animation Company Compact Disc India (Largest Animation Company in South Asia).
2. Gaming industry would grow to $1 billion from $212 million in 2008. Long term investors should closely watch animation and gaming industries along with Mobile VAS.
3. Mobile: India will have 23 crore 3G subscribers by 2013. Huge opportunity for Mobile VAS providers.
Final verdict: If we fail to create jobs, there will be no improvement in consumption means there will be no recovery in economy means further job losses means further fall in clonsumprion means further slowdown in economy. When will this cycle end? I am searching for answers. I am searching for great leaders to bailout us.
Sourced from: Stock Market Guide
