Executive Money
Published January 14, 2009

Nomura sees 25% rise in global stocks

(NEW YORK) Global stocks will gain 25 per cent this year as government measures revive the economy and investors move from cash into equities, according to Nomura Holdings Inc. ‘The scale of the planned stimulus ought to be large enough to short-circuit the feedback between asset markets and the real economy,’ global equity strategist Ian Scott wrote in a note to clients dated Jan 9.

Investors should be ‘overweight’ in financial stocks and so-called cyclical industries, which are more sensitive to economic swings, Mr Scott wrote. He recommended an ‘overweight’ position in emerging-market stocks, saying they will lead gains worldwide.

Earnings will decline 21 per cent globally this year and investors face ‘dilution’ as more capital raising takes place to shore up companies’ balance sheets, according to the note. The Standard & Poor’s 500 Index will rise to 1,110 by the end of the year, a gain of 24 per cent from the Jan 9 close, Mr Scott said.

The recovery from last year’s record drop for the MSCI World Index will be led by cyclical and financial sectors and clients should position themselves ‘underweight’ in so-called defensive industries, according to Nomura. The latter are companies that tend to be less sensitive to an economic decline. ‘If, as we suspect, the market recovery continues, then the underperformance of the defensives ought to be the main feature,’ Mr Scott wrote in the note.

SCI World slumped 42 per cent last year as US$1 trillion of losses at financial firms pushed the US, Europe and Japan into the first simultaneous recessions since World War II. Analysts estimate earnings in 2009 will slip 1.2 per cent in Europe’s Dow Jones Stoxx 600 Index, while profits in the S&P 500 may fall 2.1 percent, Bloomberg data show.

Citigroup Inc strategists forecast corporate earnings are about a quarter through an estimated 50 per cent tumble from their peak, according to its 2009 global outlook report dated Jan 7. Profits will drop sharply, reflecting the ‘collapse’ in demand from the fourth quarter of last year, they said.

In emerging markets, stocks will surge 35 per cent this year as the result of stimulus measures overshadows the slowdown in goods sold outside China, according to Nomura. ‘We have retained an upbeat outlook on China’s economic growth of 8 per cent during 2009 as monetary easing and fiscal pump priming ought to offset the effects of an export slowdown,’ Nomura’s chief Asia and emerging markets strategist Sean Darby wrote in a separate note dated Jan 3. China’s economy will expand 7.5 percent this year, the slowest pace in almost two decades, the World Bank predicted.

Jonathan Garner, head of Morgan Stanley’s emerging-markets strategy team, predicted the MSCI gauge will rally to 810, while Andrew Garthwaite, Credit Suisse Group AG’s global equity strategist, expects a rise to 630.

Clients should be ‘underweight’ in Japanese shares, while remaining ‘overweight’ in Asian equities, Nomura’s Mr Scott said. He maintained a ‘neutral’ stance on European stocks. — Bloomberg

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Simple yet powerful words.  Something to ponder about ……

“Change the changeable, accept the unchangeable, and remove yourself from the unacceptable.” Denis Waitley

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My dear readers,

Some light is finally shining from amongst the dark clouds!

Business Times reported positive news about the direction of Asian stocks.  Low valuations make attractive buys. But as always, do exercise caution with your investments.  We still want to have adequate diversification in our portfolios.

(more…)

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I am inspired by what my friend, Vikram, has shared in his blog.  He’s the co-founder and wellness coach of Metro Nirvana, a holistic wellness company based in Mumbai.  We met while learning Iyengar Yoga at the Iyengar Institute in Mumbai 5 years ago.

Here’s his take on wellness in the new year:

“Even if resolutions are not kept in the course of the year, the importance given to wellness reflects a positive change. Every small step you make towards holistic living will improve your physical, mental, emotional and spiritual health.

So does this year’s New Year resolution involve any of these holistic goals?

*      A better work-life balance
*      Exercise more and regularly
*      Spend additional time with family and not just friends
*      Resolve to quit smoking and drinking
*      Have a healthy wholesome diet to tame the bulge
*      Spend more time travelling to different parts of the world
*      Have regular massages
*      Allot more time for rest and leisure
*      Build a life outside the office
*      Practice yoga, the perfect antidote in this stressed-out world
*      Kick unhealthy habits by taking up a healthy hobby
*      Learn something new this year
*      Spend more time in volunteer activities. It is here you can see the larger picture
- the purpose of your life and meaning to your life
*      De-clutter your house and desktop
*      Spend some time in silence daily. Ir picture - the purpose of your life
and meaning to your life
*      And finally, constantly remind yourself that you deserve to be happy!

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Here is an article which was co-written by me and Sam Wadia and published in the iFAST Insight magazine in January 2007.

It is an article exemplifying the “Select & Compare” concept that is the cornerstone of the Independent Financial Advisory model.

This is a powerful advantage for clients as through us, they have access to the solutions across the market and are able to select the best (in quality and contract terms) and most cost effective.

If you have not started on proper financial planning or gained clarity with your finances,  why not start the new year with the resolution to set your finances in order?

“The Emerging Voice of Sound Financial Advice”

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As a financial adviser, my role is to give clarity to my clients and help them stay focus on their financial plans.

In these challenging times ahead, my advice for people would be to:

• Reduce debt
• Reduce expenses
• Build emergency funds
• Hang on to your job
• Give it your best shot
• Invest your idle money especially your cash

Let’s not forget that money is not everything.  To live a fulfilling life, one needs to have a balanced lifestyle.

• Take time to exercise & keep fit
• Spend quality time with your family & loved ones
• Laugh heartily
• Eat wisely
• Give generously
• Smile more (and from your heart)
• Surprise yourself with your potential
• Be a blessing to the people around you

Have a great 2009!

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This is an interesting read -

Laszlo Birinyi, the man who accurately predicted 2008’s financial crisis, said that the S&P 500 index hit a bear market bottom end Nov’08 and that now is the best time to buy the largest US cap stocks.

LASZLO Birinyi, the investor who accurately predicted this year’s rout in financial shares, said the Standard & Poor’s 500 Index reached a bear market bottom two weeks ago and recommended buying the largest US stocks.

Mr Birinyi, who spent a decade on the trading desk at Salomon Brothers Inc and is known for pioneering money-flow analysis, said financial stocks will rise over time and shareholders were ‘too quick to dismiss them all as tainted’.

Mr Birinyi’s October 2007 warning that a recovery in banks would be snuffed out presaged a 59 per cent plunge in the S&P 500 Financials Index. The measure fell 36 per cent since he advised selling the stocks in August following a three-week rally.

‘I’m very comfortable saying the market has made the bottom,’ Mr Birinyi, president of Birinyi Associates Inc in Westport, Connecticut, said in an interview with Bloomberg Television. ‘It’s time to get out of the bunker mentality. You want to be looking at stocks, you want to be considering the market, and you want to get out of this funk that too many investors have been in for the last three or four months.’

The S&P 500 fell 52 per cent from an October 2007 record to an 11-year low of 752.44 on Nov 20. Financial shares lost three quarters of their value, dragged down by almost US$1 trillion in losses and writedowns that froze credit and pushed the US, Europe and Japan into recessions.

Mr Birinyi, whose money-flow analysis compares the dollar amounts moving into or out of a stock or index to establish whether it is being more aggressively bought or sold, cautioned against betting on a sharp market recovery.

“It’s time to get out of the bunker mentality.  You want to be looking at stocks …… and you want to get out of this funk that too many nvstor have been in the last three or four months.”

‘A bull market is forming, it’s just not going to be any outsized gains over the next three to six months,’ he said. ‘The market is going to do better, but it won’t be up, up and away. With all the concerns and issues around the world, I’d be hesitant about being very, very aggressive.’

Mr Birinyi said he bought shares of General Electric Co because the company has pledged to keep its dividend. Mr Birinyi also said Dow Chemical Co’s payout makes the company attractive and Apple Inc. is ‘good for a trade’ because it fell too far.

‘The wind is at the back of the large caps,’ Mr Birinyi said.

Stocks rose around the world on Monday, sending the Dow Jones Industrial Average to a one-month high, as President-elect Barack Obama pledged to boost the economy with the biggest public-works spending package since the 1950s. The S&P 500 on Monday added 33.63, or 3.8 per cent, to 909.70. The benchmark for American equity extended its gain since Nov 20 to 21 per cent. GE rose 5.8 per cent to US$18.88 on Monday, Apple increased 6.1 per cent to US$99.72 and Dow Chemical climbed 7.2 per cent to US$20.37.

All 10 industry groups in the S&P 500 have risen at least 9.2 per cent since the benchmark’s low last month. Financial stocks led the rally, climbing 46 per cent collectively, followed by consumer discretionary and telephone companies.

Monday’s gains put a technical end to the 13-month bear market that began after the S&P 500 reached a record close of 1,565.15. An advance of more than 20 per cent from a low is the standard definition of a bull market.

Mr Obama said on Dec 6 he will boost investment in roads, bridges and public buildings to create or preserve 2.5 million jobs after companies cut payrolls at the fastest rate in 34 years.

‘There’s an awareness now that this is across the board,’ Mr Birinyi said. ‘You have bleeding all over and a Band-aid here and a Band-aid there is not going to form a solution. You’ve got to really take some dramatic action, and I think that’s what investors are responding to today.’

Mr Birinyi started his research and money management firm in 1989. — Bloomberg

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Dear friends,

Wishing you all a Healthy, Successful and Peaceful New Year! Hope you are keeping well and have started the year on a high note

I’m looking forward to a year of personal growth and fulfilling the things that I’ve set out to accomplish.  The end result is not all that important. It is the journey of reaching our goals that will teach us valuable lessons and give us wisdom for the future.

Instead of dwelling in the ‘gloom’ (well, it’s forecasted the global economic recovery will take anywhere between 12-18 months), and whining & complaining away (which I call a dis-ease), we should take a quiet, reflective moment and give thanks to the many blessings in our lives.  It is so easy to focus on the things we do not have and forget all about what we have been blessed with.  One of my goals this year is to get involved in helping a children charity.  Helping the less fortunate gives perspective on life.  We need perspective.  That will help us to understand things/situation in a more positive light and allow us to make wiser decisions and stay calm.

The same goes for your investments.

The financial crisis caused by the greed of the big institutions is a Very, Very rare event.  There will continue to be volatility in the markets.  But that does not mean ignoring the market altogether.  I believe that it is time to take calculated risks as equities tend to react ahead of an improvement in the economy.  This event has indeed created some of the best buying opportunities of the century for investors.

Having said that, please proceed with caution when entering the market (if you’re a stock investor).  Remember - invest only money that you can afford to lose and also the stock market has no human emotions (unlike you and me). Investing is not a ‘play play’ game as the consequences can be disastrous if not managed properly.  To protect yourself from the downside risk, look to invest in under-valued stocks or stocks that are selling below net asset value. Look also at sectors with stable earnings.

To reiterate, here are the golden rules of investing that will help you stay on the path of wise investing.

Golden Rules of Investing:

1. Diversification - across asset classes, countries, industries

2. Liquidity

3. Valuation

4. Dollar Cost Averaging

5. Rebalancing; monitoring and review

6. Cost

7. Upside potential

8. Long term time horizon

9. Peace of mind - sleeping well!

10. Income - current, future, predictability, stability

11. Downside protection - fencing/safety net

12. A well thought out retirement strategy to secure your golden years

With that, Carpe Diem! (latin for Seize the day!)

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