Thursday, April 2, 2009

Long term bear turns bullish.

I enjoyed watching this clip on CNBC:

      Used car sales prices have gone up in UK, US, and Germany.

      Mortgage payments have been cut by 50-80%, and that is very significant when 30-40%of your average income goes into paying these mortgages.

      IFO stats has been going up past 2-3 months.

      If you look at consumer trends in the early part of 1930s and if you did keep your job (which ~80-90% people did), they had a 20% increase in their real living standards: their wages went down 10%, prices fell 30% so in effect you’ve got an increase.

      Things to keep an eye on:
      First: How do equities react to the news? A lot of very negative numbers are already publicly known and discounted.
      Second: To see a confirmed bottom here we need to see value outperform

      What to avoid? What about sector rotation?
      Don’t want to be in branded food companies: squeezed on price from all sides. Branded food companies with high debt on their balance sheet is perfect. Pharma is same thing.Big leadership and fully valued. Don’t want to be involved.