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December
2009 --From the desk of Patrick Lenouvel
2009
will be remembered as a year characterized for economic meltdown with
negative world GDP growth. The year started with a freefall economy
than moved to signs of stability followed by a return to positive GDP
growth.
The
recovery is expected to broaden, but the question still remains its staying
power over the next two to four years.
Limited
access to credit and high consumer debt level continue to damper consumption
and housing market recovery especially in the USA.
Once
monetary and fiscal programs around the world are scaled back, developed
countries economies could be vulnerable to setbacks again.
China's
economic and fiscal policies may impact recovery around the world. However,
country debts and account deficit could be the next big crisis unless
economies jump-start again. We are still very worry about the
condition of the US banks and their lending (or should I say lack of
lending) policies.
A
good news, according to Goldman Sachs, companies within the same sectors are
no longer as correlated as in recent months. The selection of
securities should once again have an impact of
performances.
November 2009 - From the desk of Patrick Lenouvel
Good
news for the US for the third Quarter 2009...
However,
GDP growth mainly results from government stimulus. Unemployment
remain high and continue to increase. We need continued consumer and
business confidence and spending, increased export, reduction of the trade
deficits, governmental spending control to ensure substainable growth.
China
remains the good story, but as in the case of he USA, China continued growth
is heavily dependent on government stimulus. however, the situation is
somewhat different as China is in a better financial position with its
surpluses.
In
both Europe and North America, business activities (mergers and
acquisitions) while still at lower levels (both values and numbers) are
increasing. Valuations in some sectors are high based on historical
values.
October
2009 - From the desk of Patrick Lenouvel
The
global economy continues to be pulled up by the strong performance of Asian
economies...
The
recent rebound in commodity prices and supportive policies are helping many
emerging and developing countries.
In
other economies, there is a danger that the economic stimulus that have been
driving the current rebound could gradually loose strength if confidence
levels were to decrease.
The
global economic outlook continues to be driven by the impact of the
financial crisis and the plunge in global trade at the turn of the
year. Most economists estimate that global growth is expected to be
slowly gaining momentum. However, global growth is projected to remain
sluggish.
China
is leading the pack and is contributing to the recovery in other Asian
countries. It is interesting to note that Korea, Taiwan and Thailand
now ship nearly three times the exports to China that they ship to the
United States.
August 2009 - From the desk of Patrick Lenouvel
Is
the market due for a correction?
Although
industrial companies have been reorganizing and cutting costs, high
unemployment and low consumer spending prevent revenue growth and impact
improved gross margins.
The
stock market has increased significantly since March 2009 and has reached
levels that indicates strong economic recovery and investors' confidence.
Demand
for commodities in China and the impact of economic stimulus around the
world remain keys for economic outlook
July 2009 - Patrick
Lenouvel desk - Japa International
A different game for the next few years. ..
Politics in China
and in the Bric countries as well as positioning are defining the
battlefield for corporations and should impact on stock market return
performance around the world.
We no longer can depend on US consumer spending and increased
demand in the USA
as a catalyst to valuate corporations.
China
and other BRIC countries need to develop their infrastructure and increase
consumer demand. Commodities are
expected to drive stock market return.
A game that few Portfolio managers are familiar with.
Country debts, corporation default potentials will need to be
addressed both at the political and corporation levels in order to reduce
the danger of an other crisis.
History will repeat itself.
It is just a question of time.
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June 2009 - From
the desk of Patrick Lenouvel
Stock
exchanges around the world have reacted sharply upwards from the March
lows.
According
to the IMF, all of the advanced economies wre expected to be in a recession
in 2009. The IMF forecasts a turnaround in 2010.
The
US and China remain key to a global economic recovery. The
fundamentals have not been fixed yet despite perception that the worst is
over.
May 2009 - From
the desk of Patrick Lenouvel
Gloom
default outllook for 2009...
Credit
default risk remains high. Standard and Poor expects that in the US
corporate speculative-grade default rate to increase within the next 12
months exceeding prior record-high levels.
According
to S&P, 297 corporate entities are rated B- or lower (almost 3 times the
number from a year ago) for a combined rated debt worth over $520
billion. Out of the 297 corporate entities, 225 are from the
USA.
March 2009 - From
the desk of Patrick Lenouvel
A Trader’s Paradise...
It sounds that the world is ending. Most companies are valued as very low
prices. Shopping centers are valued lower
than the construction cost of cheap housings from the 80s. However, uncertainty still persists. Company revenues drop like no tomorrow.
How far down can the economic situation go?
Volatility is crazy.
While screening companies around the world from Asia to Europe to America, we
note that a company stock price can increase 14% one day and drop 10% the
next.
Because of the large drop in valuation, portfolio managers from
around the world will need to increase equity positions or renegotiate
asset allocation ranges with investment committees. This should put pressure upwards.
It is almost impossible to remain rational as too much
uncertainty exist regarding future revenues, earnings, capital budgeting
and bank lending policies. This
market is a trader paradise.
However, as a good trader, take your profit and run.
January
2009 - From the desk of Patrick Lenouvel
Cash is king. ..
Some
great returns in selected countries are available on cash.
Corporate bond
spreads reached levels that should be scary. The extra yield
over government bonds in the U.S. is in average 6.39
percentage points, the highest since Merrill started collecting the data in
1999. Spreads on European bonds are at a record 4.13 percentage. It
is of no surprise that in the UK, some analysts predict one
in every 10 high-quality firms may go bust. Although portfolio
managers are taught not to try to time the market, 2009
continues to be discouraging for most. However, there is also great
opportunities for the strong at heart.
Traditional
asset allocation no longer works. Extreme correlations
among countries stock market indexes makes it almost useless to allocate
funds systematically among countries. Further research is required before
investing.
The
role of your investment counsel or portfolio manager is to identify
the battlefields, to identify securities that will generate cash
flows or are valued below their intrinsic values or are turnaround
situations.
Pension
funds continue to increase their investments in alternative investments
including private equities. However, many pension funds seem to hold
on and are slow to make decisions.
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