Market Review and Trends
Time to show and tell for US and global financials…
By Kevin Scully-Financial Blog  •  April 8, 2009
...the stocks that have led this rally! [caption id="attachment_1430" align="alignright" width="150" caption="Photo by jenny downing"]Photo by jenny downing[/caption] The sentiment rally show is over and its now time for the Fed and US banks to deliver the goods that led to this strong rally since March 9, 2009.  As a recap, the rally seemed to be an orchestrated attempt to boost global financials - first Vikram, CEO of Citi tells staff in an internal memo that the bank was profitable in Jan and Feb 2009; second we have Treasury Secretary Geithner tell investors that he will create a good/bad bank and buy out the toxic assets from US banks; and finally the FASB waives or provides some flexibility in the mark to market rule for banks for their toxic assets. If you look at the Dow, Hang Seng and STI from March 9 2009 till yesterday - it was the banks/property stocks which led these indices higher.  I also noticed that investors were buying cyclicals and defensive issues such as transport and utilities under-performed.   The latter would be the result of a perception that the markets had bottomed and that the worst was over.    The strength of the recent rally seemed to add weight to this and I even received emails from seasoned fund managers telling me this was a "V" shaped recovery.   I remain skeptical because over the same period, global GDP growth estimates for 2009 have fallen from -1% to -3% and global trade for export oriented economies such as Japan, HK and Singapore declined by close to 50%.  All these must translate into weaker and poorer corporate earnings - including the banks.  To me the bottom can only occur when US employment peaks and stops rising.  I estimate this will occur in Q3-2009 at more than 10%. Read more...
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By Kevin Scully-Financial Blog
Kevin began his working life in the regional and economics division of the Ministry of Foreign Affairs. He then moved to the private sector analyzing equities before venturing out to start NRA Capital. After 25 years of watching stocks and living through financial disarray during the Pan Electric Crisis, the 1987 Crash, the Barings debacle, the Gulf War, Asian financial crisis - what can sub-prime do but add another scar to already bruised wounds. Ever since starting his blog, Kevin has been enthusiastically giving his personal views on the market. He discusses about equities, the market turmoil, and the broad economy.
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