One of the best newsletters that I have read recently is the Greed and Fear, edited by Chris Wood. Remarkable for its clarity and yet leaving enough material for the analyst to make his own calls.
When you meet people around the world and see them change their views from that of extreme fear to extreme greed and euphoria, you have an important contrarianÃ‚Â criteriaÃ‚Â to judge the market direction and more often than not, it beats the technical indicators. As US released its latest Jobs numbers of 163k new job addition, I was surprised at the speed with which some blogs have gone ballistic over the future US growth and the case of US dollar to touch levels like 90 and 95 and yen to decline to levels like 150 (am not joking. A very respected hedge fund trader who nearly lost his shirts last time markets crashed Ã‚Â is now betting for the US dollar to reach out into stratosphere. Time to be vary?)
Presented are a few thoughts of mine juxtaposed along side Chris’s (CLSA) view, whichÃ‚Â coincidentlyÃ‚Â match on almost all parameters.
In the context of US, CLSA estimates aÃ‚Â rapid, albeit short lived, upswing in the American economy and one which hasÃ‚Â been significantly discounted by the stock market. The upswing is being driven by capex which is being funded by a corporateÃ‚Â sector which has abundant cash flow and which has seen a big pick up in profits from theÃ‚Â recent low. Thus, according to the latest national accounts statistics, US aggregate corporateÃ‚Â profits increased by US$108.7bn or 8% QoQ to an annualised US$1.47tn in 4Q09 and are upÃ‚Â 30.6% from the low reached in 4Q08. As a result, the US corporate profits to GDP ratio roseÃ‚Â from 7.8% in 4Q08 to 10.2% in 4Q09Ã‚Â the upswing is being driven by capex which is being funded by a corporatesector which has abundant cash flow and which has seen a big pick up in profits from therecent low. Thus, according to the latest national accounts statistics, US aggregate corporateprofits increased by US$108.7bn or 8% QoQ to an annualised US$1.47tn in 4Q09 and are up30.6% from the low reached in 4Q08. As a result, the US corporate profits to GDP ratio rosefrom 7.8% in 4Q08 to 10.2% in 4Q09.
US Corporate Profits
US Corporate Cash Flows
In keeping with the rapid rise of profitability of US corporates,Ã‚Â aggregate corporate cashflowÃ‚Â increased by US$69.1bn or 4.4% QoQ to a record annualised US$1.64tn in 4Q09
US Private Investments has been led by IT investments
Tagged with: china, corporate, India, MSCI, profit, US