Andrew Coppin - The New Bull Market? NOT

Issue #02 - Insight

Have we all survived the worst of the hang- over derived from the implosion of global excesses that threw most of the world’s major economies into recession over the past 18 months?

hat we know for sure is  that the current rally has been one of the biggest in the history of world markets and aren’t we happy with the performance of Asian markets as they come off a low base -  Shanghai up 35%, TAIEX up 30%, KOSPI up 21% ytd!

Traders in our region who had the courage and the mandate to play the momentum that was spawned out of some pretty pathetic US banking results back in late January should at least have enough to pay the school fees...

 

laiming things are better for a month or two after a trillion plus in write-down’s and a trillion  in stimulus courtesy of the Fed.... is a lay down for a quick trade and short cover rally even if the fundamentals tell another story.  Despite their 20 something % bounce off their March lows the US markets are looking pretty pathetic compared with many Asian markets  with Dow Jones still down 8% ytd and  S&P 500 down 6% ( and still 40% below their highs of Oct 2007 ).

So let’s maintain perspective and note that with China being one of the few countries where the IMF’s recently revised global forecasts for 2009/10 remain positive... about the only thing that is adding up at the moment is that China should be faring better than most. So where are we at when: GDP Forecasts down + Unemployment Rate Rising + Declining Profits+ Confidence smashed = New Bull market?

Hmmm... Well, we all know that markets lead recoveries and we will see upside before well before the numbers turn, but still... can a hangover from a party that big all be over in a month or two?

I would propose that whilst we all recover from the party and the federal banks clean up the mess I don’t think it’s a very good time for bravery in this market and remain convinced that there are still plenty of risks and average corporate earnings reports ahead of us yet with over 40% of the S&P 500 companies to report in coming weeks. The average consumer may have been given a Panadol but is still drunk if they think we are straight back to the good old days.

Most consumers remain very shy and discretionary retail franchises are really feeling the pinch. Advertising budgets are being slashed and /or redirected into on-line strategies which augers well for the savvy internet companies but not so well for traditional media. Consumers are buying cheaper foods, downgrading the car and taking the domestic holiday rather than the Greek Islands this coming season. They are saving at the time they should be spending and the winners will be the companies with the balance sheets and the brands that can still be there when the cleaning up and stimulus  are well past and we are about to pop the next bottle of bubbly.

So as you clean up from the party and start to get your house in order be sure to remember to avoid companies who will need to raise cash. Remember that you’re more likely to fix the broken table yourself, use the old glasses, and that a cheap takeaway eases that hangover better than the degustation at Tetsuya’s. As for me....I’m still determining the amount of Tabasco for my Bloody Mary but I don’t need to rush.

 

ndrew Coppin is of one of the most respected financial advisers and arbitrage experts in the Asia-Pacific today. Which brands are terminal? Which are prospering? Which stocks should we be buying - or perhaps bailing out of? Andrew was formerly an Executive Director and Head of Private client wealth management with one of Australia’s largest independent stockbroker’s Paterson’s Securities. His career has included senior managerial roles at Bell Potter Securities and some 15 years as an wealth adviser and institutional dealer with Merrill Lynch amongst others. He is a highly regarded financial commentator who now advises  high net worth and corporate clients on investment strategy and asset allocation via his firm Coppin & Partners which is based in Sydney, Australia. Andrew has kindly agreed to be a regular contributor to Agency.Asia Magazine. Expect a completely unique perspective on your brands and those of your competitors – and perhaps profit a just little during these absolutely $@%#* times. www.coppinandpartners.com

 

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