No Ideas ? New Valuation Paradigms in a 3 Speed Recovery

I have been spending some time on the herb and vegetables. Sweet potatoes flourishing but under savage attack by the relentless white fly army, same for the chilli and chilli padi. Rosemary sprouting like mad along with those spinach stalks I saved from the coffeeshop bin. Should have enough spinach leaves for a dish by next week at this rate. Got some maize kernels from a friend just now and putting them to soak in shallow dish before I plant them tomorrow.

That is what you do when you have no idea.

Like me.

Uninspired and slightly disoriented by the markets where nothing appears to be what it seems.

IMF reports that it is a 3 speed recovery but “risks of a longer growth slowdown in emerging market economies have now increased, due to protracted effects of domestic capacity constraints, slowing credit growth, and weak external conditions.”

Overall “Downside risks, old and new, still dominate the outlook.”

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That is quite glum and it is a chain effect because “IMF Blanchard:A 2% decrease in the Emerging Market growth rate might decrease US or Euro growth by abt 0.5%”

With the Fed normalising, I cannot bring myself to buy stocks because valuation systems need to be recalibrated for cost of capital and that cost is measured against the risk free rate.

Stock valuations are based on 1. returns and 2. future returns ie. growth. With higher interest rates, returns cannot be compared to past measures.

In the IMF report, we are currently in the midst of “a one-off repricing of risk due to the changing growth outlook for emerging market economies and temporary uncertainty about the exit from monetary policy stimulus in the United States. ”

The next phase is ” if underlying vulnerabilities lead to additional portfolio shifts, further yield increases, and continued higher volatility, the result could be sustained capital flow reversals and lower growth in emerging economies.”

Another big risk going forward that was unveiled in the Group of 8 meeting last month (which excluded Brazil India China S Africa), is the largest ever FTA ever negotiated, this is between US and the Eurozone which is expected to conclude next year and affect 30% of global commerce.

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Even more bad news, I think, to cut the rest of the world out.

We are going into earnings season. JP Morgan this Friday, Citi on Monday, Goldman Sachs Tuesday. And the all important China GDP next Monday too at 10 am.


Yesterday a broker friend asked me what to invest in ? Who is mad enough to be investing right now ? It is a trading market.

A wise man who has seen many crises have this to say, “anyway i am reducing my risk not sure of where all this is going”.

So I am wondering if spinach prices will go up or down with higher cost of funding ?