{"id":142,"date":"2012-04-23T03:41:11","date_gmt":"2012-04-23T03:41:11","guid":{"rendered":"http:\/\/teekhapan.wordpress.com\/?p=142"},"modified":"2012-04-23T03:41:11","modified_gmt":"2012-04-23T03:41:11","slug":"sell-in-may-oops-april-and-go-way","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2012\/04\/23\/sell-in-may-oops-april-and-go-way\/","title":{"rendered":"Sell in May (oops April) and go way!"},"content":{"rendered":"

\"Image\"<\/a><\/p>\n

Vivek Kaul<\/strong><\/p>\n

(vivek.kaul@gmail.com) \u00a0\n<\/p>\n

\u201cDid I say I\u2019ll be back, when I left?\u201d I asked.\u00a0
\u201cNo,\u201d she replied. \u201c\u2019You just said, this is the end my beautiful friend.\u201d
\u201cAh! Jim Morrison had me doped.\u201d\u00a0
\u201cNever mind,\u201d she said. \u201cHope this time you are back for good.\u201d\u00a0
\u201cThat time will tell,\u201d I replied cheekily.\u00a0
\u201cYou are still as fickle minded as the stock market.\u201d\u00a0
\u201cWell, there is clearly some logic in the way the stock markets operate. Just that it is not obvious to everyone.\u201d\u00a0
\u201cAh. There you go V, blowing your own trumpet!\u201d\u00a0
\u201cLet me explain.\u201d
\u201cPlease go ahead.\u201d\u00a0
\u201cLet\u2019s start with Spain where all the trouble seems to be concentrated these days. There benchmark index IBEX 35 is down around 10% since the beginning of this year and is down 30% over the last one year.\u201d\u00a0
\u201cWhy?\u201d
\u201cTheir banks are in big trouble. The stock price of their biggest bank Banco Santander has fallen 18% over the last one month and 45% over the last one year.\u201d\u00a0
\u201cBut why?\u201d she interrupted again.\u00a0
\u201cSpain had the mother of all housing bubbles! It currently has as many unsold homes as the United States (US), even though the US is six times bigger than Spain.\u201d\u00a0
\u201cOh! I didn\u2019t know that.\u201d
\u201cYes. And even though Spain contributes only 12% of the gross domestic product of the European Union it accounted for 30% of all homes built in the EU since the turn of the century.\u201d\u00a0
\u201cAnd all this construction must have been financed by loans from banks?\u201dshe asked.\u00a0
\u201cYes. Loans to developers and construction companies amount to nearly 50% of the $1.4trillion Spanish gross domestic product (GDP). Of course, with homes lying unsold developers cannot repay their loans and this means the banks are in trouble. And Spain\u2019s banks are too big. In fact the asset size of the three biggest banks in Spain is around $2.7trillion, twice of their GDP,\u201d I explained.\u00a0
\u201cSo if banks go bust, Spain goes bust!\u201d\u00a0
\u201cExactly! And Spain is not the only country in trouble. Other European countries are not doing too well either. This has an impact on China because Europe is China\u2019s biggest trading partner. Exports to Europe in March were down 3.1% in comparison to last year. Chinese exports had ranged between $475billion and $518billion in the last three quarters of 2011. In the first three months of this year the number has fallen to $430million. The Shanghai Composite, China\u2019s leading stock market index fell by 6.8% in the month of March.\u201d\u00a0
\u201cSo a slowdown in Europe is having an impact on China?\u201d
\u201cYes madam! Profits of Chinese companies were also down for the first two months of 2012.\u201d\u00a0
\u201cSo a slowdown in Europe, slows down China. What happens next?\u201d she enquired.\u00a0
\u201cThat in turn has an impact on Australia.\u00a0 Australian exports to China in 2011 stood at A$72billion (Australian dollar), up 24% from 2011. Now around 26% of Australian exports are to China. An ever expanding China bought coal, iron ore and natural gas from Australia, driving up Aussie exports. But exports for the month of February fell to A$24.4 billion, the lowest in an year. Coal exports were down by 21% to A$3.4billion.\u201d
\u201cAll because of a slowdown in China,\u201d she concluded.\u00a0
\u201cYes. The other country which has suffered because of a slowdown in China is Brazil, which has been enjoying an economic boom to a huge demand for crude oil and agricultural products. A slowdown in China impacts any commodity exporting country because prices tend to fall as China consumes less. But that is not the only reason by Brazil\u2019s exports have fallen.\u201d\u00a0
\u201cSo what is the major problem?\u201d
\u201cThe major problem is an appreciating Brazilian currency. The central banks of United States, Japan and Great Britain have been running zero interest policies, in the hope of reviving their own economies. But what this has done is that international investors have been borrowing in these countries and taking the money into emerging markets like Brazil to invest there. When they come to Brazil with their dollars, they need to sell those dollars and buy the Brazilian real. This leads to an increase in demand for Brazilian real and hence the value of the real appreciates against the dollar, which in turn means that the Brazilian exports become expensive. Hence, the Brazilian Bovespa, the premier stock market index of Brazil has fallen 7.4% over the last one month,\u201d came a long explanation from my end.\u00a0
\u201cInteresting, the way it\u2019s all linking up!\u201d
\u201cSo Europe slows down leading to China slowing down and then Australia slows down as well. Brazil slows down because of China and the United States. In the United States elections are due in November this year. If Obama is re-elected tax on long term capital gains could increase to 20% and income tax rates are also likely to rise as tax cuts initiated George Bush junior may be allowed to expire. The stock market of course won\u2019t like this.\u201d
\u201cBut what about India?\u201d
\u201cDo I need to say anything? We are in a big mess to say the least! And the state of the Indian stock market is largely decided by the foreign investors. If they are not feeling good about things, the Indian stock market will not go anywhere. In the last one month the BSE Sensex has been almost flat.\u201d\u00a0
\u201cHmmm. As my former boss used to ask, so what is the takeaway?\u201d she asked.\u00a0
\u201cThings are not looking good all over the world.\u201d\u00a0
\u201cSo, is there any hope?\u201d\u00a0
\u201cYup, there always is. Ben Bernanke may come to the rescue with another round of money printing, technically now called quantitative easing. That is possible because it is an election year in America, and past Chairman of the Federal Reserve have helped incumbent Presidents fighting elections by running an easy money policy before elections. This money could find its way into stock markets around the world and juice up returns,\u201d I replied.\u00a0
\u201cBut that may or may not happen. So what does one do now?\u201d
\u201cAn old stock market saying goes \u201csell in May, go away! It is time to change that to April!\u201d<\/p>\n

\u00a0(Vivek Kaul is a writer and can be reached at\u00a0<\/em>vivek.kaul@gmail.com<\/em><\/a>)<\/em><\/p>\n

(The article appeared in the Daily News and Analysis on April 23,2012.\u00a0http:\/\/www.dnaindia.com\/analysis\/column_sell-in-may-oops-april-and-go-away_1679339<\/a>)\u00a0<\/p>\n

References:\u00a0
<\/strong>Endgame \u2013 The End of Debt Supercycle and How it Changes Everything,\u00a0<\/em>John Mauldin and Jonathan Tepper, John Wiley &Sons. 2011
Minefields that can Blow-up Global Stock markets\u00a0in 2012,<\/em> Gary Dorsch, April 12, 2012,\u00a0www.sirchartsalot.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Vivek Kaul (vivek.kaul@gmail.com) \u00a0 \u201cDid I say I\u2019ll be back, when I left?\u201d I asked.\u00a0\u201cNo,\u201d she replied. \u201c\u2019You just said, this is the end my beautiful friend.\u201d\u201cAh! Jim Morrison had me doped.\u201d\u00a0\u201cNever mind,\u201d she said. \u201cHope this time you are back for good.\u201d\u00a0\u201cThat time will tell,\u201d I replied cheekily.\u00a0\u201cYou are still as fickle minded as … <\/p>\n

Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"qubely_global_settings":"","qubely_interactions":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[358,530,682,1016,1694,3492,3858],"qubely_featured_image_url":null,"qubely_author":{"display_name":"Vivek Kaul","author_link":"https:\/\/vivekkaul.com\/author\/vivekkaul\/"},"qubely_comment":0,"qubely_category":"Uncategorized<\/a>","qubely_excerpt":"Vivek Kaul (vivek.kaul@gmail.com) \u00a0 \u201cDid I say I\u2019ll be back, when I left?\u201d I asked.\u00a0\u201cNo,\u201d she replied. \u201c\u2019You just said, this is the end my beautiful friend.\u201d\u201cAh! Jim Morrison had me doped.\u201d\u00a0\u201cNever mind,\u201d she said. \u201cHope this time you are back for good.\u201d\u00a0\u201cThat time will tell,\u201d I replied cheekily.\u00a0\u201cYou are still as fickle minded as…","jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/142"}],"collection":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/comments?post=142"}],"version-history":[{"count":0,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/142\/revisions"}],"wp:attachment":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/media?parent=142"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/categories?post=142"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/tags?post=142"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}