There Is Always a Bull Market Somewhere!

Yes, Mr. Cramer, you are right. There is always a Bull Market Somewhere! Emerging Market India’s SENSEX surged about 2000 points (i.e. approx. 22%) in two sessions of one minute each.

India went to polls and its one billion citizens voted the pro-reform party to power. This pro-reform party is led by none other than Dr. Manmohan Singh, well respected economists and architects of India’s economic reform. Dr. Singh was prime minister for last five years, but he had to run a coalition government with leftist groups. This often tied his hands down.

But now the population has given him a convincing win, which not only increases government’s stability, it also abode’s well for the faster pace of reforms. The markets cheered this with the one day surge and kept the India story alive and kicking.

Since January 2009, India’s SENSEX index has gained 48% (including the latest surge). If we look at other emerging markets, then China’s Shanghai SE A-Share Index has gained 45.6%, Taiwan’s TAIEX has gained 43.3%, Russia’s RTS-2 has gained 33.2%, and Indonesia’s Jakarta Composite is up 31.2%. So India’s SENSEX is following the trends in the region.

Suddenly within the span of few months, emerging markets as showing that every thing is hickory dickory again. There is this sudden spur of optimism that is proclaiming India will outperform emerging markets in coming 12 months. Global investors are being lured into chasing this performance as this may only offer the best chance with 7% to 8% growth in next few years. Suddenly in span of few months, its being said that the sentiment has changed to growth (instead of value). Suddenly, pundits have now started the re-rating of India’s economy.

My personal viewpoint is investors in developed worlds such as United States, England, Europe, and Australia, have been drowning in losses or at best expected to remain flat during 2009. It is estimated that four trillion dollar is waiting in money market funds. Alas! a perfect trap has been laid in emerging markets.

What is ironical is sense of optimism in emerging markets is based on perception, everything is based on potential. Nothing has changed in terms of fundamentals that justify this optimism. A recent article showed that majority of companies in India’s 30 company SENSEX Index are showing declined earnings and reduced profitability. A stable government is no way a passport to prosperity. India had stable government in 80s, was there a prosperity?

Mr. Cramer, you forgot to mention something. Speculative bulls may tread on DOW of S&P500, but in some parts of the World, speculative bulls run amok. And the most likely outcome is more serious injury than treading bull.

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