WorldWinds | The World at your Fingertips: July 2008

The glory days have returned to the Middle East it appears, with regional indices rising between 30-50% YTD. If, however, these currencies were floating, and not pegged to the dollar, one could expect that this YTD rise would be between 80-90%. There is, however, one change to my thesis about the Middle East. While previously I was a strong advocate of the lack of correlation to global markets thesis, this is changing. Foreigners have begun dumping cash into Middle Eastern markets seeking this lack of correlation, and as this fast money comes it, it can come out just as fast. While the macro story is among the most attractive in the world, and assets versus global peers are cheap, the lack of correlation story no longer exists in the UAE and Saudi Arabia. A new factor, however, highlighting the region's attractiveness is amount of foreign capital seeking currency revaluation and cheap assets being shifting towards the region.

By: Sherif Elhalwagy

2007/12/10

As we get ready to position for 2008, the most immediate question which needs to be asked before determined sector/equity strength is global market strength.I believe that stocks are not expensive, nor are they a bargain. I still believe that global rising wealth levels will drive the developed world's economic strength, but more importantly, stock markets.While 2008 should probably be year of moderate equity gains (7-10% area ), I believe it will probably be in the likes of 20% + in developed markets, and potentially more for emerging markets. One might call me crazy? However, I just call the others crazy. I think this is a likely scenario because as people watch equity markets rise moderately, a horde of cash will begin chasing them higher and higher, until we reach a global asset price "bubble scenario." Some argue that equities are in a bubble, although I have to disagree with this given that the rise in developed market equities for the decade has not been large, although the last three years have. Also, profits grew significantly during this period, keeping valuations attractive. I also do not see a significant risk to the global economy.

By: Sherif ElHalwagy

Once again Goldman has not only surpassed The Street's estimate, but has blown away investors. A quote I once heard - "'only kiss the prettiest girl in town" has come to life with Goldman's earnings.For any long-term investor in the US bulge bracket financials, it is without question that if you want to bet on the smartest, sharpest, and savviest financial experts, the team to go with is Goldman.For 3Q07, Goldman reported $6.13 EPS, versus a consensus of $4.35.While broad based strength across business lines were stronger, Goldman's mortgage unit posted a $1b gain by shorting sub-prime debt.Even better, it was not simply speculation performed by a hedge fund, but risk management. One hopes that Goldman will remain the talent it does to manage there high-risk balance sheet.

By: Sherif El Halwagy

Wednesday, July 9, 2008

Business as usual on Wall-E Street

Okay before you start reading, let me say this article is nothing about the silly new Disney movie called Wall-E. I just couldn't think of a creative title for this post. Okay so lets move on.

It doesn't take a rocket scientist like Hillary to tell us that the US economy is in dire straits. Your average Joe can no longer afford his groceries. Grandmothers can't afford their denture adhesives. Little kids can no longer get their Happy Meals. And, the Big Banks of Wall Street can no longer afford paying million dollar bonusues. Times are changing, and they are changing fast.

What's going on in the world? India, China, and all of those emerging market countries that were considered unstoppable are all out of gas (no pun intended). In fact, the Indian stock market has taken a 40% drop from it's 2007 highs. The US S&P 500 Index just entered a bear market today, for the first time since 2002.

The Great Bush Era is finally coming to an end and Change is about to enter Washington. Why don't we realize that the economies of the world are all cyclical. Doom is not ahead for The US. The economic cycle goes up and down for a reason and every now and then, countries go into recessions. Now is just our turn.

Lets get real. We don't need to play the blame game on who caused what panic and what bailout. Lets take things as they come for the next six months or so. After that, Barack O-drama will take care of the rest.

This blog is back in action. I know I just made your day with that announcement. So keep coming back to this blog and check out the amazing ads on the page if you know what I mean.

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