Uncategorized

Perfect storm, Nouriel Roubini, Emerging Markets and Starbucks tea session

I tweeted a couple of times on how companies across emerging markets demonstrated the following;

1. High positive cash conversion cycles
2. Increasingly lower stock turns
3. Lowering GMROI &
4. In perception, increasingly high PE multiples

Screen Shot 2013-12-09 at 9.30.22 AM    Screen Shot 2013-12-09 at 9.30.14 AM

These have all the variables for a perfect storm.

Screen Shot 2014-02-03 at 11.13.51 AM      Screen Shot 2014-02-03 at 11.19.11 AM

The Trouble with Emerging Markets
http://www.project-syndicate.org/commentary/nouriel-roubini-explains-why-many-previously-fast-growing-economies-suddenly-find-themselves-facing-strong-headwinds

* The financial turmoil that hit emerging-market economies last spring, following the US Federal Reserve’s “taper tantrum” over its quantitative-easing (QE) policy, has returned with a vengeance.

* This mini perfect storm in emerging markets was soon transmitted, via international investors’ risk aversion, to advanced economies’ stock markets. But the immediate trigger for these pressures should not be confused with their deeper causes: Many emerging markets are in real trouble.

* The list includes India, Indonesia, Brazil, Turkey, and South Africa – dubbed the “Fragile Five,”

* Then, there are the over-hyped BRICS countries, now falling back to reality.

* But the short-run policy tradeoffs that many of these countries face – damned if they tighten monetary and fiscal policy fast enough, and damned if they do not – remain ugly.

Companies globally are demonstrating very similar analytics.

This presents a terrific investment opportunity for investors of both debt and equity which you will see in the coming quarters and in “supply chain vocabulary” move from;

i. Desirable & Essential to “Vital Inventory”
ii. C & B to “A” value inventory
iii. N & S to “F” inventory
iv. OS to “S” Seasonal inventory
etc.

In London and meeting some folks for coffee. It’s going to be very interesting in what I have to pull up from my past blogs and tweets to share at the Starbucks tea session.

Fundamentals matter.

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Categories: Uncategorized

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