[T.S.R:16820] Bulls-Are You Ignoring Falling Profits, Rising Unemployment And Inflation?

Ignore Compressed Profit Margins, Unemployment and Inflation, But At your Own Peril

A European Think Tank put out the Misery Index last week-guess what who topped? Spain, India and China.

 

The index a simple summation of inflation plus unemployment rated India and China as high as Spain. The two Asian widely credited for pulling the World out of recession in 2009-2010 have a majority of their population living with less than $ 1 per day in earnings. It is in these nations that the trouble hot-spots for 2011 lie and will lead to a blow-out.

The pre-budget rally and short covering apart, what bulls seem to be shaking off are 3 big concerns. They follow:

Declining Profits: We have begun to see the specter of compression in profit margins. If you listen to companies such as Whirlpool, Hitachi Home, Colgate, Procter and Gamble, and HUL are all expecting compression and maybe even down trading. 

Under-Employment: There are no clear estimates of un-employment and under-employment in India, but it could be as high as 20 per cent or 30 per cent, add the inflation of 18 per cent and you have a misery index of 38, perhaps the highest in the World.

Uncontrollable Inflation: Few realise but while the RBI is tightening credit the US Fed is keeping the flood gates open. This is having an unwanted consequence inflation in Commodity price which aided by credit and futures market is just reflecting inflationary moves across the World. Quite undeterred private sector banks are growing credit at 30 per cent in India-a sure fire sign of an impending disaster three quarters from now say December 2011.

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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