TLV

TLV, the pride of BVB, one of the few private companies built up based on the romanian capital market, reported yesterday the 2008 financial results. Usually, the last quarter used to be a hit!

TLV did not lose money in the last quarter of 2008, but they did not make money either. The net profit after q4 is just a (tiny) tick higher than the result after q3. We hoped till now that the predictions are awfull, but the reality will be nicer. Well, the hard facts are clear: DOWNTURN is here!! Fasten your seat belts!

Highway to hell

So, what do we have new?

1. TLV really buys back its shares! Tough to say if they are not doing a terrible mistake! BRD and SIF5 stopped apparently their unofficial buybacks (because they did not get the expected result?)

2. Suddenly, all the local analysts agreed that eurron will move towards 4,5 ron. As always in a market, when all the participants agree on something, the markets moves immediatly and brutal in that direction. Ron's direction is clear and the trends in currency markets run years, not days.

3. Worldwide bad news popup: Royal Bank of Scotland loose 28 billion euro (that's a bit less than what whole Romania produces in one quarter), automakers worldwide cut production by 50% or so, xmas retail sales fall.

In such a confuse situation, I would say nobody is able to predict how long the recession will last and how deep it will go. The world economy is too big and strong interconnected (comparing with 1929 or even 2001). You cannot compare 1929 world trade with the current situation. World market economy is not anymore limited to US and Western Europe. The world leaders and economists never faced such a huge elephant. It is tougher than ever to turn it arround. And I'm afraid that Obama is better in marketing than in macroeconomis.

When even the bravest give up

During 2008, the SIFs ignored the general trend and lost lots of cash buying shares quite early, despite signs/voices announcing a downturn. In January 2009, they suddenly make an interesting announcement: they are not so sure, whether to participate in the cash subscription at Bancpost! The SIFs, those brave investors, the sole active buyers during the 2008 bear market. They have no more money or they become more pessimist now!

So, what do we have? The bravest longers give up, the macro indicators are terrible, even the big recession-proof companies are shaken, the auto industry is almost in collapse worldwide (Toyota sales dropping 35% !!). At the end of 2008, everybody was expecting a massacre in Jan and Fed 2009. Not even a single guy said that we might see something positive at the beginning of 2009 - "Maybe in the second half of 2009, but for sure not in the first half"

And? Despite all these, the stock indexes start the year incredibly strong! I think this will be the beloved example of those supporting the contrarian investing model.

Now I wonder: Can it be that the stock index, the best leading indicator, after signaling in 2008 a sudden macroeconomic downturn, is already early-indicating an upcoming economical revival thanks to the low interest rates and the economy support packages introduced by governments around the globe?