The Hindu Business Line : There's always a bull market somewhere

THEIR bull gendereth, and faileth not... They send forth their little ones like a flock, and their children dance. They take the timbrel and harp, and rejoice at the sound of the organ. They spend their days in wealth... "Who? Where?" Well, that's a snatch from Job's speech in the Old Testament, to suit the current bull-run. To match that mood, here is Dan Denning's "The Bull Hunter," from Wiley (www.wiley.com) , tracking today's `hottest investments'.

John Mauldin reminds in his foreword. "As the saying goes, there is always a bull market somewhere. There are opportunities awaiting the investor who is willing to do a little extra homework." But the old way of making money in the stock market doesn't work anymore, announces Denning. No longer can you settle for a portfolio of companies and expect to watch your nest egg build over time, warns the author, Editor of `Strategic Investment' of Agora Publishing.

"Instead of achieving your goals by `being bullish' - a strategy that won't work if stocks go sideways for 20 years - you redefine bull market, he urges. For, as the blurb alerts, "Even as you read these words, a raging bull market is developing somewhere not far from your hometown, thanks to our new, fast-paced global economy."

On the origin of `bull' and `bear', Denning writes: "Back in the days when traders hunted animals, so-called bear skin jobbers were fur traders who sold skins from bears they had not yet caught." An early futures contract! And, `bear' described "anyone who sold short on any stock share or commodity". Bull, as the opposite, is from "the old practice of pitting bears and bulls against each other as a form of sport," says Denning. For the historical minded, there is also a reference to Thomas Mortimer's `Every Man His Own Broker,' of 1785.

There's nothing wrong, and indeed a lot right, about the `old' industrial economy, states the author, because "it's how most great nations have become rich". The `finance economy' that we boast of is one that is distorted by easy availability of credit, leading to speculative bubbles that go out of hand, notes the author, and cites a quote of Dr Marc Faber.

Every bubble creates some `white elephant' investments, that is, investments that don't make any economic sense, says Faber.

"In financial economies' bubbles, the quantity and aggregate size of `white elephant' investments is of such a colossal magnitude that the economic benefits that arise from every investment boom... can be more than offset by the money and wealth destruction that arises during the bust."

A section titled `dollar doomsday clock' introduces you to BEDspread as a way to measure dollar risk. BED stands for `benchmark emerging market debt', and the measure that Denning suggests is "a comparison between rates on US government debt and rates on emerging market debt."

Another useful discussion is of ETF or exchange traded funds, where the author compares MF or mutual funds to ETF, and highlights `the seven moneymaking features of ETFs. Elsewhere in the book, he'd tell you about "an ETF that tracks the stocks of major oil companies, rather than the commodity (crude oil) itself," and also show you "how to turn small price movements in that ETF into large profits"!

Specialisation is for insects, says Robert Heinlein. Referring to that quote, Denning adds that to invest like an insect, or a specialist, is the sure road to doom. "As an investor, you should always be more concerned with making money than being right about your favourite ideas." Modesty is a good investment virtue, he reminds, and suggests that "a better way to invest in a hypothetical second coming of the bull market is to identify the leading sectors and invest in them rather than trying to find the leading stocks".

One such is `energy', points out the author. Do you know about "the 18 trillion cubic feet of natural gas reserves that sit off the shore of Russia's Sakhalin Island" that had served as "a brutal and remote prison during the reign of Czar Alexander II"? It is `the energy mother lode of the region', writes Denning. This is a golden age for oil and energy investments, he proclaims.

On China there's a chapter titled, `The Dragon in the Pin-striped Suit', from where you'd learn that the country's automobile industry is a big source of gold demand there; that China's Dalian Commodity Exchange is the second largest soybean futures market in the world; and that its traditional culture and its emerging free-market culture can replace the statist culture. What follows is a chapter titled `Bombay Dreams and Economic Reality in India', where Denning rues that investors are still treating India as an emerging market. "At the first sign of trouble, it's run home to the dollar momma and the US markets, even US bonds."

A book worth hunting around with!

BookValue@TheHindu.co.in

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