Saturday, May 16, 2009

Tuen Draaisma - Buy signals for an end of the bear

Tuen Daaisma (chief strategist at Morgan Stanley) signals to look for:

1) Valuations low - Shiller P/E ~10x and Price to NTA ~30%
2) Earnings at cyclical low - ROE below the long run average of 12.8%
2) Fixed income markets rallying while equity market is still heading lower
3) Copper price is bottoming out
4) Auto sales improving (or at least getting less bad)
5) Inventories very low - US housing inventories of unsold homes under 8 months
6) Banks balance sheets repaired and ready for business - as measured by senior loan officer survey being greater then negative 20% (ie. not still undergoing credit contraction)

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