First Post

This is the first post of the SINletter, which I begin with listing the trends whcih can create a winning company during a recession, to reflect the prevailing mood of the global economy. I hope you will find this more useful than the many media talking heads.


1. Global shortage of food grains: Global stocks of a number of important food items like wheat are at multi-decade lows. The problem is exacerbated by drought in some major agro-countries like Australia and Venezuela.

2. Decline of USD: Decline against major currencies is producing an advantage for companies which produce in the dollar zone and sell in other areas.

3. Retiring baby-boomers: As in the past, when consumption patterns by the baby-boomer generation set the pace for the US economy; so now, this generation will still set the pace – since it is simply the biggest and most affluent demographic. This will create demand for medi-care services and products, retirement lifestyle products and services (like retirement homes, RV homes, golf resorts, etc.), among other things.

4. High energy cost: High prices are prevalent not only in the hydrocarbon sector, but also in areas like wind, solar and especially nuclear power. This applies both to the cost of raw materials as well as the actual infrastructure costs.

5. Defense expenditure: The war in Iraq is likely to keep sales of defense companies up.

6. Rising commodity/raw material prices: Base cost of all commodities is likely to rise in the medium to long term, despite periodic dips. Coal, metals, soft goods, etc.

7. Olympics related expenditure: This is likely to directly impact revenues of sports and media companies and of consumer goods companies in general.

8. US elections: This is likely to impact the revenues of media companies in the US, especially those specializing in local advertisements. The effect is likely to remain until November.

9. High cost of borrowed capital: Companies which do not depend on debt, in other words, companies with high cash flows, are likely to do well in the recession. Companies which follow the franchise model for expansion are also likely to be safer.

10. Defensive/inferior goods: Companies producing goods and services for daily use will likely fare better. Example, waste management, water management, medical products and services, etc.

Over the next few weeks, I will identify some companies according to these principles, and will post their prospects on the SINletter.