If the bull market that ended in 2000 the bear market that began in 2000, the bull market that began in 2003, the bear market that began in 2007, and the possible bull market that began in 2009 and that may or may not have ended in 2010 teach investors anything, it’s Don’t get stuck in a rut.

It’s incredibly hard not to get trapped in the rut of the familiar as an investor. We all tend to invest in what we know, to try to stay in our comfort zone by putting our money into the comfortable.

But over the last decade and more, investing in the same stocks from one bull market cycle to the next hasn’t been the way to score the biggest returns.

During this period not only has the stock market been extraordinarily volatile but the leadership in each bull market rally has been radically different from the leadership in the previous rally.

Keep that in mind as you get ready for the next bull market—whether it’s just a cyclical bull rally inside a longer secular bear (as I suspect) or a long secular bull like we enjoyed in the 1980s and 1990s (I hope but I doubt.) For more on why I think we’re in a long secular bear market see my post from February 2010 http://jubakpicks.com/2010/02/19/why-even-after-a-70-gain-this-is-still-a-secular-bear-market/

And keep it in mind as you revise your watch list of stocks that you’d like to buy in the next bull. (I started a big overhaul of Jim’s Watch List with my June 8 post  http://jubakpicks.com/2010/06/08/while-youre-waiting-for-the-market-to-bottom-you-should-be-working-on-your-watch-list-heres-an-overhaul-of-mine/ )

Today’s topic is how to bust your investment thinking out of any ruts. And I’ll be adding some of those rut busters to my watch list with this post.   Read more

Brazil’s financial markets already start to anticipate early end to interest rate increases thanks to euro crisis

In theory—well, in my theory, anyway—the euro debt crisis and the resulting slowdown in Europe’s economies will gradually reduce inflationary pressures in developing economies. And that will lead central banks in countries such as Brazil, India, and China to raise interest rates less than is now projected.

As a result emerging stock markets, which are taking a beating from a flight to safety during the euro crisis, will bottom sooner rather than later and bounce back faster.

The timing depends on when central banks in developing economies decide it’s safe to stop raising interest rates. Read more

Update Ambev (ABV)

A great first quarter for Ambev (ABV) up against some very tough year-to-year comparisons. Earnings per share grew by 24.7% and net sales by 8.2% in the first quarter, the company reported on May 5. Costs rose but the company still managed to show a 0.1 percentage point increase in companywide margins as the higher margin Brazilian business grew faster than operations in the rest of Latin America and Canada.

With the Brazilian stock market facing strong headwinds in 2010 from the Banco Central do Brazil’s decision to raise interest rates to fight inflation, I would be tempted to sell these shares and sit the year out—except that Ambev is very likely to lift the cap on dividends it imposed in 2009 to increase its debt repayments. Read more

Brazil raises interest rates as emerging economies step up their fight against inflation

Brazil’s central bank, Banco Central do Brazil, raised interest rates as expected yesterday, April 27.

But the bank also did the unexpected. The increase in the benchmark Selic rate to 9.5% from 8.75% was more than most economists and analysts had expected. 30 of the 54 economists and analysts surveyed by Bloomberg before the increase had projected a 0.5 percentage point move instead of the actual 0.75 percentage point hike.

The interest rate increase is the first by any Latin American bank in more than a year.

In a one sentence statement announcing the decision the central bank didn’t indicate how fast or far interest rate increases would go. But economists say that the bank is likely to raise rates at its next four to six meetings. Read more