28th March 2009
Obama is putting all his might and he is doing it in rapid steps. On last Monday, he further announced one trillion dollar public / private partnership programme to buy toxic assets from banks / financial institutions. The steps taken by him so far are such that he dare not go to congress for any additional funds. So this time the gun is on the shoulders of FED and FDIC as well as 350 billion dollars from earlier congress approved TARP funds.
His 8,000 dollars tax rebate for new house buyers seem to be working as February sales figures were a tad better than expected. Mondays announcement + better housing figures + further short covering gave more than 10/12 % boost to DOW in first four trading days followed by a small profit booking on Friday.
According to me the coming week will be a make or break week for this rally as well as further course of this 17 month old bear market. So I am going to watch with lot of interest.
Back home the US rally was replicated one to one and for the time being market seems to feel that the worst is over and this is the beginning of atleast a medium term bull run. Politics is not giving good signals at all and making may bear spreads – which are still cheap - will be the order of the day.
My monthly levels will be out on 1st April which should give a better clue to what the next two months hold out for the markets. They have rarely failed to gauge the mood.
I will recommend profit booking on any trading / investment positions that you may have. It is too late for a fresh long entry.
Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.
21st March 2009
Obama fired one more salvo on Wednesday – 1.3 trillion dollar liquidity infusion by way of FED buyback of mortgage based securities issued by Freddy Mac and Fannie May – both govt-owned reinsurers as well as other gilts / govt bonds . This resulted in surge in govt bond prices - weakening of US Dollar and corresponding huge spike in all commodities.
US equity markets also surged on the day of the announcement but retreated on the two following days on the back of the fear of inflation. Meanwhile certain quarters in US congress and the corporate auditors are resenting the changes mooted to mark-to-market rules existing now. The developments on this MTM front need to be watched carefully as the fate of the entire bear rally witnessed so far is hanging on this one thread.
Back home, we are now staring at ‘deflation’ as WPI will soon move in negative territory. This is worrying some economists since deflation normally reduces borrower’e repayment capacity further. Unfortunately, no further stimulus by way of increased government spending can be envisaged as we are now in election mode and ‘code of conduct’ is in place. I must reiterate that our macro-economic problems are overwhelming and political scenario is getting murkier by the day.
I will not recommend any serious investment in the coming 4/6 weeks till all political alignments and its implications become clear. We have a hope if Congress / BJP led government is in place but the case is lost if we have to face a third front experiment.
Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.
Sunday, March 29, 2009
Monday, March 16, 2009
Archives of what I wrote in The Economic Revolution - 7th March and 14th March 2009
14th March 2009
US markets are in the midst of a strong bear rally. This rally has two major underpinnings – 1…. Up-tick rule is likely to be re-instated next month 2… major changes are expected in mark to market rules applicable to banks and financial institutions.
This has resulted in massive short covering – thus the sharp rally. Both these measures were contemplated in October 2008 and later dropped. Obama administration has revived this ‘ BRAHMASTRA’ as nothing else seems to be working.
Revival of Up-tick rule is a technical matter and it is intended to moderate ‘bear raids’ but the changes in mark to market rules have dangerous fundamental implications. It is akin to overlooking patient's internal hemorrhage. If not treated / arrested immediately, this will kill the patient when the blood starts oozing from some hole. It is like taking a chance that, given the time, the rupture will self heal. But all of us no efficacy of such ‘wishful thinking’.
Back home we have replicated the rally with a bit of lag and that indicates markets reluctance to make a meaningful up-move. Macro-economic problems are overwhelming and political scenario is getting murkier by the day.
I will not recommend any serious investment in the coming 4/6 weeks till all political alignments and its implications become clear. We have a hope if Congress / BJP led government is in place but the case is lost if we have to face a third front experiment.
Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.
7th March 2009
Our market is in a hole and the hole is getting deeper. RBI announced a Repo and a Reverse Repo rate cut mid-week but market in-fact slid further on the following day. This clearly implies that the bulls are on the back-foot and market is firmly controlled by the bears. We have a reason to believe that whatever small rallies that are happening are engineered by the bears just to get better levels to sell.
US markets are in deep trouble with all three indices at more than a decade old lows and still falling. President Obama has lost popularity and the republicans are complaining that he is taking left of the centre stance on economic issues. Instead of leading the economic think tank, he is getting guided by them.
The US problems are persisting while the whole of eastern Europe funded by West European banks is on the verge of bankruptcy – threatening to pull down most of the European banking system.
The macro problems faced by our economy are also so huge that there is no quick-fix solution and we should be reconciled to have weak to moderate growth in the coming 6 / 8 quarters – irrespective of the form of the government the April / May elections may throw-up.
Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.
US markets are in the midst of a strong bear rally. This rally has two major underpinnings – 1…. Up-tick rule is likely to be re-instated next month 2… major changes are expected in mark to market rules applicable to banks and financial institutions.
This has resulted in massive short covering – thus the sharp rally. Both these measures were contemplated in October 2008 and later dropped. Obama administration has revived this ‘ BRAHMASTRA’ as nothing else seems to be working.
Revival of Up-tick rule is a technical matter and it is intended to moderate ‘bear raids’ but the changes in mark to market rules have dangerous fundamental implications. It is akin to overlooking patient's internal hemorrhage. If not treated / arrested immediately, this will kill the patient when the blood starts oozing from some hole. It is like taking a chance that, given the time, the rupture will self heal. But all of us no efficacy of such ‘wishful thinking’.
Back home we have replicated the rally with a bit of lag and that indicates markets reluctance to make a meaningful up-move. Macro-economic problems are overwhelming and political scenario is getting murkier by the day.
I will not recommend any serious investment in the coming 4/6 weeks till all political alignments and its implications become clear. We have a hope if Congress / BJP led government is in place but the case is lost if we have to face a third front experiment.
Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.
7th March 2009
Our market is in a hole and the hole is getting deeper. RBI announced a Repo and a Reverse Repo rate cut mid-week but market in-fact slid further on the following day. This clearly implies that the bulls are on the back-foot and market is firmly controlled by the bears. We have a reason to believe that whatever small rallies that are happening are engineered by the bears just to get better levels to sell.
US markets are in deep trouble with all three indices at more than a decade old lows and still falling. President Obama has lost popularity and the republicans are complaining that he is taking left of the centre stance on economic issues. Instead of leading the economic think tank, he is getting guided by them.
The US problems are persisting while the whole of eastern Europe funded by West European banks is on the verge of bankruptcy – threatening to pull down most of the European banking system.
The macro problems faced by our economy are also so huge that there is no quick-fix solution and we should be reconciled to have weak to moderate growth in the coming 6 / 8 quarters – irrespective of the form of the government the April / May elections may throw-up.
Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.
Thursday, March 5, 2009
RIL / RPL merger - my take ......
RIL / RPL merger - my take ......
all of you must have heard on most business channels that about 65/70 % profits of the merged entity will now come from refining activity ...... if that is so - then why not discount the stock like any other refineries .....
and i am not talking of other indian refineries .... many of them are govt owned / old and may be inefficient .....
i am comparing with international competitors .... who all hv fairly advanced technology and most of them also have E&P arms as well as petrochemical production facilities ... so that is more like to like comparison ......
yes - i am talking of chevron / exxon mobil / BP / total / royal dutch shell etc etc .....
how many of you know that all these are getting P/E discounting of 5 to 8 maximum ...... so even if we are charitable and give merged RIL discounting at highest level of 8, then at the earnings level of 127/130 - indicated by some experts on channels ...... the share price can be atmost 1000 /1050 ......
and it takes care of all plus points like complexity and ability to process any dirty / cheap crudes etc etc ..... all that is reflected in earnings and we hv looked at P/E while arriving at this price ......
now what remains to be added is a political premium - if any - that you wud like to add ..... and even then the price can not go beyond 1100/ 1150 .....
CLSA has just downgraded ONGC and it is only to be expected that some firangi wl downgrade RELIANCE also .....
so act now when you are still likely to be the first ......
if ONGC and RELIANCE will take say 10 % knock from current levels ..... i think we r destined to see 2500 levels .... this month itself ........
JAY HOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO .......
all of you must have heard on most business channels that about 65/70 % profits of the merged entity will now come from refining activity ...... if that is so - then why not discount the stock like any other refineries .....
and i am not talking of other indian refineries .... many of them are govt owned / old and may be inefficient .....
i am comparing with international competitors .... who all hv fairly advanced technology and most of them also have E&P arms as well as petrochemical production facilities ... so that is more like to like comparison ......
yes - i am talking of chevron / exxon mobil / BP / total / royal dutch shell etc etc .....
how many of you know that all these are getting P/E discounting of 5 to 8 maximum ...... so even if we are charitable and give merged RIL discounting at highest level of 8, then at the earnings level of 127/130 - indicated by some experts on channels ...... the share price can be atmost 1000 /1050 ......
and it takes care of all plus points like complexity and ability to process any dirty / cheap crudes etc etc ..... all that is reflected in earnings and we hv looked at P/E while arriving at this price ......
now what remains to be added is a political premium - if any - that you wud like to add ..... and even then the price can not go beyond 1100/ 1150 .....
CLSA has just downgraded ONGC and it is only to be expected that some firangi wl downgrade RELIANCE also .....
so act now when you are still likely to be the first ......
if ONGC and RELIANCE will take say 10 % knock from current levels ..... i think we r destined to see 2500 levels .... this month itself ........
JAY HOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO .......
Archives of what I wrote in The Economic Revolution - 21st feb and 28th feb 2009
28th February 2009
Pranabda is nothing less than an Indian magician. On Monday, 16th February he refused to oblige the Indian corporate sector with any mercy under the guise of propriety but come Thursday the 26th, all that mask melted as butter melts in the hot sun. We had fresh excise and service tax cuts and a small dose of incentives to exporters on Friday.
The quarterly GDP figure of 5.3 % is in-fact better than my expectation and we must be ready to face even worst figures in the coming quarters. I say this in-spite of some popular charitable views declaring this figure of 5.3 % as the worst that we have seen.
What we are facing today is crisis of confidence and unless that is restored all these dollops of thousands of crores of rupees will vanish in the proverbial black hole with nothing to show.
Yesterday, we had all three US indices – the Dow / Nasdaq and S&P closing at a new 52 week weekly closing lows. We are staring at 6,000 on Dow and 600 on S&P and that is not a good feeling. This does not give any confidence whatsoever to trade on the long side and I must repeat over and over again that all bounces must be used to exit longs.
RIL / RPL merger is announced and we will know the details like exchange ratio etc on Monday. I have some views on this matter which I will keep reserved for the time being and they will be published at an appropriate time. I can only say that I am not very sanguine about the prospects of the merged entity.
If Dow is going to 6,000 which is the next plausible target, we should be looking at 2,000 / 2,100 as possible nifty level. So all ULIP investors are better off switching to debt funds till this downslide has played out. MF investors hv to step aside and wait. I had given similar warning when nifty broke 3,550 early October and what followed is history.
21st February 2009
As expected, Pranabda’s interim budget was a non-event and the bulls have finally thrown in the towel and now they are at the mercy of the bears. The bears are still pulling their punches in view of the Monday - trading holiday in India – and will make the assault on Tuesday if the Dow is with them.
As I write the Dow has given a weekly close well below 7500. This now opens the gates for further substantial downside. It may happen over next 10 days or 10 weeks is anybodies guess but there are now more than 80 % chances that we will make firm downside move in the coming weeks and months. There may be sharp short term rallies but they will fizzle out even before average investor / trader can get in.
If Dow is going to 6,000 which is the next plausible target, we should be looking at 2,000 / 2,100 as possible nifty level. So all ULIP investors are better off switching to debt funds till this downslide has played out. MF investors hv to step aside and wait. I had given similar warning when nifty broke 3,550 early October and what followed is history.
Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.
The macroeconomic factors and the election jitters are bound to come forward in full force this week. Let us wait and watch ……
Pranabda is nothing less than an Indian magician. On Monday, 16th February he refused to oblige the Indian corporate sector with any mercy under the guise of propriety but come Thursday the 26th, all that mask melted as butter melts in the hot sun. We had fresh excise and service tax cuts and a small dose of incentives to exporters on Friday.
The quarterly GDP figure of 5.3 % is in-fact better than my expectation and we must be ready to face even worst figures in the coming quarters. I say this in-spite of some popular charitable views declaring this figure of 5.3 % as the worst that we have seen.
What we are facing today is crisis of confidence and unless that is restored all these dollops of thousands of crores of rupees will vanish in the proverbial black hole with nothing to show.
Yesterday, we had all three US indices – the Dow / Nasdaq and S&P closing at a new 52 week weekly closing lows. We are staring at 6,000 on Dow and 600 on S&P and that is not a good feeling. This does not give any confidence whatsoever to trade on the long side and I must repeat over and over again that all bounces must be used to exit longs.
RIL / RPL merger is announced and we will know the details like exchange ratio etc on Monday. I have some views on this matter which I will keep reserved for the time being and they will be published at an appropriate time. I can only say that I am not very sanguine about the prospects of the merged entity.
If Dow is going to 6,000 which is the next plausible target, we should be looking at 2,000 / 2,100 as possible nifty level. So all ULIP investors are better off switching to debt funds till this downslide has played out. MF investors hv to step aside and wait. I had given similar warning when nifty broke 3,550 early October and what followed is history.
21st February 2009
As expected, Pranabda’s interim budget was a non-event and the bulls have finally thrown in the towel and now they are at the mercy of the bears. The bears are still pulling their punches in view of the Monday - trading holiday in India – and will make the assault on Tuesday if the Dow is with them.
As I write the Dow has given a weekly close well below 7500. This now opens the gates for further substantial downside. It may happen over next 10 days or 10 weeks is anybodies guess but there are now more than 80 % chances that we will make firm downside move in the coming weeks and months. There may be sharp short term rallies but they will fizzle out even before average investor / trader can get in.
If Dow is going to 6,000 which is the next plausible target, we should be looking at 2,000 / 2,100 as possible nifty level. So all ULIP investors are better off switching to debt funds till this downslide has played out. MF investors hv to step aside and wait. I had given similar warning when nifty broke 3,550 early October and what followed is history.
Please remember CAPITAL is always scarce no matter what you are and we must learn to respect it. That means you must learn to preserve it at all costs.
The macroeconomic factors and the election jitters are bound to come forward in full force this week. Let us wait and watch ……
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