Friday, December 31, 2010
Thursday, December 30, 2010
Sunday, December 19, 2010
Link - Domestic institutions turn cautious, go on selling spree ...
As usual, FII fundflows continue to dictate market direction, but as the above article points out, Domestic Institutional investors - Mutual Funds are booking profits.
Saturday, December 18, 2010
Friday, December 17, 2010
Graft in India - Rotten to the Core? Coping with the aftermath of a massive scam !!!
And who's to say that they are off the mark as far as the story goes.
We have been on a never ending roller coaster of scams.
- IPL - Cricket scam -issues regarding benami -ownership structures of teams
- Commonwealth games scam.
- Adarsh Building scam in Mumbai - Illegal Building on Army land
- Telecom 2G scam - That's a mega one!
- Public Sector bank officials involved in a loans for bribes scam.
- Stock price rigging scam being investigated by SEBI.
- Nira Radia tapes - involving journalists, industrialists etc!
So we have massive wealth disparity, income inequality, corruption, rural poverty, poor infrastructure and then we have on the other hand an ecomnomy that's doing fantastically well, while the world economy is still reeling under the strain of slowing consumer consumption and record debt levels.
While its going to be a never ending discussion about the politicians, industrialists and other individuals involved in these scams, there are some facts and lessons that an investor in Indian markets can take away from this mess.
- While the Indian Economy does present a fantastic investment opportunity to both Indian and overseas investors, it can be bumpy ride at times.
- While the Indian government continues to move slowly on / ignore vital issues like wealth disparity, rural poverty, overburdened infrastructure and the poor state of primary education and healthcare facilities across India, they must realise that this economic boom cannot continue unless they start to tackle the above mentioned critical problems and target "inclusive growth".
- Remember to curtail investments to firms where the management has a credible track record and takes care of the interests of all stakeholders concerned - & not just themselves! You may come acoss an interesting investment opportunity, but if the management has a dodgy track record, just stay out!
- If SEBI fails to rein in the Equity market scamsters, it will result in a massive blow to SME (Small and medium enterprises) businesses in India. The SMEs are the ones most affected by these stock rigging scams because a tightening of bank credit across the SME sector will deny working capital loans to many deserving and good quality small cap companies in India
- The incredible progress that has been made by Corporate India has been made inspite of our politicians and not because of them!
- While I'm not condoning the massive, almost blatant and shameless corruption here in India; we live in a world where politicians in most countries are no better than the ones we have here. It may be less blatant but sadly,corruption goes on!
- There is incredible corruption,short termism and lack of leadership in global politics today.As someone rightly said, " The people who want to be in politics are not the people whom you want to be in politics". No politician is willing to fix a problem that he can kick further down the road, an example being the *crazy debt crisis* facing the western world today! Imagine asking consumers who have no savings to start overspending and re- leveraging again - Thats both WRONG & insane!
- Lastly, remember that the prudent investor does not chase an over extended stock market rally. Remember to wait for pull backs and always look to invest in good quality stocks, with managements that have an established track record!
All new telcos have less than 50% active users, finds Trai - The ...
The Pre-paid/ Pay as you go segment dominates the mobile phone telecom sector in India.
With record-low tariffs and cut throat competition, telecom companies are hoping to regain earnings traction via 3G services!
Furthermore, we may be headed for a 3G price war as well.
The percentage of active subscribers is far too low in the case of many of the new entrants. Some of the new players will gradually find the current tariffs unviable for their business models, and a consolidation is likely.
This is clearly an overcrowded market. In the meantime, expect the established incumbents to aggressively defend their market share. This will result in reduced profitability in the near term, until an inevitable consolidation occurs/ some players exit the market altogether.
Saturday, November 27, 2010
Monday, November 15, 2010
The USD seems to be trying to stabilise, even as gold prices cool off after striking new highs.
Here is a fantastic article that addresses the topic of Banana Republics!
Currency wars / manipulation continue and as bailout packages are announced, many are still asking questions as to who the final beneficiaries of these handouts will be ??
Here's an excerpt from the NY Times article of Nicholas Kristof -
The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.
That’s the backdrop for one of the first big postelection fights in Washington — how far to extend the Bush tax cuts to the most affluent 2 percent of Americans. Both parties agree on extending tax cuts on the first $250,000 of incomes, even for billionaires. Republicans would also cut taxes above that.
The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from President Obama. They would get $370,000 from Republicans, according to the nonpartisan Tax Policy Center. And that provides only a modest economic stimulus, because the rich are less likely to spend their tax savings.
At a time of 9.6 percent unemployment, wouldn’t it make more sense to finance a jobs program? For example, the money could be used to avoid laying off teachers and undermining American schools.
Likewise, an obvious priority in the worst economic downturn in 70 years should be to extend unemployment insurance benefits, some of which will be curtailed soon unless Congress renews them. Or there’s the Trade Adjustment Assistance program, which helps train and support workers who have lost their jobs because of foreign trade. It will no longer apply to service workers after Jan. 1, unless Congress intervenes.
So we face a choice. Is our economic priority the jobless, or is it zillionaires?
Wednesday, October 20, 2010
Here are some charts that tell the whole story. No one seems to want a strong currency!
- The rally in the EUR, JPY and CHF will hurt exporters in Europe, Japan and Switzerland.
- A weak USD meanwhile, will boost US exports.
- The Chinese have thus far resisted any significant appreciation in the Chinese Yuan.
The USD appears to be oversold in the near term and a counter trend rally is underway. The market is betting on some mega fire power solution from the US Fed at its meeting in November. If QE2 disappoints and the equity markets sell off, the USD could stage a much stronger rally!
The Equity markets have been getting far too complacent about the weak and worrying news data and unemployment numbers in the US.
Fund flows to emerging markets have boosted stock prices across the board and a correction is well overdue. These markets are ''not decoupled from the actions of the US Fed'' and when the tide starts to turn we can expect large fund outflows to have a drastically negative impact on stock prices in emerging economies
Lastly, the rally in Gold prices also appears ripe for correction and consolidation. Silver prices too, are clearly overstretched in the near term. expect lower prices if the USD stages a comback rally. It's not time to be buying the precious metals sector just yet!
Watch this space!
Thursday, September 30, 2010
Monday, September 20, 2010
Could gold and silver have a repeat performance of those parabolic moves?
Well all I can say is who knows! Gold has been the top performing asset class of the last decade. The Every bull market has corrections along the way and the precious metals sector is no exception. So expect corrections and panic selling as part of the ongoing gold bullion bull market. The fundamentals are rock solid and long term buy and hold strategy is advised.
Once again I would like to warn investors not to try to time the precious metals market or indulge in leveraged trades when gold prices are rising. Instead look to buy in only after sell offs and corrections rather than chasing rising prices.
Friday, September 17, 2010
Wednesday, September 15, 2010
Markets have been bullish across asset classes. Equities, Bonds and precious metals, all rallying at the same time!!
U.S. unemployment numbers as well as the continuing slump in the US housing market continue to be worrying reminders that all may not be well with the global economy.
David Rosenberg recently reminded us that the U.S economic recovery has been largely dependent on government support (think mega bank bailouts, cash for clunkers, food stamps, infrastructure funding packages etc). By this stage of the game and given the extraordinary stimulus packages of the last two years, the economy should have been growing strongly.
Instead it looks like the U.S. economy is unable to survive on its own, given its slumping home prices, high unemployment numbers and high consumer debt levels.
Even Ben Bernanke is looking to cut growth forecasts while remaining silent about the eventual withdrawal of 'fed support' for the economy.
The FED & GSE's continue to support the housing market, even as home prices continue to remain weak.
No government in the western world can risk withdrawing its support for the ongoing ''fragile'' economic recovery. In fact, many are contemplating another round of stimulus packages to head off a slowdown in the second half of 2010.
Here's a quick roundup -
- Gold and Silver are on a surge yet again, after trading confidently throughout this summer. They appear to be overbought in the near term, especially silver which has had an almost vertical rise over the last fortnight.
- US Equity funds continue to see outflows, while US debt funds continue to see further inflows.
- US Equities have been rangebound in the 1030-1130 range on the S&P 500.There have been multiple corrections and rallies and despite regular tremors about the Club Med economies, the Euro and the state of finances of the states like California in the U.S.A --markets have chosen to ignore any worrying news.
- Emerging market equities are rallying again and decoupling theorists are back to claiming that the BRIC economies can thrive and grow despite global headwinds.
- The Indian equity market has been an outperformer in 2010 YTD. The rally is spreading to the mid caps and small caps. Overall the markets appear to be factoring in growth rates that may prove to be a tad unrealistic, especially if we see any turmoil in the ever slowing western economies
Overall, I continue to be wary of the ongoing rally in equity markets that seem to refuse to acknowledge poor economic data as well as the total lack of confidence on main street (especially in the developed world).
Are equity markets adequately factoring in a possible slow down in the second half of 2010? - I think not
Remember, it's better to be realistic that hopelessly optimistic.
I am still bullish on precious metals. We are also entering a 'seasonally strong' period for precious metals. Caveat Emptor - A sell off in equity markets will trigger a sell off in precious metals.
Expect upcoming posts on Gold, Silver and Indian Equities in coming weeks.
Tuesday, August 10, 2010
Monday, August 2, 2010
Thursday, July 22, 2010
The Three Gorges Dam is located on the Yangtze river in Hubei province China
more details on the Three Gorges Dam (For anyone who didn't know about it yet, this is one MEGA hydro electricity + flood control project in China)
Torrential rain, flooding and rising water levels resulted in the authorities needing to release water and monitor water levels closely.
Just goes to remind us of the humongous power of nature and her ability to test and sometimes defeat mankinds' ever improving technological and construction engineering skills.
So far, the Dam has survived its massive stress test.
Let's hope the raging waters subside & everything ends peacefully and that loss of life stays at a minimum.
Tuesday, July 20, 2010
Friday, July 16, 2010
Will we see a revaluation in the Chinese Yuan? Currency markets have been all over the place. The Euro has rebounded of recent panic lows even as sovereign debt troubles in the 'PIIGS' nations remain unresolved.
The USD has given back some of its recent gains, mainly due to an improving risk appetite and the subsequent rebound in global equities.
But as David Rosenberg recently said, are the Chinese Equity markets and the Baltic Dry Index warning investors that we could be in for a difficult second half in FY10?
Perhaps it's now time to be cutting back on risky assets and looking at minimizing portfolio volatility.
Thursday, July 15, 2010
Friday, July 9, 2010
Should you double up on stocks or expect a double dip around the corner instead?
The news flow is almost manic.
Confusing and contradicting data and news flow have made the last few months a rally testing time for investors.
Some pundits are calling for the resumption of a bull market, while others like David Rosenberg and Robert Prechter are expecting the markets to head back down again.
Data from the US Housing market and US unemployment numbers continue to be weak.
Sovereign debt worries have not yet been resolved.
Graham Summers over at ''Gains Pains & Capital'' put up some interesting charts.
Perhaps now is not the best time to be doubling up on risk.
Meanwhile as Mr Summers rightly points out, the Bond market is continuing on its upward trend. David Rosenberg is another ''bond'' fan who seeks 'safety and income' at a reasonable price in these volatile markets.
Saturday, July 3, 2010
|The Daily Show With Jon Stewart||Mon - Thurs 11p / 10c|
|An Energy-Independent Future|
Just remember, it's not just the U.S.A!!!!!
For the forseeable future, Crude Oil will remain the main fuel source driving the world's ''oil hungry'' economies.
As car sales zoom in China & India, consumption of refined petrochemical products will rise.
This means that the world's oil companies will have to continue to drill for crude oil in deep offshore blocks. Increasing fuel efficiency and enforcing ''clean fuel '' norms can only take us so far. It's time to prepare disaster managment plans for deep off shore drilling.
Accidents may occur, but it will be a whole lot better if the drillers and regulators have disaster management plans and solutions in place before such unfortunate accidents occur again, instead of continuing a never ending blame game!
Friday, June 18, 2010
Sovereign debt worries and an ever increasing supply of paper currencies continue to provide fuel for the ongoing gold bull market.
At this stage it's worth pointing out, that gold could correct substantially (yes even to $1000) without breaching any crucial long term support (green line in chart).
In the second half of 2010, I expect a correction in the equity markets.
Markets have been far too optimistic of earnings estimates and are thus likely to be disappointed with earnings numbers when they come out.
As David Rosenberg says, the aftermath of a credit bubble collapse is '' no garden variety recession.''
At that point in time, gold may correct along with the markets, thus providing an excellent buying opportunity.
It's so surprising how experts and brokers continue to push stocks, while totally ignoring Gold - the best performing asset class of the last decade.
Sunday, June 13, 2010
Friday, June 4, 2010
Up until the year 2000, the total public debt was less than $6Trillion (yes that's TRILLION!!!).
Look at the rate at which it accelerates from the year 2000. The year 2005 onwards and subsequently post the Lehman crisis, the graph just spiked upwards.
In 10 years time, the total public debt has doubled to just over $12 Trillion.
As the world rushes into the safety of the USD, and everyone is busy criticizing the 'PIIGS' nations and the EURO as a flawed currency, it's time that we take a closer look at the debt situation in the US.
With interest rates at record lows, the U.S. continues to add onto its debt burden.
The GSEs are still bleeding, and the FED continues to add more MBS to its Balance Sheet.
Accumulating and refinancing debt may not be an issue in the short run, but over the longer run debt servicing issues are going to resurface and the market will demand a higher rate of interest on US Government debt.
Watch this space!
Thursday, June 3, 2010
The Chinese Equity market topped out in July 2009.
The S&P 500 hit its 'bear market' rally / recovery highs in April 2010 !
Markets have been as volatile as ever, and fundamentals have shown no significant improvement.
We are moving from an individual & corporate debt crisis to a sovereign debt crisis.
The so called '' sub prime '' sovereign debt of countries like the PIIGS is already starting to stress out global bond markets.
How will the already weakened PIIG nations cope with the austerity measures, and still continue to support the global economic recovery?
Meanwhile, the Chinese government has been tightening liquidity as it tries to cool down a bubbling real estate market in urban China.This could mean tougher business conditions in the industrial metals and ores sector if the Chinese economy starts to slow down.
The rally is clearly getting rather long in the tooth, and may be running out of fuel!!!!
Wednesday, May 26, 2010
The USD & Gold, normally share an inverse relationship. Gold has also managed to detach itself from the correction in the CRB commodity Index.
Currency instability, market volatility and concerns over mounting government debt have been considerable tailwinds supporting this rally in Gold.
Year to date, Gold has also outperformed the S&P 500 by a wide margin.
Saturday, May 22, 2010
Even as the Apple iPad & iPhone & BlackBerry smart phones continue to dominate news as far as mobile technology goes - here is a story of an Indian company that has dared to challenge MNC giants in the mobile phone handset business.
The entry level mobile handset is tough ->first time buyers, cut throat competition, wafer thin margins and every changing technology.
Take a look -
Wednesday, May 12, 2010
Lastly, here is a link from Main Street that the guys on Wall Street should take a look at.
""""""""Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.
The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.""""""""""""
Tuesday, May 11, 2010
Equity markets in Spain, Portugal and Greece soared, but did anyone notice how the financial stocks in France and Germany reacted yesterday!
BNP Paribas +20.90 %
Société Générale +23.89 %
Commerzbank + 8.97 %
Deutsche Bank +12.62 %
Here's an interesting take from Socio - Economics History Blog
Europe's Exposure To 'PIGS' Problem! « Socio-Economics History Blog
Friday, May 7, 2010
Wednesday, May 5, 2010
Public sector behemoths like L.I.C. & New India Assurance have continued to maintain their stranglehold over the Indian Insurance sector.
ICICI Prudential, HDFC Standard Life & Bajaj Allianz have continued to gain market share, but have yet to make profits.
Equity market analysts are always trying to value the above above three insurance companies - to calculate the sum of parts valuation of their listed parent companies.
At this stage it's worth pointing out, that it may take a while for these guys to be profitable.
Cut throat competition and well established incumbents are delaying their break even dates.
Warren Buffett is rumored to be interested in the Indian Insurance sector.
In the long run, this sunrise industry is set for many decades of exponential growth, given the low penetration of insurance products in the Indian economy.
In the near term, we may be headed for a shake out or consolidation, as weak hands throw in the towel or sell out to larger players.
Watch this space.
Now, whenever I hear that the damage has been contained, I have come to expect the eventual cost of the crisis to be a whole lot more than initially estimated.
Some say that the crisis in Club Med is contained and that there is no risk of contagion.
Still others say that the finances of some states in the U.S.A., are not as terrible as pessimists may fear.
The prudent reader must read between the lines and ignore the noise in financial news as he makes his/her investment decisions.
The US is not immune to the current crisis in the Eurozone. A weak Euro will hurt US exports to Europe and subsidize European exports to the U.S.A.
Emerging market exporters are not immune to a slowdown in developed markets in the west.
As I've said in recent posts, it's not a time to be taking unnecessary risks.
Gold prices in the meantime have held up really well, despite a rally in the USD and a sudden sell off in global equity markets.
Thursday, April 29, 2010
The Indian Equity market provides international investors with an exposure to a well diversified emerging economy, that is not overly dependent on exports or raw materials and has a large domestic market.
BRIC nations like Brazil and Russia are more heavily concentrated on the commodity sector (basic raw materials).
China is an export oriented BRIC country.
However as the article says, the Agriculture and Trade sector are both absent from the NIFTY & BSE SENSEX.
Another point worth noting is the gradual rise in the % weight of the Banking and Financial services sector.
Internationally, both the FTSE (U.K) and the Hang Seng (Hong Kong) have considerable exposure to banking and financial services.
A Benchmark index must be truly representative of the underlying economy, and currently I feel that the Banking and Financial services' % weight in the index is too high.
In the long run, I would hope that sectors like Pharmaceuticals, Telecom, and Cement are given a greater share of the index.
The Automobile and FMCG sectors are also vital components when it comes to gauging consumer consumption demand.
As India waits for the arrival of the south west monsoon, everyone's hoping for a normal monsoon this year.
Insufficient rainfall resulted in rising food prices, as the prices of vegetables and food grains soared.
Last year, consumer demand in rural areas held up pretty well despite a poor monsoon. Continuing inflation, especially ''food price'' inflation will have a dampening effect on consumer consumption in the auto, FMCG & durable goods sectors.
Thus, a back to back season of insufficient rainfall will have serious repercussions for the Indian economy.
In the meantime, the India Meteorological Department (IMD) has forecast a normal monsoon across the country this year.
'''Lending a quantitative perspective to the available indications, IMD said the total rainfall during the June-September monsoon season would be 98 per cent of the long period average. This assessment is subject to a model error of ± 5 per cent.'''
Lastly, just a warning for those who may blindly follow the forecasts of the IMD!!
''''Last year too IMD had predicted a near-normal rainfall of 96 per cent. Two months later, in June, it issued an update scaling down its assessment to 93 per cent of normal. Both these predictions went awry. IMD then revised its forecast for a third time in August, this time predicting 87 per cent of normal rains. These predictions, however, turned out wrong and the country received only 77 per cent of normal rainfall. This led to a drought in large parts of the country.'''''
''''Last year too IMD had predicted a near-normal rainfall of 96 per cent. Two months later, in June, it issued an update scaling down its assessment to 93 per cent of normal. Both these predictions went awry. IMD then revised its forecast for a third time in August, this time predicting 87 per cent of normal rains.
These predictions, however, turned out wrong and the country received only 77 per cent of normal rainfall. This led to a drought in large parts of the country.'''''
TAKE A LOOK-India forecasts normal monsoon rainfall
Monsoon to dispel clouds over sugar, grain
MD predicts normal monsoon
Thursday, April 8, 2010
Thursday, April 1, 2010
Cheap money lead to excessive valuations for buyouts.
As I read the article below in the Economic times newspaper last week, I was reminded once again of how experts, analysts and investment bankers continued to justify deals that were irrationally dangerous and value destructive!
The only guys who benefited from these deals, were the investment bank advisers who earned massive fees on these now failing LBO deals.
Lastly, I leave you with an interview of the ever consistent, rational and down to earth - David Rosenberg.
He continues to be the lone voice advising caution and recommending measures to minimize portfolio volatility!
The bear: Dead or just sleeping? - The Globe and Mail
Monday, March 29, 2010
The Diminishing Marginal Productivity of debt :THE Most Important Chart of the CENTURY
Here is Nathan's explanation for the the above chart.
Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.
Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!
This is mathematical PROOF that debt saturation has occurred. Continuing to add debt into a saturated system, where all money is debt, leads only to future defaults and to higher unemployment.
This is the dilemma created by our top down debt backed money structure. Because all money is backed by a liability, and carries interest, it guarantees mathematically that there will be losers and that the system will eventually reach the natural limits, the ability of incomes to service debt. '''''''''''''''
Clearly, Prof. Fekete and Nathan are trying to highlight the 'fatal danger' we face due to the diminishing marginal productivity of debt.
Sadly, most economists and finance ministers around the world, see further debt accumulation of debt as a solution to the current crisis, rather than the root cause of the chaos we face in financial markets today.
Tuesday, March 23, 2010
I have not added to gold positions recently, and remain slightly wary of a ''summer sell off'' in equity markets that may trigger a sell off in the precious metal markets.
The USD has been trending upwards, aided by the turmoil in the Eurozone; that has kept the EURO in check.
But I must say that inspite of the strength in the USD, gold prices have continued to consolidate.