Tuesday, December 29, 2009

Can we see revival of American Economy during Obama’s Presidency?

Ever Since, Mr.Obama took over the presidency of USA, the US Stock Markets saw a deep correction followed by sharp rally. But it is well below the highs of 2007. The US Stock Market Index Dow Jones Index made a high around 15000, in 2007. But it is trading around 10,500 now.

The Economy is gauged by the stock Market Indices in any country. So, if we want to know the future state of the Economy, study of Stock Indices would reveal the real picture. So, if Stock Indices behave well during his Presidency, than the Economy is going to perform well.

The Dow Jones made a high of 15000 in 2007. If the US economy performs well in his tenure, then Dow is going to move above 15000. Is it possible for Dow to move above this level? If so, then he will be recorded as one of the best performed President in USA history.

Let me examine the possibility in detail. Stock Markets behave in cycles. If you see a five rally then it will be followed by some period of correction. Normally, bearish periods are more in time than bullish periods, which means, Dow Jones has to remain in bearish mode for another 5 years.

Since Obama’s term will end in another 3 years, the chances are less for the Dow Jones to move above 15000 which in turn unlikely for the US economy to grow in the next three years.

If this happens and if Obama doesn’t get a second term, then he may go down in the history as an unpopular President of USA.

Fundamental performance of companies for the past five years

The fundamental performance of any company is the performance of their sales, net profit and etc. If it grows year by year then we can say it is growing. It can be stagnant or it can show negative growth. Some companies may show loss also.
So a company can grow positively, or it can grow negatively. Likewise, it can remain stagnant or it may show loss. The financial health of any company can be gauged by the financial performance of that company over these years.

Technical performance of the stock price may not really reflect the fundamentals. Let me discuss the fundamental performance of all the companies in the year 2008-2009. Though Stock Markets have rise all over the world in the year 2009, does it really reflect in the fundamental performance of the companies?

The performance of the companies started showing good growth since 2003 and it peaked in 2007-2008 year. In 2008-2009 period it showed negative growth in many sectors except few sectors. In 2009-2010, it has improved but not at the pace that we have seen in the last five years. To put it simple, the present growth is not as good as it seen in the past five years.
But Stock indices have rallied to 2008 levels which show that the present rally is not supported by the fundamentals. So, it is purely a technical rally in the Bear Market. One need to wait and watch for few more quarters of financial resulss before deciding about the future fundamental performance of the companies.

Monday, December 28, 2009

Cutting losses is the toughest decision to make!!!!!!!!!!

Ask any trader or an investor in the stock market or commodities market, he will say, the toughest decision he has to take is when he plans to cut his losses, if his positions goes against his way. The art of decision making is an important department in human’s life. Though decision making is the most important factor in trading, but it is been given the least importance.
For a trader to be successful, he has to be prompt and wise in taking decisions to cut his loss. If he makes a mistake in taking a decision in booking a profit, it will not affect him financially. But, if he makes a mistake in taking a decision in cutting a loss, then his capital would be wiped out partly or completely.
For a trader to take a wise decision during cutting his loss, he should plan his trade before he enters it. If he enters the trade with proper planning, then he will surely know, when to enter and when to exit.
Entry and exit are the important decisions, but, exit is the more important of these two. Even if you make a wrong entry, you will be saved by correct exit. Suppose you make a correct entry but you fails to make correct exit, then you will end up loss.
Traders who have mastered this art are the ones who are making consistent profits in speculative markets. This type of traders will be only a five percent of the total traders. The other nifty five percent traders are losers.
You decide in which type of traders you belong to.

How should be your investment portfolio?

The short term trader is meant to the people you who trades in the Derivatives Market (Futures and Options Market) in Stock Markets or Commodities Market. A trader takes a position in the market in futures or options and holds it for few days. Normally, we can see one month, two month or three months contract in the derivatives market, but we have contracts ranging from months to years.
The trader holds the positions until he makes a profit or until he cuts his losses. Not all trades end up in profits. If the trade goes against his position then he has to close it before he makes a substantial loss. Anyway, he has to close the position with profit or loss or at cost. If he feels, the underlying security move as per his expectation for the next month also, then he can carry forward the contract to next month also. Likewise, he can carry forward the position to unlimited number of months.
So a person trading in this time frame is called a short term trader. In a futures positions, he has to pay a margin to hold a futures position (whether it is short or long). In case, if the position he holding is loss, then he needs to pay the extra margin to make up the loss and also to continue to hold the position. So, there is always a risk of holding these type of positions. Unlike, holding a delivery share, holding a futures position would anytime invite margin call. If we are not prepared for that, then we have to close the position in loss, if it goes our way in the near futures.

Trading for the short term is always risky. But the profits we make in the short term is substantial. You no need to hold it for a long time. Your money will not be blocked for a long time. You can quickly use your funds.
But in the long term investments, your money will be blocked for a long time. There may a time when your money would remain idle without appreciating for years. But it is less riskier than short term positions.
I prefer any investor to invest more than seventy percent of their investments in long term and trade only twenty five percent of your investments in short term trading.

Saturday, December 26, 2009

Don’t be married to a stock!!!!!!!!!!!!!!!!!

In investments, don’t marry a stock. Don’t stick to a stock all the time. Not all the stocks perform all the time. Various groups and various sectors perform at different times. Sticking to stock just because you love that stock is a waste of time in Investment.
Let me take the example of Hindustan Unilever from the Indian Stock Market and General Motors from the American Stock Markets. Hindustan Unilever is in Fast Moving Consumer Goods sector. It is a Multinational Company and excellent performing company fundamentally, till now.
The high price of Hindustan Unilever was 325 during 2000. The 2000 bull market was followed by a bear market till 2003 in all world stock markets. From there a bull market started in all world stock Markets. The Indian Bombay Stock Exchange Index , Sensex soared from 2600 to 21000 in another five years where as Hindustan Unilever traded in between 100 and 300 till 2008 and it is still now trading between this range.
If had been a fan of Hindustan unilever for it s performance and its fundamentals, then you would have invested a major portion of your investment in that stock. But for the past 9 years I would not have given a return on your investments.
Had you invested your money in Infrastructure and Reality stocks, it would have appreciated by more than 100 times in these 5 years. So don’t get married to a stock. Always every bull market is supported by a new set of Sectors. Identify it to for successful investing.

Past Financial Bubbles- an Explanation.

One of the oldest recorded financial bubble is Tulip mania in Netherlands. Tulip was brought to Netherlands by the ottoman empire. Initially, it was introduced there in 1590. Slowly cultivation of tulips was started and it soon attracted the attention of the whole Netherlands. Rich people got it in their households these tulips as a status symbol. Soon a craze for Tulips started in the country. Normally, it will take 6 to 7 years to get a tulip bulbs from the plant. So, as the demand picked, new varieties of Tulips were being cultivated, many people joined the bandwagon and almost all in Netherlands was directly or indirectly growing or trading or investing in Tulips.
As the prices of this tulips have gone astronomically, everybody is investing their savings and other money in Tulips. This mania continued for 40 since it started. By the time of its peak, a Tulip is trading more than 10 times the salary of an ordinary worker of that Country.
This Tulip mania has gripped Netherlands and the prices were going up, going up only. Every household in Netherlands is holding Tulip bulbs according to their financial capacity. One fine morning, around the 1737, the prices of Tulips started coming down. The prices were dropping on every passing day. The investors in the tulips are getting wary and they hoped that the situation would soon improve. But it moved otherwise.
So soon everybody started selling it pulling the prices further down, creating further panic among the population. Then only the people realized that they had grown, traded and invested a asset which is worthless to the money that was given. But before they realized the damage was already done. The whole of Netherlands were in financial ruins. The tulips were trading at rock bottom price. There were no buyers and soon tulips of any variety turned worthless within in one or two years.
The rich had become paupers at that time and the poor had become beggars at that time. The whole of Netherlands suffered for more than 2 or 3 decades because the crash in the prices of Tulips.
A worthless Tulip flower was inflated in price simply by the people’s greediness to dizzy height only to come down to few pennies due to the fear of losing the money. This type of process is financial Bubble. Financial Bubble will always burst.
Don’t be a part of a Bubble.

How will IPOs perform in coming months?

IPO is an acronym for Initial Public Offering. IPO is the initial offerings of a company in the form of shares to their share holders at the start of a new company or at the time of expansion of a existing company.
IPOs are being offered by companies that wants the money from the company for their project. People those who are interested in the project of the company or those people who have confidence in the management of the company would subscribe for the shares that is being offered according to their will.
If the IPO is subscribed fully then we can say, people has confidence in that particular company. If it is oversubscribed, then it shows the interest of the investors in that company. If it under subscribed then it shows there lack of faith in that company.
Investors’ interests in investing in IPOs are affected by the various factors. One of the biggest and most influential factor is sentiment in the secondary Markets. If the sentiment is bullish, the IPO will subscribe fully, if not it will flop in the IPO Market.
In any market, the sentiment would be bullish only during Bull Markets. So IPOs will be successful only during the course of the Bull Market or in the end of the bull market. But in Bull markets, the IPOs are priced highly. In bear markets how much ever good project will be bombarded in the IPO market.
But as an investor it is always best to invest during Bear Markets. Simply it is good because it will be priced lowly.

Risk versus reward

Risk is always directly proportionate to reward. The same holds good in investments also. The riskier investments are always give good returns. For example, Investing in Stock is riskier than investing in Real estate. Investing in real estate is riskier than investing in Gold. Investing in Gold is riskier than investing in Bonds. Investing in Bonds is riskier than fixed deposits.
When taking into consideration, investing in Stocks are looking riskiest of all. Dow was trading around 14000 in 2007 and it traded around 7000 in 2009 march. The Indian BSE Index Sensex was trading around 2100 those on January 2008, but by 2008 October, it depreciated by more 60 percent. The Chinese stock market Index was trading around 6100 in October 2007 and by October 2008, it was trading around 1670.

Investments in Stocks would have given negative return to one’s portfolio. Whereas, those who have invested in Gold, would be in good profits till now. Likewise those who have invested in fixed deposits would have got a fixed small return.

But in the longer run, say in another 5 years, Dow may be trading above 25000, Sensex may be trading above 50000 or Shanghai Index may be trading above 15000. If you take in to consideration the return we get from these Indices, it would be phenomenal. Stocks are riskier but in the longer run it will perform above other assets.
So risk is always is directly proportionate to rewards. In one’s portfolio all types of investment of various risks should be maintained for successful investing. One should not choose only a particular asset class. One should choose right mixture of assets including high risk stocks and low risk fixed deposits.
Happy investing.

Scams and Stock Markets?

Whenever a bull market is over, a scam would emerge at that time. The person who is so bullish on that Market or a sector would be jailed because of scam. In 1992, Harshad Mehta a leading Stock Broker at that time was arrested for frauding some leading Banks and Financial Institutions.
In 2000, Ketan Parkeh, a leading Investor and operator of the Stock Market was arrested for swindling some Bank’s Money. In 2009, Ramalinga Raju of Satyam Computers was for cooking up his company’s accounts.
In US, Bernard Madoff, who was running a ponzi scheme based on Stock Market, was arrested for defrauding the Investors. In Germany also a major scam was known at that time. And also in all countries minor scams were unearthed.
Why scams are are being unearthed only during the start of the bear market or in middle of the bear markets. Let me explain the mechanism. During Bull Markets, price of stocks are moving steadily up. So, a confidence has been built over these years about the market that the price will go forever. Once the trend changes as no trend will continue forever, the scamsters failing to foresee the change in trend get trapped in their own landmines only to be blown away.
Don’t think any trend will be there forever.

Brain Drain has stopped or not?

In India, IITs (Indian Institute of Technology) was incorporated in various parts of the Country by the Indian Government, after a special resolution was passed in the parliament.
These Institutions remained the premiere Institutions in India, as for as higher studies are concerned. The Government pumped so much of money into these Institutions to boost the academic levels of the Country and to make students as competitive as any students in the developed Country.

But for the past thirty years, most of the passed out students placed them in jobs outside Indian, mostly in USA and European. Though the purpose of starting IITs is for improving the Country, the purpose is not fulfilled, as those who studied here in IITs had gone to US or Europe for the jobs and the investment put by India on those students were not utilized for India.
For the past three decades, the debate on this subject of Brain drain has taken place in all circles of the Country. But, now the trend has changed. We have seen some US and European Nationals have come to India for working in leading IT and Telecom Companies.
Now it seems the brain drain has started to stop. The sole reason for this is the massive economic growth we have seen in India. The GDP grew more than 8% for the past three years. Becoming of an IT Capital of world has boosted the pay for the employees and for some of them, the salary is much more than what their counterparts are getting in US or Europe.
This has stopped the brain drain as the IITician’s are getting abundant opportunities in India itself.  The purpose of starting the IITs has fulfilled after more than 3 decades. If this growth continues in India further, even foreign would come to work in India.
The days may not be too far.

Wednesday, December 23, 2009

Financial power would translate into Super power

The Country which flourishes in the Trade and Commerce would automatically turn into a financial power and then into a Military Power and then into Super power.
Since, the beginning of the 15th Century, the British started trading with all parts of the World and slowly started conquering the world and soon became the super power of the world. Their financial power turned into Military power.
After the Independence of USA from British, they started growing as a business power and by the start of 20th Century they become the center of world trade. The free society and vibrant democratic system of the USA attracted the Investors, Professionals and Business-mans all over the world, to live and do business. Their rule of the law atmosphere has made USA a conducive place for Investing.
Soon USA grew as a financial power and then it slowly grew as a Military power and by another fifty years it is the only super power in the World.
Any country which is growing financially would one day become a financial power and then into a Military power and then as Super Power. In the present days, China followed by India has started growing as Financial powers. G-8 Grouping lost its significance and G-20 grouping has become the new power bloc of the world which includes China and India.
If the financial growth is sustained in China and India in years to come, then surely these two countries are likely to be the Super Powers after USA.

No Super power is going to rule the world forever

We all know the might of British Empire in the 17th,18th, 19th , and 20th Century. There was a saying ‘ The sun never sets in British Empire’ which means almost all the parts of the world were ruled by the British. Such was the mighty of British Empire. They brought most of the world under their rule spanning from America to Asia to Africa. They were the dominant powers in the world affairs at that time.
But they were outclassed by USA and USSR after the world wars. USA and USSR became the superpowers of the World. World politics revolved around them. But after the disintegration of USSR in the 1990s, USA remained the sole super power of the world.
Before the 15 Century, the world was under the control of Muslim rulers. The Arabian and Persian Muslim rulers conquered most part of the world except Americas since it is too far away from their countries and also sea expedition is not possible for far off continent. Sulaimansait even expanded his kingdom to Spain in Europe. Muslim rulers conquered most of the Asia except the Mongolia. They conquered African continent. That is why most of the North Africa was Muslim populated Countries. But their might and importance vanished since the emergence of British Empire.
Before 10th Century, the world is dominated by the rulers from the Indian subcontinent and Mongolians. Chenqish Khan one of the Mongols ruler had made a expedition to conquer the world. But their Importance and power vanished by the arrival of Muslims rulers from Arabia.
No power center will rule the world forever. The super power status of USA would be challenged one day by some other country. But the rotation will  continue forever.

Long Term Investments versus Short Term Investments

There would be always a debate going on whether long term investments are best or short term investments are best. There will always a fifty percent people vote for long term investments and a equal percent of people would opt for short term investments.
Long term investments are investments held by a person for more than one year. Any thing less than that would be considered as short term. Long term investments can be held from one year to a decades. Short term investments can be held from one day to one year.
Even a single day would be enough for the you to get a return from it. Whether it is long term or short term, the utmost important factor is timing the market and picking the right security. Without this no investment would give you a good return.
I prefer long term investment over short term investment just because, even if you have missed the right time but you have chosen the right security, then still you are likely to end up in good investment.
In short term investments, you have to time the market properly. Otherwise, instead of profits, you may end up in loss. The risk is more in short term investments. The short term investments would not give you a second chance. But long term investments do.
Whether is long term or short term, time the market for profitable investments.
Happy investing.

Savings is not for TODAY,it is for TOMORROW!!!!!!!!!

Money flows through every ones hand but very few only holds the money firmly. Without some basic attitude, you cannot save money in this fast moving modern world. In economics these basic things are called as "Factors of Production". For every economic activity  the land manpower and money are the basic needs and they are the factors of production.

You may think loans can be availed easily but in reality  the lenders are verifying your repaying capacity and your bonafied.  Even for a home loan the banks are asking for the margin money from the borrower. In this case your savings only will give you a hand.

Even a skyscraper is built with small small bricks only. If you start to save money right now it will accrued  to a large sum tomorrow.
What ever may be your earnings weather  it is in thousands or in lakhs, your needs also more than that of your earnings,hence whatever be the income you have to save a small portion of your earnings.

In this fast changing world, your savings only will give you a hand in your future needs. hence you start savings from this New year itself.
Once you decided to save money there are various ways to save. You can invest in recurring deposits in banks and if you are a salaried person you may voluntarily invest more money in P.F or you  you may invest in systematic investments plans(SIP).
Last but not the least  Every building is built by small small bricks only.

Trend in real estate in India and China a comparison!

In total Indian GDP growth, the portion of foreign investment in real estate market is only 1.1 percent only. Where as in China it is 3.2 percent the reason behind this much variations are many let us analyze  these in detail.

 In China the total land holdings and its rights are with the Chinese government and hence there is no hurdles for the foreign investors to invest. But in India most of the land holdings and their rights are with the Public. The land owners have the sole desecration in fixing  the land price.  They cannot reduce the land price to the minimum but they can raise the land price according to their wish. weather right or wrong they raises the land value and makes huge profits. The mediators also plays to some extent to get more commissions.

In India next to agriculture.  The real estate is giving more employment opportunity and lot of employment opportunities are available in this field.  Generally if a particular sector is of in boom the other industries related to that sector also will get more benefits  they also will be in growth mode.

Hence it is the right time for  foreign investors to invest in this sectors.  For domestic small and medium investors to invest in real estate and construction related shares. Now most of the mutual funds also investing in this sectors only. India's leading bank SBI invests12.7 percentof its investment in real estates only. So think and act wisely.

A successful Stocks and Commodities Trader

Successful trading comes from experience and experience comes from only after spending money and time in the Markets. A trader is considered only if he trades and makes money in bull or bear markets.
Proper analysis and strict financial discipline are the two important factors that are very crucial for a trader to be successful. Successful Traders have developed a good trading system after prolonged testing of the trading system.
 A trading system may be of any kind but over a period, it should show good results, irrespective of any Market. Until you design a trading system, try experimenting with your system till you are satisfied with the system. This is not going to be a easy process.
Once you have found a successful trading system that works for you, you need to test the system for number of times for Profits and losses before you use it in real time.
A trader you trades the markets without proper trading system is destined to lose. So, designing a trading system is the half way mark for a successful trading. The next part is financial discipline.
Financial discipline is nothing but executing your trades based only on your system with proper entry and exit levels. The loss from any trade should be less and the profit from the trade should be more.
Successful mastering of developing a trading system and following it with discipline would surely make a successful Trader.

Tuesday, December 22, 2009

Will This Growth Sustain forever?

The new Investors and younger generation of India and China feels that the economic growth of their countries are non stopple and the growth is going to be there for ever. May be this growth continue for another decade, but at one stage, any growth has to see a saturation.
Saturation will be followed by the period of negative growth. The economic cycle will always see a high and a bottom. May be the growth and slow growth time periods may differ, but that will happen.
After the World War, Japan concentrated more on their economic growth. So Japan attracted lot of foreign investments from all over the world and the Japanese invested in all countries. The growth was phenomenol since 1950 to 1990. Their Stock Markets peaked in 1989 when Nikkei was trading around 39000.

Since then, for the past 20 years, Nikkei crossed its all time high of 39000. Now it is trading around 10000. It is one fourth of its all time high of 39000. So, a generation on Investors has never seen the peak in Japan.

The same will happen to India or China in the future. People has to learn lessons from Japan.

Rich becomes richer, Poor becomes poorer

The year 2003 to 2008 saw massive growth in India and China. The GDPs of both these countries are growing more than 8 percent while other European and North American Countries are growing at zero percent rate.
Since 1998, India and China saw the growth of IT industry in their countries but the growth was higher in India than China. BPOs and KPOs business boomed in India since then.
The massive growth of IT, Telecom and BPOs in India has helped many middle class families boys and girls in India, particularly in South India, to earn a good salary which hitherto was not available to them.
These middle class families slowly lifted to the upper middle class family category because of the Income they got from these Industries.
At the same time, Chinese concentrated more on other sectors for their growth as they are good in English. So, the growth is even in China in all sectors and the salaries rose nominally for all class of people. Hence, the growth of the Chinese families were more or less homogenious.
But in India, the growth is concentrated more in select sectors of the Industry. So, the growth of the Indian families is not homogenious. Only a few section of the people, say 10% of the population, has enjoyed the Economic growth.
While India was growing one side, we saw farmes suicide in some parts of the Country because of the crop failures. Price rise of essential commodities has made the life’s of the weaker class very difficult.
So, the recent Economic growth is enjoyed only by few percentage of the population of the India.
I would not say it as a real Economic growth untill all sections of the society enjoys the fruits of growth.

Evils of Inflation and deflation

Let me explain the concept of Inflation and deflation in a simple manner. Inflation and deflation are the terms used to describe the state of a Economy.
Inflation is the word used during price rise of essential commodities. Inflation is nothing but, too much of money chasing too little goods. To put it simply, if there is too much of paper money and less quantity of goods are produced, then too much of paper money would chase too little goods which would automatically increase the price of the commodity.
Inflation occurs when there is more paper money and less end products. There is imbalance between the money printed and the goods produced during inflation. Inflation can be controlled by controlling the printed paper money or producing more of the goods.
The term deflation is used opposite to Inflation. Deflation is a period when too little money chases too many goods. Because of this, the price of the commodities starts falling which will put the producers to get a price lower than their production cost. This is also evil to the economy.

So continous fall or rise of prices would be seen as evil for the economy. Inflation and deflation can be controlled by the Government by increasing or decreasing the Interest rates or by controlling the printing of Currencies.

Saturday, December 19, 2009

When there is blood in the streets, You buy property

There is a popular saying “ When there is blood in the Streets, You buy Property. In the Hollywood Movie ‘The Inside Man’ the sentence was used frequently to describe situation of Character in that Movie making money during world war.

The saying would surely fit for the Investments decisions. Whenever there is a decline in the price of the assets whether it is Stocks or Bullion or Real Estate, they are bound to come up from low levels. But it may not be immediately but surely it will rebound atleast after some time.

But the emotional setup of all Investors at that time would be biased towards panic. They will be following the herds. Herd Mentality would set in which would surely ensure the Investors not to take rational decisions.

But the history shows whenever there is panic in any Market that is the best buying opportunity and it is mostly missed by most Investors. Investment decisions should be taken in a particular asset when others are selling. This is called the contrarian thinking.

The best Investment chances came when everybody was in Panic about the particular Market. In future, we may see a panic situation in the any market. We should see that an Investment opportunity, instead of joining the herd.

The contrarian thinking says ‘you buy property when others are selling’.

Dubai Crisis- Is it the end or the tip of the Iceberg?

Dubai Crisis- Is it the end or the tip of the Iceberg

We all know that the financial crisis in Dubai World is due to heavy exposure in Real Estate Investments and the fall of property prices, and a very little demand for the already completed projects.

Money is locked in declining assets. The same scenario was seen in 2008 in US with large Investment Banks collapsing under their weight by holding huge exposure in real estate market. The ripples of that effect was heard in Asian and European Countries also.

But at that time, the asian countries some what remained insulated from that effect. In India also, those effects can be seen by the fall of property prices and lack of demand.

Now the million dollar question is whether the worst is over or the worst is yet to come. Normally, when a financial bubble is burst, its effect can be seen for 5 to 10 years. For example, the dot com burst had it effect for another 10 years. The same is going to happen now also.

In India, large number of IPO are coming in Infra, Power and Reality sector. This indicates people are still confident of this sector. It does apply that the worst is yet to come. We are likely to see Dubai Crisis scenario in coming months in some Asian and European Countries.

What I feel is that the Dubai crisis is just a tip of the Iceberg. When the whole Iceberg is known to the world, I don’t know how it is going to affect our career and living.

How will be the crude oil prices in the months to come?

How will be the crude oil prices in the months to come?
The crude oil prices which was hovering around 12 to 15 dollars in 1998 has started the rally from that level towards 145 USD in 2008. A correction was set from that level.

Before the end of 2008, it tested USD 30 region and bounced back towards 80 USD. Since then it is trading in the region between USD60 and USD80.

Technically every Markets peaked in 2008 except Gold. Crude oil also peaked in 2008. The peak of Crude Oil was coincided with the start of recession in all global Economies. The demand for Energy was slowed by the slowing down of global economies. So the prices of crude oil stabilized around 70 USD in 2009.

Unless the Global Economies start showing growth the demand for Crude oil is more less would be the same. There would not be significant increase in the demand.

No Economic cycle shows fast decline followed by immediate growth. It will surely take to start the next cycles, which means we are likely to see some more years of downtrend.

Until then, we can be sure that oil prices would move above the 80 Dollars mark in the near future. Technically also, any which corrects itself more than one third will see a severe bear market. So, crude oil prices are likely remain in a range below USD 80 for few more years.

I may not be astonished in seeing Crude below USD30 in another 2 years.

Friday, December 18, 2009

Will the downtrend in Gold continue?

Will the downtrend in Gold continue?

After testing a high of 1226 USD Gold has reacted from that high to test a recent low of 1100. A 126 USD decline is a significant decline from the high. Such a decline in the past 6 months was not seen.
Previously I have been advocating that we are developing a ‘Gold Bubble’ and it about to burst. Will this decline foretell the end of the bull Market in Gold.
One of the famous tools used by Analyst to forecast free Markets is Elliott Wave Principle. Based on the study using that tool, it points we are in the fifth wave of a impulse, which means we are in the last leg of the bull Market.
According to the theory, If this is going to be the last leg of the bull Market, then we are going to see a big decline for another few years to come.
Ok, If 1226 is not the top, then what will be the Maximum target for Gold. Yes, based on Elliott Wave principle, we can derive a target of 1400 USD in another 6 months period.
Whenever a commodity is largely discussed in Media, then that would mark the significant turning point of that Market. Gold is being discussed in all world media and it is the only commodity which is in limelight for the past one Year.
Last when Crude oil Prices were peaking, the same story happened. Media covered Crude oil daily and their focus was on Crude oil with analysts predicting 200 to 250 USD as price Target.
Now, the same thing is happening in Gold.
Let us wait and see whether History repeats itself……………..



The ego battle between India’s two exchanges comes to a permanent halt.  Bombay stock exchange advanced its timing by ten minutes, reacting sharply to it National stock exchange advanced its time by 55 minutes to 9 A.M.  As there is no other option the Bombay stock exchange also announced opening at the same time.  There is so many mixed reactions in the market most of the peoples object this arbitrary move.

The original move was to check the foreign fund managers using the Singapore market to beat the Nifty by short selling the Nifty futures options over the Singapore market.  Even now also they could not resolve this problem, why because the Singapore is still open well ahead of our revised timings.

Before this revision the BSE will set bench mark prices because by that time NSE may remain closed and hence the BSE will set bench mark prices.  But now the NSE will lose this opportunity.

But there is so many operational hardships are there.  The banks will not open that much earlier hence arranging funds will be a problem other than the strain on their daily routine.

Most of the peoples related to this field oppose this arbitrary move and they feel that they should be consulted before taking this move.

Economic Growth and Social unrest.

Economic Growth and Social unrest.
The Economic growth of a Country is interrelated to the peaceful social conditions of a Country. A social harmony in a country would automatically turns into a peaceful Business atmosphere.
A peaceful and harmonial social environment of a Country would attract foreign Investors to invest in their country. Local businessmen would be doing business peacefully which in turn would put the Economy in growth path.
One best example of Social harmony is important for Economic growth is, India and Pakistan. Though India and Pakistan were in the same plain in the 1990s, India turned out to be big Economic Power by 2008.
The reason is the social unrest in the country had put the economic development into the backseat. Frequent bombings, Killing of Political figures, hate campaign against the westerners has presented a poor picture on that Country.
That has dithered away potential Foreign Investments from that Country. On contrary, India which is having a vibrant democracy and rule of the law has grew leaps and bounds.
When comparing India with China, we say the growth of China is better than India because of this Social harmony factor. Even though our environment is much more better than Pakistan, it is not better than China.
In India, we had frequent terrorist attacks, bombings and political unrest. But in China, there is no such incidents taking place. That is why the growth rate is higher for China than India.
If a country wants to grow Economically, then it surely should have a peaceful social atmosphere.

Thursday, December 17, 2009

Which is going to be the next Bear Factor?

Which is going to be the next Bear Factor?
The late 1980s bear market in the world Stock Markets were fuelled by the Gulf war and failure of East Asian Economies like Malaysia, Singapore, Hong Kong and etc. The bear market sustained till 1998.
The early 2000s bear market was fuelled by the dotcom bubble burst and also by the terrorist attack on WTC in USA. Then it terminated only on 2003.
The 2008 bear market was fuelled by real estate bubble, which impacted heavily the USA and also the World Economies. Since then it has pared some of it losses but still vulnerable for another bear attack.
If so, then which is going to be the biggest factor for the next bear market. May be it is real estate itself. As I believe the real impact of the real estate bubble is yet to be felt.
Another possible factor could be a Gold asset Bubble. Peaking Gold prices would lead to Bubble in days to come.
Let us wait and see…

Economy and Stock Markets

Economy and Stock Markets
Are Economic growth and Stock Markets are interrelated. Half of the economists will say ‘Yes’ and half of them will say ‘No’.
According to me it is ‘Yes’. Stock Markets and Economic growth are interrelated because the rise of Stock Markets would attract small investors into the Market which will propel the stock Markets further, which in turn fuel the start of new companies and projects, which in turn help grow Economy.
A rising Stock Market would invite retail Investors and Foreign Investors to invest in the Stock Markets through secondary Markets and also through Initial Public offerrings. This process will infuse huge amount of idle money into the system
The money that came for circulation would be used by the companies to expand, backwared integrate and forward integrate. Thus the production capacities of all companies increases, so they produce more end products.
These end products has to be sold and this will be done by exploring new Markets locally or internationly. Thus the earnings of the companies will increase, which in turn means increased tax for Governments.
Thus a rising stock Market will surely propel a Economic growth.

Wednesday, December 16, 2009



The global industry down turn is a double bonanza for the Chinese leading automobile industries. The fast growing Chinese industries are chasing western brands to utilize the steep global industrial down turn.
Beijing  Automotive Industry Holding(BASIC) is one of the largest auto maker in China.  Recently Beijing automotive industry holding acquired Saab unit a part of General Motors  as a part of developing its own cars. More over it will by the intellectual property for 9-5 and 9-3  sedans and other equipments for a huge  unspecified sum.

This deal will help in the new saap production , but the Saap people clearly informed that the deal will not affect the sale of Saab to others.

The Dutch sports and ;luxury car maker SKYPER is also holding talks with general motors for Saab. Not only SKYPER and BASIC  there are so many other automobile manufactures like GEELY automobile groups are running behind the western car manufactures to harvest the benefits of Global industry down turn.

Most of the Chinese Auto mobile industries are running behind VOLKSWAGEN, TOYOTA MOTORS for tie ups .

Acquiring some assets of GM by BASIC  us a boon to the Chinese  company. Though it is a fifth largest automobile maker in china,
It still does not have its own brand car. Hence, even though the Saab platform is old still it  can use it for manufacture its own cars in future. More over it will get support from Saab as it will use the acquired technology in production of its own cars.

Tuesday, December 15, 2009



The announcement of Dubai world seeking a stand still in debt servicing clearly indicates, that the Global financial crisis is not yet over.

 The economy of Dubai had relied on the massive borrowings. It build the economy mostly on trade,reality and tourism. Moreover Dubai invested largely in foreign assets such as Casinos luxury hotels. Ocean liners, properties  etc. Its economy is substantially financed by international borrowing.

In 2007   global financial melt down hit its growth, trade and tourism very hardly, resulting in entire collapse of commercial trade abandoned construction projects,unoccupied  commercial complexes, which lead the property prizes to tumbled down to its bottom.

At this juncture servicing the huge debts raised to create these assets became difficult. The Dubai world one of the government owned company owing nearly $60 billion to international banks asked for a  stand still as regards debt servicing from its borrowers for six months since late November.

Here it is very important to discuss how this same crisis was handled by both US and Dubai. In US the capitalistic country several private banks, including investment banks have been bailed out of with large dose of public or other wise  taxpayers money. But in Dubai the international lenders to the government owned entities have been left alone to handle the massive credit related problems. In Dubai government  entities are substantially in excess of the GDP of the country hence it considered a sovereign risk in the conventional sense of the term.

 The international banks which lend to Dubai world are in no financial position to take even a partial write down on these assets. It is now certain that the process of cleaning up bad debts and recapitalising them.

After the Dubai world travails, the international credit market unlikely to offer government owned corporates without  an explicit sovereign guarantee .

Monday, December 14, 2009

Which is the long term Investment bet? Deposits,Gold, Stocks or Real estate?

Which is the long term Investment bet? Deposits,Gold, Stocks or Real estate?
During the 20th century, investments in the real estate showed steady returns. Sometimes the price rise is fast and sometimes it is slow. But the rate of return is some what better than the Fixed deposits and also above Gold. But is somewhat riskier than fixed deposits.
Likewise, Investments in the Gold also showed good returns and at times it is stagnant. It sometimes performed better than fixed deposits and at times it is under performed when compared to fixed deposits. But is riskier than fixed deposits.
Investments in the Stocks is the riskiest of these investments. But the returns were phenomenal during the Bull Market and it showed negative growth in bear markets. But on Average, it performed better than other investment avenues. But the risk factor is much more in Stocks.
My investment plan would be to invest 30% in Stocks, 30% in Real estate, 20% in deposits and 20% in Gold. Any investment plan should take into consideration atleast 5 years time frame. And the best way to invest is to invest at bear markets.

How Interest rates affect the Stock Market?

How Interest rates affect the Stock Market?
Interest rates are the percentage at which the Lenders lend the money to creditors. The lenders may be Banks or Individuals or Financial Intstitutions. The creditor may be any one.
But here, the Interest rates we are talking about is the rate at which a central bank or federal bank of any country lends the money to other banks. In USA, the central bank is Federal Reserve and in India, it is Reserve Bank of India.
Central Banks world over lends money to other Banks of their country. The Interest rate at which it is being given to the Banks really matters. If there is inflation, in order reduce the price rise, Central banks increase their lending rates in order to reduce the flow of money in to the system. This in turn reduce the price rise.
And in times of deflation ( prices decline steadily ), Central banks reduce the lending rates to inject money in to the system.

If interest rates are hiked, then the Banks will increase their lending rates and the Industry which is financed by Banks will get affected by the rising interest cost. Thus it affects the bottomline of the Company.
Since companies bottomlines are affected by rising Interest cost, their earnings will be affected which in turn affect the sentiments of the stock Market, which in turn affect the stock prices of the companies.

Sunday, December 13, 2009

Fundamental Analysis of a Stock

Fundamental Analysis is the way of analysis of security based on their internal and actual performance of Company unlike Technical Analysis in which just the movement of prices is studied, without considering the fundamentals of the company

Fundamental analysis of a security is the study of Balance sheets, Profit or Loss account, assets and liabilities, sales income, other income, interest payment and etc.

Based on this an Analyst comes a conclusion about the future of the stock or the Company.

Some of the main value they see are PE ratio, EPS and Book value.

PE ratio is the ratio between Price of the Stock at the Market to the earning of the stock per share. Higher it is, the stock price is highly valued. If it is less, then the stock price is priced low.

EPS denotes Earnings per Share. It is the ratio of profits made for the year to the number of shares of the company. If the value is high, it means the earnings are high for the company and if it is low, then the earnings of the company is low.

Growing sales figure or slowing sales figure would influence the future performance of a company.

An analyst also see the performance of the sector at which a particular belongs to. They analyze the performance of the company with the sector’s performance. And also they see the future for the that sector.

Various factors like this influence the movement of the price of a particular stock. Study of this factors is Fundamental Analysis.

Saturday, December 12, 2009

Technical Analysis Introduction-2

In latter years , in the course of market history many analyst propounded their own theory, and new indicators are introduced .Many indicators based on momentum have become popular nowadays .

Japanese candlestick techniques are used along traditional western charting techniques.

The price of a security represents a agreement between a buyer and seller. It is the price at which the buyer decides to buy and the seller decides to sell.

If he expects the price to move up, he will buy it. If the investor expects the price to move down, then he will sell it.

Humans as a individual, are not easily predictable. But as a crowd their behavior is predictable. A individual as a member of a crowd would behave differently.

Because of the participation of people of various emotions, anticipation and expectation, the market movement is unpredictable. Because of this there is always a gap between demand and supply which makes the prices to swing constantly .

Technical analysis, in other words is the study of this demand and supply ,and anticipate price changes.

Technical Analysis Introduction-1

Technical Analysis is the art of analyzing a stock's historical prices in an effort to forecast the probable future prices. It is done by studying and comparing current price movement, with the help of tools like (i.e prices ,volume ,speed ,pattern and time) ,with the past price action to predict future course of the price action.

To put it simply, technical analysis is the study of prices, with price,pattern, volume and time as being the primary tool. it is applicable to stocks, commodities and currencies.

With the help of Technical Analysis we can predict the prices from days to several years . It can be applied at the time of both purchasing and selling.

Technical Analysis is useful for improving the investment decision making skill Before making investment decision technical analysis should be supplemented with fundamental analysis

Concepts and tools of technical analysis were developed several centuries ago. Japanese used candlestick trading techniques for rice trading in 16th century itself .

These tools are well tested since then and all over the world investors are using it successfully .

The traditional technical analysis method got a boost after the Dow Theory, developed by Charles Dow in 1900. So he is also called the father of modern technical analysis.

Since then many theories are propounded by many people based on Dow theory or based on price pattern (ie Elliott Wave Theory and Neowave ) or based on Momentum of the Market.

..........to be continued in Part 2.......

Friday, December 11, 2009

Is the Bear Market over Worldover?

January 2008 saw the start of a bloody decline in stock markets World over and it terminated the bull run in the stock markets that started on 2003. The decline continued till  october2008 in most of the Asian Markets and the decline terminated around february in US and European Markets.

People ranging from ordinary men to investors in the stock market panicked and the period saw many layoffs in all sectors of the Economy. Unemployment rose in US and world over. The severely affected country was USA.

Many Banks and Financial Institutions in USA went bankrupt mainly because of sub prime crisis which is due to the burst of real estate bubble and Stock Market decline. The tremors are felt heavily in European countries and it is felt mildly in Asian Economies. It was said at that time, that World was going to face the worst bear market.

Ever since that, Governments offered stimulus packages to boost their respective countries economies. The stock Market were recovered from the lows very quickly. Now, everybody saying that the bear market is over. The stimulus packages given by their governments boosted the economy and everything is normal today.

But My opinion is, even though Stock Markets have rallied for the past 9 months, the present rally seems to be temprory.

No bear market completes its term in just 9 months. So, the real and the worst bear market is yet to come. It may take another five or six years to complete. Hisotry will always repeat itself.

Be prepared for it.

Will be US Dollar replaced by Euro or Chinese currency?

For the past six months Dollar has been depreciating against all major currencies. Against Indian Rupee it depreciated from 52 to 46 Rupees. It depreciated against Euro and it depreciated against Major Asian currencies.
There is already a talk among certain coutries like Russia, China, France and etc, to replace US Dollar as World Reserve Currency. They want to trade oil in some other currencies except USD.
The US Economy is growing at a very slower pace for the past ten years when compared to the other Major developing Countries like China and India. The growth rate is likely to be slow for another 5 years in USA.
Even the once mighty Europeon Countries are no longer growing as Asian Countries. The continueous lesser growth or no growth in US and Europeon Economy would surely put China in the Drivers seat in world affairs and World Economy.
The Chinese growth in the past decade is phenomenal. It is vast a country and it is almost equal to the size of USA. Its population is more than 4 times the population of US and their only disadvantage is English, the language spoken and understood in most part of world. Even in that area, they are improving day by day.
Going by the vast potential of Chinese in Military and Economic Might, Chinese currency may replace US Dollar in another  Five or Ten years in the Future.

Thursday, December 10, 2009

Sectors for the Next Bull Markets

Sectors for the Next Bull Markets
World over each Bull Market will be lead by any particular sector or any particular set of Sectors of the Industry. The 1990s rally was lead by Old Economy Sectors like Cement, Steel, and Automobiles. The next Bear Market was also lead by the same sectors.
The 2000 rally was supported by ICE sectors. ‘ICE’ shortly denotes Information, Communication, and Enterntainment Sector. The Stock prices of Companies like Microsoft, Apple, Oracle, Adobe, Sun, IBM went to dizzy heights. In India, Infosys, Satyam, Wipro, Hcl Tech are the companies saw a massive bull run.
Zee tv, Himachl Futuristics, Global Tele systems were the stocks from Media and Telecom Sector that are in bull Run.
Globally, Telec om Multinational Companies like AT&T saw bull run in all European Stock Exchanges.
Like wise in the previous Bear Market, the same sectors which lead the bull rally, lead the next Bear Market.

The Bull Rally that started in 2003 Globally, is supported by Power, Infra, and Reality Sectors. Globally, the companies in this sector was in demand in all Stock Exchanges.  Like wise, the bear market in 2008 was also lead by these sectors.
So, which sector is going to lead the next bull rally. Technical studies reveal Pharma, FMCG, Financials will lead the next rally Globally in all Stock Markets.
Be prepared for that.

Wednesday, December 9, 2009

Market Cycles

I have observed that any free markets in the world are behaving cyclically. Careful examination of the time period taken by the market in each legs reveal that they are behaving rythematically.

It seems world Equity markets are moving in 33 year cycle. A new bull market is started in Dow Jones Index in 1950 and it continued for 1983 and the current leg is likely to terminate 2016.

Whenever equity markets are in last phase of a cycle, Bullion markets are behaving in opposite direction of the equity Market. So, Equit Markets are in bull phase if Gold Markets are in bear phase and Gold marekts are in bull phase, when Equity Markets are in bear Phase.

The 1970s Bull Market in the International Equity Markets were lead by Japan. The 1980s and 1990s Bull Market in Equity Markets are lead by south East Asian Countries. The 2000s Bull Market is lead by India and China. So the next bull market is likley to be lead by some other new countries.

The smart Investors should always look for the right Market to invest and the right marktet to withdraw their funds. It will not be profitable for anyone to hold on to their same investments in all period.

Market cycles will help you to time the market at appropriate time. So do study the Market cylces and take investment decisions based on the study for profitable Investments.

Monday, December 7, 2009

Is a Bubble building in Gold?

In Financial Markets, herd mentality is in work. Investors always go by the herd.
Last year, they chased real estate and property prices shoot up world over and investors bought properties as though there is no tomorrow.

So, this effectively set up a stage for impending financial Bubble and that happened. Property prices fell all over the world. Many caught in the melee. Banks went bankrupt. Companies went bankrupt. Individual went bankrupt.

But still, herd mentality is in work. Now, the people are chasing Gold assets and it has effectively set the stage for the next financial Bubble, that is ‘Gold Bubble’.

Financial Bubbles are created when all of the investors who are interested in a particular asset want to get hold of it. Once the buying potential recedes, then a huge selling potential is created. Once prices start coming down, panic selling by all the investors push down the prices beyond its intrinsic value. This is how financial bubbles are burst.

The present price rise in gold reminds me of bubble is being built in it. It is likely to burst in another six months. The same story will happen again. Banks will go bankrupt. Companies will go bankrupt. And individuals will go bankrupt.

Let us see, if this happens shortly.

Saturday, December 5, 2009

Is it worth giving Noble peace prize to Obama?

Is it worth giving Noble peace prize to Obama?

Ever before completing one year in office and even before any Major policy change by the US President, the Nobel Committee announced Nobel Peace prize.

Even before he performs, he was given the Nobel prize. I wont argue that he is unfit to get the award, he has all the qualifications to get it. Had he been given the award after 2 or 3 years in office, It would have been appreciated by the all quarters.

Many people of questioning the decision. Many feel it is pre mature and biased. I too astonishe on hearing that. I thought at that time, normally Nobel prize would be given to the achivements already done but here it is given that he will achieve those objectives in future.

Anywhere prizes will not be given for the things that will be done in the future. The awarding of Nobel prize to Obama seems like that. I don’t understand if there is no other person in the world is fit to get that award for this year.

But one thing is sure, as he has got the Nobel peace prize, we would not indulge in further military activities in anywhere in the world. From that angle, I really appreciate the Nobel prize Committee for awarding the prize to Obama.

But in the future, if Noble prizes are given in this manner, then it would surely show Nobel prize as laughing Stock and also it will loose its respect it is command among the people.