Monday, 29 September 2008

European banks are falling like nine pins

Our passion to securitize every asset has brought this doomsday on us. This rush of securitization made speculators out of home owners and they thought that apart from staying in their houses they could also play the real estate game and speculate on their own homes, see what all this has gotten us into!
what next? the central banks will bank roll these banks in trouble and take the assets on its own books. So, now if you foreclose then you will turn over your house to the government. The govt of US is going to own a lot of homes in the next six months apart from owning the stocks of your homes. I read a few comments on this phenomenon and I think, the people who have been talking about very bad days or dooms day are simply frightening / scaring investors away. That's like telling your kid brother not to eat the chocolate saying that is tastes bad and slyly eating one yourself.
If you believe in your country's progress and the progress of your fellowmen. If you think that business can be conducted and profits can be made then go ahead and buy stocks. Buy stocks of companies that have been around for 25 years or more and don't worry about their immediate problems. This too shall pass!

Saturday, 27 September 2008

Should Indian markets follow American markets?

That is the question we ask ourselves today. Has business become so interrelated that a meltdown in one country leads to the same in another country? Is the Indian economy so entangled in the American Economy that the Sensex and Nifty should react to whatever happens to the Financial institutions in US?
Aren't Indian Financial Institutions better off than the Americans as of now? India does not have a sub-prime problem! It does not talk of falling consumer spending. We have higher inflation - meaning more money chasing less goods. banks are wary of providing loans as usual and in the last five years the Indian banking system has been cleaning up its act by reducing non-performing assets and shoring up capital adequacy ratio. This should lead us to a stronger financial system and not a weaker one. Indian Sup-prime market is full of "Prime" cooperative sector. these loans are not scrutinised and therefore not tradeable. These loans will always be held till maturity or default, whichever occurs first. The cooperative sector has nothing to do with the corporate sector or the organised banking sector. So, there is no threat of the same thing happening in India.The range for nifty remains to be between 3800 and 4300. expect some positive news on the nuke deal and thus expect a decent opening on Monday.

Tuesday, 23 September 2008

The N-Deal will bring a whiff of fresh buying

The signing of the N-Deal will bring a fresh whiff of buying interest on the bourses in India. this may happen after the expiry of this months contracts. The markets are expected to trade in the range of 3900 and 4300 on the NIFTY for the time being. The N-Deal will break the range to take it up to 5000 levels. But euphoria will be shortlived and the markets will again catch the contagion of the western markets. Untill then buy GOLD and sell dollars.

Sunday, 21 September 2008

An Hi-FIVer tomorrow and an opportunity to exit stocks

If you were looking for an exit opportunity from the stocks that you bought last fortnight, tomorrow is the day. This euphoria will be short lived and the rally will end with a whimper. Remember Isac Newton? he said "October is the worst month for stocks. The other months are December, April, March, January, May, June, July, August, February, November and September." All bail out drama will last for a while and then once short selling is allowed we will be back to the old meandering ways of the market for a while, at least till the middle of the next calendar year. We can expect the performing markets/ companies to be separated from the "also ran with doles" my the middle of 2009. I foresee a long and treacherous bear phase for the markets.

AIG being taken over by the federal government means a lot to the industry. I have been getting calls about the future of AIG and my stock answer is that there is no bigger person on this planet than the President of US of A to own a business. In India we have a peculiar scene, TATA group the most trusted group has a joint venture with AIG (now the property of the federal government). IRDA in India has water tight investment rules and thus, there is no cause for concern for the insurance policy holders.

So, where do we invest in India now? of course the Infrastructure sector because that's where all the money is going. if you want to buy a stock and forget then buy reliance infrastructure limited keep it in your demat accounts and forget about it for a decade. It will finance all your dreams at the end of the decade.

Thursday, 18 September 2008


The plunge protection team of all the central bankers is on an overdrive trying to rummage through the debris created by the sub-prime and the derivatives market and salvage whatever can be salvaged. The choice of the salvage is in question. do we need to salvage stock prices of companies whose PE ratios are 50 and above in such a market? That's the moot question.
Central bankers want to provide liquidity to what CDOs? My question is why should these bonds have a market at all and who in their sane minds will buy them? Real estate prices have been jacked up by speculators and these prices have been considered as "values" and then securitized. Do we need to bail out such operations?
Another difficult thing to understand is the commodity ETF. Lets take an example GOLD ETF, what kind of people are buying these things? Aren't they speculators in gold? Are we going to encourage speculation in gold now that our help in speculation in real estate has come to a nought?
Again, if there is some lucky sane mind reading this blog, please sell dollars, dollar is a goner as of now. US stocks will be available for their fair prices and Indian stocks too. Remember the golden rule is to buy only those stocks whose PE is less than 10 don't touch high fliers they will not survive. Money is always made in unglamorous ways by working hard and soiling ones hands and not by speculating and putting values on others toils. Go back to basics, follow the oracle of Omaha and buy value, buy businesses that you understand and diligently add money to your wallet.
Expect a knee jerk reaction from the European zone over the weekend. All these central bankers are throwing good money (supposedly) after the bad.

Wednesday, 17 September 2008

Uncle Sam owns CDOs, and doles housing finance for a song

AIG gets a breather (sorry a lifeline), the government has taken over AIG and demonstrated that it will help all the CEOs who indulge in riskier financing that UNCLE SAM is there to look after you after all and take all the bad debts you generate in pursuit of your greed. By this week Uncle Sam owns fannie, freddie and AIG. Poor lehman got left out and had to fend for himself.

In India the Govt owns most of the banking machinery but has not gone to these levels of profligacy. It has been outsourced to the co-operative sector. In the co-operative sector it is "Hush-a Bush-a, we all fall down" going on for a long time and RBI has been tightening the noose rightly. I am proud and happy that i was born in India in these times and have an opportunity to look at the misgivings of the US govt from a safe distance. Anybody interested in a free tip? go short all your dollars it will pummel to the depths in the coming 12 months.

Another prediction, beware of ICICI bank it has all the makings of an Indian Lehman. They are already hiding a lot. They have stopped all their personal and home loan operations for the last four months now.
Look for good old PSU banks who are conservative and good in their book keeping. there are plenty of them and they will shine in the next two years. Beware of flashy private sector banks (barring AXIS which has its head on its shoulders as of now.)

so long

Monday, 15 September 2008

Lehman goes dow under

We witnessed a blood bath on the indian bourses today, dragging the sensex and the nifty by around 4% each. Lehman Brothers folded up and filed for bankruptcy, AIG is in deep trouble and Merrill Lynch was gobbled up by BoA. Commodities have also shown large movements, gold is up, crude is down and generally all commodities are looking down. This calls for some rethink on our strategies. I think we should hold our horses and not jump the gun. The NSE and BSE are very close to major support levels.
I remember reading somewhere about technical analysts and investment gurus talking about why they went wrong when they predicted doom. All of them blamed the plunge protection team, you can see the plunge protection team in full action right now trying to salvage the situation in the markets. so untill our friend ben brings the moolah in, happy investing

Thursday, 4 September 2008

IPOs of the week

This week saw two new listings resurgere and austral coke. Both are glaring examples of manipulation in the listing price and operating the stocks. I think SEBI should wake up and take note of this phenomenon and probe the going on's in these two listings.

JK laxmi cement seems to be a good buy for the long term it is trading lower than its book value and has been adding a lot of brand value. Remember OM Puri talking about "chain ki neend ki guarantee".

bye for now