- Blog Maverick: I’m Going Long Right Now
I put 8 pct of my net worth in DIAmond puts at 11000, as a hedge, and just sold them at a very nice gain. Very nice. Now I’m short puts that I sold in not near as big a position, but nice. I’m going long.
My first stomping grounds are MLPs. They have been getting killed. KILLED. They build pipelines, ships, whatever, and they do contracts to provide service via those assets. The assets are very long term, and the cash flows are very consistent. I am putting together a big porfolio that will pay me more than 10pct yield.
Why sell puts ? With market volatility (VIX) at an all time high, I wanted to take in some of the volatility premium in this bullish move.
This is Mark Cuban. 8% of NW is a big number in this case. 
There were two rumours doing rounds explaining Wednesday’s bungee-jump by the stock markets. One was that there was a firesale by three India-focussed hedge funds.The second was that one of India’s big bulls, who has been sitting on big shorts for some months now, has been asked by New Delhi to cover positions and not to try and bring the market down. That there was significant short-covering is true because Nifty Futures volume hit an all-time high of 5.69 crore shares on Wednesday.
Rumours - the lifeblood of Indian stock markets?
Posted by Kaushik on October 09, 2008 08:08 AM · permalink
Here are the market metrics for Wednesday. At the end of the day, I run a scan and then these metrics go into Excel. Out of 1270 NSE stocks, 901 stocks made 52 week lows and 447 stocks made new lows, 688 made fresh 20 day lows ! This is enough to drive anybody crazy like hell. About 13 % of stocks are above their 200 day averages. These are extreme readings but certainly not the rock bottom. What if the number of stocks making new lows keep on increasing ? Anyway, looking at these extremes, a bounce is likely but after that we are back down again. Posted by ss (noreply@blogger.com) on October 09, 2008 06:31 AM · permalink
continue to read it here
Posted by ss (noreply@blogger.com) on October 09, 2008 02:29 AM · permalink
The salvation army is back - this time cutting rates all over across the globe. Do you think this is gonna help? No! There is a limit to printing money like this.Posted by ss (noreply@blogger.com) on October 09, 2008 01:58 AM · permalink
Here is the 20 day ATR of Nifty Futures. We are near the previous peak of around 176 and rising. The Indian blogosphere is full of ideas about trading Options. But trading Options with so much volatility is like playing with fire and many novice traders forget the basic rule - buy an Option when the volatility is low and write an Option when the volatility is high. In this set up (assuming that there will be a relief rally of sorts) will you buy say a 3500 Call or write a 3500 Put ? Posted by ss (noreply@blogger.com) on October 08, 2008 08:03 PM · permalink
The news flow was bad. Russia and Indonesia halted trading after losing major ground - some 20% each. Russia and Brazil are largely commodity driven - and commodities are heading towards all time lows. Oil's at $87 and not looking good.
Note: the problem with non-market pricing is that while we rejoice on the way up - since the government subsidises petrol/diesel for us - the reverse does not happen on the way down. The HPCLs, BPCLs and IOCs scream that they lost money going up and should be allowed to recover it going down - fair argument but we don't know where to stop...when they make back their exact losses? What about the oil bonds? Do they count in estimating losses? And if they're actually allowed to profit, how much? Lack of market pricing is a mess.
This also means our inflation is not going to come down by much. Which suits the government - I'm sure they are targeting Jan for an inflation break, as it gives them good election PR.
The UK decided to put in some 50 billion pounds as capital into banks. Meaning they'll buy bank stock for the money. Good move, and people are calling for the US to do the same, but in the US the amounts needed are so high the shareholders might as well give up. (I think)
Now the Fed's gone and cut interest rates 0.5%. I don't know why. Still, this is a market that only news can stop - and any news will do. Including "Ben Bernanke successfully flies a kite, Dow up 200 points". At least these are the headlines every few hours. "Stocks down on lack of belief in interest rate cuts", says Yahoo's finance section; and when you hit refresh, "Stocks up on hope from rate cut". It's like they have two reporters and they hate each other.
(That's my theory of the French language. Whoever did the spelling bit hated the person that did the speaking bit. That's why they have random "-oux" and "-eus" suffixes for no rhyme or reason)
Where do we go from here? We've had a lot of drama. I think we should enjoy it while we can. Come January and we might actually long for this kind of volatility. This is a recession - and our little recession in India is coming too. It's remarkable how literally everything is down 50% at least. Real estate, probably 70%. JP Associates and Unitech are under 100. ICICI Bank went down to 418. Suzlon's worried about the crack - this time it's not in the turbine blades, it's in the stock.
I still think we're going down - forget why and all, it doesn't matter, we'll go down until we have lost all interest in the markets. But we have gone from 4300 to 3350 in a matter of 10 days. This kind of stuff doesn't happen without a serious bounce. So I think we'll bounce, even if it's only a few days worth. I think we will see 3,100 on the Nifty, and I think the word "value" has started to make sense now. It will become more evident as we go on.
Disclosure: I'm currently long the Nifty, short a few options and long a few stocks.
Posted by Deepak Shenoy (noreply@blogger.com) on October 08, 2008 07:55 PM · permalink
Now that’s what I call a turn-around:
Do note the simultaneous 50bps rate cuts by the US Fed, Bank of England, ECB as well as Swiss, Canadian and Swedish central banks. European indices were down 5%+ earlier today, but are now in the black.
Rock on!
Posted by Kaushik on October 08, 2008 12:24 PM · permalink
India is in the middle of a storm at the moment, there can be no doubt about that. But the important point to note is that this storm is not of India's making. The financial turmoil in a number of key developed economies, and above all the United States, is sending shock waves across the global economy, and as is normal, when the earth trembles, it is the most fragile who notice it most. India's economy may be fragile in the sense that it is very vulnerable to what is colloquially known as global risk sentiment, but it is not fragile in terms of being susceptible to having its growth trajectory knocked completely off course. India may be shaken, but her economy will not be broken.
Emerging Market Bonds
Posted by Edward Hugh on October 08, 2008 10:45 AM · permalink
One system is up 5% and the other has told us not to trade today. Therefore the discretion makes it worthwhile and can focus on what to buy at what price etc.
There's way too much news, noting in separate mails. Blame Reliance for the delay - my net connection has been shot for the last two days!
Posted by Deepak Shenoy (noreply@blogger.com) on October 08, 2008 08:34 AM · permalink
It's been ages since I've drawn some trendlines. So before I forget how to draw, here is the Sensex daily chart with trendlines. 9000 looks cool and easy here and that is where this whole thing started off anyway, so let's go back and see how 21 k looks from there ! Posted by ss (noreply@blogger.com) on October 08, 2008 05:35 AM · permalink
It’s the end of the world as we know it. Or not.
Posted by Kaushik on October 08, 2008 04:43 AM · permalink
- BCA Research: Panic Reigns In Financial Markets
The market in Saudi Arabia sank by 7% while the biggest percentage loss was reported in Egypt, where the key index plummeted by more than 16% to its lowest level in two years.
The Tadawul All-Shares Index in Saudi Arabia, home to the Arab world’s biggest market, finished down 7% to a four-year closing low of 6,253.72 points. The index had tumbled 9.81% on Monday and lost 16.1% in the past two days. TASI is 43.35% off last year’s close.
Shares in real estate giant and market leader Emaar shed 2.14% to under AED6 (US$1.63), less than half book value, analysts said.
The drop came despite attempts by government-controlled real estate firms in Dubai to maintain investor confidence by announcing new multi-billion-dollar projects that have become a hallmark of the booming city state.
- Business Standard: Defaults threaten fixed maturity plans
Fixed maturity plans (FMPs), which have garnered Rs 102,133 crore of average assets under management (AAUM), are facing the prospect of rising defaults on their investments in real estate and non-banking financial companies (NBFCs).
FMPs contribute almost 19 per cent to the Rs 5.29 lakh crore average assets of the industry.
. . . some of the leading real estate companies have defaulted on their repayments and are seeking rollovers. And though there hasn’t been any huge redemption pressure, mutual funds are gearing up for it, especially from companies that have invested in the FMPs.
. . . around 10 to 15 per cent money of the total AAUM has been invested in real estate and NBFC papers.
Those extra 2-3% p.a. returns might just be not worth it?
Posted by Kaushik on October 08, 2008 02:12 AM · permalink
Dow, Nasdaq, S&P down another 5%. CBOE VIX spends another day above 50. Breadth abysmal. T2108 at 20-year lows. News flow horrible. Technical indicators beyond oversold. Volatility reigns supreme.
Looks like another 4%+ down for Indian indices today. That would mean Nifty at 3500, Sensex at 11300. Wow!
Buyers on strike. Sellers on drugs. Investors finding value (traps) left & right.
Posted by Kaushik on October 08, 2008 01:58 AM · permalink
Posted by ss (noreply@blogger.com) on October 07, 2008 05:39 PM · permalink
Most people feel that big down days are followed by pullbacks the next day. In this year, we had 25 occasions when the market was down by 3% or more. I decided to check whether the "strategy" of buying Nifty Futures at the close on a down day and selling it at the close the next day can give me any profits. The result is negative as it turns out that only six times this strategy would have given a +2% profit. These days are marked by white arrows in the above chart.Posted by ss (noreply@blogger.com) on October 07, 2008 04:14 PM · permalink
- what should be my buying strategy ?
- Should I buy immediately or wait for the bottom?
- Is the price of stock ABC good for buying or should I wait?
I have very simple approach and answer to all the above questions (from my perspective)
Step 1: understand the company well. Have confidence on your analysis
Step 2: Evaluate intrinsic value. Be realisitic in your evaluation. Be neither too pessimistic or too optimistic
Step 3: check price. If selling below intrinsic value (I personally prefer 50% below intrinsic value, you can choose your own number), buy. Otherwise do nothing
Step 4 : Every quarter analyse the results of the company and check if your assumptions are still valid. Recalculate intrinsic value if required.
Personally I decide on the position size and then invest around 40-50% of the full position if the price meets my criteria in step3. The rest of the buying is done in the next couple of months.
This approach cuts both ways. In a rising market, I am unable to build a full position. In a bear market, I am able to average down on price. However while I am doing this I am not looking at the overall market levels or trying bottom fishing. I personally think bottom fishing is a futile exercise and a 5-10% difference in the price will not matter in the long run. If it does, then one is cutting it real close
Do not invest
There is caveat to the above suggestion. If you do not understand the company well, cannot evaluate the intrinsic value or do not have confidence on your analysis, please don’t invest. A bull market is forgiving and you may make money inspite of poor analysis. However a bear market is brutal. If you analyse a company incorrectly or do not have the confidence, the market will not bail you out.
Finally, if you ask for the all time best strategy – Create an SIP (systematic investment plan) on the index for the next 15 years and don’t disturb it.
What I am looking at now?
The market is moving pretty fast these days. As a result I have been reviewing my holdings and looking at new companies. As I plan to keep the total number of holdings fixed (more on that later), I am comparing new ideas with the exisiting ones. A new idea has to be more attractive than an exisiting one, to get into the portfolio (and push out the less attractive stock)
Some companies I am looking at
Lakshmi machine works
Ingersoll rand
ICSA (later)
SKF bearing
HTMT global (cash bargain)
Denso india
Sonata software
Torrent software
The above list is not a recommendation list. It is just a list of stocks I am looking at and may or may not invest in any one of them. I will post on stocks which I find attractive when I complete the analysis and am able to write a post on it.
Posted by Rohit Chauhan (noreply@blogger.com) on October 07, 2008 03:02 PM · permalink
Bespoke: Russia Falls 19% Today
Another double-digit fall. Another trading halt. BRIC.
Posted by Kaushik on October 07, 2008 02:55 PM · permalink
Bill Gross, PIMCO: Nothing to Fear but McFear Itself
We believe that the Federal Reserve must now act as a clearing house, guaranteeing that institutional transactions clear (and investors receive) their Big Macs at the second window. They must also take another bold step: outright purchases of commercial paper. They should also cut interest rates to 1%, because we are experiencing asset deflation, and the threat of headline inflation is long past.
Fed to buy massive amounts of short-term debts
The Federal Reserve announced Tuesday a radical plan to buy massive amounts of short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy.The Federal Reserve will buy “commercial paper,” a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls.
There was $1.61 trillion in outstanding commercial paper, seasonally adjusted, on the market as of last Wednesday, according to the most recent data from the Fed. That was down from $1.70 trillion in the previous week. Since the summer of 2007, the market has shrunk from more than $2.2 trillion.
Next up: a 1% rate cut?
After that? Dial 1-800-BAILOUT-BILL
Posted by Kaushik on October 07, 2008 01:30 PM · permalink
Posted by SA Editor Judy Weil on October 07, 2008 09:47 AM · permalink
Here is something interesting - Nifty (top) is just above its March - April 2007 lows, while Sensex (bottom) is below ! Next support level for the Sensex is around 11300; while it is 3300 for the Nifty. 
Posted by ss (noreply@blogger.com) on October 07, 2008 02:41 AM · permalink
FT: Dubai property on red alert
Dubai is the most exposed of the local economies because its local real estate market is supported by foreign investment and because, as an emirate, it has little in the way of natural resources. A home-grown credit squeeze caused by excess lending and insufficient deposit taking has added to the disquiet.
Credit default spreads on Dubai debt, especially real estate linked borrowing, have ballooned as institutions bet that the pace of growth in the property market will not be maintained.
“The stock markets are a barometer of the real estate market - it’s telling you investors are very concerned right now.”
Well, first look at the golden goose that was driving the market - crude oil prices. They are now down 40% from the peak:
Let’s say oil settles down ~ $80 over the next few months. I think that’ll prick the ME/GCC/Dubai real estate & infrastructure bubble, given the huge amount of supply coming online - who’s going to occupy all that RE? Where do the cash flows come from? US/UK financial services companies? I don’t think so.
Let’s see if the skyscraper indicator works this time: Skyscraper indicator, LIBOR signals, Deficits & rupee
Posted by Kaushik on October 07, 2008 02:25 AM · permalink
We believe that the Federal Reserve must now act as a clearing house, guaranteeing that institutional transactions clear (and investors receive) their Big Macs at the second window. They must also take another bold step: outright purchases of commercial paper. They should also cut interest rates to 1%, because we are experiencing asset deflation, and the threat of headline inflation is long past.
- Investors Insight: The International Currency Crisis
Now, not only are those who borrowed Yen and bought EURs, or Aussie dollars, or Russian Rubles, or gold, or equities anywhere around the world, or debt securities of almost any kind, finding that they are losing money on the “cross” itself, they are losing more and vast sums on the investments they made.
Dr. Milton Friedman once said regarding the EUR… in which he tended to have very little confidence…that he doubted it would last through its first real recession. His fears are being put to test today.
. . . for the Euro to survive, either a) it will have to be a structurally weak currency or b) some of the weakest links (i.e.: Portugal? Italy? Greece? Spain?…) may end up being forced out. The path of least resistance is, of course, for the Euro to a structurally weak currency.
- Economic Times: MFs raise load to stop investor exits
Mutual funds are attempting to minimise outflows from their equity funds in the current difficult market scenario via increasing the exit loads on their SIP plans. In the various equity fund schemes of mutual funds, nearly 80-85% of the total equity fund corpus of Rs 1.44-lakh crore is contributed by retail investors.
“We are trying to send a strong signal to investors that SIP investments should be made from the point of view of long-term investments.”
Posted by Kaushik on October 07, 2008 01:58 AM · permalink
Time to buy? Perfect for a short term bounce now? Yes, I see the Indian indices going lower than this; but that doesn't mean it will go straight down.
Two 4% down days, and the last 10 days have seen a fall from 4300 to 3600. It could just be that the index will move up. Yet, I could be horrendously wrong here - today there was simply no turnover in the cash market - just 10K cr. Which means the selling isn't shorting - it's selling. Shorting means a cover will drive prices back -the lack of shorting = nothing to save the index.
A CRR cut and PN reparticipation (Sebi has removed restrictions on PNs) should help the market. Yet, this is not a normal market and will not react normally. So expect anything. I am long at this point - a position I will eventually build as the markets go down further.
Posted by Deepak Shenoy (noreply@blogger.com) on October 06, 2008 02:53 PM · permalink
Despite the 6-7% drop in most indices, the total turnover in the cash segment at the NSE was only Rs 10,367 crores. Moreover, even the F&O turnover dropped to Rs 46,853 crore. Seems like there’s only delivery-based selling, not much day-trading. What’s even strange is that the turnover for RELIANCE alone was Rs 1,025 crore - that’s almost 10% of the CM turnover!
FIIs sold stocks worth Rs 1169 crore (on top of Rs 1660 cr on Friday).
I would like to think that this is a sign that the selling will soon abate. But then again, I went long today - so I’m biased.
Posted by Kaushik on October 06, 2008 02:29 PM · permalink
There is just way too much doom & gloom in the financial markets, so here is a list of things to keep in mind before dumping your entire equity portfolio:
- Equities offer the best long-term inflation-adjusted returns across all asset classes.
- There are times to buy (be greedy) and times to sell (panic). This is not a time to panic, all evidence to the contrary. The time to sell was October 07 - January 08.
- Indian companies aren’t going to suddenly stop revenues or earning profits. There will be sector-specific bumps, but then, there’s cycles in everything.
- Only 3-5% of Indian retail wealth is invested in the stock market. Similarly, a very small % of companies are listed on the stock exchanges. Imagine a time when 20-30% of wealth is in equities, and 10 times as many companies are publicly traded. There will be tons of opportunities to make money via trading & investing over the next several years.
- Things like FDs and gold should be used strategically to hold cash while waiting for great risk/reward opportunities. Switching your assets wholesale to these asset classes for the long-term may not be that great an idea.
- The next few months will offer great opportunities for stock picking. For those with no time or inclination to do so, there is always the index fund route. Either ways, there will be good entry points for both traders as well as investors soon. Keep your gun-powder dry.
- Overhead matters a lot - it is important to cut down on brokerage costs, expense fees, mutual fund loads, unnecessary transactions and taxes. If you pay attention to all of these, you can further boost your returns.
- Ignore what the media says. The media gets paid to get your attention, not to generate absolute returns.
- Ignore what (most) fund managers say - they get paid as a % of AUM, not if they generate absolute returns.
Don’t panic. Be patient. Making money is about 3 things:
- Probabilities - Are the odds in your favor?
- Money management - Do you know your risk?
- Luck - Shit happens.
Posted by Kaushik on October 06, 2008 02:12 PM · permalink
This won't ease liquidity too much - that will only happen with a repo rate cut, and the RBI has to put more money in to be able to sell the bonds and bills they are selling this week.
Posted by Deepak Shenoy (noreply@blogger.com) on October 06, 2008 02:03 PM · permalink
Check out the current status.
I should have had more transactions in there so am feeling a little stupid. But I think it's time for a bounce, and feel the need to book a little profit.
Posted by Deepak Shenoy (noreply@blogger.com) on October 06, 2008 02:00 PM · permalink
Things fall down
people look up
and
when it rains
it pours.Posted by ss (noreply@blogger.com) on October 06, 2008 12:09 PM · permalink
First, what the heck are ODIs: If ODI is not one-day international, what’s it?
ODI or ‘offshore derivative instrument’ includes PNs, but there are more. Such as, equity-linked notes, capped return note, participating return note, investment note and similar instruments issued by FIIs (foreign institutional investors) and their sub-accounts outside India against their underlying investments in listed or proposed to be listed securities (shares, debt or derivative) in India.
. . . entities which otherwise are not eligible to invest, e.g., hedge funds, use the ODI route to invest in the Indian market.
“The value of outstanding ODIs with underlying as derivatives currently stands at Rs 1,17,071 crore, which is approximately 30 per cent of total PNs outstanding. The notional value of outstanding PNs, excluding derivatives as underlying as a percentage of AUC is 34.5 per cent at the end of August 2007.”
Hmm. Not chump change. And quite important in the current context - where hedge funds are liquidating everything in sight to meet redemptions and margin calls.
So, here is what the SEBI decided to do today: SEBI revises P-note norms; lifts 40% cap in ODIs
. . . the restrictions on offshore derivative instruments in will be removed. The 40 per cent cap on ODIs in both cash as well as derivative contracts will be lifted.
I would be surprised if this juices up the market in the near future; but seems good for the longer-term.
Posted by Kaushik on October 06, 2008 11:33 AM · permalink
Posted by iang on October 06, 2008 10:27 AM · permalink
OK, there is enough blood on Dalal Street to warrant a contrarian long position.
Based on a highly scientific combination of modified P/E ratios, oversold indicators, the degree of gloom & doom on CNBC, and my inability to stay away from fire sales, I put on the following long positions today:
- Bought JUNIORBEES at 57
- Bought the Nifty Midcap-50 October future at 1650
- Bought the Nifty-50 October future at 3616
Buyer beware! Now, off to my prayers.
Posted by Kaushik on October 06, 2008 10:11 AM · permalink
The current volatility as indicated by the Average True Range (ATR) of Nifty, looks like peanuts compared to the levels we saw in Jan and Feb this year. Currently, the 20 day ATR (below) is at 156 and the Jan - Feb peak was at 285. Compare this with the 10 day ATR (above). Imagine what's gonna happen if we reach the previous peak - a doubling of volatility from these levels is sure gonna drive people very very crazy. Jesus!
Also read Bill Rempel's post here - Link
Dr Brett's post - Link
Posted by ss (noreply@blogger.com) on October 06, 2008 03:08 AM · permalink
The liquidity crisis in the US and now Europe is beginning to hit the shipping industry, with a $20 billion (Rs93,800 crore) investment plan by Indian shipowners to replace part of their ageing fleet and expand cargo capacity likely to end up being put on hold.
“Indian banks cannot lend money for longer periods. They can lend money only for two-three years, whereas shipping firms typically need money for tenures ranging between eight and 15 years,”
Typically, 20% of the cost of a ship is contributed by owners while the balance is financed with debt.
- Economic Times: Banks going slow on credit card hardsell
Amid fears of default rates going up in the wake of high inflation and global slowdown, banks and card issuers in India are going slow in issuing credit cards. Industry insiders indicate that the annual growth rate in the industry could slip to 20-25% by the end of FY09 from 30-35% being recorded over the last few years.
At present, the default rates for payments is around 7.5-9%, according to a CCMC data. Consumers in India spend an average of Rs 4,000 a month on their cards.
Indians spend just 1% of their total purchases through credit cards, while the world average stands at 9%. There are currently 25 million credit cards in the country of which only 40% is active.
- CFR: Peak petrodollars?
On a quarterly basis, the foreign asset growth of the oil exporters probably peaked in either q2 or q3 2008.
. . . the oil exporters will “break even” (neither adding to their foreign assets or dipping into their external savings) this year if oil is around $70 a barrel. That break even price though has been rising quickly — and it isn’t inconceivable that the break even price might be $75 or $80 a barrel next year (unless some folks with ambitious plans cut back in the big way; with rents up 65% this year in Abu Dhabi there is certainly a bit of froth in the market) and, well, the market price of oil could potentially be lower than that.The UAE has announced a similar $13.5b facility, a facility that is considered to be a “quiet” bailout of Dubai by the much richer sheiks of Abu Dhabi.
Hmm. I wrote about the importance of oil money for real estate & commodity bulls: ME / GCC Realty - Last man standing, or not? Imagine if we see a bust in 09 there.
Posted by Kaushik on October 06, 2008 02:19 AM · permalink
- After Ireland and Greece, Germany guarantees all deposits (translation, bloomberg link)
- Iceland thinking of a $14 billion rescue (which for Iceland is a LOT of money)
- TED Spread at 3.87, which is statistically equivalent to a sudden volcano in Worli, Mumbai.
- Germany also bailing out Hypo, which is a real too-big-to-fail estate company.
- Companies like Charter and Freescale are bailing themselves out buying back their own debt at obscenely low prices.
- Lehman's creditors say JP Morgan was responsible for it going down, by holding back assets. Heck, JPM bought Bear Stearns, which did the same thing to LTCM in 1998 - obviously JPM inherited the attitude.
- Holland nationalises Fortis.
- Wachovia gets rapped for running to Wells Fargo who gave a sweeter deal, over Citi who rescued it. The court says no, you gotta deal with Citi. Wachovia doesn't quite agree.
- Tata Motors bails out of Singur.
Posted by Deepak Shenoy (noreply@blogger.com) on October 05, 2008 06:57 PM · permalink
ACC Futures is in a pull back mode on this weekly chart and will meet resistance around 650-680 zone or maybe a bit earlier as prices are working their way inside a contracting triangle.Posted by ss (noreply@blogger.com) on October 05, 2008 12:18 PM · permalink
Look at where the stock is on Friday:
A drop to 145 is now halfway, in a month and a half. No more insider selling noted after that post, but someone's been pulling the plug. No F&O - so no shorting - so it's investors pulling out.
Posted by Deepak Shenoy (noreply@blogger.com) on October 05, 2008 10:53 AM · permalink
Posted by ss (noreply@blogger.com) on October 05, 2008 09:48 AM · permalink
- Brad Setser, CFR: The worse the US does, the better the dollar does …
The dollar hasn’t fallen along with the US stocks, US Treasury yields or US employment. There is now a broad consensus that the US is currently in a recession, something that might be expected to lead to a fall in the dollar.
A recent research piece from Sophia Drossos and Yilin Nie of Morgan Stanley argues that global deleveraging is a major current source of support for the dollar. Drossos and Nie note that US banks have grown reluctant to lend to banks abroad — and many banks abroad have significant holdings of dollar debt and thus need dollar financing.
. . . the US became the new Japan after the Fed’s rate cuts — despite a large current account deficit. And the US dollar has started to act like a “funding” currency in times of stress. And in general, when risk aversion goes up and risky bets are pulled, funding currencies rally …
- Washington Post: Bad Medicine
When, in 2006, the roof began to fall in, Wall Street was in a quandary. It held outsize volumes of triple-A-rated mortgage-backed securities (MBSs). That they were not, in fact, triple-A, had become painfully obvious. Curious analysts consulted the financial statements of the top mortgage dealers, including Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley, for clarification.
Readers, however, found no clarification and no foreshadowing of the troubles to come. Neither in Bear’s year-end 2006 report (10K, in Securities and Exchange Commission jargon) nor in its March 31, 2007, quarterly filing was there a meaningful word of warning about the sagging prices of the MBSs that did so much to pull Bear down. Those seeking to learn Merrill’s exposure to the mortgage contraptions called collateralized debt obligations, or CDOs, were similarly stymied. Although Merrill was to write off $23 billion worth of CDOs in 2007, the phrase “collateralized debt obligation” did not appear once in its 2006 10K.
- Deal Breaker: Dear Investor
TPG Axon Investor Letter [PDF]
Tontine Investor Letter [PDF]
Cerberus Investor Letter [PDF]
Read the letters. Eye-opening stuff.
Posted by Kaushik on October 05, 2008 05:10 AM · permalink
Posted by ss (noreply@blogger.com) on October 05, 2008 03:12 AM · permalink
I receive a lot of requests seeking my view on specific stocks. If you have been around this blog for some time, you may have noticed that any point of time I have around 10-15 ideas. I typically look at companies and end up rejecting most either as they are out of my circle of competence or there is something wrong fundamentally or the valuation is too high. As a result I may not have an idea of the company being highlighted in the email.
In order to provide a decent response, I have to invest 3-4 hrs of my time to arrive at some conclusion. As investing is not a profession, I cannot devote as much time as I would like to. So I would request you to be patient with my response. Finally time is key constraint for me (I do have a life beyond investing :) ), so my approach is to focus on a few decent companies and not spread myself thin.
I am currently analysing the Annual reports of some of the companies I hold and would then start looking at new companies, preferably in the list which was provided to me in response to an earlier post (I have not forgotten about it).
I assume most of you are aware of RSS. RSS allows you get my posts directly in a feed reader such as google or you can subscribe via email too (don’t worry, I will not spam you). You can subscribe to this blog via ‘subscribe’ option on the sidebar. In addition, I typically update twitter with what I am reading or planning to post. You can follow me via this link.
Posted by Rohit Chauhan (noreply@blogger.com) on October 05, 2008 02:34 AM · permalink
Here is a sectoral comparison of BSE Indices. The January high of each index is compared to its close on Oct 3. The two sectors which show minimum losses are on the extreme right - FMCG and Health Care, while the most screwed up sector is the Real Estate which has dropped a huge 75.9% !Posted by ss (noreply@blogger.com) on October 05, 2008 02:25 AM · permalink
Now NRIs are getting their money over to India as banks here aren't quite as leveraged and are largely safe (at least the public sector fellows). Interestingly while Indian banks don't have an FDIC like structure - the RBI guarantees 100K rupees worth of money in all accounts. But then the government owns a large chunk of banks like SBI, PNB, Syndicate/Canara/Corporation Bank etc. and there might be a depositor cushion there.
If this is the trend going forward, every country is going to want to guarantee it's bank deposits - otherwise capital will move to safety. Either that, or Ireland is going bust.
Posted by Deepak Shenoy (noreply@blogger.com) on October 04, 2008 04:59 PM · permalink
In bear markets, some pockets do offer opportunities to hide your money - FMCG and Health Care sectors can be good examples. Here we see the weekly charts of Hindustan Unilever (above) and Lupin (below). These two stocks are compared with Nifty as on January 1, 2008 and you can see that the relative strength for both is rising. Just a quick comparison - Nifty dropped 37.8 %, while HUL gained 17.4 % during Jan - Oct this year. Just another example of "buy strength". Cool, eh ?
Posted by ss (noreply@blogger.com) on October 04, 2008 11:05 AM · permalink
How to screw a machine capable of analyzing a zillion permu-combi of moves per second ? Yeah ! Garry, you did it man ! This is a game from the Man vs Machine 2003 World Championship.
Posted by ss (noreply@blogger.com) on October 04, 2008 04:04 AM · permalink
The dance of death gathers momentum as Reliance Futures (above) closes way below its July low and makes a series of classic lower lows and lower highs (blue spots) on this weekly chart. Now, it is only a feeble hope that 3750 holds on Nifty Futures (below) as a break of this level will open the gates below. This week I was hoping to get a pullback to 4100 but all we could manage was 4016. Personally I feel that the support 3750 will not hold and we are going to see much lower levels. There is going to be a complete shake out.
Posted by ss (noreply@blogger.com) on October 04, 2008 03:55 AM · permalink