Everyone thought Swine Flu is history, or atleast not as threatening as it appeared to be initially. However, they are back, and this time in the form of PIIGS – Portugal, Italy, Ireland, Greece, Spain. They had the world markets go bollocks for the whole of last week, and the danger looms large even now.
Well, to me, it was no new news. Everyone knows that more than half of the Europe, and almost all of US riches are a giant Ponzi scheme, and the end payers are the unsuspecting tax-payers in China and India. None of those economies actually produce enough to feed themselves (this includes all the goods, not just food), and end up spending more than what they earn. Its not just the government which is at fault, but more so the common man on the street. The toughest task Obama has is to tell the Americans that their lifestyle needs to change, and they need to work harder. Till now, he has failed miserably there – and instead tried passing up more perks in the form of Health Bill.
Back to Europe, here the task is much more tougher as they do not run the USD printing press. These nations would ‘NEED’ to get back their deficits back down to respectable levels, and how they would do it (apart from some accounting jugglery) is not clear. Geo-political tensions would certainly rise in 2010, and we may have one of the hottest years in recent times (another fact that 2009 indeed was the hottest year in India even weather-wise). Google has been boo-ed out of China, and Toyota and Honda might face similar back-lash from the public (with government support) in US. China controls the triggers to the world relations now – in form of its huge UST reserves. Sooner or later they would start converting them into other hard assets (commodities), equity stakes (in foreign companies) or some other currency.
I do not think 2010 would be a very calm year in any of the markets, and there would be storms. We wouldn’t see smooth up-moves in the markets like 2009, and there could be periods of high volatility. There is high unemployment in the world, coupled with high inflation and free money. Sometime down the line, something would give away – this state can’t continue for long. Its a waiting game from here on, and I would rather be on the right side of the gamma.
In India, markets after trading around 5200 for more than 3 months finally broke on the downside. The RBI raised CRR by 75 bps, and signaled its intension to drive down inflation (raise rates). At least, they would not be increasing the stimulus for sure – so its only downhill from here. Same is the case in China, and it too is on a tightening path. Think this would bring the earnings down – from their record numbers last quarter. The worst affected may be Auto sector – this sector has seen phenomenon rise in volumes, and almost all the stocks are trading at their life-time highs. And whatever Livermore has to say about it, its very difficult mentally to buy the stocks at their lifetime highs – more so now as these are caused by fund flows and teaser rates. Real Estate seems to be the paradox to me here – the property rates and volume are also close their highs, whereas the stocks have been beaten down out of their lives. Either the rates would come down (and the volumes being reported are incorrect), or the stocks would move up. Banking seems to have corrected substantially after the RBI meet, and I would be over-weight on the same – lending is happening at a great pace, and the NPAs (which are a worry) would hit us with a lag. In the coming quarter, the results would show increased lending activities only (albeit at lower margins). One interesting sector I have added recently is cements, and would be posting on it next time – seems to be a relatively simple sector, with classic Economic and demand-supply factors at play.
I’m not quite clear now on the direction of the markets, and think there is a decent chance of either way movement. This is as good as saying something is either right or wrong, but that is the way I feel now. The only trade I can think of is buying OTM options (or rather strangles), but then, very rarely people make money that way. So, would give the markets a pass for this week, and wait for more clarity from here. The next action point locally is the budget – and as usual it would be a pro-people budget. STT might be the wild-card, and if abolished/reduced, could lead to another pop-up.
Food for Thought: Jesse Livermore is one of the most respected trader ever, and he has set down a few rules for trading. His fictional life story is a bible for all those who want to understand trading in a very informal way. Some of his most quoted sayings are as follows:
Well, to me, it was no new news. Everyone knows that more than half of the Europe, and almost all of US riches are a giant Ponzi scheme, and the end payers are the unsuspecting tax-payers in China and India. None of those economies actually produce enough to feed themselves (this includes all the goods, not just food), and end up spending more than what they earn. Its not just the government which is at fault, but more so the common man on the street. The toughest task Obama has is to tell the Americans that their lifestyle needs to change, and they need to work harder. Till now, he has failed miserably there – and instead tried passing up more perks in the form of Health Bill.
Back to Europe, here the task is much more tougher as they do not run the USD printing press. These nations would ‘NEED’ to get back their deficits back down to respectable levels, and how they would do it (apart from some accounting jugglery) is not clear. Geo-political tensions would certainly rise in 2010, and we may have one of the hottest years in recent times (another fact that 2009 indeed was the hottest year in India even weather-wise). Google has been boo-ed out of China, and Toyota and Honda might face similar back-lash from the public (with government support) in US. China controls the triggers to the world relations now – in form of its huge UST reserves. Sooner or later they would start converting them into other hard assets (commodities), equity stakes (in foreign companies) or some other currency.
I do not think 2010 would be a very calm year in any of the markets, and there would be storms. We wouldn’t see smooth up-moves in the markets like 2009, and there could be periods of high volatility. There is high unemployment in the world, coupled with high inflation and free money. Sometime down the line, something would give away – this state can’t continue for long. Its a waiting game from here on, and I would rather be on the right side of the gamma.
In India, markets after trading around 5200 for more than 3 months finally broke on the downside. The RBI raised CRR by 75 bps, and signaled its intension to drive down inflation (raise rates). At least, they would not be increasing the stimulus for sure – so its only downhill from here. Same is the case in China, and it too is on a tightening path. Think this would bring the earnings down – from their record numbers last quarter. The worst affected may be Auto sector – this sector has seen phenomenon rise in volumes, and almost all the stocks are trading at their life-time highs. And whatever Livermore has to say about it, its very difficult mentally to buy the stocks at their lifetime highs – more so now as these are caused by fund flows and teaser rates. Real Estate seems to be the paradox to me here – the property rates and volume are also close their highs, whereas the stocks have been beaten down out of their lives. Either the rates would come down (and the volumes being reported are incorrect), or the stocks would move up. Banking seems to have corrected substantially after the RBI meet, and I would be over-weight on the same – lending is happening at a great pace, and the NPAs (which are a worry) would hit us with a lag. In the coming quarter, the results would show increased lending activities only (albeit at lower margins). One interesting sector I have added recently is cements, and would be posting on it next time – seems to be a relatively simple sector, with classic Economic and demand-supply factors at play.
I’m not quite clear now on the direction of the markets, and think there is a decent chance of either way movement. This is as good as saying something is either right or wrong, but that is the way I feel now. The only trade I can think of is buying OTM options (or rather strangles), but then, very rarely people make money that way. So, would give the markets a pass for this week, and wait for more clarity from here. The next action point locally is the budget – and as usual it would be a pro-people budget. STT might be the wild-card, and if abolished/reduced, could lead to another pop-up.
Food for Thought: Jesse Livermore is one of the most respected trader ever, and he has set down a few rules for trading. His fictional life story is a bible for all those who want to understand trading in a very informal way. Some of his most quoted sayings are as follows:
"There is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again."Trading Rules:
- Buy rising stocks and sell falling stocks.
- Do not trade every day of every year. Trade only when the market is clearly bullish or bearish. Trade in the direction of the general market. If it's rising you should be long, if it's falling you should be short.
- Co-ordinate your trading activity with pivot points.
- Only enter a trade after the action of the market confirms your opinion and then enter promptly.
- Continue with trades that show you a profit, end trades that show a loss.
- End trades when it is clear that the trend you are profiting from is over.
- In any sector, trade the leading stock - the one showing the strongest trend.
- Never average losses by, for example, buying more of a stock that has fallen.
- Never meet a margin call - get out of the trade.
- Go long when stocks reach a new high. Sell short when they reach a new low.
- Don't become an involuntary investor by holding onto stocks whose price has fallen.
- A stock is never too high to buy and never too low to short.
- Markets are never wrong - opinions often are.
- The highest profits are made in trades that show a profit right from the start.
- No trading rules will deliver a profit 100 percent of the time.
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