Markets For 25-02-2008

The ERA Snapshot
Serious negative risks to watch out for:
>Credit-inflation in the US spread to rest of the world after oil rose from the $28
levels, post-Iraq invasion on 20th March, 2003. At $97 now, oil's profits for
producing countries has been the single biggest source of this credit-inflation.
Petrodollars have flooded every asset, thanks to the higher risk-taking stances
taken by receipients of those petrodllars: Hedge Funds, Private Equity
and Central bankers in new-profit-making-booming emerging countries led by
China and India,
>Housing loan default in the US
>Housing loan delinquencies in India
>Malls being converted into office space
>2-Wheeler borrowing-delinquencies here
>Credit card default in the US
>More sub-prime blowups in the US
>Personal-spend dropping in the US
>There is noise about DLF having dropped prices for their newest residential
venture in Gurgaon. If this is true, and Unitech's accountants say it is, then the
first big blow-up is coming in a sector in India..land and construction companies.
>Bank of Punjab thought they could milk money from retail. They lent to
every milkman and newspaper boy to buy 2-wheelers. Centurion Bank thought
they could do the same thing and make lots of money. They even bought Lord
Krishna Bank, and nobody has a clue why. That was then. But the RBI has ways
of telling a nearly-blownup-bank to stop the drama and hand themselves over to
someone else who can recover those bad loans. They got that done when
Centurion were made to merge Bank of Punjab with themselves.
But now, the wheel has come a full circle.
The RBI has now told HDFC Bank to do the needful, ofcourse at a cheap cost.
Either you see this truth or go believing all that horse manure that the pink
newspapers lied and lied about for the past four years about India Shining and
shining.
It's now shining where the sun cannot shine from.
Which next bank will you hear about getting "merged" into?
>Land and building prices slated for a drop: An FII has done some sort of
walk-the-street research in Bangalore city.
They say now that around one lakh apartments under various stages of
construction HAVE NO BUYERS ! One full lakh of them !
The Hindu newspaper too reported this last week, if you want a credible source
about that.
Which means that Bangalore's flat and apartment prices will soon implode, if they
haven't already.
Ca you see the "mood of the public" here?
Can you see why sellers are getting desperate there in Bangalore?
Can you see where land and construction company share prices are heading
for in the months ahead?
Issues
1.Fact
...Dollar at three-week low on euro at 1.4829
...Forget that, it's also at a 2.5 year low since November 2005: 1.18 to 1.48 now.
Apparent reasons on TV channels, internet and print media
...That the Fed will cut rates again on 18th March because of definitive fears from
economic statistics which say the US is already in a recession. When the Fed
cuts, yields on US bonds fall further, and investors in bonds take their money out
from the US, and short the dollar on the way out.
...Since monies are flowing out of the US, most part of that is going to the second
strongest currency of the world, the euro. And so the euro rises on the dollar,
while the dollar continues falling
Our view on the above
...The dollar's fall may continue for some more weeks. And after that one should
expect a consolidation of sorts before it starts a surprising rise.
...A finally-rising dollar will see monies leave the rest of the world and shift more
to the US. To the dollar. Which means the rupee will weaken even more in the
weeks and months ahead.
...The rupee is slated for weakness anyway because stock market monies have
already been leaving India and shorting the rupee on the way out, since the 18th
January crash. No surprise that a weak rupee is good for exporters like Satyam
and their bretheren.
...Whether the Indian Government would be unhappy with a steadily weakening
rupee? Even if they hate it, since the cost of importing the largest commodity, oil,
keeps rising and thus fuels inflation here in the weeks ahead, the feel-bad or feelgood
factor of politicians is something the market doesn't give a - - - - about.
Fact: Weaker rupee ahead.
2. Fact
...Gold at historic high...$950.80 this morning, though down from a trading high
yesterday at $958.40
Apparent reasons
...Hedge Funds taking long positions in gold after evacuating cash parked in
stocks, land, paintings, and other speculative things
...Gold is theoritically the only best hedge against inflation. And inflation will rise
more this year because of booming commodity prices and falling interest rates in
the US, to be followed by all other pups-for-country-central-bankers this year.
Our view on the above
...Too much of a good thing doesn't last.
...You know what happened to all that screaming and shouting about stocks
being THE place to park your money. And when the middling classes of the world
did that on the advice of Wall Street, Dalal Street and other such puntingstreets...
you know how they went euphoric till December 2007...and now this
awful awful mess of innards and organs strewn on the pavements !
...Gold will also hit a top, we don't know how much and when. But that it will, is a
cinch.
...Expect this commodity too to turnaround in the weeks and months ahead. So
don't get too euphoric about buying more gold at these crazy prices and in the
middle of this super uptrend of its zillion-year lifetime. Get ready to close your
existing longs when your reversal stop gets taken. And then to short it too.
Not yet. Wait some more for the rises to stop, and then turnaround significantly in
price.
>The Dow shot up +230 points in the fag end of Friday after the Comedy
Channel out there said some duds-for-banks were going to fund Ambac, the
dying bond insurer, a sum of $3 billion. Ofcourse, all know that this $3 billion can
be wished goodbye by those banks. Ambac is on its last leg, after all that stupid
dud subprime paper that it insured all these years for profitable premia. Time to
pay your dues.
The Far East is up on that sentiment.
Wrong reason, but "sentiment" of the public has turned up a tad.
It won't last long, we know that. But for now, the mood's up.
Expect an up-day of sorts for the Nifty here today.
>If and when the price of RPower drops for any other reasons, will Anil Ambani
issue yet another bonus? Or a cheap rights issue? How long will his obsession
with the share price last?
Can you see how badly his credit-worthiness and credit-reputation has been
hit after the RPower listing? Can you see how he's doing ANYTHING, most
desperate at that, to mollify you and the FIIs and Hedge Funds?
Isn't this a desperation that has no steam?
Just the kind of stupid things promoters will do in future in the upcoming bear
market.
The Mood
>A little hope for this week and the next. All expect very little from the Budget,
and so anything that's good will bring back buyers.
What to expect today, this week, and going forward
Today:
>An up-trade day
In the rest of Feb, this week:
>Rally still awaited
From March onwards after the Budget:
>The post-Budget rally MAY last more days than we assume.
But to short at the peak after that is a certainity.
Day trades ...Only with TIGHT stops...DO NOT c/o>Buy the Nifty to close at the end of day.