Markets -The Road Ahead

1. Reclassify steel as an essential item. Withdraw export benefits, DEPW out. Appoint a steel regulator.
How far Minister Paswan's suggestions to the PM would take effect isn't the point.
The point is that socialist-type control of a free market priced commodity comes when a Government fears it's losing control. Or that it never did have any control on steel prices and now wants to. Or that the "mood" amongst steel bureaucrats is also bad, just like the mood amongst India's stock market players (All know that politicians have no clue about market economics. It's the educated bureaucrat that manipulates what he wants through the politician currently on hold). When the mood sours, everybody wants to exert "control" on something they blame as the reason for the stock market's crash !
At the bottom of this "suggestion" by Mister Paswan is another sign of the "social mood".
Not good. Not good at all. Steel shares will get the stick from today onwards.

2. "..Price stability...Will monitor inflation developments carefully..."
Those words in their statement were enough for bond street to conclude that the Fed would stop these cuts, and hike one day too. Inflation is a real headache, and now that they've thrown enough coins at the begging banks and investment
banks, which had no effect anyway, it's time for the Fed to focus on what they were appointed to this job for: Inflation management. That day might be far, but will come sooner than expected. The dollar rose from 1.5844 last Monday to close on Thursday at 1.5436 and is 1.5362 this morning.
It's rising. Yes it is. All that talk of the dollar-will-die-anddie had reached a crescendo only after the stock market crash of 18th Jan. But all that end-of-theworld talk was without a historical background to what happens when something
goes too much in one direction.

Gold fell badly. From the peak at $1033 last Monday to $920 on Thursday and $914 right now. Or in our languae, from Rs.13.397 last Monday to Rs.12.048 on Wednesday. This $914 rate is the lowest since June 2006!
Silver fell even more. From $21.24 to $16.77. Or, Rs.27.500 became Rs.22.276.
Every other commodity fell badly.
Be ready for the dollar to rise even more in the weeks ahead, and commodities to collapse.
And short them.

3. Leveraging. Credit derivatives. F&O punting. Borrowing way beyondone's ability to repay.
It was the same story in gold and silver till last week. In crude, copper, aluminium, nickel, zinc and natural gas too. It's been the same story for hundreds of years where mass participation does the same thing year after year. Boom-Frenzy-Leveraged hysteria-Excessive optimism-Inexplicable crash-Total collapse of leverage-Credit withdraws easy
funding-Denial based buying at lower levels-Total crash-Disgust-Revulsion and so on.

4. OECD: The US economy will fail to grow for the first time in six years.
Sideways, but not contracting.
Another statistician's nail in the co....

5. An auto show is going on in the US right now. An aircraft show also is on.
Auto managers say the fuel price hike in the US would hit their sales like never before this year.
Aircraft manufacturers like Boeing and Airbus think passenger traffic would totally collapse in the US this year. And that that would see the worst ever slowdown in aircraft orders in ten years.
See Saturday's Business Line for more on this dismal picture from two of the largest industries in the world.

6. Inflation rose "unexpectedly" last Friday to a ten month high at 5.92%.
What's so unexpected when the rupee dies from 39.40 to 40.57 and oil imports rose when crude rose from the $98 levels to $110?
Bond yields will die this week because of that inflation thing. And also because of the recovering dollar. And also because of the year-end demand for call money by banks. And because of...
Which ordinary consumer doesn't know that everything costs more this year than the last?
But the social mood worsens when the inflation number is announced officially.

7. Kotak, Indiainfoline, Motilal, Religare, ILFS, ICICI and who else are the
big chaps who're in stock broking?

Who else lent huge monies in F&O and for deliveries to their super-leveraged clients? Who else were earning oodles last
year from broking incomes?
Be sure all these brokers, and that last-mentioned who's really a bank, face the brunt of the bad-bad-bad mood of stock players. Each of these shares will continue getting beaten this year.

8. Sunday's Business Line: MFs selling to pay up for redemptions.
Mutual Funds selling stocks? Aren't they the ones who put thier hand on their mothers' hearts and say they love buying low and selling high? Why're they selling at these dirct cheap rates then?
Answer: Fund manager's job is at stake. Bonus is at stake.

9. Did any housing company advertise in newspapers last year?

Especially in expensive-colour on the first page of nationally circulated most-expensive newspapers?
So who's showing their desperation now?
Buyer or seller?
When buyers disappear, seller goes to knees. Seller desperate.
Banker now hounding seller. Seller missing. Dear Seller of expensive flats and condos,
Please return immediately. Mother unwell. Father too. Mother-in-law and Sisterin- law as well.
All will be forgiven on your return. Yours lovingly,
Banker.

Existing risks:
>Credit-inflation funded by petrodollars and cheap-interest money
>Housing loan defaults in the US
>Credit card default in the US
>Sub-prime blowups of banks, brokerages and investment banks in the US
>Personal-spend dropping in the US
>Consumer confidence in the US falls to a five year low
>US home sales fell to their lowest in nine years
>The S&P Case/Shiller Home Price index at 20-year low
>Construction loan problems for banks in the US and India.

Trends
NIFTY trends
TODAY : A rally of sorts
Use it to build more short positions in the Nifty and Bank Nifty
WEEKLY : BEARISH
MONTHLY : BEARISH
For 7-15 days :
>Short the Bank Nifty
>Short the Nifty