May 20^th 2012 : THE BLACK SWAN IS FLYING TOWARDS  SPAIN.

 Black Swan Event : As per the definition of Investopedia, “ An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. “

It goes on to add : “ For example, the previously successful hedge fund Long Term Capital Management (LTCM) was driven into the ground as a result of the ripple effect caused by the Russian government's debt default. The Russian government's default represents a black swan event because none of LTCM's computer models could have predicted this event and its subsequent effects”.

The other day , I was amused to read an article by Sanju Verma ,the MD and CEO of a well known Institutional Brokerage where she is betting on a Black Swan Event to happen in India  which would take the Nifty to 7000.  She bases her optimism on our PM suddenly taking decisions on FDI ,Insurance , Aviation etc and surprise surprise , Mamata Banerjee calling for reinstating Dinesh Trivedi as the Railway Minister.

I first thought it was written in sarcasm , but sadly I was wrong . Sanju was very vehement in believing this scenario would actually play out, the primary reason being that NO ONE was expecting it !!!!.

Whether Sanju Verma’s predictions come true or not, I think we should all be more concerned about what’s happening in Europe. As Uday Kotak once remarked , the Indian Capital market dances more to the European tune rather than that of the US or Asia. Kotak should know , since he is one of the shrewdest judge of global capital flows.

So what should be worried of in Europe ??? Greece ???. The whole world is fixated on whether Greece would quit the Euro and the subsequent chaos which is likely to prevail .

My understanding of the situation is that the whole world is concentrating on the wrong country .

It reminds me of the Ram Janmabhoomi movement . Advani was leading the Rath Yatra which started at Somanath and was supposed to culminate at Ayodhya. The then Narasimha Rao government was goaded into taking some action to stop the Rath Yatra before entering Ayodhya and it was universally felt that the Mulayam Singh Government ruling UP would definitely stop it at the borders of the state .

There was thus huge media frenzy as to how the events would unfold in UP and the undivided attention of the whole nation was concentrated on the probable actions of Mulayam Singh Yadav and the UP Government’s security arrangements.

But , THE BLACK SWAN appeared in BIHAR !!!!.

Just when the Rath Yatra entered Bihar , enroute to UP , the Rath Yatra was stopped and disbanded !!!!!.

It was Laloo who saved the blushes for the Central and the state government of UP . So he was truly the BLACK SWAN , because this was totally unexpected .

Cutting back to the present situation , even a  casual observer of the events in Europe , would be alarmed at the way Spain is undergoing its share of pain . Unemployment is extremely high ( 50 % of people under 25 are without a job ) , Banks are failing , Interest rates are shooting up .

Spain is a much much bigger economy than Greece , yet the whole world seems to be obsessed with Greece.

And with elections to be held in Greece once again on June 17^th , there is a “cooling off” period since there is no effective Government there and there would be a policy holiday till then .

But one month is too long a time in the current global turmoil and this one month is likely to be devastating for Spain and the rest of the world if something is not done ……………..immediately .

THE BLACK SWAN IS HERE, but no one seems to be noticing it .

17th March 2012

   The 2012 Budget : The Devil is in the Details.

 In the days leading to the Budget, the expectations were divided . While the diehard optimists predicted that this would be a Path Breaking one since the Congress had nothing more to lose ….. they were losing Elections, Supreme Court Judgements, Special Court Judgements, Allies etc etc.,the pessimists pointed out the very same reasons for the Budget to be a populist one .

But it seems that neither the optimists or the pessimists were prepared for the Devil hidden in the details.

 Even as the Budget speech was on, while the Financial Sector Heads were praising the budget, based on the Fiscal Deficit Nos., the Industry Captains were uniform in complaining about the sops which did not materialise for their section of the industry.

So , it seemed at the end of it all it was a 50:50 case.

That’s until around 2 pm , when some eagle eyed Auditors decided to look into the explanatory notes and then they found, not one, but many smoking guns, which could blow up in the faces of all the stakeholders .

Chief among them was the amendment of the IT Laws with retrospective effect, which would directly affect the mood of the Foreign Investors ( Vodafone case). This was not the only one.

As an eminent commentator pointed out, there were at least 17 such amendments, with retrospective clauses.

 There was also confusion regarding the tax free status of Infrastructure Bonds and whether the Rajiv Gandhi Equity Investment Scheme was applicable to Equity Mutual Fund Units.

The Govt. on its part came with its guns blazing and has stoutly defended the measures in the Budget , including the controversial ones. The Govt. is in no mood to listen.

This despite, the tide of popular opinion turning from mildly positive to downright negative .

While the markets sold off in the latter half of the day on Friday , the real test would come on Monday.

If the markets are in a forgiving mood , then it may be a good idea to buy the Blue Chips.

If they are in a punishing mood ( Sensex dropping more than 200 points at the end of the day ) , then we are in for a real tough summer .

Stay out and Book Profits wherever you can .

Whatever you do , hope you have a profitable time.

September 2011

Everyone and their aunt is now talking of investing in GOLD .

I have been observing the movement of the precious metals for quite sometime now and am getting the queasy feeling that a dramatic sell off in GOLD  is around the corner.

I had the same feeling when Silver was on fire in April of this year . I was so confident that I wrote a piece on that metal when it was trading at around Rs. 72,500 in the local market and around $ 49 in the US market ( the write up is at the end of this article ).

Silver topped out in the following week and nose dived all  the way to Rs. 52,000 per kg /$ 32 over the next few weeks.

Coming back to Gold , the last one week has seen wild swings in the price of Gold .

On Friday,  it climbed an incredible $58 in the US to close at $1887 , just below the all time high of $ 1912 achieved a fortnight ago.

The price in India is around  Rs. 28,000 per 10 gram.

The public is in a frenzy because of the huge anticipated demand of the upcoming wedding season .

However , I have my own doubts.

If you don't VERTIGO by looking at the chart below , please go ahead and INVEST.

But , I would rather SELL than Buy .

Whatever you do , hope its profitable .