Disturbing News - A Day of Reckoning

to all Boarders,

Following very disturbing news have emerged today which every one of the boarder should know.

It is reported in Bloomberg that according to the Oppenheimer & Co. analyst Meredith Whitney (who correctly predicted massive losses at Citicorp that engineered the crisis in the stock market)

- MERRIL LYNCH might report additional loss of US$ 6 Billions (against US$ 2 Billion expected) due to further deterioration of CDO market value)

- UBS may also write down additional US$ 11 Billions

- CITIGROUP may write down further US$ 13 Billions

To cap it all, British Prime Minister , George Brown, has exhorted European Central Bank (ECB) to come out with exact exposure of European Banks in respect of Sub Prime related loans, CDO (Collateralized Debt Obligations) and CDS (Credit Default Swap).

This is extremely serious request. When FED pumped in US$ 64 Billion earlier, ECB flooded the market with over US$ 900 Billions of liquidity.

This means that losses at European Banks far exceed that of USA. When they start reporting, there could be havoc

Still left out in the rut are Japanese Banks who are also used to play derivatives. Nothing is known about them, but it is quite likely that due to prevailing low interest rates in Japan, the Japanese banks would have been enticed by CDO/CDS market. Their losses are not estimated by anyone.

There is no evidence in sight that FED will buy back the Sub-Prime loans. Even if they do, the problem is not resolved. The real problem is not the Sub-Prime loans for which there is tangible security to primary lenders, but the multiple derivatives which rely on CDO. When the primary lenders assume the security in foreclosure, all other derivatives could have ZERO valuation.

These derivatives are nothing but the parallel money created by the banks in the form of CDO and CDS. The losses could reach trillions when everyone's skeleton is known.

There is also Senate enquiry into the JP Morgan chase/Bear Stearns deal as to why did the FED allow it against all established norms. If Citigroup Inc. reaches the crisis point soon, there will be more cry to help them out, in the same manner the JPMC saved BS (in my opinion it was FED who saved JPMC and not JPMC saved BS)

A Day of Reckoning is coming soon. Since the FED did not come out with the Bond Buying Back plan, I sold my entire inventory, including very good stocks like HPCL with a view to buying back later after the major storm passes away.

We are in Category 6 Super storm. God save America and the entire world! It is high time International Monetary Fund (IMF) come out with some rescue plan.

Kalidas, Hong Kong
Ref: 08089 of 27-03-2008

for Radhika,

there are always two sides of the coil.Depends which side face you.

Markets generally does not go up or down in straight line. in up market, 2 steps up and one down; in down market 2 steps down and 1 step up.

There is always someone who takes opposite view, generally traders. They buy on dip and sell in rally, but when they find no buyers, same thing happens when BSE dropped 3000 points in 2 days and did not find any buyers. There was free fall of almost all scrips.

This is why it is said that 'there is always sucker's rally' - this is what we are witnessing.

Kalidas, Hong kong
27-03-08

Reply to Airan on (12-Apr-08 15:11 )

Point 1
No bank in India is going to go under. SBI is too big to fall and ICICI Bank is also equally big. Yes, their share prices may suffer a lot depending on their exposure, but failure - it is ruled out.

Point 2
SENSEX will go down to lot of FII selling because they will find home market more attractive than emerging market. Only excess money comes to emerging market like India after home market is found saturated. SENSEX will go down due to weaker global market scenario - India is not immune to global shock

Point 3
I do not read much in last two weeks' recovery. The stocks are also way down than their peak, and some bounce is more like 'dead cat's bounce'

Point 4
There is nothing Government of India or SEBI can do in the event of turmoil Government has to care more about rising food prices which may cause rioting if attention is not paid. Fortunately, monsoon around corner and if it is satisfactory, food prices may come down later in 2 months. The situation will be serious if Rain GOD - Indra does not show kindness to India

Point 5
There is nothing SEBI can do. It is a regulator, not policy maker. When the money was coming in, they tried to stop it by framing regulations relating to PNote. Now, that the money wants to see the exit, SEBI can not come in the way. They will know how stupid they were when they put impediments and barriers to FII money coming in, only to let the rupee depreciate. Now, they want to arrest inflation, so they want stronger rupee, so they need more dollars coming in, and that will not come in, but will go out. SEBI is not imaginative and they lack experience how to deal with seemingly difficult situation when they are not.SEBI chief has to stand before mirror and say - you stupid! what the hell did you do?

Point 6
This is not correction - this is a worst ever crash, even bigger in scale than one seen in 1930s. This is century's worst crisis and will take a long time. Not months, but at least 3 years will see the market gyrating from one extreme to another. The money has just disappeared.

At the moment, we have to presume that stock market will be dead or nearly on death bed for minimum 3 years, unless some miracle happens. There is one chance, but I will not disclose it now. You better focus on something more tangible to make more money.

Kalidas, Hong kong
12-04-2008 Ref: 09-013R

Reply to BUFFET777 on (12-Apr-08 21:45 )

If G7 could do anything, this crisis would have resulted at all

IMF and World Bank depends on member country's contribution. In any case they do not or can not have trillion of dollars

Try you luck for SENSEX 21,000 by 1Q 2009. It is good to be optimistic as pregmatist, not sentimentalist. Market may drop to 6000 level by Q1 2009. We are talking bout massive and unprecedented crash since 1930.

Kalidas, Hong Kong
13-4-2008

for Dilip54

Yes,the property market will correct in Mumbai and also elsewhere. The only real estate price that will go up is 'Farm Land' or 'Agricultural Land or Plantations.

When the food grain prices rise, the farmers' income also rises. The very first thing a farmer buys is Farm, followed by Gold. He hardly keeps cash - poor as he serving from hand to mouth.

Specualtive bubble in Mumbai will burst. Only high flying property will correct drastically. Other property might see some correction by 10% to 20% - but not more. Also, property prices are also location conscious. If one holds the property in remote location, then the prices will drop more there.

Two factors are operating against Mumbai property:
1. Falling stock market which may initiate margin calls.
2. Rising interest rates.

Indian properties can not be equated with US properties. In India, there is heavy demand for property due to continuous migration of workforce from villages and small towns to big cities like Mumbai, New Delhi, Chennai and Bangalore. Citywise and weatherwise Bangalore is best followed by Pune and Gandhinagar in Gujarat. These locations will see rising demand. Gandhinagar, though away from main city Ahmedabad, is so green, and bungalows so beautiful with aesthetic appeal that this is perhaps best location from 5 years perspective. Further, it is also a Capital of the state, so the safety, power supply and water supply is more than adequate. An international airport is also developing very fast. I saw that city and fell in love at first sight.

Rental value in Mumbai will rise, though the property prices may fall. When the people can not or do not want to buy, they rent it out. Current rentals are not fully priced out compared to capital value.

I do not like Mumbai property - which looks more like Tihar Jail. Even in good buildings, the owners build grills all around the apartment lest some one creeps in. It is so unsafe that in the event of fire, there is no escape route. In any other country, the Fire Brigade will simply pull down these structures.

Kalidas, Hong Kong
13-04-2008

Reply to Zapata on (13-Apr-08 16:26 )

There is absolutely no difference in what you quoted me and what you mentioned thereunder:

Firstly, I was borne in Bombay and lived for 36 years. I have seen entire Bombay(Mumbai) from Navi Mumbai to Borivali. I also have very large family of 23 people who are also scattered over the length and breadth of Mumbai. I also possess several properties which are also rented from Ghatkopar to Navi Mumbai to Borivali.

You quoted me 'Speculative bubble in Mumbai will burst. Only high flying property will correct drastically. Other property might see some correction by 10% to 20% - but not more.'

You then commented: ...Property prices have already started falling and reduction in some cases has been as much as 10%....You went further ....Large plot or re-development deals are breaking down rapidly even in PRIME areas such as the Bandra-Kurla complex. Hence the prices of plots are expected to reduce substantially in the next 1 year and property prices will reduce ATLEAST 30% from their peaks. I am taking mainly about the suburban belt from Bandra to Borivali.

Now I ask you ...where is the disagreement? I did mention that high flying property will correct drastically but other properties might see correction of 10% to 20%.

Further you are counting on speculative land prices and very high end properties, whereas my emphasis was on fully built up property (Apartments) where 98% of people live. I have taken proper sample - your sampling focuses on just 2% of population

SECONDLY:
You quoted me : 'Rental value in Mumbai will rise ....Current rentals are not fully priced out compared to capital value' to which you went on giving example of rental value from Rs 70,000 to Rs 500,000 per month to even Rs 10 Lakhs per month for bungalow.

You gave only flat, not comparative figure whether rentals are falling or rising. If a place where rental is Rs 70,000 now, what is the new rental - more or less - you did not mention.

Again, you have taken samples of rich people's segment. How many people do you think pay Rs 500,000 to Rs 10 lakhs per month rent? Mostly they are corporate clients or consulate staff. for your information, I have handled large property deals on rental basis where the tenant used to pay non-interest bearing deposits of nearly 12 months + low rentals so that overall yield is much more acceptable. I handled deals over Rs 4 crores. Do not be under impression that I do not know anything about Mumbai property.

I was borne in Ghatkopar, where 1/6th of entire Mumbai population live. I wandered every street of Ghatkopar to several central suburbs, so I know how the people build the grills. The place where I lived in Ghatkopar, in 300 buildings and 8000 apartments, almost 95% have grills. Do you call it a small sample?

Grills are not prerogatives of the owner - they must conform to Fire department's regulations. Supposing there is a fire, and a child is trapped, how fire department will enter the apartment to save the child from raging inferno?

And, my comments in the article, in reply to someone's specific enquiry was pretty harmless.

And how Hong Kong came into play? Are you jealous that we are in Hong Kong? Do you know what it takes to become a citizen of Hong Kong where the property market is one of the best and vibrant in the world? We know the latest properties. Don't talk nonsense.

And where Chinese people came into picture - it was not subject of discussion at all. If you hate Chinese, keep the hatred with you. You can not compare a Chinese in small village with that of one in Mumbai. Compare him with a farmer in Vidarbha where over 5000 committed suicide - no such event in China.

Am I acting like God or you are acting like a demon.

I would have loved your feedback based on reason, but your reply post was full of hatred, venom, misquotes, jealousy and misbehavior. This forum is not for you - so back off.

Kalidas, Hong Kong
14-4-2008 Ref: 09-014R

for shia,

Canadian Mint coins with 9999 purity looks okay to me, so also the gold with 9995 purity. Baglaore prices may be higher due to higher transportation cost from Mumbai and related insurance. For Gold, Mumbai could be cheapest center. Other cities may have higher price by 1% to 2% due to such expenses. It is okay to buy at other centers if you are located there.

Kalidas, Hong Kong
14/4/2008

Reply to wbuffett001 on (14-Apr-08 14:12 )

I really did not want to reply to your post, which is 'Bogus, highly manipulative, full of contradictions, concocted numbers, exaggerated claims, and displays your complete ignorance about the difference between millions and billions, composition of true market caps (which is public float) and lack of knowledge with regard to what is savings, investments, borrowings, mutual funds investment, per capita income of India, disposable income per capita of Indians etc.

I understand that of late some writers have cropped up, including you, to gang up against me only because I talk sense and very popular. I wanted to avoid replying; I really do not have time for being argumentative. If you do not like, just skip it and go to some other boards

I would not get into too much details - because it is more like reading a ' Bible before a Buffalo'.

Point 1
When you say that mutual fund investments (India alone) represent 4.8% of savings. Now how did you know whether it is savings or the investors have bought by borrowing from the banks or other sources?

Point 2
When you say that MF will reach US$ 520 Billions or say Rs 2,080,000 crores which represent only 4.8% of savings, that is, total savings of the Indians will be 20 x 2,080,000 crores or 41,600,000 crores. This is total savings, If savings rate of any Indian, including you, is just 10%, then their earnings will be 10 x 41,600,000 crores. Divide it by 100 crores population, and Earning per capita comes to staggering Rs 41,60,000 or Rs 41.60 lakhs per capita per annum or Rs 350,000 per month per capita!

Are you crazy? Are you suggesting that every Indian, from new borne child to beggar on the street to a poor farmer in vidarbha (where 500 farmers committed suicide for having no money or being deep in debt), make Rs 350,000 per month or Rs 41 Lakhs per year? Are you making even 20% of this figure yourself- calling your self as warren buffet?

The income you are projecting is over US$ 100,000 per capita or US$ 400,000 per family in India, when the richest country like USA (they are still richest despite problems) where annual household income is just US$ 36000. Does it mean we are not poorest nation in the world but nearly 12 times richer than the United States?

Point 2
You quote UBS and Goldman Sach CEO stating on record that 'UBS and Goldman Sach CEOs are on record yesterday the worst is over and it cannot get any worse.'

You are quoting UBS? Do you believe their opinion on the world market? That idiot CEO does not even know his own Bank whether the worst is over, and he is talking about the whole world, and what do I call you if you believed him? They lost 30 Billions with over 120 Billion more to go. Do you have idea what is their loss?

Do you know when LTCM collapsed, why did they (UBS) merge with Swiss Banking Corporation? It was because hundreds of billions of swap contracts were outstanding between them and both would collapse if they did not merge. By merging with each other, their cross swaps would be cancel led, and their balance sheets will look 10 times better.

This is why even JPMC merged with Bear Stearns because they too had similar situation. This is why they suddenly raised bid from $2 to $ 10. They did not want anyone to know the internal swaps

And you are talking about market caps of highly inflated prices of Indian corporate? As per Moneycontrol latest statistics, Top 100 companies have market cap of Rs 3,655,240 crores of $ 913 Billions. Considering promoters control of about 50%, (majority of PSU , GOI have stake over 75%) the real Public Float will be just $450 Billions. Are you suggesting that entire float is taken up or will be taken up by domestic mutual funds? what about other non-MF investors, FII, Foreign Mutual funds, pension funds etc.

Do your maths first and then write. I will not reply to you further - because you do not deserve more than one reply.

Kalidas, Hong Kong
14-04-2008 Ref: 09-015R

for SENSEXXX

Today's holiday (Was it Ambedkar Jayanti?) in India has deprived Indian investors of a chance to get out. In this kind of environments, all public holidays should be cancelled until the market improves or at least stablizes. This will provide the investors to get out the market from Monday to Friday at their will.

If US markets falls further as steeply as on Friday, the Indians would have lost opportunity to sell, and they will be in deeper red.

But who thinks that way? FM,SEBI, RBI have run out of imagination, and they become 'reactive' than 'pro-active'


Kalidas, Hong Kong

And with regard to your remark that you are a long term investor, and I am not, everyone on this board is aware that I never traded the stock day in and day out , and I never sold any stock in last 5 years, and sold out everything this year - 100% (2007-08)

Good Bye Mr. Buffet. Never say Never Again - said James Bond

Kalidas, Hong Kong
14-04-2008 Ref: 09-01S

Reply to howcome on (15-Apr-08 03:47 )

from where did you invent this number - 24% savings rate in India?

Oil, ghee, Milk and Dal alone constitute 30% of total income (if it is less than Rs 15000 per month). If you do not know, ask your mother and wife; they will tell you. And count your own savings - is it 20% - (Do not count your earnings from Stock market)

When I was in Bank in 1984 in Mumbai, India at Officer level, earning Rs 2500 per month (take home pay was just Rs 1500), I could not save even Rs 100 per month ( I had wife and 2 Children with my own apartment with mortgage outgoings Rs 235 and Society maintenance Rs 138). during my time education was very cheap (were paying little over Rs 10 for fees - whereas my nephew pays over Rs 1500 for his daughter per month)

Tax liability alone used to Rs 250 per month. Disposable savings could not reach Rs 100 per month at that time. Sometime, we were forced to borrow Rs 100 or Rs 200 from friends towards the end of the month. And remind you - we were bank officers - earning more than many other private employees at that time.

My nephew stays in Mumbai and earning Rs 20000 per month and he finds very difficult to save even Rs 500 per month, after accounting for Tax and other expenses, including his daughter's educational fees.

I also have some farms in Vidarbha region where the monthly laborers hardly earn Rs 2400 per month or Rs 80 per day.

Are you living in dream world? Read the following item that just appeared in Hindu today:

QUOTE

MORE SUICIDES IN VIDARBHA REGION
Meena Menon

MUMBAI: Yet another debt-ridden Vidarbha farmer immolated himself, leaping into a pile of burning hay last Friday, according to Kishore Tiwari of the Vidarbha Jan Andolan Samiti (VJAS).

Baban Jughale of Buldana had taken a loan of Rs. 1.75 lakhs to cultivate 10 hectares of land, but he could not repay.

Suicide by farmers continues in the region despite the Prime Minister’s Rs. 3,750-crore package and the Rs. 60,000-crore loan waiver announced in the Union budget.

Mr. Tiwari said 116 farmers had committed suicide ever since the waiver was announced. On Sunday seven farm suicides were reported from Yavatmal, Chandrapur, Washim Amravati and Bhandara in the region, adding to the 15 reported in the four days before that.

Over 282 farmers have reportedly committed suicide in Vidarbha since January 2008.

UNQUOTE

Same news was headlined as under (Silicon India News 15/4)
20 farm suicides in three days in Vidarbha...

The story ran...Returning from a private hospital in the sub-district headquarter of Warora Friday morning, Rambhau reportedly told his son that he would 'die in debt'.

SAVINGS RATE OF CHINA 50% - Oh My God!

from where did you get this dream number? do you know that Chinese rules require that employer build housing quarters for their employees (they can not stay with their families). These laborers work almost 16 hours a day with only 3 hours break. They get paid low salary from where they have to send money to their family in villages. They have to maintain two establishments - their own and their family in the village.

We are in Hong Kong and visit almost 5 times to China every month. We know better than you (and other writers on this board) what China is and the level of income there. Many Indians have shifted their office to China for simply one reason - Chinese labour cost is almost 80% less than Hong Kong.

Well, I am in no mooed to accept highly exaggerated claim by some boarders - they waste my time and also others. If you have joined them - good luck to your belief and stay with the market to make tons of money.

Kalidas, Hong Kong
14-4-2008 Ref: 09-016R

8) for Karthik,

I think the people should listen to you carefully, before beating the drum that India's savings rate is 24%!

If a person like you with 30K salary finds difficult to save a penny, and you represent one of those 300 Millions middle class, when farmers in Vidarbha are committing suicides at the rate of One person per day, I do not know where the sense of discrimination of various boarders have gone, and they go on believing 'make believe' stories that India's growth rate is 24%?

To answer your specific question when you will be able to buy home, I have to tell you that you are lucky that you have a decent job and making almost 30K. This is the first sign of your luck. I do not know your age, but any person's golden period starts from the age of 36 and ends somewhat near 45. This is the fastest growth of prosperity of any person, wherever he is, whatever his social status is.

Compare yourself with me - I did not earn even 10% of what you are earning today, and I am still in Hong Kong. If I can achieve that, why can not you. Work everyday, work very smart (not hard), establish a goal, then break up that goal into smaller targets, and start achieving those smaller targets one by one. Bigger targets develop automatically without your conscious knowledge and you also develop inner ability to achieve those higher targets with ease, with so much experience gained in achieving smaller targets.

Having your own home is everyone's dream. Make it as one of your target. Your target should be to make the most out of yourjob, and not from stock market. This is a 'gambler's arena' for newcomers. Do not gamble with your life at this stage. Instead, start achieving target one by one in a company where you serve. If the company is not suitable for you, change it for better. You can go on taking chances from Mid 25 to Mid 36, by jumping job from one to another, and then settle down when 36 hits you on your birthday.

No good work goes to waste at any time. If the God wanted you to fail, he would not have given you 30K at first instance. So have faith in you, get married, have one or two children quickly, and then go on working towards predestined goal.

Have great faith in yourself. You are your own best friend and you are also your worst enemy - choice is yours what do you want - Best friend or worst enemy.

Kalidas, Hong Kong
16-04-2008

9) for guest,

NO. I don't change opinion on minute to minute or day to day basis. I take view based on certain critical facts and they have gone worse fro bad.

Just now, Merrill Lynch reported a loss of $6.5 billions for third straight quarter and their revenue has dropped by 69% which means that their customers are closing their accounts.

And my followers do know what they are doing. If they feel disenchanted, they will leave for which I have no regret. Everyone has his own priority - and if they can make money by following a person like you, so be it.

I have mentioned in this forum before - this is no time to make money - but to preserve what you already have. If you have nothing left, if something happens what I expect, they will never make money in their life time.

Count down has just begun. It is said that Dying flames always shine at its brightes So buckle up.

Kalidas, Hong Kong
17-4-2008


10) Reply to Cybergamer on (17-Apr-08 17:21 )

Yes, I agree. This is the way one should invest all the time. I just amplify your viewpoints a few steps further. (This is what I have been doing all the time for over 16 years)

Identifying Growth Area
1. Select the Currency (not applicable to domestic Indians)
2. Select the Country (Some currencies are adopted by many countries)
3. Select the Industry (that will grow)
4. Select the first 3 companies + 3 more growing companies
5. Select the popular one
6. Study the stock, market and growth potential
7 Narrow down to just 2 stocks
8. Study the market for a while and familiarize with the stock movement (how the stock behaves or misbehaves)
9. Make a target price to buy, and wait for the time. When the prices come within 15% of your target price, watch actively and take sudden slump to buy the stock
10 Now that the stock you have bought, consider upward potential for the stock, market and industry and set the selling target.
11. When the stock comes within the 20% range of selling target, follow actively and go one selling in a rally.
12. When the stock overshoots on upside, speed up the selling
13 Trade for a while, buying on a dip (12% down from peak) and sell on gains in rally
14 after two or three attempts, and when the stock refuses to go up, sell it out and search from No.1 some other stock

From your post, it is not clear whether you are talking about 'Direct Investment' in the business of talking about stock market investment?

I never advise anyone to shun their bread/butter business and start playing stocks. This is never a good idea.So long as your business is in growth area and you are making over 20% per year - stick to that business, and never let it go.

In my view, your own business income should always have priority over stock investments. In business, you are in control, in stocks, the controller is the fate.

Kalidas, Hong Kong
17-04-2008

11) Reply to Jalan


The biggest mistakes investors make in bear market is to believe in Analysts's story that ' market has discounted the bad news' and that 'Worse is behind us'

Whenever the major banks have reported huge losses, they also simultaneously reported that they would be raising capital (to the extent of losses reported) just to cushion the bad impact.

Often the reported news are misleading. Let us see the today's news in CBS marketwatch says

QUOTE
Citigroup's .... The most obvious target to raise capital and help investors would be the sale or spin off of Smith Barney, Citigroup's brokerage arm.

Also
Even Pandit's hedge fund required a bailout during the most recent quarter
UNQUOTE

Read them carefully. Selling some assets does not raise capital, but merely raises cash.

Two quarters ago, when the CITI reported massive loss for the first time, Abu Dhabi Investment Fund gave them US$ 9 Billion via Convertible Bonds carrying 11% interest.

Now, two quarters later, CITI has lost over $30 Billions. How much more it would raise the capital and who will lend them? Abu Dhabi said NO.

Mere announcement of raising capital is not enough. There is no follow up announcement that the 'Capital was indeed raised and it was subscribed or oversubscribed by 'n' number of times just as you see in Indian market.

When UBS reported massive loss of $9 Billion for the first time, Singapore Government extended $ 9 Billions with great fanfare. Soon thereafter, UBS reported additional losses of $25 billions with a promise to raise $ 20 Billions as capital. The stock went up because investors were lead to believe that worse is behind us,

Again, there was no follow up announcement whether they did or did not raise capital and if so how many times the issue was oversubscribed., There is 'pin drop silence'

Also, Royal Bank of Scotland, Britain's second largest bank, reported massive loss, and cushioned the news that it would raise US$ 20 Billions to bolster its capital. Financial Times (FT)reported that 'RBS rose as much as 4.9 percent after reports ..

LEX of FT commented that 'RBS last reported a 4.5 per cent equity Tier 1 capital ratio .... this falls to roughly 4.0 per cent. If RBS then raised $20bn in a rights issue, its equity Tier 1 ratio would recover to 6.0 per cent.

If the bank's capital adequacy ratio falls below 6% it is presumed to be near bankruptcy.

Merrill also reported to have been exploring means to raise capital by $15 Billions

You can see that these are all 'promises' , away from hard reality. There are no follow up confirmation that they in fact did raise the capital. Whoever raised earlier carried interest rate 7.5% to 11%.

Even Mr. Pandit, seen as savior of Citigroup, finds his own fund bankrupt (see the above news under Citigroup)

The total losses and expected capital raising comes to over $100 billions - who is going to lend them money? Why no investor's name come out?

In Hong Kong, a profitable company CNOC, leading Petroleum producer from China, found difficult to create investors interest when it tried to raise $ 10 Billions in spite of making billions of dollars of profit.

Then, how come these losing banks will raise $100 billions, 10 times the size of profitable CNOC.

I am looking at the facts, not the promises. Citigroup, Merrill Lynch, Lehman Brothers, Wacovia, Royal Bank of Scotland, even J P Morgan chase, UBS are all bankrupt.

Wait for some bank to really go bust officially. We are facing complete collapse of banking system. And when that happens, there will be no buyers in the market, and Investors will find themselves trapped with all doors closed.

In spite of rally, I still maintain that nothing has been discounted as yet. As per my estimate, the losses in the system is over $10 trillions. I am unfazed by some rallies.

I do not invest looking at others. My intellects says - Retain cash 100%. I never failed in my life following this line.

Kalidas, Hong Kong
19-April-2008 Ref: 09-019

12) Reply to grkr2001 on (19-Apr-08 10:34 ) GAURAV

Reg: Prepayment of Housing Loan
You have to follow one principle in life time. Long term assets should be financed by long term finance or Capital; and short term assets (current assets) may be financed only short term finance or capital.

Home is a long term assets, so it may be financed by long term loans such as Housing Loans. Even if you can buy the house from own capital, you should not, because you never know when do you need that capital for medical or social reasons (like Marriage). Unless there are very strong reasons (like very high interest rates on housing loans), I would not pre-pay the loan. Right now, the interest being paid by Banks is about 8% to 9.5% and loans are being charged about 11% or about ( I am not sure about this). Thus, difference is just 2.5% which is not much - you can easily make it up by disciplined investment.

The greatest investors' best quality is to manage their cash level. It is always tempting to invest, looking at others, when cash is on hand, and many will tell you of your stupidity in not investing, In Gujarati, we have an idiom that ' People always get itching sensation when cash is on hand' so that you feel like disposing of the cash.

The present problem in the world, in credit crises, was the habit of banks to finance Long Term Assets (LTA) with Short Term Financing (STF) because FED was reducing interest all the time. The bank went against their own Principle, which was bedrock of financing. The reason was the higher spread - due to LTA financing carrying higher interest rates and STF carried low interest rate - so they did 'Interest Arbitrage'. They thought that STF will always remain same or low - which is not the case now. STF always moves up after some time.

Similarly, you should sell when your investment has trebled at least 70% if your entry point was late. I normally start selling my investment when they have gone up by 500% or five times. I sell about 80% if I see no further scope, or just 60% if my original target was higher and entry point was lower.

5 to 6 years ago, when SENSEX was at 2780 or about (with 100 points here and there) I gave to all investors in Hong Kong to buy aggressively Indian stocks and more particularly banking stocks of PSU. I bought IOB (from 9 to Rs 16), Bank of India (Rs 10.50 to 14), Syndicate Bank from Rs 10 to Rs 16, UTI from Rs 61, GAIL from Rs 71 onwards, MRPL from Rs 8 onwards and SAIL from Rs 5 onwards right up to Rs 16. When they became 7 to 8 times, I sold 70% and when they reached almost 10 times, I sold everything. IFCI was also bought at Rs 12.60 on average.

But my initial SENSEX target was just 10000 but the market shot up way beyond. Generally, I am always stock specific. If the company makes money, the stock will make money. I never go by hype by media or analysts on CNBC, NTV etc where the speaker do not know what they are talking about.

So keep your excess funds in bank deposits for the time being. Wait for the massive correction, which will come anyway. Perfect timing of correction is like predicting when a healthy person may die. He may die in an accident or live a long life or die soon if he has fatal disease like cancer.

My views on current state of affairs are crystal clear. I do not change my opinions often.

The current Dollar crisis you see was predicted by me in my 100 Page damning report, BANKRUPT DOLLAR which was published at the height of Asian Crisis when Euro was about to be borne. This report was also sent to all Asian leaders including RBI Governor Mr. Jalan and then Prime Minister I P Gujral who picked some of my sentences direct from my report during his public speech on the currency crisis then. What you see today is the precise outcome of the scenario I had envisaged 9 years ago. More later.

Kalidas, Hong Kong
19-04-2008 Ref: 09-020R

13) for IFCI_Rocky

Saddam invited US attack by switching oil price of quotes from Dollar to Euro. Iranian President is doing the same game, with the difference that Saddam was never vocal like the former. USA will not take it lightly and when they find excuse, they will attack Iran with massive force. You know what happened to Iraq - Iran could be next.

War is the ultimate result of the economic crisis - politicians could deflect the attention. Chavez of Venezuela and Iranian President are playing very risky game - they are not even 1% of American military strength - why to incite them when they are in middle of crisis? You do not sprinkle 'salt over serious wound'. If Iranians had offered help instead to resolve the problem of USA, then it would have found great friend in America. Now they face the bitter enemy in them.

This is not the display of statesmanship but manifestation of arrogance, ego, ignorance and stupidity. No one likes these two leaders world wide, and US can easily use Israel to start the war game.

Kalidas, Hong Kong
19-04-2008

14) Reply to gmsamy on (19-Apr-08 11:08 )

A good imagination but far fetched.

I do not think that FED was directly involved with the creation of the derivatives. The derivatives were originally conceived as instrument designed to 'hedge' the risk of the nature, for Agri products, where farmer is often left to the vagaries of the nature.

Later on, these derivatives started converting into speculative instrument by the financial engineering of some investment bankers. These did not attract attention of the FED whose attention was more for controlling inflation & banking system; not investment banks.

Alan Greenspan recently admitted in his Bloomberg interview with that Fed did not really understand the complexities of the derivative trades, and being OTC instrument, no real time statistics emerged from any authentic source.

Yes, US Government did play indirect role, by way of passive participant. Treasury Secretaries from recent past, viz. Rupert Rubin (Clinton Administration) and recent incumbent Henry Paulson were from Goldman Sach, who were the designers of such dirty game. They also become the source of inside information to their parent firm Goldman Sach. This is the reason why almost all Investment Banks from UBS, Lehman Brothers, Merrill Lynch, Bear Stearns, Morgan Stanley suffered billions of dollars of losses, EXCEPT Goldman Sach.

These high flying Treasury Secretaries were having overpowering influence over FED. Rubin simply prevailed over Greenspan, and being Chairman of National Economic Council, he was in constant touch with the President Clinton.

Rubin was notorious used ENRON to manipulate the spot prices using future trades. I do remember when the Spot oil prices were trading at $28, two year forwards were quoted at $18 almost 33% discount. They used to sell future oil at $18 and buy spot and then short the spot to bring down the spot price, to control inflation; Oil being major constituent of inflation index. This continued for long, and when those future contract came to maturity, the roll over market slowed down. Those contracts could not be rolled over with the result that the companies like ENRON had to pay the difference of future contract price and spot price and it went bust.

Entire ENRON episode was managed through Citigroup and JPM Chase bank, with Citi leading the role. Rubin then resigned from TM post prematurely. He then became Chairman of Citigroup to cover his track and wind up the affairs of Enron. Very recently, Citi made massive final payment of over $ 1.3 billion or about to the Enron creditors.

He also played major role in Long term Capital Management (LTCM) affairs that also became bankrupt. With its bankruptcy, Salomon Brothers became almost defunct when Warren Buffet took over the company. Finally, Salomon brothers was integrated with Smith Barney which became Salomon Smith Barney. This was bought by Citigroup so that none of the information leaked out.

Greenspan of FED was virtually unaware of this game. In his book 'Age of Turbulence' he mentioned that he hardly saw or met the President, often once in a few months, whereas Rubin was having daily contact with the President Clinton. The President followed the advice of Rubin on understanding that he was expert, whereas he was shrewd manipulator.

FED did not save Bears Stearns but it saved JPMC. Bear Stearns was only a bait. When I left the business of stock broking about 5 years ago, JPMC was reportedly having derivative exposure of over $ 30 trillions and now it could be almost twice..

Ordinary Americans do not understand the complexities of derivative game; even best experts like George Soros and Julian Robertson didn't understand them.

These derivative created money out of vacuum have gone back into that vacuum. This is not law of physics where Energy changes the form from one to another. Who gains when the owner loses entire house in a fire? None. It was just destruction.

Kalidas, Hong Kong
19-04-2008 Ref: 09-021R

15) for Karhikn

Yes, I do have the solution, but will disclose at right time to right persons in USA

The crisis will only worsen - you are not reading my posts that well and repeating same questions again and again. Looks like you want to re-enter the market again, seeing having gone up by few % points.

We are at beginning of the crisis, not even 5% over. Miles to go ahead. In great depresson times, the stock prices dropped over 80% - this time it will match in % terms, but in value/volume terms, will far exceed nearly 50 times the value of great depression.

Current market scenario is a 'Mouse Trap' for small investors. They look around in the disbelief that they are losing opportunity everyday, forgetting that they are being saved everyday. Capital preservation rather than earning more is a priority at least for me.

100% cash is again my message and sell everything is again my message. After a while, I will write my predictions at the height of the Asian Crisis which came true word by word today. I was vindicated almost 100%. If you know any major investor in Hong Kong who is member of Progressive Group (Indian Businessman's community) where I gave a major speech 9 years ago, call me almost every third day how right I was in perceiving entire scenario.

I am not perturbed by some scumbag's remark that I lost my pant and that I do not even earn 3000 or even 10% of what Indian earns. They do not know what is Hong Kong. The house that we rent cost Rs $25000 per month or Rs 120,000. Now count how much we must be making? They do not know what is 'Chart' and 'Guru' and do not even know that Chart does not smell. and at times, the market does go to 'uncharted territory'

Kalidas, Hong Kong
19-04-2008

16) I have lots of gold and silver (physical). I have a problem of storage in India where lockers are not available. I have almost 20% of liquid funds in Silver followed by Gold in Hong Kong

for me,outside India, if Rupee rises, the gold/silver do not rise as fast as it should. In Hong Kong, it is different. for us buying gold and silver outside India is more profitable than in India. We can sell 24 carat gold in a snap in any gold shop. All gold/silver bars are marked 9999 purity and no one cheats.

I buy a lot of Agricultural lands which has given me appreciation of nearly 300% in last 3 years. with the food prices rising, the rate of appreciation will be much more. When I can buy Agri land at just Rs 2 to Rs 3 per square feet, why should I buy property in Mumbai or other centres paying Rs 5000 to Rs 10000 per sft?

I also bought some MIDC land for just Rs 5 per sft only a year back and now gives me return of nearly 800% in just under one year, due to change in land allocation policy by MIDC in Vidarbha.

I do not consider Stock as only investment vehicle. I also buy lots of Agri machineries from USA which gives me excellent bargain due to 20% depreciation of $ vs Rupee. I have machineries which no one has in India, and therefore venture into Rental equipment business.

I avoid Stocks, bonds and bank deposits for the time being. Yes some surplus is there in banks, but invest immediately if I see good bargain in plantations, forestry and Orchards like Orange and Mangoes.

Kalidas, Hong Kong
19-04-2008

17) for topdog

3 Factors are operating against Indian stocks:
1. Rising food prices.

Other countries can afford higher food and grain prices, not India where most of the people are still poor. When these poor people raise their heads. the politicians seize the opportunity to incite violence. Food related violence is the biggest threat to India's economic stability. This time for a change - not Hindu/Muslim- but real food related chaos

2. Rising oil prices that erodes subsidizing power of Government of India.

Government is in dilemma. If they raise the prices to curb the subsidy, huge protest wave could emerge from Auto Riksha operators, Truck drivers etc. Auto demand may also ebb but the single driver operated Scooters, Motorbikes may see the surging growth. The refinereis are under tremendous pressure.

Government had best opportunity for decades to let the rupee rise and let the import bill of the oil fall. Instead, the GOI used SEBI to deflect the fII inflow and with the onset of credit crisis, the Rupee is now in most vulnerable state. Inspite of dollar weakness, the rupee might fall to 44 at least, if not more. That will make the import of oil worse and refineries will see their margins hurt badly.

3. Drying up liquidity (Rs 18000 crores withdrawn by hike in CRR)

RBI acted in advance in response to rising food prices. RBI is almost scared to death. Its all calculations have gone wrong. Sterilizing Rupee's rise was the biggest folly of RBI and its wrong advice to GOI to curb the $ inflow through SEBI (P-Notes) played dirty role in promoting the inflation. When EURO was not affected by letting it rise 90% (from 0.84 to 1.60), how India could have been affected? RBI/SEBI are still having 'export fobia' . When it has not worked over last 50 years, why do they still stick to same medicine? Whey not they change the outlook at lease for one? Okay you took chances for 50 years by letting Rupee go weaker and it did not work. Why not let Rupee rise for at least 2 years and see the effect?

4. Rising Interest rate

This is now a world phenomenon. LIBOR rates jumped at fastest pace after Citigroup's result. World over, the interest rates will rise, because almost all governments are now seized to slow the food prices rise - but it does not. Most western countries are non-vegetarians. When the beef, pork, chicken and egg prices beging to rise in those countries, hell will let loose.

In India, rise in interest rate will moderate house price's growth and may even decline. Indian mortgage is different than world in that it does not have too much derivatives like in western world.

Rising rates will cut almost all bank's profit, especially PSU banks. They are sitting on huge lot of government securities where 1% rise will bring down the value by 8% to 10%. If they follow MTM rule (Mark to Market), then profitablity of almost all banks will be seriously affected.

Interest rate is the biggest enemy of stock market. In India, the lending is highly leveraged. If a borrower borrows Rs 100, he gets loan of Rs 75, that is, debt equity is 3:1 whereas in centers like Hong Kong, the ratio is 1:1

So higher interest rate will affect Corporate profit more than anywhere in the world. Only cash rich companies like MTNL, ITC, Hindustan Lever, and wineries may benefit.

In short, the signs are not encouraging for India. Everyone is projecting growth at 9% or 10% in India, but thst is simply not acheivable. Exports will slow, Imports will rise, interest rates will rise, bonds may fall, corporate profitability will fall etc are factors that may seriously hurt Indian stock's valuation. If overseas market crash, then foreign funds may exit, lowering Rupees value, that may again jack up the oil bill and subsidy. Indian government will have higher deficit financing, lower $ inflow, higher $ outflow will cap the rise of Indian stocks

Kalidas, Hong Kong
19-04-2008

18) for karthikn

Farmers are poor everywhere regardless of country. Their prosperity is always relative to general economic level of that country. Also, farmers are the biggest vote bank everywhere in the world - including USA. No one bothers about them for 4 years, and suddenly start expressing concern at near election.

Did you see a movie called 'Swadesh' where SRK is sent by his foster mother to a farmer to recover the rent (she wanted him to realize the abject poverty and hapless state in which these farmers were living, not to recover rent). It was one of the most pathetic and realistic scene I have ever seen on Hindi film cinema. Compare this with daily suicide by farmers in Vidarbha.

So, you do not need to google the research. And Chinese farmers from what we see in Hong Kong (which imports all vegetables from China) are very efficient. In my 25 years of stay in Hong Kong, I never saw a single insect in any of the vegetables sold. Obviously, they are well educated how to manage their farms.

Kalidas, Hong Kong
20-04-2008

19) for victorjunior,

To me, nothing is changed except some tacit intervention which may come tomorrow by Bank of England who may pump in close to $50 Billions by way of accepting Mortgaged Backed securities against British government bonds. We do not know the details as yet because it may be announced tomorrow at about 1:00 PM India Time.

This is the dangerous game that BOE is going to play who in fact placing tax payer's money to save the mortgage market. The fact of the matter is they are going to given them British Government's bonds (100% value) in exchange of Mortgaged backed securities (like CDO/CDS) which have ZERO value. They are still not aware that these secoindary mortgage papers have ZERO value because underlying securities have been sold by Primary lenders, leaving nothing for the secondary holders.

Only yesterday, Royal Bank of Scotland, considered second largest bank in UK, disclosed massive loss of US$ 14 Billions and its caqpital ratio has dwindled to just 4 - much below 6.0 required under BIS requirements. Such low figure is considered the first sign of bankruptcy. RBS wants to raise $20 Billions from the market via Rights Issue but no one knows whether their existing shareholders will subscribed to these rights.

The market may rally for a while in UK which might boost Indian market which usually takes cue from opening of UK market.

British government may know only later what hit them.Do not think they know everything. The present Prime Minister, Gorden Brown, sold 400 Million ounces of gold at most depreased prices two years back ( at about 257 to 310). At today's Prices the loss works out to over $256 Billions - many Brits are questioning the move to sell the gold by auction at that time.

To me nothing has changed. Such government intervention was expected by me when I first gave the 'SELL' Call and I still maintain it. More and more losses are still on the way, and in USA, 250,000 mortgages is going into foreclosure, raising defaulted derivative stakes by $ 300 Billions every month.

Things are getting worse day by day. I know most boarders want to invest because they feel that the market is slipping away from them. I would let them follow their own instinct and discretion. If they are day traders or short time traders willing to cut losses if the market misbehaves again, trade by all means - but follow other traders because I am not short term trader. They do not have to listen to me if they are not convinced.

I do not want to sound repetitive. But my original position remain umchanged despite some rallies here and there. If you believe that loss so far declared which have wiped out more than Indian Government's total FOREX reserve is small, go ahead and invest. I am not with you.

Kalidas, Hong Kong
20-04-2008

20) COmments on pkk07 post on (20-Apr-08 21:44 )

Of all the boarders I have seen, I must admit that you are one of those rare one, who had understood the basic tenets of crisis by at least 30% - other are mostly ZERO and guided more by pride, ego, false sense of nationalism and their efforts to play to the galleries and conscious attempt to appease the minds of losing boarders who are more eager to see their portfolio up and quickly.

I read with interest to see the quotes of Peter Lynch or some traders of yesteryears when derivatives were almost non existent. Their theories do not hold good in present scenario and kind of 'monkey following' will push the investors to the era of wilderness. They were great investors, but their theories have to be modified to suit the current conditions.

Some quote also Mark Mobius, whom I have followed for 17 years, since he was also based in Hong Kong and quite vocal. We used to read him view him on TV and hear him on FM radio almost once a week, if not more. He was of course very knowledgeable but at times misguided too for placing too much reliance to official figure.

However, people do not realize that he is a 'Fund Manager' who does not want to face redemption pressure and become a distress seller. I read somewhere that his fund trades at discount to NAV by about 8%. They have not published data after 29/2/2008 which is the most testing time for the funds.

I was amused to see some highly critical and at times abusive boarders using this thread (initiated by me) to launch personal attack on me, and they go on expanding its horizon with different content - why not they start their own new thread? Do they fear that they have not enough followers to read them? Do they feel that 'Kalidas' is popular, so use his thread to project their right or wrong views, to develop their follower's base? Strength lies in independence, not on excessive reliance of some on's strength where one can hide his weakness.

One slight correction to your projected scenario of SENSEX EPS of Rs 1000 divided by 15 to give you earnings at 6.7%. You ADDED the inflation rate of 5% (instead of 7.5%), instead of DEDUCTING. When you work out inflation adjusted return, the rate of inflation has to be deducted, not added. The Net Return come too low at 1.7% (in fact it is MINUS - 0.8% of we use current inflation rate). Your entire range of forecast changes.

Right now, domestic interest rate is about 6% on average (highest of 9.5% is ignored as they are for 3 to 5 years). There is negative interest rate if we use Inflation Adjusted Return (IAR) (6% - Inflation 7.5%) with inflation curve still rising.

Indian Corporates are highly leveraged in bank borrowings and they will suffer most in rising interest scenario. They were biggest beneficiary due to falling interest rates during last 3 years, and you saw the Corporate profit growth and consequent increase in share prices.

An average borrower in India gets a loan of Rs 75 (against Asset value of Rs 100) or debt : equity ratio of 3:1. If the interest rate rises by 1%, he is affected by 3% per year or 0.75% per quarter. Since % interest cost to Sales value is usually not more than 4% maximum for a good corporate, his profit falls by 0.75/4%=18.75%. So when you project the growth of income at 15% for Indian corporates, the reality is that it will be much smaller and in fact there could be some negative growth in earnings.

Now you work out the EPS of SENSEX. It will come down significantly, that will place SENSEX projected value at much lower level, almost unthinkable. Please note that in bull or bear market, the markets always overshoot the projections by at least 30%

Otherwise, your thinking was on right track. This is the reason I rate your post 3 star for your very good attempt ( I hardly rate any message, so far just 3). I would have given higher rating if your calculations did not have factual and interpretation error.


Kalidas, Hong Kong
24-04-2008 Ref: 09-022R

21) for Radhika

Good quote but rather misplaced. Option and Futures are not leveraged instrument. They are usually issued on 1:1 basis

The CDo/CDS are not issued on 1:1 basis, but they are issued in 5:1 to 6:1 minimum (They are issued in minimum 6 tranches of almost same value)
for instance, HSBC in its report of 2006 mentioned the Credit Derivative outstanding in 2005 at about 210 Billions and in 2006 about 432 billions, that is, fresh issue of over $220 billions (of the size of India's FOREX reserve) The figures for 2007 is not known. These leveraged derivatives have ZERO value, whereas in futures, the value is not ZERO but may move or down unless the underlying asset is completely destroyed.

This is why I said that Peter Lynch's theory is to be modified in modern context.

I do not know about Warren Buffet's statement that all options and future markets should be outlawed. If that is done,then volume in the stock and bond market will dwindle to 20%. Just look at the volume in FNO segment and Cash Segment. Often people buy and sell the futures (hedge fund strategy), Inversely, if there is no future hedge, then there is no cash purchase. Almost all hedge funds will disappear overnight.

Warren Buffet is too intelligent to make that kind of statement. He knows what is Future and Option because the Salomon Brothers he bought at the height of LTCM crisis, was a major player in Futures, Options and other exotic derivatives. I hope your source of information was authentic. If your source is Buffet's book authored by him, then I will take this statement with pinch of salt.

Kalidas, Hong Kong
24-04-2008

22) for pkk07

Suit yourself.

I still do not get it how do you say that the stock return is inflation adjusted? Further, you are counting only pre-tax return. If you allow for taxation, your Net Return on equity will be much smaller. Almost throughout the world, the Interest Rate and Rate of Return on Equity is always worked out bare, then post tax return and then adjusted for inflation.

Although no one admits it, the Stock Market is the best barometer of inflation. Stock market thrives on profits. If Profits or earnings are more, then the market rises (You also worked out the earnings). The earnings rise, if the prices rise, and if prices rise then the inflation is reflected in Consumer Price Index.

So, if the index has risen from 3000 to 21000 in less than 5 years, it means that average % rise per annum was about 150% on simple average basis, or about 100% on Compound Average Basis ( appx - I have not worked out the compound rate).

Yes, wages also rise. That it why it is called 'Wage Induced Inflation' (WII) whereas when the wages do not rise and inflation rises (for instance, USA, China), then it called 'Demand Induced Inflation'. The interest rates rise or fall have direct effect on 'Demand Induced Inflation'(DII) . The very purpose of controlling DII through Interest Rate rise is to curb the consumption or reducing the demand.

Interest Rates increase do not affect Wage Induced Inflation. The only way to curb the WPI is to withdraw the money from the pocket of the consumers, and best way to achieve it is to 'Raise the Taxes'

Kalidas, Hong Kong
21-04-2008

23) for pkk07

Again, excessive dependence on very old books do not apply in modern context.

When the company makes profit, it pays taxes. When it pays dividend, the recipient of dividend also pays taxes. And the share buyer also pay taxes in his hand if the share price rises as result. Thus, same profit induces income on 3 fronts, and also raises taxes multiple times, and also causes inflation that many times.

Anyway, I will drop this discussion. You have done well in your views, and I expressed mine.

Kalidas, Hong Kong
24-04-2008

24) for laxminrv

Japan is no longer a major influence on world market. At the height of burst of property bubble, Japanese government allowed banks not to disclose the real losses. As result, the actual profit of Japanese banks are not known.

In spite of keeping Yen at nearly ZERO level for over 16 years (or less), and allowing Banks not to disclose real losses but let them remain concealed for a long time under one cover or other, the Japanese market (NIKKEI) dropped from 39000 level to 13000 level now or down 67% whereas almost all markets world over rose over 100% to 600% (like India, China, Brazil)

Kalidas, Hong Kong
24-04-2008

25) for Guest,

You may be right, but do you know the extent of their losses as yet? They have still not filed 20F/10K with SEC of USA which is a yearly report nor they have mentioned the reasons for delay.

I was told that they are trying to spin off their Securities division. In short they are selling more and more assets to realize the cash and raise more and more capital without informing investors in advance their true state of affairs.

There are better bargains in finance sector, especially in banking, than ICICI Bank. Further, rising interest rates pares down their holding of Government securities by 8% to 10%. Their profits after 6 months or so, may not be that spectacular, unless the stock market recovers and stays at higher than present level.

We have to make so many presumptions for this bank. The stock is no doubt popular, so I feel that its Rights Issue may get subscribed and raise their capital base.

Please note that as BIS rule, the minimum Capital Adequacy Ratio is 6% and under Base Rule II, in the event of economic downturn, the banks will be required to raise this ratio even if other things remain same. So, there will be higher and higher capital requirements. Therefore, capital raising exercise may for the time being remain continuous exercise. If the number of shares go on rising all the time, and they are not matched by relative income, diluated EPS will not permit higher valuation for bank like ICICI.

The stock may move higher if they keep their losses under their wrap. They have to come out clean whether they have built in losses or do not have it at all. So far, to my knowledge they are not clear.

Of late it has become fashion that all bad news have been discounted. No one says that all good news have been discounted. Take your pick

Kalidas, Hong Kong
24-04-2008

26) Reply to topdog on (21-Apr-08 12:49 )

In USA, most farming is only fuel driven. Bio-diesel is very expensive and will not be effective substitute.

Indian farming and US farming are incomparable. In India,for example in Maharashtra, there is ceiling on holding of farms up to 52 Acres; In USA, there is no limit. A farmer with 200 acres is considered a small farmer. The farms are huge, running into 1000 or 2000 acres at a stretch. Feeder, fertilizer spreader are as wide as 148 feet. I have farms in USA and also in India, so I know what India has and not. I import lots of US made machineries, many of them are so cheap that Indians simply do not know. Not many educated people are in the farming in India

ITC tried its hand in agriculture but failed miserably. You can not wear a suit and go to a farm. The names you have quoted do not have experience in Agriculture. Tata has not produced even a tractor in spite of Auto business for so long, whereas Mahindra does have some direct experience. The names you quoted have trading mentality. Look at Reliance's attempt to sell vegetables and other produce - they seem to have failed due to lots of opposition from farmers, politicians etc.

US has so much of land that it can feed the entire world. India is a minuscule - just look at the map size of India and USA - you will know the difference.

USA is still richest country - its wealth is not going to drain away. Japan, China, Australia, Europe, UK, India, Brazil, Argentina, Russia are all USA dependent. The volume/value of their one stock on NYSE is equal to entire volume of BSE and NSE combined. And they have over 6000 companies on NYSE, NASDAQ and other OTC counters known as 'Pink Sheet' stocks.

you rightly said the only fear is the 'hunger'. When the food crisis comes, people are not going to eat Demat statement. They need rice, wheat, soybean, pulses, oil, Ghee, Milk whose prices have gone up by almost 100% - ask your female members of your family - they will tell you.

Kalidas, Hong Kong
24-04-2008 Ref: 09-023R

PS:
Let us not talk about 2009. Right now the situation is so fluid that one can forecast only on very short terms.

27) Reply to radhika_nandlal on (21-Apr-08 14:35 )

Yes, you read wrongly. I compared Karthikn salary of Rs 30,000 to what I earned back in India in 1984 as Bank Office where our Gross Salary was Rs 2500 and take home pay was hardly Rs 1600 (Deduction of housing loan, refrigerator, provident fund, Advance taxes etc.)

Hong Kong is a very expensive place. Even an office boy, what you call peon, earns over HK$ 8000 or Rs 40,000 per month. I also clarified in one of the post that I pay my house rent about HK$ 25000 or Rs 125,000 per month. Our children who used to go to English Foundation School (ESF) were charged fees for secondary school @ HK$ 7500 or Rs 37500 per month.

Whether I am rich? 'RICH' is a very relative term. If you think I have more than you, I am richer than you; and If I have less than you, I am poorer than you. I never compare myself with others in monetary terms. I am a self made man and Hong Kong is a place where any dedicated person can thrive.

I have my own farms. Except for the bank I served (19 years), I never worked for others. Even as stockbroker for 16 years, we had commission sharing arrangement. Some time we make more, some time less. I made at times HK$ 9000 in a month and at one time I also made over HK$ 1.8 Million (almost Rs 1 crore) in a month. Hong Kong is a dream place where no one comes in your way. If you succeed, you compliment yourself; and if you fail, blame yourself - never ever blame your luck if you are in Hong Kong. This is expensive but what is expensive if you can afford to pay. In Hong Kong, we try to increase income rather than cut expenses. If your income is more, expenses can be taken care of. This is what all other boarders should do.

I think I am sharing too much personal information on public forum like this, but when some one in this forum says that we have no work to do, he is living in a fools paradise. Even car parking cost HK$ 3000 (Rs 15000) per month and per hour public parking cost anywhere HK$ 30 (Rs 150) per hour in main area.

I have worked so hard as stock broker that at one time I never went out of Hong Kong for 6 years, worked for 12 to 16 hours a day, 7 days a week for all 6 years, researching for my valuable clients, who were as big as large fund managers. I have not acquired knowledge in finance so easily - I have worked for it, and earned what I deserved. My children live in USA who are both MBA.

I am also qualified Science Graduate (Chemistry & physics), Degree in Law (LL.B), Degree/Diploma in Banking, Degree in Cost Accountancy and also part qualification as Journalist. I have 19 years experience in Banking, and I was the first banker in 1979 when I told my Bank's management that India's future was 'Capital market' and my bank was only second to State Bank of India to open 'Merchant Banking Division' when no one knew anything about stock market then. Now you know where we are, and my bank knows how insightful I was and what great foresight I have had at that time.

Kalidas, Hong Kong
24-04-2008 Ref: 09-024R

28) for Guest,

You say

QUOTE
The point is that all these companies will be able to raise cash to meet their capital requirements...
UNQUOTE

Easy to say. do you know whe what is $20 Billion. It is equal to Rs 80,000 crores. (almost 110% of Marketcap of SAIL - India's biggest employer) When every bank says they would raise that much amount, who will lend them when everyone knows that they lost that much.

Kalidas, Hong Kong
21-04-2008

29) Reply to jinal on (21-Apr-08 15:10 )

Against market force, everyone is small, be it government, FED, IMF, World Bank, Bank of England or ECB - even their combined force can not reverse the course of the market. If they can, then whole financial system would have been monopolized by some one, and what you see the free market would not have been existing.

Bank of England announced the package but no one can use it. One of the condition is that BOE will exchange Treasury Bonds for Mortgaged Backed Securities (MBS) issues only in 2007 and not before, and any losses now or later will have to be borne by the borrowing banks, and that at any time any MBS is found to be deteriorating in quality, the concerned banks will be obliged to replace those securities. Further, this package is valid only for 1 year and maximum 3 years, whereas all mortgages are for 30 years.

This is no package at all. It does not address to the problem at all. This will fail totally. Government of UK can not afford to risk tax payer's money just to save some bankrupt banks. Did those bank took permission of BOE before buying those securities? Then why they approach them for help.

The banks are possessing the 'Secondary Mortgages' which have ZERO market value. They can not give them to BOE and receive 100% liquid government securities. BOE is very clever - they are asking banks to resort to this help SUBJECT TO the condition that they will have to give only good, liquid and qualitative securities, whereas all these banks are sitting on heaps of worthless papers.

BOE can not nationalize these institutions. It will be very dangerous precedent. If they did nationalize, and they are obliged to carry out all obligations of the concerned bank, and in that event the losses to British tax payers would be in trillions of pounds. In that case, the Sterling Pound will crash to 1.0 from 1.98 now.

You have more concentration on Indian market. You feel that if something goes bad, Government will step in. It is more like if some thing seriously goes wrong, people go to the GOD and pray for help. Does the GOD help? (except in Kahani Ghar Ghar Ki) .

NO. God also has not time for wrong doers. He will ask, did you come to me when you did this? And if not, why do you come to me now?

GOD is also human. Have you seen a movie called 'God must be crazy' - When God saw that movie - he retorted 'these human creatures must be crazy. Chitragupta - where are you?'

Kalidas, Hong Kong
21-04-2008 Ref: 09-025R

30) for jimmyrocks

ICICI Bank did not exist at that time. ICICI did exist as term lending institution (TLI) was it was not a bank. It bacame bank only recently. HDFC was its offshoot which later divided into HDFC and HDFC Bank.

No, I was not with ICICI - it did not have any presence at that time.

Now, stop speculating. If I go on replying, you will know the answer by way of elimination.

Kalidas, Hong Kong
21-04-2008

31) for raj70

Someone compared Investors with Vultures. Don't know who?

Vultures relish when some one dies or about to die. In middle east, and in the midst of Sahara or Gobi desert, the vultures go on circling the victim, the way some Investors circle on the stock at bargain price. Both want their victim/market or stock to die so that they can relish the meat or what you call in Investor's parlance - Bottom fishing.

When the party is over, the vultures leave with bloodied face; Investors leave with a message - Bad news were discounted, so pick up the bones.

Kalidas, Hong kong
21-04-2008

32) - Reply to Guest on (21-Apr-08 17:52 ) RITESH

3 Answers:

1. No - I did not work for Bank of Baroda (it did not exist during 1984~87) and ICICI Bank was opened only recently, whereas I left bank in 1987

2. No one manipulates the market. These are always 'cheap talks' May be some specific counters might be manipulated if they are illiquid, but the Market - impossible. Market is simply too large for anybody to manipulate.

3. Trust your source. I have answered this question more than 2 times before - so I avoid repetition

Kalidas, Hong Kong
21-04-2008

33) Anyone's real growth age starts from 36 and continues right up to 56, but first 10 years are very powerful.

Only Hard work pays, luck comes later. Luck is always there but excessive reliance and showing to hand reader is a waste of time. I call them our Astrological Analysts, who predict what you like and never tell you the truth (because they do not know)

No good work goes to waste - I'm firm believer. I was a keen observer from my childhood days and often people used to say I wasted time. But here I am - thanks to habit developed earlier. Whenever a news hit me, I instantly get the insight what was wrong, right and could happen next. I rarely go wrong.

How long it takes to become a mature stock broker? Well, being in Hong Kong, we are exposed to world market, so our horizon is very wide. It took almost 5 years to understand and next 11 years to get mastery over the subject. This is ongoing process.

In Hong Kong, I was exposed to GDR/ADR arbitrage, Convertible Bonds (my main business), HK Equity and Indian equity (for my own investment). I learnt some thing hard way - when you are a broker, do not become investor. Never trade on your own account if you are broker for your customer. That gives me lots of commission and did lots of justice to customers.

Returning India - never. My children settled down in USA, so where to go in India? No one knows us anymore except a few friends.

for managing farms, I allow discretion to my own foreman and also brother in law. I treat my farmer employee as if he is my son - gave him mobile phone, new bicycle, built roof over his home and will build for him the pucca cement house within a year's time. Too much give away too soon also spoil the employee.

This is enough

Kalidas, Hong Kong
21-04-2008