1)
Of all the FED Governor, Bernanke is the best. He inherited the sins of Alan Greenspan and yet he is smiling and facing the uphill and imposing task of re-surrecting US economy and prevent it from sliding into recession. While Alan Greenspan was following Yudhisthir (except Truth) by following his famous dictum "Naro Va Kunj Rova" in every FED meeting and Senate hearings, Bernanke on the other hand is open, communicative and extremely forthright. He does not hesitate to take the action dictated by his common sense and intelligence. He does not care what the critics think - he is just focusing on the market and how to get out of the mess.
Rumors are FED may announce its buying plan to buy troubled bonds to relieve the banks from severe stress. A body - similar to Resolution Trust Corporation floated in 90s (by Senior President Bush) to stop the massive collapse of Savings & Loans banks when over 500 S&L failed) may be formed to buy these bonds, funded by FED.
President Bush and Treasury Secretary Henry Poulson have objected to this idea on the ground that it can not risk taxpayer's money to save the troubled banks. But they have no other options.
This is not unusual. I give India's example. 5 years ago, when almost all banks suffered from NPA or Non Performing Loans (including this IFCI). Government of India established Asset Management Corporation (AMC) where most bad liabilities of the banks were transferred. The Banks' balance sheets became clean and with the advance of the market, all banks saw their stock prices jumping 10 to 35 times in just 5 years.
FED is going to be supported by ever willing Bank of England and reluctant European Central Bank. However, this remedy is completely wrong - it is more like emergency injection given to a patient on his death bed.
The problem is NOT the sub-Prime but the Derivatives which are NOT on any of the bank's balance sheets. For every sub prime loans, the banks have issued derivatives nearly 5 to 20 times depending on the leverage. If FED buys the sub prime loans, which is not a massive problem, the derivatives are not going to be affected because the derivative owe their life to "Swap Market" or "Roll Over" market that is dead. If there is no roll over, the music stops and the person in the middle gets caught.
Derivatives are instrument created outside the FED control. They mimic black money over which RBI has no control. These derivatives created "Book Entry Money" out of vacuum. According to International Bank of Settlement, over 560 Trillions of derivatives or about US$ 200,000 per capita in the world are floating in the market with little backing.
SHORT TERM, however, the market might see swiftest rally on record. As result, my earlier advice to sell everything is to be placed on HOLD for a few days.
FED move may come as early as this week, before all banks start reporting 3Q in April. Only yesterday, Bank of America revealed another massive loss of US$ 6.5 Billions.
If the FED does move, US$ may strengthen, Gold, Silver, Commodity prices may fall steeply (10% to 20% in just under 2 or 3 days), Oil may fall by 15%, and Rupee too may fall over 5% to 6%. However, do not expect FII money to come here in floods - The Rats- SEBI, RBI and FM have effectively killed foreign investment.
DO NOT buy commodity stocks. Refinery stock may perform better. ONGC may fall. Airlines may rise strong. Finance (banking) stocks may rise as much as 20% to 30%. Hotels and software to do much better on weaker rupee. Textile Exporters gain too.
This is a risky gamble worth taking. If you are on short side, better cover yourself ASAP. If you want to buy your favorite stocks, do it for very short term basis. When SENSEX rises over 2000 or 3000 points, sell at that time everything. Buy only those stocks that have fallen most.
Kalidas, Hong Kong
Ref: 08086 of Monday, March 24, 2008
for Manish2703
Short term means about 2 weeks to max 3 weeks. If FED does not come up with idea to buy the bonds, just sell whatever you bought.
Situation is very fluid today. It is more like you are a soldier on the battlefield, who does not know what the other party will do. You have to deal with the situation as it comes.
Chances are 70% FED will buy back the sub-prime bonds that may engineer swiftest and strongest rally ever seen in the marketplace. Dow may rise about 1000 points within 3 days - guess what SENSEX will do.
Kalidas, Hong Kong
24-03-08
for Gopinathcog1
Of course it is prediction based on calculated guess what the FED might do. Because most of the persons are on the 'short side' the rally will be the swiftest and those 'Shorters' will be wiped out in matter of hours, just as the bulls were wiped out in hours after SENSEX fall of 3000 points within 2 days.
If you are not bold enough, stay out of it.
Kalidas, Hong Kong
24-03-08
for TVMonty
You did not read my article well. This is no time for selection or fundamentals. Buy the quality stocks that have fallen much in last 5 to 7 sessions. This is the place where most have shorted, so rally there will be fast and substantial.
In this kind of market, you do not go for second or third lines. Stay with bigger and liquid stocks, so that you can come out quickly at your will.
Second and third liners are dead for some time. They will not wake up until the market's rise is consistent. They may be good for long haul.
Now, do not ask me which stocks to pick. My answer is when you have to lend the money, who do you lend? The person to whom you know better and know that they will return your money.
Similarly, stay with the stocks you know. Do not venture into unknown stocks - they will harm you 9 out of 10 times. The regular stocks you know of, you know their pattern, behaviour and practially every movement. This is what your attention should be.
Kalidas, Hong Kong
24-03-08
for giggle,
you always reach the sky. If the stocks do not go to the high enough in the sky, the sky falls to come closer to you so that you can feel it.
In stock market, only 2% make very big money, otherwise, 20% make money moderately and 80% definitely lose.
Kalidas, Hong Kong
24-03-08
for Guest,
Agreed. My call is purely short term to maximize the gain. My move is more of anticipatory than fact based. Cautious investors should wait - but only those are waiting for long who have already lost lot of money. Those who are professionals and are not afraid to wager on well calculated gamble, should buy before FED Acts.
These rumors or loose talks have emanated from very knowledgeable quarters. One of them is a Alan Blinder who used to be very vocal member of FED in the past. Another is from the Fund Manager from PIMCO - world's largest bond manager. They are not people who will even move their lips unless they have strong reason to.
But you are right. It is better to leave 500 to 700 points on table, rather than risking on the basis if heresay. However, please note that there may not be 500 to 700 points rise - it will be much bigger than you think, and may be there may not be any seller in same way there were no buyers when the market fell by 3000 points.
My scenario is only for professional investors only who know what is RISK and RRR (Risk Related Returns.
I did buy 3000 UCO at 33.7+, Air Deccan 1000 @103.5 on average, and 21000 of GV Films at 4.60 (not suitable for small investors). I did buy IFCI at 38.90 but sold it back at Rs 38.65 (2000 shares) because I wanted to buy Air Deccan more than IFCI. I had sold Air Deccan earlier over 304 having bought earlier at 138. I would buy Spicejet at this price 38+ (could not get it), and GE Shipping at 330 (the level at which I had bought earlier and sold at 480)
Kalidas, Hong Kong
for Vivek Dhariwal
Agreed. You may defer buying Gold and Silver for time being. While Gold may fall to 810 to 835, Silver may fall faster - often 20% in a single day. This level may be reached if FED moves the way I thought.
My upside target is Gold 1800 Min 2400 Max and Silver $31 Min and $60 Max for short period of 12 months. In India, the Silver may fall to Rs 18000/Kg and upward target is Rs 36000 Min and Rs 60000 max per Kg. If Rupee drops by 7%, add that much amount to above target.
Please note that Gold is real money. If the crisis continues, a day will come when like Bretton Wood Conference in the past, the world monetary system may go back to Gold Standard one way or another.
The Gold demand will therefore rise, not only from retail investors in India but also Central Bankers all over the world. GOLD IS GOD and TRUST WE DO IN GOD
Kalidas, Hong Kong
24-03-08
No, Right now almost every brokerage firm or ETF are investing directly or indirectly in derivatives. They may disappear at any time. This atmosphere is more like World War II where whatever under your arm is yours.
The worst form of investment is in brokerage stocks. Look around who is in trouble? Merrill Lynch, Goldman Sach, Bear Stearns, Lehman Bros., Morgan Stanley, Goldman Sach, UBS - what is common factor in them - they are all brokers. In India you may have India bulls, Kotak etc.
You never know the true state of affairs of any broker. They live and thrive in Opium, that is, OPM or Other People's Money
Physical is physical and paper and paper - when all investors will learn?
Kalidas, Hong Kong
24-0308
for Mani25,
You do not increase the bid from $ 2 to $10 overnight. I can understand if it is in increment of $0.50 or more or some other bidder had chipped in - but that was not the case.
I will write soon about JPMC
In my short, sweet and bitter opinion, it is not JPMC who saved Bears Stearns =- it was FED who saved JPMC whom I consider as 'bankrupt'. No one gives away US$ 30 Billions to a bank @ 2.5% for 10 years on non-recourse basis, with even nominal interest being deferred for over 2 years.
2.5% on $30 Billion = US$ 750 Million per year or US$ 1.5 Billion for two years - are we to believe that JPMC did not have such pittance amount to pay to the FED?
Bears Stearns was used as 'bait' - real troubles are brewing at JPMC - not from now but for many many years - it is reaching climax...
Kalidas, Hong Kong
25-03-08
for vivek Dhariwal,
I never read any book in my life. Hong Kong is too busy center to find time to read hundreds of pages.
I gathered my knowledge reading magazines, newspapers, watching TV , and mostly Bloomberg machine. Bloomberg machine was used by me when I was a stock broker - and I consider it as my first wife (with second at home). There is no other quote and news service in the world which can match Bloomberg. It is quite expensive though - costing USD 1500 per month - but that was small expenditure for a brokerage firm where I was working.
Books are valuable companion though. You learn a lot, but I did not have that luxury.
Read from every source but use your own common sense. You have to have keen observation power that you can cultivate over the years. Nothing is impossible.
Kalidas, Hong Kong
25-03-08
for pkk07
You read only Second column where Gross Market Value (GMV) was shown. First column section contains Notional Amount Exposure (NAE)
In Billions of Dollars
RiskCat Dec-05 Dec-06 Dec-07
TotalCon 297,670 414290 516,407
GMV works only when the Swap Market is good, so that people can roll over. When it does not work, so called NAE becomes real exposure.
It is like you give a guarantee for Rs 20 Lakh and pay only Rs 2 Lakh as margin money to a bank. Your GMV may appear to be Rs 2 Lakhs but when the guarantee is invoked, those contingent liability become real at Rs 20 lakhs
This is what has happened. Sup Prime losses may be around $900 Billion (not all of them are bad, realizable value may be around US$ 500 Billions).
However, leveraged derivative contracts were issued nearly 10 to 20 to 50 times by those banks. Thus, the real exposure in derivative market comes to $ 9 Tillion, 18 Trillion or $ 45 trillions depending on leverage.
JP Morgan Chase alone had exposure to detivative contracts to the order of $ 30 trillion about 5 years ago, I have read from a good source.
Since roll over market is almost dead, the counterparty is simply demanding performance or ask the other party to pay up the contract value and receive the underlying securities.
If I have bought Reliance at Rs 3500 and now trades at Rs 2200, the counterparty may not agree for cash settlement for the difference, but may ask you to pay full value of the Reliance contract and receive the shares. What you do after receiving the shares is your bueinss.
Kalidas, Hong kong
26-03-08
REJOINDER for pkk07
I did not say that there were losses of $500 trillions. What I mentioned was the total derivative exposure. What is realizable losses are equal to $500 trillions LESS security realizations.
In sup prime market, the derivatives were issued in several trenches spread over mortgage period of 30 years. first 3 years 'Interest Only' and subsequent for say every 5 years.
The primary mortgage was for 'Interest only' All others become 'sub-oridnated', that is, they can realize security only after left over after first mortgagee realizes his dues and leaves the balance for the others
Again, in foreclosure, the first mortgagee keep all rights and entire balance after realization of security (unlike India, where the mortgagee is required to pay the balance to the borrower after his dues are adjusted. However, in foreclosure the lender (mortgagee) assumes full ownership. Thus, all subordinated mortgages like above derivative have ZERO value.
Kalidas, Hong Kong
26-03-2008
for pkk07,
Derivatives are always leveraged 20 to 50 times. Call up some FOREX broker who will ask you to deposit just 2% or 3% to give you a contract of USD 250,000!
Why go elsewhere? BIS (Bank of International Settlement) published Notional value of contracts outstanding at US$ 517 trillions of which Gross Market Value was US$ 11 Trillions - that is - just 2% - that means that the leveraged is 50 times on an average. I have replied to someone on this subject (was it you? - I lost track)
Even BIS does not have full records. OTC derivatives may not have been fully reported. Most of the portion is Interest Rate swap and Credit default swaps - both markets are now virtually dead - you are reading everyday like brushing your teeth in the morning.
Kalidas, Hong Kong
26-03-2008
REJOINDER 2 for pkk07
I stated in previous rejoinder
Quote
Since roll over market is almost dead, the counterparty is simply demanding performance or ask the other party to pay up the contract value and receive the underlying securities.
Unquote
This is what Harshad Mehta did. When he bought the shares from stolen money from RBI, he demanded delivery of the shorted shares (or insisted on performance) He was controlling float of the shares in circulation as result of which the short seller had to cough up huge losses on settlement day. He used to say - Take the money and give me the shares physically - which other party did not have.
Kalidas, Hong Kong
26-03-08
for Karshin
I do not have specific views on Tata Motor's purchase of Jaguar.
I have a general view however for taking over companies. Right now is not the time to take over any company. Market commercial interest rates are on rise, and they may gallop upwards. The stock markets world over are in a state of flux and may suddenly take plunge if real issues are not addressed now. This will make valuations of any company far expensive. There is real fear of recession. Auto industry is extremely sensitive to recession.
Even Microsoft's proposed take over of Yahoo is fraught with same risk. Microsift may end up paying top dollars at wrong time. However, Microsoft is very Cash Rich, so it can afford the taking over luxury. But supposing, microsoft's billions of dollar disappears if the bank in which is it has kept billions, goes bust, what will happen to its take over?
Does Tata Motors have as much cash as Microsoft has? If they have, may be they will succeed and if not, and they intend to finance acquistiion by debt. then may be they will have to face some uncertain period.
If TATA MOTOR had waited for over 6 months from now, may be their purchase price would have been much cheaper.
Kalidas, Hong kong
27-03-08
for Guest
This crisis originated in USA. India can not do anything except softening impact. Allowing Rupee to rise may help to some extent, not much.
The banks, investment brokers and hedge funds generated 'book entry money' which created 'parallel economy'. They created crdits several times the FED, ECB and BOE created officially. The only adjustment process is self balancing. What form will it take, no one knows. Money created out of vacuum will go into vacuum or black hole permanently.
I can not answer beyond this point. it is like asking what is the 'black hole' in the universe where no one can ever go.
Kalidas, Hong Kong
27-03-2008
for TVMonty
FED is not legally permitted to buy bad loans. There are other agencies. Further, the problem is not in sub prime loans but with derivatives. So even if the FED buys back entire bad loans, the problems (of connected derivatives) are not going to be resolved.
Please read my previous post relating to CDO over here.
Kalidas, Hong Kong
27-03-08
for Blue Violet,
There can not be roll over when the counterparty perceives greater risk. Further, the contract value of the contract has come down to ZERO because the underlying collateral was siezed by the Primary Lender under foreclosure with the result that there can not any value in future.
Under the foreclosure rules, the primary lender of subprime moartgage assumes the ownership and he retains all profit and loss. He does not have any recourse to borrower in the even of shortfall. Borrower therefore simply walk away.
In country like India, there is no foreclosure under the mortgage. If the lender takes possession of the property and sells it later, he can adjust the proceeds to his dues and if there is any shortfall, he can sue the borrower, and in case he realizes more than his dues, he has to refund it to the borrower after all expenses.
Thus, in India, the value of the mortgage does not come to zero, but in USA it does because the lender has no recourse to the borrower for the shortfall.
Kalidas, Hong Kong
28-03-08
Kalidas, Hong Kong
for gs 2007
India imitates USA , not USA imitates India. Quarterly reporting, known as #Q in USA, is age old practice there. India is just trying to follow it.
Stay where you are - with CASH. Otherwise, when the market slumps big time, you have no cash to invest. Patience is a virtue in this kind of game of investment.
Kalidas, Hong Kong
4/4/2008
for Guest,
Rupee appreciation will not bring any benefits or reduce the losses of Indian banks or corporates.
The instruments - CDO or CDS - on which they are sitting have ZERO value. Even if Rupee goes to Rs 10/$ or Rs 5/$, it can not make ZERO to anything bigger than - say - ZERO
Kalidas, Hong kong
4/4/08
11) Reply to Guest on (22-Apr-08 11:49 )
No government or authority wants to have complete financial meltodwn. At the same time they do not want to risk the tax payer's money.
This is not the rally and tiume you quoted. It has already passed. The FED announcement was made, and it is all over.
I do not consider it to be a rally which was based on specific stocks' recent earnings. They were totally unrelated to the problems facing the world. What GOOGLE has to do with Citigroup or UBS or Merrill Lynch.
What you see here is the range bound trading. Any bad news is considered to be discounted and no one ever says why good news are not discounted by same criteria?
No one can give you precise timing. When a woman is given a date of delivery, it is just indicative. Even until she goes to labor, the Doctor or Surgeon does not know precisely when the baby will be delivered.
If you believe that the spate of bad news is over, and there can be only positive and good news, you may re-enter. To me, the bad news are just disclosed to a fraction. As you correctly said, Gordon Brown was furious at European Banks not disclosing their losses at one go.
If banks start disclosing all losses at one go, trillions of losses would be revealed and the collapse may become imminent. Gordon Brown is exhorting Europeans because British banks had to declare the losses but European banks are shielded by their Central Bank ECB. The real problems are in Europe. When FED pumped in only $ 64 billions, Europeans pumped in over $ 500 Billions and then again $ 400 Billions totalling $ 900 Billions. That means the problems in Europe are massively hidden.
I do not have crystal ball to tell you when and which European bank will come out with their losses, so also Japanese banks, because everyone is determined to conceal their losses, in the hope that things may turn better and their losses may sound smaller, unless all these banks are forced to disclose their losses in one go.
In London, each bank is suspecious of another especially when one approaches the market with larger amount. The very first doubt created is why thgis bank wants so much? are they in trouble? This is why the lending has come to a stand still.
If you want to enter and play the market, you can do so with clear mind and target to book the profit and loss at predetermined target. It is like riding a wave, where the surfer always wants to remain on top of the wave. If you can achieve that, do it if you can.
For me, this is a very risky market. Since no one is disclosing their true state of affairs, I am sceptical about them. I continue to be liquid 100% cash with no intention to return to the market in foreseeable future. However, you do not have to follow me. there are many other active traders, who might guide you for proper strategy.
I have one simple strategy for any confused person. If one is confused, don't do anything. If you are sure of money making opportunities, go ahead and seize it.
Kalidas, Hong Kong
22-04-2008
10) Even a Chairman of the SBI may not know how much deep in Red it is or could be at some future date. During the days of heavy losses, the dealers or traders conceal the biggest losses.
Baring's fell only because of one rogue trader. It was 89 years old company, Recently, Soc Gen lost over $ 7 billions only because a trader concealed the losses; even Credit Suisse disclosed $1.5 Billions of losses because its traders did not report true position.
Even USA concealed its problems for so long, only now they are unfolding.
Mr Bhatt blames the losses on his Corporate Clients. He knows pretty well that those clients can not and may not sue SBI for fear of getting outcaste. Most banks are 'nationalized' and any enmity with one bank will not find favors with other banks with same parentage. It is like to swim in a lake and make the crocodile as your enemy.
Mr. Bhatt did not explain how come their Corporate Client lost money when the Indian rupee fluctuated just 1 to 2% in last 6 months. To book a loss of Rs 700 crores on movement of just 1%, means that those corporate took the position nearly 100 times or 50 times at least. That is they exposed themselves to Rs 70,000 crores - which Corporate has 'balls' to undertake such exposure, including Reliance?
So he is hiding the truth. The losses, though classified are not 'FOREX derivative losses' If they admit that they were 'sub prime losses, the bank will be shunned out in London's LIBOR market almost immediately. So they use 'Nickname' Forex losses, not derivatives losses.
And he candidly admits - SBI did not lose in sub-prime loans or its derivatives, but in its investment in Fortis Bank which was at one time was one of the top most bank in Belgium known formerly as 'Belgium Bank' and not taken over by some Chinese bank.
So when that Fortis Bank is existing, how could SBI lose in that bank? In banks there are only inter bank transactions which are HIBOR or LIBOR based. Obviously, he is not telling the truth either deliberately or he does not even know what is wrong in his belly which is making swirling sound.
And read what he says
QUOTE
Speaking at a seminar organized by FICCI, Mr Bhatt said that SBI has structured derivative deals only for its customers and each deal has an underlying clause. “In our books there is no provision on this account,” he said.
UNQUOTE
The whole world has lost money only in Structured Derivative deals through SIV or Structured Investment Vehicle of each bank. And what does he mean that ' in our (SBI) book, each deal has an underlying clause - In our books there is no provision on this account' What is he hinting at? that SBI sold those structured derivative products simply without any basis? Are those corporate clients goddamn fools to have bought those papers that have no basis at all?
Honestly, The Chairman himself does not know the underlying transaction at all. Otherwise he would not have made a statement which has no head or tail at all. Wait until something hits him very hard
Kalidas, Hong Kong
26-04-2008
11) Reply to drkhalsa on (25-Apr-08 23:12 )
I have mentioned in my previous posts that there is nothing wrong in maintaining deposits with SBI and ICICI bank.
SBI was created by the act of the parliament, and any Government of India - Congress, BJP or even Communists, will allow it to fail. The losses anticipated by me was due to my thinking of inter-relating number of events. I do not have open admission from either SBI management of any losses due to sub-prime nor absolute denial of such losses. I would rate my own anticipation as 'guesstimate'
ICICI Bank, India's second largest and most high profile bank, does seem to have large exposure but it appears to be within its capital base. Even if they lose Rs 10000 crores, as estimated by some brokerage (2.6 Billions), their total capital base of nearly $10 Billions may provide sufficient cushion. This bank too may not be allowed to run into troubles by GOI as well as RBI. You need not worry about this bank too.
What is the full name of SBP - is it State Bank of Patiala? for NRI, it is always advisable to keep funds with parent bank like SBI and not its children SBP, SBS (State Bank of Saurashtra) or SBM (State Bank of Mysore)
You need not change the funds to some other banks because at the moment the fear is unfounded. The GOI will never back out of its commitment to depositors to pay the full amount, even if the Deposit Insurance limit is Rs 1 Lakh only. The default risk is minimum.
If you do want to switch, out of excessive fear, use Axis Bank (formerly UTI Bank) or HDFC Bank as one of the alternative. You can open account ONLINE with even ZERO balance.
I do like the nationalized banks, but there is one more risk for persons like NRI. There are lots of frauds committed by bank officials in NRI accounts. I explain to you in continuing post the kind of fraud taking place in NRI accounts.
Kalidas, Hong Kong
26-04-2008
12) CONTINUING POST for drkhalsa
FRAUDS IN NATIONALIZED BANKS AGAINST NRI
There used to be a practice to allow cash kickback to the NRI investors by a borrower of the bank. In this transaction, a finance broker will inform the NRI that he can get 1% to 3% extra kickback if he kept the deposits in a designated branch of a bank. Such extra costs used to be borne by the borrower of that branch. An example:
'A' is a borrower of 'X' bank. He wants to borrow Rs 4 crores. HO of that branch tells the branch that its deposit level is low. Unless that branch raises the deposit, HO can not sanction the loan.
The Branch Manager of 'X Bank' introduces the Finance Broker 'FB' who knows the NRI customer. The borrower 'A' agrees to pay deposit premium of say 1% per year or 3% for longer deposit of 3 years in cash. The branch manager also gets something. FB approaches his NRI customer to wire the TT into X Bank's branch. The transaction is settled immediately as soon as TT reaches the branch.
So far so good. The tricky situation develops here and many NRI from Hong Kong, Dubai, Singapore, USA to UK have lost large sums and faced CBI Investigations.
When NRI sends the TT to a branch, the Branch sends Fixed Deposit application form to be filled in by NRI and send it back to with a copy of his passport. This takes about 2 weeks time.
However, in some cases, the Branch Manager colludes with the borrower to issue the Fixed Deposit immediately under NRI name but with fraudulent signature. He then pledges the deposit using the forged signature and allows borrower to withdraw the money.
When the genuine NRI investor sends the Deposit application form signed by him, he is also issued the same deposit receipt but his signature is not officially taken on record.
Now, there are two deposit receipt - one the bogus one against which cash was withdrawn by the borrower A and another genuine deposit receipt which is sent back to the NRI customer.
The deposit receipt being for 3 years, the NRI customer will not know about the fraud for next 3 years. When the deposit matures, NRI customer is advised by the branch that he has already pledged the deposit with the bank and the borrower has used up the money. Unless that loan is adjusted, NRI can not withdraw the money. NRI comes to know of the fraud only then.
When he lodges the complaint to HO or to RBI, they, instead of settling the NRI's claim, hand over the investigation to CBI who suspect that borrower has used 'havala' to send the money overseas, and NRI was only a proxy. Several NRI's were black listed in such scam. They ultimately got paid after 3 or 4 years, but they lost interest for extra period.
Allahabad Bank had Rs 100 crore scam, so also BOB, Canara, Vijaya, Indian, Dena Banks were involved from time to time.
HOW TO AVOID SUCH FRAUDS AGAINST NRI?
If some one wants to defraud, there is nothing in this world to stop him. However, the solution is simple. Take Credit Confirmation from the bank every year by writing to the bank's Zonal Office/Regional Office, pleading that it is your Auditor's requirements.
Looks a fairly tale but true because I know it as a matter of fact.
Kalidas, Hong Kong
26-04-2008
13) Reply to drkhalsa
In USA the future of the Health Industry is extremely bright. They even give special visa to those who undertake Nursing Profession and they are paid almost twice than even professional engineers. My daughter who also lives in California has a friend in Salem who finished the course in Nursing and got immediate employment and also work visa.
Americans are extremely health conscious. They intake lot of cheese and orange juice, and then go for running to burn the calories they just took in. They can live without AMEX card (that is the slogan of AMEX), but they can not do without prescription and Over the Counter medicine.
They also have obesity problem which becomes acute day by day. If you can identify such area and specialize, then you will have very prosperous time.
Kalidas, Hong Kong
26-04-2008
14) Reply to sdmital on (22-Apr-08 22:21 )
It looks like you are reading my posts intermittently. I am not a technical player at all. Technical players are those who rely on historical charts to predict the futures. They are backward looking to look at the future.
I rely only on present events and its fundamentals to foresee the future, and my calls are not for short term traders where everyday some rescue operations here and there try to save the market.
My calls were for SELL only and even now SELL with 100% cash. I gave the call to those who had long position of stocks and not for someone who wanted to play with the market short term (or speculate) and wants to make money.
My SELL call was to save the money of those who were long on equity. I have mentioned number of times, that the present times are not for making money, but to preserve the capital for future use.
There were times, when I also gave the most bullish calls on the market as a whole when the banking stocks were trading at their nadir and SENSEX was at 2800 when I had predicted that the Indian market would rise to 10,000 and that Dow and SENSEX would shake hands (with SENSEX rising and DOW falling). Dow did fall and SENSEX did rise, with latter overshooting the DOW much higher.
None of the technical analysts or the chartists could have predicted such forward looking statements, because they relied on historical which never saw the market beyond 6000 at the most. I relied on fundamentals at that time and even now. I rarely read charts therefore. though I do possess extensive knowledge of its theory and practice.
Whenever I give calls or express opinions, I always back them up with adequate explanations as to why? If the reader agrees to accept my opinion and back up explanations, they follow me or else they are free to follow others.
So your anger that I should not open my 'Big Mouth' is out of place. You were not the kind of investors to whom my opinion was directed at. It is unfortunate that you, as short term operator, followed up the call for short term treats,. whereas my call for long term investors to retreat.
Kalidas, Hong Kong
26-04-2008
15) Reply to Guest on (23-Apr-08 14:46 )- A Mukherji
I was waiting exactly for the kind of or even the worst reaction.
Some abusive boarders questioned my call why was I writing, and when I abstained away (because of my business pre-occupation and attending trade fairs in Hong Kong) for a few days, you have come up with the statement that ' I have tanked'.
You do not know me, and some of the biggest investors, who used to be my clients and were 10 times larger than Rakesh Jhunjhunwala, know me pretty well, that I always aired really 'independent views based on hard facts' and had been right not only in January 2008 but for the last 10 years in a row. One of my client was very solid customer of UBS and even its Chairman would call my client to remote place in Thailand for meeting most prestigious customers. At the time of merger of UBS with SBC, I had told him the problems at UBS and asked him to shift his assets from there to some other banks.
He realized only recently and partially switched his assets to some other banks. In 1999, I was the only person on this planet to write very boldly - BANKRUPT DOLLAR' and who created Asian crisis and why. It turns out to be 100% true after 9 years, when my time horizon was 3 to 5 years. I also predicted why the Gold should go to $1200 when it was just trading at $ 257 to $ 310.
A leading Consul General in Hong Kong to whom I had sent a copy of my report, invited me twice for dinner and asked me one question ' How many times you have gone to China?' I replied 'None' ( at that time I was stockbroker. After leaving that field, I traveled a lot to China). Then the Consul General invited me to a highlighted Para of my report - he said - I was in China for 4 years as Consul. What I could not learn for so long, you have learnt and expressed in just one Para the eternal truth without ever going to China. After a few days, he told me - My Report was lying on the President's table when he went to his home country. I do not name that country for obvious reasons.
And do not mention Harshad Mehta and others. Harshad used the stolen money, and he is as famous as dacoits of Chambal or Foolan Devi. And who knows who made how much, including insiders like Damani, who are always privy to some sensitive BSE information. I just study the public domain or news, not the news behind the 'Iron Curtain' to which only a few have privileged access. I am ordinary person like you and rely on public knowledge.
And your comments that how can I as an Indian have solution for the world crisis - well I do maintain that - yes, I do have. Higher intellectual faculty is not the domain of only non Indians or for that matter even Noble Laureates or other specialists.
Today, we live in the age of 'Specialists'. The eye specialist what is wrong with ears, and ear specialist does not know what is wrong with your teeth and a dentist does not know what is wrong with your lungs or hearts or liver or kidney or diabetes. But your family doctor who is General Medical Practitioner, knows your body too well, he does not use even stethoscope and just by holding your veins, knows what is wrong. I am that Generalist, not so coveted specialist.
I have mentioned number of times here that I do not change my opinions frequently. A few days back, and even now my call is still 'SELL everything' and stay with the Cash 100% (Gold is also known as CASH and not an investment. Gold is a hedge, effective savior, of those who trusted this noble metal.
When India was at the height of FOREX crisis in 1991-92, It was India's Gold that came to the rescue of India,. British Govt would not have lent a penny if India did not have gold. Even IMF has run out of money, so selling Gold - it is not negative event. It is IMF's admission that it is gold that has come to its rescue.
Kalidas, Hong Kong
26-04-2008Guest on (23-Apr-08 14:46 )
16) Reply to Guest on (26-Apr-08 11:49 )
Before alleging 'double standard' you should read my post several times. You should also quote my statement verbatim using 'cut & paste'.
YOU SAID 'Kalidas leave your double standards and stand by your words. On one hand you say that ICICI is going to be bankrupt and they will loose more than 10k cr and will not be able to withstand the onslaught of such a loss and the Indian govt will come to its rescue and on the other hand now you say there is no problem and nothing will be affected.'
WHAT I SAID (in Reply to aquarius5863 on (19-Mar-08) ' In India the deposits are insured up to Rs 100,000 only. However, Government of India is 'Kuber'. It will come to the rescue of depositors in case something happens to ICICI. At the moment it does not appear that they will have liquidity crisis........'
I ALSO SAID (in Reply to pkk07 on (19-Mar-08) 'Let me put to rest your anxiety. In worse scenario, the bank(hinted ICICI Bank) could be nationalized. Of all the governments in the world, Indian government is the only one who really cares for the depositors. It is the best Government for social security in this sense '
I ALSO SAID (in Reply to tamal on (19-Mar-08) ' I do not know the level of exposure of ICICI to CDO/CLN and other derivative market, and therefore to avoid spreading rumors, I would not comment whether they will go belly up.' ....also 'It is possible that Government of India may nationalize this bank if it faces acute crisis. Today's ICICI Bank is almost second largest bank in India, and like FED, Government of India can ill afford to let it go belly up....'
I ALSO SAID ( Kalidas on (26-Mar-08) Reply to Guest
'Let me very specific about ICICI - I never suggested to anyone to withdraw money from ICICI Bank - because in the event of serious trouble there, it can be nationalized by GOI. So there is enough safety out there in India.'
I ALSO SAID ( in Reply to Airan on (12-Apr-08) '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.'
I ALSO SAID 'ICICI Bank, India's second largest and most high profile bank, does seem to have large exposure but it appears to be within its capital base. Even if they lose Rs 10000 crores, as estimated by some brokerage (2.6 Billions), their total capital base of nearly $10 Billions may provide sufficient cushion. This bank too may not be allowed to run into troubles by GOI as well as RBI. You need not worry about this bank too.'
YOU SAID 'You always say something then twist it when it goes wrong and defend yourself' ....went further...'the sensex will go till 18k and then there will a crash of say 2k and then Kalidas will say see I told you so.'
MY REPLY: I never said so. If you believe I did - just reproduce my statement verbatim as I did for you.
YOU SAID 'On one hand you say America will starve and there will be roits (riots) and on the other hand you say ppl will like to take treatment of obesity etc and will follow their health regime strictly and blah blah'
MY REPLY: I never said that America will starve.. on the country America can feed entire world. Have you seen world map and compared the size of India and America?
YOU SAID 'please beware of Kalidas and his statements as he always twists them.He may have good technicals but attitude and arrogance along with his repeatedly changing stance makes following him worthless.'
MY REPLY: I never bother about technicals. very recently I said that ...I am not a technical player at all. Technical players are those who rely on historical charts to predict the futures. They are backward looking to look at the future.
I rely only on present events and its fundamentals to foresee the future, and my calls are not for short term traders where everyday some rescue operations here and there try to save the market.'
Kalidas, Hong Kong
26-04-2008
17) for Rajaram
Thanks for your message. I am relatively immune to such attacks or at times some criticism our of ignorance. The purpose of my replying to the concerned 'Guest' was to summarize my views which were misinterpreted not only by some guests, but also some other well known boarders just to derogate me.
We all live in Democracy, and one of the best outcome of democracy is the expression of uninhibited views of many boarders, some novice, some graduating, and some well experience ones. I would not attempt to constrain their views either by myself or by MMB moderators, unless they go beyond the means of decency and verge on the board of abusiveness and vulgarism.
Indira Gandhi once summed up the democracy in one sentence ' Democracy is not a license to Chaos' (these are not exact words but nearly same, when she imposed Emergency Rule in mid Seventy.
I normally do not reply to such 'Guests' on ongoing basis. However, I allow them to accumulate their honest or abusive criticisms and reply in one go, so that most boarders will get broadened view of the subject under discussion. Not every boarders has time and passion to go through the entire thread, and they are susceptible to quote me out of context.
Some boarders also wildy accuse me of 'arrogance'. My reply to them is that 'Contesting someone's ignorance through my display of facts, figures and constructive opposition, is not necessarily 'My arrogance'. Someone's ignorance is not my arrogance.
So let it be the way it is. We all enjoy the fruits of democracy which is the only means to acquire more and more knowledge and enhancing our life with greater illumination.
Kalidas, Hong Kong
28-04-2008
18) Reply to ysb on (28-Apr-08 18:52 ) Ref: 08-026R
US was explicit for Strong dollar policy during the reign of Rupert Rubin, the Treasury Secretary during Clinton Administration, and who was also Vice President of Goldman Sach before joining Clinton Administration.
US always wants to show stronger GDP numbers. One of the component and most sensitive one was 'Consumption' or Consumer's ability to spend. GDP is a measure of expenditure and not savings.
To encourage the consumers to spend, Rubin, whom I call as trouble maker or scoundrel, he wanted to bring oil prices down and imports more. Strong dollar policy makes import cheaper, so the consumers' spending raises the GDP.
During his time, Rubin, manipulated oil prices, by shorting the futures, buying spot and again selling the spot, so that oil prices go down in spot market. This is the game of derivative. When I was a stock broker, 2 years forwards of Oil contracts or LEAPS or Long Term options, were being quoted at $ 18 whereas spot prices were $28. People usually look at future to judge whether the market will go higher or lower. Being an Ex-Goldman fellow, he knew the game very well.
To my judgement, he used ENRON to short the oil futures to bring down the spot prices. However, Arabs understood the game late, especially Iran, who started cutting the oil production with the result that previous theory of 'Futures' ruling the 'Spot' failed and now, the Spot market started ruling futures.
During his time he also used Citicorp and LTCM - Long Term Capital Management - which busted with $ 1 trillion derivative exposures. This is the reason, in my opinion, LTCM got busted, and with it 'Salomon Brothers - second biggest after Goldman.
Salomon was ultimately taken over by Smith Barney who was taken over by Citicorp to cover its tracts. Rubin suddenly resigned and went to Citicorp as Chairman to cover the tracts and manipulate all derivatives.
Strong dollar was advocated by him because EURO was about to be borne. He feared that there would be debacle for dollars, if Asian countries like Japan and China were to switch to Euro which opened at about 1.20 to dollar.
He then used ARGENTINA to borrow heavily in EURO at about 9% to 11% in international market. European Union welcomed Argentina's actions, because they thought Euro was being accepted outside the EU.
Now, Argentina was dollar block country. Why should it borrow in Euro at very high rate of interest? What Argentina was made to do was to Sell the Euro so borrowed on spot market and Buy US dollars.
When the world thought, including China and Japan, that Euro will go higher, found that it was going down. He also arranged for the artificial Asian crisis, where everything was going down - Stocks, bonds, Property, Asian Currency, Gold, Silver, Commodities, EURO and rest of the world currencies, with only US$ rising.
This is how he prevented outflow of $ to Euro, and until today no one knows it (except me) because I spend over 200 hours to prepare the report 'Bankrupt dollar' in Nov 1999
Rubin was able to follow the strong dollar policy because of wide use of derivatives.
Now coming to your question: Why US is maintaining silence on dollar weakness. Not their intention but they are forced to. To follow strong dollar, you have to have efficient 'Derivative Market' which has now collapsed. If they want to sell derivative contracts, who will buy them now? This market is dead.
US followed explicit 'strong dollar' policy only during Clinton Administration under the leadership of Rupert Rubin. Clinton was a politician and did not have knowledge of finance, just as Bush does not have, so they used to depend on Rubin. He even prevailed over Greenspan - and that fellow as hapless. No one was listening to him when Rubin was around.
America's biggest export is WMD (Weapons of Mass Destruction). They make 1000% profit on every sale. Pentagon always wanted war to support their war industry.
Kalidas, Hong Kong
28-04-2008
19) Reply to Guest (BRB) on (29-Apr-08 11:19 ) Ref: 09-027R
No country can completely switch from $ to Euro. Consider this; in spite of market sideways, and the feeling that it may see new lows, how many of boarders are in cash? Have they switched to other assets? No, because they know that stocks, in spite of being risky at times, still offer liquidity. You can sell them at any time and get the cash within 3 days.
$ is also like that. it is the most liquid currency in the world. Not even Euro comes anywhere near it.
Regarding George Soros, you are right. Also, he was the pawn - the real actor was Rupert Rubin who appear to have used George Soros and Julian Robertson to wreck the Asian currencies and save the dollar from complete disaster.
Kalidas, Hong Kong
28-04-2008
20) Reply to map_ahmedabad on (29-Apr-08 11:09 ) Ref: 09-028R
There are two ways of investing.
One, you watch the market and then take the position. If the market comes down, almost all stock comes down. The only risk is that in case the market moves up, the investor feels left out.
My opinion is that nothing is left out. There are always opportunities at all times. It should be remembered that for every buyer there is a seller who take just opposite view of the buyer. Without other party, the first party simply does not exist.
Second, to be stock specific. After all, you invest into a specific scrip. So if one does not want to follow the market gyrations, he can buy the stock on every dip and retain the position. He should have studied the stock from every angle. This is also important way of investing, and these investors never get out of the market completely.
for example, one bought stock A 5,000 @ Rs 80 (Rs 400,000). Suppose, the stock goes down to Rs 40 due to market correction and the fundamentals of the stock remain as they were, It is advisable to invest same amount Rs 400,000 more to buy 10,000 shrs. Now he has 15000 shares with average cost of Rs 53.
If the stock goes higher, he may sell, say 5000 @ Rs 60, to book the profit of Rs 20 (Rs 60-Rs 40) or Rs 100,000. Always treat each trade as separate one. Never count the Average cost, which is the biggest mistake an investor makes.
Therefore, if you believe in the stock too well, you may buy them at your discretion and listen only to yourself. It is said that 'Luck favors the Bravo'. It is also said that 'Too much caution makes one coward, and they never make money'. Both are right in different context. Take your pick.
NOTE: Of late, the talks are going round that SEC has indirectly agreed to let banks and investment banks NOT to market the losses on the basis of 'MTM or Mark to Market. so everyone believes that worst is over. When you change the rules in middle of game that ZERO is not ZERO but 200 and then treat it as fresh start, and followers believe them, then market appear to recover.
Look at ICICI Bank. Bloomberg reported yesterday:
QUOTE
Indian companies may lose $4 billion on derivatives, according to Hong Kong-based brokerage CLSA Ltd. Sundaram is among a dozen firms that have filed lawsuits against banks including ICICI, Kotak Mahindra Bank Ltd. and Axis Bank Ltd., accusing them of hiding risks to lure small businesses into contracts they didn't understand. No rulings have been issued.
UNQUOTE
That is, the Indian Corporates may lose Rs 16000 crores, and if they do not pay to ICICI Bank, who loses then? And still, ICICI Bank reported larger profit, and its lady Executive when asked about the derivative exposures, said she could not comment because the matter is 'subjudice'. There is no question of being 'subjudice' - she has to comment only on the level of ICICI Bank exposure, which is not a matter of adjudication. It is a question of fact and not fiction.
Obviously, the losses are concealed. ICICI Bank once reported that it will not make full provision because it will hold the scrip until maturity. When the scrip value is ZERO where is the question of holding the security for 30 years? ZERO is not going to become 100 or even 10.
If ICICI Bank's customers do not pay, and even court rules in favor of its customers (Bank is supposed to educate the investors of potential risk before selling any complex product such as 'derivatives'). then it will have to provide for NPA running into 12000 to 16000 crores, and whatever profit it is reporting, may get into heavy losses.
This is why I said to one of the boarders - If you are confused, do not do anything. Similarly, if you do not know everything about the investment product offered to you, NEVER HESITATE TO SAY NO.
Kalidas, Hong Kong
28-04-2008
21)
Reply to a4patel on (29-Apr-08 12:33 ) Ref: 09-029R
Until very recently, I was stock specific, because ultimately we invest in stocks which make money.
However, I perceived market risk so much, that its level is highest in last 70 years of history. When the market is having so much of risk, I did not want to suggest any specific scrip because in the event of meltdown, everything comes down.
I know many stocks which have very good potential, However, I am still not investing even a single paisa anywhere in the market.
Look down the road. Only yesterday, CLSA (Credit Lyonis - one of the largest French bank)reported losses of Indian corporates up to US$ 4 Billions or Rs 16000 crores. These are the derivative losses of customers of ICICI Bank, Axis Bank (formerly UTI Bank) and Kotak Mahindra Bank with major share of such advance belonging to ICICI Bank. or let us say (as wild guess) Rs 12000 crores. Add to it ICICI Bank's own exposure to Sub-Prime loans which was estimated by UBS about 2 months ago at US$ 2.6 Billions against which only 10% provisions have been made.
Now, if the borrowers/customers of the above banks do not pay up, they will become NPA of those banks. If they do pay up, then the Indian corporates will lose (we do not know how many of them are listed companies). These losses are built in but not yet reflected into the profits of the listed companies or banks
Stock market is the function of the 'profits'. If there are no profits, then earnings go down, so also the stock prices.
However, there is a caveat. When these losses are NOT allowed to be reported publicly for a long time, the investors will be led to believe that worst has been discounted. In that case, the markets do go up.
When the rules of the game changes in the middle, there is no way we can prove to be accurate in short terms. I am in this money business for a long time - over 35 years. So far, my judgement have proved to be nearly Right - that is my track record. Further, I am also 60+ years old. So I can not be aggressive like youngsters who are now dominating the market.
Right now, we are living in the midst of highest level of concealment or we do not know the truth behind 'Iron Curtain'. All those talks of transparency are just on paper.
For me I have some investment alternatives - investing into Agriculture, farm lands even some Industrial lands too. Right now, my view is that the long term interest rates are on rise, and all massive losses are converted into paper (when Citibank raises US$ 37 Billions to finance its losses, it means that it is issuing massive tons of worthless papers). When all those worthless papers start circulating, a time invariably comes when no one trusts paper any more.
Take therefore my advice with a pinch of salt. Be a stock specific and trade for a while with strict stop losses. I again reiterate that 'Do not necessarily follow me, if your trading instincts are right'
Kalidas, Hong Kong
30-04-2008
22)
Reply to Guest (Sree) on (29-Apr-08 13:36 ) Ref: 09-030R
You are mainly in Power and Energy sector, both of which are very strong growth area. However, two of them RPL and RNRL are still going through 'childhood days'. Their earning power is still distant. Further, India is still living in the age of Price Control which do not permit these companies to pass on the cost to the consumers. Their profit growth is limited to that extent.
Refineries stocks are in inverse proportion to the Oil prices. If the oil prices rise, they lose (because they can not pass on 100% cost increases to their customers) and if the oil prices do fall, then they benefit, because benefits of lower oil prices too are passed on to the consumers only after long delay.
Currency also plays important role. If Rupee rises by 20%, the Refineries benefit (Oil Producers like ONGC loses) because cost of their input is low. So while evaluating energy stocks, use above yardsticks.
GSPL is certainly Gem of a stock. It makes money out of distribution and its prospects are more tied to oil consumption. In India, oil and gas consumption, especially GAS will continue to go higher and higher, so they are more defensive and yet prospective play
PTC is in power game, which is again in growth area. You may buy these stocks in correction. Normally, these kind of stocks always give lowest returns in other countries. But India is different - in that - it is in high growth and high power demand area.
I have not followed prices above stocks except GSPL which is still on my buy list - but I do not own any at the moment. right now, my approach is 'Macro Market approach' and not 'Stock specific approach'. This is why I do not want to advise you about RPL - However, if the stock moves up by 20% in short terms, better sell and buy back same stock when it drops in value.
Kalidas, Hong Kong
30-04-2008
23)
Reply to Guest (Anand) on (30-Apr-08 15:35 ) Ref: 09-032R
I can go at length to counter all your beliefs which defy all logics.
I have discussed these issues in the past, so avoid repetition.
I reply to your one point ' Bubble yes, inflation no'
You better ask your female members (wife, sister or mother) and ask them how much they spend on Food now compared to 3 months earlier or even one year earlier. That should tell you whether there is inflation or not.
Again you say, higher oil prices withdraw money supply, so they are deflationary and not inflationary. Oil producers do not keep $ in their own pocket but go on spending it. Have you seen Dubai where some of the most spectacular hotels, buildings and space age designs are coming up in rapid succession?
And do you know when the gold was at $ 257, the Canadian dollar was at 1.54 and Australian dollar at $0.49 and South African Rand at almost 13 - Today all these currencies are higher by 35% to almost 90%. They are the Gold producers. So their cost in US$ goes up by almost 80% on average just for extracting from the earth. They can not be printed.
And you say fundamentals are coming to the help of $? Do you know that US debt used to be just $7 Trillions 5 years ago, is not almost $13 trillions or $ 6 trillions higher in just 5 years or $1.2 Trillions per year or US$ 4 Billions or Rs 16000 crores per day?
And these deficits are creating money, so more money goes into circulation, not withdrawn. This is the reason that more money is chasing almost same level of goods or production that raises the prices or inflation.
Yes, you may remain in money market, everyone has to, because the money changes the form from $ to GBP to Euro to Yen to Aussie dollars to Rupee. You have to keep the money somewhere but almost all governments are running huge deficits that strokes inflation. But when the people loses the confidence in paper money, they buy Gold because that is the real money where the governments have no control
If higher money supply is accompanied by equally higher level of goods, then the equilibrium is not breached - this is not the case now.
Kalidas, Hong Kong
30-04-2008
24)
Reply to KUD on (29-Apr-08 13:05 ) Ref: 09-031R
My Comments:
1. Never believe in theory that so and so found so much of reserve. This kind of news are being spread during high oil prices to bring down the futures and also spot prices. Who knows what is inside the earth's belly? No one can go beyond 1000 feet inside the earth or they will be simply burnt out. When you find flood of Oil Exploration companies like Shell, Exxon, Chevron, etc running for exploration right, then only semblance of belief comes in.
2. Americans never go after Petro dollars. They sell their weapons to these Arabs and let them fight amongst themselves, making 1000% profit therefrom.
Americans allow Moslems only after tremendous scrutiny. Arabs can not simply make direct investment in USA. Even 911 incident revealed mostly Saudi Arabian participants, including Osama Bin Laden.
Further, their Moslem religion do not allow Arabs to invest into US treasury bonds. Islam does not permit earning interest.
Saudi Prince's help of just US$ 500 Millions in 1991 is entirely different than the situation today. There were not many derivatives, some most exotic ones. At that time, the problem was bank specific and not market specific.
Compare Saudi Prince's help of just $ 500 Millions to save Citi and today, in spite of US$ 37 Billions help or nearly 75 times, there is no solution. And no one knows who invested so much in Citigroup and why their names are not revealed?
Either that news out is a hoax or US government itself is pumping money into this to save Citibank from almost disaster. Do not forget that present Chairman, Rupert Rubin, ex-Goldman VP and also ex-Treasury Secretary during Clinton era, is still there and manipulating here and there, using his connections with White House.
You will suddenly see increase in US deficits and especially US Budget shortfall, because money has to come from somewhere.
The most cash rich persons like Warren Buffet wants to eat Chewing Gum and Bill Gate another major person with billions of cash in his hand, is after Yahoo. Both of them, in spite of having deep pockets, do not lend even a cent to Citigroup. Then the question arises, who is having more money than these two richest guys in the world?
I therefore do not believe all these bogus stories in getting the capital raised in billions of dollars. US government may give indirectly, and they have to just print it, and it will be known when the deficit figures are revealed. Even Citigroup's 10K and Q2 will have to reveal the names of major investors
Kalidas, Hong Kong
30-04-2008
25)
for laxminnrv
Citibank has abstained from active lending to consumers for many years now. If you are NRI, they will approach you to open the account with ZERO balance, no minimum for next 5 to 10 years, and they will handle all remittances free of cost including issuance of drafts to out of city destination. Why? They are just enticing small investors to give them money so that they can recoup their past losses.
Even otherwise, in interbank market, one bank always lend to another, but that activity has also become difficult. They may not be lending to Barclays, who is also in trouble, but may be returning their loans by way of repayment. You never know from isolated and out of context newsreport.
You are right on one point. Citi is raising finance at higher price and lending at lower price? How come? It could be they had some past commitments to lend to other bank at lower cost, and if they do not discharge the obligations, rumours will fly through interbank market that this bank is in trouble. So they consider interest differential as part of cost of their survival.
It is said that they raised $ 37 Billions from 7.5% to 11%, that is on average 10%. That is their interest liability alone is $ 3.7 Billions - from where they will make that much money?
You know that banks borrow at say 5% and lend them at 6% (in overseas centres) giving them spread of just 1%. Net Spread after expenses is not over 0.25%. That is to earn $3.7 Billion they have lend $3.7 Billions /0.25 x 100 = $3.7 x 2500 = $9.25 Trillions or 2/3rd the size of entire GDP of United States.
Earlier they were showing all derivative premium as income. This market or income source is dead. from where will they bring money. We have to wait for another round of financial engineering.
Kalidas, Hong Kong
30-04-2008
26)
for map_ahmedabad
Market prediction or expectation is not physical science like Newton invested that apple has to fall down and can not go up, and Archimedez/Einstein theories of relativity.
This is an abstract science, where, unlike physical science, the forces change all the time. In physical science, there is every day, night and day again, and you have predefined seasons. Not in abstract science (or Arts) like stock market.
In physical science, you set an alarm clock to wake up at 6:00 AM and the alarm does sound at exact time, because it is outcome of physical science.
Stock market predictions or expectations are more like an Astrologer's predictions of your life, based on planetary movement, where every Astrologer has version of his own. Though planets follow physical science, the Astrologer's predictions do not - because it is imperfect science for each of them.
Even my original prediction in 1999 of Bankrupt dollar came true, point by point, in 5 years, happened in 7 years - so what? It did happen.
If you feel that I have failed, so be it. Trust your own instincts and go ahead. You should not feel guilty if you take position and found the market came crashing down as per my own expectation. Because you took chances. And for any reason if you win, forget Kalidas, who is he? - You are the king. There is a saying that 'Winner takes all'
Kalidas, Hong Kong
30-04-2008
27)
for map ahmedabad and other boarders (Ref: 09-032R)
As I had promised in my initial post, I am happy to announce that I have been proved wrong in my forecast of severe market fall within the time frame of 25-04-2008. All boarders need not follow my advice and if they wish, they can participate using their own best judgement and instincts.
The markets have gone up steeply based on the belief that worse is behind us, and credit crunch is easing. Even Gordon Brown, the UK Prime Minister and former Chancellor, has stated today that credit crunch is behind us. The belief is that if that is not bad, it has to be good.
To me nothing has changed; and on the contrary, the situation has worsened. Minor correction in food and energy prices after steep rise is inevitable, so also the strength of the dollar. Whatever good earnings announced by some US companies, was due to their non-US operations where the currency gain of nearly 20% helped them. The volume growth is not that spectacular.
In spite of Oppenheimer Analyst who correctly spelt disaster for Citigroup in her initial coverage has reiterated that Citi is still having lots of troubles, and may have to provide for another US$ 12 billions for the losses. Consumer confidence is absymally low, House Prices continue to tumble, and along with that rate of foreclosure has risen to the highest level. The Sub Prime related derivatives, which are foreclosure dependent, are increasingly becoming ZERO every month, because once the underlying security is seized and sold by the primary lenders, the subsequent derivative holders of CDO and CDS find their value disappearing every day in and out.
There is absolutely no chance of derivative markets reviving anytime soon. In the words of Alan Greenspan' the real 'Irrational exuberance' has just started, not ended.
Do I withdraw SELL EVERYTHING call? My answer is strict NO. I consider the present rally, which some predict to 14000 that may propel SENSEX much higher, defy realities and based on unfounded optimism. To me current rally that may last for few hundred points more, is excellent time to reduce the exposure, until such time the 'derivative market' is restored to pre-crisis level, and interest rates world over begin to go down, and the fresh lending starts everywhere, and house prices begin to stabilize, and in fact start rising with same force as the current stock markets world over.
If banks like Citigroup, UBS, Merrill Lynch, Lehman Brothers go on borrowing billions of dollars at 7.5% to 11%, the mere look at the FED's reducing interest rate, is deceiving. If money is that cheap, why don't they get it at reduced rate for several billions of dollars?
And what about Gold and Silver? They are coming to my original target of $ 835 or below (ideal level will be $810). If those believe that Gold is a scrap and scrap (worthless papers in the form of billions of shares now being issued by bankrupt banks in USA and worldwide). There is a strong possibility that rise of DOW beyond 13200 and its sustenance, may propel some hedge funds to go short on gold and it may see some severe correction, especially in Silver. That may be the time to buy these precious metals.
Good luck to all of you for investing into this dare devil market. You are on highway running at full speed with no speed breakers. Enjoy riding with a small prayer to God to let it rise on continuous basis.
Kalidas, Hong Kong
2-5-2008
28)
Reply to Guest (DEEDEE) on (01-May-08 13:17 ) Ref: 09-033R
A GAME OF % (Percentage) and ABSOLUTE (Real Volume)
In bullish market, Government officials or Corporate Executives talk about 'Absolutes' because the figure looks larger.
In bear market, same people talk of % (Percentages) because the figure looks much smaller.
When a company reports a profit, it dilates upon 'Absolute numbers' that they made X amount of crores. When they report losses, they report the profits were down by Y% which looks very small.
In the real market, only absolute prevails. People do not care whether you lost fraction of % but the absolute amount of dollars or rupees (in India)
Mr. Kamath has still been 'dodging' a question 'What is the total derivative and CDO/CDS exposures of ICICI Bank'. Instead of focusing on ICICI Bank's balance sheets, where the figure looks larger (because rest of the PSU Banks collectively have no exposure to such derivatives or CDO/CDS) he talks of the balance sheets of entire banking sector. If the trouble haunts ICICI Bank, people will look at his bank individually, and not collectively of entire banking sector.
0.50% of entire banking sector looks smaller. In absolute terms it comes to US$ 2.5 Billions or Rs 10000 crores. If the entire exposure belongs to ICICI Bank, then its exposure terms is 2.5% (presuming its balance sheet of $100 Billions). Further, if we ignore its balance sheet size, and instead focus on its Capital, then the same % comes to 6%.
Mr. Kamath is clever and shrewd gentleman. He understands the game of % and absolute too well. In bullish days, when ICICI Bank increases profit of just Rs 1000 crores, he will report it as absolute number - at that time he would not say, that the profit increased by just 0.25% of his entire balance sheet of $ 100 Billions or Rs 400,000 crores.
Unless and until he comes out with very specific numbers relating to his bank, that is, ICICI Bank, the risk profile of his bank will remain at higher level, and the stock may not go that high as deserved in normal market conditions.
Kalidas, Hong Kong
2-5-2008
29)
Reply to jaimin_b on (02-May-08 20:41 ) Ref: 09-036R
By hindsight, everything looks other way around. There is no end to 'If and But' theory. You say that you losses could have been less IF you had not sold 90% of your portfolio.
In January, I sold 72% of my portfolio before the crash, which saved me almost 40% to 50% of profits and capital. When I held on to 28% of my core investment, I find them going down by almost 50% to 60% from pre-January level. My profit of Rs 12 lakhs disappeared. Also, I took heavy losses in counters like Abhishek Industries where my average price was Rs 32 and sold between Rs 16 to Rs 18. Loss was 50%. If I buy back now, my losses will be reduced to just 12% because when I resume my position at Rs 19 or so, I would have lost just Rs 3 (Rs 19-Rs 16) or just 9% of my original investment, not 50% if had not bought back.
The important thing for you was that 'You decided' It takes courage to book losses. I have mentioned in this forum that ' Out of 10 decisions taken, 7 will work to your advantage and only 3 will go against initially. Over a period of time, this ratio improves to your advantage.
In stock market, only wavering and indecisive mind loses the money. If some of those people make money by chance, it is more due to accident or just sheer luck.
Before I attained prudence or mastery over Investment, I booked heavy losses at times. During 'Gulf War' in 1991, when I was traveling to India, I left my stock exposures in Hong Kong open, where I lost over Rs 15 lakhs in just under one day. It took me over 6 months to earn it back. My wife did tell me to liquidate my high risk portfolio in Warrants before we headed for India, but I did not listen because I was to lose about 6%. This indecision cost me entire capital invested.
Then I learnt what is decision making. Never ever regret your decisions. They prepare you for bigger bets and earn back much more in medium to longer tern - Always without fail.
I have seen lots of comments in this thread and others, where I gave a call to sell at least 70% portfolio before 16-1-2008 and the SENSEX crashed on 22/23-1-2008. Some boarders wrote to me that their life savings were saved because they sold everything against my advice of just 70%
Let even Warren Buffet say that credit crisis is ebbing - he is terribly wrong in my opinion. When he bought Reinsurance group (General Re) many years ago, when I was a stock broker, I wrote to my clients that he was making biggest mistake of his lifetime. And he lost over $ 6 billions within a next 3 years.
Even today, Citigroup announced that its CEO Mr. Vikram Pandit's promoted 'Old Lane Fund (Hedge)', which is almost bankrupt, has permitted its investors to withdraw entire amount. The fund will close and it highlights the increasing troubles at Citigroup which is seen by many as 'having been discounted'
To me, Loss is a loss, whether discounted or not. Such losses hurt the bottom line and it really hurts or even haunts for a very long time. You said you lost good deal of amount. Is it discounted by your family members or it will haunt you for a long time?
Even Microsoft chief Bill Gate is making mistake of his life time in buying Yahoo at expensive price at wrong time. He is a software guy, with very little knowledge in financial engineering or planning. If the market crashes, which is still very likely, he would lose 50% of his Yahoo takeover in just 10 days.
Sometime, biggest people make biggest mistake. They are not infallible. And very rich people lose their lifetime fortune by becoming aggressive and overconfident at wrong time. Many will pounce on me for my opinion in this post - I anticipate it.
Right now, I am still siting on cash pile. When I do not invest, I do not advise people to invest. However, you are a decisive person - and if you feel like re-entering, do it by all means. May be you are right this time - who knows?
Kalidas, Hong Kong
4-5-2008
30)
Reply to shia on (04-May-08 12:00 )Ref: 09-037
The market is an 'unpredictable beast'. When will SENSEX reach 21000 again is anybody's guess. Whether it will crash for the reasons already stated by you (like Inflation, Food price rises, higher Oil and commodity prices, higher interest rates and unknown losses of Derivatives) is still anybody's guess.
Only today, Bloomberg reported that Citigroup's Vikram Pandit originated and owned 'Old Lane Funds' has gone bust. This fund was bought by Citigroup as part of package of inducting Mr. Pandit. The cost of this acquisition was US$ 800 Millions. This fund is shut down and Citigroup reported that all investors are withdrawing money, and it will allow all depositors to withdraw almost US$ 4.5 Billions by 31-July 2008. This means that Citigroup is under continuous pressure and heading towards bankruptcy.
Understand this; in 1991 Gulf War, the Citigroup lost almost $ 4 Billions in Latin American debt crisis. Prince Abdullah came to its rescue by offering $500 Millions as lifeline in the form of equity.
Today, same Citigroup has lost nearly 10 or 20 times, and having raised over $ 41.7 Billions, (nearly 82 times than 1991) still finds capital inadequate.
Business Standard reported on 24-4-2008 as under:
SBI clients may lose Rs 700 cr (BS Reporter / Mumbai April 24, 2008)
After Axis Bank, it is now the turn of State Bank of India to disclose losses its customers could face on derivative trading.
India’s largest commercial bank today said its clients may suffer a mark-to-market loss of up to Rs 700 crore at the end of March 2008 due to derivative transactions....
It is obvious that if the clients do not pay, SBI will have to gulp this loss.
AGRICULTURAL LAND
The valuation of Agricultural land is soil, water availability and main road proximity dependent. If you are getting Irrigated Land for just Rs 3 lakhs per Acre, with ample water supply and good black soil, it will be a good price to pay. I paid from Rs 80000 to Rs 250,000 recently per acre. But your quality is high from its description.
Further, you can not compare Agro land with stocks. Agro lands are not so liquid whereas stocks could be liquidated in a minute, and you are in control.You should have judicious mix.
Now, Agriculture is my hobby. I met a farmer who won Award in producing 80 MT of Sugarcane per acre or Rs 80 x 800 = Rs 64000 per acre per season. If you take a crop 3 times a year, then ideal target is Rs 300,000 minimum per acre. A well educated farmer can earn from Rs 2 Lakhs to Rs 7 lakhs per
Acre, depending on how good is he in rotating the crop.
Further, it also depends whether in your state, there are no problems in holding Agro land. Nowadays, any one can buy agro land, so if you are new to Agro land, better buy 4 acre piece to start with. (I also started same manner)
With Agro commodity prices rising, the cost of Agro land will become higher in less than 1 year - they may double or treble depending on location.
If you want to re-enter the market based on market optimism, you can do so by choosing good stocks. I am still 100% cash - I find better opportunity in farmland than anywhere else.
Kalidas, Hong Kong
4-May-2008
31)
Reply to Blue Violet on (02-May-08 21:12 ) Ref: 09-034R
LIC Housing Finance
This is one of the BEST STOCK on has to own for long term point of view. Even when it was trading at about Rs 61, I had bought with a target price of Rs 1200 at least in 3 years time. Many of my customers still own this stock. I sold it early (at about Rs 287) due to market meltdown fears.
I do not know its Yen derivative exposures. If they have borrowed in Yen, then they may lose somewhat in currency but gain in terms of interest. Overall, its borrowings even if it is Yen, will be much cheaper than in Indian Rupees.
Coming to fundamentals, this is one of the best paying stock in terms of dividend, capital appreciation, stability, and future growth potential. It may even outstrip HDFC because, LIC's reach is right up to small villages, where even HDFC can not reach.
The company has about 85 Million shares or about 8.5 crore shares outstanding. Its profit after tax for 3/2007 was Rs Rs 279 crores or Rs 35 per share. Its EPS for 3/2008 is estimated at Rs 52/shr. giving a growth rate of nearly 30% (Actual is more). It also distributes the dividend of 20% of its annual profit or it could be around Rs 10
Since India is a highly populous country, with millions still living on roads, the housing demand will remain robust for number of years, at least 10 years. However, let us take compound growth in earning for next 3 years:
P = C (1 + r/n) (raised to) nt
where
P = Future value
C = Initial EPS
r = Growth rate (expressed as a fraction: eg. 0.06)
n = No of times per year EPS in compounded (it is one)
t = number of years.(3 years)
C=52; r=30% or 0.30; n=1; t = 3
so P = 52 (1+ 0.30/1) raised to 3 = 52(1.30) raised to 3
= 52 x 2.86 = Rs 148 (after 3 years)
Giving a growth multiple rate of about 15 (for finance stocks it is lower), the potential price could be 15 x 147 = Rs 2205
The dividend growth too will be very high. The company could disburse about 25% of its PAT which may work out to Rs 36 per share at the end of 3 years. The cumulative dividend income alone for 3 years could be around Rs 100 (based on 25% of EPS every year)
Let other boarders, some of them are already IIT graduates and good mathematicians, work out the above numbers, and correct me wherever I am wrong.
Please note that the above projections are based on:
1. Present no. of shares remain same
2. There are no bonus share issue or forward split
3. There are no negative earnings impact due to unforeseen event.
4. Interest rates remain at current level. (If they go up, the earnings may slightly go down and if they go down the earnings may go higher)
The very first stock I would buy on re-entry is this baby. It will be really life saver.
Kalidas, Hong Kong
3-05-2008
32)
REJOINDER
The best way to play LICHF is as under:
If you have old LIC policy, take a loan, invest some amount in LICHF and also take another Life Policy for same amount for longer duration so that your cash outflow is less. Thus, your life is covered two times the original value, you get Income Tax deductions on increased premium, and you also get tax free dividend from LICHF.
If the market correction is severe, I will take stock finance against LICHF at that time and buy more at lower level.
The dividend so earned will more than compensate the cost of borrowings (against Life Policy) and also your life policy being twice, income tax incidence will be also less.
If the stock does go at least 60% of my projections, you will earn at least 100% return per year on your stock investment. Sell some stocks when the stock has trebled, and out of sales proceeds, liquidate your LIC loans and stock finance.
Now you are almost debt free + decent capital and enhanced Life Policies in your account. You can adopt such strategy in such high quality stocks - not to duplicate this stance in other stocks which do not come anywhere near this stock.
You may lose only if something drastically go wrong with the stock which is at the moment very unlikely. there is no risk on your life policies.
Kalidas, Hong Kong
3-5-2008
33)
Reply to vivek.dhariwal on (03-May-08 13:45 ) Ref: 09-035R
CONTRACTING IN $ OR EURO?
Very interesting question. This is not the right forum to raise such question However, treat my reply with utmost caution and discuss with your management all aspects before making final decision.
First, let me tell you what China is doing with us in some cases. Only yesterday, I received quotation from one of our supplier who is fearful of fall of US$ and rise in Chinese Currency RMB (or Yuan). He quoted as under:
QUOTE Remark:All price are FOB Shenzhen (China) and available for three months, price change without notice after time limit. 20' = 20' container, US$1=6.8RMB, if the current exchange rate increase over more than 5% (difference) will pay by buyer. UNQUOTE
In other words, the seller wants to take exchange risk at the most 5%. If the exchange rate goes beyond 5% band on downside, the difference will be borne by the buyer. However, if the $ appreciates, the gain will be retained by the seller. This is real life example.
Now, consider the following scenario and facts of the trade:
$ is still a very liquid currency. EURO is still not that liquid. I doubt whether in India, banks quote Euro rates with as much ease as they do for the dollar.
India is also almost 'Dollar Block' currency. (although it is not officially pegged). You will find more liquidity in $ than Euro
America still calls the shots. Look at them - in spite of lots of trouble, and losing billions of dollars by Citi and alike, they keep smiling and say that the crisis is almost over, and the stock markets defies the gravity. It will be still very difficult to dislodge the $ from the world scene as 'intervention currency'. Japan and China can not do without $.
Further, America is English speaking country. You know more about US because you read, listen and watch TV in English media. One is more worried when he knows too much.
Having said that, you may have the following options:
- CHOICE 1 Follow the above Chinese example. Depending on the profit margin you have, you may include the 'Currency fluctuation clause' under which you may stipulate that 'If Rs value appreciates above Rs 39.25 (RBI reference rate say Rs 40.45) at the time of shipment/negotiation/payment, the exchange difference shall be payable by the buyer. There will be no adjustment if the Rupee value falls versus dollar (from RBI reference rate) at the time of shipment/payment.
CLARIFICATION: This will hedge you against rupee rise versus $ beyond 39.25 (3% less than RBI reference rate on contracting date). If the Rupee rises to say Rs 38.25, you will get compensated by Rs 1 per $ for the fall of value of $. If for any reason Rupee weakens and falls below Spot reference rate of Rs 40.45 (say it goes to Rs 42.45), then there will be no adjustment. You get higher exports proceeds by 5% (Rs 2 more than spot reference rate). BE CAREFUL HOW YOU WORD YOUR OFFERS, and understand 10 times before you include this clause.
- Choice 2, you enter into contract in Rupees to avoid any exchange risk. The profit and loss belongs to the Buyer. This is the straight forward contract.
- Choice 3, If your buyer is insistent on contracting only in $, you may include the 'Price Escalation Clause' to compensate you against any adverse factor of any kind such as Currency or rise in the cost of raw materials. Make the terms as simple as possible.
- Choice 4 If you want to enter deal in Euro, you may have to enter into forward contract with your bank to sell Euro forward and buy Rupee. This is the least preferred option, because Euro quotes are not easily available (to my knowledge), and all conversions ultimately take place using $ only
If you are not interested in currency fluctuations, better use Choice 2 followed by Choice 1, Choice 3 and Choice 4 in that order. If you can not understand the Forex market or instrument, DO NOT enter into complex arrangement with your banker.
Kalidas, Hong Kong
3-5-2008
34)
Reply to Guest on (05-May-08 10:25 ) Ref: 09-038R
You may be right. I am not Sugarcane grower which require lot of water. I am mainly in plantation business - growing oranges, lemons, anaar, Chiku, some local varieties of Mangoes. Taiwan papayas and sitaphal (known as Sugar Apple). Just planted new imported varieties from USA - Pink colored Sitaphal (from inside)
My trees are generally 12' to 16' apart, so I use the vacant land in between for use of seasonal cash crops or vegetables,
I told you about Sugarcane from an award winner in Maharashtra, whom I had met during my last visit. He was experienced Sugarcane grower.
I generally do not go for crops subject to levy, because we can not manage it well.
I also have small greenhouse where I have begun to propagate some local plants, but intend to bring from USA some varieties of Orange and Nut products like Almond, Pistachio, Hazelnut etc. However, import formalities are quite tough for Citrus fruit varieties.
In plantation, the work is less and yield is more because trees of Orange, Lemon, Almonds have life of over 40 years.
Kalidas, Hong Kong
5-5-2008
35)
Reply to laxminrv on (05-May-08 11:44 )
The strength or weakness of one currency is relative to another currency. When you say that $ has gone down - against which currency? Euro? then Euro has gone up. Against Rupee? No, it has gone up from Rs 39.60 to Rs 40.55. Against Yen? No, it has gone up from 100 to 104. Against Gold? No, it has gone up vs gold from $1035 to $ 857 yesterday.
When something goes down, other things go up. When all currencies go down? the question is against which measure? May be Gold when people loses faith in paper currencies.
When the people sell one stock, they tend to buy another. Similarly, when someone sells $, he may be buying Yen, Euro, GBP or even gold or commodity.
Kalidas, Hong Kong
5-5-2008
36)
Reply to SafeMil on (06-May-08 15:10 ) Ref: 09-040R
Often people confuse in the conversion of 1 ordinary Oz & 1 Troy Ounce.
1 troy ounce ......= 31.10grams (Rounded off to 2 decimal)
1 Ordinary Ounce = 28.35 Grams or 1 Pound = 16 Oz = 453.6 gm
Current International Price = US$ 876 per Troy Ounce
(1 Troy Oz= 31.10)
Price per Gram ................... = US$ 876/31.10 = $28.17
Price for 10 Gram ............... = US$ 281.70
ADD Import duty@ 2% ............. = US$ 5.63
ADD Importation Cost/Ins ........ = US$ (X)
Total Import Cost (CIF).......... = US$ 287.33 (ignoring X)
Rupee Rate (Customers) ......... = Rs 41.02
Import Cost per 10 Gm in Rs........= Rs 11,786.28
ADD Local Sales Tax @ 2% ..........= Rs 235.72
Bank's Profit Margin ..............= say, Y
TOTAL SELLING PRICE ...............= Rs 12,022.00 + X + Y
HDFC Rate to Customer .............= Rs 13,500
Difference ........................= Rs 13,500 - Rs 12,022
Bank's Gross Margin ...............= Rs 1,478 (or 12.22%)
Even if we add the Bank's profit and Transportation cost of about 2.22%, the Bank's profit margin comes to 10%. Now, the difference between 1 Troy Ounce and 1 Ordinary Ounce = 31.10 - 28.35 = 2.75 or 9.70%. Two possible reasons.
FIRSTLY, HDFC sells Mudra Bar with Assaying certificates which are generally quoted about 10% higher than normal market price.
SECONDLY. the HDFC Bank mistakenly overcharges customer, presuming the 1 Troy Ounce = 28.35 Grams instead of 31.10 grams. This is why their selling price is nearly 10% higher.
Further, HDFC never buys back. So when you want to sell, you have to go to the Jeweler, who will give you market rate. So, if you buy from HDFC, you lose out 10% straight away.
HDFC WEBSITE STATES
QUOTE
HDFC Bank presents Mudra, an offering worth its weight in gold. Mudra is a 24 Carat, 99.99% pure gold bar that you can purchase for investment or gifting.
Mudra is great value for money. These 24 K Gold Bars are made in Switzerland and come with an Assay certification, signifying the highest level of purity as per international standards.
UNQUOTE
CUSTOMER's CHOICES
A customer may ask HDFC for explanation for overcharging of gold prices by 10%.
If HDFC has mentioned in its Sale Brochure that Mudra Bar are being sold at premium to International Market price due to Assaying Certification, then the customer may not succeed.
If HDFC has NOT mentioned specifically( It's web site is silent), it faces the massive claims from all customers, who paid presuming they are charged at International Rate.
In that case, a customer may file a complaint with HDFC and then RBI/World Gold Council (WGC - India Chapter) and Consumer Council or file a criminal complaint with police for cheating the public (This is easiest way, because in Civil case, the customer has to pay Stamp Duty and also bear lawyer's charges)
HDFC might be forced to refund the customer the excess price charged from the moment it started using 1 Oz = 28.35 grams. They potentially face massive losses.
INTERNATIONAL PRACTICE
We in Hong Kong buy .9999 (24K) Gold from Bank of China in the form of Tael (1 Tael = 37.5 grams) or bar of 5 Tael (5 x 37.5 gms). There is no assaying certificate and the bars are not encased in plastic case with any certificate. The bank's cash receipt is enough to guarantee the purity. We get at International Market Price + 1% commission to the bank for its profit.
USA PRACTICE:
Visit American Precious Metal Exchange who charges normal international prices for the gold bar. However, if some one ask for Gold Coins or other form with Assaying certificate, the charges are significantly higher.
IN APMEX, they also buy back the bar which trades at premium to international prices. So, if you want to sell, you also get the higher price.
In HDFC, you are a big loser. The moment you buy the gold, you are losing straight away 10% because they will never buy back
It is said that BUYERS BEWARE.
Kalidas, Hong Kong
6-5-2008
37)
Reply to Guest on (07-May-08 09:45 )
Hong Kong follows international practice. All prices are based on 1 Troy Oz = 31.1034768. Normally, it is rounded off to 4 digits or 31.1035 gms
Bank of China may not have in stock 1 Tael lagdi which is Round shaped. As per Hong Kong, all gold products are to be marked of purity either 0.999 or 0.9999 or just 0.99. These letterings are so small that they are not easily visible with naked eye. If you ask the gold dealer, they will show you where the markings are made.
You can also buy from local jewellery shops like Wing On Jewellery who also sells 1 Tael bars or lagdi at international rate + 2% for their profit. All these bars are statutorily sold under Purity marking only like 0.999 and 0.9999. I have bought occasionally from such shops in Wanchai with full marking on it 0.9999 and also certified by them on their Invoices
No jewellery shop cheats in Hong Kong, our 24 years experience tells us. If anyone finds that he was cheated, the shopowner will be instantly arrested. (see Hong Kong Tourism Logo in their shop to make it reliable).
However, we never buy from Chung King Mansion where some shops sell 22K gold imported from Dubai. The shops on ground floor are reliable because they have got license under local law that has to be observed. If shops are on some remote floors, there may not be any guarantee because they may not be registered ones.
When I sold a small piece for testing purpose in India, the Jeweller shop in Ghatkopar (Mumbai) bought it immediately without any deduction like 'kasar', and paid me instant cash. They knew that it was 24K. We were not their regular customer but occasional one.
Kalidas, Hong Kong
7/5/2008
38)
Reply to Guest (Raju Desai) on (08-May-08 11:43 ) Ref: 09-042r
I go by my own study. I read everything as you do, but I develop my own judgement based on multitudes of factors. My independent views rarely lets me down.
George Soros is a history now. His success in GBP has been cited as mark for future performance. He was politically close to Administration which made him privy to sensitive information. He was also used to cause havoc in Asian Crisis. He is no longer close to Bush Administration due to his strong views on Iraq war, which has distanced the Authority from him. He is no privy to privileged information.
Warren Buffet is a defensive investor. Of late, he turned from Investing to Money lending - take his last deal with Mars and Wriggly, where Banks were reluctant to lend, and for Buffet, yield over 10% was too sweet to forego. This was, in my opinion, a mistake, because when a person starts business of money lending his approach changes. What you call ' Interest Eater'.
Of late the Bush Administration has found that there are no takers for its or FED promises. So they look up to Warren Buffet with massive following, to say a few kind words to ease the credit crisis fears.
If Credit Crisis is nearly over, why don't Warren Buffet buy the company like Lehman Brothers, Bank of America, Merrill Lynch, UBS, Morgan Stanley, Wachovia or Washington Mutual? Why does he like Chewing gum unit as money lender and instead of an investor?
Read his actions, not words. Face the following facts.
It is reported that every month 250,000 foreclosures are taking place, that means that Primary Lenders seized the assets and sell them out, with entire profit and losses belonging to them, leaving ZERO for the secondary holders.
250,000 x US$ 0.25 Million (US$ 250000 mean average price per home) = US$ 62.5 Billions. Against this amount, the secondary derivatives issued (which were bought by ICICI Bank and SBI and also BOI) were 6 times or US$ 375 Billions per month. Deducting $ 62.5 Billions for primary lenders, the holders of secondary derivatives are US$ 300 Billions PER MONTH
Since the Primary lender has seized the primary mortgage assets, and leaves nothing to secondary holders, the secondary derivative holders are losing at the rate of US$ 300 Billions per Month. Their valuation is ZERO and may be they are not recognizing in their books, but they will have to. SEC informed all Investment banks to report their latest capital position and exposures that caused DOW to fall 200 points yesterday.
When $300 Billions, the size of India's entire FOREX reserve, is disappearing every month, where is the question of 'End of Crisis' very near?
Now, you might say, why the equity markets are rising in that case, and are not these things discounted? My reply is that it has become a fashion to justify 'Buy' call based on discounting of bad news. How many times did you hear that 'Good news too' were discounted when the market rose to 21000, when even CLSA predicted that the SENSEX might reach 40,000?
REASONS FOR EQUITY MARKET RISING?
Equities rise if only profit rises. And with almost daily parade of a bank here or there losing $ 10 Billions to $ 20 Billions per quarter, where is the profit in the system that will push up the market higher?
Investors found Equity as last alternative for investment.
Bond market is nearly 10 times bigger than Equity. When an investor sells equity, where to put his money into? Bonds? no, they are falling. Banks? no, they do not know which banks is safe? Treasury? No, $ is plunging and yield is too low and market rates are much higher. If treasury market catches up market yield, the prices will fall by 30%? Commodity? No, it is too late to enter? Gold? No real yield and too high. falling Property? No.
Equity today is 'Andho mein Kana rajaa'. it is alternative for no other choices. Equity is the most riskiest game at any time. Make your own decision.
Kalidas, Hong Kong
8/5/2008
39)
Reply to Guest (Chintan) on (08-May-08 16:36 ) Ref: 09-043R
You have misunderstood me. What I have mentioned was the reason for equity going up due to lack of alternative for the time being.
You have not read that 'Equities rise if only profit rises. And with almost daily parade of a bank here or there losing $ 10 Billions to $ 20 Billions per quarter, where is the profit in the system that will push up the market higher?'
It is like the house is burning and all surroundings are destroyed one by one. The only remnant are 'Trash' and that is what I compared today's equity.
Normally, whenever the equity market falls, the money, is shifted to Bonds. However, today the bond market is so bad and so nasty, the investors and hedge funds are afraid of placing money into those bonds (Mortgaged, Municipals etc.)
Share prices rise, if the profit rises. If there is no profit, then the rise based on wrong expectation brings the 'Violent correction' called 'Crash'. This is inevitable outcome. The end is nearer than ever before.
Share prices are also dependent on the quantity of shares outstanding or public float. When almost all banks, investment bankers go on reporting huge losses, running into billions, and then they raise money by issuing billions of shares, the Earning Per Share or EPS gets diluted heavily, which ultimately reduces the share price proportionately.
A company may print any number of shares - there are no restrictions. They just order a printer to print X billions of shares. These are not shares but representative of losses converted into shares (Paper). They are worthless.
This is the reason I gave SELL EVERYTHING call, and I still maintain it. This is 'sucker's rally' If you want to be a player in this 'Spanish bull's arena' play by all means, but remain alert all the times. There are no authentic reasons to justify the rally and fundamentals are worsening day by day.
If you want to believe that George Soros and Warren Buffet will be right, then do not read their statements, but look at what they are doing by their actions. Are they investing? No. The hedge fund managers like Soros have interest in keeping the market high and avoid 'redemption pressure' on their hedge funds. They know very well that if they do not talk up the market, they will be ultimately sufferers.
Don't you know that Vikram Pandit, now CEO of Citigroup, who made a precondition for Citigroup to take over his hedge fund for $ 800 Millions and now it is bankrupt? that Citigroup agreed to let the customers withdraw as much as $ 4.5 Billions?
Do you also know that the customers of UBS have in last 2 months, withdrew $ 12 Billions?
Do you know what it suggests when the people withdraw money from the banks and brokers? Why these banks are raising money by paying 7.5% to 11% interest rate when the market rates are supposed to be just 2% FED rate and 4% normal lending rates?
Use your common sense.
I am waiting for a major bank like Citi or RBS or UBS to fail which will take down with it the entire market. Do not tell me that this was 'discounted'!
Regarding Gold? Of course, when the people loses the confidence in 'bogus paper currency and worthless papers like Shares of bankrupt companies' the Gold will rise. However, I did not ask you to invest major portion of your portfolio into gold. Every portfolio has to be balanced. and in spite of potential, one can place 10% to 15% money into gold and retain the balance in cash, waiting for right opportunity at right time.
If you want to play short term, go ahead and play with stop losses. I am still 100% cash and I do have large position in Gold and Silver, but they were bought between $ 257 to $320 and Sliver $ 4.19 (very small lots) to $ 5.20 for over 4 to 5 years. I am not buying any more because my sub-limit per instrument (Gold or Silver) has reached.
Kalidas, Hong Kong
8/5/2008
40)
for safemil
I don't trade futures. In India, the futures are very short lived, for 2 months to 3 months, whereas in West, there are long term options valid for 2 years, and futures too get quoted on longer terms - upto 6 months to 9 months.
Technically, yes, shorting future may make money but the caveat is that it is too short span to manage successfully. In falling market, the government,FED, US Administration, SEC, SEBI, RBI, BOE, EU, Japan etc try to intervene and may for a very short spell try to talk up the market by drastic reduction of interest rate or tax package or other short term measures. what they will do is anybody's guess.
Normally, in shorting futures, smart players play the Calender spread and straddle. They play both ways, if they are bullish they take more long position (say 70%) and also take short position (30%). So if the market goes up they sell the long position and when the marklet goes down, they sale their short position. They may lose on one side of trade, but if their judgement is correct, then they make more on shorter side.
This is a complex strategy requiring full time attention. Not the ordinary cup of tea for most investors.
This is why I always tell the investors and boarders that ' If you do n't understand 100%, then don't do it. Stay with simple equity position and manage it efficiently.
Kalidas, Hong Kong
8/5/2008
41)
for manju blore
To me, IFCI has already been fully priced. Since it did not sell most of its investment during SENSEX rally upto 21000, and those stocks having declined by almost 50% to 66%, the old valuation is no longer good.
Further, finance sector itself is most unfavored sector due to sub-prime crisis, and although most Indian banks and institutions like IFCI may not have been affected, we still do not know how many of them have 'Forex derivative' exposures?
GOI also did not adhere to grant, so it forced IFCI to provide for the liabilities. When GOI could not get bid over Rs 88 at the height of the bull market and high real estate market, both big attractive factors for IFCI at that time, how GOI could expect higher price in bear market, especially when the IFCI issued shares to nationallzed bank by almost 20%, which has effect of reducing EPS? If EPS goes down, the equity price goes down.
One has to reduce the target range from Rs 80~Rs 120 TO Rs 40~Rs 65. I see no way for IFCI to go higher than current level.
Further, there will not be any foreign interest. No Goldman, No Barclays, No Lehman Brothers - all are in trouble already and they have no time to look at IFCI.
Sterlite may not revive the bid at all. They may imitate Microsoft - Walk away from the bidding and withdraw the earlier proposal.
And with Rai around, sitting like a cobra on IFCI snakebox, it is premature to take any position.
Kalidas, Hong Kong
8/5/2008
42)
Reply to amarawargaonkar on (09-May-08 21:31 )
Coming to ULIP (if you mean - Unit Linked Insurance Policy), I may say that I do not know much about its terms and conditions.
For Life Policy, I always prefer simple 'Endowment Policy' with at the most anticipatory payments after a few years. I knew about LIC practice about 24 years ago.
Further, I do not know what kind of units you hold - under Unit 64 plan or units related to other growth funds like Petro Growth Funds. I bought Petro Growth Funds 4 to 5 years ago, based on rise in oil prices, and although the related shares in the UTI's portfolio rose 3 to 7 times, there is not even 20% of matching returns. Had I invested in Reliance or ONGC during their level of 360 and Rs 138 or held longer in Essar Oil, I would have made nearly 10 times of my original investment.
These fund managers always transfer one profitable position to another losing fund under their management, so that their performance looks good to please the investors of that fund. Only those invest in mutual funds who do not know how to invest directly into equity or bonds or otherwise.
Subsidizing Oil prices is another social function of the government. Deficit of course increases and sooner or later the tax payers pay it up in the form of higher taxes in one form or another. Govt need to borrow higher and higher amount to fund the deficits - interest rates depends on the market conditions prevailing at that time.
Kalidas, Hong Kong
9/5/08
43)
Reply to brb-1 on (09-May-08 13:03 ) Ref: 09-044R
Wow, $ 400 Billions? Who they are going to sell to, and what they are going to sell? Derivative assets?
The whole Balance Sheets of Citigroup is BLOATED - they have manipulated assets and liabilities for over 18 years.
In 1991/92, Citigroup had total assets of $ 91 Billions; now at the end of 31/12/2007, they have $ 2100 Billions or nearly 20 times or by 2000% rise in 18 years or about 110% rise per year on simple basis. Their share capital or number of shares have remained unchanged.
So, how these giant leaps into Assets and Liabilities took place? Looks like most of them are derivatives or such fancy instruments.
If they want to sell $ 400 Billions of assets, which is 133% of India's FOREX reserve, who will have that deep pockets to buy such junk assets with 100% guarantee for complete loss?
And, sell of Assets does not mean raising of capital. It is an exercise to raise cash by selling assets to meet the liabilities. Raising of cash is not equal to raising of Capital.
Again, when some one is a large seller of $ 400 billions, the buyer, if any, will be hard bargainer and may seek heavy discount. Of course, Citigroup will incur massive loss on such sale. If they lose about 30% in distress sale, they will lose over $120 Billions in 3 years or $ 40 Billions per year or $ 3.5 billions per month.
Wishful thinking. There is a saying that 'Bolne wala bhi diwana AUR sun ne wala bhi'
And if Citigroup still survives? it will be 'indestructible' I will be willing to die in such case. I do not want to live in this mad, mad, mad world.
Kalidas, Hong Kong
9/5/2008
44)
for IFCI Rocky,
You have mistaken me. One has to evaluate the IFCI under the present conditions which does not favour financials. Financials today do not command higher P/E multiples. Further, you have to consider 'diluted EPS of IFCI' which is less than Rs 10.. You have to consider 20% more shares issued to PSU banks upon their converting Zero coupon bonds into equities. Stock market and property market are not as strong as they were before 6 months. The future earning prospects have to be evaluated in this context. IFCI lost its opportunity to sell its stock holding at higher profit and also selling more shares to intended bidder at higher price.
Even if another suitor comes now, and takes 26% stake in IFCI, there will be further dilution of equity and IFCI earnings will go down even further by another 25%. The real interest rates are also rising (to keep pae with inflation)that again erodes the interest spread of IFCI lowering the income.
In short, the future IFCI earning prospects are not that good and heavy dilution of equity, first by issuance of new shares to PSU banks and now proposed issue of new shares to potential suitor, threaten to reduce the future earnings. The real loan growth is likely to be slower than before.
One should not evaluate the SENSEX based on patrioism. 8 to 9% GDP growth is now a history. Rupee is falling, rather than rising, suggesting that $ is flowing out, than coming in, interest rates are on rise, budget deficits are rising due to higher oil and consequent fertilizer prices, cost of infrastructure has risen by over 30% due to higher steel and cement prices, food prices are on rise, core inflation is on rise, which will compel RBI to raise the rates sooner than later. its reliance on CRR ratio will he short lived. In short, overall cost structure is rising with no matching rise in sales. Also government controls are raising their ugly head - look at ban on commodity future trades (one should regulate the market, should not stop it altogether). Such measures do not inspire confidence in the foreign investors. They don't argue - just leave. In 1987 crash, when Hong kong Stock Exchange chief Ronald Li closed the market for over 2 days, whole investment community simply packed their bags and left; and they did not return for over 2 years.
Right now, the market is under correction due to external factors. After a few months, the markets will contract further due to India's own weakness. Please note that there is no clear idea how much the Indian corporates have lost in forex derivatives.
Higher interest rates will hit Indian corporates are badly, because Indian corporates are highly leveraged to bank's financing. In overseas centers, the lending ratio is 1:1 whereas in India it is 4:1. This is the reason Indian corporates' profit rose higher than expected during falling interest rate regime. Now the same leverage will other way round. Their earnings will fall faster than expected, that will hurt the overall markets.
All the factors above will shove off the GDP growth by at least 2% to 3%, leaving Net GDP growth 5% to 6%. In short, we are going to see the contraction of economy, albeit on lower scale compared to world, that forces us to revise the earnings and P/E multiples on the downside.
When the the whole world goes on the brink, it also takes India along. In free and interdependent global economy, almost all diseases are contagious.
You will hear what I have said now, after 3 to 4 months by the hosts on CNBC, NDTV, DD and other media. Current utterances of many authors are based on 6 months old figures when the recession had not even set in.
45)
Reply to pkk07 on (09-May-08 10:19 ) Ref: 09-045R
Unless you are in USA, where SEC regulations does require the Mutual Funds to disclose their investment holding position , it is difficult to determine what Citigroup's various offshore entities may be holding in India.
If you believe that if major holder sells, nothing may happen except panic reactions, then you are highly optimist and non-realist. You know what happened when Bears Stearns reportedly sold in the Indian market. The size of the Indian market is so small that some sort of panic selling may wreck havoc.
Most of the turnover you see in Indian market is in F&O segment where notional values of the contracts are shown as 'Turnover'. The turnover in real cash segment is significantly lower.
Oil, Food prices and inflation are not slower processes. Unless they are nipped in bud, they can move on in uncontrolled pace. You know what happened to Rice prices in just under 3 months - they have doubled or trebled. Is it a slow process? If monsoon fails, then they can rise at fastest pace in another month or so.
If oil prices are de-controlled, the oil prices will go up by another 40% to 50%, and with that entire cost structure in India will go up - Electricity, Kerosene, Gas, power, rail and truck transportation etc. It will have multiplier effect with no options left. If Rupee falls further (it should not, but RBI and GOI policies are disastrous - when it was rising, they stemmed the rise with sterilizing operations - well you sterilized it - suffer the consequences now), the Crude oil, Edible oils (from Malaysia), pulses (from China, Turkey and Australia) will rise significantly,
In order to control the run away inflation, if RBI raises the interest rate by 2% points in 3 or 4 steps, hell will broke lose, because almost all banks will lose on their treasury holding by 20% ( if treasury prices are 100 with yield of 7% and if interest rates rise to 9%, then the prices of current treasury to fall to 100 x 7 divided by 9 = 78% or loss of 22% straight away. All banks who hold the Treasury bonds mark the holding to market, they will have to show massive fall of 23% on treasury investment alone.
The biggest risk in not able to control the inflation is the 'food related demonstrations in every city' which may swell into 'riots' . It happened in Indonesia, Philippines, Thailand, Burma and some African countries, who are mainly rice eaters, and India with its long history of 'rampaging riots be they on religious ground or otherwise for over 60 years' is very prone to such social disturbances which instantly affects the stock market.
People are guided by SENSEX which represent just 20% of the entire market. SENSEX is not true representative of Indian market conditions. Because SENSEX figure of 17000 looks bigger than 4500 for NIFTY, people talk about more about SENSEX which is almost senseless to follow to have broad measure of the market and money flow.
Kalidas, Hong Kong
11-05-2008
46)
Reply to shia on (12-May-08 07:08 ) Ref: 09-046R
Agricultural Property:
Property is a STATE subject, not Central. So each state has its own law and policy relating to Agro Land.
Earlier, the buyer had to be a 'Farmer' in a state like Maharashtra. However, no one is borne as a 'farmer'. One may buy a small piece of Agro land and register it successfully (there is no problem,because 7/12 (known as Saat-Baara) or title of the land is issued by the local Patil or leader of respective village. Once it is done, you are a farmer and can buy more land later on.
I do not think that Agro land prices have gone up by 5 to 8 times. You may be talking about land close to the city and main road that usually trade at premium. They can be converted into plot-able land saleable as commercial plot. for instance, if you paid Rs 90000 for 1 acre of farm, the cost is Rs 2 per sft. Conversion cost is usually Rs 15000 or so or Rs 0.33 per sft. Total cost is Rs 2.33/sft. 1 acre of land (45000 sft) becomes saleable commercial land up to 30000 sft after allowance for public road and utilities. Thus, the final cost of land becomes Rs 3/sft (depending on original cost)
When you sell it as Commercial Plot, close to developments nearby, like developing highways or closeness to local Municipal limit (allowing access of drinking water), the land may be saleable from Rs 18/sft to Rs 100/sft depending on location, giving you magnificent profit. Even if one buys the Agro land at higher price of Rs 3.60 lakhs/acre, the cost becomes just Rs 12/sft.
Please note that the Agro land laws are different in each state, so be guided accordingly. The income from Farm is also Tax free. There are many subsidies for digging well, greenhouse, small lake (if you are holding large piece of land), subsidized crop loans etc.
Note that such investment is NOT for ordinary investors. It requires hard work. Avoid buying from City investors because the their cost is high. Such investors like Doctors, Lawyers, Engineers (of Government dept) local businessman need outlet for their non taxable cash.
If you buy directly from farmer, the cost comes down often by 50%. If you are not serious in developing the farm, leave this idea. Better stick to Stocks or residential/Industrial/ commercial property
INDUSTRIAL LAND
Many State Industrial Development Corporation sell large piece of developed land, sheds at fraction of the normal price. In Maharashtra, MIDC is such corporation, log on to web site and find out the nearest center to your city. We bought land @ Rs 5 per square feet in Maharashtra state at one of the 5 star industrial estate with full facility of power, water and roads. The value rose to 10 times in just under 18 months.
However, such lands are sold only to people wanting to set up some industry.
Why should I buy a land or apartment in Mumbai paying Rs 6000 to Rs 30000 per sft, when I can buy agro/industrial land in same state for just under Rs 10 per sft at the most. Rs 30,000 can not double or treble easily, bu Rs 3 can become Rs 30 or Rs 300 per sft in developing village near a major city.
THIS IS WHY I mention other alternative avenues for investment. One has to keep his eyes and ears open at all times. One should develop the 'attitude of curiosity' and enquiring mind. Otherwise there is no difference between an animal and a human.
SOME BOARDERS question me why did I discuss ' 'Irrelevant' Agriculture investment, under ICICI or stocks?
They forgot that 'This is Money Control Board' not only stock investment board. Money changes form from Cash to Deposits to property to stocks to bonds to insurance policy to gold to silver to commodities to agro/commercial/industrial land. We can discuss here any form of investment.
Investment is not necessarily in stocks. Those who do not know 'alternative investment opportunity except Stocks or FNO' are very poor category of investors, in my opinion.
Kalidas, Hong Kong
12/5/2008
47)
Reply to pkk07 on (12-May-08 11:57 ) reef: 09-048R
I do not attach too much importance to charts of over 70 years. Dow 70 years ago had different constituents, and Index components go on changing every 2 or 3 years. So what was existing in 1929 is no longer applicable in 1960 or 70, 80, 90, 2000 or 2008. There were no computers or emails at that time, and information used to flow from one point to another by snail mail or called ordinary mails. there were no TV or powerful radios at that time.
When the communication increases, the information gap narrows down. This aspect has tremendous influence on the functioning of all markets, stocks, bonds, currencies,commodities.
So do not waste time on such undependable measures - they are meant for so called scholars or analysts who are always far away from realities.
You can at the most compare recent years - say last 7 years at the most. There were not enough computers even in 1987 when the markets crashed nor were there emails or Internet (even if they were existing, they were not as widely used as they are now)
In spite of market weakness it is preposterous to presume that IFCi will go back to 20s or 30s. May be early 40s is ideal level to enter even under current market conditions. If they do go down to 20s as you say, simply double up or treble your positions, if there were no negative news about the company which may warrant re rating.
You never know who owns which company and the quantity. This is just a guesswork and sometime there are always brokers or speculators who are eager to boost or beat the prices. Buying on unfounded rumors or without semblance of some indicative proof is always disastrous. We should not be used by others as 'pawns'. This is a game of chess, where we have act like Vazirs, not the soldiers.
Finallyl, we share views - we do not try to teach others. This is an open forum where one considers himself as learning if the ideas are found acceptable. Otherwise, as you said, 'you were not too impressed with the investment principles I am preaching'
Kalidas, Hong Kong
12-05-2008
48)
Reply to ifci_rocky on (11-May-08 19:58 ) - Ref: 09-047R
I am replying out of courtesy to make some observation on your statement. Although you are resourceful, often you tend to place a 'lid' on your creative thinking and blinded by so called ' misplaced patriotism' like 'We INDIANS can handle the ship called IFCI'
To use your own words 'We INDIANS can handle the ship called IFCI', I may add that IFCI would have not come close to bankruptcy at the hand of INDIANS only and Government would not have raised limits of foreign investors from 26% to 74%. Be objective in your assessment.
You also believe in 'Other market's weakness' as strength of Indian market. Such borrowed strengths never hold good for long time. Country's own strength should be given greater weightage than others' weaknesses, though I agree that it is relevant point.
Under normal circumstances, IFCI stock price would have gone over Rs 100 (target reduced due to equity dilution due to more allotment to PSU banks and also potential sale to new suitors -unless the existing shareholders sell their equity by 26% in which case there will not be dilution)
When the stocks tanked, hundreds of small investors went almost bankrupt and they do not even pay their debt to margin lending Investment banks. Bloomberg reported that most of such lending is NPA but they are going to recognize for another 6 to 8 quarters. If 3000 points fall can bring such havoc, what will be the case if the market tanks another 6000 points due to global crisis - that will effectively spread to India?
Under these circumstances, one has to be a 'pragmatist' rather than 'irrational optimist'. IFCI EPS power of Rs 23/30 in next 3 years is a wishful thinking. My original estimate of IFCI, that you quoted was based on conditions prevailing then and that too if Goldman or similar brokerages were to take over.
You have to play by the rules. When the Government changes the 'Rules of Game', wisdom dictates to adjust accordingly. This is not a war in Kargil, where one has to display the attitudes of nationalism. It is just misplaced.
Kalidas, Hong Kong
12/5/2008
49)
For all Boarders,
I will be travelling from 23/5 to 12/6 as result of which I may not be able to post anything during this period.
Since many boarders are very anxious to enter the market again, I can only say that the situation is no more friendly than before. HSBC lost $ 3.9 Billions (they have grossly understated, they were the biggest lender of the sub-prime loans (which may not hurt them as direct lender) but their derivative exposures are rising by almost $ 750 Millions per day (not months). Credit Agricole, one of the largest French bank, reported today a massive loss of $ 9 Billions. In short, the parade is not ending, but the queue is getting longer and longer.
Even Bernanke said today that the credit crunch has not yet ended, though it may seem to ease. He is too euphemistic. The LICOR rates are significantly higher than FED rate that goes to suggest that credits are not so easily available in inter-bank market. If that is so, it will not be long before Corporates will have to pay higher interest rates in near future.
Kalidas, Hong Kong
13/5/2008
However, those who are concerned at sitting on pile of cash, may invest upto 15% of their cash into select stocks that they understand. They can wait for some either sharp or slow but continuous correction of over 3 days or more, to invest into their desired stocks. They should be stock specific rather than market specific.
I am not investing anything now, and may not invest during next one month for the simple reason of my busy travel schedule that keeps me away from the stocks. My principle in such uncertain time is ' If I can not monitor it, I should not invest it'.
50)
for Satheesh Nair,
To my knowledge, Credit Agricole is partly owned by the French government. It is one of the largest, well diversified and well reputed bank.
Global Finance, exclusive magazine for Banks and on finance, ranks Credit Agricole, rated by S&P as AA- and numbered at 21 (HSBC ranked 22) as World's safest banks in 2007.
This list may be debatable, because UBS is ranked No.6 and Citigroup at No. 11 (after losing over $ 38 and 42 billions respectively). We all know that they are almost bankrupt but still operating on borrowed time. This list is again debatable, because these banks total assets are well over 1.8 trillions each, suggesting that most of their assets are derivatives. French banks are biggest derivative players at least in Hong Kong
Loss of $9 Billions in one quarter may not hurt them that much, as French Government might lend them more capital - it is a socialist government like Government of India. However, if this is a beginning and not the end, then your friend has to reconsider diversifying bank deposits.
None of the Indian banks, including State Bank of India, appear in Top 50 of world's safest banks, although Indian banks, in my opinion, are safest banks in today's uncertain financial world, because of extra safety nets provided by over 50% ownership by Government of India.
Kalidas, Hong Kong
14/5/2008
51)
Reply to laxminrv on (14-May-08 14:51 ) Ref: 09-049R
Rupee is depreciating, not appreciating. IT stocks move up because their earnings in Rupee terms are expected to be higher, at least that is the concept, when the Rupee depreciates.
RBI and GOI have been following the policy of depreciating rupee on misconceived notion that it helps India's exports and the economy, forgetting that it also hurts the Imports such as Oil which tend to push up the cost of electricity, transport, fertilizer, chemicals, air-rail-sea freight, unless they are subsidized. And if they are subsidized, as practiced over 50 years, it swells budget deficits.
Even when the oil prices fell to US$ 9 per barrel in nineties (against $ 126 today), India never saw the Petrol, Diesel or Kerosene prices falling to single digits, that is, less than Rs 10 - for simple reason that Rupee was allowed to have free fall. It also helped illegal holdings of Ministers who hold $ in Swiss account. If Rupee appreciates by 20%, they lose also 20% in Swiss accounts.
On one hand, RBI/GOI want to help the exports by enabling depreciation of rupee, it wants to control the inflation at the same time. This is impossible.
FII came to India on perception that not only Indian valuations were good, growth was good, the market was good, but because they thought that Rupee too will appreciate doubling their gains.
If I make 10% in stocks but lose 20% in currency in Indian market, I am a net loser in foreign country in terms of $.
Obviously, when the FII feel that Indian valuations have become stretched, and the Rupee is also allowed to fall (6% in last 2 months), their losses compound and I do not think they would be prepared to invest UNLESS their gains in stocks far exceeds the loss in currency. If they make 20% in stocks after taxes, and lose in currency by 7%, they still gain 13% which is a very good return, and in that case, they will come in.
On other hand, if they feel that of late they are losing 20% in stocks and also lose 7% in currency, they will be in hurry to get out by selling the stock and also the currency to take home the $.
In India, the value of rupee is adjusted (manipulated) by RBI in the name of sterilizing operation to boost the exports, regardless of its adverse effect on inflation. This is a disastrous policy.
Currency is the best indicator of the state of the country's economy in a free market. If currency does not do well, it is presumed, prima facie, that the country is not doing that well.
Take your pick
Kalidas, Hong Kong
14/5/2008
52)
Good argument but absurd in every respect. If you believe that US government is God, and God does NO WRONG, then it is acceptable.
It is almost a false notion of most investors that Government will not allow this or that to happen. If everything was in control, this crisis would not have come about.
Further, I have mentioned elsewhere in this thread that Equities are rising as default because the Bond market or Debt market (they are 10 times bigger than equity market) is such a terrible shape that they can not keep money in banks (because they are not so sure about the safety of deposits with insurance available for only $ 100,000), property market is so bad, insurance market is so bad, that they have no other choice to place the funds in equity.
However, mere rise in equity without fundamental reasons, is always portending bigger fall. The main strength of the equity market is 'earnings' and if the earnings fall, as they are now with almost every other day some or the other bank is reporting $3.9 billion (Rs 16000 crores) to US$ 9 Billions (Rs 36000 crores), there is no way the equity market will stand good for long time on its own.
When Indian markets collapsed during Harshad Mehta or Ketan Parekh, the government led funds like UTI tried to stem the rot, with the final result that Unit 64 scheme ultimately busted.
With regard to the policy of appeasement to Saudi investors, let me tell you that Americans no longer like Saudis after 911 tragedy in which most of the culprits were from Saudi Arabia, including Osama Bin Laden. If they want petro dollars, they have other means, war, financial engineering etc. If people can not earn, they ultimately rob if they still want money.
If you are a firm believer that Government is supreme, go ahead to invest. We always learn hard ways.
Kalidas, Hong Kong
14/5/2008
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment