Reflections...

Weekend Reflections     20.10.2018 

QUE SERA SERA : NATURAL,LIQUIDITY DRIVEN OR THE BURSTING OF A BUBBLE : QUE SERA SERA

1 Since the beginning of this Millenium, market has been subjected to 6 Major downsides.The first bear market happened in 2000 when the dot com bubble brought the Nifty down by more than 50 %, though the damage in Individual stocks especially the ICE sector of K-10 group lost upwards of 75 % . BUBBLE & LIQUIDITY

2. The second one ( Jan2004-May2004) came out of the blue , literally . It was an overbought market which needed to let of steam since it had risen almost non stop from April 2003 by more than 100%. Though strictly this downward move was not a classical bear market yet it lost 35 % peak to trough . NATURAL

3. The Third one was again a sudden surprise which lasted for just a month but took away 33 % during that time ( May 2006- JUne 2006 ).Again this was too fast too soon and worked both ways. NATURAL

4. The 2008-09 was unravelling of the Excesses in its truest sense as all the sectors lost. At its worst it fell 65 % from the highs. BUBBLE & LIQUIDITY

5. Obama's curse Part -1 was the fall from October 2010- December 2011 , when Nifty in a grinding way took away 30% from the top. NATURAL

6. Obama's curse Part-2 was slightly benign but it did not end till we lost 24 % over the next 12 months between March2015 and 2016. NATURAL

7. Is this the SEVENTH OF THE DEADLY Moves ???. Based purely on stocks in the broader market we are definitely in a bear market. If we take the broader market we are already 9 months into bear territory, while for Nifty and Nifty 500 we are just getting started . We are down 12 % to 15 % respectively.

8. So what does the future likely hold ?. If its a "bubble" we should not be surprised with a 50 % drop ie a scary level of below 6000, last seen in 2012 ; If its a Liquidity issues we may end up with a drop of one third which means we may see a figure which prevailed during Demonetisation time. In the Best Case scenario of it just being a "natural correction" which would mean a 25% drop just like the 2015-16 mini- bear market which would still mean 8800. So what will it be : Only time will tell

9. So how long would it take to reach there ?. Based on past observations it may end around August - September 2019. The fastest drop has been in 2006 when the pain ended in a month, the worst case is when the pain prolonged in the 90's when between 1992 Harshad Mehta Peak and 1999 when Vajpayee Govt won a full 5 year term, the Sensex moved within a range of 4500 and 2800 for 7 long years.

10. So will it be a "quickie" like 2006, or a " swiftie" of 5 months like 2004 or a "slowie" of an year as is the norm or would it be a "death by thousand cuts" one , which was the most painful of them all : The 7 year curse ? Only time will tell.

QUE SERA SERA , WHATEVER WILL BE , WILL BE

              10.06.2018

During Advani's Rath Yatra in the early 90's , the Nation was curious to know whether he would be arrested by the UP Government and alerts were sounded in various towns of UP. People feared the worst about UP. Surprise surprise , Advani was arrested when the Rath Yatra was passing through Bihar by the Bihar Government . No one was prepared for this turn of events. How is this relevant to today's markets ??. Today, everyone is concentrating on the Equity Markets and wondering what will happen next. However , the debt markets are larger and affect almost all parts of our lives. We have more money in debt markets ( Debentures , Bank FDs , SB account etc) and connected to debt markets ( Car, Housing Educational Loan ) and specific products like OD, TOD s etc. We have investments in the actual debt market through MFs like Debt funds , Balanced Funds etc. WE SHOULD FOCUS NOW ONLY ON THE DEBT MARK.

For people observing the Govt 10 Year yield , Friday was a landmark day since the 10 Y yield crossed 8 % Intra day. Remember it was 6.3 % just 10 months ago. Which means the yield has shot up TWENTY SEVEN PERCENT . This is huge by any standard. Bond portfolios of Institutions as well as Individuals would have gone for a TOSS.

And this is not the end, probably its just the end of the beginning since the RBI pushed back the yields below 8 at the close of the day. This will continue to rear its head and we don't know where it will stop. WE SHOULD BE ALERT on this more than ever before. Interest rates on everything will RISE. While the retired may be happy to see that the FD rates will now rise , all others who deal in debt are likely to be dealt with a DEATH BLOW.

 I have been pointing out for several months , when yields were about to touch 7 % that the interest rate scenario was changing and one should OPT OUT OF ALL BALANCED AND DEBT FUNDS and hopefully people have followed my logic. Its still NOT TOO LATE .

Happy and thoughtful Sunday

Weekend Reflections : 17th June 2017 

 I started investing in stocks in 1983, while still in college. The first Bull Run I experienced was in 1985 during Rajiv Gandhi's time, but I had not studied history of the markets and hence sold out early.

The second time I thought I was better prepared. In 1992 I was scared of my wits when the market started rising irrationally. However, having seen '85, I held on and saw my NAV spiraling upwards, When I could no longer believe that it was God's intention to make me Rich, I sold out and that day almost coincided with the peak. When the Harshad Scam broke out I thought God was really on my side and keeping some money aside for my first Car : A Maruti 800, I ploughed back the rest of the money a 1000 points below the peak. But I saw a slow downward grind of the market which fell another 1500 points over the next year, thereby completely wiping out all my gains. 

 In the 1999-00 Dotcom Bull run , I was more careful and I advised clients to put a trailing stop loss ( ie. protecting their profits in case market reverses) and was able to save a few of my client's profits, since most of them did not heed my advice.Same was the case in 2007-08 Bull Run. Again most of the clients called me a Perma Bear and refused to listen. 

Now we are in the midst of another crazy bull run with all the analysts in the media goading investors to buy blindly. The valuations today are higher than we have ever seen for so many mid caps and micro caps. Stock Markets are irrational for more time than we can imagine.

 In such times, while enjoying the Bull Run and the positive effect it has on one's portfolios, it would be prudent to keep trailing stop losses and protect one's profits. Hope some one else other than me learns from my past mistakes. 

 Happy Investing

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