Pull up your sleeves, Recession is Over

I have been following the Global Economy and major Stock Markets closely. There are not much positive news, and things are moving from bad to worse. Any trial of the market to come up is nullified by the fear of another backlash, and the immediate profit bookings. This is the reason for Indian Stock Market moving up and down frequently in last few weeks. People are playing very short term game, and trying to recover their loses.

The Economy is bad, jobs are lost and real estate prices have fallen. Governments have pumped in huge amount of money to the market by increasing infrastructure spending and Central Banks have decreased the CRR and the Interest Rates. Too many things happening.

These are something thats in news, but what is not in news is -- WHERE IS ALL THE MONEY GOING?

Do you have any answer to it? Well I have some assumptions based on my knowledge. Everyone has money now. All have started saving from the big corporations to small, from big-shot celebrity workers to the blue color workers. All have fear of job and future income for the individual and the company, and they have risk adjusted reserves.

This money is atleast around $3 Trillion more than money present in the Pre-2008/09 Economic Crisis. This additional money is printed by various cash strapped governments lead by the United States.

My feeling is that, there is a need of major kick for the economy to rebound. And when it happens, it will make lots of happy faces and new world will see lots of new millionaires and billionaires. It has to happen and it will happen, afterall this Economic Crisis is no different from earlier crises [like Asian Crisis (1995-98), Great Depression (1930s), and Oil Triggered Economic Crisis (1970s)], and this will too go away with time.

While I have mentioned too many rosy factors, the incoming ride wont be too easy. The difficulty next year for many Nations will be to fight inflation brought by this massive influx of currencies to the Market. Govt. needs to be ready for sleepless nights fighting it, else social revolution is inevitible.

If you are an investor, go and buy the stocks. They are damn cheap now. My recommendation for US people is to buy Fair Isaac shares whose Market Cap is less than Annual Revenue, and Indian folks buy the ICICI Bank Shares (while there are too many good shares to buy; mentioned two as examples).

Happy Investing. Good Luck! Remember me when you become a big shot by following this advice :)

MoneyVidya.com in Indian social investing space

Guest Post By Ankit Agarwal, MoneyVidya.com

MoneyVidya.com is an online community where anybody can share stock recommendations. Its differentiator from standard message boards and other social investing sites is its superior Investor Rating System, which rates each member (on a 5 star scale) based the performance past recommendations (stock picks) that the member has shared with the community in the past. For example if Arjun makes a stock pick to 'buy' hindustan lever for one month -  MoneyVidya.com tracks the return and the volatility of the stock during that period, and based on the average return, success rate, analysis quality and riskiness all of Arjun's stock picks, he is given an unbiased rating. 

MoneyVidya.com is one of the later entrants into the Indian social investing space - but I daresay that it is the most credible player thus far.

 

On existing websites / messageboards users are anonymous, and even if they are rated they are likely rated by user feedback, rather than performance. This can be misleading, and indeed prone to abuse. In an environment where everybody and their grandmother is willing to provide stock market advice, and nobody knows who the real expert is (ever seen a fully disclosed track record for any of the so-called experts that come on CNBC? No? I thought as much...) - MoneyVidya.com's offer is really quite refreshing.

Other sites such as Stockezy.com etc. are less focused on stock picking and and more focussed on discussion / chatting. Sites such as markethero.in are more game / competition oriented - having some fun at no risk, rather than disseminating serious advice / ideas to get feedback from the community. Cafestocks.com seems to have, a far less sophisticated rating system - and its user interface is rather unprofessional looking. 

 

Another long term differentiator for MoneyVidya.com - is a strong finance base of the management team. Both the CEO, Gautam Kshatriya and the CFO are ex-financial services management consultants from Ernst & Young, London. Their advanced understanding in finance should help them continue to fine tune their rating system to identify tomorrow's Star Stock Market Analysts!

For suggestions/feedback please contact gautam.kshatriya@moneyvidya.com

Have Dollars, Sell It OFF

US Economy is in problem, everyone knows it. First the sub-prime crisis, then the overall Financial Crisis due to liquidity crunch, and now overall economy in recession. No one should be unaware of this fact.

But are you following the Financial Markets? If yes, then you must be knowing that value of USD is increasing w.r.t. all major currencies of the World. Surprising huh!!
Earlier when the sub-prime crisis started people throughout the World just got panicked and lost their confidence in US Economy. They started doing transaction in other currencies, and selling whatever dollar they have. In this period, Indian Rupees went stronger against dollar from Rs. 45 per dollar to Rs. 39 per Dollar in 4 months window.
This was obvious as people had more confidence in Indian Economy than US. But suddenly dollar value started rising while the US Economy was going from Bad to Worse. Investment Banks collapsed, then the major banks went into crisis and now Auto Companies are in the verge of collapse, the employment scenario look gloomy; but still dollar rises.

Few argue that these things are obvious because by this time other World Economies went into crisis. But are other Economies worse off than US? It is not specially when I consider Indian Economy. Europe and Japan are in recession; but China and India are not. So, why does value of dollar increases against these currencies?

It is all because US Economy dominates the World, and specially whole of Asia is run by American Investments. When the American investors had bad time at home, all they could do is sell overseas operations or buy dollar from outside and fund their US operations. The impact is so huge that US Govt. had to sell hundreds of billions of dollars to few of the Economies to control the dollar shortage. Korea South, Taiwan and others took about 30 to 50 billion dollars each from US; but still the money market seems skewed towards dollar shortage.

This could lead to serious consequence of dollar collapse in coming days. And it can only get more serious if US govt. have actually pumped more dollar by printing it to fight the crisis. With more dollar floating in the market than it was a year back and patchy economy brought by sub-prime and mortgage crisis, all we can expect is a steep correction. I expect it to fall at-least by 30 to 40% against all major currencies as soon as the markets starts getting normal. This however wont be so bad news for US Economy and the US Companies; but it will hurt the general public, the consumers.

So my suggestions general US population is that, just sell the dollar off. Buy some Indian Rupees or Euros, and wait for one year to get a huge bonus. May be it will bring some cheer for you at the end of the crisis. Else you will again lose, lose the value of money you have, and lose the opportunity gain that you could have got.

Good luck!!

Economic Crisis, Liquidity Crunch and Cash Bubble

Wait for few months more and you will see growth. Growth in all quarters be it stock market, or the economic activity. Its not because everything that has gone wrong for last one year in US is getting back, and also not because World governments have been doing a lot to being economy back on track. But because of one evil that exists now-- CASH BUBBLE.

We have been hearing about people selling whatever commodity they have. From stocks to metals, from houses to currencies everything is being sold. But if you consider the principle of Trade, is it possible to sell without people buying it? No right!!
Even if we consider it is possible, if people are selling in such an huge extent and not buying, where the hell they are keeping the money? Banks!! No way, all banks are facing liquidity problems and it is understood that people are not parking their cash in Bank too. They are just keeping cash with themselves.

This phenomena has increased also because of many market analyst suggesting people to keep cash at times of crisis. This is a good suggestion, but is cash a commodity whose value remains same? No. People are forgetting this fact. But thats fine, I am not discussing that today.

I see all of my friends to relatives, from employees to organizations all are saving cash. Ofcourse this do not include who are not able to finance their own operations, but the others who have good disposable income. They are not spending or investing.
Above it, governments are printing more and more cash. From US to EU, from China to Japan, and from India to Kuwait everyone is pumping money to the World economy. But still economy is not growing and consumption of products are coming down. Where the hell is the money going? I am surprised!! Are you also??

Well I found the answer, money is in the hands of people. Banks and Govts don't have it. This has in one side created a cash crunch, and the other side CASH and DISTRUST BUBBLE. Its just few months for it to burst, and then we see a lot of economic activity around. After all none of the recessions have remained for more than a year and this too will not remain for long.

If you have cash, then today is the time when you will have to invest. ICICI Bank share is at Rs 300 or Cisco share is at $20; chance to own huge number of these high value share may not come again. I expect there will be at-least 100% increase in stock prices of these sound functioning companies. Don't be late, just buy it and be patient for the cash bubble to burst. Move early and be at the top. Or wait for others to join in and get lost in the crowd. Choice is yours.

Indian Stock Market : Week of Bulls and Bears

Indian Stock market has fallen sharply Monday and Tuesday too. Monday alone the Sensex Fell 1408 points to close at 16450, which resulted in the loss of 6,700 Billion Rupees of Investor wealth. This is the biggest ever loss through the Indian stock Market, and it is being continued Tuesday giving the second biggest fall in the History.

The question now is, are the days of growth over? This is a trillion dollar question.

The Indian Stock Market fall is in line with the Global Markets that has been falling for past few weeks. This is a clear indication that India is more prone to external factors than never before. Let is now see what might have caused the fall and what may be the way forward.

Before we move with those things, please read the disclosure of my blog.

Reasons for Fall and its future effect that can happen:
The major reason for fall is the US sub-prime crisis, which has resulted in the loss of billions of dollars for the US Banks. They have write-off more than 100 billion dollars in the last quarter. This has some direct effect and many indirect effects.
The direct effects are :
1. loss to the Banks
2. credit squeeze in the market due to less capital available with the banks
3. decrease in credit rating for the consumers whose loans are written-off
4. higher interest rate for consumer loans
5. low property prices due to less resale possibilities

These effects are very serious. I would say more serious than it is seen from the surface. The main reason being, it looks cumulative and iterative.
The result may be seen in weeks or months ahead and I see a very rough pitch for US economy to come out of this. The bad that can happen might be:
1. huge bankruptcy filing from the consumers due to low property prices and less credit availability.
2. bankruptcy filing from major banks due to losses spread to other portfolios like Credit Cards
3. less credit availability lessens the capability of companies to expand, thus decreasing employment
4. decrease in consumption of goods by the consumers thus causing deflation
5. a major US recession, and thus a global recession.

We have now discussed about what worst can happen. Now, lets see whether this is a possibility. I cant deny the occurance if governments do not take sufficient measures and the financial players support them. The effort may not be able to stop the loss but may slow down it. A decrease in interest rate cut by the US govt. has given some hope to the market, but I see loss a possibility in all cases.

Implication to India and Indians:
From the surface it looks very bad. I have lost around 50% of my portfolio value in last two days. But I see, there's no reason for investors of Indian companies to panic.
The major reasons I see for no panic are:
1. India has very strong domestic consumption (almost highest in Asia; US consumes 109% of their GDP; India at 55% and China 35%)
2. Indian companies are among the best performers globally.
3. India is young, above 60% of the population is below the dependent age. So that means huge workforce now and more in the years ahead.
4. Full functional democracy and moving towards liberal economy.
5. Investors have no alternative to invest than India.

Good news is, the stock market has bounced back in the last two days of this week. And Today (Friday) it has given the rise of 1100+ points giving it biggest intra-day jump in the history. Thanks to the global recovery.

But the bear is not over. US economic problems are still there. They are living in debt and their banks have crumbled. These worries may come all over again, hope not in the way that came this week.

But whatever it may be, India is set to grow. Asian Tigers grew in 70's to 90's, China 90's to present and India is set to follow same rule and grow in the days ahead. As everyone grows once and only once. All settles at a point and time before that point is critical. People at that growth phase grow more than economy and we are already seeing Indians growing.

Any body who is missing India now is missing his future. After all in the world today, Europe is history, America is present and Asia is Future. But not to forget, New and Integrated Europe is coming back once again and Americas defending. But Asia is fighting and winning lately, and so India.

Happy Growing With Big Indian Growth!! I am Bullish in Indian Story and in Sensex. Are you!!!