FACTS OF LIFE

ROMANCE MATHEMATICS

Smart man + smart woman = romance

Smart man + dumb woman = affair

Dumb man + smart woman = marriage

Dumb man + dumb woman = pregnancy

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OFFICE ARITHMETIC

Smart boss + smart employee = profit

Smart boss + dumb employee = production

Dumb boss + smart employee = promotion

Dumb boss + dumb employee = busy

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SHOPPING MATH

A man will pay $20 for a $10 item he needs.

A woman will pay $10 for a $20 item that she doesn’t need

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GENERAL EQUATIONS & STATISTICS

A woman worries about the future until she gets a husband.

A man never worries about the future until he gets a wife.

A successful man is one who makes more money than his wife can spend.

A successful woman is one who can find such a man.

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HAPPINESS 

To be happy with a man, you must understand him a lot and love him a little.

To be happy with a woman, you must love her a lot and not try to understand her at all.

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LONGEVITY 

Married men live longer than single men do, but married men are a lot more willing to die.

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PROPENSITY TO CHANGE 

A woman marries a man expecting he will change, but he doesn’t.

A man marries a woman expecting that she won’t change, and she does.

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DISCUSSION TECHNIQUE

A woman has the last word in any argument.

Anything a man says after that is the beginning of a new argument.

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HOW TO STOP PEOPLE FROM BUGGING YOU ABOUT GETTING MARRIED

Old aunts used to come up to me at weddings, poking me in the ribs and cackling, telling me, “You’re next.” They stopped after I started doing the same thing to them at funerals

IS U.S. BOND TAPERING A FARCE?

On September 15, 2008 under the haloed auspices of Hank Paulson the once venerated house of Lehman Brothers filed for a USD 617 bn corporate bankruptcy-the largest bankruptcy ever filed. Many intellectuals of the standing of Larry Summers and Warren Buffett who though on the sidelines, were also involved in the process, requested the Treasury to negotiate a closure of Bad trades made by Lehman with it’s counterparties. People like Paulson and Tim Geithner played roughshod and while Bear Stearns, Barings and Lehman were forced into liquidation Merrill Lynch was merged with BOA and Goldman Sachs was thrown a massive multi-billion lifeline by Buffett. 2 Institutions survived Lehman collapsed in the process.

On that horrendous Sunday, the debt issued by the US Fed at USD 14 trillion-the largest national debt held by any nation in the World. If viewers who get up early, would have noticed that the lights at the White House were on even on a Sunday at 4.30 AM IST ostensibly to settle the Fed debt Ceiling that expires on Monday night US Time.

Importantly, after the monthly Fed Bond Buying programme of USD 85 Bn a month, the US National Debt now stands at USD 17 Tn and is set to rise as the socialist black President wishes to give away free medicare to all. Free medicare in a capitalist nation? Or did we hear a socialist state?

So while Obama may have majority in Senate, he has none in House of Representatives. A compromise to pay the Government bills will mean that the US Debt ceiling will be again raised from USD 17 tn to maybe USD 18 Tn or the Medicare Bill on which this guy has won two terms will collapse.

The QE I to III, sequester and Fed Taper are nothing but hogwash meant to destroy the impoverished nations of Asia so that Imperialist America flourishes and wastes enough money in Tunisia, Somalia, Haiti, Iran, Iraq, Afghanistan and Pakistan.

I repeat there can be no Fed Taper or withdrawal without the US Government itself collapses. This is in fact what that nation deserves for enforcing trade in virtually everything across the World in USDs and forcing every national government to play subservient to a self created world gendarme

TRADING IDEAS FOR 30-9-13

BUY AUROPHARMA STOP LOSS 195 TARGET 220

BUY PVR AT 462 TARGET 478 , 490 STOP LOSS 455.

BUY TATA COMM FUTURE STOP LOSS 190 TARGET202, 209.

HAPPY TRADING !!!

TRADING THOUGHTS

1. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analysis and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it.

2. I see the younger generation hampered by the need to understand and rationalize why something should go up or down. Usually, by the time that becomes self-evident, the move is already over.

3. When I got into the business, there was so little information on fundamentals, and what little information one could get was largely imperfect. We learned just to go with the chart. Why work when Mr. Market can do it for you?

4. These days, there are many more deep intellectuals in the business, and that, coupled with the explosion of information on the Internet, creates an illusion that there is an explanation for everything and that the primary test is simply to find that explanation. As a result, technical analysis is at the bottom of the study list for many of the younger generation, particularly since the skill often requires them to close their eyes and trust price action. The pain of gain is just too overwhelming to bear.

5. There is no training — classroom or otherwise — that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. There’s typically no logic to it; irrationality reigns supreme, and no class can teach what to do during that brief, volatile reign. The only way to learn how to trade during that last, exquisite third of a move is to do it, or, more precisely, live it.

6. Fundamentals might be good for the first third or first 50 or 60 percent of a move, but the last third of a great bull market is typically a blow-off, whereas the mania runs wild and prices go parabolic.

7. That cotton trade was almost the deal breaker for me. It was at that point that I said, ‘Mr. Stupid, why risk everything on one trade? Why not make your life a pursuit of happiness rather than pain?’

8. If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.

9. Losers average down losers

10. The concept of paying one-hundred-and-something times earnings for any company for me is just anathema. Having said that, at the end of the day, your job is to buy what goes up and to sell what goes down so really who gives a damn about PE’s?

MORNING CALLS FOR 24-9-2013

BUY ESSDEE ALUMINIUM STOP LOSS 570 TARGET 600 & 610

SELL IB REAL ESTATE FUTURE TARGET 54 & 52 STOP LOSS 60

BUY TITAN FUTURE STOP LOSS 235 TARGET 250.

SELL LIC HSG FINANCE FUTURES TARGET 185 STOP LOSS 200.

BUY JUBILIANT FOODS TARGET 1150 STOP LOSS 1090.

SELL BANK OF INDIA FUTURES TARGET 160 STOP LOSS 176.

SELL AXIS BANK FUTURES TARGET 1000 STOP LOSS 1070.

HAPPY TRADING !!!!!

ARE INDIAN PRIVATE BANKS IN TROUBLE?

A lot was expected from the latest RBI Governor Rajan, when he set out to pronounce the busy season credit policy. A minute into the speech all hopes of the new “Suit” from Harvard and Chicago’s Booth school, vanished. Infact, there was no possibility apparent that this guy will toe the populist line advocated and forced upon the previous guvnor Rao. Reduction in MSF and increase in Repo implies that Banks have to go forth and fend for themselves.

Kotak Bank was off the gates on September 21, doubling the interest rates on deposits of above Rs 1 crore to 9 per cent for maturities of 9 per cent and as much as 9.25 per cent for deposits of 270 days.

Compare this to the rate tariff of August 20, 2013 and Kotak was offering a mere 4 per cent on similar deposits with maturities of 7 days and above. Clearly, most private banks from IndusInd, Yes Bank and HDFC were leaning heavily on the Repo market to finance the growth in loans now running at 17 per cent.

This is against the norm. A economy growing at 4 per cent cannot have loan growth of 17 per cent, unless more good money is being thrown at bad money or in other words the NPA/NPLs are being “greened” to fool the RBI.

With Deposit growth at 14 per cent yoy, this 3 per cent gap in CD ratio will have to be filled with high cost bulk deposits obtained from cash rich corporates. The results will become negatively visible in Q3 and Q4 NIMs unless, the banks find a new way to cook books

MORNING CALLS AT 8.35 A.M 23-9-2013

BUY REL INFRA STOP LOSS 400 TARGET 426 & 435

BUY MADRAS CEMENT STOP LOSS 178 TARGET 190 & 197

BUY AMBUJA CEM FUT TARGET 202 STOP LOSS 188

BUY APOLLO TYRE FUT TARGET 80 STOP LOSS 68

BUY TECH MAHINDRA TARGET 1365 STOP LOSS 1300

BUY HCL TECH TARGET 1080 STOP LOSS 1040.

SELL OBC FUTURES TARGET 160 STOP LOSS 176.

SELL SYDICATE BANK FUTURES TARGET 62 STOP LOSS 75


HAPPY TRADING !!!!

WEEKLY DELIVERY TIPS

Stock Name CMP Target Stop Loss Adani Enterprises 150 165 139 Bhartiya International 185 215 164 (Holding 2 Weeks) BF-UTILITIES 148 175-180 135 Mc-Dowell 2530 2700 2430 These are Some of the Hot Favourite Counters for this Week......from 21st Sept - 27th Sept. 2013 These Counter, has Potential to Move Higher Despite Severe Market Conditions......

TRADING LEVELS FOR THE WEEK BEGINING 23rd SEPTEMBER 2013

The short term trend will remain positive as long as index trades

above 19500. Decline below 19500 will imply that the index is

heading towards 19100 or 18700.

The medium term trend was that it was moving sideways between

18000-20500 since the begining of the year. If we assume that the

Correction has ended at 17448 then the next long term wave has a

target of 20729 and 22758.

The entire zone between 20700 to 21100 is a potential threat to this

Rally. Resistances for the week are placed at 20480 and 20740.

If we are unable to break the first resistace then we are heading to

20050 or 19500.

The NIFTY has already begun a short term correction. It faces

Resistance at 6063 and 6142. If it does not cross 6063 then traders

can go short with stop loss of 6080. The targets are 5933, 5750.

Keep a stop loss of 1000 and go long in SHRIRAM CITY UNION

FINANCE. It closed at 1080 on FRIDAY..The target is 1150. Break

of 1150 will take it to 1200.

HAPPY TRADING WEEK !!!!

HAS FOMC LOST CONTROL OVER THE ECONOMY?

Mike O’Rourke at JonesTrading sums up what a lot of traders are feeling right now about the Fed (still easing), the stock market (making new highs) and the economy (seemingly weakening a bit) in one paragraph that will make you uneasy.

 Right now, the FOMC has “a tiger by its tail” – it has lost control of monetary policy. The Fed can’t stop buying assets because interest rates will rise and choke the recovery. In short, today’s decision not to taper was driven by unimpressive economic data, the fear of a 3% yield on the 10 year Treasury and gridlock in Washington. If the economy cannot handle a 3% yield on the 10 year, then the S&P 500 should not be north of 1700. It is remarkable that the equity market continued to buy into easy money over economic growth. QE3 has been ongoing for nearly a year and the economy is not strong enough to ease off the accelerator (forget about applying the brake). Simultaneously, the S&P 500 is up 21% year to date and the average share gain in the index is over 25%. Maybe today’s action will turn out to be short covering, but if it was not then paying continually higher prices for equities in a potentially weakening economy is a very dangerous proposition.

THE FED SUSPENSE

 A taper of $5, $10, $15, $20 billion, it doesn’t matter. The market will instantly draw it’s own conclusion on the release of the taper number but it the real direction will come on the explanations. If it’s tapering because he spins a yarn of a good US recovery the buck goes North. Even the low $5bn number will likely reverse any dollar sell off if he plugs a recovery. As I said before and during the Non-farm week he hit the jackpot with a string of good data. He’s got the ammo to push tapering for economic reasons but we’ll have to see if he’s strong enough to convince the markets.

Like Europe and the UK, he also has to dampen rate expectations and herein lies the problem with forward guidance. At times the market is a very simple creature. It knows rates go down when an economy needs stimulating and it knows rates go up when an economy is doing well. It’s that simple. It’s like saying the sun comes up and the sun goes down.  Trying to tell a market that rates are not going up on economic positives is a thankless task and Bernanke will have to turn it right on to convince the market not to get carried away. This might put some initial pressure on the dollar but I think it will be fleeting.

So in my mind here’s what I think we may see.

1.       $5-10bn taper based on improving economy. Emphasis on adjusting QE either way should economic data improve/not improve. Heavy dampening of expectations. Makes QE ultra adjustable month by month. Reaction – USD down initially before bouncing. Stocks fly.

2.       $15-20bn taper, Will again be based on supposed good fundamentals, adjusting either way, heavy dampening of expectations, but may emphasise that further tapering won’t be on a month by month basis and he’ll go into forward guidance mode. Reaction – Dollar flies initially, stocks tank. That’s around a 20% cut in QE, so a big chunk.

3.       None or too big a taper and the dollar is likely to fall. we’re likely to see falls in the buck and stocks.

I can’t stress enough that it’s going to be the language that sets the direction. We’re going to have to be very quick to trade it to get on a big move. My only caveat is for a long term position. I will still like to buy the dollar on a big fall lower rather than sell it on a big move higher. Japan has fallen slightly off the radar and the US economy is very unlikely to go backwards to any great degree. My overall trend for the buck is up and anywhere down around 95-90 and I’ll be in hoovering it up.

I also can’t stress enough that this will not be an event to trade for the inexperienced. Unless you like playing “red” or “black” with your trading account it may suit you to sit this out.  It won’t even matter if you miss a 1000 pip move, the one thing you are guaranteed is that there will always be other opportunities when trading. Resist the urge to see this as big ticket win that can change your life.

TRADING IDEAS FOR 18th SEPTEMBER 2013

BUY ITC STOP LOSS 330 TARGET 350.

BUY ARVIND STOP LOSS 80 TARGET 90

BUY TATA COMM STOP LOSS 175 TARGET 190

BUY DR REDDY TARGET 2350 STOP LOSS 2280

BUY BHARAT FORGE TARGET 275 STOP LOSS 255


NIFTY FUTURE WILL FACE HURDLE AT 5935. COSSING 5935 WILL TAKE IT TO

5976-85. STRONG SUPPORT AT 5810-5820 RANGE.

BE PREPARED FOR 700-800 POINTS MOVEMENT IN BANK NIFTY IN COMING

TWO DAYS.


HAPPY TRADING !!!

TRADING IDEAS FOR 17th SEPTEMBER 2013

SELL RELIANCE COMM STOP LOSS 147 TARGET 134

BUY BPCL STOP LOSS 310 TARGET 335.

SELL ACC STOP LOSS 1100 TARGET 950.

SELL DLF STOP LOSS 156 TARGET 146

SELL TATA STEEL STOP LOSS 298 TARGET 275.

BUY TECH MAHINDRA STOP LOSS 1260 TARGET 1310.

HAPPY TRADING !!!!

SIGNS OF EMERGING MARKET CRISIS

Emerging markets have found themselves in hard times. Economic growth has slowed and their currencies have been getting walloped.

 So much so, that Morgan Stanley identifies the Indonesian rupiah, the Indian rupee, the Brazilian real, the Turkish lira, and the South African rand as the ‘fragile five.’

With everything that’s going on Morgan Stanley identifies “the seven deadly” characteristics of past emerging market crises.

A sudden stop - This is a “severe slowdown or an outright reversal of capital inflows that ultimately leads to a loss of access to funding markets, creating a severe economic downturn even if there is no outright default.” This can be caused by excessive real exchange rate appreciation, non-performing loans shrinking banks’ balance sheets, uncertain elections and so on.

1.    It spreads - Irrespective of which sector or part of the economy the ‘sudden stop’ begins, it spreads into other areas.

2.       The sell-off is quick - “Market moves far outstrip fundamentals. Disorderly sell-offs are naturally about capital protection as investors (domestic and foreign) move capital out of the way and demand a risk premium for re-engaging. However, the speed is also the market’s way of forcing a rapid resolution of the underlying macroeconomic problem – a process that would otherwise take a lot longer.”

3.    The scale of the sell-off is related to the size of the adjustment needed to solve the problem - “Whether the underlying problem actually gets resolved over the longer period of adjustment …is irrelevant as the crisis unfolds (just look at the uncertainty about the future of Europe even though the peak of the crisis is most likely behind us).”

4.     The sell-off can cause currency weakness or a fall in various domestic assets - This depends on a few different things like how much the banking system has suffered, or how much the currency had appreciated in real-terms before the crisis kicked in. Major distortions make it harder for the central bank to raise rates and support the currency because it will “damage the banking system.”

5.       There is contagion risk - The crisis spreads from the “weakest link” to other “vulnerable economies.”

6.  Economies can be shut out of funding markets - “A full-blown sudden stop sees economies lose access to funding markets for a period of more than six months. Economies that are exposed but not vulnerable tend to be shut out from funding markets for only a brief period of time.”

WEEKLY LEVELS FOR NIFTY AND BSE STARTING 16th SEPTEMBER 2013

The sensex crossed 19500 mark last week and is currently facing

resistance at 20000 mark. Strong move above 20000 mark can take

it to 20200-20500 range. If this range is surpassed then 20700 to

21000 levels come into play. Inability to move past 20000 can take

The sensex to 19450 initially. The 200 day moving average is placed

at 19363.  A strong break below 19363 can hasten the fall to 18900

level. As long as the index stays above 17200, the long term trend

remains up. Major support is at 18150.

If the NIFTY is unable to surpass 5900 level then it can fall up to

5750 or 5700 level. If 5700 is breached then 5550 or 5330 is possible.

HOW TO IDENTIFY THE RIGHT STOCK

For most investors, the ‘Right Stock’ remains an elusive mystery. We hear about it once in a while but are almost always unable to find it! What truly constitutes a ‘Right Stock’ and how do we find one amongst the thousands available in the Stock Market? Starting this week, MoneyWorks4me will be focusing on a series; the first being ‘How to Identify a Right Stock’.

Value Creation:

The first and foremost question to ask of a company you’re looking to invest in is – does it create value for me?

- From the investor’s perspective, ‘Value’ is created when the returns generated on the capital employed are higher than the cost of capital itself. After all, that’s what you want your investment to do. You want the returns from it to be higher than the costs you have incurred in investing in it. Likewise, you want the company, you invest in, to be generating returns higher than the cost incurred, on the capital employed.

Formally put, ‘Value Creation’ can be calculated using the following formula.

Return on Capital Employed-Weighted Average Cost of Capital)/Weighted Average Cost of Capital.

Explanation of the Formula:

Why do we take these factors into account? Let’s examine the formula in more detail and how it benefits you as an investor.

Weighted Average Cost of Capital (WACC)

The capital that the company raises is not free; there is a cost attached to it.

This cost, primarily, comprises of two factors:

1.Cost of Equity, which is further calculated using:

- Risk free rate of investment 
- Risk associated with investing in stock markets 
- Risk associated with investing in a particular company (measured by the Beta of the company)

2.Cost of Debt

These factors are proportionally weighted and we then, arrive at the Weighted Average Cost of Capital (WACC). From a value creation’s standpoint, the lower the company’s WACC, the better it is.

Return on Capital Employed (ROCE)

Now that we have a view on what the cost of capital is, let’s move on to the returns that can be generated on the capital employed. As mentioned previously, a ‘Value Creating’ company is one which generates a Return on Capital Employed (ROCE) that is higher than the Weighted Average Cost of Capital (WACC).

ROCE basically compares the earnings of the company against the capital employed. To put it simply, it tells how many Rupees are being generated by the company per Rupee of Capital that the company has employed. This measure gives a sense of how well a company is using its money to generate returns.

Comparing the ROCE and the WACC:

To know exactly how much value is being created by a company, it is essential to compare these two numbers using the formula given above. They will term the output of this formula as Value Creation Index (VCI).

Value Creation Index, thus, can act as first filter for identifying fundamentally strong stocks in the market. As mentioned previously, while looking at the VCI, it is important to check the consistency with which the company generates a positive return.

Apart from the value creation, revenue growth and margins should also be focused. When they both go hand in hand, only then company delivers sustained value for customers.

TRADING POSSIBILITIES

      Does this trade fit my chosen trading style? Whether it is:  swing trading, momentum, break out, trend following, reversion to the mean, or day trading? Does this trade fit into the parameters of who I am as a trader, or is it just based on my own fear or greed?

.        

      How big of a position do I want to trade? How much capital am I going to risk? Am I limiting my risk to 1% or 2% of my trading capital? Knowing where my stop will be how big should my position size be to limit my risk?What are the odds of my risk of ruin based on my capital at risk?

       

      Why am I entering the trade here? What is the entry trigger to take the trade? Is this a quantified entry on my trading plan.   How will I exit with a profit? A price target or trailing stop?

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       At what price will I know that I was wrong? Where is my stop loss based on the position size  Will I be able to admit I was wrong and exit the trade if my stop is hit, or will my ego make me hold and hope? Can I trade this position size and keep my ego out of the trade?  Is the risk small enough that I can emotionally handle the loss without blaming the market or myself? Is my risk small enough to keep my mind and trading plan in control?  Can I really risk this money or do I need it for upcoming bills? Trade with risk capital not living expenses.   Am I committed to staying disciplined and following my trading plan on the trade? Free-styling a trade that is losing is usually a formula for disaster.

     

.     

I believe the answers to these questions will determine your success in any one trade more than anything else.

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