DO YOU KNOW ?

IS UNITED STATES HEADING FOR A BIG BEAR MARKET ?

here is a great deal of concern surrounding the outlook for American equity markets. The markets are up nearly 200 per cent from their low of 666 in March 2009, and many credible and serious market observers are expecting a big bearmarket to hit US equities anytime now. The bears are making the argument that valuations are very high in the US on any valuation measure using normalised earnings and profit margins. Current price-to-earnings (P/E) ratios look reasonable since the denominator is based on peak profit margins, which are unlikely to be sustained.

The bears point to worrying signs in terms of sentiment. Margin debt is at an all-time high; investment advisor bullishness is very elevated; and we see bubble-like behaviour in initial public offerings and mergers for new technology companies. Flows into equities have also started to pick up. The bears also make the point that we continue to live in a very artificial environment, driven by super-easy US Federal Reserve policy. As Fed policy normalises - the path and timing for which are now clear - we will see market disruption. One cannot normalise a hyper-stimulative policy environment without market casualties.

It is notoriously difficult to time bear markets, but it is interesting to see how the US markets look on some simple indicators. The US markets remain the most important, and any significant decline there will have consequences for equity markets globally.

In an attempt to understand the vulnerability of the US equity markets, the most important variables to assess are monetary conditions. Tight money conditions are a clear negative for equities. Monetary tightening leads to an economic slowdown and has a consequent impact on corporate earnings. High interest rates will reduce the relative attractiveness of equities as an asset class and also disproportionately reduce the value of any long-duration asset such as equities (through a higher discount rate). Slowing money supply growth (a normal consequence of a tight monetary policy stance) will reduce the surplus liquidity that can flow into financial assets from the real economy.

How should one measure monetary conditions? Which measures have some predictive power vis-a vis equities? BCA has done some research on this topic and has come up with a few key variables.

The slope of the yield curve is a simple and effective way to judge the monetary stance; a flat to inverted slope implies tight policy. The spread between the 10-year bond yield and the three-month Treasury bill is probably the best way to measure the yield curve. If this spread is negative or zero, that is normally a good leading indicator of market vulnerability. Another equally effective measure would be to look at the gap between five-year bond yields and three-year bonds.

The level of real short-term interest rates is another effective tool to assess monetary conditions from an equity market perspective. In general, real short-term rates will need to be strongly positive before the onset of any bear market. Though an imprecise indicator, real short rates above two per cent seem to have the ability to cause market damage.

Another tool investors may use to judge monetary conditions is a type of Marshallian K construct: comparing the growth of some form of money supply (like M2) to nominal gross domestic product (GDP). The logic is that whenever money supply growth lags nominal GDP, liquidity will be sucked out of financial assets for real economy use. The reverse flow from the real economy into financial assets occurs when M2 is growing faster than nominal GDP. As BCA points out, the gap between growth in M2 and in nominal GDP turned negative before almost every bear market prior to 1980. Though this signal has been less effective in recent years, it is still something to keep track of.

Currently, none of the three monetary indicators mentioned above shows any signs of impending market stress. The yield curve is positive, real short rates are negative, and money supply growth continues to exceed nominal GDP. There is nothing on the monetary side that should worry market participants. Yes, the Fed has begun normalising monetary policy, but raising rates from very low levels when economic growth is improving should not trigger a bear market. Market volatility and disruption, yes - but bear market, no.

Valuation is the other obvious indicator that judges a market's vulnerability to a bear phase. Valuation indicators, whether they are simple P/E multiples or even the cyclically adjusted P/E, have very little use for timing equity bear markets. Valuation overshoots can persist for long periods of time. Valuations are, however, useful in determining prospective returns. Buying a market when P/E ratios are high will generally deliver lower 10-year returns than buying when P/Es are low. There is also a loose relationship between the extent of overvaluation and the severity of the subsequent bear phase. While equity markets in the US are no longer cheap, they are not at an extreme either. Current trailing P/E ratios are within 10 per cent of long-term averages. Stocks also look very cheap if one uses any interest rate-based valuation tool, which reflects the extent of overvaluation in fixed-income markets. As discussed, valuation is not useful for timing - but apart from that, except for some technology and biotechnology subsectors, broad market valuation does not seem to be at such an extreme as to cause worry.

Technical indicators - such as sentiment, breadth and momentum - can be important in trying to understand market vulnerability and are useful at market turning points. Current technical readings are mixed - the market is above its 200-day moving average, but sentiment seems elevated with investment advisor bullishness and margin debt at an extreme. However, given the amount of discussion that is taking place on bubble-like conditions in financial markets, it does not seem that we are in the midst of euphoria. Nor are equity market flows strong enough.

US equity markets will eventually have a significant bear market. All markets are eventually cyclical, but there seems to be no reason to feel that it is imminent. A shock independent of monetary policy can induce a market correction, as can a serious economic recession - but the first is not forecastable and the second seems unlikely in the short term. Most economists expect the US economy to actually accelerate from here, not fall into another recession. A significant decline in corporate earnings can also be another trigger. However, absent a recession, despite the calls for regression to the mean in terms of profit margins, one cannot see how earnings in the US can decline enough to trigger a bear market. Recent corporate earnings have been weak, but they are not declining.

If the US equity markets hold, that will hopefully provide an enabling backdrop for equity markets across the world.

ONE LINERS FOR TRADERS

• Let winners run. While momentum is in phase, the market can run much further than might be expected.
• Corollary to that rule: Do not exit winners without reason!
• Be quick to admit when wrong and get flat.
• Sometimes a time stop is the right solution. If a position is entered, but the anticipated scenario does not develop then get out.
• Remember: if one thing is not happening the other thing probably is. Historically, this has never been good for me…
• Be careful of correlations. Several positions can often equal one large position bearing unacceptable risk. Please think.

• I am responsible for risk management, money management, trade management, doing the analysis work and putting on every trade that comes.
• I am not responsible for the outcome of any one trade. Markets are highly random. I do not have a crystal ball. I am not as smart as I think I am.
• Risk management is the first and last responsibility. I can make almost any mistake and be ok as long as I do not violate my risk management parameters.
• Opportunity comes every day. Do not neglect the work. Must do analysis every day.
• Opportunity comes every day. Get out of poor positions. Move on.
• I am a better counter trend trader than a trend trader. Sometimes the crowd is right, and they will run me over at those times if I’m not quick to admit I’m wrong.
• If you’re going to do something stupid, at least do it on smaller size.

HOW IS THAT ?

No iPhone, no toys, no television and see their face

28 March 2014 

LESSONS FOR MR. MODI FROM MRS. INDIRA GANDHI

Marginalised by the Bharatiya Janata Party (BJP), former Union minister Jaswant Singh has claimed that the current decision-making in the party reminded him of 1975, Indira Gandhi’s Emergency era. A more apt comparison might be made with the years preceding the Emergency when Gandhi split her party to create a new Congress in 1969.

Gandhi was then fighting a powerful group within the Congress known as the “Syndicate” that was opposed to her.Narendra Modi also appears to be struggling with what can be termed the “Old Guard”. Just as the Congress became synonymous with Gandhi after the party split – literally as Congress (Indira) – the BJP is fast becoming synonymous with Modi. Gandhi made the institutions of the Congress irrelevant, as Modi seems to be doing in the BJP.

If Gandhi was likened to goddess Durga after the Bangladesh war, Modi is being likened to lord Shiva (ironically, the god of destruction), with Hindutva supporters adapting the chant “Har Har Mahadev” – to “Har Har Modi“. The slogan may be no accident considering Modi deliberately chose the city of lord Shiva, Kashi (Varanasi), to establish his credentials as leader of the nation. It was withdrawn, however, when it upset religious Hindus – underlining the chasm that exists between Hindu religiousness and Hindutva as a political ideology.

However, there are crucial differences between Gandhi’s reshaping of her party in the face of opposition from the older leaders of her party and Modi’s latter-day attempt to do this in the BJP.

Gandhi established her democratic credentials as prime minister in 1967, through an election in the Congress Parliamentary Party – winning 355 votes against Morarji Desai’s 169. Modi is yet to go through that baptism and was anointed prime ministerial candidate through more opaque processes.

Gandhi fought a bitter but democratic battle within the party for her social agenda before she was expelled from the party by its president, S Nijalingappa, forcing a Congress split. Modi has fought no such battle of ideas in eliminating potential challengers in his party.

Gandhi’s 10-point programme, announced in May 1967 at the All India Congress Committee meeting at Bangalore, was radical for its time – it proposed nationalisation of banks and insurance, state control over import and export trade, ceiling on urban property and income, curbs on business monopolies and concentration of economic power, public distribution of food grain, rapid implementation of land reforms, provision of house sites for the rural poor and, most importantly, abolition of privy purses of erstwhile princes. It was a socialist programme with a focus on distributive aspects of wealth. Modi comes with a corporate-funded and corporate-inspired agenda of growth premised on alienation of public resources to private entrepreneurs and no promise of distributive justice.

Gandhi had an inherent advantage in reshaping the Congress and consolidating it because she began to take on the older leaders in the party after she had become prime minister. Being in government, she held a monopoly over patronage distribution. Her victory in the 1971 war also helped reinforce control over the party in the 1972 elections.

Modi, however, is putting together a party of loyalists even before he has come to office. They include many opportunists salivating over the prospect of loaves and fishes. Anyone who seems to have the slightest chance at the hustings – from rank opportunists opposed to the party till yesterday to fading film stars – is welcome.

Consider the two states that hold the key to the BJP’s prospects of forming the next government. Nearly 26 outsiders have been fielded as Lok Sabha candidates in Uttar Pradesh. The number of outsiders in Bihar is 10 (one new entrant, two independent MLAs and seven defectors). In other states, candidates with a proven record have been sidelined because their loyalty to Modi is in doubt. Thus, Harin Pathak, seven-time MP and an L K Advani loyalist, was cast aside in favour of Bollywood’s funnyman, Paresh Rawal in Ahmedabad East. In Barmer, Sonaram, a defector from the Congress who was defeated once in the parliamentary election by Jaswant Singh’s son, is being fielded instead of Jaswant Singh. In Sikar, three-term MP and former Union minister Subhash Maharia was ignored in favour of a Ramdev acolyte, Swami Sumedhanand, who is from Haryana. The story is repeated in constituencies across Madhya Pradesh, Punjab and Delhi.

The deliberate humiliation and marginalisation of leaders critical of Modi are evident in the way senior leaders have been forced to change constituencies, their candidature not announced in time, or denied the opportunity to contest altogether. Adding insult to injury, Modi’s supporters have publicly advised them to grin and bear it.

Such is the surveillance of the “thought police” in Modi’s dystopian new BJP that even party president Rajnath Singh had to face the ire of Modi loyalists for tweeting, “Ab ki bar, Bhajpa Sarkar(This time, a BJP government)”. Barely 33 minutes later, he modified it to “Ab ki bar, Modi Sarkar(This time, a Modi government)”.

In confronting his own “Syndicate” within the BJP, Modi has the advantage that his party president is an acolyte. He also has the additional advantage that, despite apprehensions, the organisation that provides the cadre to the BJP for elections, the Rashtriya Swayamsevak Sangh (RSS), has thrown its weight behind him.

Unlike Indira Gandhi, Modi, therefore, does not need to split his party. It is enough to relegate contenders to the margins. The RSS, led by a weak and confused leader like Mohan Bhagwat, will not be able to check Modi in this. In one breath he blesses Modi as the BJP’s prime ministerial candidate, in the next, Bhagwat cautions against promoting a personality cult. Modi could well argue after the elections that, like the BJP, the RSS too needs a generational change and advise an ageing Bhagwat to retire. If he succeeds, Modi’s control over the BJP and the RSS would be complete. The big assumption here, of course, is that those opposed to Modi will roll over and oblige.

HOW MEN & WOMEN SEE COLOR

RELIANCE INDUSTRIES UNDER SCANNER

Supreme Court Scanner on Reliance Industries money laundering charges

26 March 2014 - 

The Supreme Court today asked the government to file a report on the steps it has taken after a Singapore High Commission letter asking for an investigation into alleged investment of Rs 6,500 crore into four RIL group companies by Bio Metrix Marketing and Strasbourg Holdings in Singapore.

In August 2011, the Indian High Commission in Singapore had written a letter to the government asking an investigation into investments made from “a one-room defunct company in Singapore”. During the hearing of the public interest litigation over Reliance KG-D6 case, the bench asked the government to file a report as to what was done pursuant to the High Commission letter.

The bench said, “We want to know what inquiry was done and what was done about the matter after the letter from the Indian High Commission.” Reliance Industries Limited (RIL) had last month (February 27), rejected allegations of making foreign direct investments (FDI) in certain Indian companies through the Singapore-based firm Biometrix.

“The investments by Biometrix were open, transparent and perfectly legitimate transactions in full compliance with the extant regulations. These investments in the Indian companies were made by Biometrix out of loans raised from ICICI Bank, Singapore branch. ICICI Bank has confirmed this fact to the regulators. Regulatory authorities have fully investigated the matter and have found no substance in the allegations of money laundering. The insinuation that this money was from “gold plating” from KG-D6 is completely irresponsible and false,” the statement added.

The RIL statement further added that the allegations made by Prashant Bhushan of Aam Aadmi Party have been previously made in judicial proceedings in the Delhi High Court and have been appropriately responded to.

“Our legal advisor, Atul Dayal, was neither the owner nor director of Biometrix, and Biometrix has filed its balance sheets and income tax returns in each year with the regulatory authorities in Singapore. The allegations that ill-gotten laundered money or profits have either been made or that these have been deposited in the accounts of Mr.Mukesh Ambani through Singapore or otherwise are false and are treated by us with the contempt that they deserve,” the RIL statement said.

Prashant Bhushan appearing for the petitioners Common Cause , today pointed out that this is a company with no assets, no equity and does not file an income tax returns in Singapore claiming to be a small company. Yet,  this huge investment by this company of Rs 6530 crores is the single biggest FDI into India from Singapore.

“The High Commission had stated that all this money has gone into Reliance group of companies in India with the major chunk going to Reliance Gas Transportation Infrastructure Ltd which is a company 100% owned by Mukesh Ambani personally,” he added. 

MODI BUBBLE FOR INDIAN STOCK MARKET

While major rating agencies have highlighted game-changing role of Lok Sabha elections and the ‘imminent’ empowerment of BJP PM candidate Narendra Modi in the top job at Centre, which they said would power the Indian economy, a new report seeks to prick that particular balloon.

Leading American brokerage Bank of America-Merrill Lynch today cautioned against excessive fear of the poll outcome as in 2004 and the over-enthusiasm of 2009, saying the market should look more at the global economic cycle and its impact on growth than who takes charge at the Raisina Hill after the hustings.

“We can only emphasise that the global economic cycle drives growth far more than who rules in New Delhi. It is for this reason we caution against extreme euphoria ala 2009 or utter despair ala 2004 on May 16,” a BofA-ML report said.

The brokerage also warned, after talking to over 20 equity and fixed income investors in Singapore last week, that the forex market players would be playing it safe and square off their positions before the polls.

It can be recalled that the market saw a massive 15.9 per cent sell-off in May 2004 after the surprise defeat of the NDA and a 15 per cent BSE Sensex rally after the emphatic re-election of the UPA in May 2009. On both the occasions, the market did not get the poll outcomes correctly.

In a report titled, ‘Will markets be third time lucky? Three big ifs: Polls, the El Nino, and the dollar’, BofA-ML India chief economist Indranil Sen Gupta said the consensus among equity investors is to go along the polls in the hope of a successive stable coalition.

However, “forex investors are more circumspect; most say they will square off before the polls to avoid the event risk,” Gupta said.

Gupta noted that in both the past two occasions, the market behaved irrationally: in 2004 it lost 15.9 per cent even as growth was picking up and in 2009 it rallied 15 per cent on the result day just before growth began to fall.

Gupta goes on to add that the real test for the investors will be impact of the three big ifs facing the country-the polls, the El Nino and the US dollar.

On the polls, Gupta said that though opinion polls place BJP in the lead, we also acknowledged that poll predictions went wrong in 2004 and 2009.

REACTIONS

Reaction of a baby gorilla and a human baby to the cold stethoscope.

25 March 2014 -

EXAMINE YOUR BELIEFS

There is lot of talk of trading psychology , but what exactly are the 3 or 5 things you can do to improve your psychology.

If you want to increase your muscles you go and lift weight

If you want to improve your stamina, you go and run daily

If you want to reduce weight you eat less and exercise more

What exactly do you need to do to improve your psychology.

First starting point if you want to improve your psychology is by examining your beliefs

You can only trade what you believe in.

Your beliefs drive your behavior.

If you believe only way to trade is using mechanical methods ( that is a belief) and as a result all your behavior will flow from it.

If you believe one should only trade triple etf and not waste time on individual stocks (that is a belief) and as a result all your behavior will flow from it.

If you believe that only way to trade is with big risk (that is a belief) and as a result all your behavior will flow from it.

Every trade has deeply held beliefs. The bundle of deeply held beliefs drive what kind of setup they will trade, what kind of timeframe they will trade and also all elements of trade like entry, exit , risk,  and number of positions held.

Beliefs are not necessarily based on science or logic. In trading there are many beliefs based on to others pseudoscience . Personally I would never trade based on Elliott Waves , because it is not in line with my belief system. I believe it is not scientific and hocus focus. But there are traders who build their entire trading around it.

Your beliefs drive your trading actions. If you want better results in your trading you start by examining your beliefs about market, how they operate and about your trading and beliefs behind those trading decisions. A critical study of them might show you where you need to fix things.

It is  difficult to change beliefs. Contrary to what self help books and many motivational authors and speakers will tell you it is not easy to change beliefs. Beliefs persist for lifetime in some people. So much of human behavior is driven by beliefs. Religion survives because people are driven by beliefs.

But psychologists who have studied beliefs know it is difficult to change deeply ingrained beliefs. There are no magical technique or method which will change your beliefs overnight.To change beliefs you need to educate yourself , expose yourself to new way of thinking, get rewarded for new beliefs.

When you are kid you have many simple beliefs, like monster exist or eating sweets will lead to cavities, or my parents are going to be forever, but as you grow and get exposed to science your beliefs change.

New knowledge and new discovery leads to change of beliefs. Same thing with markets and and trading. More you educate yourself and expose yourself to different beliefs you will reexamine some of your deeply held beliefs and start changing them. Your surroundings and people you interact with also helps to change or reinforce your beliefs. If you want to change beliefs change your surroundings, friends, family and incentive structure. 

 

For traders same thing applies. If you hang around with traders who all the time whine and “believe” market is manipulated, you will also imbibe same beliefs, you will get rewarded in that setting for those beliefs. If you change that and say start interacting with a highly motivated trader with 10 year plus track record and no negative years , your beliefs will change. In that setting you will not be rewarded for your beliefs about manipulation.

First starting point if you want to improve your psychology is by examining your beliefs

Align your beliefs with market structure by educating yourself about how markets work. Align your belief with what has shown to have worked in the market based on history and statistics. Align your belief with a style of investing growth, value, contrarian investing. Align your belief with time frame (day trade , swing, position). Align your belief with right kind of market paradigm

Lot of time people claim they have discipline problem, but the basic problem is wrong beliefs and as a result wrong behavior. If you fix the beliefs discipline is comparatively easy. 

DELIVERY PICKS

MARKSANS PHARMA

(Bse Ticker-524404@ Rs.21.45)

Excellent Breakout In Stock

AboveRs.21/-

Gate Open to Stock to Cross Rs.32/-

TARGET

Rs.23/- Rs.25/- SL Rs.15/-

DEN NETWORK

(Bse Ticker-533137@ Rs.176/-)

Excellent Breakout Above Rs.171/-

Stock May Go to Rs.210/-

TARGET

Rs.181/- Rs.187/- SL Rs.162/-

MARKETS FOR 21-3-14

   Market Review for 21st March 2014     

Nifty (6524)  we said ‘technically trend is still intact but looks like some selling pressure in the upper regions’ the market unfolded flat…technically the trend is still intact as long as 6430 holds…

The support for Nifty is it 6430 and the resistance to the up move at 6575-6600

20-3-14

   Market Review for 20th March 2014     

Nifty (6524)  we said ‘technically trend is still intact but looks like some selling pressure in the upper regions’ the market unfolded flat…technically the trend is still intact as long as 6430 holds…

The support for Nifty is it 6430 and the resistance to the up move at 6575-6600

NO BANK LICENCE FOR CORPORATES ?

Corporate houses may not get bank licences-

19 March 2014 

Industrial houses aspiring to set up banks could be in for some disappointment, as the Reserve Bank of India (RBI) is in no mood to oblige any of them. Sources familiar with the developments said while the licensing process was in the final lap, a final announcement was still some time away.

While the names of several business houses were considered during discussion, the thinking in the important corridors of the central bank headquarters favoured caution. RBI is not alone in its caution. Regulators in the US and South Korea do not allow industrial houses to set up banks; Australia, Canada, the UK and Hong Kong allow it but with restrictions on ownership and voting rights.

Besides, there has been widespread opposition from several quarters. Many economists and institutions, including Nobel laureate Joseph Stiglitz and the International Monetary Fund, have cautioned against the move, as the risks might outweigh the benefits. Former RBI governor, Y V Reddy, too, has advised careful weighing of risks vis-à-vis benefits before such a step.

THE UNFAVOURED?

The prominent corporate houses among the 25 applicants include Aditya Birla Group, Anil Ambani’sReliance Capital and Bajaj group Earlier, business houses were not considered both in 1993 and 2003-04 There has been widespread opposition from several quarters, including former RBI governor Y V Reddy, Nobel laureate Joseph Stiglitz and IMF Names in the final run could include IDFC and a few prominent NBFCs and MFIs Bimal Jalan panel had given its report at the end of February

Some of the business houses whose names figure in the list of 25 applicants are the Aditya Birla group, Anil Ambani’s Reliance Capital and the Bajaj group. Tata Sons and the Videocon group-promoted Value Industries had withdrawn their applications, while M&M Finance, part of the Mahindra group, did not finally apply.

On two previous occasions when bank licences were given — in 1993 and 2003-04 — business houses were not considered.

The sources said four to five entities might finally get the licence and the final names doing the rounds are those of IDFC and a couple of prominent non-banking financial companies and microfinance institutions. And, it is now largely certain that India Post will not be considered, as it is owned by the government. The licences will be awarded only to entities in the private sector.

RBI had appointed a high-level advisory committee under former central bank governor Bimal Jalan to screen the applications. The committee was constituted to examine the applications on the parameters of the fit-and-proper criterion, business plans, corporate governance practices, among other things. The Jalan committee had filed its report in the last week of February.

On the licensing process, the sources said the RBI governor and deputy governors had several rounds of meeting but the names were yet to be finalised.

The announcement could be delayed because after the names are finalised, those will be sent to the committee of the central board (CCB) of RBI for its approval. The CCB, which generally meets once a week, might take more than one meeting to give its approval. The banking regulator has also sought the Election Commission’s approval before announcing the names, as the model election code of conduct is in place.

TRADING CHECKLISTS

Here is a checklist that might be useful for self-evaluation:

1) Have you experienced one or more recent large losses in markets that shook you emotionally?

2) Have you experienced a recent painful loss in your personal life that has left you feeling more vulnerable in your finances and/or your personal sense of security?

3) Have you experienced a recent threat to personal safety that shook you emotionally, such as a violent attack or a serious accident?

4) Do you find yourself emotionally “overreacting” to what should be normal trading stresses and losses? Are you experiencing significant anxiety, frustration, anger, or depressed feelings when trades don’t work out?

5) Do you find yourself “overreacting” in your trading behaviors during what should be times of normal stress? Are you freezing up and not acting on your ideas or impulsively lurching into trades after losing periods in markets?

6) Do you look back on your trading and feel confusion, shame, or puzzlement over actions that you took that run completely contrary to your plans for the day?

7) Have you tried to reduce your emotional and/or behavioral reactivity to markets, only to see the same destructive patterns return during times of stress?

A “yes” answer to any of items 1-3 and a “yes” answer to any of items 4-7 suggest that a degree of traumatic emotional stress may be interfering with your trading. 

A “no” answer to items 1-3, but “yes” answers to some of the remaining items suggests that past emotional conflicts or issues–not necessarily recent traumatic stresses–may be compromising your ability to keep a clear head and execute sound decisions when you are facing meaningful risk and uncertainty.

In either case, present-day stresses from markets have the potential to trigger emotional reactions from our past, leading us to think, feel, and behave in unwanted ways. This compromises our freedom of will, leading us to react rather than act. 

The first step toward changing repetitive patterns of behavior is to recognize them in real time. My next post in this series will focus on that before we tackle steps you can take to reprogram and overcome these patterns. The links below should get you started in that direction.

23 BUSINESS RULES

1. You’ve got to get along. If you don’t have good people skills, you’ll never succeed, even if you run your own business.

2. Money talks. He who has cash has leverage, and someone always has more than you do. There’s rarely a deal between equals.

3. Leverage is not always about money. I.e. if you’re an unsigned band that can sell out arenas, you’ll get an incredible deal from the label.

4. If a deal is too good, it probably is. In other words, if the other person can’t make any money, there’s going to be a problem.

5. The best deals are win-wins.

6. If you’re not willing to risk, if you’re not willing to give something up, you’re going to sit on the sidelines. Sure, the label might not offer you your dream deal, but the alternative is to go it alone, which is an option, but probably not the one you want since you entered negotiations in the first place.

7. You don’t know everything, you just think you do. If you’re not learning every day, you’re hanging with the wrong people and not applying yourself.

8. The more powerful the person, the less the chance you’ll see them at the conference. The conference is for never have and wannabes and for the purveyor to make coin. In other words, have a good time at SXSW, but the real winners are the people who put on the conference.

9. A contract does not guarantee behavior. At most it’s a guideline. If you think suing to get what you want is a solution, that the contract entitles you to win, you’re naive.

10. Some people use litigation as both a business strategy and a profit center. If someone has deeper pockets than you, you’re not on an equal footing.

11. The real world is very different from books. In other words, there are very few professors who can succeed in the real world. Theory is one thing, practice is another.

12. Lawyers are worth every dollar you pay them. So choose wisely and don’t expect a deal. You need an outside voice. Someone who knows the pitfalls.

13. News often isn’t. It may be on the Business page, but frequently the corporation has a relationship with the journalist and wants a certain story told.

14. If you haven’t been screwed, you haven’t been in business. There’s more than one way to fail, you learn lessons from your defeats, which is why so many want to hire those who’ve failed, because they’ve gained so much experience!

15. Nitpicking is for losers. If you can’t let something go by, if you want the other party to live up to every letter of a contract, you’re going to find yourself an outcast by the sidelines.

16. Winners see tomorrow as well as today. If you don’t have the exit strategy in place when you’re negotiating a deal, you’re going to find yourself in an uncomfortable position down the line.

17. Those who give the best advice are the hardest to get to know, and the hardest to get to speak at length. The powerful don’t want to know the powerless, there has to be an advantage in it for them, or else the response will be very brief.

18. Time is irreplaceable. Never waste someone else’s. Make your pitch short and to the point and thank the other person for listening. You think you’re explaining your point, ensuring success by going on at length, but the truth is the other person is rolling their eyes and looking at their watch, wondering how they can get out of this meeting and never ever speak with you again.

19. Most conference calls are a waste of time. Do your best to avoid them. If you’re on one, talk only business and make it brief.

20. Respect your adversary/opponent. Treat people with dignity, dividends will follow.

21. Don’t take you or your business too seriously. Make jokes.

22. Have fun. Work takes up too much of your time not to.

23. Break the rules. All the winners do. School is all about rules, which is why those who’ve done well in school rarely do well in business.

POSITIVES & NEGATIVES OF THE WEEK

Positives:

1. Initial jobless claims fell to 315k, 6th lowest claim in ~7 years.
2. Despite all the noise, the S&P 500 is 2% off ALL-TIME HIGHS.
3. Gold is at its highest level since September, perhaps a sign of inflation pressures.
4. Retail sales ex-auto & gas rose 0.3% v 0.2% expected.
5. Inventories ex-autos rose 0.7% in January, the largest gain since July.
6. Australia had a huge jobs beat in February, adding 80,500 full-time workers, the second largest monthly increase on record.
7. U.S. PPI fell o.1% in February, the first decline in 3 months. Inflation is well contained.
8. Central banks in Japan, Indonesia, and South Korea leave rates unchanged. Thailand cuts, while New Zealand hikes due to inflation concerns.

Negatives:

1. Chinese exports collapsed 18.1% from a year earlier to its lowest level since 2009.
2.  The German DAX fell 4% this week and is down 8% in March.
3. Fears over a Russian invasion of Crimea has amplified stock market volatility.
4. Business sales fell 0.9% in January, the largest drop since March (cold weather blamed).
5. Nasdaq had its largest weekly loss in over 6 months, down a whopping 1.7%
5. January retail sales were revised down to -0.6% from -0.4%.
7. Consumer confidence fell to 79.9 v 82 expected.
8. NFIB small business optimism fell to the lowest reading since March ’13
9. European stocks slid to a one-month low.
10. Chinese Yuan saw its biggest daily decline since 2008 thanks to a string of bad data.

ETF OF SELECT PUBLIC SECTOR UNITS

Goldman Sachs Asset Management (India) today launched the much-awaited exchange traded fund (ETF) of select public sector units.

CPSE-ETF is an open-ended scheme that will track the central public sector enterprises index.

To be launched by the National Stock Exchange (NSE) on March 18, this index will consist of 10 major public sector enterprises: Coal India, GAIL (India), Oil & Natural Gas Corporation, Indian Oil Corporation, Bharat Electronics, Oil India, Power Finance Corporation, Rural Electrification Corporation, Container Corporation of India and Engineers India.

An ETF is a security that tracks an index but trades like a stock on an exchange. However, the CPSE-ETF will serve as an additional route for the government to monetise its shareholdings in these entities. The process will be such that the Centre will transfer a basket of stocks to the scheme as part of its disinvestment process against which units will be issued to investors in the scheme.

The new fund offer (NFO) will open for subscription on March 18 for anchor investors (investing above Rs 10 crore) and the next day for non-anchor and retail investors.

Retail individual investors can invest a minimum of Rs 5,000 and in multiples of Rs 1 thereafter up to Rs 2 lakh. On the other hand, non-institutional investors/ QIBs can invest a minimum of Rs 2 lakh and in multiples of Rs one thereafter.

“Though ETF is a very popular (investment vehicle) globally, it is at a nascent stage in India. Moreover, equity ETFs are yet to gain traction here. Through the CPSE-ETF, the government is trying to make this product popular,” said Alok Tandon, joint secretary in the disinvestment department told reporters at the launch here today.

The government plans to raise up to Rs 3,000 crore from this scheme in the outgoing fiscal, Tandon added. Describing the scheme’s benefits, he said it provides a sound opportunity for investors to be part of the top 10 PSUs.

In a bid to attract retail investors to subscribe to the NFO, a 5 per cent upfront discount is being offered. “Loyalty units” will also be given to those retail investors holding the units for a period of one year from the NFO allotment date.

Tandon said investor response to the current scheme would determine whether the government came out with another ETF involving state-owned entities.