- Where is the bottom?
The stock market’s massive fall has been swift, sharp and painful. Experts believe there’s going to be more pain before it settles down. Yet, predicting its bottom is like catching a falling knife. - Getting real about real estate
“Buy land, they are not making it any more,” said Mark Twain a long time ago, surely not in India or anywhere else for that matter. But the asset bubble seems to have burst. - Stop Worrying, and Learn to Love the Bear
That which does not kill investors makes them stronger. And painstaking investors — literally, those who can take the pain of a bear market that seems to drop another 1% every day — will ultimately triumph, by patiently amassing greater and greater equity positions at better and better prices. - The Price of Growth
India is slowly becoming a high-cost economy, which translates into industrial emigration, job losses and falling competitiveness.
Archive for the ‘Daily Notes’ Category
This Time It’s the Same
by Todd N Kenyon
I was reading through my latest copy of Outstanding Investor Digest yesterday. If you aren’t familiar with OID, it’s an excellent if quirky periodical that presents a hodge-podge of speeches, letters, articles, presentation, interviews, etc by/of great value investors.
It’s quirky because it comes when it comes. I swear there was nearly a year between my last two issues – at least it seemed like it. That said, it is always chock full of interesting stuff. I guess they know they can get away with this “relaxed” delivery schedule because they know value investors are willing to wait patiently for good things to happen.
Click here for the full article
Additional Readings
- Soros’ hedge fund Quantum on buying spree
- Have stock prices of PSU banks bottomed out?
- Historically, bears should’ve weaker legs by now
- Q1: What sectors have in store
- How to pay zero tax on Rs 13.10-lakh income
- Dividend Investing + Value Investing = Superior Returns
- All Intelligent Investing IS Value Investing
Random Readings
‘Markets may bottom out around 11,000-11,500′
Ridham Desai, MD and Co-Head Equity, Morgan Stanley, said the markets have made lower tops and bottoms, which confirms that we are definitely in a bear market. “Price damage is the first indicator. Around 75% of the price correction is over in the current bear market. Fundamentals have also given way. A lot of stock market drivers are taking us further into the red. The bottom may lie around 10,500. So, the markets are likely to se more downside for the next six months.”
He feels that valuations have come off. “Markets are trading around 14 times forward earnings. They are still not cheap. Valuations will get attractive around 10 times earnings.”
According to Desai, the markets are seeing a bear market rally. “There can be an 20-40% upside in the markets, but investors should sell into it, as one will never know when bear market end. It can only be defined in hindsight.”
The markets may not go though a prolonged sideways move like the one in the 1990s, he said.
For the markets to rise, Desai said, crude prices need to top out. “Consensus estimate for FY09 growth has come in at 20%, which needs to be revised downward. We see more pressure on EBIDTA margins and downward adjustments. However, earnings bottom is dependent on policy response to economic woes like inflation.”
He feels that investors need to patient. “One will get good buying opportunities on corrections. Investors can buy in small amounts for in investment perspective of around 2-3 years. They need to look at price erosions and valuations, which is the most fundamental tool. Investors also need to put capital to work slowly. They will see better times to invest further.”
Desai does not see the markets hitting new highs very soon. “We can go back to the old highs by July 2010. However, equities will still remain the best asset class with CAGR returns of around 20%.”
On politics, he said that expectations on reforms increase around formation of new governments. “Elections are likely to happen in May 2009. By then, the bear market may be over.”
Click here for the full story.
Additional Reading
A buying formula
The theory of reflexivity was first mooted by philosopher Karl Popper and then adapted by his famous chela George Soros. Reflexivity suggests that trends (social, cultural, religious or economic) are often amplified by feedback loops that make them stronger and more prolonged.
In particular, financial trends start from rational causes but are often prolonged to a point where prices swing far into the irrational. In the context of a market, a feedback loop can be understood simply as the price-amplification that occurs whenever profits are reinvested. A trader profits, reinvests those profits and makes more profits. Others bring in new funding in hope of emulation.
Click here for the article.
Additional Reading
