Sunday, October 28, 2007

Fighting the PANTA Trip Murphy. - RC 1

I have previously spoken at length about honourable Mr. Murphy. Here, I am going to deal with our endeavour to fight the Murhpy that was haunting our trip plans for a while now. A bit of a background - First time Mr. Murhpy hit us on the face was last year when we'd decided to go to "वासोटा" for a trek. pilot, was then called for a late night last minute duty and we'd to drop the idea. Next time Mr. Murphy hit us was when we'd almost finalized the plan for an overnight trip to 'तारकर्ली', when Bayani was suddenly diagnosed with a tumor. Thankfully, it turned out to be benign one hence no Mr. Murphy there.

Inspite of such lost battles, we had continued planning for the next trip. This time one was an overnight to 'कशिद' beach, and then people started dropping down like Indian Cricket team wickets. Initially, we started with eight and were down to five. But still five and we'd decided, never mind we are going to go ahead with the plan. And then, and then Bayani calls me on the previous night saying one of the five had met a small accident!!! We were deliberating about possible choices and a few came up (of course dropping the whole idea of trip was one of them). But one thing just put me off - Bayani said we'd start at 10.30am next day. I said, nothing doing we are going to the trip as planned, which was by the way trimmed down to a single day trip to मुळशी and then to लोणावळा. If Mr. Murphy has to meet us, let him do that at मुळशी not here.

So fighting these odds - We started finally on Saturday morning. Absolutely nothing eventful for the good part of the trip initially, when we started testing our luck, initially with Diesel in the car. While there was 'enough' diesel in the car, we were certainly stretching it a bit. Then we reached a point where the closest Petrol Pump that we knew was 30kms away. Which was not all that intimidating (Interesting dialogue - Bayani - माणगाव is 37 KM. Unmesh - पाली is 36 KM. Bayani - What is a big deal about 1km? Unmesh - When you've to push the car for that much, you'd know!) So finally getting down from the ताम्हिणी घाट, we asked the local shopkeeper about the nearest Petrol Pump. He suggested, there was one at भिरा (That is where Tata Power Company has a power plant. We decided to take a lunch in the canteen there, but shunted right at the gate by the dutiful 'Security') Looking at the state of the Petrol Pump, I asked the guy atleast three times - 'Are you sure this is diesel?' Surprisingly, he wasn't annoyed. But so far so good.

Initially the 'plan' was to go to लोणावळा via मुळशी - लोणावळा Road, which is about 50 odd kilometers just from the beginning of the ताम्हिणी घाट. So dutifully we came back to a place where we wanted to start from, taking a detour of 30km for filling the freaking fuel, never mind! Bayani suggested a place where we get 'excellent कांदा भजी' and it was already 1.30pm in the afty and we decided to get some fuel for ourselves and then go ahead. After going about 10km in that direction, we realized that it was a bit too far to be trying that, hence we decided to take an about turn and head towards our planned venture. 20km detour for nothing in particular.

The road from मुळशी to लोणावळा is 'treacherous' to say the least and the guy who actually put a sign board indicating that this road goes to Lonavala must be a sadist of the first grade. This one was certainly one of the less travelled types!! First kilometer was 'uneventful' apart from thick forest we were in and I was reasonably scared at 1.30pm in the noon to be outside the comfort of the car. After taking a small break and a bit of photoshoot, we decided to move on. A kilometer and half further, we saw a curious railing and a nice flat space and broken beer bottles suggested this place was visited by a few atleast. It was a consensus to halt there and take a peek. That decision was worth it! The splendid scenary out there was ammmaaazinnngggg (pun intended), cannot be described in words! Curious of such wonderful sights in store, we decided to move on.. Next couple of kilometers were rather bland, nothing spectacular happening. In the meanwhile, we were a bit surprised about how Mr. Murphy was still so silent, it was quite unlike Mr. Murhpy. Then going further we came across to a bus stop called 'Luthra Van Bus Stop', and crossed a bridge. If one regrets crossing a few bridges in life, it was certainly one of them, a stretch of next 4-5 kilometers was tasting. There was nothing 'resembling' a road, everything was just stones laid with no particular intention in mind. It didn't strike us till then we'd not seen a single vehicle in either direction, hence may be 'one was not supposed to go this path', and in the middle of that stretch of 5 kilometers, we were counting every single meter of the 52000 we'd to cross to reach our destination. I was certain, Mr. Murphy has saved everything for the end-game. Crossing a couple of kilometers, we decided, the best bet was to move on. For the first time, in my life, I was actually believing 'An unknown friend is better than a known enemy'. Unknown friend here being 'The Road Ahead' and known enemy was the 'The Road So Far". Honestly we had no choice, the only thing that was left to us was pray and move on. There were atleast 20 occassions, where we believed this road is never going to lead to Lonavala or we're lost somewhere. If I ever wanted to know what 'Himalayan Car Rally' is all about, this was certainly a trailor to that. A couple of times I'd to ask the junta to get down, so that the freaking car could climb the 40 degree slope with no chance of getting a grip on the road and everything that can go wrong could go wrong there! Finally we came to a point where I had lost almost all hopes of reaching Lonavala, or for that matter reaching any place where human civilization existed. We did come across a few humans along the way, but none suggested us that, only a fool is going to go by this road, or probably they were too nice to call us fools. For the benefit of those who know Crooked Street in San Francisco, Just imagine that without a tar and a slope 5 degrees too steep and yes a few stones here and there. And finally, after a trecherous four or five kilometers we reached a point of 'No More please' and I came across a guy, asking him "How much more?" He said just a bit more. I had heard that answer twice or thrice before, so wasn't really sure how long 'just a bit' is. Meanwhile, people who were asked to get down of the car joined and we got into the car, and guess what, in less than fifty meters, that was over! This does not mean we were out of the woods, well literally!! But there was atleast no 'visible damage done'. We still had to go good forty kilometers and we started our countdown. What was remarkable was while all of this was happening, no one not a single one of us pressed the Panic Button (of course there were no usual suspects who'd, still..). A few kilometers further, we started seeing some cars in opposite dirction. I even saw a 'मंदीर' and I suggested 'मंदीर is a positive thing' and everyone burst into a laughter. (I am not sure whether it was for my saying it or for thorough hopelessness with which we were going on!) and continuing in that fashion an hour or so later, we reached a place called 'अंबवणे', yes that is where the famous 'Amby Valley' is. Mr Murphy not in action yet! Oh and yes all this while, there was not a single drop of drinking water with us!

The road from Amby Valley to lonavala is a perfect anti-climax to what we'd gone through just now, if one has to experience hell and heaven separated by one hour and few kilometers, we'd done just that. It was just a smooth ride from there to Lonavala to Kamat hotel for some snacks. Finally, we dropped the idea of going to Sunset Point for it was already past 6pm and there was no Sun left to set. Thus we began our return journey to Pune, nothing much to write about!

In a span of less than 6 hours, we'd driven on every possible road one can see in India, save the one that goes along the beach. A village path, a state highway (which is barely 4 meters wide), a national highway and finally the Mumbai-Pune Expressway the best road in India.

And when we finally reached Pune and stopped for the customary chai, we'd defeated Mr. Murphy of PANTA Trip atleast for now! (A feeling tantamount to defeating Australia in any form of game)

Next release of this will have a picturesque version. Tough luck for those who missed this, well I can say that now!! I wouldn't dare saying it 32 hours back!!!!

Demystifying the 'India Story' - Part 1

I am personally a great believer in Technical analysis. The trouble with Technical Analysis though is that, it gives a Sell signal sometimes when it is too late. Especially in times of 'Parabolic Frolic'. Hence for whatever it is worth, I decided to look at the fundamentals of the India Inc. today. I was mainly concentrating on the Major Sensex companies, to see whether,
my notional belief of market being expensive is really true or is it just my misinterpretation that market is expensive. To my surprise, some interesting facts came out.

I was basically concentrating on the following parameters for Benchmark - EPS for Trailing Twelve Months (this is one real indicator), EPS Growth QoQ and EPS growth YoY (This shows how the company is performing in past twelve months and is likely to perform in next 3-4 months. Just an indicator). (Price/EPS) will eventually give the much talked about P/E ratio.

Looking at these numbers - Some interesting facts came out. I am just noticing the sailent features

1. Reliance is quoting at 29.1 times its EPS for TTM and YoY and QoQ growth is 41.0% and 17.0%.
2. ONGC is quoting at just 15 timees its EPS
3. Bharti and RCom are quoting at 40.0 and 53 times their EPS, but this is for quarter ended june. Interestingly their QoQ growths are 10 and 22 percent respectively.
4. L&T is quoting at 62 times its earnings and its YoY and QoQ EPS growth is Negative. Yes Negative!!!!
5. ICICI Bank is quoting at just 20 times its earnings and its YoY and QoQ growth is 6 & 5 percent.
6. HDFC Bank is quoting at 38 times its earnings and its YoY and QoQ growth is 8% and 25% only.
7. I have not completed others yet, will do those when their September earnings are out and revisit Bharti and RCom.
8. Reliance capital is quoting at 50 times its EPS, when its QoQ growth is negative, yes negative, but YoY growth is definitely positive.
9. Quick look at RNRL, it is quoting at 276 times its earnings.
10. The IT stocks are 'still' quoting at about 25 times their earnings. However, it should be noted that 'save Reliance' these are the only stocks that are giving both QoQ and YoY positive performance for past 3-4 quarters (albeit smaller).

Looking at these numbers, it is evident that the 'value' of the stocks is certainly going ahead of whatever these stocks are worth. Contrary to popular belief that our market is quoting at 20 P/E, we are quoting well above that, almost similar to Nasdaq 1999-2000, pre bust valuations.

Most notable are the so called 'Winning Horses' or the Capital Goods and the Power companies (details in Part 2)

I don't know when the day of reckoning arrives, but when it arrives, we are going to see a whole lot of sinners then.

While, I have only focussed on the QoQ and YoY numbers, I have not taken a closer look at some 'interesting' parameters like 'Other Income'. If these 'parameters' are accounted for, we are certainly overvalued even more, even assuming a twenty percent premium for 'Emerging Market' story, one can easily expect where the stocks are headed, once the judgement day arrives.

After taking a look at this - I have decided to trim down some of my Axis Bank and may be Suzlon. (I have very miniscule, but a bird in hand is better than two in the bush.) I have decided to take money out of my MFs (over a week). There may be a 10-20 percent upside, but the downside risk is too much to be playing with.

A request to SEBI - I believe SEBI should make it mandatory to report EPS numbers, for investors to be aware of real performance of the shares. Otherwise in the clamour of beating the street, ordinary investors are never made aware of the 'bare basic facts'.

I have used data on stockhive for my reference. It is a very good site for the investors looking for good solid information about the company they want to invest in.

PS: I have no idea why someone would want to bid for a 20 percent (yes that is percent) out of money 4500 puts? Taking a clue, it might be worth trying that stunt!

Disclaimer: The ideas expressed are purely personal and a result of my own studies, they do not constitute 'Investment Advise' in any way.

Wednesday, October 24, 2007

Who runs our country?

Just something that came to my mind -

We have got a prime minister - Who goes ahead and signs a nuke deal and when push comes to shove, somersaults to say - "It is not end of life if this deal doesn't go through...." and then whines and cries and says "Allies didn't support nuclear deal..." and says he's 'embarrassed'. Actually Mr. honourable PM, we are embarrassed to have you as a prime minister. When was the last time we heard a prominent leader saying he's embarrassed, perhaps one should give some credit to the man for being honest, but there is something called dignity and our dear PM does not seem to have it.

We have got an agriculture minister - Who is when not watching a cricket match at some place on the earth, is busy acquiring farmer's lands for SEZs and cricket grounds. Who not only stops at that, but goes ahead and actually asks farmers that they should stop farming and do some other business and then in a typical politician style somersault - clarifies 'He intended to say that atleast one in the family should be doing a business other than agriculture." Are you asking the farmers to be Pitch Curators or Groundsmen? I am afraid, we've too much supply of them to be holding those jobs.

We have a finance minister - Whose official job it seems is that of a Capital Markets commentator. I guess you'd do better than Udayan Mukherjee? CNBC TV18 listening??? In his passtime, he like meddling with SEBI's affairs and making pre-emptive comments about stuff he's no business speaking at all and then 'clarifies' what he meant.

We have an external affairs minister - Whose primary job is to manage 'internal affairs'. When he's not passifying his next door neighbours in his home town Kolkata, I am not really sure what he's doing.

We have a chairperson of UPA - Who apparantly has no constitutional role, but generally is treated at par or sometimes above the head of the Government, ie. PM. Which I don't have too much crib about, still isn't that odd?

But isn't it true afterall, people 'deserve' the government they get? Don't americans 'deserve' a George Bush or a Hillary Clinton?

Sunday, October 21, 2007

Mr. Honorable Finance Minister....

After the recent p-note issue, BJP came up with an interesting idea of having a JPC enquiry of it. I have no idea what BJP's intention behind it is - which of course is politically motivated, but the way they are reacting is rather childish. However, thinking a bit further on this issue - Though BJP is wrong in its rationale the spirit isn't quite wrong. Having thought a bit more about it, even I have a few questions to our Honourable Finance Minister. Here's my list Mr. Chidambaram -

0. Is it part of your duty to make comments about Stock Markets or even for that matter 'Forex Markets' did you forget 'Bond Markets' by any chance?

1. Mr. Honourable Finance Minister (HFM) is SEBI not supposed to be an Independent Regulator outside the scope of broader politics? If then, why did you react to the SEBI's recent 'draft proposal' on P-Note indicating that it is a part of broader 'capital control' in view of the receint 'copious' inflows, while SEBI says it is primarily worried about the anonymity associated with P-Notes? Or should we assume that it falls within the broader spectrum of your duties as an FM to interfere with the day to day operations of 'independent regulators'? Should we just assume that your interference is limited to SEBI and to some extent RBI or are there any other regulators that we should be aware of?

2. Mr HFM, I remember you going on the records on a television channel asking the reporters - "Please do your homework, check who is buying on the NSE and BSE now? Some of the prominent FIIs are buying now. I don't want to take names, but you do your homework...." Does this mean that it is not unreasonable to assume that - as a part of priviledge of you being FM, you are aware of the 'actions' of certain market participants, the knowledge of which is not available to an ordinary investor like us? Is it not fair to assume that "Such knowledge can be potentially used in a manner that can be financially beneficial to you as an individual?" Is it not abuse of the priviledge you have? Or is it true that you are so naive that you forgot that you should not be atleast 'publicly speaking about it'?

3. Was LIC asked by someone prominent which is you Mr. HFM to buy on Wednesday? If that is true, I think your stomping is not limited to 'independent regulators'. Are there any other names that we should be aware of?

4. In view of this, should you be trusted with nation's money at all?

I am really surprised - not a single journalist (they are more like VJs) asked any of these questions to our honorable finance minister. Infact, I was even more surprised, some of the eminent editors at channels like CNBC, believed it is part of FM's duty to interfere with stock markets. One of them went to the extent " If I were a finance Minister today, I would ....." This is disturbing or should I say disgusting?

Friday, October 19, 2007

October 19th

Today is the twentieth anniversary of the Black Monday (when the Dow Jones Index collapsed 22.6% in a day.) Taking this occassion and the recent happenings in the Indian Markets, here is my take -

There is a lot of cry about "P-Notes" and its effects and everyone is crying blood how the proposed actions are affecting the stock markets and how investors are loosing their money. We'd get to that point quickly but here are a few questions which no one ever asked when the stock market was going up... -

1. How does uncle Ben's interest rate cut affect the so called "India Growth story" that the stock markets should go to dizzying heights?

My Answer: IT does - Sentiment: After Uncle Ben bailed out wall street after the recent credit crunch in August, Gorillas ( big guys at the Wall street and their clients - Hedge Funds oh sorry obscene Leverage Funds) start believing that they can do pretty much anything and will eventually be bailed out by the Fed, so lets start stomping some fields. Unfortunately after the Dotcom bust and the housing bust there is nothing left in the US markets to chase, what next? Emerging Markets - they also have a story about them. So here they come - with billions of dollars stashed in their pockets ready for the party.

2. Did everyone forget what happened before dotcom bust? (This is not the end of the world yet! don't worry, we are probably going to see another rally, but mostly a sane one.)

3. Is anyone trying to tell me that the "concerned parties" were not aware of the impending "draft proposal" about the P-Notes? O come on I am not a kid anymore. Most of them would have received a 'pre-draft version' of the 'draft-proposal' in advance.

4. So why did the Crash then recovery and then to new heights and then down again?
Imagine yourself being a gorilla - When the markets goes down (as happened on Wednesday) with practically zero trade, I don't get a chance to get my billions out of it. Most of my money is underwater (except the shorts that I have been buying right left and center). So here are possible scenarios to what happened on Wednesday

#1 - Some gorilla got left out of the party and somehow an entry had to be created for him to enter the party. What better ways than a Downside Circuit gap open, everyone is shit scared, and slowly let him in.

#2 - After the crash - Someone was asked by honourable Finance Minister to start buying so that the public doesnt loose faith in India story and in our government. We've already had enough with the nuke-puke.

#3 - Gorilla saw the cops coming to the party (after getting the 'pre-draft' version of the 'draft proposal')- so how do they get out of the party? Ok let some monkeys in (you and me) and then booze them, drug them, let them start partying and we'd go one by one, so when the cops come we are out!

What happened in last two days is most likely to be #3. Or to be really really alert - It is probably made to believe to be #3. (They'd eventually want their part of the pie, so why buy it expensive.) My recent take is #3 + caveats. Remember these guys only care about money - and next time they'd be smarter, will party a little less obviously.

By the way my #2 was also not way off the mark, LIC was indeed buying on Wednesday as reported by Economic Times. (Don't buy Unit Linked Insurance Plans) don't invest your money if someone is picking up a gorilla's litter.

Now someone would actually say - I am vomitting venom because I was caught on the wrong side. To be honest - I was caught on the right side (luckily - no claims to smartness), and I actually made some money.

And guess what while all of this is happening - The global markets have started getting some hiccups. The only indicator of stock markets that I learnt matters is - Yen-dollar (once there is a strength in yen, see markets coming down and vice versa.)

How does it look from here - A downside of 10% is not ruled out and another 10% possible. There might be another rally to 5500 nifty levels (if that fails and we go down from there, I think we are heading for something worse! (Sell ALL mutual funds then!).. that scenario atleast looks unlikely for now! There's enough money to be made in India story yet by gorillas)

Now I have also started learning a lot and given up my short side infatuation!!

This is markets for you... Watch out Monday (could be a nasty one!)

Few last remarks -

Whether P-Note should be banned or what? I really don't understand these mechanisms. My take is - In a free market economy no one should interfere on either side, don't do this by cutting interest rates or suddenly pulling plugs on certain means of investments (if they are wrong, they should not be there in the first place).

Thankfully we have some really really good regulators who will do their best to avoid a Thailand (1997) happening to us!

No claims to smartness. Purely personal opinions could be wrong in every possible way!!

When I read about investors loosing few lakh crores of their wealth, I was thinking what exactly is "wealth?" Honestly, I am still thinking about this and yet to get any meaningful answers.

PPS: Google, while you are making record profits (I wonder how - More about that some other day), will you care to fix this nasty onKeyPress in blogger, it renders typing impossible.... Or may be time has come to pull the plug on blogger.

Tuesday, October 09, 2007

Eighteen and on

On 18th September Ben Blew the whistle for the "Beta Treasure Hunt" and it still continues, with some finding huge treasures along the way. So sensex yesterday reached 18000 and all of us have a reason to cheer.

Lets look at what really happened - After the Fed cut the rate, there was new wave of liquidity that was chasing high Beta. One saw it in US markets, in emerging Asian markets and popular Beta stocks in the US markets viz. Google, Apple, RIMM (This is what minyanville says not me!). But in last week or so we have started seeing a divergence in this beta, what it means is they are not all moving up in sync, these are definitely first signs of caution.

But, but but rallies like this typically end not on the basis of technical indicators or valuations, they end with structural imbalances manifesting into something awry. From what little I know, I think they are getting there and it is just a guess, I don't have any claims to smartnesss, but we are seeing something really really soon, maybe within a week. I could be as wrong or right as anybody and certainly don't claim to be smart.

Atleast now I have started hearing words like "End of Bull Market" from eminent fund managers, so the current mad rush is to get the maximum buck for your bucks.

Having said so - I would say continue to party, as long as it goes on, but don't be a minute long than you should. One would have no place to hide!!

Wednesday, October 03, 2007

Toooooooo Mucccccchhhhhhh

The only other time I remember laughing as much as today was after reading "Almost Everything about Flowerpots" from one of P G Wodehouse's novels, or may be not.

This is the best piece of humour, sarcasm I have read in last so many years, if ever in my life.

So here it is Kevin Depew of minyanville on Five Things you need to know for today on minyanville tonight!!