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!

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

PS:
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.