Pithaly

KaksStearns FREE MARKET DIGEST
(For educational purposes and private circulation only)


Here is something to digest in retrospect. On 2nd November 2007 I had written the trailing long mail, claiming that a top had been formed, and the reasons why:

It's 20th January 2008 today and an article dated 18th January 2008 now confirms that indeed the long term bull market topped out in October 2007. Of course, they have more data (from November 2007 to January 2008) to support their arguement, which I did'nt.

"Bottom Line: Probability is very high that the bull market top arrived in October 2007 and that we are now in a bear market that will continue for another year or more, possibly until mid-2010. Until we have evidence to the contrary, remember that bear market rules apply."

You can read the full article here; (which has some very alarming charts), showing indeed a bear market has started.

Quote:

"In China, the world’s fastest growing economy, the Central Bank is combating inflation with higher interest rates and other measures aimed at tightening credit. Furthermore all indications are that a major market top in China has already taken place - a variety of Chinese stocks climbing 200% in one day during the month of October was a sure sign of a major market blow off top.

While all eyes are focused on the U.S. markets and the looming recession, a stealth Bear market is taking place elsewhere. Above a two year chart of the heart of the emerging markets, Hong Kong’s HANG SENG Index. The index has lost 6000 points in the last three months, down from 32000 to 25800. A close below 25000 will hasten the move down to the 20000 level and will constitute a 30% retrenchment.

The evidence strongly suggests that the emerging market phenomenon witnessed over the last few years is over."

With the S&P at 1333 or so today, the four year cycle chart predicts a low of 750 by mid 2010.

Most Corporate CEOs in the USA now agree that the USA is indeed in a recession. All hopes of recovery etc. are over now. The bear must play out.

Rumours abound at such times, due to fear. In fact, one may expect a rally before the flames die out. Some are claiming a crash on 28th Feb 2008.

So did I make any money out of my convictions? No. But I indeed saved a lot of market losses, by investing in other avenues available. It's virtually impossible for retail player in cash to make money in a bear market.


KaksStearns

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On Nov 2, 2007 3:08 AM, kaks wrote:

KaksStearns FREE MARKET DIGEST
(For educational purposes and private circulation only)


I know I may be putting my foot in my mouth, by going against the "experts", but I do think that a top has been formed and we are in for a violent fall.

The Dow cracked 360 points tonight. Citibank is down 6% with a lot of guys being sacked. (when Citibak breaks $30, runs for the hills. It was $ 41 yesterday, and today a 6% fall).

All this, just two days after a drop in interest rates by 0.25%. compare that with the euphoria last time when interest rates were dropped 50 basis points.

Now, the contrarian contrarian view. Conventional wisdom would say that money would rush to emerging markets if there is a drop in the DOW. Somehow I don't think that that is a rule. With oil at $96, fears abroad that the sub-prime mess is much larger, (an old story, but who listens :), a history of violent falls in emerging markets (not slow secular bear markets, the fact that a whole lot of fresh investors many of whom have not seen the crash of 2000 having entered the market, (I know this for a fact), the sheer sense of "happiness" on the rise of the sensex, (A girl at a bank smilingly cautioned me not to wish for a violent fall in the sensex since so many people had made money, i.e, read that as being long in futures, that .... she left that unsaid, and I completed it for her.), the feeling that because the Indian economy is doing so well then the market must obey fundamentals and rise, strangely the fact that markets do not always follow fundamentals is ignored!, the small red lines forming on the sensex, (they are always small at first), oil at $96, repeated, since the effect of that will be really bad and affect fundamentals, the very important fact that a huge amount of complacency has been built up that no matter what, every correction is to be treated as a rising bottom, the non-sale of real estate in India, the crash in real estate prices in Shezen district, China, where guys call out to you to buy property like pani puri wallahs on the road, the imminent danger of a collapse of China stocks, the rising rupee, which has created a Catch-22 situation for the Indian govt, and in fact for the rest of the world's currencies, with Europe about to, if not already in a recession because of this, the fact that the capitalisation of RPL at 280 is more that the total capitalisation of ALL Indian refinery comanies, BPCL, IOL, HPCL, etc (Businessline paper)!! I mean, what the...!!

Ok, there's more:

On the other side, what's there to temper all this? India is a growth story. Sure. With Larsen and Toubro at a PE of 75 (!!) take a guess where that could land up.

A small hiccup now, can prove to be bronchial pneumonia for the market now. A small hint of a slow down, and wham!, there blows the extreme optimism. Sigh. How many times does the world have to learn the same lesson again and again, that it is never different this time.

Let's see how things unfold!


KaksStearns