When you read a heading like 'Today BSE Sensex closed higher by 726.72 points at 14,042.32' then most of the people don't dare to predict that market will tumble and will tumble so fast. But that's what I was saying (getting beating for that) when I wrote this on my blog on September 19, 2008. This warning was repeated by another warning on Oct 7, 2008, by that time Sensex was already at 11,695.24, when I reiterated that Sensex will tumble to 9000 levels. Today, when I am writing this article, the Sensex is at 8043 level and has already lost 7.56%.
This was my second prediction in a row which went absolutely accurate. The first one was about Rupee. When rupee was hovering between 36-38 levels and many were predicting the death of the dollar, it turned out to be rupee which surprised many. Rupee has touched a level of 50 now and presently trading at Rs 50.16. Both these predictions were based on macro economic environment and coincidently both were against the common belief that it will never happen - under no circumstances.
So what's next in the offing. Before I start writing about that, I would like to start on the note about the risk that many people take. I have spoken to at least two senior professionals. Both of them had purchased Unitech at a price of Rs 500+ and both of them have bought 200 shares. Today they do not know what should they do with that investment/gambling of Rs 1 lac and when will they be able to recover their investment, forget about profits? My question to them was/is, what was the sense to make that investment? No one knows as it was more of an erratic emotional investment decision that was made because the stock was moving up sharply and some nonsense 'technical' analyst predicted that it has strength to see new levels. Unfortunately that never happened and they lost almost 80% of their wealth (lost up to 95% till Friday). The important factor is not that only 'educated' people can fall prey to this, it can be anyone who is constantly getting flooded by media with the message that market is going to see moon.
There is another set of people who were always probing me to get investment ideas by leveraging (simple terms taking easy loans esp personal loan and investing the market). This is the second layer of speculators who are now out of the market.
I recommend and follow in the simple investment philosophy - Invest only what you can afford to lose but before investing make it sure that you don't lose. So for not losing you will have to come to the terms of investing only in sound businesses while understanding the overall/macro economic environment.
Now about what is next in the offing: the markets were always here and they will continue to be here only. Only the stocks will move out from weak hands to the strong hands. We will miss some of the players who were identified as the weak link in this game. In my last 15+ years in the market, I have seen several (almost 99%) people loosing their life time in the market and have seen very rare (just 1% or even less) who have earned decent returns from the market. But the common thing that I have found in those who have earned decent gains is they were well disciplined and have never been in a mad rush to make quick bucks.
I wrote in my previous post (subject: Spanish flu - The Great Depression of 1929 - Bird flu - Financial turmoil of 2008) this downfall was well expected and it will continue, albite with lowered intensity, till the end of December 2008. The market is now discounting December quarterly earning. The market to come out of this situation will take at least 6-9 months time. However, this will give us very exciting time from investment perspective. I am also very tempted to invest and may be investing gradually and very carefully, under no circumstances more than 1% of the total fund (my total exposure in stock market is very very low). This investment has to be very selective investment only in very high quality stocks which are offering huge cushion to the investment. Market will come down further but it will become better and better for those who want to stay here for long term.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Tuesday, October 7, 2008 Niteen S Dharmawat wrote:
Market Updates and course of action
Only 3 weeks ago, to be precise Sep 21 2008, there were not many takers of my call that market may meltdown to a level of 9000, please see the posting 'Reliance Industries Update' on the blog. But today when you see that the market - mostly paper wealth - getting chopped like pack of cards there are many who come to agree with this view. It's a common human tendency that we want status quo or if the change is expected then it should/will not hurt me and my financial goals in any of the way. The human tendency which is common amongst everyone is nothing but greed.
The market is not the only entity which is getting chopped off. The after effect, as anticipated, is further erosion of INR. The INR is now at 48.60-48.75 and coming close to 50. I may sound a dooms sayer here but the things are not very rosy and in fact things are slipping out of the hands of country like India. We did not require the outsiders to make mess out of our system. We should also be equally blamed. We have pursued populist policies including loan waiver schemes of the farmers, pay commission recommendation, not taking action while world-wide crude prices were witnessing a sharp rise etc. These all have a serious impact on the overall health of fiscal (deficit) and is going to impact INR, Inflation everything, stock market. The markets are a just reflection of the policies pursued world-over in a globally connected economy.
Now what's next if markets continue to melt like an active volcano erupts and engulfs anything and anyone that comes in the way? Invest in the quality stocks which are offering value for money, how to look for one? Simple, to find a multi-bagger stock or a stock which has intrinsic value please follow following simple rules:
- Single digit P/E
- 3-4% yield
- PEG (PE Growth ratio) is less than one
- No Debts OR Very Low Debts compared to equity
- Management buying the stock
- Always remember, when in doubt, stick to quality. Never speculate...
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Mon, Sep 22, 2008 at 1:12 PM, Niteen S Dharmawat wrote:
Reliance Industries - Update
Reliance Industries is one my favorites. Some of you would recall that I have been recommending this stock from Rs 520 onwards when the feud between two warring brothers were on the street and media was opening fresh can of warms on a daily basis by flashing new breaking stories released by 'good sources' of warring brothers. The entire market during that time was in upswing while RIL stock was butchered to the extend that it became an untouchable stock. Later they reached a settlement and problem got resolved leading to unlocking huge value which I was talking about in my mails. The RIL stockholders were the biggest beneficiaries. They got shares in four companies free of cost. Today RIL is at 2100+ levels and the free stocks (RComm, RNRL, Reliance Energy etc) are doing equally good. This is a return of almost 6 times from the original recommendation.
Now what should we do with the stock with yesterday's 'big' announcement by Mukesh Ambani. One of the conclusions that we can draw is that the company is in a great shape to go to the new levels which means un-parallel growth and solid wealth creation for the shareholders. If you are holding the stock from 520 levels onward (and various other levels when it was re-recommended) then please continue to hold it. This single stock may help you plan your retirement, I am talking about real long term investment!!!
But if you want to buy more then is it the right time to enter in the stock? Should we really want to time the market or intrinsic value offered by the company is more important? The value offered by the company is, as I said earlier, going in the trajectory of un-parallel growth which will be realized over a period of 2-3 years. But the value offered by the market is something under question. So would advice immense caution while making any fresh exposure in the market. Let opportunities go but we should not loss our investment - should be the philosophy of the investment. I am of the opinion that market may come down to 9000 levels due to various reasons, discussed in earlier posting, over a period of next 6 months and that will be an amazing opportunity for investment. However, one can start investing from a level below 12000 thru' a stagger investment mechanism. If you have any questions, then please do write to me or post your comments on blog itself.
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
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Monday, October 27, 2008
Thursday, October 16, 2008
Spanish flu - The Great Depression of 1929 - Bird flu - Financial turmoil of 2008
I would like to quote here one very unusual example which does not have any direct relation with economy/stock market. But still gives a convincing reply to why and how the world will come out of the financial trouble it is facing today.
The example is of Spanish flu which hit the world sometime in 1918. This influenza pandemic spread to nearly every part of the world. It was caused by an unusually severe and deadly Influenza A virus strain of subtype H1N1. Historical and epidemiological data are inadequate to identify the geographic origin of the virus. Many of its victims were healthy young adults, in contrast to most influenza outbreaks which predominantly affect juvenile, elderly, or otherwise weakened patients. The Spanish flu lasted from March 1918 to June 1920, spreading even to the Arctic and remote Pacific islands. It is estimated that anywhere from 20 to 100 million people were killed worldwide, or the approximate equivalent of one third of the population of Europe, more than double the number killed in World War I. So in short it was a very grave situation which took life of 20-100 million people between 1918-20.
We had another unprecedented turmoil that hit the world in 1929. It's better known as The Great Depression. It was a worldwide economic downturn starting in most places in 1929 and ending at different times in the 1930s or early 1940s for different countries. It was the largest and most important economic depression in modern history, and is used in the 21st century as a benchmark in how far the world's economy can fall. The Great Depression originated in the United States; historians most often use as a starting date the stock market crash on October 29, 1929, known as Black Tuesday. The depression had devastating effects both in the developed and developing world. International trade was deeply affected, as were personal incomes, tax revenues, prices, and profits. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by 40 to 60 percent. Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as farming, mining and logging suffered the most.
Now, I have a parallel to Spanish flu. Avian influenza, sometimes Avian flu, and commonly Bird flu refers to "influenza caused by viruses adapted to birds." Recent influenza research into the genes of the Spanish Flu virus shows it to have genes adapted to both birds and humans; with more of its genes from birds than less deadly later pandemic strains. Between year 2003 to 2008, 385 cases of Bird flu were reported in the world which took 243 human lives. It is not even 0.001215% of the total human lives lost by Spanish Flu (here I took total 20 Mn casualties and not higher number of 10 Mn by Spanish Flu). This is even more important considering the fact that genetic analysis of the H5N1 virus (bird flu) shows that influenza pandemic from its genetic offspring can easily be far more lethal than the Spanish Flu pandemic.
So why the number of casualties were far less than Spanish flu? The reason is only one. The world is much better connected than it was in 1918. Today the globally connected economy responds and communicates much faster, better and effectively. The coordinated efforts of various governments, health groups, NGOs, WHO etc have helped to successfully face this challenge posed by Bird flu.
In the similar way, the world is in a much better position to face the unprecedented financial situation today than it was in 1929. I believe that the world market is going to come out of this situation within 6-9 months period with the coordinated efforts of all the governments world over. The media is going to blow things out of proportion and a panic like situation is going to get created which will benefit only those who control their nerves.
These were my two pence worth. You may share your thoughts/opinion directly on the blog or write to me at niteen.dharmawat@gmail.com
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
The example is of Spanish flu which hit the world sometime in 1918. This influenza pandemic spread to nearly every part of the world. It was caused by an unusually severe and deadly Influenza A virus strain of subtype H1N1. Historical and epidemiological data are inadequate to identify the geographic origin of the virus. Many of its victims were healthy young adults, in contrast to most influenza outbreaks which predominantly affect juvenile, elderly, or otherwise weakened patients. The Spanish flu lasted from March 1918 to June 1920, spreading even to the Arctic and remote Pacific islands. It is estimated that anywhere from 20 to 100 million people were killed worldwide, or the approximate equivalent of one third of the population of Europe, more than double the number killed in World War I. So in short it was a very grave situation which took life of 20-100 million people between 1918-20.
We had another unprecedented turmoil that hit the world in 1929. It's better known as The Great Depression. It was a worldwide economic downturn starting in most places in 1929 and ending at different times in the 1930s or early 1940s for different countries. It was the largest and most important economic depression in modern history, and is used in the 21st century as a benchmark in how far the world's economy can fall. The Great Depression originated in the United States; historians most often use as a starting date the stock market crash on October 29, 1929, known as Black Tuesday. The depression had devastating effects both in the developed and developing world. International trade was deeply affected, as were personal incomes, tax revenues, prices, and profits. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by 40 to 60 percent. Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as farming, mining and logging suffered the most.
Now, I have a parallel to Spanish flu. Avian influenza, sometimes Avian flu, and commonly Bird flu refers to "influenza caused by viruses adapted to birds." Recent influenza research into the genes of the Spanish Flu virus shows it to have genes adapted to both birds and humans; with more of its genes from birds than less deadly later pandemic strains. Between year 2003 to 2008, 385 cases of Bird flu were reported in the world which took 243 human lives. It is not even 0.001215% of the total human lives lost by Spanish Flu (here I took total 20 Mn casualties and not higher number of 10 Mn by Spanish Flu). This is even more important considering the fact that genetic analysis of the H5N1 virus (bird flu) shows that influenza pandemic from its genetic offspring can easily be far more lethal than the Spanish Flu pandemic.
So why the number of casualties were far less than Spanish flu? The reason is only one. The world is much better connected than it was in 1918. Today the globally connected economy responds and communicates much faster, better and effectively. The coordinated efforts of various governments, health groups, NGOs, WHO etc have helped to successfully face this challenge posed by Bird flu.
In the similar way, the world is in a much better position to face the unprecedented financial situation today than it was in 1929. I believe that the world market is going to come out of this situation within 6-9 months period with the coordinated efforts of all the governments world over. The media is going to blow things out of proportion and a panic like situation is going to get created which will benefit only those who control their nerves.
These were my two pence worth. You may share your thoughts/opinion directly on the blog or write to me at niteen.dharmawat@gmail.com
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Monday, October 13, 2008
Rupee dollar equation & market updates
If you were holding the previous dollars which you might have earned during your onsite engagement/earned thru' exports of services and products then the time has come to book the dollars now. One can now start converting those dollars into the Indian currency.
The collective efforts taken by various governments across the globe will have its impact visible in next 6-9 months. It is the same as dollar rupee equation. I wrote about the change in the direction based on the crude prices which were moving north and the impact on the dollar was visible in 2-3 quarters. The mad rush to get dollars so that one can buy crude had its impact on all the currencies worldwide. All the currencies depreciated against dollar. A parallel can be drawn when interest rates in India were increased to control the inflation. This had to impact the liquidity and thus the growth of the economy. The impact took almost 9 months and now we have dismal industrial production numbers. This was surely expected. We can't expect better industrial and manufacturing numbers in next quarter also. The impact of interest rate hike will still be haunting the companies, how? The companies were finding hard to get loan for expansion, or if they had taken the loan then they had to pay higher interest amount in their 'EMIs'. So all the calculation had gone for a toss. Now when the RBI in India and other regulators world-over had reduced the interest rates then a similar impact will be visible in terms of more stability by way of fresh liquidity in the world market. But it will take some time, may be 6-9 months.
As mentioned earlier also, one can go for stagger investments in the market and look for the best value and margin of safety. One can start injecting the money by investing 10-15% of total available money for equity. It is the discount sale which is going on right now. However, on the caution note: one should not have more than 30% of the investible amount in equities and investible amount should be distributed amongst: equity, debt, cash, insurance and real estate.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
The collective efforts taken by various governments across the globe will have its impact visible in next 6-9 months. It is the same as dollar rupee equation. I wrote about the change in the direction based on the crude prices which were moving north and the impact on the dollar was visible in 2-3 quarters. The mad rush to get dollars so that one can buy crude had its impact on all the currencies worldwide. All the currencies depreciated against dollar. A parallel can be drawn when interest rates in India were increased to control the inflation. This had to impact the liquidity and thus the growth of the economy. The impact took almost 9 months and now we have dismal industrial production numbers. This was surely expected. We can't expect better industrial and manufacturing numbers in next quarter also. The impact of interest rate hike will still be haunting the companies, how? The companies were finding hard to get loan for expansion, or if they had taken the loan then they had to pay higher interest amount in their 'EMIs'. So all the calculation had gone for a toss. Now when the RBI in India and other regulators world-over had reduced the interest rates then a similar impact will be visible in terms of more stability by way of fresh liquidity in the world market. But it will take some time, may be 6-9 months.
As mentioned earlier also, one can go for stagger investments in the market and look for the best value and margin of safety. One can start injecting the money by investing 10-15% of total available money for equity. It is the discount sale which is going on right now. However, on the caution note: one should not have more than 30% of the investible amount in equities and investible amount should be distributed amongst: equity, debt, cash, insurance and real estate.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Wednesday, October 8, 2008
Market Updates and course of action
Only 3 weeks ago, to be precise Sep 21 2008, there were not many takers of my call that market may meltdown to a level of 9000, please see the posting 'Reliance Industries Update' on the blog. But today when you see that the market - mostly paper wealth - getting chopped like pack of cards there are many who come to agree with this view. It's a common human tendency that we want status quo or if the change is expected then it should/will not hurt me and my financial goals in any of the way. The human tendency which is common amongst everyone is nothing but greed.
The market is not the only entity which is getting chopped off. The after effect, as anticipated, is further erosion of INR. The INR is now at 48.60-48.75 and coming close to 50. I may sound a dooms sayer here but the things are not very rosy and in fact things are slipping out of the hands of country like India. We did not require the outsiders to make mess out of our system. We should also be equally blamed. We have pursued populist policies including loan waiver schemes of the farmers, pay commission recommendation, not taking action while world-wide crude prices were witnessing a sharp rise etc. These all have a serious impact on the overall health of fiscal (deficit) and is going to impact INR, Inflation everything, stock market. The markets are a just reflection of the policies pursued world-over in a globally connected economy.
Now what's next if markets continue to melt like an active volcano erupts and engulfs anything and anyone that comes in the way? Invest in the quality stocks which are offering value for money, how to look for one? Simple, to find a multi-bagger stock or a stock which has intrinsic value please follow following simple rules:
- Single digit P/E
- 3-4% yield
- PEG (PE Growth ratio) is less than one
- No Debts OR Very Low Debts compared to equity
- Management buying the stock
- Always remember, when in doubt, stick to quality. Never speculate...
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Mon, Sep 22, 2008 at 1:12 PM, Niteen S Dharmawat wrote:
Please read this using the following link:
http://dharmawat.blogspot.com/2008/09/reliance-industries-update.html
Reliance Industries - Update
Reliance Industries is one my favorites. Some of you would recall that I have been recommending this stock from Rs 520 onwards when the feud between two warring brothers were on the street and media was opening fresh can of warms on a daily basis by flashing new breaking stories released by 'good sources' of warring brothers. The entire market during that time was in upswing while RIL stock was butchered to the extend that it became an untouchable stock. Later they reached a settlement and problem got resolved leading to unlocking huge value which I was talking about in my mails. The RIL stockholders were the biggest beneficiaries. They got shares in four companies free of cost. Today RIL is at 2100+ levels and the free stocks (RComm, RNRL, Reliance Energy etc) are doing equally good. This is a return of almost 6 times from the original recommendation.
Now what should we do with the stock with yesterday's 'big' announcement by Mukesh Ambani. One of the conclusions that we can draw is that the company is in a great shape to go to the new levels which means un-parallel growth and solid wealth creation for the shareholders. If you are holding the stock from 520 levels onward (and various other levels when it was re-recommended) then please continue to hold it. This single stock may help you plan your retirement, I am talking about real long term investment!!!
But if you want to buy more then is it the right time to enter in the stock? Should we really want to time the market or intrinsic value offered by the company is more important? The value offered by the company is, as I said earlier, going in the trajectory of un-parallel growth which will be realized over a period of 2-3 years. But the value offered by the market is something under question. So would advice immense caution while making any fresh exposure in the market. Let opportunities go but we should not loss our investment - should be the philosophy of the investment. I am of the opinion that market may come down to 9000 levels due to various reasons, discussed in earlier posting, over a period of next 6 months and that will be an amazing opportunity for investment. However, one can start investing from a level below 12000 thru' a stagger investment mechanism. If you have any questions, then please do write to me or post your comments on blog itself.
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
The market is not the only entity which is getting chopped off. The after effect, as anticipated, is further erosion of INR. The INR is now at 48.60-48.75 and coming close to 50. I may sound a dooms sayer here but the things are not very rosy and in fact things are slipping out of the hands of country like India. We did not require the outsiders to make mess out of our system. We should also be equally blamed. We have pursued populist policies including loan waiver schemes of the farmers, pay commission recommendation, not taking action while world-wide crude prices were witnessing a sharp rise etc. These all have a serious impact on the overall health of fiscal (deficit) and is going to impact INR, Inflation everything, stock market. The markets are a just reflection of the policies pursued world-over in a globally connected economy.
Now what's next if markets continue to melt like an active volcano erupts and engulfs anything and anyone that comes in the way? Invest in the quality stocks which are offering value for money, how to look for one? Simple, to find a multi-bagger stock or a stock which has intrinsic value please follow following simple rules:
- Single digit P/E
- 3-4% yield
- PEG (PE Growth ratio) is less than one
- No Debts OR Very Low Debts compared to equity
- Management buying the stock
- Always remember, when in doubt, stick to quality. Never speculate...
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Mon, Sep 22, 2008 at 1:12 PM, Niteen S Dharmawat
Please read this using the following link:
http://dharmawat.blogspot.com/2008/09/reliance-industries-update.html
Reliance Industries - Update
Reliance Industries is one my favorites. Some of you would recall that I have been recommending this stock from Rs 520 onwards when the feud between two warring brothers were on the street and media was opening fresh can of warms on a daily basis by flashing new breaking stories released by 'good sources' of warring brothers. The entire market during that time was in upswing while RIL stock was butchered to the extend that it became an untouchable stock. Later they reached a settlement and problem got resolved leading to unlocking huge value which I was talking about in my mails. The RIL stockholders were the biggest beneficiaries. They got shares in four companies free of cost. Today RIL is at 2100+ levels and the free stocks (RComm, RNRL, Reliance Energy etc) are doing equally good. This is a return of almost 6 times from the original recommendation.
Now what should we do with the stock with yesterday's 'big' announcement by Mukesh Ambani. One of the conclusions that we can draw is that the company is in a great shape to go to the new levels which means un-parallel growth and solid wealth creation for the shareholders. If you are holding the stock from 520 levels onward (and various other levels when it was re-recommended) then please continue to hold it. This single stock may help you plan your retirement, I am talking about real long term investment!!!
But if you want to buy more then is it the right time to enter in the stock? Should we really want to time the market or intrinsic value offered by the company is more important? The value offered by the company is, as I said earlier, going in the trajectory of un-parallel growth which will be realized over a period of 2-3 years. But the value offered by the market is something under question. So would advice immense caution while making any fresh exposure in the market. Let opportunities go but we should not loss our investment - should be the philosophy of the investment. I am of the opinion that market may come down to 9000 levels due to various reasons, discussed in earlier posting, over a period of next 6 months and that will be an amazing opportunity for investment. However, one can start investing from a level below 12000 thru' a stagger investment mechanism. If you have any questions, then please do write to me or post your comments on blog itself.
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Wednesday, September 24, 2008
Re: Re: Micro Technologies - accumulate
Hi Venkatesh,
I am glad that you raised this. Please find below the balance sheet and the P&L account of Micro Technologies. All the figures in this are in Crores Rs.
As per my understanding the balance sheet looks very strong. They have an equity base of Rs 10.97 crore which is 1.097 cr shares. Now the best part is Rs 192 cr as Reserves & Surplus amount. This shows the strength in the balance sheet. Further, they have total debt amount Rs 70 cr (Unsecured and Secured). In the previous year this was 9.37 cr and is increased to Rs 70 cr. With in this debt amount also the unsecured portion has a bigger contribution, in fact only unsecured has increased. This is not a good decision. But will not affect it adversely. The debt:equity ration is still in favour of the company. The D:E will be 70:203 which will be 0.34. The company is very conservative in using the funds. I like it very much.
Instead of looking standalone Debtors number I would prefer to look at Net current assets and current liabilities number and compare. The Net Current Assets of Rs 188.63 cr while the Current Liabilities are of Rs 15.69 cr. This gives us a difference of Rs 172.94 Cr. If it's divided in 1.097 cr shares then each share has Rs 157.64 cash available. This is extremely positive (I am using an adjective 'extreamly' because it's to be used to describe a very positive aspect of the balance sheet). This gives me the margin of safety and my investment gets protected in case the company gets into difficult time. This what is taught in the value investing principle. Remember if the company is growing and sales is increasing rapidly then there is a possible of debtors number increasing accordingly.
P&L Account. Last year the profitability (PAT*100/Revenue) was at 28.88% and this year it has increased to 30.54%. It means the company does not have any pressure on the bottom line. It's not because the company is innovative and is operating in the niche areas. The other income component is almost negligible which means that entire profit is from operations.
In last 5 years, which is a good indicator to suggest that it's not an overnight success, its revenue and profits did not dip a single time. They have shown healthy growth. The company has been paying consistent dividends at the rate of 20% during last 3 years and 10% during first two years.
One can cook up the numbers in a year or two but you would agree that this can't be done consistently for 5 years to deliver more than average results.
Please find a link to get recent Director's report of the company: http://www.cmlinks.com/lkp/profiles/LKPDirectorreport.asp?code=17761
I did not find anything significantly negative about this report. In fact, I liked the Threats part in the SWOT analysis and also performance overview section where they have listed various partnerships and associations established during the year.
Balance Sheet
Year8-Mar7-Mar6-Mar5-Mar4-Mar
Share Capital10.9710.5210.098.195.45
Reserves & Surplus192.1133.7102.950.4241.19
Total Shareholders Funds203.1144.311358.6146.64
Secured Loans9.649.375.332.052.42
Unsecured Loans60.5400.360.030.88
Total Debt70.189.375.692.083.3
Total Liabilities273.3153.6118.760.6949.94
Gross Block158.565.2748.129.6319.77
Less: Accum. Depreciation24.210.236.834.413.35
Net Block134.355.0441.295.2216.42
Capital Work in Progress19.8516.915.5212.562.8
Investments0.5401.122.218.25
Inventories38.0419.6811.197.785.46
Sundry Debtors69.138.182910.276.79
Cash and Bank Balance11.123.921.131.550.01
Loans and Advances28.189.415.675.022.98
Current Liabilities15.693.042.121.982.03
Provisions12.16.444.11.930.94
Net Current Assets118.681.6960.7720.7112.27
Miscellaneous Expenses not w/o00000.2
Total Assets273.3153.6118.760.6949.94
Contingent Liabilities00000
P&L
Year8-Mar7-Mar6-Mar5-Mar4-Mar
Sales Turnover172106.858.5626.7320.74
Other Income0.490.140.070.110
Stock Adjustments00000
Total Income172.5106.958.6326.8420.74
Raw Materials00000
Excise Duty00000
Power & Fuel Cost0.260.290.140.040.01
Other Manufacturing Expenses86.7358.6433.9916.1215.26
Employee Cost2.481.730.940.030.01
Selling and Administration Expenses7.923.41.811.170.38
Miscellaneous Expenses0.061.240.010.380.22
Less: Preoperative Expenditure Capitalised00000
Profit before Interest, Depreciation & Tax75.0241.6221.749.14.86
Interest & Financial Charges1.620.740.510.380.32
Profit before Depreciation & Tax73.440.8821.238.724.54
Depreciation147.522.421.060.88
Profit Before Tax59.433.3618.817.663.66
Tax6.872.521.180.740.15
Profit After Tax52.5330.8417.636.923.51
Adjustment below Net Profit00000.6
P & L Balance brought forward56.3330.8816.9410.957.44
Appropriations5.575.393.690.930.6
P & L Bal. carried down103.356.3330.8816.9410.95
Equity Dividend2.192.12.020.820.54
Preference Dividend00000
Corporate Dividend Tax0.380.290.280.110.06
Equity Dividend (%)2020201010
Earning Per Share (Rs.)47.5429.0417.28.326.33
Book Value185.1137.111271.5685.58
Extraordinary Items-0.010000
Trust this clarifies.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Tue, Sep 23, 2008 at 10:15 PM, Venkateswaran wrote:
Dear Mr Niteen,
I have also been following Micro tech for some time now and more after you earlier mail on this.
When I got the Annual report for this year, I was very excited to read and understand how the management looks at these uncertain scenarios. But when I read through the Annual Report of the company, honestly I was not impressed with the way it has been presented. Very poor language and the AR looked more like a college student write-up, with unnecessary adjectives and unwanted words.
Second thing I noticed is the high level of debtors. For sales of 190 crores, more than 70 odd crores remains as outstanding.
What is your opinion on the quality of management and debtors turnover ratio?
with kind regards
Venkatesh
On Tue, Sep 9, 2008 at 6:37 PM, Niteen S Dharmawat wrote:
Hi,
You would recall that Micro Tech was reco at 220 level in Oct 07 and it reached 375+ afterwards and corrected to 200 levels sometime in Feb/March08 to provide another
excellent opportunity to enter in the stock. The stock has again retraced to 300 levels in April'08 and appreciated by almost 50% within no time.
The stock is now again trading near 220 levels. It's offering another excellent opportunity to enter into the stock at this levels.
Just to further update you on the stock from the last communication, the company has given excellent results during last quarter and year. In June Qtr the revenue of the company has increased by 67.37% to Rs 57 cr and PAT increased by 65.46% to reach Rs 17.44 cr. The profitability (PAT/Revenue) is excellent at 30.59%. YoY (March'08) the revenue increased by 60.79 % to reach Rs 171.02 Cr and profit by 64.66% to reach Rs 52.84 Cr (again profitability is healthy at 30.89%).
The company is operating in niche area and has been able to successfully create a strong positioning and a reliable brand name in the market. It has launched another product yesterday, please read details by using the link below
Micro Tech launches micro cellular controller system:
http://www.myiris.com/newsCentre/newsPopup.php?fileR=20080909152742203&dir=2008/09/09&secID=livenews
Please do not commit 100% of the investible funds but stagger your investments with 15-20% at different intervals.
Cheers,
Niteen S Dharmawat
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks.
Sincere efforts have been made to present the right investment
perspective. The information contained herein is based on analysis and
up on sources that we consider reliable. I, however, do not vouch for
the accuracy or the completeness thereof. This material is for
personal information and I am not responsible for any loss incurred
based upon it & take no responsibility whatsoever for any financial
profits or loss which may arise from the recommendations above.
On 10/7/07, Niteen S Dharmawat wrote:
> Hi,
> Micro Technologies looks good to me and can be accumulated from a long
> term perspective. The company is currently quoting at Rs 220 levels
> and will be a good buy on every dip.
>
> Please read the comments below and the attached file and share your opinion.
>
> Reasons for investment:
> - Excellent profitability
> - Good, experienced management
> -Good track record - No dip in revenue or profits during last five years
> - Very strong balance sheet. 10.52 Cr share capital and reserve of 133.74 cr.
> - Negligible debt (just 9 cr on Total Shareholders Funds i.e. Share
> Capital & Reserves of Rs 144 cr)
> - Dividend paying company
> - Good book value Rs 137
> - Decent PE just close to 7 (singe digit) and double digit growth
> - Bennet and Coleman acquired 2,50,000 equity shares of Rs 10/- each
> at a price of Rs 250.40 per share on preferential allotment basis.
> - Allotted 900000 warrants with option for conversion into 9,00,000
> equity shares of Rs 10/- each a price of Rs 250.40 per share to
> promoter group.
> - Goldman Sachs has acquired 2,59,047 shares in last couple of months.
>
>
> Please find the detail report attached with this mail. I have not made
> my comments on all the points since most of them are self explanatory.
>
> Cheers,
> Niteen S Dharmawat
>
>
>
> IMPORTANT DISCLAIMER: Investment in equity shares has its own risks.
> Sincere efforts have been made to present the right investment
> perspective. The information contained herein is based on analysis and
> up on sources that we consider reliable. I, however, do not vouch for
> the accuracy or the completeness thereof. This material is for
> personal information and I am not responsible for any loss incurred
> based upon it & take no responsibility whatsoever for any financial
> profits or loss which may arise from the recommendations above.
I am glad that you raised this. Please find below the balance sheet and the P&L account of Micro Technologies. All the figures in this are in Crores Rs.
As per my understanding the balance sheet looks very strong. They have an equity base of Rs 10.97 crore which is 1.097 cr shares. Now the best part is Rs 192 cr as Reserves & Surplus amount. This shows the strength in the balance sheet. Further, they have total debt amount Rs 70 cr (Unsecured and Secured). In the previous year this was 9.37 cr and is increased to Rs 70 cr. With in this debt amount also the unsecured portion has a bigger contribution, in fact only unsecured has increased. This is not a good decision. But will not affect it adversely. The debt:equity ration is still in favour of the company. The D:E will be 70:203 which will be 0.34. The company is very conservative in using the funds. I like it very much.
Instead of looking standalone Debtors number I would prefer to look at Net current assets and current liabilities number and compare. The Net Current Assets of Rs 188.63 cr while the Current Liabilities are of Rs 15.69 cr. This gives us a difference of Rs 172.94 Cr. If it's divided in 1.097 cr shares then each share has Rs 157.64 cash available. This is extremely positive (I am using an adjective 'extreamly' because it's to be used to describe a very positive aspect of the balance sheet). This gives me the margin of safety and my investment gets protected in case the company gets into difficult time. This what is taught in the value investing principle. Remember if the company is growing and sales is increasing rapidly then there is a possible of debtors number increasing accordingly.
P&L Account. Last year the profitability (PAT*100/Revenue) was at 28.88% and this year it has increased to 30.54%. It means the company does not have any pressure on the bottom line. It's not because the company is innovative and is operating in the niche areas. The other income component is almost negligible which means that entire profit is from operations.
In last 5 years, which is a good indicator to suggest that it's not an overnight success, its revenue and profits did not dip a single time. They have shown healthy growth. The company has been paying consistent dividends at the rate of 20% during last 3 years and 10% during first two years.
One can cook up the numbers in a year or two but you would agree that this can't be done consistently for 5 years to deliver more than average results.
Please find a link to get recent Director's report of the company: http://www.cmlinks.com/lkp/profiles/LKPDirectorreport.asp?code=17761
I did not find anything significantly negative about this report. In fact, I liked the Threats part in the SWOT analysis and also performance overview section where they have listed various partnerships and associations established during the year.
Balance Sheet
Year8-Mar7-Mar6-Mar5-Mar4-Mar
Share Capital10.9710.5210.098.195.45
Reserves & Surplus192.1133.7102.950.4241.19
Total Shareholders Funds203.1144.311358.6146.64
Secured Loans9.649.375.332.052.42
Unsecured Loans60.5400.360.030.88
Total Debt70.189.375.692.083.3
Total Liabilities273.3153.6118.760.6949.94
Gross Block158.565.2748.129.6319.77
Less: Accum. Depreciation24.210.236.834.413.35
Net Block134.355.0441.295.2216.42
Capital Work in Progress19.8516.915.5212.562.8
Investments0.5401.122.218.25
Inventories38.0419.6811.197.785.46
Sundry Debtors69.138.182910.276.79
Cash and Bank Balance11.123.921.131.550.01
Loans and Advances28.189.415.675.022.98
Current Liabilities15.693.042.121.982.03
Provisions12.16.444.11.930.94
Net Current Assets118.681.6960.7720.7112.27
Miscellaneous Expenses not w/o00000.2
Total Assets273.3153.6118.760.6949.94
Contingent Liabilities00000
P&L
Year8-Mar7-Mar6-Mar5-Mar4-Mar
Sales Turnover172106.858.5626.7320.74
Other Income0.490.140.070.110
Stock Adjustments00000
Total Income172.5106.958.6326.8420.74
Raw Materials00000
Excise Duty00000
Power & Fuel Cost0.260.290.140.040.01
Other Manufacturing Expenses86.7358.6433.9916.1215.26
Employee Cost2.481.730.940.030.01
Selling and Administration Expenses7.923.41.811.170.38
Miscellaneous Expenses0.061.240.010.380.22
Less: Preoperative Expenditure Capitalised00000
Profit before Interest, Depreciation & Tax75.0241.6221.749.14.86
Interest & Financial Charges1.620.740.510.380.32
Profit before Depreciation & Tax73.440.8821.238.724.54
Depreciation147.522.421.060.88
Profit Before Tax59.433.3618.817.663.66
Tax6.872.521.180.740.15
Profit After Tax52.5330.8417.636.923.51
Adjustment below Net Profit00000.6
P & L Balance brought forward56.3330.8816.9410.957.44
Appropriations5.575.393.690.930.6
P & L Bal. carried down103.356.3330.8816.9410.95
Equity Dividend2.192.12.020.820.54
Preference Dividend00000
Corporate Dividend Tax0.380.290.280.110.06
Equity Dividend (%)2020201010
Earning Per Share (Rs.)47.5429.0417.28.326.33
Book Value185.1137.111271.5685.58
Extraordinary Items-0.010000
Trust this clarifies.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
On Tue, Sep 23, 2008 at 10:15 PM, Venkateswaran wrote:
Dear Mr Niteen,
I have also been following Micro tech for some time now and more after you earlier mail on this.
When I got the Annual report for this year, I was very excited to read and understand how the management looks at these uncertain scenarios. But when I read through the Annual Report of the company, honestly I was not impressed with the way it has been presented. Very poor language and the AR looked more like a college student write-up, with unnecessary adjectives and unwanted words.
Second thing I noticed is the high level of debtors. For sales of 190 crores, more than 70 odd crores remains as outstanding.
What is your opinion on the quality of management and debtors turnover ratio?
with kind regards
Venkatesh
On Tue, Sep 9, 2008 at 6:37 PM, Niteen S Dharmawat
Hi,
You would recall that Micro Tech was reco at 220 level in Oct 07 and it reached 375+ afterwards and corrected to 200 levels sometime in Feb/March08 to provide another
excellent opportunity to enter in the stock. The stock has again retraced to 300 levels in April'08 and appreciated by almost 50% within no time.
The stock is now again trading near 220 levels. It's offering another excellent opportunity to enter into the stock at this levels.
Just to further update you on the stock from the last communication, the company has given excellent results during last quarter and year. In June Qtr the revenue of the company has increased by 67.37% to Rs 57 cr and PAT increased by 65.46% to reach Rs 17.44 cr. The profitability (PAT/Revenue) is excellent at 30.59%. YoY (March'08) the revenue increased by 60.79 % to reach Rs 171.02 Cr and profit by 64.66% to reach Rs 52.84 Cr (again profitability is healthy at 30.89%).
The company is operating in niche area and has been able to successfully create a strong positioning and a reliable brand name in the market. It has launched another product yesterday, please read details by using the link below
Micro Tech launches micro cellular controller system:
http://www.myiris.com/newsCentre/newsPopup.php?fileR=20080909152742203&dir=2008/09/09&secID=livenews
Please do not commit 100% of the investible funds but stagger your investments with 15-20% at different intervals.
Cheers,
Niteen S Dharmawat
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks.
Sincere efforts have been made to present the right investment
perspective. The information contained herein is based on analysis and
up on sources that we consider reliable. I, however, do not vouch for
the accuracy or the completeness thereof. This material is for
personal information and I am not responsible for any loss incurred
based upon it & take no responsibility whatsoever for any financial
profits or loss which may arise from the recommendations above.
On 10/7/07, Niteen S Dharmawat
> Hi,
> Micro Technologies looks good to me and can be accumulated from a long
> term perspective. The company is currently quoting at Rs 220 levels
> and will be a good buy on every dip.
>
> Please read the comments below and the attached file and share your opinion.
>
> Reasons for investment:
> - Excellent profitability
> - Good, experienced management
> -Good track record - No dip in revenue or profits during last five years
> - Very strong balance sheet. 10.52 Cr share capital and reserve of 133.74 cr.
> - Negligible debt (just 9 cr on Total Shareholders Funds i.e. Share
> Capital & Reserves of Rs 144 cr)
> - Dividend paying company
> - Good book value Rs 137
> - Decent PE just close to 7 (singe digit) and double digit growth
> - Bennet and Coleman acquired 2,50,000 equity shares of Rs 10/- each
> at a price of Rs 250.40 per share on preferential allotment basis.
> - Allotted 900000 warrants with option for conversion into 9,00,000
> equity shares of Rs 10/- each a price of Rs 250.40 per share to
> promoter group.
> - Goldman Sachs has acquired 2,59,047 shares in last couple of months.
>
>
> Please find the detail report attached with this mail. I have not made
> my comments on all the points since most of them are self explanatory.
>
> Cheers,
> Niteen S Dharmawat
>
>
>
> IMPORTANT DISCLAIMER: Investment in equity shares has its own risks.
> Sincere efforts have been made to present the right investment
> perspective. The information contained herein is based on analysis and
> up on sources that we consider reliable. I, however, do not vouch for
> the accuracy or the completeness thereof. This material is for
> personal information and I am not responsible for any loss incurred
> based upon it & take no responsibility whatsoever for any financial
> profits or loss which may arise from the recommendations above.
Monday, September 22, 2008
Reliance Industries - Update
Reliance Industries is one my favorites. Some of you would recall that I have been recommending this stock from Rs 520 onwards when the feud between two warring brothers were on the street and media was opening fresh can of warms on a daily basis by flashing new breaking stories released by 'good sources' of warring brothers. The entire market during that time was in upswing while RIL stock was butchered to the extend that it became an untouchable stock. Later they reached a settlement and problem got resolved leading to unlocking huge value which I was talking about in my mails. The RIL stockholders were the biggest beneficiaries. They got shares in four companies free of cost. Today RIL is at 2100+ levels and the free stocks (RComm, RNRL, Reliance Energy etc) are doing equally good. This is a return of almost 6 times from the original recommendation.
Now what should we do with the stock with yesterday's 'big' announcement by Mukesh Ambani. One of the conclusions that we can draw is that the company is in a great shape to go to the new levels which means un-parallel growth and solid wealth creation for the shareholders. If you are holding the stock from 520 levels onward (and various other levels when it was re-recommended) then please continue to hold it. This single stock may help you plan your retirement, I am talking about real long term investment!!!
But if you want to buy more then is it the right time to enter in the stock? Should we really want to time the market or intrinsic value offered by the company is more important? The value offered by the company is, as I said earlier, going in the trajectory of un-parallel growth which will be realized over a period of 2-3 years. But the value offered by the market is something under question. So would advice immense caution while making any fresh exposure in the market. Let opportunities go but we should not loss our investment - should be the philosophy of the investment. I am of the opinion that market may come down to 9000 levels due to various reasons, discussed in earlier posting, over a period of next 6 months and that will be an amazing opportunity for investment. However, one can start investing from a level below 12000 thru' a stagger investment mechanism. If you have any questions, then please do write to me or post your comments on blog itself.
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Now what should we do with the stock with yesterday's 'big' announcement by Mukesh Ambani. One of the conclusions that we can draw is that the company is in a great shape to go to the new levels which means un-parallel growth and solid wealth creation for the shareholders. If you are holding the stock from 520 levels onward (and various other levels when it was re-recommended) then please continue to hold it. This single stock may help you plan your retirement, I am talking about real long term investment!!!
But if you want to buy more then is it the right time to enter in the stock? Should we really want to time the market or intrinsic value offered by the company is more important? The value offered by the company is, as I said earlier, going in the trajectory of un-parallel growth which will be realized over a period of 2-3 years. But the value offered by the market is something under question. So would advice immense caution while making any fresh exposure in the market. Let opportunities go but we should not loss our investment - should be the philosophy of the investment. I am of the opinion that market may come down to 9000 levels due to various reasons, discussed in earlier posting, over a period of next 6 months and that will be an amazing opportunity for investment. However, one can start investing from a level below 12000 thru' a stagger investment mechanism. If you have any questions, then please do write to me or post your comments on blog itself.
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
Thursday, September 18, 2008
Crude price increase - Uncle Sam is very smart
I had been thinking about this subject for sometime now. However, I was not sure so never voiced my thoughts on this over email/blog. But when I discussed this with some of the friends and shared my logic with them then some of them agreed and some wondered if it's really a case. But everyone was unanimous and encouraged me to post it for comments from others.
In my view/guess(?) crude price movement from $45 to $145 was a conspiracy of Americans and OPEC. Both of them were hand in glove on this subject. Why?
As I explained in my earlier posts (subject: Rupee-Dollar equation) that crude and dollar have a very strong relationship. This very relationship leads us to believe that crude prices were increased by OPEC to save American dollar and thus economy.
When real estate crash and subsequent sub-prime crises hit the American economy, which led to lowest ever consumer confidence, demand slowdown, job losses, and a complete gloomy future, then the American government decided to print more dollars and give it to its citizen to spend. The idea was to artificially increase the demand and keep the confidence level of industry, public and investment community up. They completely believed (policy makers and Fed) that if this had not been done by them then it would have certainly led to an evident economy depression similar to 1929.
Now, what's wrong if they have printed more dollars and decided to give those new dollars to their citizens? This is suicidal.... Because if you are printing more bills and distributing it free of cost then you are depreciating the value of that currency. It's like everyone will be paid without productively contributing anything to the economy.
This act of printing so much currency by any government is certain to depreciate the value of its currency. And the dollar started depreciating against all the major currencies world-wide including INR. Dollar hit a bottom of Rs 37-38 from a high of close to Rs 46-47 with in a span of 18 months.
It could have touched Rs 32, as many were predicting but it did not lost that long.
When dollar was in huge supply because of extra printing by American government then it was made sure that there is an equal or more demand for the dollar worldwide. Americans have the advantage because US dollar is the most dominant currency in world trade. They took advantage of this.... They made it sure that price of crude, value-wise amongst the top listed product worldwide, is increased multi fold. This led to a worldwide rush to catch dollar so that they can buy crude. So on the one hand an extra supply of dollar was created and on the other it was ensured that extra dollar is consumed in the world economy without any problems.
But now the next question, why would OPEC join hands with Americans because it's OPEC which controls majority of oil production world-wide?
OPEC will have to succumb to Americans. Because if Americans were printing the currency which would have depreciated its value and ultimately led to the downfall of the dominance of American currency then OPEC members would have incurred huge losses themselves. Over a period of time, OPEC has accumulated huge dollar reserve. If the currency had been devalued and lost the charm then what they would have done with that pile of reserves? They had to be hand-in-glove with Americans and increase the price of crude so as to keep value of American dollars up and running.
Who is at loss? OPEC members: made windfall profits because they were selling the same crude now at 2-3 times the earlier price. Americans: Everyone got green notes to be spent at the expense of rest of the world which was paying price so that American economy continue to buzz.
Please share your comments to me on this article directly on the blog or over email: niteen.dharmawat@gmail.com
Cheers,
Niteen S Dharmawat
In my view/guess(?) crude price movement from $45 to $145 was a conspiracy of Americans and OPEC. Both of them were hand in glove on this subject. Why?
As I explained in my earlier posts (subject: Rupee-Dollar equation) that crude and dollar have a very strong relationship. This very relationship leads us to believe that crude prices were increased by OPEC to save American dollar and thus economy.
When real estate crash and subsequent sub-prime crises hit the American economy, which led to lowest ever consumer confidence, demand slowdown, job losses, and a complete gloomy future, then the American government decided to print more dollars and give it to its citizen to spend. The idea was to artificially increase the demand and keep the confidence level of industry, public and investment community up. They completely believed (policy makers and Fed) that if this had not been done by them then it would have certainly led to an evident economy depression similar to 1929.
Now, what's wrong if they have printed more dollars and decided to give those new dollars to their citizens? This is suicidal.... Because if you are printing more bills and distributing it free of cost then you are depreciating the value of that currency. It's like everyone will be paid without productively contributing anything to the economy.
This act of printing so much currency by any government is certain to depreciate the value of its currency. And the dollar started depreciating against all the major currencies world-wide including INR. Dollar hit a bottom of Rs 37-38 from a high of close to Rs 46-47 with in a span of 18 months.
It could have touched Rs 32, as many were predicting but it did not lost that long.
When dollar was in huge supply because of extra printing by American government then it was made sure that there is an equal or more demand for the dollar worldwide. Americans have the advantage because US dollar is the most dominant currency in world trade. They took advantage of this.... They made it sure that price of crude, value-wise amongst the top listed product worldwide, is increased multi fold. This led to a worldwide rush to catch dollar so that they can buy crude. So on the one hand an extra supply of dollar was created and on the other it was ensured that extra dollar is consumed in the world economy without any problems.
But now the next question, why would OPEC join hands with Americans because it's OPEC which controls majority of oil production world-wide?
OPEC will have to succumb to Americans. Because if Americans were printing the currency which would have depreciated its value and ultimately led to the downfall of the dominance of American currency then OPEC members would have incurred huge losses themselves. Over a period of time, OPEC has accumulated huge dollar reserve. If the currency had been devalued and lost the charm then what they would have done with that pile of reserves? They had to be hand-in-glove with Americans and increase the price of crude so as to keep value of American dollars up and running.
Who is at loss? OPEC members: made windfall profits because they were selling the same crude now at 2-3 times the earlier price. Americans: Everyone got green notes to be spent at the expense of rest of the world which was paying price so that American economy continue to buzz.
Please share your comments to me on this article directly on the blog or over email: niteen.dharmawat@gmail.com
Cheers,
Niteen S Dharmawat
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