January 3, 2009
So into the 5L virtual portfolio come three stocks:
Hero Honda: Strength in auto is evident in this counter. This is largely a technical buy of a strong stock in a beaten down sector: Auto. I have strong hopes for rural auto buys, especially with dropping fuel prices, better roads and lowered interest rates. Hero Honda is a strong stock, and while the fundamental reason for the strength isn’t evident, I’m listening to the price. 10% on this stock at 792.
Gold Bees: I’m just a sucker for this commodity - 10% exposure at 1339.
Aftek Infosys: This company trades at half its cash. With Rs. 30 of cash in the bank, and half yearly EPS of Rs. 9, it’s tough to imagine the worst is yet to come. Still, the cash is parked in Portugal (of all places) and there is the danger of a shady past (involving Ketan Parekh and all). So, let’s do a 2% bet on this stock at 14.20, with plans to scale in as we cross 16, 18, 20.
Yeah, this is a little unfair coming a day after a stimulus package and all. But I’ve actually bought these myself, and I have suggested them for accounts where I consult, and we’ve been buying for the last few weeks. So huge-ass disclosure: I’m quite hugely invested in these stocks.
Disclaimer: Do not follow this portfolio - it is virtual and while I do have positions, they do not reflect proportions I mention here. This is not advice. This is not meant to be for you - it is only an expression of my opinion for me. I know you already know this, but it’s the legally correct thing to do.
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January 3, 2009
(Hat Tip: Market Folly)
Sadly he didn’t make enough money from his predictions. But then, neither has Taleb I think (if you add up all the past years) and look where that got him. Interestingly, people seemed to be outraged and laughed at Peter, all while he was making sense: I can bet that the guys (and girls) who laughed at Peter on TV will not apologise or admit they were bullshitting - because they will say “hoocudanoode!” (”who could have known”) Certainly, someone on their show did know, and they laughed.
Also read: Of Arrogance and Humility.
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January 3, 2009
We have yet another stimulus package!
Rate cuts: The RBI has cut rates by another 100 bps - repo is now at 5.5% and reverse repo at 4%. (These are rates banks pay to borrow from the RBI and get from the RBI for keeping cash there)
The Cash Reserve Ratio - percentage of deposits kept with the RBI - is now down another 50bps to 5%. Should add 20,000 cr. to the system, but that is just theory.
Bond yields fell off the charts - the 10 year yield is at 5.07%. My Gilt fund investment is now up 14.5% in two months.
Interestingly, the RBI says that while it has cut repo from 9% to 6.5% since mid September 08 (now 5.5%), PSU banks have only cut their PL from about 14% to about 12.5%. The pressure is serious.
The full text of the monetary stimulus shows RBI is no longer concerned with inflation; more emphasis is given now to the IIP negative growth figure, a slowdown in services and lack of business confidence.
India’s Subprime: RBI also has “relaxed” the classification of certain loans as NPAs. If a loan to Commercial Real Estate or equity market or personal loans is distressed, it can be restructured to make it look better. But some freedom’s been offered to a working capital loan - which earlier needed to be fully secured with collateral, and will now not require such collateral; the bank will only require to have 20% of it provisioned.
Plus, banks acn implement a restructuring within 120 days of starting it (and it has to be started by Jan 31). That’s a 30 day extension.
Amounts to basically saying we have distressed loans, we will restructure and perhaps back-load payments (charge no interest for a while and later charge higher). Further we may not require to have collateral that is valued as much as the loan. Uhm. Where have I heard this before?
Steel and Cement: There’s duty on TMT bars and cement, brought back after inflation forced the government to take em off. Yet, these prices are likely to fall at least 40% more this year, I think.
Bond easing: FIIs can now invest in rupee based Indian corporate bonds upto $15 billion (up from $6 bn earlier). That’s good, but hey, these guys aren’t even investing in AAA bonds in their home countries. So we’ll just to wait and see.
Some other areas include some recapitalisation of PSU Banks - to the extent of 20,000 cr. and some ECB usage permissions for real estate.
This isn’t much, again. The government is seeing serious revenue losses but is balking at borrowing more (look at these bond yields! Might as well borrow when people are buying) Granted, our debt is at 90% of GDP or so, but we can scale it to 100 or 120% in these times; everyone else is doing it. Get a 500,000 cr. package and that will be worth it. The measures - except the rate cuts - are of little significance.
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January 3, 2009
After my Short-Only strategy, here comes a strategy for both Long and Short, a Virtual Five Lakh Rupee portfolio, part of Kaushik’s site.
Fundas
- It’s a way I would manage 5 Lakh Rupees
- I may be long stocks, long/short futures or long/short options.
- Each buy/sell will be documented in a blog post
- It’s virtual, but there may be real money behind it. I will disclose my personal position, but not of any other people whose money I manage.
- If you follow any of the positions, it’s at your own risk. I am not dispensing advice; this are my opinions only.
- We reserve the right to charge for this in the future.
- Twitter posts will happen.
- Kaushik Gala and Arjun Ashar have their own virtual portfolios on the site as well.
I’ll create a status page on this blog also with twitter posts specific to the portfolio (so you can comment).
This page will evolve. Welcome, 2009.
Note: the Short only strategy will continue.
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January 3, 2009
Wish y’all a very happy and prosperous 2009.
For me the new year will bring along some happy and sad news. Moneyoga.com, the web site Kaushik and I started has now reached a logical end - we are going to shut it down.
What a year, was 2008. I started off moving to Navi Mumbai, and the big kahoona crash happened in January, right around my move, and I ended up making enough to pay for the move and a little bit. We had the web site on, and went and did the VC rounds, and I’m now thankful they didn’t invest - we knew the market was going down, but not that everything related to the internet in India and traders in general too. That part came as a realisation only in April.
We then stopped work on the site - it continued to be updated till yesterday - and we scaled our way into algorithmic trading. That went on to two months of discretionary trading, then getting intraday data, building systems in Wealth-Lab, testing and refining in Excel, running real money for over 6 months on it, working with a potential deal, watching the deal fall through after a long discussion, trading another client’s money, understanding how the “system” works and eventually, realising this will take us a while longer.
Having done only the site and some trading for a year and a little bit, I’ve found, like Kaushik, that I’ve learnt a lot: a bear market, trading the short side, working with client funds, understanding the importance of sentiment. I wish I could say I became rich along the way - but I didn’t. This business is about making money, but you gotta have enough to start with - and I’m undercapitalised that way.
Yet, there is hope and there is always opportunity. Trading systems is what I love and I will continue it - 2009 will be about working to build a great trading system company. How to do it is a challenge; but what’s life without a few challenges?
So I’ll add a new one to the mix. I’m moving to Delhi. Gurgaon to be precise. That’s where my wife has opportunities - I know I’ve asked for her career to be sidelined as I went on to Mumbai, but Gurgaon will let her do what she wants. (she’s lived there, I’ve grown up in Delhi - so it’s not unfamiliar territory)
What next? I don’t know. There are opportunities that I will have to explore. Some come in the area of system trading, others in wealth management. There is perhaps a way to combine them both. More details in Feb, when I will know the exact path ahead; and I have exactly two choices.
Whatever happens, this blog will continue and if anything I will get more consistent in the quantity of posts.
So again, I wish you a happy 2009. Some of you have patiently read my raving, ranting posts about everything. Some of you have joined recently and signed on. Some of you have asked questions I haven’t answered, and some of you have issues I am not quite qualified to solve. I thank you all for your patience, for reading in, and I hope I’ll continue to be relevant. And I hope I’ll be able to help more people understand this crazy world of financial markets, and yes, I hope I’ll make a lot of money in 2009. It’s going to be a fun year!
(Bonus: The worst predictions of 2008. I hope I don’t make that grade in 2009!)
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January 3, 2009
Satyam’s recovered a lot and I’m moving it out of the Short Only Strategy - one contract, about 10 bucks as a loss, which is around 6,000 Rupees. Not too bad, and the stop loss was the entry price, which was crossed today.
We are still at 11.87% on the SoS, for about four months. The next year should be good for shorts. Am eagerly awaiting results season.
Happy New Year everyone. Shall make a fresh post tomorrow. Meanwhile, stay safe.
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January 3, 2009
I’ve been tracking the RBI’s Negotiated Dealing System all day today and it’s unbelievable. All G-Secs have risen HUGELY in price, from yesterday to some obscene levels.
The yield of the 10 year G-Sec, a benchmark in a way, is at 5.27% as per Reuters.
Indian federal bond yields tumbled to their lowest since May 2004 on Tuesday as expectations grew the central bank would cut rates, while speculation of a reduction in fuel prices lifted sentiment for debt.
The benchmark 10-year bond yield closed at 5.27 percent after touching an intraday low of 5.25 percent, its lowest since May 2004. It had closed at 5.55 percent on Monday.
I want to chart this stuff - I think the prices are at all time highs for the 2018 bond and the 2036 bond. Not only have the 10 year bond prices risen (by 1%), the rise in prices of the longer term bonds is spectacular - nearly 2%. This kind of move is an earth shattering event usually, but we all know that these are not usual times.
Gilt funds should go strongly up. I’ve already got a 10% return on my (phased) investment into the ICICI Prudential Gilt Plan, in 1.5 months. I’m holding for another 20-30% return within a year.
Note: I have been told by two people now that ICICI’s mutual fund arm is pushing it’s “income plan” whenever they want to invest in the Gilt fund. The income plan has much higher costs (the fees are 2x the Gilt plan, nearly) and invests a good chunk in corporate bonds too. Now they say corp bond yields will come down as well, because the spread is too high. If you look at the US - a much more developed market - corp bond yields are still very high and gilt yields are at all time lows. The spread need not ever come down, and in India we will see our share of corp defaults.
Plus the income fund has a 2% exit load (versus only 0.75% for the gilt fund).
So I would never go with the income plan - I’d stick with the basis. Gilt is gilt, and only gilt.
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January 3, 2009
Satyam has hired DSP-ML to “look at available options to enhance shareholder value”. DSP will also review the composition of the remaining board (after four directors have resigned).
But DSP-ML has Raju’s shares pledged to it and is looking to sell them to cover margin calls.
DSP-ML is everywhere! Kothari must be proud.
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January 3, 2009
The RBI weekly supplement for the week ended 26 Dec 08 shows that the forex reserves of the country is 254 billion dollars, up $3.6 billion from last week.
And in rupee terms, we are at 11.98 lakh cr. versus 12.20 lakh crore last week, a loss of 22,000 cr. The loss is probably due to the rupee’s gain of around 2%. But it’s an irony - you gain dollars, you lose rupees.
Also it seems like Government securities have had a huge inflow - over 200,000 cr. in the week ended 19th Dec. Has gone up considerably from the 100,000 cr. or so average of the last four weeks.
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January 3, 2009
From ET:
Mangalam Srinivasan, a US-based academic who has been a director on the board of India’s fourth-largest software exporter since July 1991, said she was resigning taking moral responsibility for voting in favour of the controversial acquisitions, a copy of the resignation letter made available to ET shows.
At least someone’s taking responsibility.
Satyam’s stock meanwhile has done well for the day, ending at 136. It’s pretty badly beaten up since the acquisition notice and withdrawal, though.
Disclosure: No positions.
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Currency Banking.
