Great reads for the weekend:
India’s economy: Losing its magic (Economist)
A devastating critique of the government-The usual idiots (Mint)
What goes up must come down (GMO)
Warren Buffett’s 50 Billion $ decision (InvestingNotebook)
Student Loans for kindergarten?( Forbes)
IIT Coaching in Kota – Feel sorry for today’s kids (Caravan)
Raging (Hazing) in Ivy League colleges-a true shocker (Rolling Stone)
Found this strangely funny-Male model thrashed and swindled by women (Mumbai Mirror)
In a previous article, we had discussed the impact of politics on rail stocks.
Politics plays a key role in deciding the fates of companies and sectors.As such, it can lead to plenty of warning signals for seasoned investors.
Take for instance, Jayalalithaa’s massive win in 2011 Tamil Nadu Assembly elections.
Since then (14th May, 2011) to now, shares of Sun TV (considered close to DMK) have tanked by a third.
A Raja was arrested on 2nd Feb, 2011.Since then, perceived losers such as RCom (-30%), GTL Infra (-75%) etc had to suffer devastating losses in their market capitalizations.
In 2012, assembly elections in Gujarat are scheduled towards the end of the year.Narendra Modi is widely expected to win but if he doesn’t you can be sure some corporate entities will be affected.
Gold, art, coins etc fall into a category called collectibles.The value of these collectibles doesn’t depend on any cash flow but on what price the next buyer is willing to pay.
Now whiskey too is joining the ranks of collectibles.
According to an article in FT Adviser,
If you’d bought the current best performing 250 bottles of whisky in 2008 (at auction in the UK) they would have cost £42,508. In todays’ market they would be worth £94,884, an increase of 123.21 per cent.
If you’d done the same with the top 100 bottles, the increase is 162.96 per cent and the top 10 would have gained by 297.62 per cent, according to the Whisky Hignland index.
As with all investments, the risk of getting it wrong can be catastrophic, and whisky is no exception. The bottom 10 performing bottles of whisky represent a 73.47 per cent loss in value since 2008.
Now try convincing your wife to trade in her gold for whisky !!
Your morning financial links expertly curated:
Foreigners find India a risky business (WSJ)
HPCL’s Bhatinda refinery becomes fully operational (BusinessLine)
Suzlon Energy: The net tightens (Mint)
SEBI Watch:Insider Trading of Shri J.E. Talaulicar (SEBI)
Havard more selective than Yale (Bloomberg)
Bashing up Warren Buffett (Daily Reckoning)
What Dan Loeb learned as an investor (Market Folly)
Wtf: Urine soaked eggs sell like hot cakes in China (Mumbai Mirror)
The Cable Digitization bill was passed by Parliament on 13th December, 2011
The Bill makes it mandatory to digitize analogue cable network for the entire country before the end of 2014 in four phases.
The first phase covering the four metros of Mumbai, Delhi, Chennai and Kolkata is to be completed by 30 June 2012.
This move has proved to be a bonanza for the market capitalizations of Multiple System Operators.
Consider the increase in share prices of these companies from 13th December,2011 till now:
Moral of the story:Maybe it’s more profitable to watch Lok Sabha TV than CNBC !!
Nifty is hovering around its 200 DMA of around 5152.
The 200 DMA holds a special attraction for market observers and technicians.
Typically, if the index goes below 200 DMA, it indicates bearish times ahead and if it goes above 200 DMA, it indicates bullish times.
Is this backed by research/empirical data?
The short answer is YES.
Mebane Faber is the co-founder and the Chief Investment Officer of Cambria Investment Management.
He has authored an excellent paper titled “A Quantitative Approach to Tactical Asset Allocation”
This paper is a must read for all market observers.In this, a timing approach is compared with a simple buy and hold approach.
In the buy and hold approach, the investor simply buys the index and holds it thru thick and thin.
In the timing approach, the following simple rules are followed:
Buy when monthly price > 10-month SMA.
Sell and move to cash when monthly price < 10-month SMA.
The paper demonstrates the superiority of the timing approach over the buy and hold approach
The catch is effect of commissions,impact costs etc is ignored while computing the returns.In the long run, I am sure they will make a difference.
But the fact remains that avoiding the markets when they fall below the 200 Day DMA enables one to sit out the worst of the bearish times.
Some stuff that I am reading this morning:
Bangalore is costlier than Mumbai to live in (ET)
SEBI Watch: Did political pressure play a role in letting off the Tayals? (Firstpost)
India to be the largest economy by 2050 (Financial Express)
Mallya selling stake in United Breweries to Heineken? (Mint)
How to win friends and influence people-a lesson from Rajiv Bajaj (Business Standard)
What do value investors do in turbulent markets? (Advisor One)
Bill Gross on delivering in a delevering world (Pimco)
Gold bumps its head (Bespoke)
Have gold prices peaked? (Big Picture)
The fiasco over the rail budget has wrecked the market caps of Rail wagon companies.
Consider the performance of the rail stocks post the rail budget till now:
CIMMCO (down 22%)
Kalindee (down 59%)
Texrail (down 22%)
TWL (down 30%)
None of these stocks are in the F&O segment else they would have been butchered even further.
Considering the poor finances of Indian railways, the under performance should continue till the next Rail budget at least.
A sector to avoid.
Came across this research paper on the NSE website (see paper here)
The paper studies the effect of seasonality on Nifty and Nifty Junior.
The study found that daily and monthly seasonality are present in Nifty and Nifty Junior returns. The analysis of stock market seasonality using daily data, we found Friday Effect in Nifty returns while Nifty Junior returns were statistically significant on Friday, Monday and Wednesday. In case of monthly analysis of returns, the study found that Nifty returns were statistically significant in July,September, December and January. In case of Nifty Junior, June and December months were statistically significant. The results established that the Indian stock market is not efficient and investors can improve their returns by timing their investment.
Some stuff I am reading this morning:
L&T Finance buys Fidelity’s mutual fund business in India (ET)
Why market shakes every time the taxman shouts GAAR (Moneycontrol)
FII flows a record so far in 2012 (Mint)
A case for investing in MT Educare ( BusinessLine )
A case for not investing in MT Educare (FirstChoiceIPO)
Found this quite funny-Madrid prostitutes declare war on bankers (RT)