Scary Scenario

Scary Scenario

I hate fear mongering.

However, Value Investing Gurus have, over the past several decades, emphasised the importance of:

Return of Capital

over

Return on Capital

I can, and I have been quoting in several contexts about the pace and vigour of the current stock market rally as being discomforting.

It would be easy to quote a whole host of data, articles, etc. to point out that the current valuations are not sustainable.

The rally can, and very well may go on to greater heights - like it did between September 2007 and January 2008 - But

• The continuing financial woes in US, UK and many European nations
• Stories that one is hearing about Latvia (do a Google search!) and the potential repercussions (remember Lehman and its aftermath?)
• Emerging credit card crisis in US and Europe
• Highly optimistic predictions coming from all our business papers, magazines and channels
• Monsoon failure in many parts of India, accompanied by floods in other parts of India
• Increasing internal security issues with naxalites and maoists in India and, last but not the least,
• My hunch

tells me that the time has come to become increasingly cautious - which, in my language, translates into increasing the cash levels in one's portfolio.

Better to lose an opportunity than to lose cash!

Take care!!!

Regards,

N

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