Sunday 23 January 2011

Sixteen reasons why we'll get shares at Lower prices

Sixteen global and Eight local reasons why we'll get shares at Lower prices

Happened to come across a rather insightful piece on a favourite blog of mine - Generational Dynamics blog. Am reproducing the relevant portion below.

We must take it with a pinch of salt (as the Generational Dynamics blog has been predicting a bear market for Wall Street for at least a couple of years now). Nevertheless, many of the pointers are fairly valid pointers.

More importantly, when the US Markets falter, it is almost a certainty that other markets will follow suit.

Hence, be prepared to face a fairly significant crash in the weeks and months ahead. This is further corroborated in the Indian context by the following:

  1. Scams - big and small
  2. Political turmoil
  3. Technically weak Nifty. We've been repeatedly approaching the 200 DMA too often for comfort. If we break it, hell can break loose.
  4. Fundamentally, many major shares are quoting at unreasonably rich valuations (though not completely in the bubble territory - as yet)
  5. Elections in many key states and the linked uncertainty
  6. Problems with virtually all our neighbours (especially China - with stapled visas being issued to Indians from most parts of the country other than Delhi, Mumbai and Chennai!!!)
  7. Internal violence increasing at a rapid pace (Jammu & Kashmir, Meghalaya, Telengana, Gorkhaland, Meghalaya, Maoists from WB, Orissa, Chattisgarh, etc.)
  8. Inflation, especially food inflation

Many of us tend to perceive all this news as "Bad news". Instead, I would like to look at them as just news. While politically and socially all this stuff can indeed be "Bad news", as investors, if we are prepared and if we anticipate all these developments, it can actually be "Good news".

All that we need to do is to keep booking profits steadily in every rally and gradually increase our cash levels.

When the inevitable happens, there will be a "nice, good crash". This would result in blue chips being available at rock-bottom prices. Be prepared. You'll get all your Reliance, Infosys, Mahindra & Mahindra, BHEL, State Bank, HDFC Bank, Titan, Hindalco, Dr. Reddy, ITC, etc. at juicy levels. Grab them when the time comes.

After all, the long-term India story remains strong - as strong as ever, in fact.

Happy investing!

Now for the promised excerpts from the Generational Dynamics blog:

Original source: http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.weblog

Sixteen reasons why a Wall Street panic may be close

"Higgenbotham" in the Financial Topics thread of the Generational Dynamics forum was asked why he believes that a Wall Street panic could be near. Here are his reasons, from most important to least important:

  1. US Muni bond indices collapsing
  2. US State bankruptcy procedures being seriously discussed, indicating bankruptcies are imminent
  3. Several US housing markets making new post bubble lows and the trend appears to be accelerating
  4. Rising US, German and French bond yields, while at the same time PIIGS bond yields remain elevated
  5. Recent Gallup spending survey shows a collapse in US consumer spending in January 2011
  6. Leading Asian stock markets have been rolling over since November
  7. Russell 2000 Index lost 3% last week while the Dow gained 1%
  8. Many sentiment indicators near or at records
  9. Recent speeches by top Fed officials indicate dissent and fear is building
  10. Oil and gasoline prices moving into danger zone (subject to interpretation)
  11. US Mutual Fund cash levels at record lows (this condition can persist for months)
  12. NYSE and NASDAQ short interest at post 2007 lows (same here)
  13. High NYSE margin debt (and here)
  14. Silver prices starting to lag gold prices (probably not by enough yet to cause concern)
  15. ECRI and CMI Indices lagging stock market (this could be interpreted as bullish)
  16. US traffic volume still well under its 2007 high and not improving much (and here)

He adds that, "Low stock prices convince most people that lower stock prices are to follow. High stock prices convince most people that higher stock prices are to follow. And it will forever be thus."

In response, forum member "vincecate" pointed to one more sign: Zero Hedge is pointing out that, for the first time in years, and possibly for the first time ever, there were no insider purchases of stock last week. That is, insiders sold $163 million worth of stock, but not a one single purchase of stock by an insider.

Those insiders must be telling us something.

Sixteen reasons why a Wall Street panic may be close

"Higgenbotham" in the Financial Topics thread of the Generational Dynamics forum was asked why he believes that a Wall Street panic could be near. Here are his reasons, from most important to least important:

  1. US Muni bond indices collapsing
  2. US State bankruptcy procedures being seriously discussed, indicating bankruptcies are imminent
  3. Several US housing markets making new post bubble lows and the trend appears to be accelerating
  4. Rising US, German and French bond yields, while at the same time PIIGS bond yields remain elevated
  5. Recent Gallup spending survey shows a collapse in US consumer spending in January 2011
  6. Leading Asian stock markets have been rolling over since November
  7. Russell 2000 Index lost 3% last week while the Dow gained 1%
  8. Many sentiment indicators near or at records
  9. Recent speeches by top Fed officials indicate dissent and fear is building
  10. Oil and gasoline prices moving into danger zone (subject to interpretation)
  11. US Mutual Fund cash levels at record lows (this condition can persist for months)
  12. NYSE and NASDAQ short interest at post 2007 lows (same here)
  13. High NYSE margin debt (and here)
  14. Silver prices starting to lag gold prices (probably not by enough yet to cause concern)
  15. ECRI and CMI Indices lagging stock market (this could be interpreted as bullish)
  16. US traffic volume still well under its 2007 high and not improving much (and here)

He adds that, "Low stock prices convince most people that lower stock prices are to follow. High stock prices convince most people that higher stock prices are to follow. And it will forever be thus."

In response, forum member "vincecate" pointed to one more sign: Zero Hedge is pointing out that, for the first time in years, and possibly for the first time ever, there were no insider purchases of stock last week. That is, insiders sold $163 million worth of stock, but not a one single purchase of stock by an insider.

Those insiders must be telling us something.

Regards,

N


Sixteen reasons why we'll get shares at Lower pricesSocialTwist Tell-a-Friend

No comments:

Related Posts with Thumbnails