Too Much of Analysis Leads to Paralysis.....

Fool me once shame on you, Fool me twice shame on me...Fool me all the times and I am Equity Strategist.
O Ashuji....

With so much of information floating all around, ability of understand has come down, while perception of intelligence has gone up. The most important breed in equity markets namely equity strategists have amazing ability to understand "cause effect" relationship. To justify their existence they might even come with explanation between central bankers farts and stock market returns. In past I have written about merits of Fundamental Analysis.

http://speculationanart.blogspot.in/2013/10/fundamental-analysis-heads-i-win-tails.html

Most of the equity strategists analyze market data far too much in terms of variables affecting stock market returns. One can scan through various local and global reports and it will be surprising to see how many variables are being discussed. Greater the number of variables affecting stock market returns poor will be its efficacy. Whenever a strategist talks about large number of variables affecting stock market returns or prices, its an implied acceptance that he has no idea about markets. Best part is with all wonderful analysis target price over one year will be 10-15% (such moves are common to occur over weeks to months). In past, I have discussed about Ridham Desai (Equity Strategist at Morgan Stanley) and his ability to be consistently wrong on markets because of his sheer knowledge on market variables. Such knowledge serves as rear-view mirror type analysis. In India, few guys (I have discussed in my blogs) are extremely knowledgeable and serves as great contrarian indicators. After a long time Ridham Desai appeared today on CNBC....

Expect Sensex to fall 10% in next 1 yr: Ridham Desai

Link - http://www.moneycontrol.com/news/fii-view/expect-sensex-to-fall-10next-1-year_988617.html

Market typically respect such calls in a contrarian way. Market respects humility more than knowledge. 

MarketWatch's Perma Bear Turns Bull ???....

If Bob Prechter (www.elliottwave.com) turns bullish on markets, one wouldn't need reason to sell...Even Bernanke won't be able to save market then...
O Ashuji....

There are certain market commentators who have had brain transplant, most with bullish mind set, while some are bearish. However there are few who are born bearish. There is a character called Paul B Farrell (Commentator on MarketWatch -www.marketwatch.com) who sees dooms day everyday. 2008 crash struck his mind and he is saying crash everyday since then. 

Paul Farrell's (MarketWatch) recent commentaries in 2013...

1) Stock market will blind side investors in 2013 (Jan. 1)

Link - http://www.marketwatch.com/story/stock-market-will-blindside-investors-in-2013-2013-01-01

2) Time bomb to market meltdown ticks louder (Jan. 18)

Link - http://www.marketwatch.com/story/time-bomb-to-market-meltdown-ticks-louder-2013-01-18

3) Critical Warning No. 7: Banks crash economy, again (Jan. 29)

Link - http://www.marketwatch.com/story/critical-warning-no-7-banks-crash-economy-again-2013-01-29

4) Your sequestered brain can’t see next crash coming (March 6)
Link - http://www.marketwatch.com/story/your-sequestered-brain-cant-see-next-crash-coming-2013-03-06

5) Bond crash dead ahead: tick, tick ... boom! (March 21)
Link - http://www.marketwatch.com/story/bond-crash-dead-ahead-tick-tick-boom-2013-03-20

6) New Critical Warning as 2013 shocker looms (March 25)
Link - http://www.marketwatch.com/story/new-critical-warning-as-2013-shocker-looms-2013-03-23

7) Critical Warning No. 13: Stockman’s ‘Apocalypse’ (April 6)
Link - http://www.marketwatch.com/story/critical-warning-no-13-stockmans-apocalypse-2013-04-06

8) GDP killing the future of American capitalism (May 13)
Link - http://www.marketwatch.com/story/gdp-will-make-a-generation-of-americans-miserable-2013-05-11

9) Doomsday poll: 87% risk of stock crash by year-end (June 5)
Link - http://www.marketwatch.com/story/doomsday-poll-87-risk-of-stock-crash-by-year-end-2013-06-05

10 ) New Doomsday poll: 98% risk of 2014 stock crash (June 29)
Link - http://www.marketwatch.com/story/new-doomsday-poll-98-risk-of-2014-stock-crash-2013-06-29

Suddenly Perma Bear has a Bull Vision Till 2017 in his latest commentary....

Shiller’s hot P/Es powering a ‘Roaring Bull’ till 2017

Commentary: As in 2004, market can keep going higher

http://www.marketwatch.com/story/shillers-hot-pes-powering-a-roaring-bull-till-2017-2013-11-06?pagenumber=2

Indian Market - Direct Play on Fed's Loose Monetary Policy....

In Markets - Being early is as good as being wrong...
O Ashuji....

Indian market is pure beta play on Fed's Loose Monetary Policy. I will not get into how bad things are in real economy nor will try to understand how marginally things can only improve from here. This subject is better left to Financial Comedians (experts on CNBC) who will have views both ways depending on the market levels. Basic Crux is Indian market is direct beta play of loose monetary policy.

Indian Market - Direct Play on Fed's Loose Monetary Policy....

1) Huge Dichotomy between perceived quality stocks (IT, Pharma, FMCG) and cyclicals (Banks, Capital Goods, Metals, etc). There has been endless debates about how polarized the market has been but when capital floats around the world and India has to receive its share, such outcome is very "rational". Indian retail mood is making lower tops with each all time highs. (On lighter side - that's huge divergence). Indian market will be vulnerable to whims of Ben Bernanke till broader market improves (broader market is sign of improving local financial conditions)

2) With hint of tightening (aka tapering) Indian currency was the worst performing currency (June-Mid Sep) and stock markets (particularly banks) collapsed. When Ben woke up from tightening dream, Indian market and currency bounced back sharply since Mid-Sep 2013. Both episodes were clear signs of how Indian market is slave to global capital.

3) It is really sad state of affairs when Finance Minister of country has to interpret Fed's Language after each Fed Meeting (One can frequently see FM's comments post FOMC) and Prime Minister talks about Fed Tapering in Parliament. All this is just the outcome of over reliance on dollars.

Be extremely careful about new highs and euphoria in markets (though must say sentiments have been making lower tops). Market lacks character of being stable and is extremely vulnerable. Bull markets start with far lower swings in prices than what we have seen in last 3-4 months and broader market participation is far higher. 

US Market Beautifully Set Up For A Crash.....

Going against crowd is the most difficult thing to do...yet in hindsight it turns out to be the smartest thing...
O Ashuji...

US market is through with all perceived risks (perceived risk hardly matters they are good for media debates) and actual risks keep on mounting. Please refer previous blog on "Risks - Perceived and Actual" http://speculationanart.blogspot.in/2013/10/risks-perceived-and-actual.html.

Everything Points to Nasty 3-6 month Outlook....
When markets are distorted as they are now, markets need not go to euphoric top. Crashes are more likely in distorted markets then secular downtrend. 

Hope of liquidity is the only thing that drives the market and one can get that sense to how market reacts to "bad" economic numbers. 

Most market participants are aware that markets are not being driven by fundamentals but yet participate in it because they know downside will be protected by Fed. 

Markets have all green signals in terms of all clear perceived risks. Its precisely during these times nasty surprises are more likely. 

Sentiments as measured by Daily Sentiment Indicators or AAII says "ALL IN" behavior. (DSI - 83% Bulls, AAII - 47% Bull, 17% Bear) 

All Actual risks will  sound common sense in hindsight, but they can only warn in the present. 

TIME TO AGGRESSIVELY BUY PUTS....

Risks - Perceived and Actual

When Perception of Risk is the Lowest, Actual Risk is the Highest....
O Ashuji...

Market rarely reacts to known risk and if it does, the move is usually deceptive. 

Perceived Risks...
US Debt Ceiling - CLEAR
Syria War - CLEAR
Fed Tapering - CLEAR
Who will next Fed Chairman? - CLEAR
China Slowdown - CLEAR
ALL CLEAR WITH PERCEIVED RISKS...

Actual Risks
Twitter IPO
Russell 2000 showing signs of parabolic move
Many Emerging Markets failing to cross May 2013 high (Indonesia,Philippines, Thailand, etc)
S&P 500 is up close to 22% YTD, almost entire move is due to P/E expansion
UST 10 year is still significantly above the lows of May 2013
Barron Cover Page has ceased to be contrarian indicator

Actual Risks through Chart...
New Highs Divergence

Log Periodic Bubble Top at 1800??

NYSE Margin Debt vs S&P 500

Great Minds.....

Ability to think independently is a rare gift....
O Ashuji...  

Great Minds.....
I am grateful to such independent thinkers whose ideas and thoughts are so inspirational. 

Links to few educational videos...

1) How the Economy Machine Works - Ray Dalio

Link - http://www.youtube.com/watch?v=PHe0bXAIuk0

2) Nassim Taleb and Daniel Kahneman discusses Anti-Fragile

Link - http://www.youtube.com/watch?v=MMBclvY_EMA

3) How we can predict the next financial crisis - Didier Sornette

Link - http://www.youtube.com/watch?v=C_eFjLZqXt8

4)Jim Chanos at 2013 Wine Country Conference China: The Edifice Complex

Link - http://www.youtube.com/watch?v=5jMLulZnT1g

 5)Fractals and the art of roughness - Benoit Mandelbrot

Link - http://www.youtube.com/watch?v=wQTnVEXAtBY  

6) James Simmons - Renaissance Technologies - Mathematics, Common Sense and Good Luck : My Life and Careers

Link - http://www.youtube.com/watch?v=SVdTF4_QrTM 

7) David Einhorn on Federal Reserve

Link -http://www.youtube.com/watch?v=PcfgfjwwaPM

8) George Soros Lecture Series - General Theory of Reflexivity

Link - http://www.youtube.com/watch?v=oCaCrWzFPYY

     

"Financial Experts" Mood with Nifty at 6000+....Then and NOW...

Financial Experts on Business Channels have VISIONARY HINDSIGHT on Markets......

O Ashuji....

I have great respect for "Financial Experts" on Business Channels not because of their ability to be consistently wrong but because it saves me lot of money. 

Just a recap on Blog Titled "Fundamental Analysis - Heads I win, Tails Fundamentals have changed....."

http://speculationanart.blogspot.in/2013/10/fundamental-analysis-heads-i-win-tails.html

I had discussed one of the financial expert who has consistent track record on market but unfortunately my child beats him because my child is right 50% of time and this expert is 99.99% wrong. 

Just summary of last three call by the expert....

1) Nifty may slip to 4800; bet on fixed income: Ridham Desai (26 August, 2013) (CNBC)

2) Nifty may see 5300; buy IT, sell banks: Ridham Desai (23 September, 2013) (CNBC)

3)Valuation, weak growth to take mkt lower: Ridham Desai (1 October, 2013) (CNBC)

Summary of how markets have behaved after these calls...
1) Nifty made bottom on 28th August, 2013 (2 days after 1st call above).
2) Nifty is up 11.8% since 26th August, 2013 (33 trading days). 
3) Nifty is up 5.8% since last call on 1st Oct, 2013.

This is the consistency which everyone tries but fails. It can come only with understanding of everything under the sun. 

"Financial Experts" Mood with Nifty at 6100+....Then and NOW...

The idea of today's blog is to compare the mood of comedians on POGO channel in this year when Nifty touched 6000+ levels thrice....

1) Jan 2013 
Nifty crossed on 3 Jan, 2013 after gap of close to 2 years. Lets have a look at expert mood. 

Expect Nifty to scale 6100-6150 in January: SP Tulsain  (2 Jan, 2013)

Nifty to make new highs after taking out 6000: Ambreesh Baliga (3 Jan, 2013)

Buy banks, metals; Nifty hurdle 6150: JM Financial's Shah   (4 Jan, 2013)

Nifty may touch 6700 by year end: Prabhudas Lilladher  (9 Jan, 2013)

Nifty over 6,350 on rate-cut; sell Infy on weakness: Baliga (14 Jan, 2013)

Liquidity strong, Nifty heading towards 6150-6200: Bhamre (15 Jan, 2013) 

Nifty was above 6000 for 17 trading days in Jan 2013 and never crossed 6100 till May 2013. 

2) May 2013
After Jan 2013, Nifty again crossed 6000 on 7th May 2013. Lets have a look at expert mood.

Mkt rally to spill into small-, midcap space: Angel Broking   (8 May, 2013)

Liquidity can drive market higher; bullish on Ceat: Baliga (9 May, 2013)

See strong upside momentum in Nifty: Sukhani   (9 May, 2013)

Go long on Nifty; media pack looks tempting: Edelweiss Sec (11 May, 2013)

See volatile mkt; fresh high likely: Edelweiss Securities (15 May, 2013)

Nifty heading 6200, don't short now: Aditya Birla Money (16 May, 2013)

Don't panic, mkt won't correct significantly: Angel Broking (21 May, 2013)

Mkt won't see deep downside; buy cement: Pashupati Advani (21 May, 2013)

Nifty to test 6300 in few weeks; buy BHEL, L&T: Baliga  (23 May, 2013)

Mkt to scale fresh high; buy metals, pvt banks: InvestWorks (27 May, 2013)

Equities only option; buy Tata Motors, Godrej Prop: Damani (31 May, 2013) 

What happened over next 2-3 months is history but same experts will have visionary hindsight about the same. 

3) September - October 2013....NOW

Nifty hit 6000+ again on 19th September post sharp correction in July-August 2013....Lets have look at experts mood since mid September till now...

Mkt won't rally, but consolidate; focus on RBI: Edelweiss (19 Sep, 2013)

Use next mkt rally to book profits in banks: Ambreesh Baliga (20 Sep, 2013)

Don't get tempted by mkt rally; macros still weak: Advent  (21 Sep, 2013)

Underweight on India; USD rally key for EMs: CIMB (23 Sep, 2013)

Nifty lower side target at 4500; USD to soar: CIMB  (24 Sep, 2013)

Mkt capped at 6200 for 3-6 mths on lack of triggers:  Vikas Khemani (25 Sep, 2013)

Mkt to be bearish in Oct; Nifty may fall beyond 5500: Angel (27 Sep, 2013)

Mkt's climb to get tough, FY14 Sensex EPS to fall: Religare  (27 Sep, 2013)

Nifty may retest 5200-5400; hold pharma, IT: Sandeep Shah (30 Sep, 2013)

Valuation, weak growth to take mkt lower: Ridham Desai (1 Oct, 2013)

Nifty to hover in 5500-5850 in Oct; hold IT: Ambreesh Baliga (3 Oct, 2013)

Negatively biased on mkt; 5900 key for Nifty: Anu Jain   (7 Oct, 2013)

Mood is vastly skeptic to bearish this time around.....and Market NEVER Obliges these experts....