Thursday, July 24, 2008

The Chimps are back.

[Announcement] : Chimpanzees buy Indian Stocks at 14,800.
BSE Sensex today: 14,777.
NSE Nifty today: 4,433.

There we said it there is no mistaking.

Not into dispensing common sense( disguised as high sounding financial acumen) free of cost.. we have taken this unusual step of actually divulging our "take" on the market owing to the following reasons:

  1. The plethora of sorryAssed "investors" who, having lost their shirts and shoelaces in the recent bull market, that have signed on as Luddic clients in hope of recovering some "investments" before their wives discover their indiscretions to neighborhood rattling public spankings.
  2. The rash of value that has emerged in Indian stocks.
  3. The reforms are back on track.
  4. Everyone else is buying this rally.. the bang is back.
As is evident from the state of this country's economy and markets.. the bovine don't get it..ever.

And shockingly the "analysts" seem to be getting the message too finally..

The Swiss bank lowered its year-end Sensex target to 15,500 points from 19,600 previously.
HSBC also cut its year-end target for 2009 to 15,000 from 21,000.

The good part is these marsupials still have their jobs or we would be hard pressed for targets.. and the good fortune that follows such targeted investments.

..but our personal experience with analysts and fund managers has been less than lovely.. for over 5 months after (getting ppl invested at Index 21,000 odd) , they assured :
20,500 " this dip"
19,500 "..just a correction buy this dip.."
18,500 "..even better value buy this dip.."
17,500 "..average down your cost .. buy this dip.."
16,500 ".. bottom is here now .. buy this dip.."
15,500 .. cannot locate the switched off.
14,500 .. still no guidance.
13,500 ".. take the matter into own hands .. hold for recovery."
13,000 ".. cannot go lower.."

Suddenly , Govt survives confidence votes and the bulls' confidence is back.. Finance minister is back in saddle and economy is once again in good hands..evidence? his quick and astute analysis of the Oil situation..within hours of the vote.

...and our "analyst" is back..
...14,500 .. the market has bottomed .. just buy every stock flat out.

.. and this time of course, he can be trusted.

Strangely.. the Real Estate sector's value is still not being priced fairly.. apart from some far sighted turkeys like Lehman Brothers giving Rs.750 odd crores ($175 mil) to equally far sighted developers like Unitech .. um.. who are ideal partners considering identical farsightedness, but more importantly identically collapsing stock prices.

Tuesday, July 15, 2008

Reliance Industries : Target Price Tars

Reliance Industries, as all Indians know is the Indian growth story, the India shining that make our chests swell with pride and (nearly) make Mukesh Ambani richest man in the world (well at least till the growth story was intact) .

Reliance Industries is such a central part of this country's scheme of making it into a developed, white nation that every fund manager worth his "grasp of the investing climate" quickly loaded up on the stock in his portfolios within the first few hours at the many gasps of sheer admiration from the gallery.

It surely helped the stock Picking Process of these fund Managers' exhaustive due diligence that the media everyday sang paeans for the Reliance Pack, its visionary founder, his offsprings and the glorious path that lay ahead.
In fact so entwined is the future of this country with this family's visionary projects, visionary plans, visionary accounting, visionary shortcuts that certain Politicians (cutting across parties) were roped in to try and pass a bill in the Parliament allowing the Groups' corporate colors be changed to the tricolor national flag colors .. in fact the only reason it fell through was the bitter wrangling between the different politicians (on opposing brothers' sides) on which brother gets the colors and which gets the national emblem.. and when a national daily threatened to actually go public with such an agenda in non positive light for the Reliance Group ( unheard of in itself).. the duo decided to postpone Sovereign ambitions a tad.

So off they went about their business.. announcing project after project, investment plans after investment plans ( all running parallel..time is of essence here).. till nobody in the investment world, or the many analysts of different hues and colors who follow Reliance stock, could even keep a tab on all the projects or group companies or cross holdings or cash flows or ratios or even which growth projection incorporated which cash flow from which project into which companies balance sheet.. in fact it is suspected the situation within Reliance offices is just as chaotic and they all finally put together some nicely sloping ( upwards at an appropriate tilt) numbers every quarter to throw at the aforementioned analysts who then keep their home fires burning by deftly analyzing the same and turning up the next morning to announce their expectations exceeded (again!) in excited yelps on TV to coax some appropriate gymnastics on the Co's ticker tape..
..and the country sits back with warmed cockles and marvels at the wunderBrothers.

But lately, as the country's "investors" grapple with having to put up with sharing space with certain non-bull variety of farm animals.. who were allowed in ( a mistake in hindsight) into the stock market jamboree during the euphoric rise( of course their bovine cash helped) to add meat to the momentum..well these non-bulls (turns out most were actual, real sheep!) have now caused significantly more damage on the down move than any good on the up move.
..and Reliance, renowned far and wide for its abilities to manage growth, manage profit margins, manage tax loop holes, manage successive Govts. , manage accounting exponentiality, manage media, manage analysts and not the least manage its' share price.. had to face actual uncontrollable down moves in the scrip.. cannot the clowns see the profit margins, the growth , the projects..

That's the problem with sheep.. no reasoning .. they either move up or they move down.. and all of them.

So it began innocuously enough, more expectations exceeded more projects announced, more regulatory environments smoothened, more growth planned .. the analysts got down to work ..
since it was soon after the heady top of 21,500 on the SENSEX .. and the media was still quivering with the last spasms of the high .. corpulent, local Warren Buffetts were competing with each other to envision higher SENSEX 25,000 ..30,000 .. 50,000 ( fact Luddic's Researchers, having failed to correlate anything(worthwhile) except unrequited libido to the market's 2 year gushing.. concluded that the lower had the visionary Prognosticator's self esteem been before the bull market.. the higher he seem to project the Sensex on his "investment" horizon.. *sigh* those were the days.

In these heady days.. our "analysts" ( OK, I use the word loosely..very loosely).. but then analysts by definition are loose losers who would be on the streets with tin cups if they actually traded their analysis.. so these "analysts" in this still quivering market.. just went about outdoing each other with their Reliance Target Prices.
To be fair for the last 2 years any analyst who upped his target when a stock dipped a bit was soon given his own cubicle, own appearance on TV, own herd of bulls to prod with his newer and higher it was not surprising the highest "target" won the best cubicle/bonus/herd.

Sample some of their efforts to claim their rightful places in Analytic History :

  • ICICI secs in June : Reliance Ind Target: Rs. 3060
  • ShareKhan in April : Reliance Ind Target: Rs. 3196
  • India Infoline in Jan : Reliance Ind Target: Rs. 3316
  • India Infoline in Mar : Reliance Ind Target: Rs. 3198
  • Angel Broking in Apr : Reliance Ind Target: Rs. 3344
The analysis is not easy and any clueless john groping around to catch a quick 20-30% on his investments knows he is in good hands when he goes through the Target announcements - these are typically liberally garnished with serious doneMyHomework words like YOY, EV, EBIDTA, FY 4QF, start with. that make normal English redundant and superfluous.
In fact we think the Angel broking guys have a good handle on the analysis situation in this country ,what with having beaten down the other wannabes hands down with a 3344 and the best narrative to boot :
" ..RIL stock is available at 18.7x FY2010E FDEPS of Rs 139.1. "
what more does an Investor need before pulling the trigger.. this is a sitter !!
In fact they wanted to fine tune the Target to Rs. 3344.15 based on the FDEPS of Rs.139.1 but the stenographer seems to have missed out in the draft announcement.

No Analyst story is complete without our old cat PN Vijay of PN Vijay Investments, who has for decades sagely advised investors how to invest and who ( along with his equally geriatric flock) unfortunately seems to have boughtEveryDip right from 20,500 to 12,900 and still holds basically Reliance in all his portfolios.

What brought this post about was the recent unfortunate events witnessed in the Indian financial capital Mumbai's streets when certain hooligans and antiSocial elements(though we strongly suspect many were mere investors in disguise) owing allegiance to a local, political, Uncle's offshot nephew's Party, stormed the cubicles of the abovementioned Analysis houses and dragging the (formerly)Target Happy Analysts into the streets and onto waiting donkeys ( you are seated facing back) quickly tarred and feathered the quivering (very different quivering , this) analysts before a loud and longish parade through downtown Mumbai.( In India cops can take a very long time coming).

Needless to say, it has been a while since anyone has announced Target(or getTar) Prices in this city and mostly offshore analysts are being used to announce any new Targets.

Update : Owing to recent macroeconomic issues, Angel (or Fairy) Broking has (through an outsourced analyst) lowered its Target for Reliance Industries by Rs.7 (was actually Rs.6.65, but steno.. ) to Rs. 3337 as they announced:
".. since FDEPS is now looking like Rs. 138.76"
..meanwhile the Reliance Industries scrip hit Rs.1977 today ?

Monday, July 7, 2008

Don Victor Niederhoffer (Don,not Down )

That's right. Don Victor just got Quixoted by the panel of judges at Luddic Research for this decade.. and going by his momentum the next decade's title looks sealed too.

Victor as we all know has shown untiring brilliance in volatile performances of many kinds in his personal, professional, sports, love and trading life that would have stretched the imagination of even Obama's pastor(of AIDs is a conspiracy of the US govt. against Blacks!! fame) into hitherto uncharted territory.
Victor was/is a brilliant mind that just kept on pitting his obvious(and harped on) brilliance against the oxen that populate the financial markets in (as is evident) not only emerging markets but also the most developed and sophisticated markets operated by man.
Now how these Oxen and other lumpen elements have managed to gatecrash the mathematical and well "counted" world of Vic is another debate- whether the entire volatile and non-rational behaviour of these markets can be educated into non-medieval impulses through proper vetting of IQ levels of the players thus enabling reward structures directly linked to the depth of thought in investment/ trading strategies.
Sample this..while the rustics and the bovine have been buying shares that go up and selling shares that go down to good effect .. Victor here has been spending quality time with trees in California (studying similarities between tree rings and market cycles), imagining identical flow and ebb between musical symphonies and market trends(he even took a violinist to a strategy pitch with his clients in his heydays), pinpointing structural replication of Cathedrals in chart formations, etc. when he is not taking cues from long dead fictional characters ( anything alive does not qualify as it would be competition and Victor is nothing if not superior).

So, Victor Q. had this simple(and as usual brilliant) money making trick.. keep selling long shot put options (a bet prices will not go down) in a rising market and pocket the premium every morning.. soon he was better than anyone in selling puts in daylight hours.. every time market fell he sold more puts and when the market rose( as it always does ) he made more money.The sheer brilliance boggled the watchers .. people shook there heads in amazement.
Then Oct 87 crash happened and wiped out Vic's little firm(and investors little cash) as also all the years of option premiums he had collected brilliantly.So he had to hock the family silver and all.. but that's not all..he was back a few years later and kicking serious ass with his volatile brilliance .
This time he was a far more Educated Speculator(having written a couple of books to that effect) and studied musical and sand patterns more vigorously to decode the mystical natural cycles of the stock market.
So some fresh turkeys gave him some money (to put an end to the violin performance at the minimum) and after a couple of years of heart pounding gyrations Vicky Q. promptly doubled down a bet that never came back.. leading to the last study of tree growth circles (circles which eerily resemble his worldIsMyOyster pet vision, which alas never materialized owing to poorly gated paddocks around the stock market) and the locals were witness to the sadly familiar sight of turkey meat deliveries from the Niederhoffer farms.
Down for the second time, Don Niederhoffer realized that only lesser men learn from failure and the better men do not learn from 2 failures, while the best of course never learn from anyone or anything (except maybe a cathedral or B-Flat minor).

DonVic's trading philosophy can be summed up in 3 words (Markets go Up)..because in between his tree ring study and musical model building he divined that markets have always ended up if you take a longer term view.. if it shows lower close,just increase your long term definition.
In fact, his "counting" showed that last century it was up a million % and why would it be different.. so always bullish is the way to riches.
Well Don has had to deal with certain irritants like various sets of "investors" left dead or dying on the wayside in the short term in his long term march to the million % returns , having to hock his family silver to get over some short term problems an finally to spend more time in the botanical gardens than trading due to lack of trading funds while lesser traders are rolling in billions of trading profits with zero insights into California redwoods.

So the Don( formerly called the Chairman or "chair" in his eye opening sight ) spends his time in reading and gently critiquing books wherein his intellect comes through clearer than whatever the original author was trying to say..and lapping up the sycophancy all other posters on his site shower him with ( actually dulls the pain of those daily maulings handed to him in the market).

What one finds on the website lately is the amazement and the surprised giggles of Victor Q. on a near daily basis at the fresh low the markets are making when he had ordained the markets always need to be bought.. if lower, more so.. if still lower, still more so.. till they come back up and prove you're the Daddy now.
As he potificates here :

..I kept wanting to say "Et tu, Tyler?" because I don't believe in bear markets, and always believe it's right to buy, especially at times like this.

Going through his posts on the site( apart from some fairly intelligent and many entertaining reads) one gets the picture Don Vic is like prancing about and brilliantly picking off pennies from the path of the SteamRoller that is unrelenting and unperturbed by the intelligent thought coursing through the brilliant prancer in it's path.. it knows it gets all in it's path..thinkers and non thinkers alike.

Now, after many an hour of analyzing this interesting example of human behavior Luddic Research has figured out that Don Vic Q. has figured it out correctly .. but his trading strategy is only suitably for investors with a 112 year investment horizon and ability to fund equity draw downs of 21,800% to 65,300 % in the ensuing years.. but he is right.. this strategy may well be infallible.

..and for his unerringly always erring vision he got the Don title for this decade hands (and markets ) down.