Tuesday, July 7, 2009

The Honey-Banana trade.. duh.

It has long been the desire and misguided aspiration of the toiling masses to get some inside dope on how the hedge fund cats trade and make their testosterone charged billions while the unwashed run around towns wearing ties, holding meetings, doing lunches, sucking up all and sundry .. but still falling far short of the hedgies' easy coin.

To address a universal desire of the clueless retail crowd .. "give me a tip..how to make money in stocks?" .. we part with a little gem we have been milking to sheer boredom..I swear if anyone says fade Madhu-Kela ( that's what Honey-Banana translates in Hindi to..) one more time I will strangle him.. but the fact remains that has been the sitting duck trade for most of the last year and a half.. and just about the easiest money to be made in the Indian markets.. fading the worst momentum chaser in post Independence India.

The fact that Madhu-Kela heads Reliance Mutual fund(purportedly the largest fund in India) also ensures you get plenty of liquidity to frolic in .. but you just need to hang a little longer as he starts believing his own vision and market impact as vindication .. and then it gets really fun.

The reason we divulge a trade secret is .. you know a strategy's time is nigh when your maid's (unemployed) husband conspiratorially confides madhu-kela trade that he heard from the building's maids' (unemployed) husbands' Punters Association's grapevine.. yup the Honey-Banana trade might be nearing the end of it's run.

Apart from stuffing up his fund's coffers with junk promoters' (great visionaries all..but that's about all) offerings or buying overpriced scrips religiously at market tops he regularly scouted across the countryside on weekends during the great Indian bull run .. he spent the last year disbelieving the correction ( proudly proclaiming last year Reliance Industry was his biggest holding .. then priced >2500 ) .. then finally getting out of his bullish clown suit at the bottom .. and to complete a comedy again proclaiming on CNBC after elections that he was physically getting bullish ..shouting bullish .. after the 40% run up !!..

What is there to say .. for all the wannabes out there who've always wanted to, but never been let in to play with the big boys .. you may as well partake this little rustic charm Indian opera.

We also read a limited life span to this strategy as it is only so far a man's small town charms, labored attempts at coherent speech and eager beaver company "visits" can cover up for lack of upper deck density.. and may not be long before their own clueless auditors get worried about certain peers in Satyam audit team having to shift into govt. provided habitat in Hyderabad for merely being "misled" by their client..

So enjoy the last few spades of the Honey.B contrarian cash.. too many drunks at this punch bowl now.

Tuesday, June 16, 2009

Indian Comedy Show

It would be hilarious if so many clueless, hard working retail investors(aka stockfools) were not hurting..uhm.. actually it *is* hilarious because of such participants in the market.

The market needs fools to survive..no fools means no markets.. there is no other way the semi-literates from nondescript towns in the impoverished countryside turn up in Mumbai and grind away at plying the "share bazaar" for many, many years and suddenly find their little daily gaming the suckers is slowly turned into one of the biggest markets with plenty of 'foreigners' ( wise men these) suddenly throwing large wads of OPM(other people's money) into the casino to see if some nice personal bonus could be had..

At Luddic Research we have identified a key parameter that distinguishes Developed markets from Emerging Markets viz. EMs just do not part fools from their money as decisively as developed markets ruthlessly do.. there.. that's a key defining feature which has aided the rise and survival of folks ( who's have had to make a living hustling tourists in Rajasthan/Gujarat etc. for petty cash if had not chanced on the shareBazaar for some quick cash years ago).

And so they held forth on their views of the market to the myriad adoring fans, investors, minions and media who saw Harshads and Ketans as piedPiper reincarnates ( As an aide was heard whispering to a genuflecting investor beneficiary ".. his shit don't even stink").

But the disruptive white and yellow foreigners ( who longTermInvest with the conviction and longTermness of a parakeet) have over time put a pall of uncertainity on the cosy little arrangements with their little cartels/promoters/regulators/bankers that our odorless fertilizer producers had cherished and nourished back in the day when fools were born many a minute and they had never needed to wipe their own asses.

But this overseas non stability is a spanner which is put to paid many a fond megaloDream of many aspiring global giants/groups/houses that are having to face up to some honest money making.

So all over the world, the fund Chimpanzees were in denial all the way down and 25 sigmaed the "butNobodyNeverSawItComing" to anyone who'd listen.. all the way down..

Just when the Rhesus majority were forlonly accepting a slow and multi Year kind of recession wherein Library science would offer more action packed careers than moneyManagement.. just when conventionally mediocre wisdom (and hell even Easy Al) were coming around to the notion they'd been wrong all along.. the market just got up and ran away..

Now this posed a new quandary.. they were all underinvested now (to put it mildly).. and the market was making a massive surges.. last year they'd clung on by their finger nails on the "noOneSawItComing" boat.. and relative returns to index were still only single digit negative .. everyone was in the same boat.. But missing this rally would be curtains .. your "investors" would surely start questioning your new found onlyABearMarketRally wisdom very, very soon.. it was now up 45% since you'd started bleating about that !

And so emerged the third stage.. the primates' swarming the global markets ( yes.. yes.. Emerging Markets.. outperform.. decouple..RealEstate.. growth story.. go.. go.. go.. ) with their remanant cash of last year's boom,boom raising to try and see if now some performance can be had.. cannot miss this one.

It is getting comical and none so as one of the local boom, boom experts Madhu Kela of Reliance Mutual Fund... who's been convincingly holding out for a recovery from Index 20,000 last year and then after a "correction" of 10,000 points when he'd finally started getting worried about the longTermStory and got into rumored 30% cash.. the market upped and ran away.. so our man was on TV to announce he is savegely bullish again.. ( mostly hoping might see some recovery in his outstanding small and medium cap picks ??) and our feeling is he is having to buy, buy, buy to get back over his inadequacies all over again... it was getting a bit iffy announcing those profitable quarters for the country's biggest (Rs.80,000 crore)($15B) fund manager while the markets were tanking 60%.. eh? but then that's the reason we are decoupled here.. one gets a lump in the throat when we dwell on this one pedigreed Bull.

And as usual the astute fund "managers" have nailed it again this time.. and correctly gotten onto the next bull run.. such is the rush to equities that reportedly, awed by the seeming success of orangutans in this industry .. a delegation of marsupials(?!!) has been spotted at the bourses grappling with the basics of Decoupling.. longTermGrowthStory.. RealEstateAlwaysGoesUp.. FundamentalStrong..InfraStructureStory.. etc. to guide, lead and advise the Investors .

At Luddic Research .. we attribute the orgastically rapid upsurge in Market Indices to the rapidly dwindling forest cover in regions from where most stock experts seem to hail from .. as indeed our models show shocking, shocking correlation.

Sunday, May 31, 2009

Bovine Immortalilty

Downtown Mumbai has perked up a fair bit.. the pall of morbidity that hung over the city for months just completely lifted a few days back to once again allow the sun to blaze down in glory and the days are sweaty energy again!

Casual visitors have noticed the resurgence of the familiar lovely stench which emanates from the city and the male populi, which'd been missing owing to the (gnawing fear inspired) goose bumps most investors( long term variety) had broken out with in those bleak days.. the absence of this familiar, homely stench only added to the fish-out-of-water feel for the mostly pompous, breed of rotund semi-literates who'd long dominated the Indian investment scene.
And the more astute visitors did notice, indeed.. cold sweat does NOT smell.

Happily, those uneasy days are behind us and the heady glorious-future-ahead feeling is back again much to the relief of the long suffering better( and usually fatter) halves of the aforementioned investors.. family life was beginning to border on bizarre longTermFundamentals' dissertations to nervously receptive spouses and bewildered domestic help.

So much for the scare.. haha.. we all knew .. gotta hold on for the long term.. and we all came out smelling of roses as sure as we knew we would.

Most reception area staff in the financial district report increasingly brisk gait of the investment "professionals" high-fiving into the offices each morning to take partake the punch bowl.

The world stood back and watched in awe as the Indian markets blew the lights out violently to get back on the destined trajectory to global dominance manifest in last year's bull run.

In fact, so short was the (inconvenient) interruption to the Great Indian bull run that the usual comedians, the Japanese investors were still in the process of getting onto the bus of the last bull run and had just about finished wiring the money, for their awesome real estate and pharma plans, to some of the most upright turbaned local beards and the ilk.. and so the usually derided Japs may just find themselves in the unfamiliar situation where they are in early onto a bull run.. notwithstanding it being the next bull run long after the original detected by their slow antennas and entirely unplanned for.. the next bull run just hit the straggler Japs in the behind.. :)
..that's how short the bear market was.

Meanwhile Indian promoters are promoting amazing profits ( hell, even Jet Airways declared a profitable qrtr.. maybe Mallya next up ) .. and the banks show record profits with record low NPAs ..lovely, lovely.

Lastly, the Bombay Stock Exchange finally got the municipal permission to start work on the long overdue Bull Temple dedicated to the (long neglected, compared to his women and relegated to pulling bullock carts in the streets) Bull God outside it's premises with a 6 meter Bronze Idol already commissioned to experts in South India..

The experts are back on TV and clueless Fund managers are trying hard to look clued up.. and the foreign monkeys are grabbing RealEstate QIPs again.. low hanging fruit for lower hanging funds.. normalcy is on its way.. back to the old normal .

Now if only Obama/Bernanke can get Joe American to borrow more, consume more and worry less .. we will all be rolling again.

Tuesday, February 24, 2009

Brave Indian Investors

Bravery has been a tradition in this land of fearless warriors, just rulers and almighty gods since time began.. in fact bravery was widely practiced in India when European natives were still running around in crude,(very) smelly diapers in their caves.. and don't even get us started on the native American "braves".

So, quite clearly we were far ahead of the planet in any feats that precipitated much chest thumping and the ritualistic hopping dance.
Since paleolithic ages the fairer sex in India has suffered from chronic weak-Knee syndrome resulting from being exposed to much chest thumping and ritual dances, which invariably accompanied the multiple acts of bravery and valor of the hairy chested alpha males around campfires.

As time progressed, the feats became less bloody, in a way, but left the ladies no less awe struck by the sheer, inherent heroism they were exposed to.. and to this day the knees of the Indian women remain arguably the weakest on the planet.

The stock market index has fallen from the heady, frothy 21,000 level to the current, irrational 8,500 (and falling) .. but the braves (a.k.a the Indian retail investors) have stood their ground.. they have rallied behind any and every "expert" on the telly advising them not to panic, not to sell in panic.. long term investors have nothing to worry .. this is in fact a time to buy.. short term volatility is to be weathered.. no need to panic for the "investors" with a horizon..

So, drawing upon their generations of genetic fortitude, the braves did not panic and nobody sold any.. week after week , month after month the shares kept falling .. equity kept vaporizing .. but nobody wanted to panic.. *nobody* could ever accuse a brave of selling in panic.. this after all was what the experts were saying (in any case it felt better to live bravely in hope).. also the two greatest truths were on their side too:
1. How much lower could the stock fall?
2. It was too late to sell ( yet again as it gets after every 1000 point drop since 21,000) ?

Deeply intertwined with the bravery chromosome of the Indian investor is the recently identified handOfGod sheath that most Indian investors are blessed congenitally with.. and recent studies by Luddic Research have shown clearly the average God is much, much more inclined to protect and guide the Indian retail investor and his long term investments rather than any other comparably clueless random clown in other random markets.

As it stands now.. the Indian investor has halved (to be kind) his networth but discovered new pools of bravery in his soul, hitherto unknown, which he should cash in, in short order, as the markets inevitably recover, carrying his brave ass back to the glory and fortune.. and we'll all have a hearty laugh about these trying times.

The only disturbing sign is the new Luddic report out, that talks about an increasingly frequent observation of new cartilage in some urban Indian women's knees that is leading doctors to predict irreversible elimination of the weak-Kneed syndrome in Indian retail Investors' spouses.

To reiterate the Brave Mantra :
1. How much lower can ________ stock go ? (fill in your errant stock)
2. It is too late to sell. (again!!).

Lastly the two premier Stock exchanges NSE and BSE of India have finally succumbed to the pressure from members and started interviewing various hermits, sages, gurus (non financial type) , priests and god men ( basically anyone with a more direct line to the three reigning deities in charge of financial matters ) to be appointed as floor chanters and supernatural put sellers to put a firm floor under these errant prices.

Friday, January 30, 2009

The Dumb Japanese "Smart" Money

For years we'd been taught and narrated in low awed tones about the brilliance of the Japanese in business, in negotiations, in quality, in manufacturing, in work ethic, in attention to details, in kinky sex, in kinky foods, etc. etc.. it was mythical status

Books were written and management gurus born just on their "expertise" of the Japanese way. Legend had it they looked at every possible angle of a deal in 27 different ways and discussed each aspect of each way in 3 diff meetings with 3 different interpreters to gain their fabled holistic bird's eye view (despite admittedly short physical stature).. and at the end of it would utter succintly.. "Ahso, Ok.. I buy" .. sheer genius.

Thusly, the Nipponese folk lore travelled the world and some washed ashore on Indian shores where unsuspecting locals (though they can't differentiate between a Korean, Japanese , Chinese or even Nepalese to save their life).. completely believed in the legendary genius of Shinto.

And then news broke about two turbaned Yoyos up North leaving the small army of Daiichi Sankyo management holding so many proverbial bags after intensive due diligence meetings at Ranbaxy offices, that even the interpreters had to help the CEO carry the bags out.

The news was sensational for two reasons .. one, this turbaned community, locally, are widely parodied as the Indian Polish jokes and regularly at the other side of any bag holding event..( and innately talented at such).. secondly, these two spiffy beards were as good at running Pharma companies as Paris Hilton would be at running a biotech firm.
Their father and erstwhile CEOs grew and ran the company, that fell into their clutches after firing all such, which they promptly hocked to the first bidder(after much emotional soul searching, they did admit).That the monkeys were the famed "Japanese" just got them even more emotional.

So the yellow, globe trotting, business leading, opportunity spotting, deal making chimpanzees got oversized bags this time to hold. at Rs. 700 + a share .. which we learn made the globally expanding giant Daiichi Sankyo sputter to a $3.7 billion loss on the writeoffs owing to the turban fomented losses, as the share strangely plummeted to under Rs.200 a share.

As it stands today the same clueless wonder turban, Malvinder Mohan Singh, is still at the helm ( this is the famed inscrutible Japanese strategy at work) rumor has it the CEO Takashi Shoda ( still the CEO as the board dither through their 27 rounds of due diligence to identify the cause and assign an asian scapeGoat) has blamed it all on all interpreters unable to correctly understand the final sale figure spoken through excessive facial hair, as it were.
But, a promise was a promise (japanese honor thing).

But this was weak defence at best and the Nipponese Board (known to nip buds swiftly) made a ceremonial presentation of the ceremonial Samurai Sword to Takashi "cookedGoose" Shoda hoping he will see the light and do the honorable thing (and save them the next 26 iterations of studious meeting rituals).

So what have we, Nomura, another diligent, oriental Goliath had teams of gooks in suits swarming the financial capitals looking for thoroughly vetted deals and valuations when even the Arabs ( historically the second last to the party) finally realised that daft head gear and high oil prices does not add much to IQ and they had gotten these fine financial sector deals not because only they had money , but because only they had dumb money.(note: Luddic is currently doing detailed research into Arab and other cloth-head-geared-investors' investment talents and will shortly publish same)

So the Yellow Smart Money came into play yet again at Nomura ( historically, always on cue, and historically, always the last to the party) to "invest" in Iceland, Madoff, Lehman, RealEstate.. Merrill , name it and the wannabe Jap global opportunistic investment manager is there, loaded with the hard saving Japanese housewife's cash to shovel into another "Branded" deal making. ( Only brands will do, Japan understand only brands).. and promptly declared another $3.8 billion loss after paying all sorts of primates at Lehman their bonuses for last years circus feats.( In fact if I'm not wrong the head orangutan of Indian ops so endeared himself to the nips they took him back to Tokyo on a promotion to be part of the RealLargeLosers club at HO as befits his performance here )

As Luddic Research has long identified.. when the Japs start buying anything.. go short and go double short.. these well dressed gents from the east are here for a dose of some serious Acute Financial Pain which is an (little known but quickly spreading) Oriental sexual Fetish !!

Lately, I'm beginning to think the Japs just don't get and it's not just the language.

Wednesday, January 7, 2009

Satyam, Ethics and Platypus.

So the weeks toiled by as we watched our shorts happily run circles around the long term investors (who were taking full advantage of the amazing buying opportunity that seemed emerged and was visible only to them chosen few) .. while we lay back with a beer in the hand and toes in the sand.

Through oct/nov/dec of '08 the delinquents that flock the Indian financial markets kept themselves and their clients entertained and excited by strange bottom calling dances in different titillating tones that long term investors favor and excitedly pointed to the riches that lay just beyond the corner now that they'd called the bottom expertly and precisly. .but strangely the shorts still made money.

Of course every cabbie (and his maternal grandmother) in Mumbai knew that the worstIsBehindUs.. succour was at hand as come January 2009 the markets would rise and all would be hunky dory.

Half the planet was going .. worstIsBehindUs..worstIsBehindUs..worstIsBehindUs.. to their favored tune from their favored pulpit.. aah it was good to give solace to so many with these simple words..
The other half (of the planet) basically couldn't read and had no access to TV.. or they'd known too.

The US.. we all know that's where it's all at.. declared that the shit had failed to hit the fan and much rejoicing followed announcements by all kind of old fogeys and geriatrics who had, for years, confounded the masses with their stock picking skills , and such gents announced their investments and genius with amazing personal bottom calls (..on live TV sometimes).

Things were gung ho .. the US Govt. was in charge and (though a tad lacking in Iraq) the world felt good ex-Wallstreeters were running the show and would fix things in no time.. yup, time to partake the historic buying opportunity brilliantly identified by people who so obviously knew.

India, not to be left behind, took up the bugle call with gusto.. and soon the dormant dolts (local stock market experts) who'd been left looking morose and bereft for much of last year took up the baton and galloped around to whichever TV studio would have them, to announce yet again (so what) that the worstWasBehind and the time for selective buying was Now!! .. no matter nobody quite knew what this "selective" was.. but it sounded good and sharp expert.

Through the end of 2008 and first few days of 2009, a straggly bunch of bovines could again be seen heading for the bourses to much "expert" cajoling and prodding .. and the deeply underwater fund "managers" watched with cautious joy as they saw the oxen being herded in.. they needed relief.. the pain was bad.. how long can you keep markToMarkets, a la Madoff.. some had even started feeling some guilt..

No matter, the bull market would revive.. there was too much longTermStoryIntactness and too much IndianGrowthStory fundamentals to start getting worried about temporary events.
..as they all told each other.. if not India where will capital go?

And all along Satyam( that beacon) was winning Global Golden Peacock awards for Corporate Governance.. aaaw shucks, though there was stiff competition from many, many other (strangely all Indian) equally worthy, well governed corporates.

So it is really no wonder the stars of global investing game(and fame) like Aberdeen Asset management and Fidelity were the proud owners of much stock of this high potential and multi awarded powerhouse.

Then the Satyam Chairman broke down one morning.
..brokerages with their tens of research "analysts" who diligently followed the stock and issued myriad "BUY" and "OUTPERFORM"s suddenly found themselves bent over and receiving.

At Luddic Research, one of the foremost zoological behavior research shops in India.. even the freshly inseminated mice embryos in our labs knew, Satyam and its mustachio wonder chairman Raju were professionals and ethical.. that much the embryos imbibed post fertilization.

As research grunts at Luddic quickly zeroed in from their regression digressions .. the Great Indian growth Story.. the DeCoupled econnomy theory.. the Infrastructure Boom lasting decades.. the promiscuous Indian middle classes' demand bonanza.. these were all concepts that germinated in the heads of certain pale skinned, farsighted and swashbuckling emerging markets' focused Platypus who quickly got the brown Indian looking at his future and prospects through the same duck billed (or bird snouted) outlook.

Overall, as Luddic's regressive digress proved .. most foreign fund managers and their cousins(read hedgeFund mgrs, PE boys) showed distinct traits very closely associated with the above mentioned Platypus flat foot..snouted.. ungainly walk.. webbed feet.

.. but what really clinched their classification on the Indian subContinent was simply their subsequent performance in the markets :

  • They lay eggs.. mammals but lay eggs. (egg== 0)
.. sadly, Darwinism is catching up and fast.

So Chairman Raju's tear stained letter also sent shivers down the multiple aspirants for the corporate governance awards in this pious land.. news emerges that most of the high growth boys, in this global profitability hot spot, have suddenly taken off to their favorite temples in their choppers for special cleansing rituals before they rewrite the carefully doctored exceededExpectationsYetAgain results they'd planned this quarter and tackle their suddenly chickening Auditors.

In fact the Industry body representing the top 20 houses in India plans to meet the govt. to plead for more time to un-Cook their books and warns that failure to do so can be catastrophic for Corporate profitability and India's long Term Growth targets.