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 ...so 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..

UBS:

The Swiss bank lowered its year-end Sensex target to 15,500 points from 19,600 previously.

HSBC:

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 "..buy 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 man..phone 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.

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 job..to 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 (..in 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 target..so 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, FDEPS..to 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 ?

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.

GMR : a Global Giant is born.

Infrastructure, Energy, Airports, Roads, Bridges, SEZs , Corporate jets, Cricket Teams .. it was a heady cocktail offering from the virginal Indian countryside was.. and that excited the excitable Fund "managers" and PE YoYos in that lovely, strange way.. the possibilities looked endless..and imaginations ran wild.

GM Rao the promoter of GMR group came from behind and upped the wunderBrothers of Indian business the Ambanis at their own game..Govt connected business strategy where "environment " management viz. Govt management is the simple and winning strategy.
Some say it was his flourishing mustache (that both the Ambanis admittedly, can never dream of growing) that quickly opened many a door for GMRao and soon as he dyed it a blacker than black shade he was the cats whiskers in Infra plays.

While lesser corporates and honesty hobbled MNCs battle it out to win over customers and marketshares.. our local business "promoters" know the big game is the political game and the fools that represent the people's choice (and of course the people's interest) are the fools to win over for a cut of the great Indian booty (before the textile wrapped FinanceMinisters /PrimeMinisters /NonMinisters hand it out all out to farmers in the hinterland).

And the results are evident.. while the P&G, HindLevers,Batas, ABBs etc. of the world battled it out gamely and honestly to sell some product and grow at a non-Indian (i.e. non exponential) rate ..our boys in blue just pole vaulted into the upper end of the global rich based on castle building expertise in non terrestrial contexts.. which to their glee sold like hotcakes amongst the global alpha hunting community of smallish "managers'' with largish visions of their abilities and worth who enhanced their self image in direct proportions to the value they dished out in their latest stake acquiring.
Things got so bad the promoters had to necessarily expand his vision and potential for his business to 1500x of whatever he had fondly decided last night to meet the excitement of the fund across his table today. "..yes, he agreed the potential was there.. if funds like you came aboard , definitely the world would soon be our oyster.." ..the show was on the road!!

So was the fate of the GMR group.. their propulsion into the corporate jetting, mustachioed promoteroscenti was in no small measure due to the Funding frenzy of the Funds that would make India into a economic behemoth..though disturbingly, Luddic Research has identified them as a bit early in the emerging of India. Consequently these fine Funds who had visions of being heralded as the far sighted cowboys who came into India, saw the coy opportunities, sowed a few(quite a few they imagined) wild oats and went back victorious to knighted lives in the cigar and brandy circles back home.. sigh, those were heady days.. and no "play" was too far fetched to let loose your fertile imagination.. landBanking,deCoupling, valueUnlocking, growthStorying, infraPlaying.. the future was owned.


It was only a matter of time G.Mallikarjun Rao expanded his vision from jute making to larger extrapolation friendly plays. Such was his ability to leap into the play du jour , that he managed to sell stakes in his company at Rs. 240 per share to 49 (forty nine) leading institutional investors ranging from Citigroup( we all know how sharp these guys are) to old fogies like Soros .. and quickly announced planned investments of Rs.60,000 cr( abt $15 B) in Power and other lucrative sectors in the finest tradition of the noveau Indian Promoter chutzpah.

Well strangely these fineYoung alpha maleish investors have had to face up to the ignominy of seeing the share price dip to Rs. 82 (as we write) and despite every single analyst and fund Manager looking to average down, talk up and holdItforLongTerm, the shares of this golden Goose continue getting cooked.
The bovine participants of the Indian stock markets have refused to see light and participate in this fantastic Infrastructure play that is destined for untold greatness.( In fact the incumbent Govt. is looking seriously into the widespread rumors that bovine participants of the non-bull variety have infiltrated the markets and playing mischief with the oneVisionBulls' sentiments (who are important for this country's future global aspirations) and asked SEBI to rustle up some somnolent, Govt discard employees to look sharp and strictly ban any cattle without balls from the markets.. bulls are still to be allowed.

Evidence of the bullish prospects surfaced again today as the GMR Infra went out and bought a Dutch Power company and announced that owing to the recalcitrant behaviour of the semi literate investors in India it would look at overseas and western markets to fulfill its expansion dreams.. It's management and business acumen obviously puts it firmly onto a fast track to glory and riches and we have been advising all our clients at Luddic to buy every dip(since Rs.239).
The reasons are easy to see-

"The group has already set up an office in London as a preliminary step and has plans to start regional offices across the globe as it buys power plants in the US, builds an airport in Istanbul, and mines coal in South Africa. The group, owned by the 55-year-old Grandhi Mallikarjuna Rao, plans to earn nearly 40% of its income from international business.
The company plans to invest $10 billion (Rs42,880 crore) in the next five years to acquire overseas assets, Bloomberg reported last week. "

And it was only a little while back they had announced they were actively studying Nuclear Energy as the next foray (going by their expertise in Energy sector).

OK Infrastructure, Energy, Airports, Roads, Bridges, SEZs , Corporate jets, Cricket Teams.. and now Nuclear Energy..

..I got 3 words for G.Mallikarjun Rao .. Save Your Hair first.

Indian Corporates face waning Libido

As Luddic Research has long identified, the Indian bull story was unique in that it was essentially fueled by a bedroom revolution rather than the conventional boardroom revolutions that have marked lesser efforts in the developed world.

From the origins in the financial centers of the country where brokers, bankers, FIIs, Domestic funds, PE funds, Hedge funds (essentially any funds etc. which were populated with smallish, shape/looks challenged individuals, having mostly suffered bullying in their growing years and virtually no success with women till *after* getting employed and even after.. minimal).. well these financial players suddenly discovered an activity that seem to enhance their self image and sense of manhood wherein they could see some of that alpha that males of their category needed to prefix .

Quickly their proclivity for announcing higher valuations, bigger portfolio/private investments (for smaller stakes) , growth projections, target prices etc. etc. spread to the industrial and corporate sectors where innocent semi literate "promoters" started seeing themselves as the second coming and soon swapped their long favored traditionally tailored, striped underwear with Jockey shorts (much to the amusement of their portly traditional wives).. but the point is, they drank the "projected" kool-aid and we all know when the rustics partake a drink they can quaff long and steady without stopping for breath.

And that is what essentially happened in the spread of the new everyStreetPavedwithGold gospel.. from the long suffering financial types' need for a moment in the Sun to the RealEstate Builders and other such sharpies recently taken to making windmills ( literally and in the stock markets ..till the blades cracked) they all took note of the ever green, young strapping looks (mostly because of jet black hair) MV Kamath(ICICI) and Mukesh Ambani(Reliance) and quickly concluded the fountain of youth springs from growth plans 3 times a day and even more grandiose growth plans next morning.. and the Indian Growth Story was on.

Most Indian business promoters knew they had an innate talent and ability to get into practically any business and quickly announce a few tens of billions of planned investments in the next mornings press. Their abilities and talents which by now spanned Telecom to Energy to Real estate to Retail to Infrastructure to Brokerages to Movies to Fund management to Private equity .. basically if they had heard of a business.. they were up to it.
Our Research shows that the mere occurance of so many talented Business Stalwarts( with the ability to straddle and excel at multiple unrelated industries) and all of them coincidentally born in the same country in the same century is a 1 in 100,000,0000,00000 chance (for the modelers - about a 37 sigma event give or take).

In fact in entire mankind's history we have only GE (GenElectric) which has even come close the emulating this kind of multi industry spanning talent that seem to be commonplace in the Indian Business houses..and passes effortlessly to their equally multi-talented progeny.

We are indeed living in the Golden era of Indian Business and it is a no brainer these wunderkids will soon be able to overcome these blips and continue with their stratospheric growth plans as planned and the current negativism in the markets will die out on the realisation this is just a little, temporary, short term pause in the overall growth trajectory being ably orchestrated by the dream team of our bedsheet wrapped Finance minister, guided by our economist Prime minister, who is in turn guided by our Italian Non minister..this trio is good at winning economics awards, elections and farmers.

But coming back to the temporary predicament of business "promoters" who have not been able to raise fresh equity, fresh debt, business prospects, confidence, in fact haven't been able to raise anything the past few weeks and prospects are only looking glummer going by the survey of male oriented grooming /manicure retailers, hair dye manufacturers and men's salons.

The younger Ambani of the amazing wunderBrothers, concerned with the collapsing equity market for his offerings ( has a boatload to sell yet, if he has to cover even 5 % of his "announced" plans, given that exactly zero of his companies makes any money at all), no much happiness, as in past, from bankers to be allowed to participate in his dreams, awkward questions about the fate of Rs.100,000 crore ($25 B) of happy "investors" money put to play in the stock markets by his sharp, far sighted team at the Reliance Mutual fund in the boom boom months.. all these developments would a lesser man, put on the back foot.. but that's the lesser man..
A-nil fired back with a mega Billion deal to hock off his loss making( for entire forseeable future) RCom to the South African ingenues, renaming Reliance Energy to Reliance Infra to participate in every other industrial ( and domestic/household too if has "growth" potential) activity undertaken in this country.. and called up Spielberg to fund his studios's sagging fortunes and build a global name for himself this lifetime.

The other heroic business "promoter" Luddic Research has pinpointed as one of the future leaders (alongwith Kishore Biyani of Pantaloon /Future group) ..Pradip Jain of Parsvnath Builders ..who despite the having announced Rs.60,000 crore investment plans in the best Indian promoter tradition a couple of months back (when his shares were "guided" into Rs.400 range..sadly Rs.150 range now) .. and having most of his capital raising and other abovementioned raising abilities severely hampered by the crass behaviour of the stock market cretins .. is clear in his faith :

I don’t foresee any softening in demand. I don’t foresee any kind of pressure in end user demand.

Related to prices, prices are bound to go up. There is no way that price can go down. Media keeps talking about softening in prices, I do not agree.

..see why Luddic Research hero worships this man.. this is after a 60% + drop in his share price and projects spread far and wide into the country side which need customers and more importantly funding.The future of this country is in good, steady, confidence inspiring and clear thinking individuals 'hands.

But.. we would also here like to put a public interest request for the good of the Indian "corporate" sector, the economy and most importantly the Promoters and fund Managers who have been caught in this nobodySawItComing downturn that is fueled by temporary inflation blips (no doubt will be remedied by immediate price controls on every commodity and maybe free food rations for the rural Indians for a few months into elections by our astute Fin minister.) who will then quickly be allowed to reduce interest rates as all "experts" had been forseeing such a rate decrease even 2 months back and we will all be happy and gung ho again..this time we will really show them what "decoupled" means.
In the meantime our appeal is to not poke too much fun at the TV "market experts", Portfolio managers and other serious faces who have been entertaining us for the past few months with their well meaning "research" and "support" levels and also please lose no opportunity to put in a " nobody could have seen it coming" into all your conversations with such soldiers .. maybe, just maybe they will internalize this truth and be able to offer some fresh "buy" candidates at this market bottom currently formed..maybe also bolster some flagging libido.

We need these local experts even more as there are signs even the PE funds are wising up to the situation at hand and (after some tough love from investors) will no longer pump cash into Realty and Infrastructure "plays" we had come to love and trust.

As we had advised our clients at Luddic earlier , we are now sure this is the bottom again and of course as we all "experts" know Long Term India is a fantastic opportunity.. we only need to weather the short term corrections and volatility.. no sweat.

..and soon,the Indian bedrooms will swing to the music of testosterone charged promoters and investors yet again..building a bigger, better, growth trajectory.

p.s. A grand, Govt. sponsored, week long, mega Yagna (vedic religious ritual) is being performed in some South Indian state as we write this to ensure the Gods are appeased and kept updated on our efforts.. the Govt is taking no chances this time around, esp with election s around the corner.)


p.p.s. A late report suggests that some muscular officers of the Finance Minister's office have visited the office which released the errant inflation report yesterday for some stern talking to and quick refresher of the patriotic oath these officers need to consider before spooking the entire country and putting at risk the hard work put in by countless "Promoters" over last 2-3 years.( as also personal reelection plans)

Lehman,CitiGroup and Prashant Bhatia

It seem like only yesterday we were marveling at the analytical skills of the fine folks at Citigroup who time and again show us what it takes to be a global financial powerhouse.

It was only yesterday our chest was swelled with pride on the financial exploits of one Prashant Bhatia who has found fame and glory ( as also some good cash) in holding forth on the future prospects of the US financial sector based on some nifty spreadsheets, that he and his astrologer out together, whenever the unwashed masses need to be educated on arcane matters such as high finance and valuing such players.. in lay man's terms basically timing the toggle between "buy" and "hold" or sometimes "outperform" vs "neutral" (but the fine sense of timing is what separates these men from boys).

Prashant and his pals at Citigroup have honed their skills well enough to be couple of curves ahead of the market ( different curves altogether, as against just being ahead on the same curve). Of course their fine insights and have been responsible for creating immense wealth for all lucky recipients of same ( and who follow same unquestionably) ..as well as earning their firm formidable reputations as employers of talented "analysts".

We at Luddic Research have been hunting high and low for getting our hands on some comparable talent to analyze the local brokerage stocks behaviour here, but you have to admit Prashant is a talent hard to find (in fact we think his analytic skills are so blindingly obvious .. if such ever existed in the third world markets they would have long been put on their rightful pedestals and worshiped in local temples). Well, we did have the audacity to approach him (and his astrologer as a team) to offer him a position (and twenty temples ) to tempt him with a move to Mumbai but he felt his career span would be longer and less violent in the US where most all "analysts" and "strategists" seem to be in same boat,in sync, all the time and nobody is the wiser.
(Third world countries are not so developed or forgiving in that sense..and careers and limbs are quite expendable in these overpopulated markets).

Mostly, what has us foxed is, why the markets do not look past their short term noise and emotions to what these fine "analysts" are saying .. hell they spend all their waking hours "covering" and "following" and "analyzing" and "projecting" these companies.. only to be undone in the opening hours of the skittish herd.

Go Prashant!! ..don't let these losers drag you down.

This is all noise, all noise ...
Lehman has a little hiccup.
Fitch downgrades Lehman.
Moody's downgrades Lehman.

..but it does get a bit dicey when fellow "analysts" are jumping ship.. eh??

Indian Real Estate & Global morons

There is no denying the Real Estate "industry" is feeling bouts of anxiety at the moment..and most confess their nights are devoid of soothing sleep( leave alone libidinous heroics which came to mark the recent bull market fueled sexual self image.. again Real estate is mostly a male game).
The fawning "investors" who bought their stories, the bankers who fought to finance the mega mall in the boondocks, the PE funds (in fact, the only believers left now..but more on that later) who saw astounding opportunity in realty sector, the financial media who astutely understood why the stocks were going up and what was getting "unlocked" or could be "land banked", the Govt who ensured interest rates and loans were available to all and his milkman to speculate (ok.. invest) in real estate.. all these worthies seem to be now developing cold feet just when the Real Estate promoters are in Real need.

Day after day, the Industry "promoters" with millions of sq.meters under development or construction and little cash in their tills(or their horizons) explain, project, and plainly pontificate the "temporary" nature of the slowdown in "deals" but prices barely having moved downwards as a sign of doNotSeeSignificantCorrectionInPrices theory validation.

Now, we at Luddic Research know better than to pit our wit against such fine gentlemen(again, all male) who have shown exemplary leadership in setting new standards for most third world benchmarks of foresight, financial projections, corruption, bribery, political funds'(politicans') investment, strong armory and last but not least of bringing tons of unaccounted money to "constructive" use.
So when these exponents project unlimited pots of gold at the end of Indian realty rainbow, we ( never fight the market ) just happily hold on to our stocks in the certainty ( at least in the mornings) that this is the bottom today and surely cannot go any lower (..as only last night the analysts on CNBC were saying value has emerged in most bigger and reputed Real Estate companies and valuations are realistic, blah,blah.. and they know what they are talking about) ..surely soon we will be back to our original purchase price!!
Consequently, Luddic Research has also been strongly advising all clients to hold on to their property investments (even if no buyers today or in our analysts' horizons) and not reduce asking prices even though there will be no deals.. you don't want to send a wrong message here. We are of course aware of the pressure some of these fine "investors" are feeling from their lenders, bankers and families but as history is witness prices never come down in India and there is too much demand..you know it in your gut.. listen to your gut..remember your middle name is (now) "long term".

We have to admit despite that our sunny outlook (and the recently hired hypnosis expert) and positive sounding prognostications administered in religious sessions and sermons (through TV acclaimed God men and astrologers) that we are holding across the country for our investors.. we have been largely unsuccessful in getting new suckers into the wonderful ponzi scheme that the Indian Real Estate was shaping into lately.. but we are proud to have held up the prices and stem any wayward "distress" type sales amongst our flock. They chant every morning(at our sessions) ".. I am LongTerm..I am LongTerm..I am LongTerm..I am LongTerm..so help me Lord."

No discussion on Indian Real Estate is complete without the mention of the foreign hand..this time the sharp and naturally gifted foreign investment houses and hedge funds who swarmed the globe for "stories" and "plays" and identified this sector as the next boom sector where the demand supply projections, a variety of growth stories and entrepreneurial libido with minimal ethical and legal inhibitions promised to change the rules of the game or even the game itself.
It was a no brainer for the youngish crowd of over achieving and over reaching opportunity spotters from the US(primarily) and the EU,Asian wannabes, to start throwing cash and valuations (of course based on sound projections, though have to confess a little scary rosy) at these roperties, builders , construction companies and Land banked corporates that the entire Real Estate sector sat up, rubbed their eyes disbelievingly and changed their world vision (and self image) for ever .. to the extent of mostly abandoning even the time honored custom of the afternoon siesta the Industry has enjoyed for generations.. there are too many PE types wanting to discuss a deal with them..even in that afternoon slot.. though lately the meetings are not as enjoyable as the PE boys are trying to broach (cautiously ..they know the "staff" outside looks a little muscular for good reason) uncomfortable topics like revaluing downwards and how to exit options .. but mostly these fine boys are the last believers .. at least on the face of things.

As some wizened old hand, who doesn't like emerging markets much, said.. ".. only the locals make money in the these markets..foreigners make it and then give it all back .. never can take out the profits.." but then like we all know this time is different in India.

Me.. I just take the opposite positions to Luddic Research' clients .. someone has to provide the liquidity (and this explanation is fine with SEBI..we love third world regulators).. and I'm too shallow for Long Term thinking.

Value emerges in "Front Runners"

What is wrong with the stock markets?

For months on end we heard about tons of money waiting on the sidelines for a dip to get in and partake the merry making based on India's strong fundamentals.. months later(and a few thousand points lower) we still hear about tons of money still waiting on the sidelines.

As anyone and his "wealth manager" can see, value has emerged in most stocks which love "front running" bull markets and seem poised to resume their run into la-la-land and lost glory..but still we spy diffidence on the part of most telly tube experts, financial advisors, stock market strategists and such ( OK partly because some of them are no longer in the employ or severely taken up by praying schedules and realigning their offices for ironing out some bearish Vaastu kinks.. ) , but as we all know it is only a matter of time and soon we will all be joking and laughing about this little correction that temporarily spooked our stock picking genius.

So, what ails the markets.. it is quite simple.. we all know the market experts(voices ), telly pundits, "research heads" of broking houses and other random "analysts" are always right and it pays to listen to these knowledgeables, rather than waste one's emotions on the tragedy the market and other "non smart" money constituents ( you don't want to be seen among these plebs) ..the heartburn these non believers are foisting on our mind.

To sum it .. the experts are right and the India story is intact .. the market is wrong and keeping faith is important.

How, you may ask, can we be so sure in the face of such dismal PMS performances.. well Luddic Research has outlined key observations and reasons in their latest research note to clients :

• Inflation Concerns: The govt is going all out to tackle this issue especially as it has dawned on them that their election prospects may be hurt more by high inflation figures than by low growth figures. (In fact P.Chidambaram has been warned against making any further public utterances about growth or lower interest rates altogether). The immediate steps being taken :

• Some key inputs for calculation of inflation were based on prices in 2007 due to lack of fresher govt figures and were obviously no good.. so in an effort to tame the havoc this little figure is playing in the "investor" and vote bank's mind set, the govt has decided to move away from this incorrect input and take 2006 prices as last reliable records to get inflation figure firmly under control.
• Immediately , a senior group of economists and other govt post holders have been despatched to Myanmar for first hand understanding of how that govt has been keeping inflation, prices, govt and generally the entire country under firm control ( not to mention pesky opposition parties). Multi pronged stability measures are expected to come out of this exercise.
• The various agencies and various govt deparments involved in calculating(or otherwise influencing) the final inflation figure and various inputs have been provided longer handled brooms to ensure all non cooperating prices of any item be firmly swept under the carpet as far out of sight as these handles will permit..and any deptt lacking carpets be immly provided same before next release of any official figures.
• In the event the above measures do not control inflation, it is expected the Defence ministry will be calling in all trade bodies and industry representatives to meet and discuss price controls a la Steel and Cement industry in the past to make its message clear.. also it is rumored minister Ramadoss will sit in as an enforcer (owing to his sterling performance at taming AIIMS).

• Growth story intactness: The second factor which attracts 'investors" (again,mostly male) to the market is the clearly visible and exciting path to riches that make them feel sharp and sexy in a lovely way.. but again the path has to be clearly spelt out and a raging bull market is such a path where most successes are attributed to one's brain while losses are simply "nobody could have predicted this..". Currently , the market is facing a prolonged hiatus in the heady march to the top( in fact some pundits were projecting India to trounce the entire planet in terms of economic promiscuity) and governmental hand holding is already evident to achieve the (clearly visible) glory ahead.. it is destiny that will not be denied.
  

• False rumors and irrational fears : The nosy media and the unscrupulous rumor mongers( some say foreign agents ) have been having a field day in blowing up non issues into unwarranted confidence busting agenda unto an increasingly edgy investor pack(already reeling with underwater PMS portfolios and "front runner" holdings ). The ability to see through these agendas and restore "investor" confidence is what separates Luddic Research from lesser shops :

• Falling RealEstate Prices : This rumor is so obviously a vested interest plant that it is amazing anyone even takes it seriously. Every one knows in India prices never come down.. as surely as there is no house of cards built around real estate speculation. ( Case in point the PE funds and other "smart" money from more developed and more clairvoyant countries are happily pumping cash into this fantastic opportunity )
  
• Economy slowing down : The cluelessness of this thought is quickly evident when you note that the currently jetBlack Kamath of ICICI (DRIP hall-of-famer) yesterday scotched any rumor of a slowdown by predicting scorching growth well into his greying years (despite some minor irritants like downgrades of their securitized retail loan portfolios which surprisingly are facing repayment issues).
• Fiscal gap / current account gap widening : we all love and trust the finance minister and as he said "trust me .. we have thought about all this carefully .." no reason to distrust him now and get worried about Rs.70,000 cr+($17B) farmer loan waiver.. Rs.95,000 cr($23B) fertiliser subsidy.. this govt we love and trust to do magic and keep the growth growing.

Like is evident from all the above .. it is only a matter of time before we resume out glorious bull run which will silence these doubters and weak hands.. in fact our friendly neighborhood PMS manager is especially bullish ( though, worryingly, untraceable for the last 2 weeks).

Indians for Hillary Clinton

For years India has ensured its best and the brightest headed to the land of opportunities as soon as the opportunity presented itself..you could be a bright engineer, bright MBA, bright scientist, bright scholar, bright bridegroom or just a bright Punjabi with the opportunity and before the plane had stopped rolling on the tarmac these brights would have established themselves as the pillars of the society and economy in the land of unlimited opportunity.

Only reasonable to expect of the quickly assimilating "browns" that before long they were getting politically savvy and displaying that famed brightness as discerning vote banks. This was further evidenced by "Bobby" Jindal from Punjab hinterland who quickly converted to Christianity (what's with the US ..can only church going, God fearing Christian who ascribe to George W.'s Intelligent Design magic ever get elected in this most developed of the developed ?) , disavowed his links with India, declared himself "Bobby" and got into seriously ingratiating himself with the powers that be. To be fair, he is a declared professional politician.
Lending credence to the assumption that only the brightest of the bright were allowed ashore off the boats was that turbanned marvel Sant Singh Chatwal who borrowed to the hilt from US banks before declaring bankruptcy and sidling up to the Clintons at every public event (where security was lax) till they began to acknowledge his striking headgear with increasing interest which inexorably transformed into back slapping friendship that continues to this day. In fact Chatwal is totally immersed in all kinds of fund raising and financing efforts of the Bill's various foundations to save the world and his services are proving indispensable for shaking down reluctant donors for Hillary's grand campaign( she's doing it for the country not herself) so they do not have to part with any of their own hard earned cash.

Why are we interested in this at all ? Well her false smiles and eyes popping in fake joy jar our senses thousands of miles away at an average 5 times a day and her utterances disturbingly bring up violent thoughts that one believed was only possible towards this sorry assed simian . .more on this Schmuckaroo later..I promise.

Coming back to Billy and Hillary, the unbelievable support she enjoys amongst American people and establishment ( as evidenced by her previously inevitable nomination) speaks volumes for why the USA is such a great nation and has taken a lead role in charting a course for this planet (and a few neighboring ones too,if possible) and most of the flora and fauna therein.
Ok, so most of her supporters are the illiterate, blue collar, rural and old biddies worried about a young black male running the country, but even so it does not explain the Indian community ( those few forward thinkers who have been able to refrain from trying to elect George W. the third time) supporting this two(rumor has it three) faced, sniper ducking, ready to lead from day one, gimmick on legs..especially when these are supposed to be best an brightest India produces..though I have to confess her blatant hypocrisy would have brought back fond memories(little twinges of guilt maybe?) of Indian politicians they left behind.

The only reason I can think of is that Indians are as racist (if not most) amongst all races when it comes to racism. This behavior has actually been finely practiced over the centuries and in the absence of consistent color characteristics to practice discrimination against, the previous generations struck upon caste system to be able to safely and surely discriminate and exploit.
This was safer than using skin color , which tended to vary from very fair to very dark through generations and within same castes / tribes inexplicably.Thus the skin color based discrimination was only practised against Blacks, as in African, whose color showed more consistency and could be safely used to feel superior and less worthless (brown holier than black) in these difficult times, what with casteism outlawed by infiltrated policymakers.
Fast forward to the US and despite all their academic, technological and financial success, the Indian community still struggled to be seen as anything but Brown or Indian or Asian despite much efforts to acquire mainstream first names, houses, cars, nannies, schools, professions etc.
Actually, the only acquisition which did significantly help, was getting a non Indian wife(only works for men not vice versa) to break through the brown ceiling.
Now that I focus on this, it becomes somewhat evident that the greatest factor by far is the Indian woman and her Indianness that hampers most of the progress towards blending into the American dream without the color coded baggage tags. It does sound callous but the closest any brown(we're talking only males here) has made it to the (white) American dream is by getting a non brown spouse.
This seems statistically significant to such a morbid degree that it rules out brown females being part of any (non Exotic) American dream in any forseeable future.
The contributing factors are stark( though too shallow to even think this way as they'd say):

• She cannot dress western(trying too hard) and cannot dress Indian (too exotic).
• She never does work out ( by mid thirties is carrying enough lard on hips to drive husbands wild)..severely restricting her clothing universe as well as vacation destinations (further away from beaches).
  
• Always trying to get a grip on her social insecurity, cultural insecurity, sexual insecurity, parental insecurity, religious insecurity and any new insecurity that the TV or Bollywood potboiler may throw up in the evening.
• A complex, emotional and intricate logic and reasoning (or lack) dog an Indian woman's mind even without transporting her millions of miles into a social, moral and psychological war zone where she feels physically (and colorfully) bested in most non brown settings, resulting in a lot more non linear behavioral idiosyncrasies that define her day.
• Most waking hours her mindset (mildly set) dwells on concepts like how much she cares, sacrifices, loves, gives up , provides, labors uncomplaining, adjusts as a woman and is still deeply unappreciated.. to arrive at(very convinced) the truth of how much more she deserves , earned the right to, have claim to, should be showered with, from all and sundry populating her life.

By the time the brown man gets to reasoning(to her) and rationalizing(to himself) how important this woman and family life is to him and how much he really,really appreciates her, he has lost the plot of where it all started out from.

So, where does that leave the Indian American when the elections come to his/her doorstep..one look at Barack Obama and his athletic(and black) looks decides it for the shape challenged (usually wife) as this is exactly the kind of change they can do without (in fact any change to their status quo looks like too much work ) ..also Hillary's shape is one they can readily identify with.

So the female(shape challenged predominant) brown vote goes to Hillary Clinton..and most line toeing husbands easily get beaten into toeing this line, especially given that George W cannot be voted in for a third term and is not a candidate.
But even without the wife issues dominating the brown vote bank, the racist underbelly of the subcontinent plays up significantly enough as blacks are the only ones brown parents still shudder to think may one day be their son-in -laws or daughter-in-laws ( not to mention the mama-in-laws)..so where does this vote go?

I know this is subject went way off topic, but it was coming when even the milkman in India recognises HC and our local markets are still coping with US fund "managers" orgies here last year ..so we gotta keep a lookout on what the blueCollars and illiterates in rural America, who seem to be suddenly having a hard time, might foist on us after their Texan chimpanzee.

Indian Real Estate is Realty Challenged.

Things became a little clearer this week. Parsvnath Developers' Pradeep Jain finally gave us a glimpse of the awesome intellect that has become the hallmark of the Indian realty sector and how they are in a fine position (hormonally) to see far beyond what ordinary mortals.

Increasingly these Quixotic Visionaries have had to battle the previously discussed bovine behavior and lack of faith from the very investors, lenders, buyers and general countrymen who will benefit the most from their vision and tireless efforts to "develop" this country.
In today's article , you can understand the sheer frustration that would have prompted such an appeal from the usually stoic Builders and Developers who have worked tirelessly and selflessly to give a roof over the heads of fellow Indians. Just when they were warming up to really and seriously house a serious number of families, their offices, their malls, they seem to be buffeted from all sides by vested interests and other such out to exploit them.

First, their stocks get hit by negativism.. 50-70% down and all the money spent on propping prices and buyBacking own shares is more or less vaporised.
Second, just when they were irreversibly invested and partly built on 1785 different projects spread throughout this country (A,B,C,D,E,F,G and some even O class cities ) the ponzi pyramid of bigger fool iterations hits a speed bump.
Third, their Bankers, who could usually be relied upon to volunteer as bag holders when everyone and his mother-in-law were finally getting wise and wanting out, were suddenly under orders to cut lending to this sector and would not budge no matter how much you "revalued" your "land Bank" to offer bigger collateral.
Fourth, the traditionally growth(and cloth) inclined finance minister ,who only last month was brow beating the banks to lower interest rates seemed to have been reined in by the opposition Parties (and own Party) to either attend to Inflation or dress in proper trousers and quickly dropped the lower interest plans..leaving the highly leveraged Realty sector facing new reality.
Fifth, the retail investors and locals(native Indians) who had been heavily relied on to act as the bigger fools in the past, were now showing their true colors as fair weather friends and refusing to up the ante (or even take the bag from some poor speculative "smart money" caught when the music stopped)..the point is if the local(who actually wants to live in the property) is refusing to take the bag at this price .. a lot of definitions need to be re-looked at.
Last and not least, it emerges today the cement and steel prices have risen to unplanned and unprecedented heights. This has just come as a total surprise(as the industry had projected flat or lower prices till year 2020) and looks very suspicious, to say the least.

Any other industry and the captains would be at a loss to figure out what happened, but these Construction Leaders quickly deConstructed the mysterious price escalation to cartels in the steel and cement sectors .
Why we are taken in by the sheer brilliance of this Industry's stalwarts is the raw intellect and vision that tether such insights. Not only did they identify a cartel in steel but also in cement and thus reached the same conclusion as our venerable Finance Minister independently.The FM who'd been sulking having failed to get banks to cut interest rates, jumped onto price controlling the nation into growth with gusto as the cement/steel sectors provided familiar whipping boys.

Further evidence of why our country's future development is safe in the able hands of the Jains , Agarwals and Goels("promoters" all) crowding the realty space rather than whimsical outsiders , can be seen in clueless observation of Cushman & Wakefield -

“With the exit of speculators from the residential market, the transaction volume is down by almost 40%."

Whereas, our trusted visionary Pradeep Jain's much more faith inspiring ( and frankly heroic) but well grounded opinion that I'm much more likely to buy -

Asked whether the industry was witnessing any slowdown due to high interest and inflation, he said: "There is no slowdown. I do not think there is any softening of prices." Softening of prices is next to impossible as input cost, interest rate and land prices have increased substantially, Jain added.

Also, further evidence of the amazing potential this sector offers is offered in the multiple PE and "smart money"and other smart manager driven funds which are unflaggingly buying up whatever they can in the Indian Real Estate space based on year 2025 earnings, at the time of writing .
In fact Parsvnath( getting a little obsessed here) , no slacker in such matters got hold of one such "smart" money bags Saffron Asset Advisors UK.. to dump some good stake on him.

Finally, we hear the astute National Real Estate Development Council (NAREDCO) identified a disturbing new Cartel of Buyers who are conniving to drive the Property prices lower and take unfair advantage of the Council's members..and took their findings to the (champion of the downtrodden) Finance Minister who immediately promised to look into the allegations and take strict action against all found guilty.

Indian Stock Broking , Broker..Broken?

The days pass slowly.
The south Mumbai air is now recording record density with the usual smog, grime, humidity now diffused with record levels of hope and longing. .the hope to recover some notional loss( we all know this is notional and temporary and markets will recover, so why the long face)..the longing to ride a bull move again..aahh, that was a feeling.

Every day the stock broking community awaits deliverance from this irrational and unexpected behaviour which has laid many a careful expansion plan to waste.
Just yesterday these Broking Houses(House sounds cool) were on recruitment sprees to fill every corner of India with necktie wearing executives to spread the gospel. The race was on to claim the biggest valuation as news broke about clueless trains from abroad disembarking new age fund managers with big money who wanted in on the financial space.
The message was clear.. maximize retail accounts, retail reach, retail teams, retail investors, retail traders..anything retail.. and these monkeys would pump in a few hundred million(USD) for, umm.. 5-7 % stake in a Broking House.

The glee was palpable (those days the downtown Mumbai air was thick with glee).

The local Broking houses pumped up the volume on recruiting anyone who owned a necktie and exhibited leadership qualities..as also those who owned a necktie and had a pulse.
There was a recruitment frenzy where assorted executives, tourist guides, bar tenders, waiters, fortune tellers, snake charmers etc. suddenly found themselves appointed Relationship Managers and other lofty Managers at leading Broking houses.
More offices, more managers, more accounts, more potential, more valuation and more More.

To be fair it wasn't the local brokers and broking firms fault, they suddenly caught the fancy of the global money managers and alpha seekers. These unassuming folks were just going about minding their business when this herd let loose the fun fest on them.

And then the bulls failed them..the bulls, they just failed.

Today's press.. the accountants can't cook these books any further. These fine equity cult spreaders look a little spread themselves. Make no mistake, it is bad when your accountants can't find growth and earnings as per your expectations..and start mentioning unmentionables like writeoffs and provisioning and recognizing losses..this almost sounds like we got the SEC here to replace the doddering, rupee challenged fools of SEBI !!

As some old timers noted, if this disturbing behavior is not dealt with promptly and firmly the Indian investor might soon even start asking for transparent accounting !!

Sample this from the above article..

"At least four top brokerages — Religare Enterprise, Edelweiss Capital, Emkay Shares and Stocks and Modern Securities — have delayed their fourth quarter results."

..these Popes of the equity religion who spread their gospel through evangelical TV and branch networks far into the countryside are increasingly spending less time on TV and more in their offices to prod the accountants to fix the mess and get on with the growth numbers. As any faithful can vouch..you never question the Gods..you keep the faith.

After all they have not been pontificating(so knowledgeably) on TV and other media about corporate growth, prospects, results, earnings,etc. so that the unwashed plebians could start questioning their companies' results or when they should announce the same. Altruistic Missionaries have never had it easy.

But the faithful hordes are now behaving like panicky hens instead of the predictable flock and though they(Broking Houses') quickly explained quite clearly that each had a totally different (and valid) reason to delay the results..and the fact that four of them happened to be in the same sector is a random occurrence to which no weight need be assigned..this obtuse market is increasingly hard to convince.

Actually, I think the overseas cognoscenti with the (previously identified) foresight and extrapolative tendencies may be the only believers who actually are still be patting themselves for their valuation due diligence and quick deal making that proves their mettle.

The natives for the most part lack vision..and that is destiny.

Bull Banking

Today, India is banking on bulls, there has never been a time when this country has needed bulls as badly as now..not in the green(agriculture) revolution not in the white(milk) revolution.

Let me elaborate..the Indian corporate sector is by and large heavily "invested"( primarily otherPeoplesMoney) in massive growth plans. Corporate India is united in its commitment to eradicate gravity in growth, projections and share price movements . These companies are heroically led by assorted "promoters" who have significant egos to promote and no regulators to fear.

The last few years were the shining years for all such ambitions..
Announce plans -> shares move up(ok, make 'em) -> can borrow more -> bigger plans -> higher share price -> more borrowing capacity -> still bigger plans -> still higher share prices .. it was intoxicating.( sigh, it seems like only yesterday *Parsvnath*(who?) announced investment plans for Rs.60,000 crores , about $15B..that was a day I was proud to be Indian, we were second to none in testosterone).

..and then these bulls failed us, failed the promoters, failed corporate India, failed the "investors" , in fact failed this Country.

What was the promised land ?
Every "promoter" and his younger brother had borrowed every bank into the brink( only foolish RBI limitations and priority sector requirements kept these banks from delivering all their deposits to the "promoters" newest, shiniest megaloStupid,growth oriented "promotion".)
For all these ensuing shining years their CAs have been hard at work churning out (nonExistent) profits quarter after quarter, much to the delight of the applauding media and "investors", purely on the basis of hiding all current expenses in their mega growth investments. After all why operate in a Third world country if you cannot hoodwink random SEBIs, RBIs , NSEs etc. into believing any crock that you can think up. Come on, these hard working "promoters" have to justify the risk premiums commanded by third world "emerging market" corporates and I feel they do a fine, largely unappreciated job of it.
The Banks of course, just could not lend enough to SEZs , Retail, Real Estate, Brokers and all such growth oriented jackpots and finally resorted to paying interest to encourage offtake.(This novel business growth strategy was predictably pioneered by ICICI Bank(of DRIP fame) who somehow even showed quarterly profits on such loans).
The investments were thus soaring, employment was soaring, wages were soaring, stocks were soaring, property was soaring, promoters were soaring ..the country was soaring.
There were bulls every where : stock markets, properties, retail, SEZs , cricket , International flights, hotel lobbies, cocktail parties, gent's toilets..you couldn't step out of your house without bumping into a bull..you couldn't slow your car without irritated honks from the bulls.

Where are we now?
The bulls spoiled the party. They grew feathers and just turned chicken.
Their snouts turned to beaks and the previous heroic bullheadedness petered into unseemly flighty behavior.
The bovine strength on which the entire future of the country was being built was emasculated in a few quick weeks.
To be fair, everyone pitched in to try and grow new balls for the bull.. the media ,the financial "experts" and "advisers", the finance minister ( he actually tried to get banks to cut rates a few weeks back), the prime minister ( managed to emit some muffled "strong economy" and very "good growth prospects" when SoniaJi prodded him), the few clueless hedgeFunds and PE wees who still bought into the "corrections" every week till their offshore masters finally corrected their "vision"..but to no avail.. the bull just wouldn't get up.

What about the "promoters" ?
They are suffering and unfairly so.Their back breaking, endless hours spent rigging share prices, passing board resolutions for share buy backs, unlocking values for new subsidiaries ( more IPOs), arranging Indian currency/foreign currency / any currency debt against their enhanced equities and fresh debt to finance the enhancing of equity, launching new, negative margin, maximum market share businesses every monday..all this effort looks seriously threatened by the obtuse bullheaded refusal of former bulls to play bull!!
These promoters and their ilk have sacrificed profits and accounting principles in favour of investing in growth well beyond their reach and financial means(er,by a very long shot) just so the country could live up to the expectations of the BRIC report by 2050 and are now being held hostage by a particularly slow thinking critter.
This is doubly unfair as 70-80% of their "projects" and revenues are in the investing stage and 100% of profits are (as usual) in the future..you just cannot pull away finance now..without the IPOs and the loans who will fund these "planned" investments of billions and billions.

What about the banks?
The banks are essentially employment shops for the chronically mediocre and the below average "people skilled" careerists who easily deceive themselves they understand "industry" and other economic activities.
Thus, being coaxed to believe that a country's economy is manifest in the banking sector, they took special pride in facilitating the growth and personal ambitions of the semi literate first gen(and papa financed second gen) "promoters", who thought they were playing the banker while the banker thought vice-versa. This was funny and convenient till our bulls caught the bird flu.
Bankers, by definition mediocre and thus unwitting big bag holders, suddenly find themselves having been handed jumbo bags in India..the chimpanzees they been shovelling funds to, instead of completing and revenue-ising (different from profit-ising which, of course, is blasphemous in corporate India) a project they originally funded..were seen to be spread thin over 23 new, different, more ambitious and more growth oriented projects which all go live in some convenient future(of course without cost or time overruns) and need massive more funding and the ownership structures as well as financial engineering involved changed every mealtime which nobody anymore understood, cared or even believed.

Today,the Promoters (and thus the country) is banking on the Banks and the banks are banking on the Bulls.

Perhaps, a solution?
The central government, in a moment of rare clarity, decided to attack the root cause rather than apply superficial BandAid to the symptoms..rather than try get the bulls on their feet with piecemeal efforts like rate cuts/ tax cuts etc. a novel and grassroot approach planned is to use the Polio Drops network to administer all adult males in the country with 1 oz of concentrated testosterone (fund managers get 4 oz ) to perk up the flagging libido dogging the financial markets in this country.

Predictably though, Reliance Life Sciences has been awarded the contract to supply the hormone as they have recently "discovered" vast quantities (also as usual, company officials refused to comment).

DLF+Reliance+ICICI+Pantaloon =DRIP

So much muck to rake, so little time.. so much comedy, so many clowns..

For too long BRIC has been foisted on us as the grand global scheme thru 2050 and still stands out as a bandwagon with all wheels intact(the trick is the far horizon..so cannot be seriously challenged till year 2040 and hopefully Roopa Purushothaman will have lived a happy, rich clairvoyant life in the meantime ).
But even so, quick to recognize the extreme short term outlook of firms like Goldman Sachs or any real usefulness of her 2050 projections she deftly monetized her fame to team up (the degree and star struck) Kishore Biyani who happily renamed his business "Future" group to reflect this move up from trousers. But recently he has put her to shorter time(and useful) frame projects like creches in his outlets to ensure she does not while away her time,on his dime, projecting year 2100 economic winners, a year he may not even witness. More on her later..we love future economists!

So all this global attention soon galvanized the worthy Indian "promoters" and business "leaders" into a libidinous growth pattern that soon separated the men from the boys.

Buying into this immense entrepreneurial energy was a no brainer and not be outdone by young birds flitting down from New York, our team soon cobbled together a gang of four stalwarts which the drawing dept. soon extrapolated into four largest and most respected companies by the year 2050 and coughed up our own homegrown acronym: DRIP . Below we list the pillars 2050:

D:DLF : The Goliath of Indian real estate , this phenom came from nowhere (actually the sleepy village of Gurgaon) to suddenly land in the centre of a frenzy that even surprised chairman K.P.Singh out of his afternoon siesta.He had no inkling his father-in-laws land banking fetish in olden times barren Delhi outskirts could catapult him into billGates' four-ball.The action caught him by such surprise he's had to disrupt his game of golf regularly to be lectured how he needs to hire "professionals" other than gardeners and caddies..frankly, he cannot understand the reason for such extravagance as he's doing just fine with periodically releasing a bits of land for "development" and planning pan India projects at the clubhouse with this new "IPO" money.
We know this group should be able to attract a few tens of billions of PE and leveraged professionally moronic money to throw into hare brained schemes.

R:Reliance : This group is actually the entire "I" in the BRIC quad. In India, if it moves, Reliance wants a piece..period. The brothers extraordinaire wake up each morning to leap into another new business before breakfast, glance at the financial dailies to see if their PR machine's yesterday's planted articles have the biggest fonts on page one and (god help them) if any negative articles didn't get smothered before daybreak.
With the regular new gas finds getting staid, Muckesh today launched into semiconductors and 21 other, unrelated, new projects( as happily reported by media) while A-nil fought hard to prop his otherPeoplesCapital empire thru buying own shares and random coal mine purchases costing 1000 cr ($250 m) for value 20,000 cr($5b) ..don't believe me ? Economic Times reported these figs...though, as usual "company officials refused to comment" but somehow "sources" are always available for every fabulous spiel emanating from the creative jugglenauts of corporate India. The undisputed go go boys.

I:ICICI Bank: Quite a few years back MV Kamath looked into the mirror at his freshly dyed(jet black) hair and realized he was surely most female bankers softest fantasy. Not one to ruminate important decisions he strode into the office that day and promoted everything female and walked on two legs , that he encountered , into senior and important positions at the Bank.
With all kinds of Govt. connections, subsidies, opacity, mediocrity and license to underperform, Kamath and his girls were onto a good jig and soon covered the whole country with *scale* banking.
As he and his flock have internalized over the years.. the manna is growth, because as long as you can grow, capitalize, securitize, layerize and obfuscatize .. nobody is the wiser esp. the "professional" money(FIIs,Hedgies,PEs) suits who love growth potentials and large branch networks.
Lately though he's having trouble finding good suckers for his securitized loans portfolios which even Chandas and Morparias have no clue how/where to collect from..add this to his trouble sweeping the subPrime cash cows under the carpet and he's promised to now highlight his hair to get schwing back in the banking miracle we know as ICICI..c'mon , he's just spotted a new flock of ladies that would put the fire back into Indian banking.We're bullish on this bull..chicks love him ;).


P: Pantaloon: Kishore Biyani was an ordinary shopkeeper minding his business selling trousers(not doing too well) till the retail revolution knocked down the building next to his parked scooter. Never one to not spot an opportunity knock(you don't need to knock many buildings next to his scooter) he was on his way to claim the retailKing title.
Very early on he realised there were no profits in this game, he'd spent enough time in this line to not waste time on trying to be profitable..the mantra was to roll the money..rotate the money..grow the business(not the money)..grow,grow,grow and the world grows with you..stop growing and they start asking funny questions like profitability, bottomline .
So at the time of going to press everything about this group is future,Future this, Future that , Future All( except of course real profits) .We are on because history has shown you never actually get to the future so this is covered.

Here's the common thread in DRIP companies, none of them, nada, zero, have any legs if you take away the growth, hype and the fine skills of capitalizations all expenses(to be amortized next 3 decades conveniently) and recognizing all (in fact a bit more..bit naughty) revenue this quarter.
Growth , more debt, bigger market cap, bigger ambition ..these are heady days.

We, of course , are just drippy about our DRIP strategy.

CitiGroup upgrades Lehman: Brown Chutzpah

You know you are behind the curve(no more a laughing matter) when you cannot figure out how these hot cats, who cannot figure out their own "book" by a longish shot(Bear Stearns "book" worth of $80/share gets sold at $2 overnight) .. and you wake up to find these fine "analysts" have put it all behind and are back in business as usual valuing others' "books" accurately on Apr 2:

"Citigroup was the best gainer in the Dow and today, Bear Stearns repeated an "out perform" rating."

Obviously there is strong spine in there, but also these guys are devoted to their craft.. reportedly the "out perform" was issued through a blackBerry from the sidewalk outside their newly pawned building.

Before you can recover ,CitiGroup returns the favor..too many of the believers have been "holding" Lehman stock(all the way down) on their "advise" and need relief :

"Lehman rose 5% in pre-open trade as it was upgraded to "buy" from "hold" at Citi, noting an "extremely attractive" entry point, the recent Fed and Treasury actions to boost liquidity and the broker's management."

(Noted:Another sign of our cluelessness: ..how do you now "buy" when you were "hold" all the way down.. there never was any "sell" ?)

..followed up for good measure:Citi reiterates buy rating on Lehman.

Now, Lehman's turn to upgrade..um, UBS ?

By now,details began to wash ashore in India..there were brown pundits involved in most all these utterances. The legions of desis(natives) who'd been toiling deep into nights and models (abstract only) had been having a rough time lately..very rough.
The law of averages were continually and horrifyingly failing every single call of "bottom in place" , "good value" , "cheap below book" and "oversold" call. Just when these cubicle wizards felt the outermost sigma possible this century was not going to be violated and "expertly" issued another "bottomed buy" call.. Gauss failed them again.

Lately, as one (nowbroken) model-analyst tearfully confessed, most of his ilk in the financial space had taken to issuing "buy" and "outperform" ratings randomly on Financials since markets refused to reflect logic and we all know illogic is yet to be modeled. So they were back to law of averages and the increased temple visits for divine signs of market bottoming.

Primary brownBrigade analysts like Prashant Bhatia who'd been building quite a career with 100% credit for 15% calls (that's admirable call hedging Prashant,you wicked fox, you).. and our beforementioned Pratik Gupta who usually was able to extrapolate stock indexes a couple of decades out ( in better times, he is rumored to have precisely projected a (to be est. in year 2015) Lhasa(Tibet) stock index "target" of 12,000 by year 2050)..these achievers in the ruthless global financial centers (where meritocracy rules) have been quietly (Ok not so quietly) edging out the reality challenged Blodgets and Meekers to bring that brown pride to their profession.

Coming back to the curve lagging realisation dawning at Luddic Research, there were additional uncomfortably model busting signs:

• UBS announces $19B in writedowns and shares rise.
  
• Lehman raises finance *it doesn't need* ..shares rise.
• SEC's "better" way to account illiquid assets.. Financials rise.
• A ton of bad news from all conceivable fronts.. markets really rise.

This put us back to the drawing board and here we display the legendary Luddic research analysis, which our clients trust and respect to explain and predict(retrospectively) most all market behavior( we confess this time the model transcended all expectations as the degree of correlation is *absolute* between our model and above market moves):

The model we now use to trade and predict(retro) any market with a >1.0% of brown(Indian subContinent origin) participants is based on (so obvious on hindsight) Brownian motion.

It all fell into place when our researchers dug up references in the ancient Vedas about such movements in Indian grain futures of the time which were dominated by exceedingly brown(outdoor mkts) men.This was way before similar behavior was noticed by Bob&Co in other non living molecules, pollen etc.

The defining characteristic of this "brown" legacy,which carries to present day markets, is these players' severely limited social life/social acceptability which frequently manifests in extreme desire to call bottoms and tops and pray for the best..safe in the knowledge they need to be right only once every few years to be employed and never need to risk own capital (in fact the law actually forbids this) .The sum total of these socially challenged(apart from work related junkets) analysts' varied and ad hoc utterances cause the markets to closely(*exactly*, if I may confide) replicate Brownian movement ,thus assuring the success of our model.

OTH,we are proud that our cubicle dwelling exports(singly insignificant,but as a group formidable) are able to exploit the capitalist folly of yonder lands with little loss to own dignity and capital.. a million brown "analysts" are not far from getting unleashed into this global financial la-la-land.. mark my words.

Luddic Research announces UnHedged Fund(tm).

Growing tired of snatching(after ample warning) candy from children,Turkeys, Ostrich, Sheep, Experts and other such clueless pretenders, who strangely, continue to proudly enroll and throng Flat Earth Society's doors (minus the candy), we today launched an UnHedged Fund(tm) to make some serious coin off this semi literate bunch of masochistic rabble.

Well, what really tipped the point today, was an inhouse research algorithm that threw out some interesting results :

• 96% of the market "investors"/traders were the bottom 10% of their academic classes (the few who actually attended any classes,that is).
• 99.2% of financial advisers,experts etc. had completely failed in making any money off their own advise and had only fixed salaries or commissions to keep them off the streets.
• 82% of these market advisers/experts had been publicly humiliated by their spouses after (yet again) losses due to eating own pudding.Thus, lately 100% of these never traded their own opinion.
• 98.9% of local brokers and brokerage houses were headed by academic and social laggards whose median education hovered around matriculation(grade 9 actually) and who had had suffered serious ridicule from the fairer sex during their impressionable years. Consequently a lot of their trading behavior was aimed at enhancing their (self image of) male attractiveness.
• 100% of foreign funded (FIIs,Hedge funds,PE,etc.) had ranks populated with young, testosterone fueled Yoyos, who loved to "network", "research" and "value-add" until they started touching(when no one was looking) random objects to see if same actually turned into gold. Strangely, "investors" usually did not notice the risk, even at this stage.
  
• 98.8% of all intelligent,professionally qualified Indians never consider opting for "Stock markets" as a career(largely due to unsavory,very misshapen, promoters with garish,crass tastes in interior decor). So they opt for yuppie careers selling soaps, being bankers, coding CRM trinkets, or just being "managers" good at "managing". If at all,the lowest percentile, ends up as research warm bodies in "professional" broking houses with excellent "target price" and "outperform" skills(these are the announce and pray group and have volatile careers).
• Lastly, it is now projected that Homo Sapiens(predominant stock market players) may not learn anything from History till about the year 2105.

Succumbing to the mind numbing opportunity as above, we decided to extrapolate our team with a strategic mix of out-of-the-box market beaters, as the team structure shows :

• Ludus: Commander-in-Chief for busting "stay-the-course" long term investors who fall into "weak beliefs, strongly held" majority(this market is big).
• Chief Economist: Lawrence Yun was by far the only good choice for precise(and brave) hand holding in these uncertain times.(Also he was having a rough time going out in public without young mothers asking him to make a prediction for their toddlers to laugh at.. though he attributes this to pure racism).Our decision purely rests on our planned expansion into real estate plays and his insights will be invaluable.
  
• Research Head: Mary Meeker has graciously accepted to be part of our deeply "fundamental" jargon spewing,extrapolation experts armed with 256 digit screen calculators. She caught our eye with very bullish projections on anything "Ambani". (In fact she projected Reliance gas *finds* to "surprise" us well into year 2050 as well as Reliance Biosciences cloning 6 identical Mukesh Ambanis with permanent jet black hair(no dye needed)..and endless growth for group.
  
• Trading Team: 3 Dart throwing circus monkeys ( have consistently shown beat-the -market performance in back tests).Plus they accepted to be paid in bananas (though payable daily).
  

We are confident this diversified core team will quickly create new inefficiencies in the market and enable us to quickly join the return free risks orgy in the markets.

Why UnHedged Fund you ask?.. well let me say we just love naked positions at Luddic Research !!