Sensex
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Small risk. Buy small qty
Renuka / Balram chin
CMP 64/84.8
SL 1%
Abe
Buy 167.3
SL 166
Abe
Nifty is 5315 now raise SL and trade for the target --- On Tue, 27/4/10, Achuappu K <achuandappu2010@
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You cant do anything about the Length of your life,but you can do something about its Width and Depth.
Samir Kumar Shah.
9830405060
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| Buy Punj Lyod around 165-166 levels for a short term delivery target of 174-179 levels. --- On Tue, 27/4/10, Achuappu K <achuandappu2010@
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| Short Nifty 5330-5340 levels tgt 5307-5290 SL 5351 --- On Mon, 26/4/10, Achuappu K <achuandappu2010@
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How Can You Remain Invested In Equity, When Bond Markets Are Signalling Trouble? Ask yourself where did the Global Stimulus money come from? Printing fresh currency or from debt markets? Shouldn't then economies grow to pay-off the debt? So why are debt yields rising and so are Equities? Does the Debt market expect default from Sovereign States? If so, how long can equities stay perched on their throne? In the bond market, it's been anything BUT quiet. In fact, the first major sovereign debt domino toppled this past week — in Greece. The Mediterranean nation is buried under a massive load of debts and deficits, and the numbers are shocking. The European Union's (EU) statistics agency has been combing through Greece's books, and it just revised the country's 2009 deficit tally up to a whopping 13.6 percent of Gross Domestic Product. Further revisions could send that even higher, to 14.1 percent. That's more than four times the official "limit" for a country in the EU. And the nation's total debt load is now closing in on $400 billion, or 115 percent of GDP. That's among the worst ratios on the planet. Greece used to be able to fund its deficits at relatively low yields. But not anymore ... Greek interest rates have exploded higher, with yields on 10-year Greek government bonds surging above 10 percent. Meanwhile, two-year note yields soared past 11 percent, more than a subprime mortgage borrower pays in the U.S.! That's a recipe for disaster for a country that needs to sell $72 billion in debt to cover its deficits just in the coming months. Facing a full-scale meltdown, Greece did the unthinkable on Friday. It asked for a bailout from the EU and the International Monetary Fund. The lifeline will take the form of up to $40 billion in three-year loans from the 15 other nations that share the euro currency. Those loans will carry a below-market rate of just 5 percent. Greece can also get its hands on another $20 billion in low-rate loans from the IMF. The market breathed a sigh of relief in the wake of the Greek aid request. Bond yields fell and stock prices rose in Athens. But ... This Is Just the Eye of the Sovereign Debt Hurricane! I say that because Greece is far from alone. Take another of the so-called "PIIGS" countries, Portugal. The country's GDP shrank 2.7 percent in 2009, the worst recession in more than six decades. The unemployment rate recently hit a 23-year high of 10.1 percent, while the budget deficit jumped to 9.3 percent of GDP. Total debt is more than 85 percent of GDP, the worst in 20 years. Ireland? The budget deficit is almost 12 percent of GDP. Italy? Its total debt load is on track to hit 117 percent of GDP. Plus, Spain is battling a budget deficit of 11.4 percent of GDP. Bottom line: Greece is just the first domino to fall. Many other European countries are next in line. And the biggest domino of all is right here in the U.S.! Our budget deficit is soaring. Our debt load is exploding. Our bond yields are starting to rise. And our risk premium is beginning to climb. The folks in Washington are sticking their heads in the sand, ignoring the warning signs all around them. They believe the same kind of bond market collapse that just struck Greece can't happen here. So they're continuing to bail out banks, brokers, mortgage companies, insurance companies, automakers, unions, homeowners and the unemployed. But now, with demand for U.S. Treasuries waning — as evidenced by a string of disastrous auctions and continued net selling by China — the only question that remains is, "Who will bail out Washington?" The simple fact is, no institution or group of institutions on Earth has the resources to save Washington when the bond market finally gives up on our ability to manage our own finances. When that day dawns, the bond market will come apart at the seams. Interest rates will shoot the moon. Our feeble economic recovery could vanish. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
China: A Land Of Asset Bubble Raise interest rates and Reserve Requirements for Banks, otherwise China risks a fate similar to Japan in the 1980's and US in 2008. Anecdotes point to a significant expansion of the property bubble. Property speculation picked up speed right after the National People's Congress meeting. Both prices and volumes rose sharply in major markets like Beijing and Shanghai. Speculators lost their fear, while the fear of inflation seized savers. No one believed the government would let property prices fall. As a result, people have been withdrawing their savings and borrowing as much as possible to buy property, regardless of the price. This is all similar to the final frenzy in financial mania. If the experiences from other countries are anything to go by, this frenzy could expand the size of the bubble dramatically. The consequences may well be catastrophic -- as Japan showed 20 years ago, Southeast Asia 10 years ago, and the U.S. is demonstrating now. The latest measures aimed at tightening property are technical in nature and target speculative demand. But, like similar measures in the past, they can be circumvented. Further, prolonged negative real interest rates -- that is, rates below inflation -- are the driving force of the bubble. Unless this is corrected, after a brief pause, the bubble will grow big again. Such a vicious cycle only ends when banks have insufficient liquidity -- that is, households don't increase their deposits but want to borrow as much as possible. Indeed, recent data suggest this scenario is coming. The most effective actions for containing the bubble are: one, raising interest rates to above the expected inflation rate; and, two, raising capital requirements for banks. China should quickly raise interest rates by two percentage points; current rates are ridiculously low. When this is the case for too long, it leads to a property bubble, resource misallocation, and eventually, a financial crisis. China's interest rates are probably five percentage points too low. Yuan appreciation expectations have provided money holders with a substitute for interest rates. Indeed, such expectations have driven up yuan demand so rapidly that the central bank has increased its foreign-exchange reserves three times, to $2.4 trillion, in the past five years. China's asset prices have risen by about the same magnitude. Inflation has followed. China's currency appreciation may have largely occurred through inflation, despite what the statistics say. The evidence is that, first, exporters are looking to shift more production to other countries and, second, China's price levels are very high in an international comparison. Much of the currency-appreciati When raising rates, China should avoid small moves. It is already very late for monetary tightening. If the first move is timid, it may show a lack of resolve and could even make the situation worse. China must raise the core capital adequacy ratio for the banking system as soon as possible, given that banks are raising capital to support their lending expansion. Unless that happens, considering that the banks are motivated to expand as fast as they can, lending could surge massively again. The demand for yuan appreciation, amplified by the U.S. calls, ensures that banking liquidity is plentiful. The current loan-deposit ratio of 67% leaves plenty of room for lending expansion. Additional capital injections will add pressure for an increase in lending. Otherwise, returns on equity capital would decline, putting downward pressure on the compensation for senior bank managers. All things considered, the government should raise the core capital ratio to 8% (from the 5% guidelines) and give banks three years to meet the target. This target won't be onerous. A high core capital ratio is the only cushion for taxpayers. China's banks are all too big to fail. When the property bubble does burst, the government will have to recapitalize the banks; the money will come from taxpayers one way or another. When the last property bubble burst in 1998, non-performing loans (NPLs) reached 40% of the total. When this bubble bursts, they may reach 20% or more. The current capital base could be far from sufficient to cushion the losses from NPLs when this property bubble bursts. The banks should increase capital as quickly as possible. This pressure would reduce their lending capacity, slowing the bubble expansion. By restricting the size of the bubble, the banks would suffer fewer losses when it does burst. The U.S. experience is a major lesson for everyone. Bubbles should not be left alone, because ultimately they cost taxpayers dearly. It is totally irresponsible to deal with bubbles only after they have burst, as ex-U.S. Federal Reserve chairman Alan Greenspan did. China must take major action -- anything less will result in a full-on gallop to catastrophe. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
Please note 3G auction amounts have exceeded estimated run up in costs and hence will prove too costly for players.
Remain in at your risk
Abe
