Thursday, May 28, 2015

India Modi should reduce big governments

The number one priority for PM Modi should be to reduce bureaucracy. Compare the situation to China where its president Xi Jinping had absolute power: He could clean up the system if he wanted to and also had the ability to do so.

Modi, however, is more like the US president. His powers are limited by the Opposition. In India, reforms have been carried out in defence, insurance and the property market, but the country has a long way to go. The climate for business is yet to improve.

Industrialists and businessmen are starting to express a bit of unease [at the pace of reforms]. There are serious question marks about growth, whether it is freight traffic or electricity production, compared with the higher growth rates of 2006-07. Sales growth and industrial production data has been poor; auto production has been down compared with 2006-07. 

Overall economic growth is not near the 7.5 percent which the government has been projecting.

Wednesday, May 27, 2015

Best Central banker worldwide is Raghuram Rajan of India

India is in the midst of change. One of the biggest successes India has had, compared to other nations, is that the stock markets have risen and the currency has been stable. This has less to do with Prime Minister Narendra Modi and more to do with its central bank governor Raghuram Rajan, who, I think, is the best central banker in the world.

Most economists are of the view that India should lower interest rates, but I disagree. Rajan’s priority should be currency stability. Once India can prove that the country has a strong rupee policy, it will automatically boost production and investments. 

The rupee had weakened in the previous years, which made it easy for exporters to make money. But with a strong rupee, companies will become more productive.

VIA Forbes India

Tuesday, May 26, 2015

Now is a stock pickers market vs index investing

My sense is that we had a very strong bull market last year and that the market is now essentially fully priced. Now, this does not mean that there are not some stocks that can still go up. I believe that we are moving into an environment where indices do not perform particularly well because of their elevated levels, but it is a stock-pickers market where some stocks can still offer some traction.

Wednesday, May 20, 2015

Russia to stay with Eastern Ukraine

The Russians will never give up Eastern Ukraine. It’s like the Chinese will not give up Hainan Island, you understand? It’s not going to happen under any condition. The West can bitch and talk and whatever they want – they’re not going to give it up.

Tuesday, May 19, 2015

Oil prices wont stay low for long

Oil prices peaked out in July 2008 at around $147 a barrel and slipped to $32 a barrel in December 2008. For several years since then, they remained around $100 per barrel. It is possible that oil prices will go down again and I don't rule out this possibility. However, it may not stay there for too long like in 2008 when we dropped to $32 levels. The equilibrium price is somewhere between $40 and $70 per barrel. Below $50, there will be very little exploration.

Monday, May 18, 2015

Could professional investors be wrong on US Treasuries

There is nothing unusual about the fact that Big Money Managers are bullish about stocks (83% of them are bullish about European stocks), but what is really remarkable is that only 12% of them are positive about US Treasuries (88% are bearish).

Just remember how many experts lost money shorting JGBs in the last few years. Professional Forecasters have consistently failed to forecast the future yield on Treasury Notes accurately. 


Thursday, May 14, 2015

Gold oil stocks can shine as a value buy

In this current money-printing environment there is a lot of volatility. Even in the EMs, there are markets that are fully priced and some have potential.

We also need to consider the currency in case of Japan, for instance. When the currency went down, the stock market rallied sharply. Hence, it is not easy to generalise. 

But, I would say one asset class that appears to me to be very depressed, absolutely and relatively, is gold mining shares and mining stocks in general. Another asset class that was oversold a bit and has now gained somewhat is oil shares and oil servicing companies.

Wednesday, May 13, 2015

India stock market correction to continue

I think Indian markets can correct further. We had the big move in India starting after the bull-run, which got underway essentially in 2013 and we had a strong performance in 2014 as well. I think this correction will last for a while.

Well, the S&P BSE Sensex went till the 30,000 mark and we can now easily drop to 24,000 - 25,000 levels. A lot will depend on monetary policy. Basically, I think the Reserve Bank of India (RBI) Governor, Raghuram Rajan, would like to see a strong Indian rupee. But he may be under a lot of pressure to lower rates. If he does lower rates, the rupee could begin to weaken more. While the stock market may go up, the rupee may continue to weaken - and in dollar terms, foreign investors are not going to make much money.

Indian stocks - Index vs Individual stock picks

I have maintained the view that if one invests in India over the next 10 years, one will make more money than in the US. But obviously you will have to live with volatility. In the last few years, we had a lot of index-related investing. In other words, people just bought the index through the exchange traded funds (ETFs) or index funds. I think that going forward, say in the next 5-10 years, stock selection will become increasingly important.

Tuesday, May 12, 2015

Emerging markets to outperform US stocks

If you look at the valuations of stocks around the world, one of the most expensive markets is the US and you have growth deceleration there. There is better value in Europe and the cheapest are the EMs. This year alone, we have seen EMs significantly outperform the US. We will have better performance in the EMs.

Monday, May 11, 2015

US Fed will not increase rates right now

I personally don’t think the US Fed will increase rates as the economy in the last six months has been relatively weak. There isn’t much momentum. Secondly, given the US dollar strength until recently, I don’t think the Fed would wish to have a stronger dollar. The Fed has always remained data-dependent. If the data are not so favorable, they are not going to increase rates. Now they may increase rates symbolically, say by an eighth of a per cent, in the hope to gain some credibility. I think that the economy will continue to be weak, and therefore, no rate increase will happen this year.

Wednesday, May 6, 2015

Interest rate hike in 2016 possible

The economic statistics that came out of the US over the last five months has been weak and I always thought the forecasters that thought the economy was growing at 3 percent per annum were totally out of reality. The truth is the US economy is slowing down despite the fact that interest rates, the fed funds rate has been close to Zero since 2009... Six years....

I think and I've been thinking for a long time. I was thinking the Fed will not increase interest rates unless there is very high inflation like Five, Ten percent. Before that they will not increase it. They will always find an excuse to not do it. Either from Dollar or weakening economy or bubble in stock market where if they increase it, stocks will down. So my view is until 2016, no interest rate increase.

Tuesday, May 5, 2015

Marc Faber on lazy investors

Lolly Daskal, who is the founder of a global leadership and consulting firm opines that it “It seems counterintuitive, but often the team members who seem lazy and disconnected are the smartest and most efficient.”

Henry Ford said he had a lazy man on every floor of his factory because they always found ways of doing things more efficiently. It's been clear for time now that today's corporate or political management style leaves no room to take a little time out and assess what you are doing, in which direction you are heading, or how your work effects the world around you.

A hard working and driven business women admits that she discovered that working less is more. According to her she has become lazier, which has made her much more focused. She spends time only on the things that really matter, and everything else, she either does not do at all, or delegates to someone else.

Mark McGuiness (a poet and author) recently penned an essay Why Boredom Is Good for your Creativity. McGuiness starts by quoting comedy writer Graham Linehan who said that, “I have to use all these programs that cut off the internet, force me to be bored, because being bored is an essential part of writing, and the internet has made it very hard to be bored.”

Finally, Hannah Richardson, a BBC News education reporter, believes that, “Children should be allowed to get bored so they can develop their innate ability to be creative.” 

Maybe the time has come for investors to be lazy and bored, and defer any asset purchases with very few exceptions. I am currently seeing only one asset class that has significant upside potential: mining companies. Mining stocks are acting well. Newmont is up year-to-date by 37% and Barrick by more than 25% - admittedly from extremely depressed levels. I prefer physical precious metals, but I recognize the superior upside potential of mining companies.   

Monday, May 4, 2015

Markets not healthy says Marc Faber

For the last two years, I've been thinking that U.S. stocks are due for a correction. But I always say a bubble is a bubble, and if there's no correction, the market will go up, and one day it will go down, big time. And I think the market is in a position where it's not just going to be a 10 percent correction. Maybe it first goes up a bit further, but when it comes down, it will be 30 percent or 40 percent minimum. 

I'm not short the market yet. But when you look at the market since November of last year to now. The market is up 2 percent. It hasn't done much, and a lot of stocks are breaking down. I don't think that the market is in a healthy condition.