Sun, 28th May 2017

Anirudh Sethi Report


Archives of “Business_Finance” Tag

A Trading Psychology Lesson :Know Who You Are

A good analyst is someone who can figure out that markets are going from Point A to Point B;

A good trader is someone who can navigate the path from Point A to Point B;

A good investor is someone who can weather the path from Point A to Point B;

Good analysts often are not good traders.

Good traders often are not good investors.

Good investors often are not good traders.

Good traders and investors often need to hire good analysts.

So much of success boils down to knowing who you are and accepting that.Doll-ASR

14 Meaningless Phrases -You Will Always Hear on Blue Channels

  1. The easy money has been made

When to use it: Any time a market or stock has already gone up a lot.BLUE CHANNELS IN INDIA

Why it’s smart-sounding: It implies wise, prudent caution. It implies that you bought or recommended the stock a long time ago, before the easy money was made (and are therefore smart). It suggests that there might be further upside but that there might also be future downside, because the stock is “due for a correction” (another smart-sounding meaningless phrase that you can use all the time). It does not commit you to any specific recommendation or prediction. It protects you from all possible outcomes: If the stock drops, you can say “as I said…” If the stock goes up, you can say “as I said…”

Why it’s meaningless: It’s a statement of the obvious. It’s a description of what has happened, not what will happen. It requires no special insights or powers of analysis. It tells you nothing that you don’t already know. Also, it’s not true: The money that has been made was likely in no way “easy.” Buying stocks that are rising steadily is a lot “easier” than buying stocks that the market has left for dead (because everyone thinks you’re stupid to buy stocks that no one else wants to buy.)

2.I’m cautiously optimistic.

10 Trading Pitfalls

  • All market behavior is multifaceted, uncertain, and ever changing.
  • “I am employing a robust, positive expectancy trading model and am appropriately managing risk on each and every trade.  Losses are an inevitable and unavoidable aspect of executing all models.  Consequently, I will confidently continue trading.”
  • Denial of loss and uncertainty is extremely destructive because it prevents us from thinking in terms of probabilities, planning for the possibility of loss, and consequently from the necessity of consistently managing risk.
  • If we view markets as adversarial we cut ourselves off from emotionally tempered, objective solutions to speculation (opportunities to profit)
  • Blind faith is no substitute for research, methodical planning, stringent risk management, playing the probabilities, and unwavering discipline
  • Depression is a suboptimal emotional state because it allows past losses or missed opportunities to limit our ability to perceive information about the markets in the present
  • We are not our trades; they are merely an activity in which we are engaged
  • Greed is linked to fear of regret, which is the greatest force impeding a trader’s performance outside of fear of loss
  • Market offers limitless opportunities for abundance
  • Trading biases prevent us from objectively perceiving reality, thereby limiting our ability to capitalize on various opportunities in the markets.

Russian Gas Supplies to China May Reach 100 Bln Cubic Meters

Russian gas supplies to China may reach 100 billion cubic meters a year in the future, Deputy Director for Strategic Studies of China’s National Petroleum Corporation (CNPC) Wang Zhen said Wednesday.

Russia’s Gazprom energy giant signed an agreement with CNPC on the basic conditions for gas supplies to China in May this year.

“Deliveries of Russian gas may reach 100 billion cubic meters [per year] in the future ” Wang told reporters on the sidelines of the Sakhalin Oil and Gas conference held in Russia’s eastern city of Yuzhno-Sakhalinsk.

In 2014, Gazprom signed a 30-year framework agreement with CNPC for annual deliveries of 38 billion cubic meters of Russian gas through the eastern route pipeline, formally known as the Power of Siberia, which is expected to come on-stream in late 2019.

China and Russia are currently negotiating Power of Siberia-2 gas pipeline, also known as the western route. According to Gazprom head Alexey Miller, the deal is expected to be signed in Spring 2016.

UK current account deficit shrinks

The UK’s current account deficit shrank to £16.8bn in the second quarter of this year, down from £24bn, marking a two-year low as a share of the country’s total output.

The deficit amounted to 3.6 per cent of GDP in the second quarter, down from 5.2 per cent. Economists had expected the gap to be larger, at around £22bn.

The Office for National Statistics, which compiled the data, said:

The narrowing of the current account deficit was mainly due to a narrowing in the deficit on the trade account and a small narrowing in the deficit on the primary income account, slightly offset by a small widening in the deficit on the secondary income account.

It adds:

The UK has run a combined current and capital account deficit in every year since 1983, and every quarter since Quarter 3 1998.

The Treasury points out:

As a share of GDP, this is the smallest current account deficit since 2013 Q2 and the smallest trade deficit since 1998 Q1.

(You can read the ONS’s full release here.)

The UK has been in a net deficit for every year since 1983. That has not changed

Global ‘Wealth’ Destruction – World Market Cap Plunges $13 Trillion To 2 Year Lows

Since the start of June, global equity markets have lost over $13 trillion.

(The last time global market dropped this much – Bernanke unleashed QE2)

World market capitalization has fallen back below $60 trillion for the first time since February 2014 as it appears the world’s central planners’ print-or-die policy to create wealth (and in some magical thinking – economic growth) has failed – and failed dramatically.

The Indian equity market does have appeal, but that is priced in

There are some good reasons for buying India. For one, companies there should improve their earnings at a healthy pace. Profit estimates, according to Credit Suisse, should compound at 12 per cent annually over the next two years. That compares well with the broader emerging markets at just 3 per cent.

Another reason: portfolio managers have relatively few options. India is the fourth-largest among the investable emerging markets. The largest three — Hong Kong/China, South Korea and Taiwan — represent more than half of the index. Each has strikes against it, either due to China’s perceived economic weakness or Japan’s more competitive currency. Add in commodity-dependent markets such as South Africa and Brazil, and almost two-thirds of the index looks unattractive to those seeking some decent growth.

India, on the other hand, has plenty of technology and service companies, relatively little China exposure and few commodity companies clogging up its index. Yet fund managers already own a lot of India. Relative to the MSCI emerging markets index, the average emerging market portfolio holds double the benchmark of 9 per cent.

Moreover, the price for that added earnings pace looks a tad high. MSCI India trades at 17 times estimated earnings, a 60 per cent premium to the broader emerging markets index that is near five-year highs. Fifteen years ago the market demanded a discount.

India’s equity market has some appeal for those wearing rose-tinted glasses. Unfortunately, that allure seems fully priced into shares.


Warning From IMF -World set for emerging market mass default

The International Monetary Fund (IMF) has issued a double warning over higher US interest rates, which it said could trigger a wave of emerging market corporate defaults and panic in financial markets as liquidity evaporates.

The IMF said corporate debts in emerging markets ballooned to $18 trillion (£12 trillion) last year, from $4 trillion in 2004 as companies gorged themselves on cheap debt.

It said the quadrupling in debt had been accompanied by weaker balance sheets, making companies more vulnerable to US rate rises.

“As advanced economies normalise monetary policy, emerging markets should prepare for an increase in corporate failures,” the IMF said in a pre-released chapter of its latest Financial Stability Report.

Emerging market corporate debt has grown to $18bn  Photo: International Monetary Fund

PIMCO on the Federal Reserve ‘phantom rate hike’ & how its caused market volatility

Tony Crescenzi at PIMCO has written a useful piece. He argues that current “market volatility has been rooted in a phantom rate hike from the Federal Reserve”.

  • In markets the anticipation of an event can invoke the same response as the real thing (market participants seek to discount the future)
  • In 2015, market volatility has been rooted in a phantom rate hike from the Federal Reserve
  • the Fed has been ringing a bell to warn markets that it is on the verge of raising interest rates
  • Anticipation of the Fed’s rate hike isn’t the cause of market volatility, it has been a catalyst
  • Biggest fallout from the Fed’s phantom rate hike has been in China
  • We believe markets are likely to remain volatile while they adjust

There is much more at the (ungated) article and its worth a read in full: In 2015, Volatility from a Phantom Rate Hike 

Crude Tumbles After API Reports Surprisingly Large Inventory Build

After 2 weeks of solid drawdowns, API reports a huge 4.6 million barrel inventory build last week – the 2nd biggest weekly build in over 5 months. Crude prices are dropping on the news…

And as expected crude tumbled…