Archives of “stock” Tag

China stockmarket opening indications – Shanghai Comp to open up 1.7% (All Asian Indices in Green )

Opening indications for Chinese stockmarkets:

  • Shanghai Comp to open up 1.7%
  • CSI300 index to open up 2.2%

–Meanwhile, elsewhere around the place a few minutes ago …

Stocks in:

  • Japan up 2.8% (getting the gold medal so far)
  • Korea up 1.1%
  • Singapore up 2.2%
  • Taiwan up 1%
  • Australia (take a bow … ) up 1.6%

“Don’t marry hot stocks, just date them.”

  1. Hot stocks are only good when they are in up trends, when the party is over you have to break up with them.
  2. Hot stocks are great to trade in and out of but you don’t want to turn them into a life long investment.
  3. A good stock might look great on the outside with it’s price action but it may not have the best fundamentals for getting serious with.
  4. Hot stocks are great for the short term but for the long term you want a solid investment.
  5. Be careful with hot stocks they may look great on the outside but they can break your heart at any moment.
  6. A hot stock can be a lot of fun for awhile but they can be a lot of drama when no one wants them anymore.
  7. As long as a hot girlfriend is very popular  she will be happy but when no one wants to date her she goes into a downward spiral. This applies to hot stocks as well. 

Markets Will Be Markets

The stock market is bipolar creature, driven by sentiment and irrational expectations. One day, it is an ingenious forward-looking mechanism that anticipates and discounts future events beautifully. Another day, it is a stubborn schizophrenic that can’t see further than its nose.

Markets constantly overreact to both, identified risks and opportunities. It is in the nature of financial markets to exaggerate, to magnify. This is why they are not always discounting the future. Sometimes, they are correcting previously incorrect view. Sometimes, they just go bonkers and send prices to levels that cannot possibly be justified by any future scenario. Boys will be boys. Markets will be markets. They’ll fluctuate violently, up and down and to levels that will seem incomprehensible to many. Indexing, robo-advising and social media won’t change that. The Internet might have made people smarter; but it hasn’t made financial markets more efficient. You could complain and whine about financial markets’ irrationality or you could find a way to take advantage of it. Or don’t. It’s your choice.

If you understand people’s incentives, you are very likely to predict correctly their future behavior and sometimes even influence it. Most incentives have expiration date. What is important today, might not be as important tomorrow. This applies perfectly to life, but not always in financial markets that live in their own world. Incentives require the existence of rationality. We have already made the point that more often than not, markets are not rational, but emotional, at least in a short-term perspective. As Howard Marks eloquently puts it:

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European Indices go into orbit on Greek deal hopes

European stock market close 22 June 2015

  • FTSE +1.7%
  • Cac +4.1%
  • Dax +3.9%
  • Ibex +4.1%
  • FTSE Mib +3.5%

European bonds

  • Italy 2.16% -12bp
  • Spain 2.12% -16bp
  • Portugal 2.80% -24bp
  • Germany 0.882% +13bp
  • Greece 11.18% -148bp

The Athens stock exchange had been up over 10% until a bout of profit taking knocked it back slightly

European Indices can’t shake that sinking feeeling

European stock market close 17 June 2015

  • FTSE -0.4%
  • Cac -1.0%
  • Dax -0.7%
  • Ibex -0.1%
  • FTSE Mib -0.7%

European bonds

  • Italy 2.31% -2bp
  • Spain 2.33% -2bp
  • Portugal 3.17% -5bp
  • Germany 0.812% +1bp
  • Greece 13.01% +7bp

The bright spot for European stocks is holding up above yesterday’s lows. We’re still in no mans land though while Greece is front and centre

Strategic Debt Restructuring Rules by RBI -Much Ado About Nothing

The Strategic Debt Restructuring Rules by RBI – Banks Will Convert Debt to Majority Equity

There’s a new law in town. It’s a Strategic Debt Restructuring proposal by RBI.

It’s kinda boring to go through the whole thing. But we think there’s no harm trying. So, here’s the gist.

  • When companies can’t repay their loans, the banks take “sacrifices” to restructure the loans. Some might be in terms of a late payment, others in the form of lower interest rates or forgiven principal.
  • Many companies, despite such sacrifices by banks, don’t rejuvenate themselves because of inefficient management.
  • In some other cases, companies don’t meet the milestones they agree to in the loan restructuring agreement.
  • RBI has decided to ensure that in these above cases, banks can change the ownership and management of the companies whose loans are restructured.

Woohoo! How can banks change ownership?

  • When banks restructure any future loans, they have to put a clause telling the promoters that “we will convert our loan to shares in case you don’t meet your commitments”. And they put milestones and critical conditions to mark the progress.
  • Companies will need to get authorization for this through a special resolution (since doing the above will dilute existing shareholders) before they restructuring.
  • Such a mandate means the lenders get majority (51%) ownership.
  • Banks cannot restructure loans without such authorization. It’s mandatory.
  • If the company doesn’t meet the milestones or critical conditions, the Joint Lenders Forum should meet, and decide within 30 days whether or not to take over the company by converting their loans to a majority shareholding.
  • Then the banks get another 90 days to approve the conversion.
  • Then they get a FURTHER 90 days to actually convert the loan to shares.

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“I can only trade in accordance with the experience of many years” – Reminiscences of a Stock Operator

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8 Stock Market Sayings That Should Be Questioned

8) There is a lot of cash on the sidelines.

There is always a lot of cash on the sidelines and that never changes. The buyer of a stock, thus taking cash off the sidelines, gives it to the seller who puts it back on the sidelines.

7) There are more buyers than sellers (or vice versa).

Maybe technically there are more bodies buying or selling than the other side but the number of shares traded has to be exactly the same as for every share bought is a share sold. It’s the aggressiveness of one side or the other that matters.

6) Stocks are attractive because they aren’t quite as overpriced as bonds.

If bonds are artificially priced, shouldn’t stocks be? Overpriced though can of course remain overpriced.

5) The higher stocks go the more attractive and less risky they are.

For long term investors, the more one pays in price today with respect to valuation, the less return they should expect in the future.

4) Stocks aren’t expensive because they are still cheaper than the valuations seen in March 2000.

Really?

3) There is no alternative.

In bull markets there is always no alternative to common stocks. In bear markets, there are always alternatives.

2) We’re going to get a rotation into stocks and out of bonds.

For every portfolio rotating out of bonds has to see someone rotating in and that buyer of stock has someone rotating out. Again, it’s the aggressiveness of the moves that matter.

1) The selloff in stocks was profit taking.

Does anyone refer to a rally as profit seeking?

India: Where’s The Cheese?

We have increased the weight of IT stocks such as Infosys and Wipro by 100 bps, taking IT to a more neutral position versus underweight previously. Despite risks to near-term earnings from cross-currency movements (largely factored in our assumptions) and short-term demand issues in certain consumer sectors (energy, telecom), we believe investors may be better off keeping some USD hedges in their portfolio. The strengthening of the INR versus other currencies and stability versus the USD may reverse if crude oil prices go up further and if there is global volatility on renewed speculation on ‘Grexit’.  
We have increased Maruti’s weight by 100 bps, noting the company’s strong suite of new products, which are likely to drive volumes in FY2016E. Valuations are not cheap and overall market volumes may disappoint.

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Closing changes for the main European bourses

  • UK FTSE -0.4%
  • German DAX -0.2%
  • French CAC +0.3%
  • Italy MIB +0.6%
  • Spain IBEX +0.6%

Slight pullback in German shares after a record high on Friday. There’s nothing a 21st century stock market likes more than cheap money and a falling currency, especially if you’re in the business of exporting.