Investment in BSEL Infrastructure can double your money

As can be seen from the chart BSEL Infrastructure deflated from 55 to below 10, investors who bought in at 55 suffered a loss of above 80% if they exited the stock at below 10 Rs. The misery of the investors who bought in at the all time high of above 118 and are still holding it could not be expressed in words. Anyways after hitting a level of below 10 Rs, the return on investment given by the stock to first time investors who bought in March 2009 beat the return on investment which the index gave. Loss from 55 to below 10 stands at above 40 and when the stock traded at 28 in June 2009 it covered 50% of this loss. The Stock again traded in the red and almost gave away its 50% value to trade at 15 in July 2009. The stock has traded between the levels of 15 to 23 from that point onwards.

You can notice from the chart that the stock which saw a accelerated deflation of prices from 22 to 17 and 19 to 15 is slowly losing it momentum. While deflation in prices from 22 to 17, 19 to 16 took place in matter of days, A move from 17 to 15 , consumed much more time then the first three downmoves, the stock seems to taking support at 15 Rs levels and might hit 19 which would be our target 1, 23 our next target 2 in a matter of days. Since the June 2009 top of 28 has not been tested that levels could be our last target.

DLF target 340, 392 stoploss 298

The accelerated speed with which DLF lost value for its investors in January has began to diminish in February. Selling by investors seems to have lost momentum and value buying seems to be emerging. Buy DLF with stoploss 298, first target 340 and next target 392. At 340 return on investment stands at 9% while at 392 return on investment is above 25%

Dow Jones 1929 Correlation Current Dow Jones

Investors trading the Dow Jones at 14000 in October 2008, were seen exchanging the Index for money, or the other way round money for the Index at below 7000 in October 2009, If we keep a track of Dow Jones Index from 1980 to 2008, this was the biggest negative return the Index gave to the investors in the close to 3 decades between 1980 to 2008, but the losses the investors digested in Dow Jones Index were comparatively less compared to the losses the Investors holding ETF’s of Emerging Markets had to digest, for e.g. The Sensex which stood at 21000 in January 2008, the investors exchanged money for the Index at below 8000 in Oct 2008, and if currency is taken into consideration then the loss was even for magnified as while 38 Rupees were equivalent to 1 Dollar in January 2009, the investors by Oct 2009 felt that 50 Rupees should be paid to buy a 1 Dollar worth Investment. This meant that the Sensex gave 70% negative return on investment, but still the losses made by the investors having there investments placed in stock markets could not outpace the Great Depression period losses, As during the Great Depression period the Investments made in Dow Jones Index saw loosing close to 90% of there value in more than 2 years between 1930 to mid 1932.

Now here starts our real topic, after the initial crash the Dow traced back more than 50% of its loss and then onwards the investors not owning the index could not pile up the cash or were hoarding cash instead of the Dow Jones Index, at the same time the Government policies at that time might have given the investors already invested in the Dow the willpower to hold the investment, as the investment would cut down losses and create profits, so what if the investment comes cost to cost 25 years latter. The Dow Jones traded narrowly for the next 15 years an could break past the initial cost of investment made in 1930 only 25 years latter in 1930.

Now how is the current situation comparable to 1929, If we make some adjustments then it is, Dow Jones has been trading in a narrow range for the period between 2000 to 2006, The investors who had invested in 2000 saw some profits on investment by 2007, but those who didn’t book profits by 2008 end, and then did not wish to exchange cash for index till they saw 14000 again are still holding the investments, so if we consider 2007 end as 1929, early 2009 as 1932, then by 2025 the Dow Jones could break past 14000 and it could be the time to trade between 10 to 11K for 5 years and other 10 years between 6.6K to 10K.

Can the USD and the US Markets both underperform Emerging Markets Currencies and Emerging Markets Assets?

Visit any financial website, ask any financial commentator or investment guide or expert about where the Dollar is headed, there would be no debate, the answer would be unanimous, the jury would be don’t buy the dollar, don’t buy any assets having there value in dollar, you will also find that gold bulls advocating buy the gold, but don’t buy it in dollars, buy physical gold, but are the dollars fundamental so weak against every currency in the world, have the analysts forgot that while the United States might be the debtor nation of the world, it is the investor nation of the world, have you read the explanation given by these same analysts for the boom and busts in the emerging stock markets, Isn’t any rally in the stock markets explained as foreign investors dumping the dollar and running for riskier assets in the emerging markets, what about the crash, isn’t it explained as foreign investors dumping the riskier assets for the safety of the safe haven called US dollar, now who are these foreign investors definitely they are not we Indians, nor are they our neighbors Chinese, and the Brazilians who have seen there stock markets skyrocket, are definitely not looking for inflation outside, so who are they? They are the Investment banks, hedge funds, fund managers and whose funds are they investing, the funds of US citizens or developing world nation citizens, what is there share in the market capitalization of the Emerging Markets space, lets have a look at Indian Stock Market, the Market Capitalization of all the firms listed on the Bombay Sock Exchange (BSE) is above 1 Trillion USD, the biggest Indian Company by Market Capitalization is Reliance Industries and Foreign investors hold about 16.5% of the Company, ICICI Bank, its one of the largest banks, Foreign Investors hold about 35% of this Bank, HDFC the biggest home mortgager of India, Foreign Investors hold about 59% of the Companies Market Capitalization, The biggest Outsourcer of IT solutions from India, Infosys, Foreign investors hold about 36% of Infosys, Except the PSU’s like ONGC, BHEL, NTPC which together have around 20% weightage in the Sensex and public shareholding is just about 20% and hence the Foreign Investors holding is quite low, most other largecap and midcap companies have more than 15% of there equities in possession of Foreign Investors, If we take 15% as an average estimate of Foreign investors holding in India’s Market Capitalization, Foreign investors hold about 150 billion USD equity assets in India.

Now the Foreign Investors are not just investing in India but all over the world, if we take the average estimate as 15% market capitalization of emerging markets is hold by foreign investors, then lets calculate how much the Foreign Investors hold, China and Hong Kong have market capitalization of around 2 Trillion USD, Korea has total value of equities on its bourses as 1 Trillion USD, Brazil has market capitalization of around 1 Trillion USD, also a point to be noted here is that the total market capitalization of the World might be standing close to 50 Trillion Dollars and out of that close to 40% would be contributed by emerging markets, so around 20 Trillion Dollars is the total market capitalization of the emerging markets space and 15% of that is hold by US and developed nations citizens so around 3 trillion USD is what the US citizens can get if they sell all there holding in the Emerging Market space.

According to http://en.wikipedia.org/wiki/United_States_public_debt China with 800 Billion USD is holding 23.35% of the total US Foreign debt, which means The United States owe the World around 3.3 Trillion USD, while they can recover near about the same amount if they sell there assets all over the world, So its not just that United States is Fishing in troubled waters, All the World is fishing in the troubled waters, albeit US is in the drivers seat so in fact it knows beforehand when the vehicle is going to crash, now I am not telling that the USD wouldn’t crash, I am just suggesting that USD wont crash with the Emerging Markets Stock Indices rallying, it could be like the USD crashing and the Dow Jones Index gaining 2% while the Emerging Markets Index rally 1%, why because If US Federal Reserve prints money, The USD would crash, The US would face inflation, and inflation more than what the world would be facing, which means the US assets would be inflating more than the assets round the world, which means investors in search of more returns on there investment would park there money in US assets while dumping the Emerging markets space. Summing up don’t dump the USD and the US assets at the same time.