Wednesday, October 13, 2010

QE2 & Bigger Fool Theory:

Asset prices around the world r moving north because of Quantitative easing.
Desperately ill patients are willing to try drugs that have not been shown to be either effective or safe. Even dodgy medicines look better than the alternative. As countries’ financial systems remain immobile in the face of standard monetary policy treatment, more are turning to “quantitative easing” as a therapy of last resort. The US Federal Reserve is already trying it out. The Bank of England is likely to follow. The European Central Bank probably won’t, because it isn't sure the politicians would back it.
Quantitative easing is the modern way to print money. The central bank doesn’t actually have to use a four-colour press to spew out crisp notes. There are more sophisticated ways to boost a nation’s money supply. But ultimately the impact is not very different from dropping dollar bills from a helicopter as Ben Bernanke once described this policy before he became the Federal Reserve’s chairman.
Greater Fool Theory
The idea that there is always a buyer for a security who will pay a better price than the seller paid. That is, the greater fool theory states that if an investor buys a security at a high price, he/she will be able to find a buyer who will pay an even higher price. The origin of the theory's name comes from the idea that if an investor makes a foolish decision to buy an expensive security, he/she can find a greater fool to take it off his/her hands. The greater fool theory is important to the formation and continuation of speculative bubbles, and only works until the bubble bursts.
Play this Bull Run till the music is ON .
Atul Sikrai
Sr Vice President & Head -Equity
wiTdom investment advisory.

Thursday, October 7, 2010

Dark Eagle is on Hunt.

We r proud to say that our prediction of Bull market done in August blog was to the perfection.We saw Nifty touching our Target of 6066 and our dark horse Bharti Airtel made a killing by stock zoomong up giving us great gains.

Today, we’re detailing why stocks will Crash this month in October. As you know the media is rife with folks calling the end of the recession and the beginning of a new bull market. It’s clear to me that this is a load of nonsense. Today I’ll show you why
Because a lot of the alleged “analysis” that is backing up the bulls’ claims of a new bull market comes from technical analysis and charts, I’m presenting the below chart from. It charts today’s bear market over that of 1929-1932.
They’re listening now.
Please notes that from October 29, 1929 until November 13, 1929, the stock market collapsed 48% (the 2008 Crash was 52%). Then from November 1929 to April 1930 the market staged a 155-day rally of 50%. Today’s rally (starting in March ’09) has lasted 150 days and the market is up an average of 50% (average of Nasdaq, DJIA, and S&P 500).Unfortunately for the bulls today, the 1929 market then rolled over and collapsed another 70%. “Bottom callers” INCLUDING legends like Jesse Livermore, Benjamin Graham and others bought ALL THE WAY DOWN, losing entire fortunes.

Potential Causes of a Double-Dip Recession
U.S. Residential Real Estate.
Top this with the next wave of ARM-foreclosures and the “recovery” doesn’t look like much of a recovery at all. There are expected to be another 7 million foreclosures throughout the U.S. continuing into 2010 and 2011.
U.S. Commercial Real Estate.
Commercial real estate, largely in the U.S. but to some potential degree in Canada as well, is widely expected to be running into some problems soon as retailers’ earnings fail to recover very quickly in light of continued consumer spending weakness.
Oil Prices/USD relationship.
I haven’t heard any analysts who expect to see oil at $147 anytime again soon, but it is not uncommon to hear forecasts of $90 already during 2010. Right now, $80 seems to be an important psychological and technical resistance level. Once safely broken, oil could easily pop to $90 by the end of the year.

Worsening Unemployment.
We can talk about a “jobless” recovery all we want, but consumer spending still comprises 70% of the U.S. economy. When higher percentages of these consumers don’t have jobs, we are left with either a shrinking GDP or the US government doing more of that spending on consumers’ behalf.
Another Rush to the Dollar? .It is possible that another market crash might send global wealth rushing back into the US dollar, as it did in October 2008, but I wouldn’t bet on it. If anything, it will cause central banks to rush into gold now that it is clear where the economic troubles really lie and most structural problems have been fixed around the world.

One of the biggest wory for me is Education loan default in United States Of America which i predict as another subprime crisis.So caution is the name of the game .we suggest u to take yr money home and enjoy this money with yr family .

Happy Navratri and Diwali to all.

Atul Sikrai

Sr Vice President & Head of Equities

wiTdom investment advisory.