Trading is injurious to wealth !

Want proof, read this.

http://online.wsj.com/article/SB10001424127887324059704578471154109438438.html

The quandary that retirees face !

The current low interest rate environment has significant impact on people close to retirement
especially if they're entirely dependent on income from bond investments. An article in this regard.

http://finance.yahoo.com/news/retirees-million-dollar-illusion-162848734.html?page=1

Yoga for better investing returns !

I'm not sure if the returns are in direct proportion to the time spent on Yoga, nevertheless any
exercise helps keeping cool.

http://online.wsj.com/article/SB10001424127887324798904578529302166205428.html

Words of wisdom from some of the great minds !

George Soros: Good investing is boring.
If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.
Howard Marks: Investing is about more than selecting the asset.
Smart investing doesn't consist of buying good assets, but of buying assets well.  This is a very, very important distinction that very, very few people understand.

Jack Bogle: Losses are a reality of the market.
If you have trouble imaging a 20% loss in the stock market, you shouldn't be in stocks."

Bob Farrell: Don't join the herd
The public buys the most at the top and the least at the bottom." And, "When all the experts and forecasts agree – something else is going to happen.

Jeremy Grantham: Recognize your advantage over professionals.
By far the biggest problem for professionals in investing is dealing with career and business risk: protecting your own job as an agent. The second curse of professional investing is over-management caused by the need to be seen to be busy, to be earning your keep. The individual is far better-positioned to wait patiently for the right pitch while paying no regard to what others are doing, which is almost impossible for professionals

John Templeton: Don't forget about taxes.
For all long-term investors, there is only one objective – maximum total real return after taxes.

Barton Biggs: There are no relationships or equations that always work
Quantitatively based solutions and asset allocation equations invariably fail as they are designed to capture what would have worked in the previous cycle whereas the next one remains a riddle wrapped in an enigma

Benjamin Graham: Beware of forecasts
It is absurd to think that the general public can ever make money out of market forecasts

Philip Fisher: Know the value of your investments
The stock market is filled with individuals who know the price of everything, but the value of nothing

Warren Buffett: Be greedy when others are fearful
Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful

Ken Fisher: Keep history in mind.
You can’t develop a portfolio strategy around endless possibilities. You wouldn’t even get out of bed if you considered everything that could possibly happen..... you can use history as one tool for shaping reasonable probabilities. Then, you look at the world of economic, sentiment and political drivers to determine what’s most likely to happen—while always knowing you can be and will be wrong a lot
Charles Ellis: Invest for the long run.
The average long-term experience in investing is never surprising, but the short term experience is always surprising. We now know to focus not on rate of return, but on the informed management of risk

Bill Miller: Think about how the market reflects information
The market does reflect the available information, as the professors tell us. But just as the funhouse mirrors don't always accurately reflect your weight, the markets don't always accurately reflect that information. Usually they are too pessimistic when it's bad, and too optimistic when it's good."

Thomas Rowe Price Jr.: Know who's running the business, and why.
Every business is manmade. It is a result of individuals. It reflects the personalities and the business philosophy of the founders and those who have directed its affairs throughout its existence. If you want to have an understanding of any business, it is important to know the background of the people who started it and directed its past and the hopes and ambitions of those who are planning its future

Carl Icahn: The corporate governance system is not your friend.
We have bloated bureaucracies in Corporate America. The root of the problem is the absence of real corporate democracy

Peter Lynch: Do your homework.
Investing without research is like playing stud poker and never looking at the cards.

John Neff: Do what's smart, not what's popular.
It's not always easy to do what's not popular, but that's where you make your money. Buy stocks that look bad to less careful investors and hang on until their real value is recognized.

Henry Kravis: Be honest.
If you don't have integrity, you have nothing. You can't buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing

Ray Dalio: Understand the system.
An economy is simply the sum of the transactions that make it up. A transaction is a simple thing. Because there are a lot of them, the economy looks more complex than it really is. If instead of looking at it from the top down, we look at it from the transaction up, it is much easier to understand."

Isaac Newton: Markets are irrational.
I can calculate the movement of stars, but not the madness of men.

Mark Twain: We can learn from the past.
History does not repeat itself but it does rhyme

investing - psychological barriers

http://seekingalpha.com/instablog/589999-nathan-kawaguchi/60334-psychological-barriers-to-successful-investing

Self assessment in investing !

An article in WSJ about the influence of  the psychological / emotional factors in investing and how we can assess ourselves in certain aspects.

 

 

http://online.wsj.com/article/SB10001424127887323415304578368362532120512.html

India GDP - historically

India GDP data historically.  It's worth watching that GDP trend particularly after the reforms undertaken by India in the early 90s.

http://www.tradingeconomics.com/india/gdp

Super investor, Walter Schloss passes away at 95

I read about Walter Schloss obituary in a business publication and felt like I should share this. He is not really popular unlike many famed investors and was a student of  Benjamin Graham and a close friend of
Warren Buffett. You could find more about this amazing investor online. A bloomberg article in this regard.

http://www.bloomberg.com/news/2012-02-20/walter-schloss-superinvestor-who-earned-buffett-s-praise-dies-at-95.html

Simple investor - astounding returns !

With the recent financial crisis and the most recent volatility of the past few months, the prevailing belief is that the stock market is rigged and the odds are heavily stacked against the small investor. But the smaller size is a significant advantage compared to big funds which has already been discussed in other articles in this blog, and this is more so in a volatile environment we've recently experienced.

Here is a recent article about a small fund with solid returns and is being run far away from Wall Street.

http://www.smartmoney.com/invest/strategies/the-400-man-1328818316857/

Recent Market Rally !

Many investors would have caught off guard with the recent market rally, and the lingering questions in their minds now is if this will sustain or a pull back or some sort of correction would ensue.  Many talking heads in the mainstream media will give their predictions, but as Buffett always says it tells more about the forecaster than the forecast itself. Even with the recent rally stocks are not expensive from a valuation standpoint and they could still be bought at these levels. Well, if the intent is to speculate it's a different matter altogether, but if you're time horizon is  atleast 3 to 5 years and probably beyond, you could buy some of these stocks that are at reasonable valuation levels.

Some stocks that I think are at reasonable valuation levels are.
CSX
NSC
TIF
WBC

Stocks of Interest !

These stocks are at reasonable valuations currently. If they go down after you buy, they are even more
attractive than your initial purchase and you should be buying more. These stocks may not be high fliers like
Apple or the latest crop of IPOs but they have solid fundamentals.

CSX
NSC
TIF

An investment perspective - Stocks Gold Currencies

This is an excerpt from the shareholder letter of Berkshire Hathaway. Buffett's thesis on stock investment versus investing in gold and currencies.

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/

Experts in the Investment world !

These are the people in the investment world worth listenening to.

David Rosenberg ( Morgan Stanley )
Chris Walen ( Risk Analytics )
Abby Joseph Cohen ( Goldman Sachs )
Bill Ackman ( Pershing Square HF)
Dick Bove
Doug Kass ( Seabreeze Partnerns )
Nariman Behravesh
Barry Rhitoltz
Sarath Sethi
Barton Briggs
Michael Mouboussin
Ed Yardeni ( Yardeni Research )
Byron Wien
David Katz
Howard Silverblatt
David Kotak ( Cumberland Advisors )
Wilbur Ross
Barton Briggs
Richard Bernstein
Tobias Lekovich ( Citigroup )
David Einhorn ( Greenlight capital HF )

Housing Market

The housing affordability index hit 183.7 in August 2011 indicating how much the affordability has increased which also indicates the tremendous drop in house prices. The historic average has been around 120. From 1997 to 2007, US household debt ballooned from 66% of economic output to 98% according to the Federal Reserve data.

Market Volatility

Since 1972, median correlation of S&P stocks to the S&P index itself over any past months has been at 0.46, meaning 46% of stocks moved the same way as the index. It hit 0.86 in October 2011, a level exceeding the 1987 October crash and one usually associated with crash like days.

Energy snapshot of the US - Encouraging signs !

U.S petroleum imports on  a net basis peaked at 60% of domestic consumption in 2005 and are now down to 46%. US crude oil output rose 18% since 2008. With the recent advancements in drilling technology over the past decade, especially the fractured drilling or fracking, the domestic oil and gas output is projected to increase significantly in the coming years.

US oil imports  country wise.

Canada                     25%
Persian gulf               16%
Mexico                     11%
Venezuela                 9%

R & D spending stats !

Spending on research and development is one of the crucial factors in attaining the competitive edge for most of the big companies, particularly for the multinationals. Total R & D spending globally is projected to increase by 5.2 % to $ 1.4T in 2012. U.S share historically has been a little over 30% of the global spending in R&D. In 2005, the U.S and Canada were home to roughly 1050 of the world's 2500 biggest companies and it fell to 750 by 2010

Projected R&D spending  for 2012 overall across the world.

U.S        $ 436 B
EU         $ 338 B
Asia       $ 514 B

Imaginary Profits only - IPO

Many investors get excited about buying IPO stocks with the basic premise that it's a great bargain, but most often than not it's a terrible time to buy a stock. There are various reason  why average investors should be cautious about buying in the initial offering due to various reasons some of which are the timing of the IPO, the size, market dynamics and the overall investment climate. Ideally any company becoming public would want to do so during a bull maket, or during normal times when there is a reasonable investor demand for IPO stocks and these investors could be both individual or institutional. Until a company becomes public, there is not much information available about the company especially the not so good things about it. Once it's public there is more information available about the company and its operations and also it has to face the acid test of being public - SEC regulations, disclosures etc. and the market wrath in general. That is the reason why most companies after becoming public see their stocks get a beating in a short time, ofcourse exceptions always exist in the form of Microsofts, Googles, Chipotles etc and as good as they are they are rare as well. But most often investors get sucked into these IPOs and if you think you can be successful betting on exceptional situations, you wouldn't be reading this in the first place. The basic fact is that when something is being sold, other factors being normal the timing of the selling occurs in the best possible times and there is no one else besides the seller who knows how good  the stuff really is, so buyers beware.

Falling in love with one or two lousy stocks !

Most often average investors fall in love with stocks like Bank of America or Citigroup etc. just because they are trading in low single digits. But considering how much shared holder wealth they have destroyed and the significant drop in the share price, it's pretty clear how risky sticking to one or two companies with lousy characteristics. The market at times does not show distinction between quality and junk especially during good times when everything seems to be going fine and nothing could go wrong - yes, it's the same movie we have seen in 2008. Especially with the new regulations taking hold, the profitability of the financial institutions is not going to be what it was before the financial crisis when credit was flowing freely and lax regulations -basically free liqour era. It's always better to have very small portion of your portfolio in these kinds of stocks.

Warren Buffett - temparament !

People like to ask Buffett how he values an investment, but a question like that is not too meaningful. He does not do it any differently than an average investor. In fact, his investment calculation model is probably the same as what we all learn from financial textbooks. The real distinction, then, is how Buffett equips himself with the right mental capacity to stick to his investment principles year after year, regardless of the prevailing environment.

This does not mean that he is stubborn or unconcerned about the ever- changing market dynamics. Instead, he maintains the same attitude toward investing while evolving along with the market. Temperament is what makes Buffett an investment genius. He understands well enough that evaluating a business is not difficult.

While anyone who has observed Mr. Buffett over the years knows that his temperament is a major asset, there is a risk of glossing over his superior business insights if we attribute the bulk of his success to this one factor. Understanding a business is not inherently easy and requires a tremendous amount of accumulated knowledge. The circle of competence of any investor depends on years of experience and effort. Making the appropriate judgment regarding key factors involved in valuation is anything but easy.

Advanced mathematics is not required to succeed in the field of investing, nor is it important to know everything about all industries. Indeed, no one including Mr. Buffett has the ability to evaluate all businesses. The key factors for success involve working hard to define your circle of competence and to always try to expand it. There really is no substitute for years of experience which is why Warren Buffett and Charlie Munger are only getting better at their jobs as they get older.

Global consumer spending - investment perspective !

The middle class in Asia will make up the majority of 2030 consumer spending, according to an OECD estimate. The break up of this spending in 2009 and what  it would look like in 2030  by regions on a purchasing power parity basis. This is based on the current assumptions and there could be some deviation to these projections, however the trend would pretty much be the same with Asia Pacific growing at a staggering pace. Multi national companies expanding globally especially outside the US and EU will grow significanly in the next decade and beyond.

Estimated spending region wise by 2030 vs spending in 2009.

Year            Total            NA          EU            Asia P          CA/SA       ME / NA        SSA                    
2009           $21.3           $5.3         $8.1          $4.9             $1.5            $0.9               $0.4               

2030           $55.7           $5.6         $11.1        $32.9           $3.3            $2.2               $0.6

Note  : On a PPP  basis in trillions.

Right to Information Act in India - consequences to whistle blowers !

It has been the most powerful legislation and the best evidence to this is the unraveling of the 2G scam. But in some circumstances the whistle blowers are facing bitter consequences, even death in some instances.  A Business week article on this.


http://www.businessweek.com/magazine/in-india-whistleblowers-pay-with-their-lives-10202011.html

Right to Information Act in India - impact and consequences to whistle blowers !

A Business week article on this.


http://www.businessweek.com/magazine/in-india-whistleblowers-pay-with-their-lives-10202011.html

S&P Earnings - Dividends historically

Year	Earnings Yield	Dividend Yield	S&P 500	Earnings	Dividends
1960	5.34%	3.41%	58.11	3.10	1.98
1961	4.71%	2.85%	71.55	3.37	2.04
1962	5.81%	3.40%	63.1	3.67	2.15
1963	5.51%	3.13%	75.02	4.13	2.35
1964	5.62%	3.05%	84.75	4.76	2.58
1965	5.73%	3.06%	92.43	5.30	2.83
1966	6.74%	3.59%	80.33	5.41	2.88
1967	5.66%	3.09%	96.47	5.46	2.98
1968	5.51%	2.93%	103.86	5.72	3.04
1969	6.63%	3.52%	92.06	6.10	3.24
1970	5.98%	3.46%	92.15	5.51	3.19
1971	5.46%	3.10%	102.09	5.57	3.16
1972	5.23%	2.70%	118.05	6.17	3.19
1973	8.16%	3.70%	97.55	7.96	3.61
1974	13.64%	5.43%	68.56	9.35	3.72
1975	8.55%	4.14%	90.19	7.71	3.73
1976	9.07%	3.93%	107.46	9.75	4.22
1977	11.43%	5.11%	95.1	10.87	4.86
1978	12.11%	5.39%	96.11	11.64	5.18
1979	13.48%	5.53%	107.94	14.55	5.97
1980	11.04%	4.74%	135.76	14.99	6.44
1981	12.39%	5.57%	122.55	15.18	6.83
1982	9.83%	4.93%	140.64	13.82	6.93
1983	8.06%	4.32%	164.93	13.29	7.12
1984	10.07%	4.68%	167.24	16.84	7.83
1985	7.42%	3.88%	211.28	15.68	8.20
1986	5.96%	3.38%	242.17	14.43	8.19
1987	6.49%	3.71%	247.08	16.04	9.17
1988	8.69%	3.68%	277.72	24.12	10.22
1989	6.88%	3.32%	353.4	24.32	11.73
1990	6.86%	3.74%	330.22	22.65	12.35
1991	4.63%	3.11%	417.09	19.30	12.97
1992	4.79%	2.90%	435.71	20.87	12.64
1993	5.77%	2.72%	466.45	26.90	12.69
1994	6.91%	2.91%	459.27	31.75	13.36
1995	6.12%	2.30%	615.93	37.70	14.17
1996	5.49%	2.01%	740.74	40.63	14.89
1997	4.54%	1.60%	970.43	44.09	15.52
1998	3.60%	1.32%	1229.23	44.27	16.20
1999	3.52%	1.14%	1469.25	51.68	16.71
2000	4.25%	1.23%	1320.28	56.13	16.27
2001	3.38%	1.37%	1148.09	38.85	15.74
2002	5.23%	1.83%	879.82	46.04	16.08
2003	4.92%	1.61%	1111.91	54.69	17.88
2004	5.58%	1.60%	1211.92	67.68	19.407
2005	6.12%	1.79%	1248.29	76.45	22.38
2006	6.18%	1.77%	1418.3	87.72	25.05
2007	5.62%	1.89%	1468.36	82.54	27.73
2008	7.24%	3.11%	903.25	65.39	28.05
2009	5.45%	2.00%	1115.1	60.8	22.31
2010	6.65%	1.84%	1257.64	83.66	23.12

Big pension funds investing - a perspective !

An illustration of the dispartities between individual investor and big pension funds especially the limitations the big funds have.

http://finance.yahoo.com/focus-retirement/article/113514/risks-investing-like-big-pension-funds-nytimes?mod=fidelity-buildingwealth&cat=fidelity_2010_building_wealth

India - 3rd largest economy by the measure of purchasing power parity !

http://economictimes.indiatimes.com/news/economy/indicators/india-to-topple-japan-as-worlds-3rd-largest-economy/articleshow/10046943.cms

A long term perspective on stocks !

http://www.ritholtz.com/blog/2011/09/the-long-term-case-for-stocks/

Howard Mark's news letter !

Howard Marks is one of the few hedge fund managers with great insights in the world of investing. His most recent book " The most important thing " is a complilation of his regular news letters over the past 2 decades. Though the book doesn't discuss anything specific about stocks, it deals extensively about  the various risk factors, investment bubbles etc in the world of investing

http://www.oaktreecapital.com/MemoTree/What's%20Behind%20the%20Downturn%2009_07_11%20Final_watermarked.pdf

India's Black economy - Affect on the growth !

Tax evasion, corruption, red tape are rampant infact it's a way of life in India and  has huge economic implications. The past 2 decades of economic growth that India witnessed has been relatively easy starting from a very low base almost 2 decades ago starting with the economic liberalization. But repeating  these growth rates into the future is not going to be easy.  The estimated cost of over $300 billion dollars in lost revenue in evaded taxes is signficiant, almost 20% of the country's output or the  GDP. Over a 5 year period this amounts to a staggering 1.5 trillion dollars and this is more than enough to put in place a world class infrastructure in the form of better highways, ports, energy infrastructure.

A recent  business week article gives some perspective on this in good detail.

http://www.businessweek.com/news/2011-07-19/india-sees-growth-imperiled-with-greek-like-tax-evasion.html

Market plunge - An opportunity !

The market correction over the past few days is an opportunity to start buying if your investing horizon is long term which typically is not a few months or even an year for that matter, it should span atleast 3 to 5 years and even longer. The economics of a business seldom change on a daily basis unlike the stock market that overshoots towards optimism and pessimism for the most part.  Most of the good companies are having a significant correction, with some of them hovering around  their 52 week lows. Currently the S&P 500 cos  have more than 40% of sales outside the US and most of them are in a solid financial standing driven by the lessons learned hard during the credit crisis of 2008 - 09. The market correction may not be over yet,  but putting some cash to work  at these reasonable valuation levels makes sense. For an  investor with a regular job and doesn't have time or interest in doing some level of research in stocks, the best thing to do would be to keep buying index funds or stocks with similar characteristics on a regular basis. But if you're really interested in picking individual stocks, buying atleast 20 to 30 stocks of good companies is proven to be least risky. This is for adequate diversification and to withstand any company / industry specific issues that affects the overall investment return. Generally speaking, a specific sector or rather company specific issues pose huge risks to a  portfolio than the overall market risk. It has been proven beyond doubt, that to rely on very few companies is highly risky unless you're extremely knowledgeable about the economics of a specific business in all its aspects. Looking back at the collapse of companies like Lehman during the credit crisis in which many professional investors lost bigtime, it is anyone's guess as to the ability of an average investor in betting big on very few stocks. We don't know when this correction ends and how low  it can go  from here, the basic strategy is picking a bunch of stocks trading at reasonable valuation levels. When the clouds are all gone and everything is clear and sunny, bargains seldom exist and there is no formal announcement in Wall Street or main street saying the market has bottomed out and you can start buying - there won't be any sort of sirens going off indicating the maket is ready for the take off. But the big risk factor here is no one really knows how low things can go and how long before they turn up.  If history is any guide, investing during uncertain and pessimistic times has not only given good but sustainable returns. With the debt ceiling, Euro crisis, emerging market slowdowns  etc the United States is not going out of business anytime soon and  its ability to unleash the human potential has not diminished by any degree.  With this back drop here are some of the picks that are trading at reasonable valuations.

Financials / Insurance           Industrials                        Shipping / Rail roads                 
American Express (AXP)         Honey Well (HON)           United Parcel Services ( UPS )   
JP Morgan (JPM)                    Ingersol Rand (IR)              CSX Corp ( CSX )
Morgan Stanley (MS)              Eaton ( ETN)                      Norfolk Southern ( NSC )
Goldman Sachs (GS)               Emerson Electric (EMR)      Union Pacific ( UP )
Hartford Financial (HIG)          Boeing ( BA )
Lazard ( LAZ )                        Rockwell Collins (COL)
Jeffries group ( JEF )                Cummins
Equifax ( EFX )                        Illinois Tool works ( ITW )
                                                Rockwell Automation ( ROK )
Materials / Drilling                    Energy / Energy services    Fashion / Retail              
Cliff Nat resources (CLF)               Transocean ( RIG )              Aeropostle ( ARO)
Mosaic ( MOS )                             Slumberger ( SLB )              Coach  ( COH )
Kennametal ( KMT )                      Conoco Philips ( COP)         Guess ( GES )
Gerdau Steel ( GGB )                     Devon Energy ( DVN )        Tiffany ( TIF )
Freeport McMoran (FCX)             BP group                              Gap Stores ( GPS )
Nucor Steel ( NUE )                      Chevron
Posco Steel ( PKX )                       Total

Banks                                     Conglomertates - Economic Bell Weathers
US Bancorp (USB)                  General Electric ( GE )
Wells Fargo (WFC)                  Berkshire Hathaway ( BRK.B) - Class B
Citigroup (C)
ICICI Bank (IBN)

Dividend paying stocks - return potential !

With the recent turmoil the yields on many dividend paying stocks looks pretty attractive. Compared to the benchmark 10 year treasury with yields less than 3%, these companies have good dividend yields.  Most of these companies have atleast 20 year consecutive  dividend paying history with increasing dividends. In trying to pick good dividend stocks atleast a 10 year demonstrated dividend payment could be one of the criteria in the overall selection. When a company with a solid dividend history declines in price, the dividend yield increases and the stock becomes more appealing. Here are some dividend picks with decent overall return potential and I'm sure we could add some more to this list.

MMM   ABT  BA  BP  CVX KO CL DD EMR XOM GD GE GS EMR HD IR JNJ KMB LLY MCD MDT MSFT PEP PG RDS-A TOT UL UTX WMT NUE DOV WM UPS INTC GPS SNY ITW WM

S&P historic information can be obtained from
http://www.standardandpoors.com/indices/market-attributes/en/us

Dow Jones Industrial's historic declines !

On a percentage basis:
-- Oct. 19, 1987: 22.6 percent, or 508 points
-- Oct. 28, 1929: 12.8 percent, or 38.33 points
-- Oct. 29, 1929: 11.7 percent, or 30.57 points
-- Nov. 6, 1929: 9.9 percent, or 25.55 points
-- Dec. 18, 1899: 8.7 percent, or 5.57 points
-- Aug. 12, 1932: 8.4 percent, or 5.79 points
-- March 14, 1907: 8.3 percent, or 6.89 points
-- Oct. 26, 1987: 8 percent, or 156.83 points
-- Oct. 15, 2008: 7.9 percent, or 733.08 points
-- July 21, 1933: 7.8 percent, or 7.55 points

On a point basis:
-- Sept. 29, 2008: 777.68 points, or 7 percent
-- Oct. 15, 2008: 733.08 points, or 7.9 percent
-- Sept. 17, 2001: 684.81 points, or 7.1 percent
-- Dec. 1, 2008: 679.95 points, or 7.7 percent
-- Oct. 9, 2008: 678.92 points, or 7.3 percent
-- Aug. 8, 2011: 634.76 points, or 5.6 percent
-- April 14, 2000: 617.78 points, or 5.7 percent
-- Oct. 27, 1997: 554.26 points, or 7.2 percent
-- Oct. 22, 2008: 514.45 points, or 5.7 percent
-- Aug. 4, 2011: 512.61 points, or 4.3 percent
-- Aug. 31, 1998: 512.61 points, or 6.4 percent

S&P downgrade of the US !

The recent downgrade of the United States is something that has been widely known for quite sometime and is not a surprising event. One of the reasons attributed to this downgrade is the very fact that these rating agencies perpetrated the enormous housing bubble by stamping top ratings on the mortgage bonds and eventually downgrading them drastically at the outset of the financial crisis, after  the whole world realized that these mortgage bonds were not investment grade at all. Due to this drastic downgrade, in a way they fueled the 2008 financial crisis that has brought the world's financial system to its knees and many financial institutions in the US and Europe to the brink. So they did 2 serious blunders, first being rating the mortgage bonds as AAA and then drastically downgrading them. Sovereign investments in US treasuries are not made based on these ratings. Despite this downgrade the recent short term treasury bills were yielding negative returns meaning treasury buyers willing to pay to hold these instruments. The only alternative to US treasuries is a mattress, you heard it right. There is no financial institution any where that can provide the size and liquidity as does the US treasuries.

China's real estate pains !

The notion that real estate prices can be sustained at lofty levels, even in China is just flawed. But many in the investment community, including famed investors think it's not a problem in China due to the rapid growth. But the overall spending in real estate as a percentage of  GDP is significant and is highly likely to have some side affects. Obviously when China sneezes the world catches cold. Just to give some perspective, over 50% of the seaborne iron ore globally is consumed by China.

http://online.wsj.com/article/SB10001424052702304569504576403793565756986.html?mod=rss_Today's_Most_Popular

Counterfeit luxury goods !

http://online.wsj.com/article/SB10001424052702304791204576401534146929212.html

An inspiring act in India !

http://articles.cnn.com/2011-06-17/world/india.village.name_1_indian-village-new-delhi-skilled-workers?_s=PM:WORLD

Life lessons from the wealthy !

http://www.washingtonpost.com/business/7-life-lessons-from-the-very-wealthy/2011/06/15/AGxw6aaH_story.html

How Not to Be a Wage Slave !

http://finance.yahoo.com/career-work/article/113023/wage-slave-leverage-work

Books pertaining to the 2008 financial crisis !

The 2008 credit crisis rocked the global financial system like never before except for the great depression. It showed how fragile the entire system is, when some of the big enterprises just collapsed and many were on the brink. If not for the coordinated efforts of the governments around the world, it would have been disastrous. There are quite many books published in the wake of this crisis, exploring the causes that contributed to this over the past 2 to 3 decades. Here are some of the titles that are somewhat interesting.

Too big to fail.
The big short.
Mortgage meltdown.
It's different this time.
Fault lines.
On the Brink
The end of Wall Street.
When markets collide
Lords of Finance.
Fooling some of the people all the time.
A colossal failure of common sense.

Loving the work !

Why it matters a lot ?
http://finance.yahoo.com/news/Why-Loving-Your-Work-usnews-1679264902.html?x=0

Stock returns - How long is the long term !

The new long term is not 5 years or 10 years and not even 15 years. It is 20 years, below is an article to get some perspective.

http://www.usatoday.com/money/perfi/stocks/2011-06-08-stocks-long-term-investing_n.htm

Historical returns on stocks - T bonds - T bills

Historic data of the returns on stocks, Treasury bonds and Treasury bills and comparison between their returns since 1928 until now. $100 invested in each of these in 1928 is shown with their corresponding annual returns. On the extreme right is the difference is returns between stocks / T Bills and Stocks / T Bonds. Normally the yield on the treasury bond is the benchmark to compare any alternate  investment returns like stocks or corporate bonds and various other investment instruments.

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histret.html

Stocks of interest !

These stocks are at reasonable valuations considering the valuation and  their overall growth potential. It's very risky to bet on one single stock unless we have a solid understanding of the economics of the business, competition regulation and various other factors that could have an impact on that business.

GE                                          Transocean  
Devon energy                          US Bancorp
Wells Fargo                            Emerson electric   
Eaton Corp                             Goldman Sachs
Morgan Stanley                       JP Morgan 
Citi                                         US steel 
HP                                         Mircosoft 
Cisco                                     GAP
Aeropostale                           Nucor Steel
Dover                                    Honeywell
Clorox                                   Kimberly Clark

Stock ADRs

Gerdau Steel                          Posco Steel
ICICI bank                            Vale
Infosys                                   Ternium

Oil / offshore drilling
Deep water drilling and exploration spending to grow by double digit percentage in next 5 years. US oil spending was 4.8 % of GDP in 2008, highest since 1982. Average was 2.1% of gdp over the past 20 years. $100/barrel would equate to 4.6% of gdp.

Rail roads:
Average annual US spending on freight movement is roughly $500B and of this over $300B is between cities. Rails account for just 13% of the share and is projected to grow.  The companies that would benefit from this trend are
Union Pacific
Norfolk Southern
CSX

Investor perception of stocks !

An article about the average investor perception of stocks.

http://money.cnn.com/2011/06/01/markets/thebuzz/index.htm?source=yahoo_quote

Can small investor have an advantage !

http://finance.yahoo.com/news/Does-Small-Investor-Stand-atlantic-2851630134.html?x=0

Articles on stock investing !

See this interesting article about this veteran investor who is just 93 years old now.
http://www.forbes.com/forbes/2008/0211/048.html

Market timing mistakes
http://money.cnn.com/2011/05/19/retirement/mistake-market-timing.moneymag/index.htm?section=magazines_moneymag

investment grade bond issuance !

Latest bond issuance by companies of investment grade. Many blue chip companies are taking advantage of the low intererest rate environment before the rates rise. An article on recent bond issuance.

http://www.cnbc.com/id/43082708

Indian investor - time to consider equities !

It's time for retail investors in India to be  investing in stocks and this could be done with mutual funds for the most part for an average investor. The returns on gold and real estate thus far had a good run and it's time to think about the returns on these asset classes at these lofty levels. I always think how can it be possible to setup a business in India given the ridiculous prices of real estate. Real estate prices in India for various reasons had risen astonishingly over the past decade and  this is going to be a huge problem going forward. Buying the real estate cheap or at a reasonable price is the most common way to setup and run a business profitably. The alternative options like leasing the land on a long term basis is not at possible currently due to the messy legal system.

http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/its-time-for-smart-indian-investors-to-show-long-term-greed-for-equities/articleshow/8379045.cms

inflation - how it affects !

Check how inflation has affected the purchasing power over the years. Most of the inflation in the United States started to occur beginning the end of 2nd world war. You could select any year and the amount and see how it has decreased in value.

http://www.bls.gov/data/inflation_calculator.htm

investing in stocks !

For the basics of investing in stocks, here is some info from investopedia.

http://www.investopedia.com/university/stocks/.

For an  investor who doesn't have time and or interest in doing some level of research about an industry and the individual companies in that industry, investing in individual stocks is a risky affair. The best bet would be to invest in an index fund like S&P500 or any index fund of a specific sector. When picking stocks consider various industries and don't just stick to a specific sector like technology or banking etc. Potential investment opportunities exist across industries for the most part and are not limited to any specific industry. Dollar cost averaging is the best way to invest - that is buying periodically with a set amount.  Never fall in love with a specific stock unless you have intimate knowledge about the company, its competitors, the general industry it is in and the economics of that particular business. Speculating in stocks is a very tough game and the results are highly unpredictable.

America's college bubble !

This is one of the biggest white collar scams in America. Especially the for profit institutions like university of phoenix online etc are just a rip off. Part of the reason for this is that most of the fees are through loans that are backed by the Federal government.  I've read some stories where students taking courses such as music at these for profit institutions piled up so much debt that it's almost impossible to pay it back in full.

http://finance.yahoo.com/news/Americas-College-Bubble-Next-prnews-3648512208.html?x=0&.v=1&.pf=banking-budgeting&mod=pf-banking-budgeting

Bubbles - hangover affect !

There is a lot we could discuss about this but just a brief outlook. Prior to 1990 the frequency of these bubbles was pretty low when compared to their occurence now. We had tech bubble of the 90s immediately followed by the the gigantic housing bubble that led to the 2008 Financial crisis and it appears that there is a commodity bubble now.  A buubble is similar to a party that starts late in the evening, many people gets drunk past mid night. The next morning hangover will be nasty just like the recession which usually follows a bubble. The more we drink the nastier  the hangover. The housing bubble hangover is extremely nasty because of the free flowing cheap liqour in the form of very easy credit.  But how do we know there is bubble forming is some asset class, is it visible in some form or will there be any indication of that. Of course there will be some indications if we pay attention and are aware, there will be lot of TV ads, people chatting about that in weekend gatherings, party's etc and the ultimate signal is that when your barber talks about it. When we see this behavior and if we're already in the party it's time to leave.

Stock Market cycles !

The stock market crash of 1929  unveiled a severe recession that has been termed as the great depression. After the prolonged bear market following the crash, the market reached its 1929 level  again  in 1954.

Secural bull and bear markets !

- Secular Bull Market, 1982 - 2000, (18 years)
- Secular Bear Market, 1966 - 1982, (16 years)
- Secular Bull Market, 1949 - 1966, (17 years)
- Secular Bear Market, 1929 - 1949, (20 years)
- Secular Bull Market, 1921 - 1929, (8 years)
- Secular Bear Market, 1905 - 1921, (16 years)

Detailed analysis is available at
http://www.tradingonlinemarkets.com/Articles/Trend_Following_Strategies/History_of_Stock_Market_Cycles.htm

Major stock market declines historically !

DJI    Peak to Trough            peak to trough time
         decline  %age 
1900      32%   12 months
1903     38%   10 months
1907     45%   10 months
1909    26%   8 months
1912   24%   26 months
1917   40%   13 months
1919   47%   21 months
1923   19%   7 months
1926   17%   2 months
1929   90%   34 months
1934   24%   9 months
1937   52%   56 months
1946   25%   37 months
1953   14%   9 months
1957   20%   6 months
1960   18%   10 months
1962   29%   6 months
1966   26%   8 months
1969   36%   17 months
1973   46%   22 months
1976   27%   17 months
1980   24%   20 months
1987   36%   2 months
1990   21%   3 months
1998   16%   2 months
2000   34%   30 months
2007   57%   18 months

India related articles !

It's time for retail investors in India to be  investing in stocks. The returns on gold and real estate thus far had a good run and it's time to think about the returns on these asset classes at this lofty levels. I always think how can it be possible to setup a business in India given the ridiculous prices of real estate.

http://economictimes.indiatimes.com/personal-finance/savings-centre/analysis/its-time-for-smart-indian-investors-to-show-long-term-greed-for-equities/articleshow/8379045.cms

Exam system and not education system
http://timesofindia.indiatimes.com/india/India-has-exam-system-not-education-system/articleshow/7977172.cms?intenttarget=no

Economic growth - rural poor - Deficiency of skills
http://online.wsj.com/article/SB10001424052748704081604576143671902043578.html

Educational standards - affect on economic growth.
http://online.wsj.com/article/SB10001424052748703515504576142092863219826.html

Inflation impact on India's growth !

http://online.wsj.com/article/SB10001424052748704547604576262091540881966.html

Project home price decline in Indian cities.
http://www.bloomberg.com/news/2011-03-10/mumbai-s-home-prices-may-decline-35-in-next-two-years-liases-foras-says.html

Diabetes in India - economic implications.

http://www.bloomberg.com/news/2010-11-07/india-s-deadly-diabetes-scourge-cuts-down-millions-rising-to-middle-class.html

Some general saving tips from Yahoo finance.
http://financiallyfit.yahoo.com/finance/article-112655-9531-1-save-100-a-week?ywaad=ad0035

Gold buzz - some facts !

George Soros is one of the famed investors and it appears he's unwinding his gold trade. Most of the commodities started to tumble, not sure if it is just transitory or the start of a big decline. Silver started
to tumble this week along with many other commodities. When big boys start dumping that usually indicates the party is getting over.

http://blogs.forbes.com/robertlenzner/2011/05/04/soros-reported-to-have-sold-gold-position-in-april/

Generally any good  business over time will significantly outperform a commodity especially from an inflationary standpoint. Besides demand from jewelry and very little industrial applications gold's value mostly depends on what others would be willing to pay. At times its value really depends on various factors like speculation, fear and uncertainity. Refer to the historic prices of gold from 1980 until now posted in an other article in this blog.
Buffetts comments on this
Regarding gold, Buffett has been critical of the greater fool phenomenon surrounding gold, and reiterated that at the 2010 annual shareholder meeting. To highlight the criticism, he said when he first bought into Berkshire, the stock price was three-quarters of the price of an ounce of gold. Today, Berkshire A shares are about $125,000 and gold is about $1,560 an ounce. Do the math.

Gold price history - last 30 years !

Gold price history over the past 30 years in US dollars.  The 1980 price was touched again in 2006 but considering inflation, a dollar in 1980 would be worth much less than a dollar today, may be 1/3rd of that. So what are the dynamics at play during these 2 decades that saw the severe price decline. Not sure if it is lack of interest in gold as an asset class, extraordinary growth in the developed world coupled with technolgocial innovations. But what are the chances of getting this repeated and when would that be.  If may be in the very near future, if all the head winds recede and global growth picks up momentum without any crisis on the horizon, would gold be as alluring then as it is now. In this recent gold buzz, the investor demand for the yellow metal has exceeded the tradional demand sectors like jewelry and industrial use.
1980 ................612.56
1981 ................459.64
1982 ................375.91
1983 ................424.00
1984 ................360.66
1985 ................317.66
1986 ................368.24
1987 ................447.95
1988 ................438.31
1989 ................382.58
1990 ................384.93
1991 ................363.29
1992 ................344.97
1993 ................360.91
1994 ................385.42
1995 ................385.50
1996 ................389.09
1997 ................332.39
1998 ................295.24
1999 ................279.91
2000 ................280.10
2001 ................272.22
2002 ................311.33
2003 ................364.80
2004 ................410.52
2005 ................446.00
2006 ................610.00
2007 ................702.57
2008 ................871.96
2009 ................972.35
2010 ................1224.53

Ajit Jain - Berkshire Hathaway !

Warren Buffet never misses an opportunity to praise Ajit Jain.  In fact during his India trip, in an interview he said Ajit is like his son to him. During the 2010 annual share holders meeting, Buffett was responding to one of the questions from a share holder and this is what he has to say in the article below.

http://blogs.wsj.com/deals/2011/04/30/buffett-hearts-berkshires-ajit-jain/

Upcoming book titles on Bin Laden's death !

 Some of the titles for the books expected in the next few months on this subject. I guess by this July we could see some books on this subject. At least few movies would also be made on this incident. There will be lot of masala added to make these books extra spicy.

1. The hunt for the Most wanted.
2. Death of the most wanted.
3. The end of  Osama
etc.

Mark Twain quotes on stock market !

October is one of the peculiarly dangerous months to speculate in stocks. The other are July, January, September, April, November, May, March, June, December, August, and February.


There are two times in a man's life when he should not speculate,  when he can't afford it and when he can.

S & P 500 earnings / dividends historically !

S & P 500 earnings / dividends over the past 50 years.

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/spearn.htm

Democracy - A perspective !

Democracy is an evolving mechanism, it requires lot of patience and persistence and sometimes it tests the resilience of its citizenry. For instance the United States as we see today has gone through so many pains over its 200 years of democracy. The civil war that threatened the very existence of this great nation took over half million lives but it also strengthened the  union and laid the foundation for a great republic. The movements sweeping middle east  are just the start and it's a long way to go and here is a  article with some Indian perspective.

http://blogs.wsj.com/indiarealtime/2011/02/01/india-journal-what-the-middle-east-can-learn-from-india/

The super cycle report !

This is a report from Standard Chartered  about the global growth over the next 2 decades. An exhaustive report covering various aspects of global growth and covers BRIC countries in great detail.

http://www.standardchartered.com/media-centre/press-releases/2010/documents/20101115/The_Super-cycle_Report.pdf

BRIC - Brazil,  Russia,  India,  China.

Big cos taking advantage of cheap credit !

Big companies have been taking advantage of the low interest rate environment and here is Coke's big bond sale.  These companies use this money for various purposes like servicing other high expense debt or for potential acquisitions or to meet other capital expenditures. See this article in this regard.

 

 http://online.wsj.com/article/SB10001424052748703805704575594523057172804.html?ru=yahoo&mod=yahoo_hs

Watching your investments !

The affect of market swings on investors, a behavioral finance expert's perspective on this. See this article. http://finance.yahoo.com/focus-retirement/article/112288/when-watching-your-investments-can-hurt-you?mod=fidelity-managingwealth&cat=fidelity_2010_managing_wealth#mwpphu-container

Stock funds performance !

When a mutual fund is small beating the indexes like S&P 500 index  is relatively easier for most of the funds. But as the size of the fund increases, replicating the performance consistently becomes very tough if not impossible. See this article in this regard.   http://moneywatch.bnet.com/investing/article/the-biggest-mistake-investors-make/355397/

Psychology in investing !

An article on the general psychology of investing.

 

http://seekingalpha.com/instablog/589999-nathan-kawaguchi/60334-psychological-barriers-to-successful-investing