sensex at 5000 in a year!!

steve forbes has predicted here oil will plunges to $35 a barrel in a year. a SEBI member says here sensex will hit 16,000 in the same time frame. perhaps, it is time for me to stick my neck out.

i believe that the sensex will fall to 5000 within a year. markets are very overheated and commodity profits form a large parts of the earnings, which is not sustainable. the period of rapid global growth couldl be impacted by some events, as past probability suggests.

see this space a year later!

a call from citibank or a loan bubble !!

A lady calls from Citibank, Chennai, waking me up from my afternoon siesta!

Citibank: can i speak to mrs ****
Me: Sorry she is not available, what it regarding?
CB: can i know who is speaking
Me: this is her son
CB: Your mother card ends with no: **** ( i can't think of any reason why i should know), and she has been paying her bills regularly. so, we are offering her a draft scheme, and we can make out a draft in any third party's name for upto Rs 4.5 lakhs. There is no need for any paperwork. this is not a loan.
Me: Can you give the draft in her name?
CB: Sure, the interest rate is only 7.5% per year
Me: What is the longest tenure you can offer and what will the monthly installments be for a 4 lakhs.
CB: It is 48 months and the EMI is Rs 10,932
Me: Great. will call u if i need it. ( i later figured the interest works out to 14% and i didnt find out what is the processing charge and prepayment penalty)


It is usual call that many of us get these days. the only problem i had with it was my mom was a retired person with a small income and could no way pay back such an amount. This got me wide awake and set me wondering. what if people accepted such offers and what if a lot of them did. (my father would have certainly accepted the offer had he picked up the phone and honestly i was tempted!) what happens if there is a minor economic shock. what will happen to these people and the asset quality of the banks. it seems to me we very clearly have a loan bubble.

I am reminded of the end -1990 days, when banks, NBFCs were lending like no tomorrow to small companies. when the bubble burst it was very painful. Kotak Mahindra, now a favourite private sector bank, was quoting at rs 15 during 1999 (rs 3 adjusted for the bonus issues and now trades at over rs 200, thats 66 times!!). of course i wasnt smart enough to buy then.

But i am hoping Uday kotak is a smarter man these days. he said in a TV interview that he has learnt a lot from from the past mistakes and they wont happen again. i wonder if he is really that smart and so are the other in the finacial services space. i feel otherwise.

China: is it a treat or an opportunity?

it has become a rather stale question now, but i did find this discussion interesting

does ms dalal read my blog??!!

i was just wondering if ms sucheta dalal reads my blog or my mind or the reverse. just kidding, ofcourse!!.

but it would be interesting to read her article here which appeared on monday, aug 22, 2005

sensex = 16,000; dow = 36,000

a recent comment by a SEBI wholetime member that sensex will touch 16,000 in the currently fiscal is astonishing to say the least. i wonder if the reporter got the story wrong.
if not, it is the most optimistic projection for the sensex that i have come across but i wonder why a person in such a reposible post should make such comments.
the statement reminds me of the 36,000 target for the Dow set a few years ago, which now seems absurd.
I personally am more comfortable with CLSA's estimate of 6000 for the sensex, eventhough i believe it is a meaningless exercise to predict a stock index.

A man peeing and a wall for reference!

i am buiding a small house on the outskirts of a meium sized town and it has been an enlightening experience, to say the least - and i plan to put up details of it in another site. Initially, i was least interested in participating in the construction, as all i wanted was 4 walls and a washroom, and i had better things to do - "like follow prices!", but later circumstances forced me to get fully involved and i think i have learnt quite a bit.
The house, 800 sq.ft, is situated on 2000 sq. ft of land and there are another 300 vacant plots in 12-acre compund.
Yesterday, a group of 11 men, who form the lowest part of the construction chain, came to lay the the roof (centering).
On guy moved to side of the house and started peeing on the wall. (he didnt know i could see him). I was too stunned to say anything for a minute, as the brown bricks of my newly built house slowly turned blood red!
I just kept quiet and pretended i didnt see anything but the incident really set me thinking.
why would a guy want to pee on the wall, when he has 12-acres of open space and atleast 500 trees, which makes it rather woody.
Obviously, the guy is used to peeing in street corners and other such places and he is propably conditioned to pee on a wall, which provides a frame of reference. further, it could it even be that the sight of free wall triggers the sense to pee !, but i will stick to former. so, the guy needs a frame of reference to pee.
I was just thinking, how different are sophisticated investors from the guy peeing on the wall. Afterall, in DNA terms we would 99.99% same. Maybe , we are not different from him in other ways too.
All of needs our false walls to lean on, to make decisions. We prefer the promximity of the building to the unknown woods. We are inherently loathe to venture far whether it is to invest or to pee!

PC's folly

the markets are showing extraordinary strength and i have never seen such strong broadbased action. i must admit that i have been caught on the wrong foot. I am not short but my cash levels are extremely high.

ofcourse, it is far less painful to point out other mistakes than examine your own and thats what i plan to do!

I was all praise for P chidambaran, the finance minister and his team here while he set up the national investment fund but lately i have to dislike the way he treats share issuance by public sector units. Sure, back tracking on strategic stake sales in PSU is the right path but many PSU could have been coaxed to issued fresh shares to the public during this bull run.
By spending his energy on confrontation with the left, PC has lost an opportunity to let PSU raise money from the market and the disinvestment battle could have been fought another day.

again, the is the strongest bull market in recent memory but with the least amount of primary paper flowing in, which is certainly not healthy.