Gold is shining
A spike in gold is not just about the spike in gold price. It signals many other things. It signals flight to safety, risk aversion, anticipation of doom, world wars, fall in government, currency collapse, systemic failures, lack of confidence in central banking & financial institutions. Things are not as bad, but I hope you get the extreme possibilities and realize that gold is having quiet a steady run and is a perfect insurance against any extreme situation in the market. Refer this update on Investment options in gold published 10th Jan 2016 and look at the 1 year graph of gold below. Near prophetic, isn't it ? :)
Market Trend is changing for good
At a macro level we are slowly but surely moving from easy liquidity to liquidity tightening around the world. In between trillions of dollars have been wasted by the central bankers and governments around the world in foolish market propping measures transferring the wealth in the hands of richest 1% in the world without any improvement in the life of common man which has infact gotten worse. It is payback time and it might get more painful this time but again only for the "common man". Refer my near prophetic post :) on the change in market trend followed by several warnings on Jan 1st, Jan 4th, Jan 7th, Jan 12th, Jan 14th
Masters have fallen and Mutual Funds are toxic
Your mutual fund investments are being managed in the most irresponsible way and you are paying money to the fund managers and brokers to do so. If we get money by 9:00 AM we are investing fully by 9:30 AM, refer this video around 5 mins from the start. But what they are not telling you is that they are taking all the redemption requests upto 2:30 PM everyday and selling forcefully to cover those by 3:30 PM leading to a daily market crack after 2:30 PM. Notice the crack in the market around closing hours on every weak day. So your money is getting invested in a hurry by 9:30 AM and dumped after 2:30 PM forcefully to meet the redemption requests. Do you think anyone can make profits by investing like this in market conditions that we have now?
I am seeing many legendary fund managers whom I used to call masters advocating people to take whatever money they have and get fully invested in this market right now. It pains me to say that the Masters have fallen. This is not the right strategy in this market. To play this market you need to adopt a very slow & steady and extremely cautious approach. Refer my blog on Tortoisish investment strategy. Only you know the effort you have put in to earn this money and only you can treat it with the respect it deserves. Other's won't respect it equally well even if you pay them to do so.
Shift your investments to low risk & high quality
Shift to large caps, diversified, stable, high dividend, ever green, boring sectors and stocks from high growth, high leverage, high beta, fancy mid & small caps names. Focus on quality with a microscope before doing any investing. Accumulate stocks that you are confident of in very small quantities, slowly over a long period of time. Refer this update on identifying high quality investments. Note for me the current market situation continues to be a great opportunity and a great bargain hunting ground every day. You can move to Fixed deposits, bonds and other instruments but know that by exiting the equity markets now, you will make your losses permanent and will never recover it. However also keep in mind that a market like this can be played only by the most skillful and experienced players. Otherwise chances of disasters are far higher than meaningful gains. On a side note, it is always markets like this that give rise to the next generation of market legends in the future. Those very few who were brave, patient, smart and skillful in the most adverse times will come out super victorious when the cycles turn again.
Boom Bust & Sector rotation & money flow
Few sectors are bottoming out and few bubbles are popping violently. Stocks like LinkedIn cracked to half in a single trading day (this is what bubble burst looks like)
But at the same time note that there are several sectors especially in oil&gas and commodity area that have been beaten down to death making even production costs non viable. Currently many of these are in a supply control lead bottoming out process but keep track of them. These are huge companies with real physical assets and tangible values. Huge opportunities can arise from this space once the cycle turn around and there is an uptick in the demand lead growth. I know the reasons for the cycle to turn around but I don't know when the turn-around will happen as of now. Will keep you posted if I see it coming.
You are in trouble
If you are fully invested and do not have enough cash to cover upcoming requirements like insurance premiums, loan installments, medical & other emergencies, hard commitments like school fees, house rent, etc you must act soon and get your cash levels upto a reasonably comfortable level plus extra buffer for the whole of 2016. If you have leveraged positions, act now or seek help. Refer this update on stock market monkeys
If you have done bulk investments at market peaks (closer to Nifty 9000) you will be suffering huge financial losses and you will have to play the current market with fresh cash in the most skilled and cautious way or be prepared for a really long stretched recovery cycle and broken dreams.
If you are not experienced in market and indulging in high risk trades, you could get sucked into one of the bull traps and it can be disastrous. Be careful while investing in a falling market. Refer my post on dead cat bounce
Future Outlook & Strategy:
As mentioned above somewhere, this market continues to be a great bargain hunting ground for me and I am out there everyday winning tough bargains and feeling great. For me Nifty at 7500 is as good as Nifty at 9000. But I am prepared for a long haul over here. I am looking at minimum 1.5 to 2 years of pain (revised upwards from 1 year at the start of 2016) and this can get further revised upwards or downwards depending on how things pan out. Stock market is the border ground of your financial security. If you run away when attacked, you will not win the war. Reiterating stay alert, be cautious but don't leave the borderline. So overall I am not bullish on the market, but not pessimist either. I consider it as a twice or thrice in a lifetime opportunity.
Note: Most of the post is in the context of Indian market only. Examples have been used from global markets only for the purpose of illustration.
A spike in gold is not just about the spike in gold price. It signals many other things. It signals flight to safety, risk aversion, anticipation of doom, world wars, fall in government, currency collapse, systemic failures, lack of confidence in central banking & financial institutions. Things are not as bad, but I hope you get the extreme possibilities and realize that gold is having quiet a steady run and is a perfect insurance against any extreme situation in the market. Refer this update on Investment options in gold published 10th Jan 2016 and look at the 1 year graph of gold below. Near prophetic, isn't it ? :)
Market Trend is changing for good
At a macro level we are slowly but surely moving from easy liquidity to liquidity tightening around the world. In between trillions of dollars have been wasted by the central bankers and governments around the world in foolish market propping measures transferring the wealth in the hands of richest 1% in the world without any improvement in the life of common man which has infact gotten worse. It is payback time and it might get more painful this time but again only for the "common man". Refer my near prophetic post :) on the change in market trend followed by several warnings on Jan 1st, Jan 4th, Jan 7th, Jan 12th, Jan 14th
Masters have fallen and Mutual Funds are toxic
Your mutual fund investments are being managed in the most irresponsible way and you are paying money to the fund managers and brokers to do so. If we get money by 9:00 AM we are investing fully by 9:30 AM, refer this video around 5 mins from the start. But what they are not telling you is that they are taking all the redemption requests upto 2:30 PM everyday and selling forcefully to cover those by 3:30 PM leading to a daily market crack after 2:30 PM. Notice the crack in the market around closing hours on every weak day. So your money is getting invested in a hurry by 9:30 AM and dumped after 2:30 PM forcefully to meet the redemption requests. Do you think anyone can make profits by investing like this in market conditions that we have now?
I am seeing many legendary fund managers whom I used to call masters advocating people to take whatever money they have and get fully invested in this market right now. It pains me to say that the Masters have fallen. This is not the right strategy in this market. To play this market you need to adopt a very slow & steady and extremely cautious approach. Refer my blog on Tortoisish investment strategy. Only you know the effort you have put in to earn this money and only you can treat it with the respect it deserves. Other's won't respect it equally well even if you pay them to do so.
Shift your investments to low risk & high quality
Shift to large caps, diversified, stable, high dividend, ever green, boring sectors and stocks from high growth, high leverage, high beta, fancy mid & small caps names. Focus on quality with a microscope before doing any investing. Accumulate stocks that you are confident of in very small quantities, slowly over a long period of time. Refer this update on identifying high quality investments. Note for me the current market situation continues to be a great opportunity and a great bargain hunting ground every day. You can move to Fixed deposits, bonds and other instruments but know that by exiting the equity markets now, you will make your losses permanent and will never recover it. However also keep in mind that a market like this can be played only by the most skillful and experienced players. Otherwise chances of disasters are far higher than meaningful gains. On a side note, it is always markets like this that give rise to the next generation of market legends in the future. Those very few who were brave, patient, smart and skillful in the most adverse times will come out super victorious when the cycles turn again.
Boom Bust & Sector rotation & money flow
Few sectors are bottoming out and few bubbles are popping violently. Stocks like LinkedIn cracked to half in a single trading day (this is what bubble burst looks like)
But at the same time note that there are several sectors especially in oil&gas and commodity area that have been beaten down to death making even production costs non viable. Currently many of these are in a supply control lead bottoming out process but keep track of them. These are huge companies with real physical assets and tangible values. Huge opportunities can arise from this space once the cycle turn around and there is an uptick in the demand lead growth. I know the reasons for the cycle to turn around but I don't know when the turn-around will happen as of now. Will keep you posted if I see it coming.
You are in trouble
If you are fully invested and do not have enough cash to cover upcoming requirements like insurance premiums, loan installments, medical & other emergencies, hard commitments like school fees, house rent, etc you must act soon and get your cash levels upto a reasonably comfortable level plus extra buffer for the whole of 2016. If you have leveraged positions, act now or seek help. Refer this update on stock market monkeys
If you have done bulk investments at market peaks (closer to Nifty 9000) you will be suffering huge financial losses and you will have to play the current market with fresh cash in the most skilled and cautious way or be prepared for a really long stretched recovery cycle and broken dreams.
If you are not experienced in market and indulging in high risk trades, you could get sucked into one of the bull traps and it can be disastrous. Be careful while investing in a falling market. Refer my post on dead cat bounce
Future Outlook & Strategy:
As mentioned above somewhere, this market continues to be a great bargain hunting ground for me and I am out there everyday winning tough bargains and feeling great. For me Nifty at 7500 is as good as Nifty at 9000. But I am prepared for a long haul over here. I am looking at minimum 1.5 to 2 years of pain (revised upwards from 1 year at the start of 2016) and this can get further revised upwards or downwards depending on how things pan out. Stock market is the border ground of your financial security. If you run away when attacked, you will not win the war. Reiterating stay alert, be cautious but don't leave the borderline. So overall I am not bullish on the market, but not pessimist either. I consider it as a twice or thrice in a lifetime opportunity.
Note: Most of the post is in the context of Indian market only. Examples have been used from global markets only for the purpose of illustration.
You are in trouble if you are "investing" without the said buffer for the bare necessities. You should refer to some article you must have written about what investing means.
ReplyDeleteI did start by writing one on retirement planning though not specific to stock investments http://myinvestmentdiaries.blogspot.in/2015/06/retirement-planning.html
DeleteWell said ! Please follow the advice.
ReplyDeleteThanks !
Delete