tag:blogger.com,1999:blog-66640088775669652582011-12-23T19:36:45.956+05:30This blog may be of interest to investors in equity Markets. Some content is me ranting and raving; most content is based on my interpretation of "The Quant Report", which can be accessed via www.maxkapital.com. The Terms set out on http://www.maxkapital.com/Terms.pdf apply; readers should ensure familiarity with the terms.Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.comBlogger1411100tag:blogger.com,1999:blog-6664008877566965258.post-10998831052369878732011-12-23T19:36:00.003+05:302011-12-23T19:36:45.964+05:30

S&P recently published its buyback report which provides details of money returned to shareholders via buybacks. On a trailing 12 months to 30 September, 2011, SP500 companies have returned per share amounts $25.18 in dividends and $44.30 for a total of $69.48.  For the full year, I expect SP500 companies will have returned per share amounts $25.65 in dividends and $47.60 for a total of

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-60726340821360228122011-12-17T15:12:00.003+05:302011-12-17T16:22:58.690+05:30

What is a tail risk?  Put simply, it is a future risk event that has a low likelihood of occurrence in the absence of sheer stupidity.  In Europe, we have seen sheer stupidity flow forth from Germany.  And that leads me to believe Europe is no longer a tail risk; it is a very real risk. This week we saw Germany scoff at the immediate need to provide funding to IMF; we also heard that none

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-44658556256990886882011-12-10T20:41:00.001+05:302011-12-11T19:43:19.019+05:30

In Europe Storm clouds continue to gather.  A recession has likely already started.  In emerging economies, rates of growth have slowed down considerably.  In US Q3 GDP was first estimated at 2.5%.  The second estimate came in at 2%.  I expect the final estimate to come in at 1.5%.  Corporate America has started warning on expectations by giving initial signals of slowing growth during Q4 2011

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-10434325289073096292011-12-10T18:03:00.001+05:302011-12-14T21:56:00.341+05:30

Merkel rightly believes that Europe's problems will take years to solve; but she translates that into meaning that she has time to act. The luxury of time is just not there; if Italy or Spain go from being illiquid to being insolvent, the problems that are manageable today, become unmanageable. What is required, or rather desired, is something credible; something decisive; something

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-5804719570600861862011-12-05T11:17:00.001+05:302011-12-10T22:20:19.521+05:30

Fiscal Year 2011 (Year end 31/3/2011), earnings came in at 1,013.  Late last year, estimates for FY12 were centered around 1,275 and for FY13 at Rs 1,500.  Estimates have now been cut down to size; with FY12 estimates coming in at 1,125 plus or minus 50, and FY13 estimates coming in at 1,275, plus or minus 50.  And there is an expectation that this downgrade cycle will continue a while longer;

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-28428859199000120722011-12-03T22:31:00.001+05:302011-12-04T09:13:40.797+05:30

Markets moved up strongly.  But why? Nothing remotely resembling a solution for EZ came up. The waffling has just continued.  There is no progress; and what is worrying is that all solutions are clearly identified and on the table on which Merkel, Sarkozy and Monti dine. Merkel & Germany are clearly part of the problem not the solution; like a spoilt child she cries for treaty amendments as the

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-89122296830457110822011-11-26T13:32:00.001+05:302011-11-27T11:27:44.605+05:30

Weak, week say what.  Down on the week, down on the year, down from the peak, languishing well below all key moving averages.  Indian Rs at a lifetime low, EZ on the verge of falling apart; the world as we know it looks like its about to end. It (the world) probably won't end; but perhaps we need that high volume climax of selling.  We may get it soon; Europe has Greek event scheduled for the

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-73723191463149933242011-11-25T19:40:00.001+05:302011-11-25T23:29:33.458+05:30

The Rs did prove a good measure of risk aversion during the US led 2008-2009 crisis.  This time around, the main risk stems from the EZ.  And the Rs may prove to be a good measure of risk aversion once again; sometimes it is better to look for the Butterfly and away from the Eye of the Storm to watch a crisis unfold or resolve. First the Butterfly On 5th March, 2009, the Rs bottomed at Rs

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-21782158955067131232011-11-23T10:49:00.001+05:302011-11-23T19:18:56.048+05:30

Gold Prices a Bubble? This chart shows the nominal annual average price of gold and the nominal annual return from gold.  Gold is more expensive than ever before.  But this says nothing about whether it is a bubble; almost everything is more expensive.  The nominal annual return on gold are high, but certainly not at a level where a bubble at the point of implosion is evident. This

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-82144935786244438982011-11-21T19:13:00.001+05:302011-11-22T11:51:37.985+05:30

What does Super-Committee Failure Mean? Well, looks like the super-committee is set to fail.  Is it bad, and if yes, why?  Its bad, because starting 2012, there are some small cuts in discretionary spending; payroll tax cuts will expire; extended unemployment benefits will go.  These cuts could hit GDP by 0.5% to 1% next year, thus ensuring that the US is at stall speed or in recession during

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-65816768869772245572011-11-20T18:56:00.001+05:302011-11-20T19:42:39.166+05:30

This is a brilliant chart from Ned Davis Research which shows the Dow has performance during the election year.  The data looks at the previous sixteen cycles.  Put it this way, the prognosis is not good for Obama unless the market has already bottomed, or will bottom no later than late November.  A decline through mid December would be bad news for Obama & indeed for markets during 2012. I am

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-19941158924629579462011-11-19T22:53:00.001+05:302011-11-20T10:35:19.346+05:30

This video is all about happy memories - a memoir of the happy times 50 years ago when my uncle passed out of school.  I passed out some 24 years later.  We have long memories and despite a 26 year gap, the memories are amazingly similar.  Hear the words of the school prayer; very simple, but in some ways it covers everything that matters.  And it ends with Auld Lang Syne; we sung it to a

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-5032458851290783062011-11-11T10:13:00.001+05:302011-11-12T17:04:51.320+05:30

Where are we in the business cycle? I would say near the bottom of the vicious phase on a secular basis.  And near the start of a vicious phase on a cyclical basis.  Good policy matters if the vicious secular phase is to be turned up into the virtuous secular phase.  Good policy to address the vicious secular phase would also shorten the vicious cyclical phase we are presently in.  Bad policy

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-43721977574309908322011-10-29T10:27:00.001+05:302011-10-30T10:00:28.160+05:30

We had a good week. Markets rose solidly for the week.  Market technicals have improved with price over the one year MA and with the one month MA rising over the one quarter MA.  This was in response to the European plan and US GDP first estimate coming in at 2.5%. The good news is that Europe came up with an action plan.  Much remains to be done, but it is an incremental positive.  Draghi's

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-68470999474543629402011-10-22T17:18:00.000+05:302011-10-23T11:33:02.893+05:30

One of the methods of investing commonly propagated by the financial services industry is $ cost averaging.  SP500 closed Friday at 1,238.  The annual average cost over the last six years was 1,227 - you could have stuffed your wealth in your mattress and used the it to buy the SP500 at pretty much the same level as a $ cost average investor. If you had bought debt or even invested in low

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com3tag:blogger.com,1999:blog-6664008877566965258.post-22486430077848517312011-10-15T23:25:00.000+05:302011-10-16T19:40:45.428+05:30

Technicals deteriorated week before last, but the repair over the last week has been considerable.   SP500 shows a weekly gain of 5.98%, a year over year gain of 4.33% and Friday closed at over the monthly and quarterly moving average with the index just 3% below the one year moving average.  Current index levels are also over the two and three year moving average and a mere two points below

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-7248753359179197552011-10-01T16:03:00.002+05:302011-10-01T16:59:47.277+05:30

Markets technicals continue to look ugly, but not ugly enough. Valuation continues to look very appealing when viewed in the context of decade valuations.  But looking at valuations in the longer term the market will be priced for buying at lower levels: Valuations investors have been willing to pay 1871 onwards says markets are attractive at 891. Valuations investors have been willing to

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-72994010130227601242011-09-27T06:55:00.002+05:302011-09-29T12:18:54.974+05:30

Relative PE is the PE of a stock divided by the PE of the SP500.  The relative PE 6 is the price of a stock divided by six year median operating earnings for the stock, divided by SP500 Index level stock divided by six year median operating earnings for the Index. The relative PE & PE 6 indicates how expensive or cheap the stock is relative to the SP500.  A relative PE of 50% tells you

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-4199036827285358172011-09-25T12:23:00.003+05:302011-09-28T22:56:41.044+05:30

Money is first and foremost a medium of exchange.  It also serves a useful purpose as a store of value and a unit of account. Gold no longer serves as a medium of exchange; because all goods and services are denominated in & trasacted using modern day money.  However, gold can be sold to buy modern day money, which in turn can be used to purchase goods and services.  Thus gold, as a

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-18549619694447429962011-09-21T11:24:00.001+05:302011-09-28T22:57:04.014+05:30

This problem can be solved the Republican way, which is really very simple. The Tea Party caucus demands austerity. The Republicans demand that long term interest rates are not lowered. These two brilliant ideas set the stage for a great leveler. A Great Grand Depression will occur, and wealth will be destroyed. Since wealth is owned by the Rich Guy, the inequality problem will be solved;

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-72178412775842969392011-09-18T13:38:00.001+05:302011-09-19T19:27:03.477+05:30

The week ended 16 September is more important than is recognized. In July 2008, the markets had fallen sharply; they traded at levels fairly close to where we are today.  The markets had recognized the risk of failure of Lehman.  The markets had likely priced the risks of the bankruptcy; what remained unpriced was the unknown; the fat tail or the Black Swan event.  By September, several

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-38892199550271356072011-09-16T22:25:00.001+05:302011-09-30T10:29:46.955+05:30

Central Bankers have an important job. They need to balance inflation, growth, unemployment and financial stability. In India, since we spend little time monitoring unemployment, we are left with inflation, growth and financial stability as key policy objectives. With the 0.25% hike in the reverse repo rate to 7.25%, in my view the RBI has committed a policy error. If further rate hikes

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com1tag:blogger.com,1999:blog-6664008877566965258.post-62687548884762285092011-09-16T19:41:00.000+05:302011-09-16T19:41:18.584+05:30

Sensex 6 year high was at 21,207 on 10 Jan 2008 when the exchange rate was Rs 39.29 to the $.  Expressed in $, Sensex was 540.  Sensex 6 year low was at 7,656 on 28 Oct 2005 when the exchange rate was Rs 45.09 to the $.  Expressed in $, Sensex was 170.  Fib retracement levels are at 453 (23.6%), 399 (38.2%), 355 (50%), 311 (61.8%), 257 (76.4%), 170 (100%). The Sensex is at 16,934 with

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-84926171576465231472011-09-16T13:13:00.001+05:302011-09-16T13:30:58.680+05:30

On 1 Oct 1945 Dow traded at 192. It rose five fold to 969 over 20 years ending 1/10/1965.  This too was a period of post war deleveraging. For the next 15 years the market went nowhere.  On 1/10/1980 it languished at 963.  The Dow then rose eleven fold to 10,788 over the next 20 years to 1/10/2000. Will we still be at 10,788 on 1/10/2015? More importantly, by 1/10/2035: Will the

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-41474064169052052962011-09-15T23:02:00.001+05:302011-09-16T09:33:47.877+05:30

US have surplus capacity. Unemployment causes aggregate demand to fall. Deleveraging in both public and private sector also places a downward pressure on aggregate demand. Falling aggregate demand, coupled with high unemployment and surplus capacity are disinflationary and potentially deflationary. Deflation is a grave risk. Both monetary & fiscal policy are needed and the leverage situation

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-49118707452543472752011-09-14T23:44:00.001+05:302011-09-15T00:06:31.143+05:30

In my normal market value reviews, of late I have found myself noting that the SP500 is very cheap relative to valuations investors have been willing to pay over the last decade. I do occasionally note, that what investors have been willing to pay over the last decade, is higher than what investors have been willing to pay over the last several decades.  Since 1871, investors have been willing

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-89160269281585461162011-09-14T13:02:00.001+05:302011-09-14T13:32:47.307+05:30

The problem with Obama is what he gives with one hand, he takes away with the other. What is really disappointing, is that the risk is clearly recognized and the solutions with the best chance of success identified.  Yet, Obama back tracks even as he extends his hand.  It looks like he wants the Republicans to deny him, so that he can blame failure on the Republicans.  And use that to win

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-9296550623541949842011-09-14T12:34:00.003+05:302011-09-14T13:38:03.538+05:30

Ms. Merkel is now on record discouraging chatter of an orderly or disorderly default for Greece. Germany may soon become aware that a Greek default, whether orderly or disorderly, will cost Germany more in absolute terms than Greece. First, there is the crippling impact of default on already weakly capitalized European banks - this raises systemic risks. But more than that think of negative

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-53119870153430637632011-09-12T12:24:00.002+05:302011-10-14T13:13:57.150+05:30

Their is no clear definition of what constitutes a Bear Market.  Our friends at Wikipedia say:  "A Bear Market is a general decline in the stock market over a period of time.  It is a transition from high investor optimism to widespread investor fear and pessimism. According to the Vanguard Group, while there’s no agreed-upon definition of a bear market, one generally accepted measure is a

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-7472204046005540442011-09-11T10:06:00.001+05:302011-09-21T09:51:56.015+05:30

I spend a lot of time trying to convince people that America is where the true value opportunities lie. As Winston Churchill said "Americans can always be counted on to do the right thing...after they have exhausted all other possibilities.". The process of exhausting all other possibilities is on, and it's creating huge investment opportunities, the fruit of which will be borne once the right

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-30934073902448052442011-09-10T23:15:00.003+05:302011-09-12T10:05:55.395+05:30

Index Levels & Performance Both Sensex and SP500 closed the week weak.  SP500 is up 4.53% over a year while Sensex is down just over 10% over a year.  Both markets trade at a discount to annual average price and to intrinsic value, but remain at a significant premium to fair value. Technicals Technicals continue to look weak with market price being below 50, 60, 200 and 250 day moving

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-29778685011634769782011-09-05T15:52:00.003+05:302011-09-07T21:57:43.110+05:30

Updated Quant Report is available for 1.  India Portfolio Allocator with relative value against SP500 As Reported Earnings 2.  Sensex with relative value against SP500 Operating Earnings 3.  SP500 Operating Earnings 4.  SP500 As Reported Earnings Valuation SP500 SP500 is very cheap relative to median valuations expressed as multiples of cyclically adjusted earnings which investors have

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-19446401723163833142011-09-01T15:33:00.001+05:302011-09-01T17:49:34.026+05:30

M2 and the yield curve are important indicators of the health of an economy.  Slowdowns are often seen through inversions in the yield curve and M2 contributes to leading indicators too.   This time, chances are that these two indicators are sending false signals to leading indicators.  Many leading indicators, including the Conference Board's Leading Economic Index, include the yield curve

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-88325249092473918522011-08-30T09:25:00.000+05:302011-08-30T09:45:46.462+05:30

Index Level The market closed up strong, 2.83% on the day and up 13.72% over 12 months.  It trades at a 11% discount to intrinsic value and a 30% premium to fair value and these values are calculated by reference to operating earnings, not as reported earnings which tend to come into focus during recessions and severe slowdowns.  Intrinsic value is the value embedded in the security itself; it

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-71153424339202525292011-08-29T18:11:00.000+05:302011-08-29T19:49:55.085+05:30

Index Levels & Performance Sensex closed at 16,416 up 3.58%, but remained down 8.79% over the past year.  Prices trade at a discount of 13% over the average prices paid by investors over the past 12 months and at a discount of 8% to intrinsic value.  Yet even today prices trade at a 57% premium to fair value.  Intrinsic value is the value embedded in the security itself; it is calculated by

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-70135235738368655672011-08-21T22:35:00.005+05:302011-08-24T19:27:44.513+05:30

Today I am unborn. But my time is coming. The worst of the turbulence is over; but it is not yet all done, the skies remain overcast and we need that final storm. After which we will see silence and then I shall storm the world once again; for I am Taurus, and I have been dead 11 long years and I am looking forward to my rebirth. The SP500 is at 1,123. It's August, 2011. It's been a

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-43501093180583148272011-08-08T14:25:00.003+05:302011-08-24T19:28:07.785+05:30

During waterfall declines, the market tends to drop from its highs by 24% on average, over a period of 50 calendar days. During the final 21 days of the waterfall declines, the 10 day moving average rises exponentially, with the 10 day moving average doubling from this time, to the end of the waterfall decline. The most recent peak occurred at 1,353 on 7 July, 2011. Fifty days on would

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-18637912213610903952011-08-07T10:43:00.004+05:302011-08-24T19:28:26.337+05:30

SP's downgrade of US makes no difference on the real economy.  In fact, even if SP had created a new quad A category and upgraded US to AAAA, it would not have mattered. Today US treasuries across the maturity spectrum deliver negative real returns.  The GS10 at decade median levels has yielded real returns of 1.7%.  Ultimately rates will rise towards this level.  And while the SP downgrade may

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-68681936936574234602011-08-05T16:48:00.005+05:302011-08-24T19:28:43.135+05:30

The good news is that the VIX has spiked and the market is very oversold.  The market may fall further and once the VIX comes down to below 24-25 levels we may have a bottom in place.  The question is whether the rally from the bottom is sustainable, or is it a rally to be sold into. The market is in the process of moving from a belief in a second half rebound in growth, to a belief of a weak

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-35828330114412216252011-08-01T22:43:00.000+05:302011-08-24T19:29:00.190+05:30

US GDP growth rate is in decline (right axis).  Interest rates remain low, spreads between GS10/Baa/Aaa have normalized; that absurdity of falling GS10 while Aaa and Baa rose has vanished.  Interest rates are all largely at 12 month moving averages, over time I expect yields to rise. India Real interest rates continue the relentless rise from negative towards zero.  Inflation (CPI)

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-25176039877908047102011-07-31T21:43:00.001+05:302011-08-24T19:31:23.422+05:30

SP500 Quant report based on operating earnings as of 31 July 2011 can be viewed here; the SP500 Quant report based on as reported earnings can be viewed here. The commentary below is based on SP500 operating earnings. Valuations remain subdued when viewed in the context of decade median levels. Risk aversion as measured by spreads between Aaa and Baa bonds, Aaa and GS10 & Baa and GS10

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-61883522323223485662011-07-31T20:44:00.002+05:302011-08-24T19:30:34.768+05:30

Sensex Quant report as of 31 July 2011 can be viewed here. Earnings estimate used is Rs 1,175 for FY2012; a fairly modest growth expectation of 16% (7.5% real GDP growth plus 8.5% inflation) over FY2011 earnings of Rs 1,013. This is moderately below consensus estimates which are tending towards Rs 1,200 to Rs 1,215. This is good news since expectations have been revised downwards from

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-16529518062735330712011-07-29T21:47:00.002+05:302011-08-24T19:30:46.273+05:30

Yesterday I said "People bet that Washington is not that stupid so as to allow a default or downgrade. But Washington is that stupid, the Great Recession as it is now known, was probably caused by bad policy decisions - Like GM, Lehman should have been rescued or sunk in a controlled environment, not the, melt down that was. I think the Tea Party bunch, are well meaning nitwits, who will hurt

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-4083980763452951582011-07-27T12:02:00.006+05:302011-08-24T19:31:45.053+05:30

Don't Fear the Rate Rise The market reaction yesterday is simply disappointment in that expectation was not met. It will reverse once markets have assessed whether it is a bad policy move or not. I do not believe it is a bad policy move. With the reverse repo at 7% and CPI running at 8.7%, the real interest rate is still negative 1.58%. The median real reverse repo rate over the last decade

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-40526125499856007072011-07-07T21:45:00.004+05:302011-08-24T20:10:24.954+05:30

ONGC and SAIL FPO to increase free float market capitalization by Rs 60,000 Crores or approximately $13 billion (ONGC Rs 53,000 Crores [approximately $11.8 billion] & SAIL Rs 6,000 Crores [approximately$1.2 billion]). Increase in free float market capitalization of Indian markets could lead to index investors and global equity allocators adding money to India equities. Today ONGC trades

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-59499981489203640102011-07-06T10:37:00.001+05:302011-08-24T20:11:23.742+05:30

Companies create shareholder value through earnings growth. Companies return shareholder value through dividends. Buybacks are a hybrid method through which companies return shareholder value to exiting shareholders and create shareholder value through earnings growth for the remaining shareholders. Dividends are nice because they create shareholder choice. The company pays cash; the

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-7439108689306139022011-07-05T09:41:00.003+05:302011-08-24T20:11:36.665+05:30

Would you like to buy one of these lovely row houses for $1.44 million where the cost of debt for home buyers is well over 10%? Its built on 500 square yards and is located in Nirvana Country, Gurgaon.  Gurgaon lies on the outskirts of Delhi.  Nirvana is located about 10 kms from the heart of Gurgaon.  The house is decently constructed, but you can expect chronic dampness and seepage

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com2tag:blogger.com,1999:blog-6664008877566965258.post-3354448206222482092011-07-01T13:49:00.005+05:302011-08-24T21:13:10.820+05:30

SP500 Quant report based on operating earnings as of 30 June 2011 can be viewed here; the SP500 Quant report based on as reported earnings can be viewed here. The commentary below is based on SP500 operating earnings. Earnings estimate used is $89 for 2011, assuming no disruptions from private and national debt markets will manifest itself into a crisis this year. This is below consensus

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-90576387150170640792011-07-01T12:28:00.004+05:302011-08-24T21:14:38.018+05:30

Sensex Quant report as of 30 June 2011 can be viewed here. Earnings estimate used is Rs 1,175 for FY2011. This is moderately below consensus estimates which are tending towards Rs 1,200 to Rs 1,215. This is good news since expectations have been revised downwards from overly optimistic levels which reached as high as Rs 1,275 to Rs 1,300 at one point in time. The valuation is in line

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-24293489363955999852011-06-30T19:58:00.000+05:302011-08-24T20:12:29.520+05:30

See below estimates: Who is right?  I'd side with Oppenheimer for 2011, but would look for $96 is 2012 - and that too with downside risks from contamination from debt defaults and write-downs. Drop a line to tell me what you think?

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-19789915108731523632011-06-30T17:21:00.000+05:302011-08-24T20:12:59.549+05:30

Policy remains abnormal.  I would like to see the nominal fed rate rise towards 2.75% with inflation at 2.5% levels for normalcy as this would push real fed funds rate to just over zero which is where it belongs.  To do this without hurting nominal GDP rate would require that long maturity & bonds don't shoot up in proportion.  Yield curve really needs to return to normalcy.  I would

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-18905454486797598812011-06-28T20:36:00.002+05:302011-08-24T21:16:32.716+05:30

The yield curve remains inverted. It is likely the yield curve inversion is caused partly by the lack of depth in corporate debt markets. In addition, the long term nominal interest rates need to go up to remove the inversion – long maturity rates will only increase, once the structural change in the global economy is recognized - watch the red dotted line; that shows the inflation trend based

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-49417471686844041702011-06-26T23:53:00.004+05:302011-08-24T21:21:08.721+05:30

India Risk: Inflation a problem.  Mitigating Factor: RBI is handling it well, hopefully they allow for the lag affect of monetary policy and back off before inflation starts falling.  Impact: Rising interest rates, moderating inflation and slower growth.  Conclusion: The problem is not interest rates but growth expectations, interest rates are still below long term average real rates.

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-43267366515745304302011-06-08T10:58:00.002+05:302011-08-24T21:21:37.133+05:30

During the 2nd quarter of 2011, Sensex retreated on cries of "Bhaloo Aya, Bhaloo Aya - Bhaago, Bhaago". In terms of valuations, the market is trading near decade median level multiples of prior, current and forward year earnings. Looking at multiples of cyclically adjusted earnings (CAE 6 year median earnings), its trading at where it has traded 42% of the time based on current year CAE, 62%

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-27253126069167991182011-06-04T23:15:00.001+05:302011-08-24T21:23:50.346+05:30

James Altucher recently came up with 10 reasons why the Dow could hit 20,000 (or SP500 2,000) in 12 to 18 months. You can read about it here. Is this possible by June 2012 to December 2012? By that time, assuming SP500 2011 has delivered 95 in earnings and 2012 expectations are at 101.5 with 2013 expectations at 108. During 2012 the SP500 at 2,000 would trade at 21X prior year operating

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-45066591961754828422011-05-18T12:55:00.013+05:302011-09-14T22:08:24.752+05:30

I did a post on fair value during April and have received much email traffic expressing confusion between intrinsic and fair value. This post seeks to clarify the difference.  What is intrinsic value?  Intrinsic value is the value of a security embedded in the security itself. It is calculated by summing the future income generated by the asset, and discounting it to the present value.

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-24322572031890638822011-05-13T22:29:00.007+05:302011-12-02T11:38:59.889+05:30

Over the centuries, the prices of commodities in real terms trended down. This occurred despite continually rising demand.  Why? Better technologies led to more efficient and cheaper extraction. Demand rose, but at a slower rate than real growth because the commodity required per item reduced due to less wastage and improved production technologies for industrial goods and consumer

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-83105647213969221452011-05-03T23:44:00.010+05:302011-08-24T21:39:03.055+05:30

Interest rates rose today.  Inflation is now at near 9% which is well above the 5.24% median levels since July 2000. The market interest rate (Reverse Repo) is now at 6.25%, which is above the 5.5% median rate since July 2000.  But do note that real interest rates remain negative 2.36% [Caluclated as (1+ money rate)/(1+ Inflation Rate)-1] even today; this compares with 0.17% positive at median

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-14684622008733313862011-04-25T15:19:00.001+05:302011-08-24T21:39:29.982+05:30

Beware of the loose use of terminology. I have started reading many professionals calling the market fairly valued. That is wrong; and far wrong.  With the Sensex at 19.7k, markets are trading at "normal" levels; that means that multiples of current year earnings are between the 50th and 75th percentile of decade levels, and multiples of prior year earnings are between the 50th and

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-64268941614087125362011-04-25T14:44:00.001+05:302011-08-27T21:28:29.872+05:30

Since 1953, the 10-Year Treasury Constant Maturity Rate has yielded 5.88% at median levels; 7.75% at the 75th percentile and 4.15% at the 25th percentile. In March the rates were at 3.41%, which is the 10th percentile. Since 2001, the 10-Year Treasury Constant Maturity Rate has yielded 4.18% at median levels; 4.67% at the 75th percentile and 3.72% at the 25th percentile. In March the rates

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-75477496385501177152011-04-18T23:14:00.004+05:302011-04-19T12:37:59.408+05:30

SP shifted US rating to negative, with a 1 in 3 chance of a cut in rating over the coming two years. Part of the reason is the belief that the politics will not allow the process of cutting the deficit to begin. It will be interesting to see how markets react to the SP downgrade; rising interest rates at the mid and long end of the yield curve must be expected. But some of it should be

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-20650130735635232782011-04-14T14:06:00.001+05:302011-04-14T14:06:46.794+05:30

Did the world just climb out of a hole to fall back in deeper?During December 2007 through June 2009 the United States and indeed the world suffered a great recession. It was brought about by the bursting of the real estate bubble which inflated as a result of excessive leverage amongst consumers. Following the binge, the pain of the hangover had to be suffered, for following excesses there is

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-85439318038982894662011-04-06T12:57:00.006+05:302011-04-06T13:58:42.843+05:30

We are into FY12! Have a look at the various economic, risk taking and market valuation indicators on the Quant Report. Using valuation as the prime basis for portfolio allocation gives the Sensex a score of 4 out of 12; see Sensex Value Grid on the Quant Report. With Sensex earnings expectations for FY11 at 1,067; a market trading at 19,687 is at 18.45X prior year earnings; that is higher than

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-79596225937293419622011-04-03T23:18:00.001+05:302011-04-03T23:18:57.914+05:30

Many have asked why I blogged furiously between September 2008 and October 2009 and have been silent since. My answer is that those were interesting times when markets were mis-priced; it made sense to buy. Since then, it's not been so exciting; it's been a market to hold - for a long only investor during such times there is not much to say.Now it is different. With the SP500 at 1,332, the

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-80453473265268812452011-03-10T20:23:00.001+05:302011-03-10T20:23:42.603+05:30

Performance Over last 12 monthsConsumer Discretionary: Outperforming since July (recently weakened)Consumer Staples: Underperforming since NovemberEnergy: Outperforming since NovemberFinancials: Underperforming since AugustHealthcare: Underperforming since MarchIndustrials: Outperforming since AugustIT: Outperforming since October (recently weakened)Materials: Outperforming since August

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-21134876082069687512011-03-09T18:17:00.005+05:302011-03-10T16:20:05.046+05:30

In a recent post I said:"For India, the picture is more confusing. I do not think Sensex should fall below 17,200-17,500 range; but this level could break if SP500 falls fast and hard. On the other hand, a fall in US would be led by a decline in risk aversion; if that takes the pressure of commodities, it could well be good for the Indian economy. But falling risk aversion also means foreign

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-59706239224978065402011-02-19T22:03:00.007+05:302011-02-20T18:35:54.587+05:30

Over the years I have gotten lazy and shifted to tea bags. Today I made myself a nice cuppa tea; nice Darjeeling tea too. Why? Well the SP500 has me bewildered! I cannot understand why it is refusing to pull back. So I decided to go back to tea leaves and read them. I shifted the cup from left to right and then swirled it around; first clockwise, then counter clockwise. Then I watched a storm in

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com1tag:blogger.com,1999:blog-6664008877566965258.post-53146281010516002852011-01-28T12:36:00.001+05:302011-01-28T12:36:29.051+05:30

Back in mid October, I had cautioned on Sensex being expensive, opining a range of 17.5k for greedy investors and 18.6k for most. It's taken over three months and we are there.In my view the markets are very near a bottom now. The markets are unlikely to fall below 17.6k – at this level there is very strong value support because the market will then be valued at historic decade median market

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-12176963261934922822011-01-26T22:41:00.001+05:302011-01-26T22:41:12.163+05:30

Industrials are firing on all cylinders; look at GE, CAT, DE and SI; look at global auto sales for that matter. Backlogs have built up nicely. Margins remain strong too. What does this mean? Industrials tend to be basic materials resource and energy intense. Basic materials resource is also an energy intense sector. The rising backlogs in industrials together with strong margins will lead

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-69176477265978758622010-12-10T23:09:00.001+05:302010-12-10T23:09:56.512+05:30

Predicting market direction during 2009 was a no brainer. While at the start of the year it was impossible to know how far markets would fall, it was easy to predict the end of year level as upwards. Similarly, 2010 was a no brainer. My SP500 outlook for 2010 said:"In my view values are not expensive at 15X 2010 earnings expectations; particularly when considering yields in the bond market.

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-46770573731739162262010-11-01T23:07:00.001+05:302010-11-01T23:07:25.077+05:30

In a recent post this single line has attracted much unrest."We have QE2; not at all a reliable basis on which to base investment decisions."Everyone seems to feel QE2 does form a good basis to invest. Here is why I do not believe it is a reliable basis to invest: It is priced. In fact QE2 was reasonably foreseeable even in July 2009 when I posted on US Policy Expectations. Once a course of

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-41624439315883192852010-10-15T23:07:00.001+05:302010-10-15T23:07:46.409+05:30

The Sensex is trading at 20.1k. That is 20.4X CY earnings estimates, 24.5X PY earnings estimates and 18X FY earnings estimates. Decade median levels come in at 16.5X, 20.2X and 15X respectively. The 85th percentile (the multiples at which market has traded 15% of the time) come in at 20.5X, 21.5X and 19.6X respectively. Based on this, the market is certainly expensive.Now change the view from

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-5628291626065369042010-02-05T17:48:00.002+05:302010-02-05T20:36:55.486+05:30

Way back in the time when oil prices spiked to over $140, I started tracking the index performance now versus 1974. As it happens, the response of human psyche to turmoil has been remarkably similar during the two bears. No doubt our own bear is much more severe, and with good reason; we have had the financial crisis in addition to essential commodity price spike based turmoil. My model

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-22641217168047446992010-01-29T10:29:00.001+05:302010-01-29T15:04:47.536+05:30

Today's press contains reports on the finance minister's keenness to introduce the new tax code now instead of during the fiscal year starting 1 April 2011 (fiscal 2012). I decided to have a look at how the market might price such an event. As previously announced, the new tax code will (a) reduce tax rates to 25% for companies & individuals will range from 10% to 30% (I use an average rate of

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-41164820057504158702010-01-19T20:10:00.002+05:302010-01-19T21:59:23.761+05:30

Budget time is coming. We know that the government is planning some significant disposition of interest in public sector undertakings. This is excellent; in my view the government should focus on running the Country not the Company! Divestment means that a journey in the correct direction has been re-started after a long hiatus. Divestment comes at a good time; the funds realized will help

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-80819074724268306562010-01-04T22:29:00.001+05:302010-01-04T22:29:01.080+05:30

The developed economies of the world remain in the grip of a secular bear market. Emerging and commodity markets remain in a firm secular bull market. The convergence of markets occurs as usual; within the secular trend all markets continue with normal cyclical trends – they will suffer cyclical bear and smile through cyclical bull markets together. As it happens, the secular trends are now

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-86995485610925300902009-12-30T22:35:00.003+05:302009-12-30T23:30:00.491+05:30

I have updated the quant report for Sensex; it can be viewed on the quant report page on www.maxkapital.com. Unlike the Sp500, the Sensex quant report has not been rolled to 2010 because I measure valuation with reference to fiscal not calendar years. It's good to gaze into the crystal ball as we approach the new-year! For 2010 the quant report has a bear value of 6,433, a fair value of 9,972,

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-39066612797761309912009-12-30T18:09:00.001+05:302009-12-30T18:09:47.961+05:30

I have updated the quant report for SP500; it can be viewed on the quant report page on www.maxkapital.com. It's good to gaze into the crystal ball as we approach the new-year! For 2010 the quant report has a bear value of 591, a fair value of 963, a historic multiple based value range of 1,477 to 1,542, a moderated range of 1,156 to 1,542 and a fearless range of 1,215 to 1,620. All of these

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-54984620437764702412009-12-24T12:12:00.001+05:302009-12-24T12:12:29.592+05:30

Happy Christmas & New Year to readers; I will likely continue blogging during 2010 when I plan on starting with an over-view of the Blackstone India Fund followed with a quant analysis of each of the disclosed largest holdings.I will close out the sector watch series with the Telecom sector. Telecom as a sector underperforms from the market bottom to the recession end. It also underperforms for

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-21501817031337476382009-12-24T09:24:00.002+05:302009-12-24T11:06:47.785+05:30

Moving on to Utilities; this sector has a record of underperformance following market bottoms through the recession end, 6 months following the recession end and 12 months following the recession end. The expectation is for continued underperformance. Keep in mind that underperformance does not mean valuations will get cheaper; it just means that if the broad market goes up 20%, this sector will

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-27361955851651183642009-12-23T17:09:00.001+05:302009-12-23T17:09:18.967+05:30

In terms of growth, much of it stems from emerging markets and this shall continue. On a long term basis, the case for investment in health care, energy and staples (basic necessities food) is compelling; we in the emerging markets are in a secular bull which will run to at least 2030. Where we stood in 2007, was at pause point; emerging markets had grown at a furious pace. There was a need to

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-31008613984022925202009-12-22T18:44:00.001+05:302009-12-22T18:44:09.712+05:30

The consumer staples sector is a defensive one. During bear market declines, this sector outperforms. Following market bottoms through to the end of a recession the sector performs in line with broader markets. Once the recession is over, consumer staples tends to underperform; it is not a time to invest in the sector when the leading economic indicators flash improvements. Valuations in this

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-71292847694273628402009-12-21T22:32:00.003+05:302009-12-22T10:00:02.530+05:30

Following my post on materials earlier today, I thought I'd go ahead and post on Energy too. That leaves me with four days to cover the four remaining sectors, which will conclude my sector watch series. Next week I hope to start a portfolio review of Blackstone's India Fund; I am planning on doing a general overview and then adding a daily quant review for each of the top 24 stock holdings over

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-84399374665242428172009-12-21T14:40:00.001+05:302009-12-21T14:40:18.866+05:30

After Industrials, we look to basic materials. History tells us that the material sector outperforms following a market bottom through to the end of a recession. It also tells us that the sector continues to outperform both six and twelve months following the recession end. What was different in the present cycle was the cataclysmic crash in the sector, followed by the dramatic reversal since

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-91544162961918428452009-12-20T21:52:00.001+05:302009-12-20T21:52:23.164+05:30

The next sector to evaluate is industrials. Like consumer discretionary, IT and financials, industrials outperform between a market bottom and the recession end. Of course the degree of outperformance is to a lesser degree, just as the underperformance during the period preceding the market bottom is less severe. During the 3 months following recession ends, industrials continue to outperform

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-32201040251245537882009-12-19T18:39:00.001+05:302009-12-19T18:39:14.922+05:30

First financials, then IT and then Consumer Discretionary! Consumer discretionary as a sector is perhaps the most cyclical of the ten sectors. Historically consumer discretionary performs with the greatest vigor following a market bottom and through the end of the recession. For the six months following the end of a recession the sector performs broadly in line with markets. It then returns

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-43951287891227025632009-12-18T15:15:00.001+05:302009-12-18T15:15:32.901+05:30

Information Technology follows with outperformance on the heels of financial services. Using history as a guide, IT outperforms the market between a market bottom and the end of recession. In the present cycle, we have witnessed the outperformance. During the six months following the recession end the sector underperforms and returns to market-perform in the subsequent six months. Using

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-37682649685670948622009-12-17T17:22:00.002+05:302009-12-17T19:38:19.606+05:30

Financials as a sector normally leads the way out of recessions. The sector has outperformed since the market bottom which normally occurs during full recession. However, of late, the sector has been marking time. This too is expected because financials do not normally continue outperformance during the six months following the end of a recession. However once the recovery has taken hold,

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-69234306713594652792009-12-16T14:53:00.001+05:302009-12-16T14:56:03.730+05:30

Handling recessions is easy. If you follow a suitable portfolio allocation, by the time the yield curve is normal, you will have reduced over-weights in equity and transitioned to a portfolio with market weight sector allocations. Then as the yield curve inverts, assuming that you follow an economic cycle sector weight-age, perhaps a slightly more defensive tilt might be adopted. You can see

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-33295437217920052292009-12-15T22:45:00.001+05:302009-12-15T22:45:49.541+05:30

Nothing is absolutely predictable but economic cycles tend to follow a somewhat predictable course and within the economic cycle, sectors too fall in line with an element of predictability. Secular trends can influence how different sectors perform during an economic cycle. For example, if you believe energy has a powerful and sustainable secular force behind it and are correct, energy as a

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-6290196999295875352009-12-14T17:06:00.001+05:302009-12-14T17:06:04.325+05:30

Today I will revisit my views on the long term fundamentals of the Energy sector.  Today Paul Samuelson passed away at the age of 94.  When a colossus who has influenced my life in some small way dies, I pay respect.  Paul Samuelson's text books have given me a passionate interest in economics; for that I thank him; may his soul rest in peace.  We are governed by the laws of economics and

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-3800595409812832522009-12-06T22:49:00.004+05:302009-12-08T08:38:05.878+05:30

A couple of days ago I turned on my computer and started looking through my various accounts. It was up day, which is always nice. What surprised me was a huge gain number with a relatively small % gain. Normally, I look at my portfolios benchmarked against fair value and intrinsic value. I consider the market price of a stock mostly as noise and opportunity (to buy and sell); it is merely a

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-63712480101045865892009-11-24T23:18:00.001+05:302009-11-24T23:18:40.251+05:30

So far I have put together quant reports for 76 companies and I will be adding another 25 to 35 over the next month or so. You can view them via www.maxkapital.com. 40% of the universe covered ex financials is dangerously over-leveraged. Some action has been taken to deleverage, but it is not enough.I keep returning to leverage because it worries me deeply. As a long term investor, excessive

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-51493275714534077262009-11-15T19:30:00.001+05:302009-11-17T16:57:55.987+05:30

Indian entities have surprisingly reasonable capital structures. From over 50 companies I have studied, I am of the view that approximately 36% have a weak balance sheet and capital structure; the remaining 64% have sound capital structures. At least half of the so called weak balance sheets are not weak when you dig beneath the surface. In several instances the asset values carried in the

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-3403563250105292009-11-09T12:59:00.001+05:302009-11-17T16:57:55.990+05:30

GDPGDP at market prices in current prices reported on 1 July 2009 came in at $14,305.1 million. This compared with $ 14,546.7 million for the same quarter during 2008. The annual decrease is 1.7%. Comparing average CPI levels during the quarter for 2009 versus the same quarter in 2008, I observe a price decline of 0.2%. Thus there is no growth in economic activity in nominal terms or in real

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-16147637582490895752009-11-09T11:10:00.001+05:302009-11-17T16:57:55.991+05:30

GDPGDP at market prices in current prices during the first quarter of fiscal 2010 came in at Rs 13,269.57 billion. This compared with Rs 12,354.27 billion for the same quarter during fiscal 2009. The annual increase is 7.4%. Comparing average CPI levels during Q1 2010 versus Q1 2009, I observe a price rise of 8.8%. Thus growth in economic activity while apparent in nominal terms; did not really

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-91286869774313490672009-10-28T22:32:00.000+05:302009-11-17T16:57:56.001+05:30

Good day today. I waded through data on 16 companies (See The Quant Report). Bought some Bharti Airtel, sold some Cairn; nothing exciting really. I feel Cairn might face some challenges over crude quality; the potential buyers are overseas and with the baltic dry continuing upwards, transport cost will be an issue. They need local buyers. Also, the market is well supplied; I see no reason

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-2997472310413270592009-10-24T12:35:00.000+05:302009-11-17T16:57:56.004+05:30

Please visit The Quant Report and link through to the Sensex Quant Report.TechnicalsSensex has approached a key Fibonacci resistance at 17,992. After reaching 17,457 as an intra day high, it has pulled back. At this stage, the markets are likely to retrace some of their gains. The 16,046 level has now become support. A drop in markets is highly unlikely to reach this level. In my view the market

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-68968440910738141542009-10-21T19:13:00.000+05:302009-11-17T16:57:56.005+05:30

Please visit The Quant Report and link through to the Sensex Quant Report.Focus on multiples without an understanding of the math of multiples can be a major investing error.Consider this; during fiscal 2003 the market bottomed with a PE (Annual Average Price divided by 14.40. During fiscal 2004, the PE rallied up to 14.90 but the market was driven higher because of the rising E.Now compare this

Shiv Kapoorhttp://www.blogger.com/profile/09682621418960284858noreply@blogger.com0tag:blogger.com,1999:blog-6664008877566965258.post-3057229830020253252009-10-13T08:50:00.000+05:302009-11-17T16:57:56.006+05:30

The Sensex is poised for a major upmove. Infosys, Reliance, Bharti and Tata Steel are four Dow Jones Global members which excite funds flow like nothing else. The infection of greed flowing from these four infects the entire market with enthusiasm. It is time for panic buying by retail and fund managers who have missed the rally.Reliance has considerable short term upside. Once the clouds

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