So did you miss the bus?

On 28 August 2009 Investorstreet suggested a BUY on Gold keeping in mind the Chinese Gold Cycle.

Had you invested in Gold as on that date, you would currently be sitting on a return of 39.72%, which by no means can be termed as an average return on any investment, even equity for that matter.

So did you miss the bus?

Gold does it AGAIN...

Gold does it every year and it is doing this again. It follows the yearly "Chinese Gold Rush Cycle" and shoots up during a 4 month period every year. This starts sometime in September every year, before the festive season in India and continues till the end of the Chinese New Year.


A previous post on Investorsteet stated this last year when gold was doing what I call "A habitual affair". This year, it is expected to finish the cycle during the 4th week of January and it is already at USD 1053.31 per ounce (Source: www.goldprice.org)

The average annual change in gold prices (in USD) has been 17.1% during the period 2004-2009 with a positive change in any given year.

200 Posts!!!!!!!!!!!

INVESTOR STREET CELEBRATES 200 POSTS!!!!!!!!!!!!!

Inside Insider Information

If someone told you that technical analysis is the reason you can earn 10+% in a day, then they were WRONG.
The fact is that market information will get you places faster than any analysis by the best of technical analysts who try to time the stock. Take for example my experience yesterday. ACC was a stock which gave a bommer of return yesterday due to exceptional results. A good friend of mine had gathered ACC on Thursday morning and gave me the info that the stock would shoot up on Friday on back of beating market expectations. He had been gathering the stock for 2 or 3 days now so that just tells you that he had some information that most out there did not, and he had that way before others too.
So your consitant capitalization on returns would be a direct function of how strong your contact network in the market is and more importantly how reliable it is. People often use insider information to reap superior returns in the markets and most do it quietly. But in all honesty, i recommend not using the insider way to make money cause you more often will attract a lot of unwanted attantion if you do so.
Bet on fundamentals and invest for the long run. I know its difficult to do when you look at easy money but its worth it cause it comes without all the trouble a short cut can get you into.

Cartoon Taken From: http://www.cartoonstock.com/

Sensex 16000? A New Bull Run....

A lot of people of late have asked me where are the markets headed. The recent run of15000+ has left many disappointed since they could not participate in the rally. So was it really such a big loss? Not really.

In terms of a risk reward approach, the chances of the Sensex moving beyond 15000 was a lot less than it testing 12000 levels. Mere quarterly improvements in the growth of key sectors and market sentiments fed by the Prime Minister's guidance are not enough to sustain the current market levels. The improvement in industrial production, sectoral growth and increased demand have to be consistent for at least 2 successive quarters in order to start a pegging point for a long term bull run. Another reason that is feeding the current frenzy is that amongst BRIC nations, India and China are still the most attractive investment destinations due to the slack in Europe and USA. As the global economy recovers from its lurid state, the BRICS will benefit the most due to the robust growth that they are capable of sustaining.

Investor street is of the opinion that if the Sensex rallies beyond 16000 then fresh positions can be taken since the rally is then expected to continue for a while. But until the market breaks the 16000 mark, fresh positions are very risky and the market might test 13000 levels again. We remain bullish on Power and Infrastructure.

Investor Street Confidence Index (ISCI)

The Investor Street Confidence Index or the ISCI takes into account more than 40 parameters while analyzing and rating the top sectors in the country.

Based on this we have rated the following sectors for the near term outlook. The rating is on a scale of 5 where a higher rating signifies more investor confidence towards the sector. The findings of the ISCI are as follows:

Investor Street is overweight on Power & Infrastructure and these two sectors would be the front runners during the upswing. Post March 2010, Real Estate could witness the maximum inflow coming in and the economy is expected to be at the peak of the recovery mode post November 2010.
We advise investors to stay away from IT and Oil & Gas for the near term. Fresh positions in Power and Infrastructure can be taken with a horizon of 12-18 months.

Flaring Sentiments: Risky Avenue

Signalling might be a reflection of sentiments but it certainly isn't always the rational thing to do. The recent rally in the Sensex and the push to 14000+ does not mean that we have beaten recession and things will be OK overnight.

This sentiment is a mere reflection of the modjo built up around the election results that met street expectations. If you have already not been a part of this rally, now is certainly not the time to enter and take fresh positions. Even if you were a part of the rally before it started, we suggest that you book profits and exit or keep a minimal exposure. The markets are expected to be range bound between 12000 to 14000 though there are chances that it may scale 15000+ for a very short duration.

We suggest that you remain invested at least for 18 months if you are taking fresh positions in stocks that have recently shot up by more than 20%. One can expect a return between 22-27 percent for a period of 18 months.

Real Estate In Mumbai

Real Estate prices all over the country have corrected by more than 25% in the last 12 months due to projects getting delayed as a recourse of liquidity crunch. But the only city that seems to be still resilient to this chain reaction is Mumbai. Property prices in parts of Mumbai have corrected by about 10% but are still the highest in the country. Prime areas in Mumbai are still going at around Rs35000-Rs45000 per sq feet and this is after the correction.

Suburban Mumbai and projects in areas such as Thane are much cheaper at around Rs8500-Rs10500 per sq feet. Developers are expecting a further correction of 10-15% over the year on grounds of many projects getting delayed and further expectations of a fall in prices. Real estate as an avenue for investment remains the most lucrative even today in Mumbai but only with a long term horizon. One can expect around 27% returns on an average for a period greater than 7 years.

Is Credit Card a Good Idea?

Your bank would often try to convince you that you need a credit card in order to build your credit history and especially if you are starting afresh. It would try to convince you that with a secured or unsecured credit card, you could gradually build a good credit history and would highlight all the benefits that the card offers. But is having a credit card the only way to build a credit history, or is it the convenience of not having to carry a lot of cash?

Actually, the credit card is not the best medium for either of the two. Studies show that credit cards make you spend more than you ideally would if you did not have the option of credit. With regular use it takes away the habit of sound money management and savings. If convenience is what you are looking for, then use a debit card. A debit card helps you build a good credit history as much as anything else and does not have the evils that come with a credit card.

There are situations where one cannot avoid the usage of a credit card. Remember the following rules and a credit card should be less of a pain for you:

• Look at several options across different banks before getting a credit card
• Don't go for a higher limit at the cost of a higher APR
• Keep the credit card as a backup for emergencies
• Use cash or your debit card for small purchases
• Avoid using balance transfers
• Avoid getting an add on
• Always check your statement thoroughly for any surcharges
  
• Mark your monthly due date on a calender. Always make the payment 4-5 days before the due date
• Push the bank for a zero APR whenever you can
• Check your credit rating and history with any one of the registered credit rating agencies at least once every 6 months. They do not charge you for the information.
  

How is Fuel Priced?

Most of the mails you receive as forwards that offer you mind boggling information are half cooked or plain darn stupid. Take this one for instance which tries to tell you that you pay an exorbitant price for your fuel:

One liter = 0.26417 gallons
A standard barrel of oil = 42 gallons
Barrel oil = 42/0.26417 = 158.988 liters

One Barrel Oil Cost now $ 54.27 @ INR 51.175 = Rs. 2777.27 for 158.988 liters

So the real purchase price of oil Per Litter is = 2777.27 / 158.988 = Rs 17.47

(Currency and Crude Price Source: Oanda.com and NYMEX; as on 6th April, 2009)

So whats the problem with this seemingly simple logic??

The problem is that out of a blue barrel of crude oil, not the entire 42 liters give you the fuel that you use for your car. The break up is as shown in this image:

So only 19% of a blue barrel gives you gasoline i.e roughly 8 liters. Apart from this, Crude Oil just consists of 64% of the final cost that you pay for the fuel. By the time crude oil is converted into usable gasoline, it goes through refining, marketing and distribution and has taxes levied on it. As such the breakup of the cost becomes as follows:


So the simple and harmless looking Rs 17.47 liter has a marketing, sales and distribution component to it, plus the taxes. Apart from this refining is an expensive affair and the margins are usually low as not many refineries have a very large scale. The infrastructure for such a setup and the labor cost is high. If you keep all this in mind, you would understand why most non oil producing nations have to heavily subsidize fuel prices. If they did not, then you would be paying between 20%-30% more for your fuel.

I hope this helped in making you understand how your fuel is priced.