If my information is correct then in recent interview Mr. Bernanke said that he can increase interest rates in 15 minutes and can stop Hyperinflation.
In my earlier post (which drew comparison between German Hyperinflation and USA today), I indicated why and under what circumstances hyperinflation will happen in USA. Let me revisit that post in different manner.
Mr. Bernanke is correct when he is saying that he can increase interest rates in 15 minutes. It is also correct that as soon as he utters word “tighten” S&P will fall 10% and gold by 12% (percentage figures are pure guess). It is also correct that prices will fall across spectrum.
He will be correct and proven right provided “OIL REMAINS PRICED IN DOLLARS”. As soon as Oil is priced in another currency, very few will watch what FED reserve chief is saying. As long as dollar is accepted exchange for commodities, all FED chiefs can manage world economy and remain in control.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Tuesday, 7 December 2010
Thursday, 25 November 2010
PPT & Contradictions within
Most of the people are convinced that there is a PPT (Plunge Protection team). Some technical analysts also include PPT factor in their analysis.
Now let me look at contradictions. People who believe PPT is active are same people who follow technical analysis. These people look at various technical indicators and give BUY or SELL signal. Now, if you believe, PPT is active then as you look at technical indicators, PPT is also looking at those indicators. If you believe PPT is manipulating markets then it is also manipulating technical indicators (as technical indicators are the result of price movements).
I am not saying technical indicators should not be followed (these are built in HFTs, so one should be careful not to ignore those). I am just driving the point.
One needs to be counter intelligent.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Now let me look at contradictions. People who believe PPT is active are same people who follow technical analysis. These people look at various technical indicators and give BUY or SELL signal. Now, if you believe, PPT is active then as you look at technical indicators, PPT is also looking at those indicators. If you believe PPT is manipulating markets then it is also manipulating technical indicators (as technical indicators are the result of price movements).
I am not saying technical indicators should not be followed (these are built in HFTs, so one should be careful not to ignore those). I am just driving the point.
One needs to be counter intelligent.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Thursday, 18 November 2010
History repeats itself
History repeats itself but in different form.
It looks to me that indices will put major top in January-11 coinciding with Chinese Premier’s visit. Markets will react once visit gets over. Markets will rally back in March-11 but will not break earlier high of January-11. However, major bottom will not be in until March-12. Around March-12, I expect S&P at around March-09 bottom.
I will update this later if I suspect it will play out differently. Stay tuned.
This will be similar to 1970s.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
It looks to me that indices will put major top in January-11 coinciding with Chinese Premier’s visit. Markets will react once visit gets over. Markets will rally back in March-11 but will not break earlier high of January-11. However, major bottom will not be in until March-12. Around March-12, I expect S&P at around March-09 bottom.
I will update this later if I suspect it will play out differently. Stay tuned.
This will be similar to 1970s.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Monday, 15 November 2010
1920s German Hyperinflation
Some commentators are drawing similarities in German hyperinflation in 1920s and the USA today. In their opinion, USA will face same problem. I will be brief.
German hyperinflation was a result of high “Money in Circulation” and we are not there yet. I am saying this again, all depends on future action of FED. However, here is the trap. If I look at dollar bills in circulation in the USA then it is not alarming. However, dollar bills in circulation in whole world are alarming if all dollars return to USA and start circulating ONLY in US economy.
Dollars will return to USA if there is a loss of confidence in dollar. Confidence in dollars will not be lost as long dollar is “accepted exchange” for commodities.
In my opinion, in the first stage world will price commodities in any other currency and then in second stage all dollars will flood back to USA resulting in hyperinflation. Note that there will be volatility, as everyone including US citizens will try to get rid of dollars. EMERGING ECONOMIES WILL NEED TO ENSURE THAT DURING SUCH PERIODS THEY IMPOSE CAPITAL CONTROLS AND ALLOW NOT A SINGLE DOLLAR TO PURCHASE REAL ASSETS. Once this happens then with due respect to chiefs, all future FED chiefs will be third page celebrity.
It needs a mention that in ensuing volatility during German hyperinflation in 1920s, bulls and bears both lost, as everyone became trader instead of investor (REMEMBER TO CHANGE TACTICS WHEN SUCH THINGS HAPPEN). Only those who remained invested in FOREX and gold preserved their wealth in Germany in 1920s. My guess is no one made huge money in that volatility.
All readers note that there is huge difference in approach by successful trader and successful investor. Most of us think that we are investors but in reality, we are traders. Very rarely, an individual will be successful as investor and as trader both.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
German hyperinflation was a result of high “Money in Circulation” and we are not there yet. I am saying this again, all depends on future action of FED. However, here is the trap. If I look at dollar bills in circulation in the USA then it is not alarming. However, dollar bills in circulation in whole world are alarming if all dollars return to USA and start circulating ONLY in US economy.
Dollars will return to USA if there is a loss of confidence in dollar. Confidence in dollars will not be lost as long dollar is “accepted exchange” for commodities.
In my opinion, in the first stage world will price commodities in any other currency and then in second stage all dollars will flood back to USA resulting in hyperinflation. Note that there will be volatility, as everyone including US citizens will try to get rid of dollars. EMERGING ECONOMIES WILL NEED TO ENSURE THAT DURING SUCH PERIODS THEY IMPOSE CAPITAL CONTROLS AND ALLOW NOT A SINGLE DOLLAR TO PURCHASE REAL ASSETS. Once this happens then with due respect to chiefs, all future FED chiefs will be third page celebrity.
It needs a mention that in ensuing volatility during German hyperinflation in 1920s, bulls and bears both lost, as everyone became trader instead of investor (REMEMBER TO CHANGE TACTICS WHEN SUCH THINGS HAPPEN). Only those who remained invested in FOREX and gold preserved their wealth in Germany in 1920s. My guess is no one made huge money in that volatility.
All readers note that there is huge difference in approach by successful trader and successful investor. Most of us think that we are investors but in reality, we are traders. Very rarely, an individual will be successful as investor and as trader both.
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Friday, 12 November 2010
Strategy
Banks depleted their capital during 2008 financial crisis. To help banks, US government came out with Stimulus where Fed bought securities held by banks and gave them much needed capital. Now this is how I think, strategy will unfold.
Fed knows that banks are investing money outside of US and making money. American Banks are controlling some stake in companies outside USA thereby insulating against dollar fall. The plan could be, banks make enough money (even by investing outside USA) and then Fed withdraws slowly.
The USA is also targeting unemployment but that plan is unlikely to succeed. If I get labour at 1 dollar an hour in Alabama and 6 dollars in Washington, will I get my work done in Alabama or Washington? Therefore, instead of doing it in USA, I will do it in Chindia. I firmly believe that most of the jobs from developed economies have disappeared forever. Job market does not go to zero, as people need electricity, water, food and other basic amenities. To supply these basic things, you need to employ certain number of people per household. Therefore, thirty thousand people employed in social service sector (including some privatised utilities company) are not an indication of growth. If population goes up by 10%, then you will need 10% more people in social sector. Therefore, if someone comes up with a chart that shows rise in employment in social service sector (including some privatised Utilities Company), one must see how much population has gone up by in the period under consideration. I THINK POPULATION IS KEY TO GROWTH!!!
Before I end this post, I have started to believe that gold price is an indicator of structural changes. When Mr. Nixon broke gold standard, traders reacted by jacking up prices of gold. Action of Mr. Nixon was sudden and probably caught world unaware. As a result, gold prices rose AFTER the announcement of Mr. Nixon. This time, god prices are reacting BEFORE any kind of announcement.
-Shrihas Pandharkar
DYOR.
© Copyright. No reproduction, please.
Fed knows that banks are investing money outside of US and making money. American Banks are controlling some stake in companies outside USA thereby insulating against dollar fall. The plan could be, banks make enough money (even by investing outside USA) and then Fed withdraws slowly.
The USA is also targeting unemployment but that plan is unlikely to succeed. If I get labour at 1 dollar an hour in Alabama and 6 dollars in Washington, will I get my work done in Alabama or Washington? Therefore, instead of doing it in USA, I will do it in Chindia. I firmly believe that most of the jobs from developed economies have disappeared forever. Job market does not go to zero, as people need electricity, water, food and other basic amenities. To supply these basic things, you need to employ certain number of people per household. Therefore, thirty thousand people employed in social service sector (including some privatised utilities company) are not an indication of growth. If population goes up by 10%, then you will need 10% more people in social sector. Therefore, if someone comes up with a chart that shows rise in employment in social service sector (including some privatised Utilities Company), one must see how much population has gone up by in the period under consideration. I THINK POPULATION IS KEY TO GROWTH!!!
Before I end this post, I have started to believe that gold price is an indicator of structural changes. When Mr. Nixon broke gold standard, traders reacted by jacking up prices of gold. Action of Mr. Nixon was sudden and probably caught world unaware. As a result, gold prices rose AFTER the announcement of Mr. Nixon. This time, god prices are reacting BEFORE any kind of announcement.
-Shrihas Pandharkar
DYOR.
© Copyright. No reproduction, please.
Sunday, 7 November 2010
Zoellick seeks gold standard debate
There you go...
Zoellick seeks gold standard debate (FT News on November 07, 2010).
http://www.ft.com/cms/s/0/eda8f512-eaae-11df-b28d-00144feab49a.html#axzz14fnVUsdf
Please see below my post "New World Currency" dated 23rd October 2010. (This post was copyright....but I am not offended)
-Shrihas Pandharkar,
Copyright. No reproduction, please.
DYOR.
Zoellick seeks gold standard debate (FT News on November 07, 2010).
http://www.ft.com/cms/s/0/eda8f512-eaae-11df-b28d-00144feab49a.html#axzz14fnVUsdf
Please see below my post "New World Currency" dated 23rd October 2010. (This post was copyright....but I am not offended)
-Shrihas Pandharkar,
Copyright. No reproduction, please.
DYOR.
Saturday, 6 November 2010
Beat Inflation
One of the easiest ways to beat inflation is to remain invested in quality stocks. Over longer run, stocks beat inflation by good margin. The problem is selection of stocks. One needs to invest in right stock. Choosing right stock is herculean task. Companies do go under. My experience suggests that individual investing in quality stocks for first few years will do well in long run. Individuals get trapped in greed and fear. They lose money in the process and then abandon stocks forever.
Therefore, whenever fund managers see stimulus, they buy stocks as a hedge from rising inflation. Reverse is true if stimulus is withdrawn. These cycles of stimulus run over years. Therefore, someone taking position based on stimulus or expansionary-policies benefits.
Gold is another asset class, which is used as a hedge against inflation.
In one of my post, I discussed ponzi schemes in Stocks/assets. Such Ponzi schemes can run forever if fund managers are convinced on inflation. “Painting inflation picture” is easy if world depends on your currency to buy commodities. Strategy is to convince fund managers that inflation is coming.
Notice the game plan?
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Therefore, whenever fund managers see stimulus, they buy stocks as a hedge from rising inflation. Reverse is true if stimulus is withdrawn. These cycles of stimulus run over years. Therefore, someone taking position based on stimulus or expansionary-policies benefits.
Gold is another asset class, which is used as a hedge against inflation.
In one of my post, I discussed ponzi schemes in Stocks/assets. Such Ponzi schemes can run forever if fund managers are convinced on inflation. “Painting inflation picture” is easy if world depends on your currency to buy commodities. Strategy is to convince fund managers that inflation is coming.
Notice the game plan?
-Shrihas Pandharkar
© Copyright. No reproduction, please.
DYOR.
Subscribe to:
Posts (Atom)