BUFFETT: I would tell people if they worry what the market does on any given day, they shouldn't be buying stocks.
Dear Rajeevbhai,
Please throw light on one development, which i am not able to justify. Till Jan 15th, the all stock mkts, Crude, Gold, Non ferrous Metal, steel (Each comodities) were almost rising togather.The US slow down, sub-prime issue were here since last August but our stock morket was enjoying bull ride with all the comodities till mid Jan. They all were ignoring above issues.But from Feb onwards, surprisingly, all comodities are near to their all time high prices (Gold, Crude, Copper, ALuminum & few Agro products) but our stock mkt is on reverse trend. Globally, the volume of stockmarket is very less compared to the volume of Comodity Mkt. Why did stock mkt started to move in oposite direction to major comodities and all news media, brokers, etc are making hype of Slow down?Please make me understand.Regards,
Well Friends,
I have been asked the following questions and I thought it to write the answer on the main page as I thought many readers may not see my answers at Comment section....but I suggest all my readers to see all comments and my replies religiously.There will always be some thing to read.I am sure about it.
Ok now coming back to the answer which Mr.Dinesh asked.....
Why till Jan 15 Stock Market an Commodities Market ran up and up hand in hand and now Stock Markets are tanking and not Commodities?
Well,one thing one has to understand the difference between Commodities Market and Stock Market. Stock Market is driven by sentiments while Commodities is driven by REAL DEMAND.....Demand coming from the consumer.Viz:Industries using Iron Ore,Copper, Coal, Silver, Uranium, Manganese Ores etc etc.....and daily consuming commodities with the people ,needs in general, like Wheat,Sugar,Oil & Gas,different types of grains etc etc....and these demands are constantly increasing world over and hence commodities will still go up.....but maybe not Stock Market....as we can say.. for eating Wheat and grains are a must and one has to buy them ,while if one do not buy Shares in stock market for years togather ,it will do....because the first priority is livelyhood.If we are not living then what the hell to do with the shares!
That is the reason lately since last Aug , Warren Buffet is buying an ailing company shares , Kraft Foods Inc, a food co....as he knows that people will have to buy food to LIVE!as he is sure about the turnaround of it.....
Well,the reason for the price rise for commodities are actually ,world is not able to produce commodities in enough amount to feed the world increasing populations and there are many reasons for that....that I will discuss another time...But I will simply put in this way that, It is a Vicious Circle....that has no end....
Hence the decoupling we are seeing between Stock market and Commodities Market....we will still see Commodities going up and up and Stock Market will be down in dumps and they may remian for more time......
Well, coming to the second point Dinesh has showed...that the subprime issue and USA Slow down were there from Aug then why stock market went up to Jan?
Well, the reason behind this is ....in Aug players were not sure how much the damage was...they thought it can be few billions dollars ....and US economy is resilent to any major drawbacks of Subprime issue...but as the things started unfolding and major loss making and writing off news started to pour in the Fund Manager started panic unwinding in Emerging Markets , where they have made money,to make up the loss in US subprime.....and the selling came in heavy which our market were not able to take and hence the strong reactions we saw in Jan and even now.....
The risk aversion view grew up and people started taking the money off from the MF's to invest in more secured Investment like bonds etc.
The Master , Warren Buffet just said that , he feels that US is already in recession and there is no need for the technical indicator to visulize whether the recession is there or not.....
So, Stock market is all about Sentiment and hence as soon as the sentiment get bad people tends to sell either to capitalize whatever profit he is having or trying to trim down the loss how mcuh he can.....When people wants to sells , it is everyone who wants to sell......adn hence we see sellers curcuits and when one wants to buy everone wants to buy and hence we see buyers circuits.....that is called Herd mentality......and market is always driven by this and those to thinks different from that makes a Fortune.............
I hope I have given enough reasons to reply the question.I may have missed one to two more .Let me see and if I can recall I will add it here.....
Dear Rajeevbhai,
ReplyDeleteSirji,A great convincing reason for the crash of Stock mkt after mid Jan. No doubts about your logic.
But I bag your pardon to differ with your view on comodities. You said that the demand driven bull run is going on in Comodity Mkt. I would like to say that, the demand is speculative one and not the real one. Take any comodity like steel, Gold, Copper, Silver, Crude or even a minor metal like Manganese and there is atleast 15 to 25% hike in last three months. How come, all of sudden the demand increased like this?
May be focus of FFI or global financial giants have changed there focus and started playing aggresively in comodities. The point to understnd is, when they will exit from this cycle? Will it be short term game? If we can derived the right equation, I think we might predit the movement and timing of our stock mkt in a right way.
I am just expressing my view only. Please take this positively.
Awaiting for your comments,
Dinesh
Hi Dinesh,
ReplyDeleteWell, you maybe right and I may be wrong.
Well,I do not take anything personally ,never has emphasized that what I write is always true.
I have proved wrong many times and that too very horribly.
Well,apart from Cricket, Stock Market is the only place where anyone can go wrong or can go right and that is the real attraction in both Game.....People love to get proved right and wrong....it is anybody's call on any given day...
Just a day back I wrote at some other place ,that as Dow is down by 314 points Sensex can be down by 900 points and that happened...Now that is just a coincidence or say a good guessing....and it doesn't mean that again I can prove right an nor would I try to do it(predict) again....
Hence,it is anybody's guess or thinking...about commodities and stock market.....
Hi Dinesh,
ReplyDeleteI would like to offer a counter view.
Before doing this, I would like you to suspend your current beliefs and assume the following:
1. The Dollar is getting downgraded across the world.
2. Consequently, Gold is coming back as the main fall-back currency.
In addition, assume that demand in Commodities is not really rising (i mean the quantum of demand), but is almost staying the same or rising insignificantly.
Then, because of 1) above, the things which have constant demand would look like they are rising in prices - *in paper currency* ie. the dollar. But if one can put a gold value for the commodities, perhaps their "gold prices" are remaining the same...
The price of Oil too would fit in with the above, to some extent.
I don't know and can in no way prove any of the above. It is just my conjecture - and I hope really informed people on this board will come forward to share with facts...
Thanks & Best Regards,
-feltra
PS: For some reason, it is not allowing me to post as myself. Hence am posting as Anonymous. Will try to rectify that if problem is at my end.
Hi Dinesh,
ReplyDeleteThe following is an extract from one of the articles by an author called "The Mogambo Guru". I read him on Asian Age. Here, he is quoting a top guy in GoldMoney.com....
"......... when James Turk of GoldMoney.com said that the problems of "disappearing purchasing power" can be solved with gold, which he proves by showing that, for instance, "When viewed in terms of gold, the price of crude oil is essentially unchanged throughout the (last) six decades. It is the dollar that is volatile, not gold." "
Best Regards,
-feltra
i have posted my query in artson thread let me post it over here again.
ReplyDeleteDear all,
Dear all,
I received the certificate of artson today but the share is not listed yet.Script is still suspended. also in certificate it is mention that face value is reduced from 10 to 1 RS but number of share remains the same i didn't understand it if they reduced the face value from 10 to 1 they should also have to give 1:10 shares otherwise share holder will be totally in loss.
So what u people think
Ahmed
Hi Ahmed,
ReplyDeleteSeems your anxiety is increasing day by day....that what will happen to Artson.
WEll, don't worry on Artson.The shares has remained same though the FV has reduced from 10 to 1....
There will be no decrease in the vakue as Tata Project has also taken stake in it of 1 paidup..
The loss was such that they have to reduce the capital to writeoof the accumalated loss.
Ahmed, remember always,this is stock market and hence you can't keep on reading stocks prices on daily basis and go on thinking that what will happen.That is a bad habit....
There is where the conviction comes.You should be so sure about what you have purchased.
I have written in length about Artson in past...Try to reread it when you feel disturbed....mayperhaps the post reading can give you some solace and stop becoming anxious...
Rs 2000 cr project is not a small amt which they are going to tender for and with Tata at helms of affiars no need to panic.
Well, actually it is better that Artson Eng is not getting relisted now in the days where our market is getting reday to make new lows.......I think that is a blessing in disguise that Artson is not being listed now....
Artson is a LT story.....2 yrs....atleast..
thanks rajeev bhai,
ReplyDeleteI think it is better that artson is not listed in such type of market otherwise it also would have suffered.
Thanks for giving reply.
Ahmed
Here is BSE notice
ReplyDeleteTrading members of the Exchange are hereby informed that the under mentioned equity shares of Artson Engineering Limited are listed and permitted for trading on the Exchange with effect from Thursday, March 13, 2008