STOCK MARKETS AND OCTOBER

So it is proved once again that the month of October is not good for Stock markets. Over the past 80 years, starting from 1929, the month of October is always a bad omen for stock markets world over barring few exceptions.Remember how bullish/positive most of the market participants were just 10 days ago and see how things have changed dramatically. While the uptrend or so called strength during the last 2 months was labored and with declining volumes, the fall is sharp and swift to say the least. Like the famous words in U.S nowadays(TOO BIG TO FAIL) we are now hearing lot of voices now which say - IT WAS EXPECTED AND/OR I SAID SO. But as far as I know only very few stayed away for buying at 5000-5100 levels(nifty)even after the INDEX doubled in less than 7 months saying that every correction is a buying opportunity and lot of money is waiting in the sidelines to support the market at lower levels.

On the macro side, the closure of small regional banks in U.S is happening faster than the H1N1 deaths as the number has gone upto 115 as of yesterday(30/10/2009)from less than 100 at the start of the month(as mentioned in my article dated 2/10/2009).


Federal regulators close 9 banks, mostly in West; marks 115 US bank failures this year

And as per the Federal Reserve's own statement another 330 banks are in the watchlist.

The telecom sector was the worst performer last month in India, with the market leader BHARTI AIRTEL losing 1/3rd of its market cap. Amongst many others, one of our knowledgeable market analyst Mr.Ramesh Damani, candidly recommended short in telecom and long in Airways as a contrarian bet sometime ago and he is spot on in his reading.KUDOS to RAMESH DAMANI!!!!!!!(He also mentioned as one of the reason for the industry's tough times is the new emerging concept"GOOGLE VOICE"). By the Way,I am not a technology man by any stretch of imagination.

With U.S market in lot of mess still and the printing notes and giving stimulus is not the solution, the crisis created by 40-50 years of borrowing and spending can not be corrected in 1-2 years. My reading is that it should take atleast 5years if not more and so we are in for long testing years before the new highs are made in any sustainable basis in emerging markets or elsewhere. So learn to be patient and tone down your expectations. Happy investing. BEST OF LUCK.

MY ONLY RECOMMENDATION: SPICEJET(BSE:500285) CMP 37.05 TARGET Rs.60-75 in 12-15months

RALLY IN ITS FINAL LAP

The problems in the U.S economy are not only continuing inspite of the liberal printing of currency notes by the Federal Reserve but are actually worsening day by day. Take a look the recent economic news and numbers:

1.UNEMPLOYMENT

This is threatening to touch double digits soon but President Obama continues to guarantee jobs to everybody everyday.

2.CLOSER OF U.S.BANKS - REGIONAL

Regulators have shut Warren Bank in Warren, Mich., and two small banks in Colorado and Minnesota, boosting the number of failed U.S. banks this year to 98 as loan defaults rise in the worst financial climate in decades, as losses have mounted on commercial real estate and other soured loans in the wake of the financial crisis and the recession that has gripped the economy. The failures have cost the fund that insures bank deposits about $25 billion, the FDIC said Tuesday.

The fund has been so sapped by the wave of collapsing banks that it now has fallen into the red. The FDIC now expects the cost of bank failures to grow to about $100 billion over the next four years -- up from an estimate of $70 billion made in the spring. Most of the $100 billion in costs are expected to come from failures this year and next.

3.SOCIAL SECURITY COSTS

As more elderly people who are losing jobs are not able to get another job, they are opting for the social security and medical benefits which is already putting a strain in that fund.

4.The major buyer of U.S.Bonds/treasury paper today is China which is now open in its view that it wants an alternative currency to U.S.Dollar and that it is looking at investments which are in real assets/value than in paper form.So, if China decides to stop funding the borrowings of U.S then imagine what will be the result. This situation is without taking into a/c the possibility of China selling U.S bonds/treasury papers?

The stock markets world over are in their own self,going up on easy money flow and discounting the positives only like signs of growth(or worst is over). These same theories are talked about even in December 2007 when U.S Fed cut interest rates from 5.25% to 0.50%. The money flow was there and also lot of MONEY WAS WAITING IN THE SIDELINES to buy at every fall. But we all know that the money in the sidelines never came to the market even after SENSEX came down from 21000 to 7700.

I am fairly convinced that this liquidity driven rally is in its final laps now and may soon end gasping for breadth as it has no final target to end the race but will have to end on its own only due to exhaustion.BEST OF LUCK