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Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

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  • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

    Originally posted by SanjanaSingh View Post
    Found this thought-provoking [ and slightly disturbing ] article on zerohedge :

    Guest Post: What's So Bad About Deflation? | ZeroHedge

    Why disturbing ? Because it has ruffled my dormant fears. For the past several years, investors have been conditioned to an ' inflationary ' mindset. We have seen unbelievable bubbles in RE, PMs, equities and commodities. All basically on the back of fear of high inflation and / or hyperinflation.

    Not to say that inflation is non-existent. But I'm beginning to feel that the fears of inflation are more overblown than monetary or price-inflation itself. In the past year, at ground level, prices of food articles have increased quite a bit, and prices of non-perishable necessities have increased somewhat. But prices of several types of goods / services have stagnated or even declined. This situation may differ slightly depending on one's geographical location, but the fear psychosis that had been created [ especially on the net ] regarding severe inflation ahead itself is turning out to be somewhat of a bubble !

    First they got as many sheeple as possible into debt of all kinds in the last decade -- home loans, credit cards, consumer loans, auto loans etc

    Then they herded the sheeple who had surplus cash into overpriced hard assets of all kinds.

    Now, wouldnt they profit immensely from a deflation ? Because they have the cash that they extracted from the suckers who piled into RE, gold, commodities at higher prices.

    Plus they would benefit from the income streams of that debt, as that income gets them more bang for their buck.

    A good investor has to be a contrarian thinker. After all we have been bombarded about money-printing by CBs, paper currency devaluations etc etc, making the perception change to a deflationary mindset is very difficult. If we accept that a smart investor does not go where there is already a crowd, then I submit that almost no-one is thinking of cash [ and / or cash equivalents / extremely liquid instruments such as FDs or FMPs ] as a safe haven, revenue-stream generating asset at present. So paradoxically, is that what an investor with foresight should be seriously considering ?

    I know Wiseman will not agree with this line of thinking.

    I'm especially interested in knowing what Venky thinks about the article and if there is some substance in what I'm saying.
    Hi Sanjana.

    Thanks for the link. Actually I have been thinking a lot about deflation - any major recession (and this is definitely one) has a component of deflation. Frankly I find it difficult to get a handle on deflation because it is only the depression which serves as example in reasonably modern times.

    But what is it that deflates?

    I think only two things deflate.

    1. Industrial commodity prices like copper, coal etc
    2. Wages deflate accompanied by unemployment i.e. some services deflate.

    Everything else inflates relative to a deflating purchasing power of lower middle and middle class. What inflates most are the essentials of life. Which means

    1. Food
    2. Clothing
    3. Transport - bus, train, flight, taxi, ferries, ports
    4. Education costs/competition for professional courses
    5. Lower end servants like daily maids, drivers
    6. Rent
    7. Real estate costs both commercial and residential

    Do the rich really benefit? They will find it easier to get many servants. But the bottom will drop out of most of the luxury markets. So luxury housing, yachts, bentleys will all drop in value.

    Most of the wealthy derive their wealth from the stock market and high end real estate. Most will lose serious wealth. It has already happened in USA.

    Some of the effects can be:

    1. Losing values in art, stamp and collectibles market
    2. Lost value in liberal arts and other "useless" degrees - and concomitant loss of jobs for university professors in these "useless" subjects
    3.Loss of perceived value in luxuries. Most of the rich revel in the fact that upper midle class yearn after what they have. With everyone dismissing these luxuries as wasteful, there will be diminishing returns from exclusive clubs and social circles. They will also result in reduced networking and money making opportunities
    4. Biggest loss of value will be in high end luxury properties. They need a continuous source of neuvo riche to maintain continuously increasing prices. With stock markets and cpmpanies not creating value, these will become white elephants and every sale will have to be a distress sale.

    I could go on but the bottom line is this - in deflation the rich lose a lot. Because they have a lot to lose, they suffer less than middle class (who are wiped out). But the rich do suffer.

    They suffer in real terms.

    They also suffer in perceived life values - this hurts the most.

    The rich also lose money assymmetrically. So some rich get wiped out while others suffer less. But as a class, the wiped out rich weigh on the minds of those who suffer less.

    We have seen all this before. In England after the Napoleanic wars, in England in the 1850s, in 1890s, in 1900s in both England and USA, in 1929 all over the world, in England of the 1950s.

    In all these times, there was churn in who is rich and who is poor. Rich lords of England were rendered poor as the economics changed. Literature is full of these stories.

    Deflations are real bad things and only common thing is this - the world comes out changed completely in ways unimaginable.

    In the 1850s, came the factories of Birmingham and the victorian population and productivity explosion. The Victorian susercycle came true for England.

    In the 1870s came the improved connectivity of railways, telegraph, phones and the Rockefeller oil wells in USA. In the 1890s came the rich American and canadian commodity millionaires and the start of the American supercycle.

    In the 1920s came social upheaval and movies and social revolution changing the entire world order - which collapsed soon in 1929 (just as our internet age has collapsed within 10 years). And also came high rise cities and their efficiencies. So you can say massive efficiency gains are invariably followed by a destructive cycle. Same thing has happened recently also - with Chinese manufacturing efficiency and internet services efficiency - the old world had to collapse.

    In the 50s came the baby boom and the massive productivity rise with new mechanisation and technology. And the second US+Europe+UK supercycle started.

    Every one of these transitions was also marked by really bad wars - with Napoleon, with Germany THRICE, with USSR.

    This time around, too - I am sure of two things.

    1. WOrld will change in unpredictable ways
    2. Wars will come

    So I dont think anyone would welcome the deflation - not the rich (become less rich), not the middle class (become poor), not the poor (starve or start revolution with carnage), not the politicians (all will be thrown out), not the armies (they will have to earn their salary now).

    Deflation is good for nobody. But deflation is staruing at us in the face. USA and Europe are headed for deflation for sure (they cant print more than they already have - not much).

    India is headed for worse - no deflation here - we will get stagflation. Whatever little money we have will keep buying less and less.
    Venky (Please read watch a or before posting)

    Comment


    • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

      July 24 (Bloomberg) -- Germany, the Netherlands and Luxembourg’s Aaa credit rating outlooks were lowered to negative by Moody’s Investors Service, which cited “rising uncertainty” about Europe’s debt crisis.

      Risks that Greece may leave the 17-nation euro currency and “increasing likelihood” of collective support for European countries such as Spain and Italy were among reasons for the change, Moody’s said yesterday in a statement.

      “Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form,” Moody’s said.

      Comment


      • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

        New member on this forum...
        Sir; when you say this is major recession, can you please clarify where is it (US, India, World..)..or this is something on the cards?
        Originally posted by Venkytalks View Post
        Hi Sanjana.

        Thanks for the link. Actually I have been thinking a lot about deflation - any major recession (and this is definitely one) has a component of deflation. Frankly I find it difficult to get a handle on deflation because it is only the depression which serves as example in reasonably modern times.

        But what is it that deflates?

        I think only two things deflate.

        1. Industrial commodity prices like copper, coal etc
        2. Wages deflate accompanied by unemployment i.e. some services deflate.

        Everything else inflates relative to a deflating purchasing power of lower middle and middle class. What inflates most are the essentials of life. Which means

        1. Food
        2. Clothing
        3. Transport - bus, train, flight, taxi, ferries, ports
        4. Education costs/competition for professional courses
        5. Lower end servants like daily maids, drivers
        6. Rent
        7. Real estate costs both commercial and residential

        Do the rich really benefit? They will find it easier to get many servants. But the bottom will drop out of most of the luxury markets. So luxury housing, yachts, bentleys will all drop in value.

        Most of the wealthy derive their wealth from the stock market and high end real estate. Most will lose serious wealth. It has already happened in USA.

        Some of the effects can be:

        1. Losing values in art, stamp and collectibles market
        2. Lost value in liberal arts and other "useless" degrees - and concomitant loss of jobs for university professors in these "useless" subjects
        3.Loss of perceived value in luxuries. Most of the rich revel in the fact that upper midle class yearn after what they have. With everyone dismissing these luxuries as wasteful, there will be diminishing returns from exclusive clubs and social circles. They will also result in reduced networking and money making opportunities
        4. Biggest loss of value will be in high end luxury properties. They need a continuous source of neuvo riche to maintain continuously increasing prices. With stock markets and cpmpanies not creating value, these will become white elephants and every sale will have to be a distress sale.

        I could go on but the bottom line is this - in deflation the rich lose a lot. Because they have a lot to lose, they suffer less than middle class (who are wiped out). But the rich do suffer.

        They suffer in real terms.

        They also suffer in perceived life values - this hurts the most.

        The rich also lose money assymmetrically. So some rich get wiped out while others suffer less. But as a class, the wiped out rich weigh on the minds of those who suffer less.

        We have seen all this before. In England after the Napoleanic wars, in England in the 1850s, in 1890s, in 1900s in both England and USA, in 1929 all over the world, in England of the 1950s.

        In all these times, there was churn in who is rich and who is poor. Rich lords of England were rendered poor as the economics changed. Literature is full of these stories.

        Deflations are real bad things and only common thing is this - the world comes out changed completely in ways unimaginable.

        In the 1850s, came the factories of Birmingham and the victorian population and productivity explosion. The Victorian susercycle came true for England.

        In the 1870s came the improved connectivity of railways, telegraph, phones and the Rockefeller oil wells in USA. In the 1890s came the rich American and canadian commodity millionaires and the start of the American supercycle.

        In the 1920s came social upheaval and movies and social revolution changing the entire world order - which collapsed soon in 1929 (just as our internet age has collapsed within 10 years). And also came high rise cities and their efficiencies. So you can say massive efficiency gains are invariably followed by a destructive cycle. Same thing has happened recently also - with Chinese manufacturing efficiency and internet services efficiency - the old world had to collapse.

        In the 50s came the baby boom and the massive productivity rise with new mechanisation and technology. And the second US+Europe+UK supercycle started.

        Every one of these transitions was also marked by really bad wars - with Napoleon, with Germany THRICE, with USSR.

        This time around, too - I am sure of two things.

        1. WOrld will change in unpredictable ways
        2. Wars will come

        So I dont think anyone would welcome the deflation - not the rich (become less rich), not the middle class (become poor), not the poor (starve or start revolution with carnage), not the politicians (all will be thrown out), not the armies (they will have to earn their salary now).

        Deflation is good for nobody. But deflation is staruing at us in the face. USA and Europe are headed for deflation for sure (they cant print more than they already have - not much).

        India is headed for worse - no deflation here - we will get stagflation. Whatever little money we have will keep buying less and less.

        Comment


        • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

          Originally posted by Zumroo View Post
          New member on this forum...
          Sir; when you say this is major recession, can you please clarify where is it (US, India, World..)..or this is something on the cards?
          We are discussing the Great recession which started in 2008 and still continuing globally. Most people expect worsening of situation in 2013. How to invest in this situation is the issue we mostly discuss.
          Venky (Please read watch a or before posting)

          Comment


          • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

            Originally posted by naganyal
            Dear Venkey and other members i want your help in taking decision in this matter so please guide me here..

            1.I am under tremendous pressure from my family for buying house in rudrapur(uttrakhand).
            2.Deal is 25lakhs 2bhk +study(1200sqft) in ready to move apartment, 'Omaxe' in nice colony. I can purchase it in cash (without loan) by breaking FD's of 15lakhs.
            3. plus point here is that rental yield is good as i can easily get rs 10000 rental return.
            4.Negative point is that Apartment rates are stagnant here no increase since last 3years and Industry is also stagnant here saturated. There is Risk of them moving out as tax breaks are over.
            5.my curent holdings are: Living in rented flat at mumbai , no flat of own, Monthly income is 800000 in hand, no housing loan, car loan with out go of 3000 , land with value of Rs 40lakhs, Shop of 10lakhs, cash of 50lakhs black got from one land deal,gold of 10lakhs and fds of 20lakhs so all are fully diversified, already liquidified all stocks and mutual funds due to todays senario. Here i dont want to invest in house of 1cr for self use as i find it too costly and i want to purchase house for self use later when my mind allows not my mothers as i am from wisemans team.
            What should i do please guide me , and yes i am from wisemans team
            regards



            ya also suggest where to invest my 50lakhs of black money as it is going in drain due to currency depreciation. should i buy more gold?
            I thought persons with 800000(8 lakh) monthly do not have to come to forums like this to ask questions. is it a typo mistake? You can buy the darn thing just like that.
            Last edited July 25 2012, 10:46 AM.

            Comment


            • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

              Originally posted by naganyal
              Dear Venkey and other members i want your help in taking decision in this matter so please guide me here..

              1.I am under tremendous pressure from my family for buying house in rudrapur(uttrakhand).
              2.Deal is 25lakhs 2bhk +study(1200sqft) in ready to move apartment, 'Omaxe' in nice colony. I can purchase it in cash (without loan) by breaking FD's of 15lakhs.
              3. plus point here is that rental yield is good as i can easily get rs 10000 rental return.
              4.Negative point is that Apartment rates are stagnant here no increase since last 3years and Industry is also stagnant here saturated. There is Risk of them moving out as tax breaks are over.
              5.my curent holdings are: Living in rented flat at mumbai , no flat of own, Monthly income is 800000 in hand, no housing loan, car loan with out go of 3000 , land with value of Rs 40lakhs, Shop of 10lakhs, cash of 50lakhs black got from one land deal,gold of 10lakhs and fds of 20lakhs so all are fully diversified, already liquidified all stocks and mutual funds due to todays senario. Here i dont want to invest in house of 1cr for self use as i find it too costly and i want to purchase house for self use later when my mind allows not my mothers as i am from wisemans team.
              What should i do please guide me , and yes i am from wisemans team
              regards



              ya also suggest where to invest my 50lakhs of black money as it is going in drain due to currency depreciation. should i buy more gold?
              Weekday me hi peena padega iss baar
              Alcohol doesn't solve any problem...but neither does the milk.

              Comment


              • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

                Good post, Venky.

                You are absolutely correct. A lot of value destruction occurs in a deflation.

                Timing is crucial to anyone who wishes to preserve wealth. In chaotic times like these, that is the goal that should be uppermost -- preservation of wealth in REAL terms.

                To be frank, I'm fearing a full-blown depression just round the corner. Yes, in India too. Deflation does not mean price falls across the board. Prices of necessities may rise, while value of discretionary / luxury items freefalls.

                We have made good returns from all these bubbles over the past decade. I think its time to move into cash, let that cash earn 10% PA, and wait patiently upto 2014 / 2015 for re-entry in RE.

                Gold / silver have tested primary supports a few hundred times in the past year. Now scraping along horizontal support-lines. No strength in the markets. Money fleeing to US bonds and causing sell-offs in everything else.

                With drought in US, Bernanke will not dare try more LSAPs. While many were watching the gold pot, DAG has given over 40% returns in last 2 months ! Heck, the watched pot never boils.

                Have to reluctantly agree with Rohit. Gold is down from here. Silver too. Regretting buying back silver at 55000. Should have stayed on in FDs. Well, one cannot time all markets accurately at all times.

                Maybe fiat [ currencies ] are going to 0. But not in a hurry. I think a prolonged deflation first. Cash will beget great bargains in this period.

                May pare down PM holdings further. Better to book profits rather than watch them evaporate. Everyone is deriding cash. Too many people buying gold at 30,000.

                Time to go contrarian.

                Comment


                • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

                  Originally posted by SanjanaSingh View Post
                  Good post, Venky.

                  You are absolutely correct. A lot of value destruction occurs in ..
                  ....
                  .....

                  May pare down PM holdings further. Better to book profits rather than watch them evaporate. Everyone is deriding cash. Too many people buying gold at 30,000.

                  Time to go contrarian.

                  So now finally Sanjana is getting scared of her precious metals.

                  Good show Sanjana.
                  Last edited July 26 2012, 12:14 AM. Reason: Trimmed quoted text and disrespectful text.

                  Comment


                  • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

                    and jokes continue unabated !

                    LMAO... thank you folks for the daily entertainment...

                    Comment


                    • Re : Indian Stock Advice Trading Strategies Trends Market Predictions & Regulations

                      Originally posted by msp1976 View Post
                      I thought persons with 800000(8 lakh) monthly do not have to come to forums like this to ask questions. is it a typo mistake? You can buy the darn thing just like that.
                      You can as well hire a part time good Financial Consultant by paying him 2 % of the salary (i.e. 15000) instead of asking this on this forum (especially looking at the track record for past 3 years ).
                      • Precious metal advocate backtracked on them.
                      • Members predicting on RE, never got it .
                      • Stock advice , you can decide better.

                      Comment

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