Ref: 10-005 of 12^th July, 2010

A golden opportunity struck a few days ago when Government of India changed its “Oil Price policy” drastically. I was expecting it to come in a few years, and it did. Just revisit my small article under NASA Ref: 0901-004-NASA dated 6-Jan-2009 Titled – Golden Era may arrive soon for Indian Oil Refiners. Click this link to read and download this article.

Compare the stock prices at the time of release of that article with present day stock price. The prices are extracted from Yahoo India.

We had mentioned very clearly in January 2009 that..

•        The era of low share prices of all SOE (State Owned Enterprises) will be gone forever…

•        My dream of SOE Refiners to multiply 5 to 10 times in less than 2 years is now a distinct possibility…..

•        …believe me if Government of India follows up with the deregulation of oil prices, the SOE Refiners will give over 500% return in less than 3 years.

The words have proved to be more than prophetic. The return is more than 80% in less than 18 months, but the real return will begin to accrue from now on. Sit down with these stocks in your portfolio, and you will find them growing even 5 times from current level (10 times from previous recommended level)

Why the SOE Refiners will give return over 500%?

This is purely a volume play. If the prices rise, those who have large volume (sales) will benefit most. Each liter or gallon of gas (petrol or diesel) will bring them additional return that will add straight to the bottom line. (Profit and Loss account). The EPS will rise tremendously.

By rough estimate, the current oil prices should have been at Rs. 75 to 80 level – about Rs 25 to 30 more (+ 47% or about). The Government of India was subsidizing to the extent of Rs 20/liter in case of Petrol/Diesel and ATF (used in Airlines). In other words, the profitability of these stocks have to rise by 47% per liter (less taxes) if the prices rise to that extent. If the Tax slab is 30%, the PAT (Profit After Taxes) have to rise by 33% per liter on increased income. (Not existing profit).

Take the example of BPCL (Bharat Petroleum). Now look at the following scenario with just about 6% increase in petrol prices recently. The company has total product sales of Rs 122,000 crores in 2010 of which almost 95% is refinery product sales or about Rs 115,000 crore. If the prices rise by 6% in petrol and diesel segment, the higher profit will be 6% of Rs 115,000 crores or Rs 6,900 crores before taxes or Rs 4,800 crores after taxes. (PAT). The company has only 36 crore shares outstanding. It means that the EPS may rise by massive Rs 135/share. If you assign PE ratio of about 10 (for growth stocks – it is no longer in non growth category), the stock price has to rise by Rs 1330 from current level. (To reach over Rs 2000)

Again, we have to reduce the subsidy level from higher profits. However, the past practices were to treat the subsidy as “investment” because they were in the form of bonds. They were not taken into account as “profit” for strange reasons. May be, they wanted to account for it on “realized cash flow basis”

NOW, this is the effect of just 6% rise in prices. What will be level of profit if the prices rise by full circle of 33% PAT? It means that the EPS has to rise by nearly 8 times or minimum Rs 1080 per shares. What will be the effect on share price in that case, after about 18 months? They will simply explode to the uppermost stratosphere.

There are many variables here. We do not know for certain how much price rise will be affected in 18 months. However, we are certain that the profits will grow much faster than historical standard. The earnings of these SOE Refiners will be in uncharted territory. Most analysts will be guided by charts, support and resistance level. They would not know that almost all of their calculations based on historical performance would fail.

Such huge rise in profit will be a distinct possibility – the only caveat is how much? There will be lot of opinions in this regard. My approach is just simple and arithmetic. Just increase profit by multiplying “revenue” by “% rise in oil or petrol prices” reduced by tax slab on increased profit. This is what happens in almost all commodity companies be they in steel, copper, aluminum or mining.

I am giving you tool. Use your common sense and arithmetic skill to work out the possible scenario. Further, the SOE normally declare higher dividend – almost 35% of their profits. If the profits rise by Rs 420 per share as PAT, the 35% of PAT will be Rs 147 per share – that will be dividend payout. In other words, the dividend yields will be nearly 21% when the prices clock full circle. Most of the dividend will go to the Government of India who owns 54% of total equity as per latest filing with NSE.

Following factors will fuel further stock price rise:

- The company will have higher cash flow for expansion

- Debt will reduce that will reduce the interest cost

- there will be much higher expectation on earnings due to expansion.

- If global prices go down, the local prices will go down less than expected because the company will use this opportunity to raise under recovered subsidy from past actions.

It all depends how speedily the prices are raised by these corporations. Although the prices will be decontrolled, the government with controlling stake in these companies will have greater say how much the prices to rise having regard to public sentiment.

Who will benefit most?

Use peer comparison in Moneycontrol.com with reference to Sale volume. If a company has larger sales than others, its profit will rise faster than other competitors. The State Owned Refiners are having sales of over Rs 122000 (BPCL) to Rs 300,000 crores (IOC). Naturally, IOC has to gain more. Those who sell more liters of petrol or diesel, will earn more – it is as simple as that.

See the following table. We considered only 6% rise in petrol prices as announced by these companies. (Annualized). Last column takes only 70% of extra profits as PAT and then divided by number of shares outstanding. This is Additional earnings due to rise in petrol prices alone – other volume increases due to higher incoming capacity is not considered.

It will be observed that -

1.       BPCL is largest beneficiary in terms of EPS. Its stock price is Rs 708 now.

2.       HPCL is most valuable because its stock price is at Rs 489 – 32% less than BPCL with almost same profits and number of shares

3.       IOC earns most but its EPS is less due to large number of shares – almost 3.5 times that of BPCL and HPCL. It is however trading at just < 400 – about 57% of BPCL and 80% of HPCL. It will earn most when the price rise completes full circle. It is poised to grow most. Its market cap will grow so much that it may become leading BSE/NIFTY Index Stock, outstripping even ONGC. Most Index Tracking Funds will have to buy this beauty whether they like it or not.

4.       Private Refiners like RIL or Essar Oil Ltd are not considered here. They are already trading at much high PE ratio – almost 3 times of SOE Refiners. So they will underperform compared to SOE Refiners.

5.       See the market cap existing and future based on price projections after about 3 years.

Market Cap of SOE Refiners – Present and Future (after 3 years)

Current Market Cap of top leader – ONGC is about Rs 278,000 crores. IOC is therefore poised to overtake even ONGC in just under 3 years to become top ranking stock in India. Almost all funds will have to buy this stock to track BSE/NIFTY Indices.

Government of India will become Trillionaire if all PSU are combined and its stake recalculated. It will be the richest government in the world.

How the stocks will move and what will boost and hurt them?

I have always mentioned that the stock has 4 strengths – its own, industry’s, country’s and international. The SOE Refiners will have strength of their own, Industry’s (oil sector), Country’s (India due to its growing status and higher GDP expected over 9%). The only remaining and uncertain effect will be Global Stock Market, dictated by United States which is in perilous state. Add the strength of 3 factors and deduct or add the weakness or strength of fourth factor.

Each quarter will show better and better performance because the SOE Refiners will steadily raise the prices in order not to rock the boats, and avoid discomfort to government.

Rise in oil prices will also fuel protest. At the same time, the intended practice to change Gas Station prices every fortnight will also ensure that in the days of steep correction in oil prices abroad caused by stronger dollar, the prices could go down. Once the people understand that the prices could go higher or lower, the protests would begin to disappear. Until now, Indian consumers were looking at only local prices in Rupees – in future they will see the international prices as guide. They would not blame government if the world prices move higher.

Higher consumption will also move the stocks higher due to higher demand. First is the value growth and then volume growth caused by expansion will drive SOE Refiners prices higher.

Higher Rupee will bring down the oil prices. Rupee is the only major commodity which is still under the control of the government and RBI. When the artificial intervention ends, and free market is allowed to play role, Rupee could rise to 26/$ from current 47/$. In that case, the oil prices could drop by over 50% from current level. However, the margin of the companies would be protected. The refining margin determines the profit, not the actual sale or purchase of the commodity.

If the international oil prices begin to climb again, then only the government will come under pressure to roll back on decontrol. If that happens, then my above targets will be severely affected. I do not think that GOI would roll back on decontrol. It has two choices – either free market determines the prices or it has to offer massive subsidy that would strain its budget.

India’s Debt rating will improve due to removal of major obstacle to deficit – Subsidy. It will bring down interest cost internationally. FII may pump in more money into the market, especially SOE Refiners stock that will propel the prices higher.

The credit rating of SOE Refiners will get back to AAA level domestically and their foreign currency bonds rating too may improve. That will reduce their interest cost boosting their existing profits.

If any of these refiners decide to float ADR or GDR, they will be most sought after. They will attain premium to domestic price and also higher rupee could boost the prices of GDR/ADR. They will be the best to invest. Return on future ADR/GDR will be 50% higher than domestic stocks. All NRIs should seize this opportunity when presented.

Some of the stocks, notably Indian Oil Corporation, may achieve cult status and propel into BSE/NIFTY indices due to its sheer size and rise in market cap. It will become almost Number 1 index stock, outstripping even ONGC and Reliance. Those stocks may suffer due to their index dilution. They will have to work much harder to retain even existing prices.

Uncertain global monetary conditions will hurt these stocks in normal course. That is only market related weakness.

Due to weaker dollar and unwillingness of Arabs to oblige United States, it is likely that oil prices will have upward bias. That will ensure higher and higher profits for the SOE Refiners.

Is my forecast accurate or reliable?

I use common sense and project the prices. I have given the reasons as above. If you agree to the reasoning, you may buy into these stocks on long term basis. One should reduce their reliance on bank’s FD and also draw loans from Provident Fund account to buy these stocks only. This is one of the safest investment bet in the world.

The global market is very risky. By my assessment, United States is almost bankrupt and it is also following bankrupt policies. All actions so far by Obama Administration are going to work in opposite directions. He should read my book “SUB PRIME RESOLVED” to direct his future economic policies to resolve the impasse.

If you are losing over 20% in leading index stocks, switch to these SOE Refiners. Do not be afraid that they have risen already by 20% recently. They have lot to go higher as mentioned above. However, buy only if you are convinced.

Anil Selarka (Kalidas)

Hong Kong

Ref: 10-005 dated 12^th July, 2010

©Copyrighted by Anil Selarka (Kalidas)

No part of this article may be reproduced in full or part in any manner whatever without the express authority of the Author in writing. General permission will be granted to leading academic institution, colleges, universities, research associates provided they acknowledge the source of this article and Author. Violators will be prosecuted and substantial damages may be recovered for breaching copyrights and intellectual property rights.

Ref: 10-004    of 19 May, 2010 By Kalidas                      PDF Downlaod from Box.net

I am writing this article at the request of many readers who want to know how do I identify and select the stocks for trading and investment purpose. The methods I am going to share apply to almost all markets. However, I may give examples from US and Indian market with occasional reference to Hong Kong market.

I am covering stocks first and then the convertible bonds as this article series  progresses. The stock market is meant for masses. Even a small investor can dabble into the market with limited means. However, convertible bond is meant for mostly very knowledgeable investors of fairly good Net Worth (called High Net Worth or HNW) investors and Mutual Funds specializing in bonds.

First of all, let me give show you some facts of life or the eternal truth relating to Stock Market or for that matter – Capital market in general. Each of the following pronouncements is referenced later at appropriate stages to prove my point.

These are the 23 commandments of the stock market. They are not codified anywhere in the world. These are unwritten rules, always in force, never documented, always debated, always investigated, never proved, always commented on and yet never concluded.

Initially, my emphasis is to give you some trading rules on how to buy or sell the stock. Whether one is a long term, medium term or short-term investor, the fact is he must know how and when to buy and sell the stock. The real investment game will be discussed in second article after about 15 days, which will disclose my methods of identifying the stocks for various term investments. Convertible Bonds, a hybrid security between stock and bond, will be discussed in the third article.

WHAT IS STOCK MARKET?
Rule-1
The stock market is a “Devil’s Game”.
•    God, Truth, righteousness, fairness etc. always take back seat.
•    Nevertheless, God (and Gold) always have last laugh when the crash arrives.
•    Stockbrokers, Fund Managers, Rating agencies, Regulators, Analysts and Politicians are “Devil’s Advocates”
•    Death, Accidents, new Customer and Market Crash always come without notice. Always be prepared to face such eventualities and seize outstanding opportunities.
•    No one knows when the bull market began or ended; no one also knows when the bear market began and ended. Analyst’s always double talk, they are more like red ringworms with face or mouth on either side. They always “go with the wind”.
•    The Devil’s advocates always concoct theories. One of them is “Discounted theory of actual events”. Another is “Better than Expected” or “Worse than expected” when they are proved wrong.

Rule-2
Bullish Markets are symbolized by SUN and bearish (market) by MOON.
•    The markets usually rise on “sunny day” and retract on “cloudy or rainy day”. It is very much true in city like Hong Kong.
•    Look out of the window and see how the day is in early morning. Moon or night brings in more rainfall. Even cloud does not hold water and throws it away as rain. If the day is heavy or rainy, one does not feel like working nor wants to buy anything. In fact he will feel like selling or throwing the stock away the way cloud does.
•    Sun denotes brain, which imparts certainty and intellects. This is why people feel like working on sunny day. Moon represents “Mind” which is always volatile, fickle or chanchal. Moon also denotes uncertain mind or uncertainty. This is why the markets usually fall during the period of uncertainty.

Rule-3
Future earnings determine the prospects of a stock, not underlying asset value (book value)
•    Earnings, earnings and earnings alone determine the market trend either on upside or downside.
•    Current earnings or P/E are the most inaccurate guide to the intelligent investor. The trend setting investors look only at future prospects to determine his actions (Buy, Add, Sell, Reduce or Hold)
•    Looking at the book value or NAV (for stocks) is the criteria of the old age. Such valuations were useful to determine the realizable asset value in case the company goes for bankruptcy. If the company were to go for bankruptcy, there was no question of investing into that company. Those who look at the asset value alone, regardless of earning power, are destined to lose big time. As a rule, when the Analysts start pitching Asset or Book Value of the company as attractive reason, it is time to get out of that stock.

Rule-4
Do not try to make small money all the time; it is enough if one makes big money at few times.
•    Most investors or speculators try to make small money (what I call “sandwich money”) in fast and furious trades; a smart and seasoned investor makes big money in few slow and steady trades.
•    Do not try to make money in every trade. It is enough if one makes money in 7 out of 10 trades.

RALLIES AND CORRECTIONS
Rule-5
Normal rallies and correction last for 2 and ½ days, good rallies and correction last for 3 and ½ days and speculative rally and correction (crash) last for 5 days or more.
•    When the stock rallies and closes near high, it means that unfilled orders will carry through on the following session (day). When it rises for 2 days, it will rise further for half day on third day and then profit taking sets in. It applies to all markets and investment products including commodities.
•    Similarly, when the stock closes near day low, it means that sell orders have not been filled and carried over. The stock continues its downward journey on following sessions.
•    Weekly high or low on good volume indicates bullish or bearish tone that is carried over to coming week. When the stock closes near week high on good volume, it determines its upward trend for the coming week.

THINGS TO NOTE
Rule-6
Never count percentages, rely on absolutes
•    Most business channels talk more of percentages, not absolutes. Watch CNBC, Bloomberg, CBS or others, the Anchors speak for percentages at least 3 times in any sentence.
•    % always look small when the base is high; similarly percentages look very high when the base is small.
•    It is the money in your pocket that counts, which is “absolute”. That is what you are going to spend.
•    When stock drops from say, 100 to 30, the % drop is 70%; when the same stock rebounds from 30 to 100 (original level) it is a jump of 233%. Absolute numbers remain same.
•    Only idiots rely on percentages; smart investors rely only on absolutes.

Rule-7
99% investors buy first and then sell; only smart 1% investors (short sellers) sell first and buy back later.
•    Stock market builds on hopes that the stock will go up so that they can make profit. This is why 99% of investors buy long (buy first and hold).
•    Smart investors (short sellers) work against such hopes and they sell first (short) and buy back later. They usually make more money than others.
•    When the short sellers sells and stock goes up, he should sell more to average up his sale price. The profit taking will set in and he will make money easily.
•    Selling first and buying (or covering later) is most businessmen do unconsciously. They get sale order first and confirm the sale. (Sold first). Then they go their suppliers to buy the goods (covering short)
•    It may not be possible for small investors to short sell due to restrictive exchange rules that normally favor the large brokers, mutual funds of hedge funds. For them, buying long is the only solution.

Rule-8
Round numbers and Beautiful girls never comes in one’s hand. Always be flexible in setting number target for sale or buy.
•    Most investors keep “round figures” as the buy or sale target which is not achieved most of the times wasting the time of investors and his brokers. 10, 20,30, 100, 500, 1000 are the round figure targets.
•    If an investor wants have his trade successfully executed, he should set the target about 10 to 15 points (or 0.5% to 1.5% depending on stock value) above or below the intended round number price. Say, if he wants to sell a stock at 30. He may write sell order at 29.85. Similarly, he wants to by at 30, he may write buy order at 30.10 or better 30.35.
•    The round number levels are as slippery as beautiful girls.  There are thousands of buyers and sellers at round numbers. Smart investors always accept lower than round number for sales or higher than round numbers for purchase.
•    Be a large hearted investor. Learn to leave something on table and do not become greedy to earn last dollar or rupee.

HOW THE STOCKS AND INDICES MOVE?
Rule-9
Indices above 5800 move in increments of 400 and 600 pts for critical levels. They move in increments of 200 pts at other intermediary levels. Those levels are supported or resisted by 35 points on either side.
•    Say, 9,800, 10,200, 10800, 11,200………..14,200, 14,800…16,200, 16,800, 17,200, 17,800, 18,200 and so on.
•    All intermediary levels are say, 10,400, 10,600 etc. where movement increments are 200 points on either side.
•    The market operators unconsciously test the upside and downside level by about 35 points on either side of critical level. Say, the indices are falling to 10,800. The index will still go down further to 10,765 from where it will rebound. Similarly, when the index is rising and hit 10,800 level, it may go a bit further by 35 points before deciding whether to go higher or go down in profit taking.
•    If one wants to buy the Index when it is falling, he may write limit order to buy at 10,765 (If the critical level breached is 10,800). Similarly, when the index is rising he may add 35 pts to write sell order for indices (10,800 +35  = 10,835)
•    If index rises above XX,200, it is possible it will rise to Xx,800. Similarly when it falls below XX,800 and stay below that level for 2 days, it is possible it may go down further by 600 pts to test the further support of XX,200 levels. Thus, if the stock falls below 10,800 and stays for 2 days, it will go down to 10,200 unless there are strong reasons to go above 10,800 level.
•    These are rules of thumb.

WHAT MOVES THE STOCKS?
Rule-10
When really bad news hit the stock or the market due to economic events, such as market crash overseas, debt crisis, exchange crisis, etc. – allow 3 days to 5 days before jumping in.
•    Over 80% of short term trades are margin based. That is, investors borrow from banks or brokers to leverage his trades. They glee in good times, and weep in bad times.
•    When the market tanks by 5% to 10% in single session, and closes near day low, the margin calls originate on following day. If the market goes down further, the margin call pick up momentum.
•    The broker or financier issue margin call to the investor and give him notice to make good the margin, If he does not, the financing banks or brokers sell the stock on 2nd or 3rd day of the margin calls.
•    Such forced sales usually take place at about one our later after market opening. Since they are forced sellers, they usually sell at the market or bid prices. The spread widens with the result that losses to investors mount at alarming rate. It is therefore good time to buy during the time of forced selling.
•    One may buy long term on margin if the stock or market has tanked over 50%. When the market drops 70% it is time to accumulate good index stocks on margin basis.
•    In market crash, the fundamentals do not work. Pick up whichever good stock has dropped most.

Rule-11
The stock moves on its own strength, industry’s strength, country’s market strength and global market strength. (Read strength = strength + weakness)
•    When the stock moves on its own strength, it invariably makes money.
•    When the stock moves on sectoral strength, it still makes money.
•    When the stock moves on Country’s market strength, it makes less money.
•    When the stock moves on global market strength, it makes least money.

Rule-12
When the earnings of the company can be easily worked out, they tend to trade at low P/E; Similarly, when the earnings of a company can not be anticipated, the stock usually trade at high P/E ratio.
•    Single product companies such as commodity companies usually trade at low P/E because their revenue can be figured out with reference to commodity mined and market price thereof.
•    Similarly, utility companies such as Power producers, Water distributors, telecom companies and energy companies tend to trade at low P/E.
•    Similarly, holding companies trade at low P/E because its earnings could be easily figured out by summing up the profit share in subsidiary companies. Unless the holding company has its own identity and business.
•    Stock market always ignores present earnings or P/E or EPS. It always seeks to anticipate the future earning prospects or things beyond.
•    A famous song “Choli ke pichhe kya hai…” sums up this section. Suspense creates excitement that moves the stocks and the markets.

Rule-13
Given a choice, go for the stocks of subsidiary companies rather than holding company. When a person wants to buy the stock of holding company because it has not moved (or cheaper) whereas other subsidiaries did (or became expensive), it is time to get out, not get in. It is the peak.
•    Again it is the earnings and its visibility. The stock of holding companies usually trade at lower level than other subsidiaries for the reason that the earnings of holding company do not hold surprises – they are just arithmetical sum total of all subsidiaries.
•    The subsidiaries may trade at 15 times P/E but holding company at 6 to 8 times because if there are not to be growth in the earnings of subsidiaries, the earnings of holding company would have peaked.
•    UNLESS of course, the holding company has own independent activities that may cover over 50% of its total earnings including subsidiaries.

Rule-14
The stocks usually move in a group regardless of fundamentals. Get out of less worthy ones.
•    This is especially true in Asian bourses where most of the leading companies are family controlled enterprises.
•    Say, there is good news about Birla group in India, all stocks in Birla group will move. Similarly for Tata, Ambanis (both Mukesh and Anil known as MDAG and ADAG), Jindals etc.
•    This is the time to lighten up on stocks on good news and load up on those stocks on bad news.

Rule-15
When the stock moves on non-financial news – such as political, social or anti social news, use the opportunities to load up or sell out after a few days.
•    Stock market relies mainly on financial fundamentals, not others.
•    When the political crisis hurts the stocks, treat as buy opportunities after 3 to 5 days.
•    If anti social events such as bomb blasts take place, treat as buy opportunity and jump in immediately.
•    Never anticipate political, social and judicial events and take anticipatory position immediately before those events.
•    Similarly, when the political events engineer rallies, such as outcome of election, get out of stocks within next 5 days of such euphoria.
•    Similarly, when the political events cause steep fall, such as outcome of election – hung parliament or coalition government – treat as buy opportunities.
•    Politicians may change – they come and go – but the bureaucrats remain same. It takes long time to change established policies.
•    Normally the bureaucrats rule the nation most of the time – the politicians are merely rubber stamps. Bureaucrats or so called experts’ advice the politicians and they have domineering effects on financial policies unless the Leadership is strong and imaginative.

WHEN TO ENTER OR REFRAIN FROM THE MARKET
Rule-16
One need not be in the market all the time; however, the market should be on his radar all the time.
•    A smart investor acts like a lion. Just as the lion kills its pray only when he is hungry (not otherwise), an intelligent investor is discreet enough to participate in the market for a kill only when the market is attractive.
•    The market is a dynamic force. It should be under the watch of an investor even if he does not participate.

Rule-17
Always be a player, not the bystander or spectator. It is the player who makes a run or a century, not the bystander.
•    There are 2 batsman in the field and 20,000 spectators. It is only those with the bat facing a ball make runs or a century.

HOW TO BUY, SELL AND TRADE THE STOCKS? – FUNDAMENTAL STRATEGY
Rule-18
Do not buy or sell after reading or watching business TV channels.
•    Many brokers or investment banks have financial journalists on their roll what they call PR exercise. They feed the information with definite intent.
•    Do not let your impulsive instinct to shroud your logic or judgment.
•    When every one knows what is read or watched on media, there is little room to make good money.

Rule-19
Buy or sell “Three Weeks” ahead of expectation of event, and reverse the bet “Three Working days” ahead of scheduled event.
•    It is similar to “Buy on rumors, sell on facts” and vice versa.
•    The stocks usually move ahead of events. The brokers start tipping around after taking proprietary position.  They usually get out a day before the scheduled event.

Rule-20
Do not try be a bottom pincher OR a peak picker.
•    Always remember very few people are found near the bottom or at the peak.
•    Start buying when the stock recovers by 8% from steep fall and start selling when the stock is within 15% of target price.
•    When you feel buying just buy, and when you want to sell, just sell without waiting in the line or Queue.
•    One never succeeds in bottom fishing or peak picking. Be practical


HOW TO BUY, SELL AND TRADE THE STOCKS? – STRATEGY TO ACTIONS
Rule-21
Always sell in first 15 to 30 minutes of market opening. Buy in next 60 minutes. Sell before lunchtime, and again buy back 30 minutes before close (provided there are no adverse international events)
•    The market makers or operators make two levels in the morning trades – low and high – within which they operate all day long.
•    Always sell in first 15 to 30 minutes of trades. The rise in price is mostly not so real trade based, but operator based.
•    The stock consolidates for 60 to 90 minutes after first 30 minutes. The market makers then buy back a little to cover their short position.
•    Some market makers or operators sell ahead of lunch hours. The broker crowd is thin during lunchtime, which helps smart operators to dictate trend. It is said that a smart broker never takes lunch. This is why most steep corrections take place during lunch time (1:00 PM to 2: 00 PM) and near the close (Last 15 minutes)
•    Last 15 minutes of trades reverses the morning bets. If the stock has risen, it will fall (due to bulls liquidation), and if it has fallen, it will rise (due to short recovering) during this period.
•    If the spread between Bid and Offer widens, it means that the market makers want to sell first and buy back only later at much lower price. The stock usually falls later in the day so that they can recover their short position.
•    If the spread between bids and offer narrows down, it means that the market makers are engaged in stock accumulating stage by forcing the level down. The stock usually gets higher later in the day.

Rule-22
Buy a stock after 45 minutes and before 90 minutes of opening trade.
•    Most people sell the stock in the morning after reading newspaper or watching business channels. Such selling is active after 45 minutes of opening. The market makers also recover their shorts when the real sellers rope in.
•    Most people buy the stocks only in the afternoon, saying they want to study the market. Even if they studied the market, it holds good for the day, not beyond. Anything can happen at night when dictating US market opens and closes before the world market opens from Australia to Arabia.
•    Study yourself. How many times you bought the stocks in the early morning hours? How many times you bought the stocks in the afternoon, especially after lunch hours?
•    Often, the market makers set two levels – high and low of the stock. The investor, trader or speculator – whatever name you call – will try to set these levels as his benchmark and try to get high price for his sale and low price for his buy. He rarely succeeds.
•    The stocks usually moves in first and last 30~45 minutes of a daily trading session. The stock usually hardly moves or moves sideways during intermediary 4 hours. Nothing usually happens during this time, and yet the daily trader glues to the screen doing also nothing.
•    A smart person would operate during first and last 30~45 minutes and then take time off to attend his normal work.
•    This rule does not apply when the market is in crash or deep correction mode due to other complex factors.

Rule-23
Always follow 35:85 rule while trading stocks.
•    Watch out interesting numbers 35 and 85 at all times. Study almost all active stocks for their daily pattern. One will notice day high and low around this level.
•    If the stock is valued at Rs 50, for instance, it is possible it may have fluctuated between 48.85 on downside and 51.35 in normal days.
•    When the stock goes to say 48.50, a round number, it is possible the traders might force it lower to 48.35 to see whether any support comes in. If it does, the trader recovers his short position quickly.
•    Look at today’s Gold prices – 1085, 1135, 1185, 1235 are the levels to which it touched and then either progressed or corrected.
•    It applies to any commodity, forex trades, bonds, CBs, property markets etc.

These are the 23 unwritten yet widely followed Commandments from the years long observations by the Kalidas (Anil Selarka). I am sharing this knowledge and experience with the readers of this blog.

Above are merely daily trading tactics. The real Long Term and Medium Term tactics will be discussed in next article – How to Select the Stocks and Bonds? However, the tactics as above will be used to time and control the purchase and sales activity

CAUTION: Kindly note that the contents of this article are “copyrighted”. General permission is granted to anyone only if they acknowledge the source as “this Article and the Author”. Ungrateful copycats are not welcome and will be proceeded against legally for violation of copyrights and intellectual property.

Kalidas (Anil Selarka)
Hong Kong, 19th May 2010

Ref: 10-004 of February 5, 2010         Download from ScribD or from Download Pool>> Article

Only a day before I have warned in Indian Stocks Observatory “Serious currency wars are going to be major feature in second quarter of 2010. BEWARE”. And it turned out to be true within a day. Now watch the following event which happened in quick succession on Thursday night:

1. Dow Jones cracked to close at 10,002 (- 268; -2.68%) S&P 500 at 1,063 (-34; -3.11%)
2. There was turmoil in the currency market. All major currencies went down against USD. That is, only USD went up. Look at the numbers here:
   
3. Gold & Silver prices went down by huge margin:
   
4. Oil Prices too dropped to $ 73.19 (Down – 3.79%)
5. 
6. NOW, look at the US Dollar Index known as USD Index. It went up to 79.96 (+2.23; +2.87%)
7. Wild rumors were spread that GREECE was about to default, next in line was PORTUGAL followed by SPAIN. What have they in common? They all belong to (1) Euro Zone and (2) They are all corrupt countries (3) except for Spain, other two were very small countries.
8. Another rumor was spread that United Kingdom (Britain) might be degraded as it had highest debt level vis a vis its GDP
9. In short, the scenario was created that only US$ could go up, all other assets will go down. Thus, an impression was created that SELL all assets and BUY only US Dollar
10. This is a repeat scenario of Asian Crisis when it was started from Thailand, a small Asian country, then Indonesia, Korea, Taiwan – all had one common feature – they were all corrupt countries. Thailand was used as “Pilot Project” how the world was going to react, so that future strategies could be refined.  During Asian crisis, all assets were going down, stocks, bonds, currencies, gold, silver etc but only one asset was going up, that is, US Dollar.  It was like a scenario when you are locked into a room with 7 doors closed and fire was ignited. There was only one outlet – a window named US$
11. 10.  The Asian Crisis was timed to synchronize with the birth of Euro.  US feared that Asian Reserve lying with Fed might be diverted to Euro, so the crisis was initiated. When Thailand needed $ 25 billions, Japan, China, Malaysia, Singapore etc contributed $1 billion to $ 5 billions. In Fed book only book entries were passed – Debiting Donor and Crediting Thailand. The funds remained with Fed – it did not move out to the treasury of ECB

Who is buying US dollar anyway?
At least at the time of Asian Crisis, there were not much of economic difficulties for US. Today, however, consider the following:

• US lost almost $ 1.9 trillions in 2009 in bailing out the banks, brokers and insurers
• Citigroup, JPMorgan, General electric, Goldman Sachs, Morgan Stanley, Merrill Lynch, Wachovia Bank, Wells Fargo,  AIG, Lehman Brothers, Bears Stearns were all bankrupt or nearly bankrupt.
• 7 millions jobs have been lost in last 2 years.
• AIG, Fannie Mae, Freddie Mae are all teetering on collapse.
• The entire economy is in the state of collapse.
• Bankruptcies galore.
• All auto companies and airline companies are nearly bankrupt.
• Housing market is dead
• Credit market is dead. No one is lending to no one.
• 70% of State governments are bankrupt.
• There is no yield on Bonds – it is kept nearly Zero.
• Most IPO for even $ 100 to 300 millions have been postponed or failed. In that case, how Bank of America, Citigroup could collect over $ 100 billions in public offering?
• Pres. Bush spent $ 700 Billions, Obama $ 787 Billions, Health care will cost trillions, and new stimulus package will cost another $1.9 trillions in 2010. They are simply nuts.

In such scenario, who in right mind will invest even $10,000 in United States and buy dollar. If people do not buy dollars who is that invisible God giving almost $ 2 trillions? No one knows. All are bluffing – Governments, Obama, Geithner, Bernanke, Senators etcetera. It is obvious that politically affiliate banks like JPMC, Citigroup, and Goldman Sachs appear to be the biggest buyers.

How GOLD was whacked yesterday by $ 41or nearly 4%?
Gold always goes up in Asia and goes down in USA? See yesterday’s picture:

It will be seen that on Nymex the Gold was trading at $ 1111 whereas as on New York liffe it was trading down at $ 1074 in very small volume of just 6 Mini gold contracts, causing panic. What these SEC, FBI, CBOE are doing out there? Are they still mis-managing whole business of supervision, control and regulatory mechanism? Or they have all syndicated with the authorities?

Also look at the data alongside on left. April 2010, where most positions have been rolled over, the Open Interest is huge – 301,656 contracts or 30.165 millions of Ounces = $ 32.182 billions (= Rs 1,480,372 crores)

There is no recovery, but they go on brain washing investors that US has “job less“recovery. It is like “Condom Economy” with lot of stimulants like Viagra, and other aphrodisiacs, where one can have sex but no babies.

The fact of the matter is that the United States is in final stage of cancer. All companies go on giving lower estimates first and then show having beaten them to prove that the economy is growing @ 5.7% in December Quarter.

ALLIES – Europeans and British people are betrayed:
The Europeans and Britain under Tony Blair sacrificed thousands of their soldiers and citizens in fighting hand in hand with Americans. Same Americans are now trying to wreck their economy by attacking their currencies in “Asian crisis” style. The American rating agencies and TV media are constantly spreading mischievous news that those countries are in trouble. The Motive: to prevent China from diverting its $800 billions reserve to Euro zone or HM Treasury of British government.

Will European Union survive?
This is a serious attack on European Union. The Americans want to break up the EU but the Europeans are just stupid not to read the writings on the wall. Look at the sequence – Iceland, Greece, Portugal and now Spain. Britain is the next one to be attacked. They were all loyalists to Americans one day. But the fact is “MONEY TALKS”. Every friendship is dispensable in love and war. Even Saddam Hussein was heroic friend of United States, who was finally hanged after destroying his beautiful Iraq in the name of WMD and democracy.

When the Europeans and British realize this hidden truth? They are really slow thinkers. It could be too late. Or it is possible that they may ask for return of Gold physically. That is when the test will come. That is the time when the Gold may rise to heroic heights. It will happen.

It looks like that the Slumlords at the top (not ordinary honest Americans – they do not know anything) do not like their No.1 status being challenged by other nation. Even Obama said that. If they can not maintain their status by competition, they will destroy or decimate other nations to remain at top. They did it while busting Japan when Nikkei rose to 38000 +. It is not even 25% today in spite of all touted GDP growth story. Two US based brokers arrived in Japan and used their financial skill in futures and options (F&&O) to destroy the Japan. However, until today and may be tomorrow or day after, the Japanese are not going to learn. They are just “robots”. This is why I never study “Japan”, nor venture into it.

It is said that you get betrayed from one whom you trusted.  The Europeans and British people will learn after a few years that they were betrayed by the nation whom they trusted most and for whom thousands of their citizens/soldiers sacrificed their lives in Iraq and Afghanistan. Tony Blair will bite his lips and nails when he reflects on what he did. He will get into asylum ultimately.

Compare Tues -Wednesday and Thursday events:
Many were asking me whether it was time to buy Gold after having been fallen to $ 1085 level.

On Tuesday and Wednesday
The Gold rose by 3%, enticing real gold investors to resume position.  Yen also weakened. Almost all precious metals rose during these session, commodities rose, US$ index weakened, Euro and Sterling Pound also rose.  The gold appeared to rise in paper, probably on other exchange NY Liffe (I am yet to study this Exchange) this was done deliberately.

On Thursday
Very next day, Gold was shattered from $ 1111 as explained above. In short, the major players, notably large affiliated banks, who were bailed out last year, and prominent broker cum bank, shorted the gold and almost all currency and commodity futures at one go – result almost all precious metals lost over 4%, base metals also. Obviously they carried out the attack at behest of authorities. This was classic PUMP and DUMP game.

The US$ index rose, Yen rose, Can$ also rose (but Aussie$ fell steeply). This means that Japan has agreed to continue with $ T Bills purchases and China did not.  The idea was to terrorize the investors in gold, especially large central banks in Asia like China and India, to prevent them from getting away from dollar into euro, pound or gold, most favored assets amongst Asians.

Please note that the people who caused this crash control exchanges, markets, media (like all business channels), and financial newspapers by feeding them the information they should receive.

In this electronic age of computers and broadband TV, the beautiful damsels go on churning out the stories of economic recovery – what they call – Jobless recovery – and any bad news being reported as “better than expected” to push up the markets when required.

What could happen today (Friday):
It is certain that all markets will suffer “route” today but manageable. The US markets could also go down first, and then these wily players in New York – banks and prominent broker cum bank, Buffet’s favorite, will come out of no where about 45 minutes to 1 hour before close and reverse the trend on every exchange – NYSE, NASDAQ, CBOE, NYMEX, COMEX etc. They will buy the calls when the markets down in morning session, selling puts bought on Wednesday and Thursday.  Please note that no logic is going to work for few days – we are in the middle of covert WAR.

US economy grew @ 5.7% – says President Obama:
If the size of economy is $ 14 trillions, 5.7% growth means that the economy generated extra GDP of $ 800 billions; where from, when 7 million Americans lost job? The $ 800 billions rise in GDP is equal to entire GDP of India. Did US with 300 millions of unemployed and under employed Americans created additional assets of $ 800 billions in worst economic environment that was created by 1 billion people of India in growing environment?

Come on, President Obama. Go back to Primary school and learn some simple math. OR if this is your deliberate move, better dress up in Halloween outfit.

And is the size of US economy really $14 trillions? When I left the field of stock broking, the US economy was estimated at little less than $ 8 trillions. If we take today’s figure of $ 14 trillions as current size, there is a growth of $ 6200 billions or 80% over last 6 ½ years. That is, the annual growth rate is 12.3%, faster than even China and India with almost 3 to 4 times US population.

Conclusion:
Only bankrupt persons will show off. They become extravagant spender in their last days. It is almost certain that “United States is technically bankrupt”. The Tsunami has arrived, just a few hundred miles away. Its all over, will be the verdict of the world after a few months. Next few months will bring the world closer to WORLD WAR III.  When the war starts world over, the first casualty will be Internet and electronic banking. Look at Google and China. Go for GOLD and SILVER in physical form, not paper contracts, passbook gold or ETF.

I was right in forewarning all the readers to sell 80% to 90% by 21 Jan 2009 remain in cash, saying that “next 15 days up to 9^th February are extremely heavy for United States. They were prophetic words at that time. They are now becoming reality much sooner than expected.

Look at Toyota as indicator – anything can happen at any time within 2 or 3 days
look at Toyota. A simple problem like a mole was made into mountain. It will recall 7 million vehicles. If every repair cost them $ 1000, it may lose $ 7 billions besides production loss for over 6 months. Its sales will plummet. The company may suddenly sign off into oblivion. TOYOTA was a “King of Auto” for several decades. It took just 2 days to destroy them. They say that they will make money. Yes, they surely will if they can print money like Federal Reserve of United States.

Let the final act of war be allowed to play it out. It will take a while but not so long enough. Be prepared. You may not have to wait too long for really long term investment. India, not China, will be the biggest beneficiary of this crisis. Hands Down.

Kalidas (Anil Selarka)
Hong Kong, February 4, 2010         Ref: 10-004

Blog site: http://www.anilselarka.com Book web: http://www.subprimeresolved.com

Ref: 10-003 of 24 Jan, 2010            PDF Download from ScribD or Download Pool Sidebar>>Articles

Dear Readers,

The correction has started precisely on the date we mentioned – 21^st January, 2010. We predicted it more than a month ago.  Now, the situation has taken turn for the worse.  The trigger was provided by President Obama’s proposed clamp down on the banks proposing far reaching regulatory actions to rein in the banks in terms of their size and activities. A separate article will appear within a few days titled – OBAMA WAR with INTERNAL TERRORISTS

Dow has lost over 5% in 3 days. S&P has dropped to 1093, slightly above critical level of 1083. I do not care for technical indicators. My forte is fundamentals. The core fundamentals are worsening.

• Bernanke’s extension as Fed chief, once considered almost a done deal, is now in serious doubt.  If he is reconfirmed, there may be a short reprieve for the market.
• The future of Treasury Secretary Timothy Geithner is also in doubt.  The AIG dossier is becoming murky. The testimony of Paulson with Geithner in relation to AIG affairs is due on Wednesday, 27^th January, 2010.  It means that the Senators know something ignominious more than the investors are aware of.
• There are indications that the Senators have finally realized the extent of damage done by Henry Paulson of Goldman Sachs and Ben Bernanke from Fed.
  • President Obama’s pathani demand  “We want our money back” alludes that the $306 billions non fund based guarantee given for Citigroup’s worthless debt at behest of  Paulson – Bernanke combine are maturing into real fund based liabilities.
  • Read with massive profit of Goldman Sachs, and Citigroup’s insistence to cancel out the “loss sharing agreement with the Fed/Treasury”, the Senators and the President Obama appear to have realized the “foul play” and “Criminal conspiracy” against the State. Many frauds may come to light. It could have massive effect on Wall Street. Even Warren Buffet could become controversial. His days are beginning to have “U” turn for long.
• Two days – Saturday and Sunday, have passed since the President Obama disclosed his plan to rein in the banks, their size and their disapproved activities. The era of $25 billions of profit for the bank is gone for ever.
  • The earnings of almost all banks will be downgraded by the Analysts up to 30% to 80% that could collapse the prices of major money center banks. The entire banking structure globally will be re-assessed on severe downside. Bank of America, JP Morgan Chase, and Wells Fargo could face the burn of third degree.
  • There will be further lending squeeze from these banks raising real market interest rates.
  • If these banks can not make double digit billions of dollars of profit for next 5 years, , they will never be able to recover the past losses.  Nor will they be able to raise new capital due to poor earning prospects.  Fed/Treasury window will be shut for good.
  • In short, some major banks could become officially insolvent.
  • Goldman Sachs and Morgan Stanley may surrender banking license to avoid above restrictions.
  • The global banking giants operating in US such as Barclays, Deutsche Bank, UBS and Credit Suisse may have to realign their business. UK and Europe too could adopt similar measures with similar effects. UK and Europe always play monkey game.
• SEC is preparing for some tough times ahead. Bloomberg reports on 23/Jan that “Concern that short-sellers accelerate stock declines may prompt the Securities and Exchange Commission to adopt a rule next month aimed at curbing bearish bets when equities are plunging.”  It adds that “The regulation would require the trades be executed above the best existing bid in the market when shares fall 10 percent in a day,” In short, alarm is on.

Massive collapse is about to set in from Monday onwards.  It is scary.  It was inevitable; we were merely waiting for the trigger. President Obama provided it. He is not to blame for what he proposes. It is the way he has presented them and timing thereof. He is under extreme pressure to perform that is telling on him for his expediency.

• The markets may lose anywhere from 5% to 15% in short time (< 1 month), and 15% to 50% in medium term (< 4 months) if the short term correction takes place.
• Margin calls will exacerbate the downside.
• Mutual Fund redemptions could cause massive slides.
• Money could become scarce overnight. Overnight Call rates could zoom and stay there for unduly long time forcing short term rates to rise. My previous article “Maturity Mismatch’ may become reality as projected.
• Monday could be the beginning of Tsunami wave, category 7. So many things could happen swiftly in short time.
• Massive losses to investors will become a hard reality.  What they lose this time may not be recoverable in next 3 to 7 years.
• The only reprieve will come when the Bernanke is allowed to continue his job. While he has lost all credibility and should not be confirmed, it is in the interest of the market that he continues for a while (temporary extension) until his successor is chosen. If he loses the job, one may be waiting for him at Goldman Sachs.

This time, protecting capital is more important than the earnings. If you have capital left, there would be earnings one day.  It is not necessary to make money in every trade every day. It is enough if you made good money some time rather than a little money every time. We therefore suggest the following from Monday onwards.

There could be huge meltdown. All markets may go down Minimum 3 to 7 days continuously in varying degree.

US Market:

1. Dow may lose another 14% (1400 to 1500 points) and then rest before going down again.
2. If S&P goes below 1083, it will be bad sign for technical analysts. In my view that it will be breached.
3. NASDAQ may outperform DOW.
4. Buy Put options on S&P 100 known as OEX-100 and Nikkei 225. These are very volatile.
5. Do not trade S&P 500, it is less liquid and does not move fast.
6. SELL short or Buy puts on ADRs of Wipro (trading at 43% premium) and ICICI Bank (-3%) and HDFC Bank (+15% premium). The heavy premium is usually lost in meltdown. Further, one can keep short position in US market on any equity or ADRs for about 12 months by paying suitable margin. Check with your US broker first.
7. Think of accumulating undervalued stocks like MTNL with Zero debt where discount will rise due to meltdown making it attractive. Stronger rupee tend to add more value in $ terms.
8. Indian ADRs could develop more discount than shown today, making them more attractive.  Some counters are better bought as ADRs than underlying equities in India. If you have choice between domestic share and ADR, prefer ADR of liquid counters. (large cap stocks)
9. A strong buy opportunity may emerge in FCCB (Foreign Currency Convertible Bonds) of Indian companies that may be hammered in meltdown. Their yields may rise, premium contracts or even trade at discount. They being denominated in $, stronger rupee will give better return than underlying shares in India. Watch out for them. Go only for well known battered counters in info tech, pharmaceuticals and telecom sector. This is for only wealthy investors having $ 1 Million or more investment budget. Not suitable for local investors due to larger size lot involved

10.  There could be political and social upheavals. Since hundreds of billions of dollars are at stake, and jobs being lost with increasing intensity, violent political removal at high level at many places is likely. This time for a change, the war will be within United States. Law may take a back seat.

Indian Markets:

Indian growth story could be dented but will remain intact than China. India is still safest place to invest. With US, Europe, UK, Japan and even China taking massive blow, India, Indian economy and even Indian Rupee (if made convertible) could become real alternative to US dollar.

Nevertheless, holed in the habit of taking cue from the Dow and Asian markets, SENSEX may tumble by 14% in a few days (2400 points). Huge margin calls from Wednesday onward could push it down further by another 1000 points. The market may reach 13,400 first, rebound for 800 pts in dead cat bounce rally, followed by sharp drop down further by 2000 points. In short, the market may lose 4600 points within one month. Even if the market recovers during intraday, it may close down near the close. Not many would want to keep their position open overnight.

However, there is a caveat. Indian budget due in February could provide relief or act as mild buffer against further sharp fall. It all depends how Government of India responds. The interest rates may be lowered, not raised to contain inflation, and Income Taxes could be lowered for Corporate and Individuals that may provide fillip to the Indian markets. This is however conjectural. Rely more on facts than rumors or opinion. Financial expediency will prevail over political one.

1. Stock financing banks like ICICI, HDFC, Axis Bank, SBI could tumble more due to proposed changes in banking law in United States.  They will not be able to carry out their investment banking activities as before. They could be the index draggers. Do not touch them for another 1 month even with remote pole. Swap them into neutral stocks like IDBI Bank or IFCI who are domestic oriented.
2. Stay on short side.
   1. If you do not want to sell down your portfolio, insure it by buying Out of Money Put option of NIFTY for February or March, if available.  Do not speculate, use it as hedge. The markets could have wild swings that could boost or bust the speculators.
   2. SELL 50% of remaining stocks held. You may have already sold 70% by now from the peak, if you have followed this column. What you may have is remaining 20% exposure.
   3. Possible exceptions are recovery play like Spice Jet. Ispat Industries and Dish TV who have returned to profits already or will return in one quarter.
   4. Finish your selling through out the day, taking advantage of intraday recovery. Even if the Asian markets recover during the day, continue selling. You may sell some Spice jet too if you are sitting on good profit, with a view to buying back later.
   5. Stocks like ITC and Hindustan Lever may perform better than others.
   6. SELL or reduce Mutual Funds (except LIC linked) by 70% and retain cash.
3. Focus on buying only after 3 days of fall only the following stocks. (1) Spice jet (<56)  (2) Ispat Industries (<23), (3) Dish TV (<41) , (4) Petronet (<71), and (5) Evinex (<3.65), (6) IOC (<270), (7)IFCI (<43), (8) UCOBank (<48), (9) LIC Housing Finance
   1. Avoid Oils, Metals, Ores, Infrastructures and all other high PE stocks. Also avoid story stocks like PSU on privatization list.
   2. Avoid oil producers; prefer State Owned Refineries like IOC, HPCL, BPCL, MRPL etc. Avoid private refiners like Essar Oil and Reliance.
4. Buy more of Gold, Gold ETF and Silver.
   1. Some may say that if Gold falls below $1065, there could be a meltdown. Do not buy those stories.  Gold rise most in uncertainty.
   2. Silver is generally stronger than Gold nowadays. Use major fall in their prices as strong buy opportunity.
   3. No targets are given because you will be in hit and run market for several days.
5. Please note that this article is meant for regular delivery based investors. Some hedging operations are mentioned to protect their portfolio.
6. Short term investors active in F&O segment may conduct their activities on their own impulse. This article is not meant for them.
7. When the markets correct as above, it will provide strong platform to build Long Term Portfolio of any amount as suitable to investors. Investments made in steep correction time will provide better return than properties.
8. Defer buying property for investment purpose until March 2010.
9. If you are keen on investing into property for investment purpose, not for self use, better look out for commercial properties from March/April. Read my all articles on “How to invest series….” again.

10.  Buy equities only when you strongly feel like selling gold or silver. At that time, one may buy equity or properties. Prefer “Ready to Possess” properties than properties under constructions from unknown developers who might close their shops suddenly and run away. This time around, avoid farm properties, and prefer commercial or residential properties in major metro cities or towns having population over 30 lakhs (3 Millions; +/- 20%)

Will the markets go the way as projected? I will be happy if I am proved wrong. The trouble is that I am often proved right than wrong. But do not take me for granted. Try to be rational and make your own calculated guess and decision.  There is not going to be time for analysis.

A question may arise, whether this crisis was solvable?  The answer is yes. For every problem there are multiple solutions. My father taught me once “For every problem, there are 10 solutions – just go out and find it”.  I therefore wrote the book “SUB PRIME RESOLVED” which provided comprehensive solutions. If US-A does not go the way I have suggested, the nation is set for gloom, doom and total collapse. It may not exist in present political form.

I also made several attempts to offer solutions to the US Administration as under. However, there was no response. No regrets. I did my job and would let them do theirs.

First, when I offered solutions to President Bush in August 2008 before crisis began.  However, he or his stooges in White House ignored.  My letter to President Bush is already in the repository and read by the readers. The real trouble started precisely three weeks later in September 2008.

Second, I offered similar solutions to Senator Obama while he was campaigning for Presidency.  There was no response. But I can understand that.

Third, when my book “SUB PRIME RESOLVED” was published in June 2009. I wrote to President Obama, the First Lady Michelle Obama and Vice President Joe Biden. No response either.

Fourth, when I wrote similar letter to ex-President Bill Clinton and Jimmy Carter;  they too did not care to respond.

Fifth, when I sent my book “SUB PRIME RESOLVED” to Sen. McCain, and Bobby Jindal, Governor of Louisiana and Chris Dodd, Chairman of Senate Banking Committee.  However I did not receive any reply or courtesy acknowledgement.

Sixth, when I wrote a letter to the President Obama very recently with similar letter copied to Vice President Joe Biden, Senator Christopher Dodd, Chairman of Senate Banking Committee, and Timothy Geithner, the incumbent Treasury Secretary. Again there was no reply or acknowledgement.

I threw a challenge to President Obama that if my solutions could not extract the United States from the severest financial crisis and make it healthy again within 9 months, I repeat 9 months, he can sign “Death Warrant” against me with my and my family’s full written consent.

Seventh, when I wrote to the Chair of FDIC (Federal Deposit Insurance Corporation). Again there was no reply or acknowledgement.

I wonder why we send our children to USA for higher education such as MBA when those expensive institutions do not even teach basics of Courtesy, Management and Administration to upcoming business and political leaders in United States itself. They keep their minds closed and ask us to keep ours open.

The Americans are suffering from “Superiority Complex”.  The past successes have gone to their head. They appear to feel that only they know everything, forgetting that the knowledge knows no bounds. It can spread anywhere. We are in internet age, America’s  own invention.

The White House may be thinking that this Kalidas, Anil Selarka or whoever he is, must be a crazy, egoistic, pseudo bastard.  When our Nobel Laureate economists, financial gurus and management experts in United States are not able to think of one solution, how on earth this Kalidas could have multiple solutions from Hong Kong 5000 miles away? Throw him into the dustbin for good.

There is one way Americans can come out of troubles learning from Americans only if they prefer.  Hand over the country to IBM executives. They know how to think, conceive, design, plan, implement, execute and bring positive result. They think out of the blue box. It was IBM who invented “Personal Computer”. Many years ago, the company was in shamble spending billions of dollars in advertisements.

However, they read the writing on the wall in time and did not take long to “dump” it by shifting to services and software solutions. There used to be IBM logo everywhere in the past.  The striped blue logo is rarely seen anywhere now; and yet, they are everywhere like God.  Look at them today – they are fast, nimble, profitable and as efficient as any coveted American enterprise ought to be.

President Obama has to take three decisions.

1. Dump GDP theory. (the way IBM dumped and got out of PC business)
2. Dump Goldman Sachs and quarantine every Goldman emission in Fed and Treasury (and everything should be fine in US and globally)
3. Pump Gold. (bringing back monetary stability by re-standardizing dollar)

Kalidas (Anil Selarka) Ref: 10-003 of 24 January, 2010 (Sunday)
Hong Kong

Personal Blog:     http://anilselarka.com
Book Web       :     http://www.subprimeresolved.com

Disclaimer:
Readers, before you proceed:
This article is released on Sunday so that you have enough time to deliberate on information available from various sources. This is for your informational purpose only. Consult your professional broker, banker or investment adviser before acting or taking any decision. No liability of any kind attaches  to the author.