“PRICE IS A LIAR”

(Source: Harolds Planet) “Price is a liar”. Attribution: John Burbank of Passport Capital. Never heard of him? Neither had I, till I watched the two-minute video below: John Burbank on Investing: ‘Price Is a Liar’ by FORAtv I need to clarify: he hasn’t uttered the four words ‘Price is a liar’ in the current scenario. John Burbank gave a one-hour presentation sometime in early 2015. To watch the entire presentation click here. With events in China deciding price action since […]

MAGIC FORMULA STOCKS – NIFTY MIDCAP 100 INDEX

Magic Formula Stocks – Nifty Midcap 100 Index Magic formula investing is a stock selection method devised by Joel Greenblatt. It uses the principles of value investing to select stocks. Before getting into the ‘Magic Stocks’ part, allow me to digress, just a little bit. This blog – Sentiments & Bubbles (S&B) has largely been devoid of stock recommendations. I have had many subscribers complain that there is no ‘actionable content’ on S&B.  The primary reason for shying away from […]

TIMING THE MARKET OR TIME IN THE MARKET?

(Cartoonist: Aaron Bacall; Cartoonstock.com) Timing the market is popularly used by all of us in our attempt to buy low and sell high. How easy is it to time the market?   Timing the Market Most of the investment gurus preach that time in the markets ought to take precedence over timing the market. Despite this the temptation to time markets is irresistible. I’ll get to the timing techniques in just a bit, before that it is necessary to clarify […]

MARKET FORECASTS: 2015 WAS NUTS; WHAT ABOUT 2016?

(Source: www.shutterstock.com/cartoonresource) Market forecasts are defined as, ‘an attempt to predict the unknowable by measuring the irrelevant’. Forecasts inevitably reflect what is happening rather than what is likely to happen.   How accurate are Market Forecasts? How many of us take the trouble to verify the accuracy of the forecasts at the end of the year? I had never attempted any such thing and decided to indulge myself. The image below shows the forecasts for WTI (West Texas Intermediate) Oil prices […]

FED FUNDS RATE HIKE: IS IT BULLISH?

(Source: www.shutterstock.com/cartoonresource) It seems to be a foregone conclusion that the U.S. Federal Reserve will raise the Fed Funds Rate at its next meeting. The question is what happens after that?   Fed Funds Rate – Historical Narrative  I think that a Fed Funds Rate hike is positive for Emerging Markets and Indian equities in particular. To understand my reasoning, one has to see how things have evolved since the advent of Quantitative Easing (QE). I have constructed the narrative […]

MODI SARKAR & THE POWER OF STORYTELLING

  (Source: www.shutterstock.com/cartoonresource) Good storytelling is exciting and memorable. The irresistible power of storytelling appeals to our storytelling bias. The content of the story does not matter. The Power of  Storytelling There is an old Budweiser commercial called ‘Puppy Love.’  It was aired during the Superbowl, which is the annual championship game of the National Football League in the United States. Take a look:   Budweiser always uses the Clydesdale breed of horses and the Puppy in most of their […]

CAPE VALUATION: IS THIS AN EXPENSIVE MARKET?

(Source: www.shutterstock.com/cartoonresource) CAPE valuations of Indian Equities show that India is the most expensive Emerging Market (EM). Is that the only reason for the underperformance of the Nifty?   What is CAPE? CAPE is the acronym for the Cyclically Adjusted Price to Earnings ratio. The CAPE ratio was derived by Professor Robert Shiller and has the following characteristics: 1. We all know that a Price Earnings (PE) ratio is the Current Market Price (CMP) divided by the latest Earnings Per Share (EPS) […]

CORRECTION ANALYSIS: WHEN’S THE CRASH?

(Source: www.shutterstock.com/cartoonresource) Every time there is a correction, all of us are scared. Are stock market corrections irrational? Not always. How can a layman investor ‘trade a correction’?   Historical Correction Analysis In the current year, the ‘peak to trough’ correction was roughly sixteen percent. (I am making a dangerous assumption, which is that the current correction is done with!). How does that compare with past corrections? To find out, I collated the historical ‘corrections timeline’ for the calendar years […]

HOW TO ‘READ’ THE 200-DAY SMA OF THE NIFTY?

(Source: www.shutterstock.com/cartoonresource) The 200-day Simple Moving Average (SMA) of the Nifty is 8382. Currently, the Nifty is trading below its 200-day SMA.   What is the 200-day SMA The 200-day Simple Moving Average (SMA) of the Nifty is the average of the closing prices of the Nifty for the previous 200 days. Very simply, the formula is [(day1)+(day2)+….(day200)] / 200. With each passing day, the oldest days data gets deleted and the latest days data gets added. Hence, it’s called ‘moving’ […]

VALUE INVESTING – IS THIS THE RIGHT TIME?

(Source: www.shutterstock.com/cartoonresource) Value investing is a strategy wherein the concept of growth is automatically ingrained into the calculation of value. The worldwide ‘search for economic growth’ seems futile. It does seem that value investing is on the verge of making a ‘comeback’.   What is Value Investing? From an investment standpoint value investing would mean buying stocks of a company that meets the following criteria: The products of the company are such that they will continue to be in demand […]