(Cartoonist: Harley Schwadron;Cartoonstock.com)(Sunday,13 March 2016) Negative interest rates represent an upside-down world. There is something about negative interest rates that makes one uneasy; it ‘s almost visceral.   FII flows & Negative interest rates Emerging Market (EM) financial assets are considered as risk assets by the Foreign Institutional Investors (FII’s). FII flows to EM’s, and the Indian stock market is a function of how risk averse FII’s are. Have negative interest rates accentuated risk aversion or alleviated it?  The following […]

(Cartoonist: Grizelda; Cartoonstock.com)(Sunday, 28 February 2016) After a torrid start to the month, global equities bounced back. However, Indian equities did not participate. The reason: Public Sector Banks in particular and the banking sector, in general, proved to be a drag on the benchmark.   Operation Clean-Up in Public Sector Banks   According to guidelines issued by the Reserve Bank of India (RBI), India’s Public Sector Banks (PSB) are in the process of recognizing non-performing loans by the end of […]

(Source: www.shutterstock.com/cartoonresource)(14 February 2016) The Chaos Theory seems to have the answer for much of the market mayhem that we have been witnessing. To me, the Genesis seems to be the falling price of oil.    How correlated are Oil Prices, Stock Prices & Inflation? There is a definite positive correlation between oil prices and stock prices. However, the correlation is too random to be predictable. Currently, the correlation between oil prices and stock prices is between 0.9 and 1.0. […]

(Source: www.shutterstock.com/cartoonresource)(31 January 2016) Is Volatility a friend or an enemy? When the markets are going up volatility is the investors friend. On the way down, Volatility is a sworn enemy. As a result, I prefer to call Volatility a frenemy. Is there any such thing as a ‘Low Volatility’ stock? Volatility: The Way Out   The National Stock Exchange of India (NSE) disseminates a Nifty Low Volatility 50 Index as part of its ‘Strategy Indices’. The image below shows […]

                        (Source: www.shutterstock.com/cartoonresource)(24 January 2016) After a tumultuous start to the new year, the last week finished off with a relief rally. Are we done with the correction? ‘It isn’t over till the fat lady sings’ is a colloquialism classified as a proverb. It is used to caution against the following: Assuming that the present state of an event is permanent in nature. Trying to draw a conclusion as to […]

(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 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 […]

(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 […]

(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 […]

(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 […]