Crude $$$$“CRUDE SHOCK”

Oil Slick will have larger impact in long term price of Crude and environment as every effort to contain the Oil leak is failing. This is Hurricane season in Gulf of Mexico and on 27th May 2010 statement, NOAA Expects Busy Atlantic Hurricane Season http://www.nhc.noaa.gov/  and this news send crude jump as many have Hurricane Katrina of 2005 fresh in mind. Oil Spill & Hurricane together would have far reaching impact and National Oceanic and Atmospheric Administration has given their view http://www.nhc.noaa.gov/pdf/hurricanes_oil_factsheet.pdf  Hurricanes and the Oil Spill, What will happen to a hurricane that runs through this oil slick?

BP Plc said on Saturday the complex "top kill" maneuver to plug its Gulf of Mexico oil well has failed, crushing hopes for a quick end to the largest oil spill in U.S. history already in its 40th day. http://www.reuters.com/article/idUSTRE6430AR20100530

Impact analysis: Many new safety regulations would increase the cost of drilling and new deep water drilling permits will be put on hold. High Crude prices have normally derailed economies and already we have Mr.Mukesh Ambani saying Crude heading towards $100. European economies slowing down and high Crude prices will be a major economic disasters if it happen in 2010. On June 7th Indian cabinet would meet to free oil prices how much would happen is to be seen

http://money.cnn.com/2010/05/28/news/companies/BP_safety_review/?postversion=2010052921  government ban on deep water oil drilling could stifle economic activity and lead to job losses and higher energy prices, an industry group said Friday.

ABB Open Offer : Would you buy NOW?

Promoter of ABB Ltd have offered to buy 48.51 million shares, or 22.89%, in the firm from shareholders at Rs 900, a 8.8% premium to CMP of Rs 826.

The offer by ABB Asea Brown Boveri Ltd and ABB Ltd (Switzerland) will launch on July 8 and will close on 27 July, HSBC Securities and Capital Markets said.

ABB Asea Brown Boveri Ltd and its unit ABB Norden Holding AB together holds 52.11% in ABB Ltd, the advertisement said.

Back of the envelope calculation:
Is their any arbitrage available or should one buy taking open offer into consideration?

• ABB current price = Rs 826 e.g. 100 shares are bought.
• Currently ABB holds 52.11% and it has offered to buy 22.89% more which would take their stake to 75% in India unit. So it makes a 47.8% probability that our shares would get tendered in Open Offer.
• So if one buys 100 shares, approximately 48 would go into open offer and he will get payout @ Rs 900/share.
• Net Profit on tendered shares = (Rs 900 - Rs 826) X 48 = Rs 74 X 48 = Rs 3552/-
• Net Profit = 4.3% on total capital invested, decent returns for holding period of around 2.5 months!

But history tells us something else -
RANBAXY shareholders were given a similar open offer which was way above its market price at that time and it was at Rs 737/share from Dai Ichi Sankyo of Japan while shares were ruling at Rs 550 at time of announcement. The stock has never risen to those levels now almost 2 years have passed, those who bought in anticipation of open offer got payout for small number of shares and larger part of holdings is still stuck.

Then why do foreign companies give open offers?

• They are investing in businesses and not at all interested in small short term gains, they think of 5-10 years in advance minimum and bet on future of the economy which a common retail investor doesn't do.

In case of ABB the open offer price looks really stretched as the company is already trading at a P/E multiple of 62 and at Rs 900 it would go beyond 67 which is not at all cheap by any stretch of imagination.

• ABB has reported an average decline of 34.5% in profits for the past four quarters ended December 2009. The performance has taken a further sharp blow in the March 2010 quarter, with profits falling by 92%. The company’s financial performance has been disappointing mainly due to its exit from a key business segment, delays in some of the projects and fluctuation in input prices.
• Company imports nearly 40% of its raw material requirement and is exposed to a large foreign exchange risk, it has to follow an active hedging policy which may be lacking so far. Recent rupee appreciation may hurt financials more.
• The probability of giving shares in open offer may go down also as public holding currently stands at less than 15%, which means that the company would have to convince the institutional investors, who hold a total of around 33%, to respond to the offer.
• Looking at company prospects in immediate future and history of similar open offer it looks wise to take profits at Current market price or have small exposure as stock may fall after the event is over. Even an 8% drop from current levels would take the investor into losses if one buys from the viewpoint of open offer now. If parent doesn't have intentions of de-listing, profit for the investor is not guaranteed by any Open Offer.

Do traders make money?

http://www.youtube.com/user/akprabhakar#p/u/1/Bz7gOwh0LnA  Indian Market Outlook& Trading Discipline http://www.youtube.com/user/akprabhakar

First let me start with few points when you are trading 90% traders lose money then next question asked is then who profits? Broker by way of brokerage and Government by way of taxes rest are given to investors, interest paid on margin funding and arbitrage funds and hardly traders gain.

Then why do people trade?

Whenever a person enters stock market he normally makes money by default and many think it is our brilliance but it is our ignorance which gave money and when we try to use our brilliance we start to lose money. So people who made money start losing money and to recover the lost money people trade to recover faster.

Do traders recover their lost money?

I have never seen a rich trader but there are 400investor in Forbes 500 richest people and I have never seen a rich technical analyst which includes me also. Normally when there is a urgency or leverage in capital money is never made.

Below i have given a article written by Shaun Rein where he talks about advisor but he has failed to complete fully nor proved a point but good one to read for investor or traders.

Warren Buffett Is All Wrong About Goldman--

Shaun Rein,

Something is rotten on Wall Street.

http://www.forbes.com/2010/05/17/warren-buffett-goldman-sachs-leadership-citizenship-rein.html  When I went in for a final-round interview with Smith Barney, a division of Citigroup, one of my interviewers asked me, "Where would you invest your clients' money?" I had read Benjamin Graham's The Intelligent Investor, so I happily responded that I would put some money in indexes, to take advantage of the low fees, and then apportion the rest based on my clients' time and risk horizons. The interviewer hunched over like a lion about to take a chunk out of gazelle and growled, "You are wrong. You put money wherever you will get the best commission. Most of your clients are stupid and don't know anything about the stock market. If the S&P 500 goes up 20% in a year, they probably don't know it. All you have to do is show a positive territory on the monthly statements." My expression made it clear I wondered how he could sleep at night. Needless to say, I got rejected that day.

http://www.akprabhakar.com/  http://twitter.com/akprabhakar  follow me in twitter

Has Warren Buffet timed the Market to invest in India?

http://www.youtube.com/user/akprabhakar

Whatever little I can understand about this legendary investor he has been the best in timing market in 2006(Dow was 10-11K) he was holding 46% cash amount equivalent to $40billion and many questioned his investment rationale but in 2008 October he said he will shop in equities and he did when Dow was 7k-8k and many investment he made during last 18months has given him good returns. Important is by waiting he has made better returns than being invested fully, so Cash management is important in investing.

Point to note from all his previous speech, 2006 he did say Dollar will correct and in October 2008 he has made a point that Government measure to tide the crisis will have inflationary impact and investing in equities will be the good idea he said.

Now he is visiting India in March2011 and he has announced this 10month in advance and now itself many started to write about stock which Buffet would or could pick and he has allowed euphoria to built. I personally feel Buffet has timed his visit to invest when equity markets will be really attractive maybe 30% down from here as history has shown. EIC- Economy Industry Company has been his way of investing and he understand the cycle of economy well.

Read this Keynes economist or a Investor http://akprabhakar.blogspot.com/2009/09/keynes-economist-or-investor.html

(Reuters) - Warren Buffett said on Saturday (May1, 2010) he plans to visit India next March, and would not rule out the country for possible future investments. Speaking at Berkshire's annual meeting in response to a shareholder question, Buffett said he had decided only on Friday to make the trip, saying the company's Iscar Metalworking Cos unit "is doing very well there." http://in.reuters.com/article/topNews/idINIndia-48155420100502  

Has the legendary investor timed his India visit by coming in 2011 March?

In October 2008, “policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts”. Said Buffet and as he started to invest in Equities after holding cash for long time http://www.nytimes.com/2008/10/17/opinion/17buffett.html

The most successful investor, Warren Buffett, has long held cash when he cannot find opportunities to deploy capital. As of the third quarter 2006 Mr. Buffett sat a top a huge pile of cash, over $40 billion. To emulate Mr. Buffett, one should hold cash until he/she finds opportunities which will earn returns sufficiently above the risk free rates offered by treasury bills with limited downside. http://www.gurufocus.com/news.php?id=4212

http://www.advfn.com/column3/berkshire-hathaway-holding-cash.html  why is Berkshire Hathaway sitting on 46.5%, and why does Buffett opine that the U.S. Dollar is headed south for the next several years? (Article dated-03/27/2006)

It is all Greek in Global market

Global Market has started to show signs of weakness and market which has so long ignored the possible risk has now started to react and correction is in all asset class Crude corrected 13% while Dow corrected 8% in a week while Dollar Index has rallied China Stock market nearing 9months low and European markets has closed near 7-8months low. Global markets have rallied 80% last year and correction was due. Recovery in the economy was due to lower Commodity prices and Government stimulus package offered by many Governments and with Commodity prices more than double in last 12months it had the possibility to derail the fragile economic recovery.

http://learning.blogs.nytimes.com/2010/05/04/its-all-greek-to-me-understanding-the-debt-crisis-in-europe/?scp=2&sq=european%20debt%20bomb&st=cse  Understanding the Debt Crisis in Europe

http://www.marketwatch.com/story/citi-sees-up-to-20-correction-over-greece-2010-05-07  Citi sees up to 20% correction over Greece

http://www.economist.com/opinion/displaystory.cfm?story_id=16063896 Greeks greet another government austerity plan, and an IMF/EU rescue package, with riots and violence

President Barack Obama said on Friday that regulators would look for ways to prevent a repeat of Thursday's mysterious stock market meltdown, adding to expectations the U.S. government will make new regulations to curb runaway computer trading. http://in.reuters.com/article/businessNews/idINIndia-48327320100508  

U.S. stock plunge raises alarm on algo trading

A spine-chilling slide of nearly 1,000 points in the Dow Jones Industrial Average, its biggest intraday points drop ever, led to heightened calls for a crackdown on computer-driven high-frequency trading. The slide, which in one 10-minute stretch knocked the index down nearly 700 points, may have been triggered by a trading error. Major stock indexes eventually recovered from their 9 percent drops to close down a little more than 3 percent. http://in.reuters.com/article/businessNews/idINIndia-48296920100506

Stock sell-off leads to faulty trade probe 
Securities and futures regulators said late Thursday they were working with exchanges to examine "unusual" trading activity during the day's massive sell-off, which saw bellwethers such as Procter & Gamble Co. plunge nearly 40%, and a senator called for tighter trading controls. http://www.marketwatch.com/story/stocks-sell-off-leads-to-faulty-trade-probe-2010-05-06
Program trading lambasted after Dow drops 1,000 points and then snaps back, Nasdaq to cancel trades http://www.reuters.com/article/idUSTRE6456QB20100507

Isaac Newton, Lost Million in the Stock Market

Isaac Newton, Lost $2.72 Million in the Stock Market, Still the Best Scientist


A little known fact about Isaac Newton is that he lost $2.72 million USD in today's money due to speculation in The South Sea Company stock in the 1720s. As a result of this crisis, he stated "I can calculate the motions of heavenly bodies, but not the madness of people." http://www.certifiedchinesetranslation.com/10/0103-Isaac-Newton-investor.html  


Mumbai Seminar Video

http://www.youtube.com/user/akprabhakar#p/u/0/Bz7gOwh0LnA  Indian Market outlook & Trading Discipline


http://en.wikipedia.org/wiki/Isaac_Newton  Newton described universal gravitation and the three laws of motion which dominated the scientific view of the physical universe for the next three centuries.
http://online.wsj.com/mdc/public/page/marketsdata_asia.html?refresh=on Good link on Global market index

U.S Market all positive data

Videos of our seminars http://www.youtube.com/user/akprabhakar

The Institute for Supply Management (ISM) said its index of national manufacturing activity rose to 60.4 in April from 59.6 in March, beating Reuters' median forecast for a reading of 60. A rise in the employment component showed employers were more confident about hiring. U.S. manufacturing registered its fastest pace of growth in nearly six years in April while data on construction and consumer spending pointed to further strength in the economy.

http://www.businessinsider.com/sorry-when-the-ism-hits-60-the-stock-market-really-slams-on-the-breaks-2010-5 When The ISM Hits 60, The Stock Market REALLY Slams on the Brakes

HSBC India MFG PMI falls for second month http://www.business-standard.com/india/news/hsbc-india-mfg-pmi-falls-for-second-month/393742/  India’s industry output, as measured by the HSBC Purchasing Managers Index (PMI) fell for the second consecutive month in April, as operating conditions improved at a weaker rate during the period. However, despite the marginal decline, the latest survey indicates considerable strengthening in the health of the industry. The index stood at 57.2, marginally down from the reading of 57.8 in March. The fall in PMI reflects slower expansion in both output and new orders. However, both the indices tracking trends in these two variables remained at levels consistent with sharp rates of growth.

JSW Steel to buy coking coal assets in US http://www.livemint.com/2010/05/03173413/JSW-Steel-to-buy-coking-coal-a.html

The sugar industry is in for sweeter days this year, thanks to a good crop of sugarcane which saw an improvement of 15% against last year. Sugar production meanwhile has reached 70 lakh tonne for the year 2009-10, which is 12% more than the last year.

Pfizer, Wyeth sue Ranbaxy over infringement http://www.financialexpress.com/news/Pfizer-Wyeth-sue-Ranbaxy-over-infringement/614545/