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[vinay28]

Another article worth reading

Author unknown

There has only been one other time in history when the price of oil has crashed by more than 40 dollars in less than 6 months. The last time this happened was during the second half of 2008, and the beginning of that oil price crash preceded the great financial collapse that happened later that year by several months. Well, now it is happening again, but this time the stakes are even higher. When the price of oil falls dramatically, that is a sign that economic activity is slowing down. It can also have a tremendously destabilizing affect on financial markets. As you will read about below, energy companies now account for approximately 20 percent of the junk bond market. And a junk bond implosion is usually a signal that a major stock market crash is on the way. So if you are looking for a “canary in the coal mine”, keep your eye on the performance of energy junk bonds. If they begin to collapse, that is a sign that all hell is about to break loose on Wall Street.

It would be difficult to overstate the importance of the shale oil boom to the U.S. economy. Thanks to this boom, the United States has become the largest oil producer on the entire planet.

Yes, the U.S. now actually produces more oil than either Saudi Arabia or Russia. This “revolution” has resulted in the creation of millions of jobs since the last recession, and it has been one of the key factors that has kept the percentage of Americans that are employed fairly stable.

Unfortunately, the shale oil boom is coming to an abrupt end. As a recent Vox article discussed, OPEC has essentially declared a price war on U.S. shale oil producers…

For all intents and purposes, OPEC is now engaged in a “price war” with the United States. What that means is that it’s very cheap to pump oil out of places like Saudi Arabia and Kuwait. But it’s more expensive to extract oil from shale formations in places like Texas and North Dakota. So as the price of oil keeps falling, some US producers may become unprofitable and go out of business. The result? Oil prices will stabilize and OPEC maintains its market share.

If the price of oil stays at this level or continues falling, we will see a significant number of U.S. shale oil companies go out of business and large numbers of jobs will be lost. The Saudis know how to play hardball, and they are absolutely ruthless. In fact, we have seen this kind of scenario happen before…

Robert McNally, a White House adviser to former President George W. Bush and president of the Rapidan Group energy consultancy, told Reuters that Saudi Arabia “will accept a price decline necessary to sweat whatever supply cuts are needed to balance the market out of the US shale oil sector.” Even legendary oil man T. Boone Pickens believes Saudi Arabia is in a stand-off with US drillers and frackers to “see how the shale boys are going to stand up to a cheaper price.” This has happened once before. By the mid-1980’s, as oil output from Alaska’s North Slope and the North Sea came on line (combined production of around 5-6 million barrels a day), OPEC set off a price war to compete for market share. As a result, the price of oil sank from around $40 to just under $10 a barrel by 1986.

But the energy sector has been one of the only bright spots for the U.S. economy in recent years. If this sector starts collapsing, it is going to have a dramatic negative impact on our economic outlook. For example, just consider the following numbers from a recent Business Insider article…

Specifically, if prices get too low, then energy companies won’t be able to cover the cost of production in the US. This spending by energy companies, also known as capital expenditures, is responsible for a lot of jobs.

“The Energy sector accounts for roughly one-third of S&P 500 capex and nearly 25% of combined capex and R&D spending,” Goldman Sachs’ Amanda Sneider writes.

Even more troubling is what this could mean for the financial markets.

As I mentioned above, energy companies now account for close to 20 percent of the entire junk bond market. As those companies start to fail and those bonds start to go bad, that is going to hit our major banks really hard…
Everyone could suffer if the collapse triggers a wave of defaults through the high-yield debt market, and in turn, hits stocks. The first to fall: the banks that were last hit by the housing crisis.

Why could that happen?

Well, energy companies make up anywhere from 15 to 20 percent of all U.S. junk debt, according to various sources.

It would be hard to overstate the seriousness of what the markets could potentially be facing.

One analyst summed it up to CNBC this way…

“This is the one thing I’ve seen over and over again,” said Larry McDonald, head of U.S strategy at Newedge USA’s macro group. “When high yield underperforms equity, a major credit event occurs. It’s the canary in the coal mine.“

The last time junk bonds collapsed, a major stock market crash followed fairly rapidly.

And those that were hardest hit were the big Wall Street banks…
During the last high-yield collapse, which centered around debt tied to the housing sector, Citigroup lost 63 percent of its value in the following 60 days, Kensho shows. Bank of America was cut in half.

I understand that some of this information is too technical for a lot of people, but the bottom line is this…

Watch junk bonds. When they start crashing it is a sign that a major stock market collapse is right at the door.

At this point, even the mainstream media is warning about this. Just consider the following excerpt from a recent CNN article…

That swing away from junk bonds often happens shortly before stock market downturns.

“High yield does provide useful sell signals to equity investors,” Barclays analysts concluded in a recent report.

Barclays combed through the past dozen years of data. The warning signal they found is a 30% or greater increase in the spread between Treasuries and junk bonds before a dip.

If you have been waiting for the next major financial collapse, what you have just read in this article indicates that it is now closer than it has ever been.

Over the coming weeks, keep your eye on the price of oil, keep your eye on the junk bond market and keep your eye on the big banks.

Trouble is brewing, and nobody is quite sure exactly what comes next.

[vinay28]

Third article in a row, written sometime around sept '14. Author unknown.

The English are feeling the pinch in relation to recent events in Syria and have therefore raised their security level from "Miffed" to "Peeved". Soon, though, security levels may be raised yet again to "Irritated" or even "A Bit Cross." The English have not been "A Bit Cross" since the blitz in 1940 when tea supplies nearly ran out. Terrorists have been re-categorized from "Tiresome" to "A Bloody Nuisance." The last time the British issued a "Bloody Nuisance" warning level was in 1588, when threatened by the Spanish Armada.

The Scots have raised their threat level from "Pissed Off" to "Let's get the Bastards." They don't have any other levels. This is the reason they have been used on the front line of the British army for the last 300 years.

The French government announced yesterday that it has raised its terror alert level from "Run" to "Hide." The only two higher levels in France are "Collaborate" and "Surrender." The rise was precipitated by a recent fire that destroyed France 's white flag factory, effectively paralyzing the country's military capability.

Italy has increased the alert level from "Shout Loudly and Excitedly" to “Elaborate Military Posturing." Two more levels remain: "Ineffective Combat Operations" and "Change Sides."

The Germans have increased their alert state from "Disdainful Arrogance" to "Dress in Uniform and Sing Marching Songs." They also have two higher levels: "Invade a Neighbour" and "Lose."

Belgians, on the other hand, are all on holiday as usual; the only threat they are worried about is NATO pulling out of Brussels ..

The Spanish are all excited to see their new submarines ready to deploy. These beautifully designed subs have glass bottoms so the new Spanish navy can get a really good look at the old Spanish navy.

Australia meanwhile, has raised its security level from "No worries" to "She'll be right, Mate." Two more escalation levels remain: "Crikey! I think we'll need to cancel the barbie this weekend!" and "The Barbie is cancelled." So far no situation has ever warranted use of the last final escalation level.

And as a final thought
- Greece is collapsing, the Iranians are getting aggressive, and Rome is in disarray.

Welcome back to 430 BC.

[Raynor]

Good Days for market is coming..

reasons

1. recently a saudi prince stated 100 dollar oil never again
2. if saudhis cut their production of oil others will take the market share.. he even said you can trust nobody in opec..

lets examine some other things..

1. already Rusia needs more money so they are going to pump more oil as much as they can
2. Venezuela also needs more money so they are going to pump more oil as much as they can
( many of you aware that Venezuela economy was in turmoil even at when oil was at 100$)
3. iran needs more money so they are going to pump more oil as much as they can
4. nigeria also needs more money so they are going to pump more oil as much as they can

and last very oil producing country needs more money and they are going to pump as much as oil they can until they are in profits..

see baring russia and venezula, all the north african countries and gulf countries have high tottal fertility rate and having a high population growth

majority of the oil producing in north african and gulf countries are not much industrialised but their
income is totally depend on oil

their social welfare system and economic policies are continually increased based on the price of oil on 100$ oil.. if they reduce their spending they may face social unrest in their countries or the ruling parties may lose their power.. even isis is going to pump and sell cheaper oil since they need more money..

so every oil producing country is going to produce oil as much as possible..so we can see oil around 50$ for next 4 to 7 years

further on going researches in battery technologies will also keep the oil prices in check.. because many auto manufacturers are also experimenting their battery operated cars which may reduce the petroleum
requirement in future

high petroluem prices may be good for 20 percent junk bond.. but low petroleum prices may drive economy and help to keep the remaining 80 percent junk bonds.

In short run oil companies which are mainly western companies may lose their profits and their share price may drag down the markets in europe but will later help market to rise because of general growth in all the other sectors..

low oil prices will act as a nitro booster for struggling world economy

---Raynor

[girishhu1]

But as production cost of oil gets unremunerative due to high volume , a no of oil producing units will have to close down( which is what OPEC countries are aiming) and in that event,again oil costs will rise. Of course for immediate future of 1-2 years, your prediction may come true. Oil prices remaining low is possible only if alternative fuel is discovered/invented.
regards
girish

[amitagg]

[apka]

[rk_a2003]

"Post: #159 PostPosted: 27 Aug 2013 17:26 Post subject: Reply with quote Edit/Delete this post

rk_a2003 wrote:

Today rupee collapsed again and closed above 66 levels .With this pace it may reach 70 levels too. It may or may not but It’s again a substantial jump for rupee thus equity markets plunged. This time not a QE tapering threat but crude price jump attacked the rupee.

It reached our level, so again buying time for us. One may keep on adding quality scrip’s throughout September month in tranches . Even if rupee reaches 70 keep adding. It’s inevitable for the rupee to crawl back to 58-54-51 levels in the future. In fact it’s American $ not Indian rupee which is trash without its military power.

In final anlysis fundamentals prevail, FII’s money come back for the reason Indian growth rate is at the second rank in the world,Indian scrips available at dirt cheap rates with higher $ and lower equity market. Keep faith in fundamentals and also in history.

Time is offering you an excellent opportunity… grab it. You may get good returns even within a few months."


This was the MMM advise given clear and loud in the month of August 2013. Now look at the below chart. My investments made at that time gave me more than 200%.

[vinay28]

ECB excluded Greece from QE till July. And the bond buying will be investment grade (means only few select bonds, not all) and done by NCBs of EU. Nobody knows how many national central banks will buy bonds as risk factor to be borne by ECB is only 20% and remaining 80% will be borne by NCBs. Already all EU countries are under severe pressure. So mkts will wait till March to have a feel of this ECB's QE. In the mean time, if German national bank Bundesbund says as they are not willing to buy at 20% risk or they want ECB to bear more risk then the situation worsens as few others will try to raise their voices too.

Apart from this, 25th Greece election will be key for further direction. In Greece, if Syergia party wins and Alex Tspiras rejects this ECB's QE then this entire drama will be worthless as there may not be any aggressive buying by the NCBs. And bottom line is, as Draghi says, as long as inflation is under 2%, this QE will continue or even more QE also can be expected. But the question is - if tomorrow Oil rises and inflation shoots up, what will ECB do? After all, with this move by ECB, bullion may outperform any other asset class in near future. If Greece election outcome comes and Alex wins then Bullion can even test $1395.

[vinay28]

Author unknown

Chance for a market decline?

The week gone by was a good one for the Indian stock markets. The BSE-Sensex gained by over 4% in the past seven days. Market sentiments were already buoyed with the RBI beginning its interest rate cut cycle; to add to that, Mr. Draghi's gift to the world (emerging markets especially) came in as a bonus.

The Sensex continues to make history as the days go by. And in the process Indian stocks are becoming more and more expensive as the earnings growth is not moving in tandem with the rise in prices.

As per the BSE website, the Sensex PE currently is a shade below the 20X figure (based on its trailing twelve month earnings). With this, the Indian markets seem to be entering the frothy stage now. We say this because over last two decades, there have been about 4,950 trading days, of which market traded above the 20x mark about one-fourth of the time.

Further, if we remove the 10% extremes during this period, this stat comes down to a little less than 20%. The chart below gives an indication of the same.

Indian stocks entering the frothy zone?

While Indian stocks may not yet be in the 'overvalued' territory (as markets have moved up as high as 22x to 23x), it would not be wrong in saying we are on the border line.

No doubt there are a host of factors pointing towards the achche din continuing from here on. Some of which include:

The very high foreign investor interest. 'Never has India been so loved by global investors' read the title of an article published by the Mint recently. An excerpt from the article - 'The Bank of America-Merrill Lynch (BofA-ML) survey of global fund managers for January shows that exposure to India is around four standard deviations above the historical mean among global emerging market investors.

- A bigger pipe of cheap money has opened up - ECB stimulus

- Crude prices are favourable

- Inflation is seemingly under control leading to lower interest rates expected going forward

- A bounce back in earnings cycle.

The year-end target for the Sensex is about 14% higher from current levels, as predicted by some major foreign brokerage houses. At the same time, there are reports as to the high probability of the Sensex's EPS consensus being lowered for the current year, given the results for the quarter ended December 2014 not having met expectations due to various factors - domestic and global.

Identifying the rationale for market declines may be easier in hindsight; but when we are amidst bullish phase, there are always reasons one finds as to why things may be different this time around. This has happened in the past, and will definitely continue to happen in the future as well.

The fact that Indian markets are amongst the most expensive global market in the world, coupled with the messy situation across the world, things are bound to take a turn for the worse as and when the tide turns.

Numerous studies have shown that there is an inverse relationship between long term returns and valuations of the broader market. In times such as the present, playing the probability game would be a good approach.

Yes, while the Indian economy may be more insulated from the global economy, and the long term story does remain intact, all of the above mentioned points (plus many more) do indicate that a considerable amount of the upside is already priced in. We believe it would not be a bad idea for one to reassess his portfolio and keep some cash aside to take advantage of any market declines that may occur in the coming future.

[NFTrader]

The original article is "An 80% chance for a market decline" and lifted from equitymaster.

[vinay28]

[ragarwal]

NRTrader,btw does it really matter whose article it is as the main objective here for everyone is to gain knowledge and profit from it irrespective of who it originally belongs to.Thanks Vinay for the article and hope that everyone benefits from it,
warm regards,no offenses please!

[vinay28]

[rk_a2003]

An indicative future prediction making rounds in virtual world.

SENSEX Journey

1978- 100

1988- 600

1998- 3600

2008- 21600

2018- ??????

[NFTrader]