This guy in interesting!!!

https://www.youtube.com/watch?v=Vttj7ZKHhKY&feature=youtu.be&app=desktop

Nifty

Sell Nifty @ 8650

Stoploss 8700

Nifty........................

MASSIVE FALL OF 200 POINTS IN NIFTY !!!!!

Our Selling figure touched in the morning...


Hope you Shorted in the morning!!!!!!

Why Hedge Funds Remain The Worst Performing Asset Class Of 2016

it's been a bad year for hedge funds as a result of significantly underperforming the market, coupled with the biggest wave of redemptions since the financial crisis. Unfortunately, according to the latest Goldman data, there is no reprieve in sight. As the following chart from David Kostin shows, both global macro hedge funds and equity long short funds are the worst performing assets YTD on both a total return and risk-adjusted basis.

There are two main reasons why hedge funds continue to underperform: on one hand correlations across various sectors have soared to the highest levels in the past three years, leading to a plunge in return dispersion making "stock-picking" virtually impossible...

... while on the other hand, the most popular hedge fund short positions have soared in recent months, crushing short books and more than offsetting the modest rebound in the "hedge fund VIP" basket of most popular positions.

And while hedge funds have continued to underperform, several outright sectors continue to dramatically outperform the S&P, most notably IT, followed by Consumer Staples, Telecom and Utilities, even if the latter three have seen some modest weakness in recent months as a result of the pick up in yields.

... leading to the following most recent return by sector, where despite the recent surge in IT, Utilities still have the YTD lead, followed closely by Telecom and Energy.

Shifting away from sectors, and focusing only on valuation factors, we find that size (in this case small is better), high margins and low dividend yield have become increasingly expensive, while on the other end, low momentum, low margins and high volatility are now the cheapest inputs into quant models.

Shifting back out, we then look at the overall market where we find the valuations on both an absolute and relative basis remain especially rich, with the S&P trading at a 17.3x forward PE, and while financials and telecom remain cheap, at 12.6x and 13.9x fwd PE respectively, they are more than offset by the lunacy in Energy stocks which trade at over 43x, while consumer staples is the second richest sector currently.

Finally, putting it all together shows that mutual fund outflows continue, with some $127 billion withdrawn from equity mutual funds, and even ETFs now negative YTD; both of these are more than offset by the $110 billion in inflows in bond mutual funds and ETFs, while as a result of the upcoming change to money market fund regulation, those particular funds keep bleeding cash, having lost some $124 billion YTD. Also worth noting, a marketwide short squeeze as a drive of upside is no longer a key concern as a result of the S&P's median short interest as a % of market cap sliding to 2.4%: the lowest since last summer.

Nifty

Sell nifty @ 8780

Stoploss 8830

China's role in the India Pakistan conflict

http://kiranasis.blogspot.in/2 016/09/if-india-has-to-hit-ter ror-factories-in.html?m=1

The blog post raises some crucial points which we should all be aware of.

Nifty

Sell nifty 8750-8780

Stoploss 8820

Could Germany Ever Allow Deutsche Bank To Go Under?

Deutsche Bank, one of Europe’s behemoths, is in very deep trouble having lost 90% 0f its share price value since 2007, has been falling sharply all this last year (48% loss this year) and, with its $42 Trillion in Derivatives exposure was singled out by the IMF, as the bank which ,

“appears to be the most important net contributor to systemic risks…”

Of course Deutsche agues the standard ‘derivatives-aren’t-a-problem’ line, that this 42 trillion all nets out and their real exposure is a fraction of that vast figure. Which is fine as long as you think that in the event of Deutsche coming unstuck, 42 trillions-worth of derivatives contracts can be held in abeyance for the time it would take for all those contracts to be netted out.  As I’ve said before netting out is akin to getting a rowing boat full of people to all change places  without the boat overturning.

And now Deutsche has been threatened by the US DoJ with a $14 billion fine for its crimes for selling knowingly over-valued RMBS (Residential Mortgage Backed Securities) in the build up to the financial crash of 2007.

Deutsche cannot pay $14 billion without raising a great deal of cash. Deutsche has put aside $5.5 billion for paying fines. A mere 9 billion short. So could Deutsche go down? Financially yes it could. But politically, I doubt it. And it’s the tension between these two answers, between the parlous financial state and the huge political significance of Deutsche, that I find interesting.

Deutsche is Germany’s only G-SIB (Global Systemically Important Bank).

Deutsche is Germany’s financial flag carrier. It stands at the centre of Germany’s long held desire to have Frankfurt eclipse London as Europe’s financial centre. Although Germany also has Allianz as a G-SII (Global systemically Important Insurer), without Deutsche Bank Germany ceases to be a globally significant financial nation (G-SFN – OK I made that one up). Without Deutsche Germany would not sit at the top table of global finance. France would. France has three G-SIBs. The balance between France and Germany within Europe would shift. Maintaining that balance between France and Germany, at the heart of Europe, has been critical in European affairs since WWI.

Could Germany ever allow Deutsche Bank to go under?

Officially the global framework for G-SIFI resolution in bankruptcy has been laid down by the FSB and agreed by all. And interestingly, though they are touted as the result of new thinking since the financial crisis, they are not. I recently received an EU document marked ‘Secret’, entitled  “Overview of Financial Stability Resolution Issues” and dated Feb 2008 which describes pretty much what the FSB has now settled upon now. I mention this because almost every word in it was completely ignored once the crisis hit and each country viewed the imminent demise of their major, flag-carrying banks. Which leads me to wonder why I should believe it would be any different next time? I think this question is particularly critical to Germany because Deutsche is its only G-SIB. In the next massive implosion of debts, France could afford to let one of its G-SIBs go down and still have two seats at the top table. England could do the same.

How will G-SIBs  be wound down?

The not-so-new rules for how a G-SIB should be wound down begin by stating that,

Resolution should be initiated when a firm is no longer viable or likely to be no longer viable, and has no reasonable prospect of becoming so.

But no one has wanted to state exactly what the trigger is, for deciding that a bank is no longer viable. Except to say the global regulators will leave it to national regulatory authorities to decide. So Germany will decide when Deutsche is no longer viable. Sure, that’ll be grand.

Should an authority take the fatal stop of admitting one of their G-SIBs is no longer viable then things are supposed to move with wonderful efficiency. Resolution of netting out is to be speedily concluded (in as little as two days!) No sniggering please. And then as the gruesome business of sorting the living from the dead parts of the bank gets going  the authorities must definitely NOT rely

…on public solvency support and not create an expectation that such support will be available;

Instead the dead parts will inflict losses first on share holders and then on bond holders in the time honoured order of unsecured first. And then those parts which are not completely dead and might be cut away to live again in a different body, are to be sold off by means of sale or merger.

1.       As a last resort and for the overarching purpose of maintaining financial stability, some countries may decide to have a power to place the firm under temporary public ownership and control in order to continue critical operations, while seeking to arrange a permanent solution such as a sale or merger with a commercial private sector purchaser.

So public bail outs are supposed to be strictly temporary. No holding 80% of RBS for most of a decade. Really? But that’s not the point which is important for Deutsche Bank. The important point is that in any sale of the viable parts of Germany’s only G-SIB, the brutal fact of the matter is that there is no other German financial institution that could afford to buy any of it. Commerzbank? Allianz? Letting an insurer buy a bank? So imagine the situation for Germany. They lose their seat at the top table and then they watch as France, England, American or perhaps China buy the crown of German financial might.

So I don’t think it will ever happen.  Or at least it will only happen when Germany is truly out of any other options.

So if Deutsche is not going to be declared “no longer viable” what are the alternatives?

One option is the UniCredit route. UniCredit was a trillion euro bank. It was Italy’s flag carrier. It had bought Bavaria’s banks and some of Austria’s as well. And yet it’s share price was always   paltry.  Just 7.6 Euros at the market top in May ’07.  And since then it has been a hollow and enfeebled giant. Lumbering and ineffectual. It has been the laughing stock of European banks. But Italy doesn’t seem to mind. They seem content to let UniCredit be the quintessential Zombie bank. Would Germany be as sanguine to leave Deutsche to go the same way?  This would, I suggest, be almost  as injurious to German pride and industrial policy as letting Deutsche go down completely.

But if Germany decided it could not face the financial consequences of obeying the letter of the resolution law nor leave the bank to be a bloated and useless zombie then the alternatives bring in their train even greater political upheavals.  Imagine the German government decides that not bailing out Deutsche just inflicts too much damage on Germany – potentially reducing Germany from the front rank of globally significant nations to  something lesser. It becomes a matter of national pride if not of survival.

So Germany ignores all the FSB rules and regulations and bails Deutsche bringing it into government ownership/protection –  call it what you like. In so doing it demolishes the entirety of European policy regarding bail outs, government debts and austerity. Where then all the German insistence on fiscal discipline it has forced upon Greece, Ireland, Portugal, Spain and Italy? The Bundesbank, Berlin and the ECB would have no authority at all. Every country would have a green light to do the same for their flag carriers.

It would be the end the European experiment. Or the European system would have to try to continue without Germany. And that could only happen if all debts to Germany were repudiated.

I realise all this is speculation. But Deutsche has lost 90% of its value. Only RBS has lost more.  Deutsche has 7000 legal cases against it. Frau Merkel is losing her grip, Brexit rocked the complacent rulers of Euroland and  Madame Marine Le Pen would like to push France to do the same.

And on top of it all NOTHING has been fixed financially at all. There is more debt more leverage, more and more liquidity achieving less and less, interest rates are negative, pensions  are going nowhere, insurers are grasping for risk even as they fear what it will do to them when the next crisis hits and governments are all, every one of them, preparing their armed forces for widespread civil unrest.

Nifty

Sell nifty @ 8785-8810
Stoploss 8850

Tale of Two Economies: Industrial vs. Consumer

Good or Bad Economy?

Is the economy strong or weak? The safe answer is – both. GDP and median income growth have remained weak, but employment and consumer spending are healthy. Manufacturing and construction hiring and wage gains have been anemic while leisure, healthcare, and business services have been energized.

Since the real estate crash bottomed in 2008 we have witnessed a below average growth cycle when combing weak industrial infrastructure with strong consumer-oriented production comprising our GDP. Historic declines in interest rates and debt service costs have sponsored a consumer spending cycle that after 7 years has returned most metrics of consumption back to previous peaks.

The Good

The good news is the slow and steady economic growth backed by about $12 trillion in global central bank asset purchases (printing money) has encouraged consumers to return to restaurants and bars and travel at very robust levels.

Car sales led by pickup trucks and SUVs have led the consumption wave. Per capita car and truck sales are well below their former peak, but nominal sales are still near prior peaks and growing at record rates. While it makes sense that this 7-year auto consumption boom has likely plateaued, the slack in the economy leaves room for another leg up should the global recovery finally reach normal rates of growth. Our Federal Reserve is keenly aware it can’t allow a recession to occur in the US, so an extended easy credit consumer spending wave may continue.

Capital investment in transportation manufacturing is leading the durable goods growth cycle.

Global air travel led by China, US and India passenger volumes has also supported a lofty transport industry. More air travel has spurred massive passenger plane investments adding to a high-octane transportation sector. The future here should remain elevated as air travel is expected to double over the next 20 years led by much faster passenger growth rates in China, US and India.

When we isolate “consumer” oriented capital investment it becomes clear that manufacturing geared to the consumer has been expanding at rapid rates similar to the 90s up until 2003. Another 5 years of growth to match the last up cycle may be needed to bring our economy to healthy GDP growth rates and over-heating.

The Bad

An industry we are personally connected to has a very different perspective than the optimistic charts above. Even in nominal dollars there has been almost no growth over the past 17 years in machines used for metal fabrication by US companies. The contraction since 2012 after a post-2008 dead cat bounce recovery highlights the constriction in basic industrial companies budgeting for capital expenditures. The sharp 4% decline in durable goods orders reported today will maintain the cloud of pessimism pervading our general industrial economy and machine tools in particular.

It has been decades since machine tool orders have been this persistently bleak. The strong bounce from depression-level orders in 2010-2011 merely brought the industry back from the brink only to be dashed again since 2012 as metals and then oil prices collapsed. 2016 may mark almost 5 years of sharp contraction in this barometer of industrial health. A US or global recession at this vulnerable juncture would be devastating. If oil falls beneath $26 and copper under $1.93, watch out for a GDP recession, deflation of stock market earnings and massive efforts by central banks to buy even more assets. For now, we continue to expect a modest expansion cycle to continue and edge machine tool orders back to a very modest growth on trailing 12-month comparisons.

Historically, almost all US expansion cycles lead to consumption growth that usurps 80 to 90% of manufacturers' capacity causing a rise in capital expenditures and factory expansion. We might have to compare with previous “recessions” to find the equivalent weakness in total industrial manufacturing utilization rates. Without above trend demand growth, we should expect capacity to shrink until utilization rates finally rise closer to 80%. A further decline under 75% would likely signify a quarter or 2 of GDP contraction despite a buoyant consumer services sector.

Energy and mining have been major culprits depressing overall industrial production and capacity usage despite strong consumer durable spending. Perhaps the good news here is that oil and metal prices have had a bounce after the headwinds of almost zero new orders were reached in the 1st quarter. Coal has been destroyed politically (look for a bounce here should the GOP win), oil fracking has been derailed economically and mining is still struggling to put its bottom in the rear view mirror.

Machines servicing the agricultural economy have also added insult to injury with sharp oversupply contractions coinciding with the collapse of oil and crop prices since 2014. Weather and supply will eventually conspire to send crop prices back up and deliver new order growth. Will La Nina elevate crop prices in 2017-2018? Cycles would favor a 2016 base with a major up cycle peak due by the end of the decade.

When looking at “all” machinery orders it still indicates a modest recession in the basic industrial sector of our economy since 2014. Manufacturers have responded with massive cost cutting, outsourcing, inventory and head count shrinkage that began in 2008. Cost cutting has reached levels in 2016 that will lead to bankruptcy, selling assets and permanently eliminating capacity unless the current headwinds become tailwinds. If oil, copper and crop prices begin a new leg above their 2015 highs, then new industrial durable goods orders would finally break sharply upwards along with above trend GDP growth >3%.

When grading this economic recovery since 2009, the consumer surveys would give it an average rating at its peak while small businesses would say we are still teetering on the cusp of a recession. Once we see the Michigan consumer sentiment and small business optimism levels return to 100+, then we can declare that a full recovery has arrived. For the next year we only see a 2%+ GDP supporting improved margins, but lackluster revenue growth. For a leading indicator, we continue to encourage watching price trends in basic commodities such as oil and copper until global growth is on more solid footing.

Growth, Value, and Dividend Aristocrats.

There are numerous reasons to be optimistic about global equities in the coming year. Capital is plentiful; central banks in Europe, the United Kingdom, and some Asian economies have an easing bias; and the equity strategists on Credit Suisse’s Global Markets team believe the equity risk premium is higher than warranted. But there are risks, too, including heightened political risk, slowing Chinese growth, and threats to existing business models from technological disruption and Chinese over investment. The net result: the Bank’s Global Markets strategists maintain only a benchmark weighting on global equities.   

But not all equities are created equal. Heading into the final four months of 2016, the Bank’s strategists have identified three investment styles that they believe offer the best opportunities within the asset class. For those looking for stocks that will perform well in either a bull market or a bear market, there are high-quality growth stocks. Value investors can look to “exceptionally cheap” high-beta stocks, while income investors should take a look at those reliable dividend-payers that Credit Suisse calls “dividend aristocrats.”   

Quality Growth Stocks   

European growth stocks have outperformed the market by 1 percent so far in 2016, while U.S. growth stocks underperformed by the same amount. In both regions, however, quality growth stocks—defined as those with the highest 12-month trailing return on equity, lowest debt-to-equity ratios, and steadiest earnings per share and cash flow return on investment growth over the last five years—outperformed their peers.   

Growth stocks tend to outperform in late-cycle bull markets. That was true in Japan in the 1980s and the U.S. tech boom in the late 1990s, and Credit Suisse believes it will be true in this cycle, too. Current growth stock valuations remain well below the heights attained in those periods, and, on a 12-month trailing price-to-earnings basis, both European and U.S. growth stocks are trading well below their 20-year average relative to value stocks. Credit Suisse’s strategists point out that companies achieving steady, significant organic growth are particularly attractive for investors at a time when nominal global GDP growth is falling, pricing is under pressure both from over investment in China and disruptive technology, including the sharing economy, and rising wages are putting pressure on U.S. profit margins.   The strategists also believe the discount rate, or cost of equity, is due to decline in both Europe and the United States. When that happens, long-duration assets tend to re-rate and growth stocks tend to outperform. Among high-quality growth stocks, the Global Markets team recommends a close look at mobile Internet plays—one of the most enduring growth stories of the last decade, and one with plenty of room to run.

High-quality Beta Stocks   

Bargain hunters can find value in high-beta stocks, which are more volatile than the overall market. The relative performance of high-volatility to low-volatility stocks has not been much different than the performance of the overall market in 2016, but high-beta stocks are among the least expensive under Credit Suisse coverage. The Bank’s Global Markets strategists call European high-beta stocks “exceptionally cheap” on a 12-month forward price-to-earnings basis, while those in the U.S. are only slightly more expensive. Credit Suisse recommends that investors focus on stocks that have delivered strong and steady growth in cash flow return on investment for the last five years. 

The Global Markets strategists have long recommended that investors favor companies that have maintained their dividends for the last 10 years—the so-called dividend aristocrats. Since 1900, dividend reinvestment has accounted for 67 percent of total returns in the United States and 85 percent in the United Kingdom. Lately, too, the returns from dividend investing have outperformed strategies that focus on companies that choose to return cash to shareholders via stock buybacks. What’s more, the steadiness of dividend payments has been a more important factor in recent performance than the size of the yield, with dividend aristocrats outperforming high-yield stocks since the financial crisis.   

The Bank prefers European dividend aristocrats to those in the U.S., noting that U.S. valuations are less attractive and the Fed may soon raise interest rates, while the European Central Bank and Bank of England are still buying bonds to keep rates low. When interest rates rise, all fixed-income products are vulnerable to a haircut, though not all haircuts are the same length. Over the past 20 years, dividend aristocrats only under performed by 1 percent when yields rose 1.17 percent—the median increase—and any increase in U.S. yields is likely to be much smaller than that. Still, tilting exposure toward Europe cannot hurt.

Nifty

Buy nifty @ 8850-8830

Stoploss 8805

S&P 500 Gets Its First New Sector Since the Dot-Com Era

REITs are being broken out from the finance sector. While that makes some intuitive sense, S&P track record on creating new sectors has been noteworthy for its timing.

Here is the Wall Street Journal:

“Real-estate investment trusts own real estate and pay steady dividends, which have been attractive to investors with interest rates so low. More than a net $62 billion had flowed into U.S. real-estate funds since 2001 through the end of 2015, according to Morningstar Inc. data.

The number of publicly traded REITs has also risen. Since 2001, 129 real-estate investment trusts have gone public in the U.S., raising more than $38 billion, according to Dealogic. There are roughly 240 REITs listed on the New York Stock Exchange and the Nasdaq, according to S&P Dow Jones Indices.”

However, REITs have been huge winners, especially in the ETF space. Again, this is a sector that has already had a great run:

 Real Estate Gets Starring Role in S&P 500, Spurring ETF Overhaul 

  

S&P 500 Gets Its First New Sector Since the Dot-Com Era

Nifty

Buy Nifty on dip

When You Change the World and No One Notices

Do you know what’s happening in this picture? Literally one of the most important events in human history.

But here’s the most amazing part of the story: Hardly anyone paid attention at the time.

Wilbur and Orville Wright conquered flight on December 17th, 1903. Few inventions were as transformational over the next century. It took four days to travel from New York to Los Angeles in 1900, by train. By the 1930s it could be done in 17 hours, by air. By 1950, six hours.

Unlike, say, mapping the genome, a lay person could instantly grasp the marvel of human flight. A guy sat in a box and turned into a bird.

But days, months, even years after the Wright’s first flight, hardly anyone noticed.

Here’s the front page of The New York Times the day after the first flight. Not a word about the Wrights:

Two days after. Again, nothing:

Three days later, when the Wrights were on their fourth flight, one of which lasted nearly a minute. Nothing:

This goes on. Four days. Five days, six days, six weeks, six months … no mention of the men who conquered the sky for the first time in human history.

The Library of Congress, where I found these papers, reveals two amazing details. One, the first passing mention of the Wrights in The New York Times came in 1906, three years after their first flight. Two, in 1904, the Times asked a hot-air-balloon tycoon whether humans may fly someday. He answered:

That was a year after the Wright’s first flight.

In his 1952 book on American history, Frederick Lewis Allen wrote:

Several years went by before the public grasped what the Wrights were doing; people were so convinced that flying was impossible that most of those who saw them flying about Dayton [Ohio] in 1905 decided that what they had seen must be some trick without significance – somewhat as most people today would regard a demonstration of, say, telepathy. It was not until May, 1908 – nearly four and a half years after the Wright’s first flight – that experienced reporters were sent to observe what they were doing, experienced editors gave full credence to these reporters’ excited dispatches, and the world at last woke up to the fact that human flight had been successfully accomplished.

The Wrights’ story shows something more common than we realize: There’s often a big gap between changing the world and convincing people that you changed the world.

Jeff Bezos once said:

Invention requires a long-term willingness to be misunderstood. You do something that you genuinely believe in, that you have conviction about, but for a long period of time, well-meaning people may criticize that effort … if you really have conviction that they’re not right, you need to have that long-term willingness to be misunderstood. It’s a key part of invention.

It’s such an important message. Things that are instantly adored are usually just slight variations over existing products. We love them because they’re familiar. The most innovative products – the ones that truly change the world – are almost never understood at first, even by really smart people.

It happened with the telephone. Alexander Graham Bell tried to sell his invention to Western Union, which quickly replied:

This `telephone' has too many shortcomings to be seriously considered as a practical form of communication. The device is inherently of no value to us. What use could this company make of an electrical toy?

It happened with the car. Twenty years before Henry Ford convinced the world he was onto something, Congress published a memo, warning:

Horseless carriages propelled by gasoline might attain speeds of 14 or even 20 miles per hour. The menace to our people of vehicles of this type hurtling through our streets and along our roads and poisoning the atmosphere would call for prompt legislative action. The cost of producing gasoline is far beyond the financial capacity of private industry… In addition the development of this new power may displace the use of horses, which would wreck our agriculture.

It happened with the index fund – easily the most important financial innovation of the last half-century. John Bogle launched the first index fund in 1975. No one paid much attention to for next two decades. It started to gain popularity, an inch at a time, in the 1990s. Then, three decades after inception, the idea spread like wildfire.

It’s happening now, too. 3D printing has taken off over the last five years. But it’s hardly a new invention. Check out this interview with the CEO of 3D Systems in … 1989. 3D printing, like so many innovations, had a multi-decade lag between invention and adoption. Solar is similar. Photovoltaics were discovered in 1876. They were commercially available by the 1950s, and Jimmy Carter put solar panels on the White House in the 1970s. But they didn’t take off – really take off – until the late 2000s.

Big breakthroughs typically follow a seven-step path:

• First, no one’s heard of you.
• Then they’ve heard of you but think you’re nuts.
• Then they understand your product, but think it has no opportunity.
• Then they view your product as a toy.
• Then they see it as an amazing toy.
• Then they start using it.
• Then they couldn’t imagine life without it.

This process can take decades. It rarely takes less than several years.

Three points arise from this.

It takes a brilliance to change the world. It takes something else entirely to wait patiently for people to notice. “Zen-like patience” isn’t a typical trait associated with entrepreneurs. But it’s often required, especially for the most transformative products.

When innovation is measured generationally, results shouldn’t be measured quarterly. History is the true story of how long, messy, and chaotic change can be. The stock market is the hilarious story of millions of people expecting current companies to perform quickly, orderly, and cleanly. The gap between reality and expectations explains untold frustration.

Invention is only the first step of innovation. Stanford professor Paul Saffo put it this way:

It takes 30 years for a new idea to seep into the culture. Technology does not drive change. It is our collective response to the options and opportunities presented by technology that drives change.