Warren Buffett' Views on Gold: "Gold Speculative Instrument"

Many people always wanted to know about the legendary world investors or investment saint, as he is also known, Warren Buffett’s views on gold.

Warren Buffet on gold: Recently Warren Buffett has given some controversial views on gold. Buffett, in his latest remarks, has said gold is inferior to stocks and bonds and more of a speculative item than investment instrument.

In his annual letter to Berkshire Hathaway shareholders, published Feb. 25, Buffett states:

“Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce — gold’s price as I write this — its value would be about $9.6 trillion. Call this cube pile A.

MAKE YOUR INVESTMENT COST ZERO: Practical Lesson for Investing

Making Investment Cost Zero.

This is interesting. You may think that how it is possible to make investment cost zero. This can be done in reality. When the markets are bottoming out and rising to mark the beginning of the run up, the stock prices rise 20% to more than 120% in few weeks and months time period. This is basically because the stock prices are already ruling at multi months and in many cases multi year lows. The stocks which were in triple digits are now available in double of even single digits! These stocks and even the better ones out of this lot attract a lot of investment and trading attraction.

So the prices rise in a manner as told earlier in this paragraph. Now, when you are entering in markets at an early stage of the price rise cycle,
You get the stocks at good price. Suppose you invested Rs.1 lakh in 10,000 Lanco Infratech shares at Rs.10 and it rose to 20 rapidly then you can offload 50% i.e 5,000 shares and thus get back your original investment amount. So now the rest of 5,000 shares that you hold are absolutely cost less as your original investment capital is out of them. Now whatever monetary benefit as to bonus shares, dividends, or price rise you get is absolutely free is can be measures as ‘infinite return’ on investment, as your investment is practically ‘zero’ in it!

Another way your cost of investment can be zero is to hold blue chip investment for a longer duration. For
e.g. those who are holding reliance industries or grasim or even hind unilever for that matter, for more than 10 years now are indeed holding it for free. Because the price appreciation, dividends and bonus shares etc. in aggregate have given them more than their investment amount.
So, the conclusion is that the advice to pull out sum of initial investment capital after rise in share price can be a general advice to retail and fearful investors.  While the cost of investment long term investment in large cap, blue chips, and value investing stocks automatically becomes zero over the longer term if invested at good valuations.

This concept can be explained in some more ways. Any ways, this concept is one of the very essential practicals that an investor should be aware of.

World Steel Production up 6.8% in 2011

World steel production rose 6.8% last year to a record 1.53 billion tonnes, the World Steel Association said, .
Growth was 8.9% in China, 7.1% in the US, 1 per cent in Germany, 5.7%, in India and 17 per cent in Turkey, the Brussels=based group said in a report on its website on Monday. While, Japan 's steel production fell 1.8%.

UK unemployment rate rises to 16 year high

               The economically troubled UK's unemployment rate has rise in November at 8.4% as per Office of National Statistics figures, which was highest since January 1996. The unemployment rate is calculated based on International Labour Organisation methods. 

This Stock will double in about 12 months

Do you see the chart below?
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Dow Jones analysis:New high possible in next 2-4 years

Dow Jones analysis:New high possible in next 2-4 years

The Dow Jones index made recent bottom of 6470.11 on 6 march 2009 on the back of Subprime housing crisis and Lehman brothers bankruptcy.

The level it made on 2 may 20011, 12807.36 must cross to blast above to touch and cross life time high of 1 oct 2007, 14198.10 lifetime high.

It has crossed 12724.41 made on 21 july 2011, on on jan 23, 2012 and made high of 12764.41, but failed to close above the 12724.41 level and closed at 12709.20.

So now Dow jones has to cross and close above first 12724.41 and then 12807.36 made on 2 may 2011, a daily close above this will confirm dow Jones up move upto 13412 and weekly close will likely confirm the breach of the all time high made on 1 oct 2007 14198.10 and rise above it.

Is 5800 possible in H2 FY12?

Market Trend

Nifty has given a better than expected start in 2012 since investors focus has shifted from gloomy scenario of sovereign euro debt crisis to positive economic data of US economy. Nifty has given a spectacular performance, rallied from the low of 4588 to the high of 4899 in just 10 trading sessions!! My view on short term trend is bullish where markets can make a high of 5050-5100, with 5100 being the key resistance area. But the hindrance to the market rally could be weak quarterly earnings, depreciating rupee and any important news relating to Euro debt crisis. However S&P downgrade of 8 Eurozone countries (Thank god Germany was spared) will lead to consolidation of Nifty in next two or three sessions.

Investment classified into 4 on the basis of duration of investment

Now no confusion on what is short term investment and what is medium term and long term!

Read our unique classification of investment based on duration or period of investment.

Plan your investing activity based on our unique classification of investment based on duration of investment.

THE CONCEPT OF SHORT TERM, MEDIUM TERM, LONG TERM AND LONGER TERM INVESTMENTS:

Many (most in fact) investors are confused about equity investments. Main reason being the volatility of markets and the investor’s inability to manage his emotional response to it.           

Other than psychological/behavioral aspects, the investor is also devoid of basic understanding as simple and as basic as ‘what is asset allocation?’ and “what should be called long-term investing and what not?”

Here in this article we have clearly explained the classification of equity investments on the basis of duration of investment. The classification mainly include the

NIFTY SPOT TECHNICAL CHART

(Click on the chart for bigger view)

Nifty spot closed at 4713 with heavy profit booking and all short term long positions winding up as short Christmas vacation is coming up. As indicated a chart of nifty daily from mid 2009, we can see volatility of nifty index. In 2011,

Excerpts of Letter of Warren Buffett to Shareholders, year 1978

Excerpts from Warren Buffett’s Letter to Shareholders for year 1978

....We make no attempt to predict how security markets  will behave; successfully forecasting short term stock price movements is something we think neither we nor anyone else can do.  In the longer run, however, we feel that many of our major

equity holdings are going to be worth considerably more money

than we paid…

…Slow capital turnover, coupled with low profit margins on sales, inevitably produces inadequate returns on capital

Excerpts of Letter of Warren Buffett to Shareholders, year 1977

Excerpts/Key Learnings from Warren Buffett’s Letter to Shareholders for year 1977:

The excerpts are taken from the letter and not changed with words or sentences. References are given as and wherever necessary.

…After all, even a totally dormant savings account will produce steadily rising interest earnings each year because of compounding.

     …Except for special cases (for example, companies with unusual debt-equity ratios or those with important assets carried at unrealistic balance sheet values), we believe a more appropriate measure of managerial economic performance to be return on equity capital.

     …The textile business again had a very poor year in 1977.  We have mistakenly predicted better results in each of the last two years.  This may say something about our forecasting abilities, the nature of the textile industry, or both.

Fake Exports Scam?: Black Money coming back to India by exports-over-invoicing with help of government

In a report dated 10 Oct 2011, Sanjeev Prasad, Sunita Baldawa and Amit Kumar of Kotak, unearthed the possible export-scam amounting to even more than combined 2G, mines and all other scams.

The report said that in between 2008-09 and 2010-11, exports to the Bahamas jumped to $2.2 billion from $2.2 million. Yet, India’s share in Bahamas’ imports, which totalled $2.8 billion in 2010, is a relatively minor 7.5 percent. Thus, this 1000 fold in 2 yrs is no-doubt an issue which demands criminal investigation.

According to UNCTAD —The global trade and investments monitoring agency of UN— says, the number in no way matches the data on the Bahamas’ global imports, which, was $2.8 billion in 2010. There are more reasons to smell scam in these figures. The 29-island Bahamas have an economy not larger than $8 billion and a population of only 3,50,000.

These and other skyrocketing increase in ‘copper articles’ exports points that some black money might have been repatriated back to the country via ‘over-invoiced’ exports (done by billing high fake amounts for overseas transactions with fake buyers or shell companies) given that international scrutiny is increasing over unaccounted funds in Swiss bank accounts and other financial centres.

It is clear that how India could continue achieving blistering rates of growth in exports (almost more than 50 percent each month) when the US and Europe, two top export destinations, are clearly in major financial trouble.

Indians’ per capita income rises 2.5 times in a decade

From year 2001-02’s Rs.18450, the per capita income of average investor risen to Rs.54000 in 2010-11. The per capital income calculated at current prices registered an annual average growth rate of about 12.80% during this time period.

NIFTY SPOT TREND LINE CHART

NIFTY SPOT INDEX: (click on the chart for larger view)

The NSE Nifty spot closed at 5050 up by 2.29% on weekend. Nifty spot

stood above 21 and 34 day EMA but didn't cross 100 and 200 day EMA which

doesn't show buying opportunity. Short term long position takers should be

cautious for next week, because of having some negative diversion in stochastic

on daily basis. There are various resistances like 5089/5129/5163 with supports

like 5005/4981/4939.

----04/12/2011

BSE Derivatives Segment records largest ever turnover: Sensex futures shine

It looks like the incentive scheme is ultimately working at least as of now. Last week on 3rd Novembar 2011, the derivatives segment of BSE recorded largest ever turnover of 759.24 crore (about 1520 crore both sides).

The sensex futures turnover was Rs.625 crore, highest ever since launch of the vastly tracked Indian index.

Total 128 members put trades in derivatives segment. It is noticeable that since last few days, the turnover of BSE derivatives segment has been rising 50-75 crores rupees everyday.

Whiile on the other side the derivatives market leader NSE is way too up. It records average of atleast 1.20 lakh crore volume daily.

USEFUL LINKS:
Sensex futures live quotes link-
http://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=1&app=0&id=998193 
BSE Derivatives market watch link- http://www.bseindia.com/deri/HotLinks/Derimarketwatch.aspx?L=2&id=hd0&Lid=0

Daily Market Wrap

On the last day of trading this week, the markets closed with moderate gains today and barring oil & gas, all sectoral indices closed positive. The CNX Midcap index was up 0.9% and the BSE Smallcap index gained 0.3%. The market breadth was positive with advances at 817 against declines of 606 on the NSE. Metals was top rising sector today. Other sectors with substantial gains included capital goods and banking and oil & gas was the only sector that closed negative. The Sensex closed at 17563, up 81 points from its previous close, and the Nifty shut shop at 5284, up 18 points. The CNX Midcap index closed with 1% gain while the BSE Smallcap index gained 0.4% in today's trade. The market breadth was positive with advances at 818 against declines of 612 on the NSE. The top Nifty gainers were Ambuja Cements, Hero MotoCorp, Hindalco and Cairn, havells, sun tv, gsk, voltas, shree cement, lanco infra while the biggest losers included Ranbaxy, Tata Power, Reliance Infra, jain irrigation, motherson sumi, crisil and Dr Reddy's. 

The market had a gap up opening on the back of positive cues from the US markets. The mood was somewhat relaxed as Greece dropped the idea of a referendum on bailout package and European Central Bank unexpectedly lowered interest rates to 0.25% at 1.25%. After touching the intraday high the market witnessed some profit booking which result in Sensex slipping down briefly into negative terrotory . Reliance witnessed cut of around 1% during the afternoon session even as few FMCG and auto stocks too slipped under pressure. Positive openings in European market enabled the market to bounce back from the lows and end the day on a positive note. Midcap and small cap stocks outperformed the front liners. 

Daily Market Wrap

Today markets witnessed a volatile day comprising movements of both up and downs where market risen into green then again falling back before ultimately giving close in the green. The BSE-30 Sensex index and NSE-50 Nifty index closed day green about 0.10% gain at 17484.93 and 5265.75 respectively, while the nifty future (largest trading instrument after nifty options) closed day with 0.56% at 5309.90 showing a huge premium of

44.15, indicating increased and sustained bullish undertone in the futures contract.

Nifty future was trading in tight range after it made fresh low of 5,221.15 around 1 pm in the noon. however then onwards nf traded about 5240-50 till ultimately started rising in the last 1 hour of the trade after 02.30 pm. 

Amongst the indices realty, power, oil and gas, and capital goods stock outperformed most other sectors. There was mixed trading in banking stocks. BSE Smallcap index closed flat while Midcap index closed with half percetage gain. The market breadth (advance-decline ratio) remained negative with 752 stocks declining against 653 stocks rising.  

Amongst the frontline gainerss Reliance infra, Acc, Dlf, Bhel, PFC, Sun tv, jsw steel, while indiabulls financial services, jp infra, crisil, and sail. HUL, Tata motors lost.

Renowned Economist Nauriel Roubini warns Lehman-type scenario out of European debt crisis

Eminent international economist NAURIEL ROUBINI who has so far been most accurate economic forecaster than most of others, has recently warned on 2008-Lehman-type credit crisis scenario and slowing-trend in growth of world’s major developed economies as well as China’s.

He also warned of Euro currency falling apart and Greece to be the first amongst those leaving eurozone monetary union.

On China, he said there is going to be hard-lending and following slower growth or no incremental growth which will have effect on world economy as china is now a growth engine for world in many ways.

Read the full article below,

KOTAK MAHINDRA BANK CHART

The state of the markets: Contemplating similarity and difference between 2008 and 2011 market corrections and the possible road ahead

The state of the markets: Contemplating similarity and difference between 2008 and 2011 market corrections and the possible road ahead.

After seeing sell off in the initlal 4 days of the current October derivatives expiry to low of 4741; nifty index has been steadily showing upward trend resulting in a high of 5402.75 on the second day (28th oct and start of nov expiry) of diwali muhurt trading day.

We had seen a sell off to 4720 level from above 5700 in at the end of the august derivatives expiry beginning from the end of july expiry (july was tight ranged and low volatile trading band month for the indice) following consistent correction in the august expiry as said.

If we go back even further and want to take a sneak of diwali to diwali map than we can see market making clear lower top lower bottom pattern (one of the few sure-shot highly reliable and predictive technical patterns) since last diwali which was on 5th of november 2010.
We can see in the chart no-1 that nifty made high of 6338.50 on 5 november that is the 2010 diwali day!

Head and shoulders pattern-