Difficult Times.

The CNBC-TV18 Investor Camp at Kolkata on Saturday Janaury 24 was a big success. The large hall was filled up. More important, the people who came were cheerful, smiling and willing to listen. Cheers for Kolkata citizens.

Nifty Watch
Market loses for second consecutive week
The Nifty closed at 2672, the lowest close in 14 weeks. This is not good news. Lower closing levels suggest weakness in the market.
Possible Downside Targets
A trading range (3150 – 2800) breakdown suggests a target of 2450. Since this breakdown has occured in the direction of the primary trend, it is possible that the final target may be lower than 2450, since targets in the primary direction tend to overshoot.
Not the time to invest
The time to invest will come, but this is NOT the time. As the Market searches for a base, it is likely to see, sharp volatile down moves. Fresh investments should be made ONLY after the index shows signs of base bulding. This has not happened yet.
The banking sector has seen the biggest losses in recent days. This was the sector that was outperforming a few weeks back. There is a message here. No sector can be assured of better returns while the bear market rages on. Thus, we cannot say that this or that sector will act better. The sectors that will eventually lead the next bull market will be discovered only after the bear market shows signs of exhaustion.
As I write, the infrastructure sector has been out performing. This sector does suggest a buy strategy, whenever the current decline ends. Such a strategy is only for short term trading. Companies include GMR Infra, GVK Power, JP Assocs, ACC, BHEL, BEL, ……..
Summary
Wait patiently for the selling to be over. Somewhere around 2450, we should see the first signs of market exhaustion. On every up move, the Nifty is likely to face resistance. Immediate resistance comes around 2875. Be prepared that there may be much more pain ahead. It is difficult to predict the end of the bear market now.

The good news.
Jeremy Grantham suggests:
Slowly and carefully invest your cash reserves into global equities, preferring high quality U.S. blue chips and emerging market equities. Imputed 7-year returns are moderately above normal and much above the average of the last 15 years. But be prepared for a decline to new lowsthis year or next, for that would be the most likely historical pattern, as markets love to overcorrect on the downside after major bubbles.

The Ugly:
Societe Generale strategiest Albert Edwards said on Janaury 15:

“Investors should now cut equity exposure … and prepare for a rout.
He predicted that the S&P 500 index of U.S. stocks could be set for a fall of around 40 percent from recent levels.”
Edwards also raised the danger of a global trade war with China.
“It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression.”

The Excesses
In 2007 (the great bull market was continuing), Wall Street baron, Steven Schwarzman of the Blackstone Group, a private equity and hedge fund, celebrated his 60th birthday with 350 guests. To appreciate the degree of ostentation and taste, Rod Stewart was called to entertain, at a cost of 1 million US dollars.
Four months after the party, Blackstone went public.
Two years later, in 2009 January, Blackstone shares are trading 85% lower.

John Thain was treated as a wise man when he saved his company, Merryl Lynch by arranging a merger with Bank of America. During the process he took some hard decisions, including the retrenchment of thousands of employees. It now appears that he tried to give himself a bonus of $30 million during the same period, gave millions in bonus to his top ranking officers, refurnished his office by spending 1.2 million dollars, including a trash can costing $ 1405 (About Rs seventy thousand for a waste paper basket). Mr Thain, resigned last week, when these details emerged.

My Notes: What is the message ? A group of people have taken control of financial services in most countries of the world. This group has no morals, is pushed only by the desire to make money, by hook or by crook.