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Happy Diwali!

I know it’s late and I’ve been preoccupied with Diwali and all : Happy Diwali to you all! Wishes for a prosperous year ahead.

Quite ironically, I’m out of nearly all of my trading portfolio. Only things left in there are: Reliance,L&T and Mudra Lifestyle. I have a credit put spread that makes some money if the market goes down.

I expect a huge downside from here. There may be a temporary move up, especially in the midcaps, but I think from here the immediate future is down, and the future a little bit ahead of that is: down.

Reasons:

  • US financial market is going to collapse. Lots of reasons for that, but I don’t like it one little bit.
  • Hedge fund redemptions are on and the impact will be visible post Nov 15.
  • The new mark to market accounting rules for financial institutions gets visible on Nov 15, and already some banks have revealed assets they own, that they have NO idea what their worth is, and that are greater than the capitalised base of the banks. Duh.
  • The Indian market data does not look good. Futures have moved to discounts from premiums, and there is a lot of call writing. The option data shows a lack of big investor participation on the buy side at least.
  • Distribution in large stocks, accumulation in midcaps. Yes, the retail investor is getting in. Time to move out and wait for the inevitable.
  • Trading distortions all over the world and accounting indicates that investors will churn out their profitable assets (read: India). And this is exactly what is happening.

I’m out of trading. Some long termers on investment remain – like some RPL, Reliance, Opto, Moser (only the bonus shares, for tax reasons), Ranbaxy, DRL, Nifty BeES etc. I continue to run them on a trailing stop loss basis.

Portfolio wise, some extreme reversals have caused me to retreat to index returns, but I am nearly all cash and by the end of the month expect to actually beat index considerably if I am right. Going forward, this is not going to be a good year for the bulls, but it may be a worthwhile year for traders who have no problem going short. Let’s see. Have fun, folks.

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