- Wealth PMS
The Slack group at Capital Mind Premium has been extremely active and if you haven’t been there, pop us a note by replying to this email. (If you’re a trial member this probably sound like Greek to you; it will be available when you sign up!)
A brief summary of some of the interesting things discussed there in the last few days:
Top oil exporter Saudi Arabia sees no need to hold a summit of producing countries’ heads of state if such discussions would fail to produce concrete action toward defending oil prices, sources familiar with the matter said on Thursday.
Jesse Livermore of the always interesting Philosophical Economics outlines the case for writing puts in his recent post The World’s Best Investment for the Next 12 Months. Given this has been an area of focus for me professionally for the better part of the last 5 years.
Thousands of people have been left without their salaries because of an IT glitch at HSBC that means employers who use its business banking accounts cannot make payments.
Some 275,000 individual payments failed to go through on Friday leaving potentially hundreds of thousands of people without their pay on the Friday before the bank holiday weekend.
Note: This has been taken a little too far – so don’t believe that HSBC is actually going to collapse. A huge overreaction by the author.
Bond funds are subject to fragilities originating from the first-mover advantage problem: when investors cash out, the cost of compensating them amplifies the funds’ price decline, making it costlier for other investors to remain. Moreover, three other conditions—general market illiquidity, lower fund liquidity, and the prevalence of retail investors—accentuate the financial fragility of corporate bond funds.
Given that CPI inflation has also been declining, RBI needs to reduce interest rates sharply to drive a recovery in demand,” CII Director General Chandrajit Banerjee said. “CII expects RBI to reduce interest rates by 50 basis points in the forthcoming policy with statements supporting further easing in the near future.”
Chinese online retailing behemoth Alibaba took the stock market by storm when it went public almost exactly a year ago. The September 19, 2014 IPO priced at $68 per share, giving the company an eye-popping valuation of $168 billion. The stock closed at $64.68 on Friday.
[Old News] We liked some small caps and in an interesting discussion on a small cap stock, PT
L Enterprises, we found that the company is undervalued substantially. The company, promoted by the Apollo Tyres promoters, has put on hold the proposal to sell its Gurgaon-based hospitals Artemis Medicare Services and Artemis Health Sciences for `181 crore, following objection from the Kerala Government and a temporary injunction from the Kerala High court.
Arvind Dham, the promoter of Amtek Auto group, is in the middle of a mess, triggered by an voracious appetite to acquire companies, thus over-leveraging the group’s balance sheet. But things came to a boil when JP Morgan Asset Management’s two debt schemes bore the brunt of credit rating downgrades.
Finance minister Arun Jaitley on Monday announced the government’s decision to impose a 20 per cent safeguard duty on steel imports with immediate effect. The duty on specific steel products will be valid for 200 days. This is perhaps the first time in nearly two decades that the government is taking a series of moves to “protect” the domestic steel industry since it was liberalised in the early 90s.
Leading diagnostic chain Dr Lal Path Labs is planning to go public and has filed draft papers with market regulator SEBI to raise funds through an IPO. The Draft Red Herring Prospectus (DRHP) was filed with the Securities and Exchange Board of India yesterday for the Initial Public Offer, wherein the promoters and other existing shareholders will collectively sell 1.16 crore shares of the company amounting to 14.1 per cent stake.
The rate of growth of bad loans of Indian banks in 2011-15 was higher than credit expansion, according to R. Gandhi, deputy governor of the Reserve Bank of India. Gross bad debt of 41 listed banks have jumped to Rs.3.3 lakh crore in June compared to Rs.91,178 crore on March 2011.
On the heels of top guns of India Inc demanding protection for the textile industry from cheap Chinese imports, textile manufacturers and associations have warned that the domestic industry would be extinct if dumping is countered.
The industry claims that as much as 60 per cent of dumping happens from China, and unofficial estimate peg the size of this trade varying between 20 and 40 per cent of the USD 105-billion domestic textile industry.
The Ministry of Finance (MoF) is reporting today that British banking giant HSBC is nearing a total collapse after its having lost a staggering nearly $1 trillion due to the ongoing Great 2015 Global Market Crash and earlier today it completely ran out of cash to pay its obligations and depositors. According to this report, HSBC is a multinational banking and financial services company headquartered in London, United Kingdom and is the world’s fourth largest bank by total assets worth $2.67 trillion.
The capital market regulator has asked asset management companies to explain the principle behind their corporate bond investments, as it seeks to avoid a redemption crisis in the fixed-income plans of mutual funds (MFs) similar to the one JP Morgan Asset Management Co. Ltd is battling. In a cautionary note issued to fund houses, the Securities and Exchange Board of India (SEBI) also asked fund managers to closely monitor companies in their mutual fund portfolios that have been downgraded recently, two people familiar with the note sent out by the regulator said on condition of anonymity.
State-run oil Bharat Petroleum Corporation will invest Rs 100,000 crore in five years starting 2016 to expand across operations. The company is in the process of changing its portfolio by increasing its upstream business and plans to leverage on its fuel retail network by using it for non-fuel retail business.
This is what he had to say (Click here)
4 Myths about Federal Reserve Interest Rates
Myth 1: The Fed directly controls all the interest rates
Myth 2: Interest rates should be kept low so that increased consumer spending can lift the economy
Myth 3: The economy will fall apart if interest rates go up
Myth 4: Higher interest rates are bad news for the bond market.
A Recipe for the Mother of All Short Squeezes?
Given the weight of all these extremes (and the implicit leverage from the ETF markets), this week’s FOMC decision may be more turmoil-er than normal by an order of magnitude.
With such extreme positioning across the equity, vol, and bond complex, it would seem no matter what The Fed does in September, there will be blood.
Aswath Damodaran’s views on the fed interest rates (My not-so-profound thoughts about valuation, corporate finance and the news of the day!)
Matt Phillips outlines why the US Fed would be nuts to raise rates now.
The Fed doesn’t have to hike rates. The global economy and financial markets have already done it. The US central bank would be wise to hold its fire and see how the US economy—still finding its footing after the Great Recession—fares in response, before piling on an interest rate increase of its own.
Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.
Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.