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September 2009

What an eventful week !…am not talking about the markets!

Phew !…It’s been quite an eventful week or two brings to close today half the Financial Year 2009-10…and I’m not referring to the Markets at all !

….. a gap of over a week since my last blog!

….my daughters selection as goalkeeper for the Maharashtra State Girls u-15 Football Team and her rushing off to Uttaranchal for the sub-junior Nationals…before this her being selected at the Thane competition for the Mumbai u-17 Girls Gymnastics team for the Maharashtra Zonals in Aurangabad later in October 2009…and her appearing for the Trinity College,London,Grade 5 Examination

…..the Fire Brigade coming one late evening and cutting off the electricity in our Heritage Office Building in South Mumbai,citing it as a fire hazard….They,the BEST,the BMC and the Builder all probably in the know of things….we are relocating as the building will be demolished in all probability and rebuilt…..Mobile phone,data card and laptop ,Zindabad !….meetings have been more productive away from the office !

….. a neice pushing off to England for higher post graduate studies

……planning for some prestigious Workshops in the first week of October

……and then Dussera….with marigold garlands and fresh crisp Jalebis and Papdi and raw Papaya chutney early in the morning

……club elections

…….sister in Mumbai , enroute from Europe back to Australia

…….death of the close friend’s grandfather who was well known for his spiritual discourses and the books he’s written…he was a keen follower of Rammana Maharishi…..has disciples all over the world

……and we yet could catch in a late night Woody Allen Movie…the heavily censored ‘Vicky Cristina Barcelona’…Scarlett Johannson and Penelope Cruz are simply mindblowing

I need a Break now…so I’m returning to the markets…..routine advisory,valuation and research work !…just noticed it’s nearing 1 pm and the Sensex has surged 199 points and has crossed 17000 after 16 months…It’s 17051 now

Diwali approaches in a little over two weeks from now ! Maybe we shall have a better Diwali this time around !

Cheers !

US Dollar as a Carry Trade Currency !…Why Not !?

With the stock bubble and the real estate bubble in Japan leading to it’s currency,the Yen becoming the Carry Trade Currency for over a decade we’re now seeing a very huge possibilty of the Yen giving way to the the World’s (yet) Reserve Currency,the US Dollar, in becoming the preferred Currency for Carry Trade !

For the first time since 1993,the three month LIBOR for the US Dollar slipped to 0.292 %below that of the Japanese Yen rate of 0.352%

It’s cheaper to borrow dollars and then switch them to other higher yeilding currencies

Investors increasing and profitably used such leverage by borrowing cheaply in Yen,and rather than consume and invest in Japan itself,transfered the Yen to other higher yeilding currencies to benefit from the Interest Differential…benefiting also by the depreciation in the Yen

The Depreciation (Demise is too strong a word yet!) of the Dollar looms large in the coming years as

  • USA Debts and Deficits balloon to unmanageable proportions…search my earlier blogs for quantum
  • Fed keeps the rate low,towards Zero and has little choice but to continue to print more and more of the US Dollar Currency…After continuous Rate Increases in 2004 (5),2005(8) and 2006(4),the Fed dropped rates thrice in 2007 and SEVEN times in 2008,with the last drop of a huge 0.75% in December 2008 bringing the Rate close to Zero,leaving little place to drop further !…the Fed meets tomorrow for the sixth of it’s eight scheduled annual meeting to discuss rates…any change is unlikely
  • US Dollar loses it’s status as the World’s Reserve Currency
  • Countries like China begins exiting US Dollar Investments…US $ 800 Billion of it’s FX Reserves of near $ Two Trillion are in US Treasury Bonds….Countries will begin dumping the Dollar once they realise that they do not need them
  • Oil Trade will switch from the existing predominantly Petro Dollar Trade to other currencies
  • read more

    Don’t ThinkHard about ThinkSoft Global Services’s IPO at Rs 120-130…Ignore it

    Thinksoft Global Services,a Chennai based financial software testing service  is seducing you with a bookbuilding IPO in the band of Rs 120-Rs 130….Issue opens today and closes two days hence on Thursday,September 24,2009

    Don’t ThinkHard on ThinkSoft !…ignore the Issuethis issue clearly is an exit route for an existing shareholder

    The IPO is for 36.46 lakh shares…of which just one-third, 13.50 lakh shares are a fresh issue,while two-thirds, 22.96 lakh shares are being offered for sale by the Gibraltar based Euro Indo Investments…so the Company would get just Rs 17.55 crs at the top end price of Rs 130 to fund a planned 400 seat facility in the Madras Export Processing Zone…..while an existing shareholder would pocket Rs 29.85 crs while offloading 90% of it’s stake held in Thinksoft Global Services

    ICRA has rated the IPO as Grade 2,indicating below average fundamentals

    I’m taking both,the rating agency ICRA and the selling shareholder Euro Indo Investments, at face value here and not even going into the Company Fundamentals and IPO Pricing  

     

    Pleasantly uncanny meeting up this past fortnight, and after over 20 years, with old mates from school,college and the building !

    It’s really been an uncanny two weeks…pleasantly so, as we met up with several old mates from our school,college and building in Mumbai

    Uncanny because we don’t meet for decades, as all had spread their wings in India and overseas and have moved up in personal and proffessional life….have families…..and then all of a sudden inside two weeks in September 2009,we meet up with them all in seperate ‘do’s’,in Mumbai ! 

    Some have become leading specialist doctors….some are top of their profession in Publications,Broking and Investment Banking….some are in top management in leading Indian and multinational corporate and banking groups in India and overseas…some are in Diamond and Steel and one even owns the Mumbai franchise of a Rajasthan based leading restaurant concept ! 

    …and one of them is crazy for music…has thousands of Retro songs on his laptop…we hooked it up to his ‘Bose’ system and were behaving like crazy teenagers,jumping up to the ‘Pinball Wizard’ by ‘Who’ ! till 2.30 am ! 

    Last night we met up after 31 years ! with a group of school mates and their spouses, from the batch of 1978…and last weekend and after 25 years ! we met up with our college mates and their spouses,from the batches of 1983 and 1984 and with some of our building mates of the 1980s and 1990s,after 20 years !

    We’ve bunked together…studied together…partied together…..competed with each other…..dreamt together….planned careers together….played in the same football,cricket,table tennis and badminton teams together…went for student fests and movies and music concerts together…..served on student debate and performing art bodies and committees together……enjoyed trips together…one was even styled as an educational trip in 1982 to avail of 50% Rail discounts for students,when we had actually gone for the Asian Games in New Delhi !…we had taken turns to stand in lines overnight to book tickets for the sporting events !…..trekked together…..we even pranked together…Just to settle an argument that a particular teacher does not even read the answer paper when correcting it, one of us even neatly wrote the whole ‘Pakeezah’ Story on the Answer Sheets in an Internal Advertising Examination and he got the highest marks !……smoked our first cigarette and even first country cigar together !…..gave each other roses and lollipops on these designated days in college…..I had received over 30 lollipops and finished all of them in college itself !….topped up together someone’s dad’s Scotch Whisky Bottle with water after draining it by more than half !……run up canteen bills together,with the ever smiling canteen boy ‘Sunder’ struggling to keep tab……agreed,argued,debated and even fought at times on many ‘worldy’ issues to shape our Impressions and Influences….and I had refused to participate with them in a ‘Qawali’ item for our college day….they were performing “Taiyeb Ali Jaan ka dushman hai ! hai !” and the students were throwing money at them from the audience !….I could go on and on and on…….. read more

    Switch from Chanda to Shikha ! ? from ICICI Bank to Axis Bank !?

    Now this is an intriguing switch to consider ! From Chanda to Shikha ?

    Just this morning I was conversing with an ex commercial editor of a Newspaper….we were discussing how the Media today is corrupt and deliberately mislead investors with guided opinions by experts and planted stories….in fact he was bold enough to even accuse a leading National Daily of being a prostitute !…where every inch of the paper is up for sale !

    When suddenly he popped an intriguing question….Should one switch from ICICI Bank to Axis Bank ?…An immediate reaction was that it becomes a choice between the two Managing Directors,Chanda Kochhar of ICICI Bank and Shika Sharma (ex-ICICI) of Axis Bank !

    Now’s this is an interesting switch !

    ICICI Bank closed at Rs 843 today and Axis Bank at Rs 914

    Chanda Kochhar has been elevated to the hot seat and is trying to turnaround the Bank’s standing…last week she was angrily defending loan transfers to ARCIL as being genuine save a few where frauds were detected…she accused a rival bank of spreading malicious rumours that such fraudulent loans ran into hundreds of crores…last year she defended the bank’s creditworthiness and financial stability because of exposure to sub prime overseas Investments and the quantum of Loans that were non performing assets ..again here ICICI Bank had complained to SEBI and even filed an FIR that there was a leading Broker behind the crash in the share price of ICICI Bank….he had send out by SMS adverse rumours about the Bank to over 30000 mobile phones…If you recollect,the ICICI Bank Share Price had dived close to Rs 300 in September 2008 from over Rs 600 levels and Chanda Kochhar very courageously came on TV several times to allay fears by giving specific details and quantum of the default accounts and Investments..The Share Price has since regained lost ground

    Shikha Sharma lost out to Chanda Kochhar to head ICICI Bank…she exited the Group and was appointed MD of rival Axis Bank….The Bank has just concluded successfuly a QIP at Rs 906….these two seem to be fighting it out on the bourses too !

    Many view Axis Bank as a better prospect than ICICI Bank  on most fronts…so the switch should very much be a serious consideration if you do not want to increase sector exposure and have both these banks in your Portfolio…Chanda may well demand “Switch from Axis and Shikha to ICICI Bank and me !”…Equity is not just clockwise thinking ! read more

    Pip-avoid Pipavav Shipyard IPO

    Yes,I know the IPO of Pipavav Shipyard Ltd  is oversubscribed and it closes today…..but pip-avoid Pipavav Shipyard

    The IPO Price band of Rs 55-Rs 60 for an Equity Share of Face Value of Rs 10 is obscene in the first place and this 11 year old (an adult in context of Corporate Existence !) child is tapping at your car window with the traffic light at red and begging you for Rs 60 !..Red means Stop!…Stop even considering this IPO

    God help those who were placed shares at Rs 80 pre-IPO !

    I’m convinced you’ll get it at Rs 40 and even lower in the secondary market,when you can consider some exposure if you like the Sector and the Company’s Business Model and Prospects…I remain very skeptical though….an ex-head of a leading Institution who has dealt with this Company in the past supports my View…says he,”Avoid”…and it’s not just the Obscene Pricing that’s bothering and putting off both of us

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