Mahant!

This could very well have been the anthem to gold bugs, silver fanatics and resource eagles. There will be a time when you believe everything is finished. That will be the beginning - Louis L' Amour

Warren Buffett is a miracle. His wealth is a miracle. But what fascinates me most is that he made most of his money from insurance. There is a lot of money to be made in insurance. That is why companies are heading in droves to start insurance subsidiaries. Every business, every project and even people face infinite situations. Many good. Many bad. And many can hurt deeply. In essence, there is risk attached to every human action (or inaction) or corporate action (or inaction). Insurance is the means to offset and reduce the pain when the calamity befalls. Insurance companies' expertise is taking on the others' risks, bundle similar risks into a package and do its best to protect itself from any calamitous claims. Almost always they have been safe. Not many bridges are falling apart or many floods at the same time. Companies have been taking money and enjoying "peaceful period on earth" (as Stephen Hawking puts it when talking of comet strike). Undoubtedly, the larges...

If you don't go after what you want, you'll never have it. If you don't ask, the answer is always no. If you don't step forward, you're always in the same place. - Nora Roberts I like this quote very much, I put this as the 100th post on our blog :) Falkor

Its been sometime I have been trying to make some special people understand the evils of inflation. Inflation is an abstract subject most of us dont know about, let alone understand the technicalities amidst jargons. I have in my previous post have briefly touched the social part of inflation but never in a concentrated way. I understand what my friends mean when they say "tell me in layman’s language." It is not a heartening sign, that they avoid technicalities. But it could well be that knowing where they stand, their role and understanding the social changes in the light of inflation may motivate them to understand the term "inflation." This is just to highlight the brief points. First and the foremost, is there any link between inflation numbers and society. Yes. The relation is same as the relation between society and money. What is money? Money is an easy means of exchange. If I am selling my horses to a pig-farmer and I am not interested in taking pigs in ret...

Why do you have to take into account inflation when you are making a retirement planning? In other words, if you want to spend One unit after 25 years, you have to roughly put aside Three units now as savings. Why is it that this assumption is so taken for granted??? The money that is true today MUST also be true to its worth tomorrow. For Christ sake, that is the reason why we earn money!! The main cause of such reason are the unbridled growth and leeway the government and central banks have in manipulating the lives of people through the means of money supply. Perhaps the most important cause it the ignorance of basic economics or general apathy towards this abstraction Everything comes at a price, even ignorance and avoidance and apathy! :) Falkor

For all those history buffs who wondered what it must have been like to have witnessed the fall of the Roman Empire, take heart – the fall of the American Empire is upon us. - Peter Grandich

Times have changed. There was no interest in gold sometime back and all of a sudden its all rage. The interest showed by general populace is amazing. There are tons and tons of articles explaining the value of gold as a hedge against inflation. I feel like squeezing their neck and scream why are you giving the greatest investment tip of the century free and that to bozos who does not understand it at all nor make even a feeble attempt to understand. I ell them patiently these are the very people who will stone your house and break your leg, the day gold prices hit a correction phase. They just dont have the discipline or the conviction (convictions comes from knowing the underlying wisdom) to appreciate what you say. Anyway, I appreciate their concern for welfare of others. And I admire them for that. And at the same time there are many articles, which are predicting the downfall in the commodity markets as the interest rates rise. This is, as of now, unfortunately not sufficient in nu...

We, a top secret brilliant bunch of geniuses working on a secret formula to save the world from idiots, stupids and earthworms; are pleased to announce success in our objective. So, what does the formula do? It tells us what to buy or not to buy. It tells us when to buy or not to buy. We are out to make every Tom dick and Harry kings and queens of financial markets. In fact, it seems to answer most of the questions investors may have. All you have to do is pay me couple of million dollars ahead and try it out. It is not like your TV ad, we guarantee we will pay you back your entire amount (if you can catch us; that is hahaha bozos). Dont worry we have done a great deal of testing and with anecdotal back testing, we can easily say it works. It works! Voila! Holy Grail! Well.. not quite but close. Version 2 should be.......closer to the truth (How else can we make more money. Bill Gates did it, dont blame us, we are just following the bests!!) We think this could be the greatest inventi...

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Markets woke to the fact that the interest rates could go much higher than 5%, which was the ceiling markets had given for "soft landing" Now that Bernanke came out with very hawkish statements on inflation, the markets were jolted our of their reveries that interest rates can go much higher and into the realms of "hard landing" rates. This jolt, surprise was what caught market on the wrong foot. And it has been seen that whenever the markets have been jolted with a big surprise, there has been a reversal in trend.

It was a story that I have heard many times, in many styles. It all says the same. The moral any language remains the same. If you cry wolf a little too many times people are eventually going to stop listening to you. Only twist in the tale is if, the real wolf strolled in one day and tore apart the people and boy (having seen the wolf running off to save himself. Was crying wolf a mischievous prank or a careful plot? Who would be to blame in this situation? And what would be to blame? It would not be feasible and practical for people to look into every hoax. But this becomes a major weakness. This is how it goes. Every hacker knows that is easier to hack into a network when you have made several fake attacks on network. Once the administrators are complacent and are expecting an attack similar to series of attacks, hacker gives them a slip and goes though a different door. It works much perfectly, if the first series of attacks were used to plant the seed for the unseen door, unseen. ...

This a very good link : http://www.wealthcentre.net/fixeddeposit/SBIGoldDeposit.asp General features of Gold Deposits: Resident Indians can invest under the scheme Gold (bars, coins, jewellery, etc.) is accepted in scrap form Maturity period 3 to 7 years Rate if interest - depends on the maturity pattern Facility of Nomination is available Multiple Certificates for different denominations available Redemption in standard 995 fineness gold or in rupees permissible Premature withdrawal after the lock-in-period is permitted Rupee loans permitted against the collateral of Deposit Certificate Deposit is transferable by endorsement and delivery No Income Tax on interest income No Wealth Tax on gold deposited No Capital Gains Tax either on transfer or maturity The Scheme at present is available at select branches only and other terms and conditions apply. Also read this link: http://www.rediff.com/money/perfin/2000/mar/06goldep.htm :) Falkor

It has been few days since I read a book on LTCM disaster. Like everything a calm was seeping into me, with the gradual forgetting of contents. Then here comes the shocker, which pokes me grimacing and asks me “so, you think you were safe bozo? hahaha" LTCM was an error of judgment from the managers of the fund. But it was history of repetition by the banks that freely funded the fund. Are we close to LTCM repetition on gigantic proportions? A proportion from which we may not be able to bail out from? In the guise on an answer lies the first shocker. It begins of trying to explain the flat-yield curve in the scenario of rising rates. It states "why is anybody willing to hold this low interest rate paper if the borrowers issuing it are so vulnerable to default risk? The borrowers don't actually issue it directly. Instead, much of the worst credit risk in the U.S. financial system is actually swapped into instruments that end up being partially backed by the U.S. government...

Ugly Americans by Ben Mezrich This book will teach you that you don’t have to be a rocket scientist to trade. You don’t have to be a math genius, or have super connections. You just need to have discipline. You’ll notice in this book that there isn’t a lot of room for error in a hedge fund – these guys play to win. The story of Malcom the football player turned hedge fund superstar will make your head spin. And teach you how important it is to prepare for your trades: he makes $500 million on one trade that he researches for months. Day Trading the Currency Market by Kathy Lien This book has an excellent description of the driving economic forces behind the currency market – and I don’t think you can find the same, reliable information in any other place, let alone in a book. Technical Analysis of the Currency Market by Boris Schlossberg Boris is a fundamental trader but he wrote a book about technical analysis. Go figure. The discussions of systems in this book makes it worth the...

The truth is, you'll find that Technical Analysis' true usefulness is inversely proportional to what is generally considered complex programming. You cannot drive a car with 10 steering wheels. You cannot trade a currency pair with 10 systems. Don't ever listen to anyone who tells you that you MUST do this or that. What you choose to focus on is unimportant. That you focus means everything. :) Falkor

An excellent article by Andy Xie of Morgan Stanley *High commodity prices are causing demand destruction. A significant downturn in Chinese demand for hard commodities suggests that demand is reacting to unsustainably high prices. As the property cycle turns down globally, demand for hard commodities should weaken further. * Commodity prices reflect liquidity rather than demand : Commodity prices react sharply to the policy outlook for major central banks, indicating that liquidity rather than demand drives commodity prices. Hence, demand weakness is insufficient to bring down prices in the short term. *Oil prices should lag demand even more. Oil exporters have become enormously rich from high oil prices in the past three years and are in a strong position to cut production to sustain high prices . It may take a global recession to bring down oil prices. *Property downturn may exacerbate inflation. The global property boom has increased the share of corporate earnings in GDP, which ha...

The "Net neutrality" issue, where we fear networks/infrastructure providers will decide (euphemism for censorship) what customers will read/watch/listen/buy on net. Many of the features that we fear in the "Net-neutrality" have already been implemented across various other platforms like telecom. For example, my telecom service provider has blocked the competitors GPRS sites and also does not allow access to many other sites on Internet, from where the free goodies like mobile applications, software, games, wallpapers, tones etc can be downloaded. This leaves me with the only service provider for above products, the service provider himself. This is totally blocking my freedom and my right to choose. This is just a glimpse; with "Net-neutrality" issues at stake are enormous. There should be no way; any entity (maybe, other than individual governments.) should be able to determine what is accessible and what is not. :) Falkor

Money Rains “Money rains are a clean way to study theoretically the effects of increases in the supply of money. In practice, it seems a bit difficult to envision how the Federal Reserve could literally implement a money rain – that is, give money away either through directly disbursing currency to the public or by disbursing it through the banking system. The political difficulties that are likely to arise from the Federal Reserve determining the distribution of this new wealth would be daunting.” Negative interest rate economy “No one would be willing to hold any asset that pays a negative nominal rate, as long as zero-interest money is available as a store of value. The strategy for eliminating the zero bound, therefore, is to make money pay negative nominal rate, by imposing some type of “carry tax” on currency and deposits” It goes on to add “It’s easy to envision such a system….. for most part, the technology to implement such a system is already in place.” Source: Para from ...

“On March 23, 2006, the Board of Governors of the Federal Reserve System will cease publication of the M3 monetary aggregate….M3 does not appear to convey any additional information about economic activity that is not already embodied in M2 and has not played a role in the monetary policy process for many years. Consequently, the Board judged that the costs of collecting the underlying data and publishing M3 outweigh the benefits .” But why would the FED stop tracking M3? The reason given is: 1) It will save money 2) Other indicators track all the money that M3 tracks. First of all, since when is the government interested in saving money? The writing on the wall is clear. When the Government starts hiding data the problem is big! :) Falkor

My definition of "Conundrum" is when you have theory, that is perfectly insync with the traditional, age-old and tested wisdom, and you wish to be blinded/fooled/charmed/enticed by looking at the smokescreen and convince yourself of the massive disconnect between the past (old-era) and the future (new-era), you are in a conundrum situation. Lest if you utter the words of truth and wisdom, you are Cassandra of doom, terribly old-fashioned, Mad Hatter and economic terrorist. And if you support the newer-day theory you are making fool of yourself, when the truth unfolds. Therefore, the word conundrum creates enough conundrum in the readers/ listeners mind that whatever the situation you face in future you can always say, "I told you so" and you will be praised as a "genius who saw tomorrow". Unfortunately the only people who are swept up by the storm that conundrum may have missed out to explain are the people who believed the conundrum existed in first place...

Part 1 Part 2 Part 3 source: morgan stanley :) Falkor

A snippet from a MarketWatch article, describing the deflation in Japan. Rising prices are usually a signal of interest rate rises to come, but have an added significance in Japan. Japan's economic woes during a decade from the early 1990s on were accompanied by stubborn deflation - prices falling rather than rising. That encourages consumers to save rather than spend, since goods will be cheaper in the future, and hits businesses wanting to invest. The zero-rate policy was an attempt to correct this effect. :) Falkor

The world markets have seen unprecedented rise and has baffled many analyst with seemingly break of traditional parameters and thier tradional impacts. One of the conundrum is the very low degree of the investements by corporates. This has been the case inspite of low interest rates that prevailed over past few years. Therfore, we cannot fully justify the theory that corporate investments are going down because of rising cost of funds. This begs us to ask a question. How long is the consumerist tendencies going to last? Are the corporates being bearish on the economy and spending? Are the corporates expecting the economy to slip into a recession? what is it that corporates feel is wrong with the hearty and seeminlgy healthy world economy's pulse? That is not a conundrum, for the answers are clearer. But for now, lets just call it conundrum. :) Falkor

Ways to overcome paranoia Remember paranoid thoughts are common Share thoughts with trusted others Imagine another person's perspective Do not treat thoughts as facts and think of alternative explanations for events Try not to ruminate on the thoughts Do not let the thoughts stop you from doing what you want to do Remember the positive things about yourself Source: BBC Just in case you are paranoid of gold and the rest if the situation :) :) Falkor

"Finally, the financial markets stayed calm despite the further massive and unexpected deterioration of US current account balance during 2005" Hmmm.... Wonder how long before someone cries "wolf"! Dumbledork's Believe it or not! “Although the US external deficit exceeded forecast by $100Bn in 2005, the dollar appreciated in real effective terms during the year” From BIS annual report 2006 :) Falkor

Wise Mogambo advice "You can almost smell the fear in the gold and silver shorts, as more and more people are waking up to the fact, without elaboration, that every time in the entire course of history that a government committed these kinds of monetary sins, it was gold and silver that saved the day for those wise enough to buy and hold them. And it was curtains for everyone else. And the pertinent lesson is not just that the people who bought gold and silver prospered, but that the people who bought early in the cycle made the most money when gold and silver rose." :) falkor

Today’s world is increasingly caught up in a China mania, with growth rates literally off the charts in most aspects of Chinese economic activity. But as impressive as these rates of increase are, it is important to remember that China is still a relatively small economy in the broad scheme of things. Sure, if small economies continue growing rapidly ad infinitum, then, of course, they will eventually become big economies -- overtaking the current leaders in the world. Such extrapolation seems to be the allure of the so-called BRICs paradigm -- the rather simplistic notion that the developing economies of Brazil, Russia, India, and China have the potential to exceed the collective output of the G-6 developed economies over the next 40 years. Source: Morgan Stanley :) Falkor