Monday, October 29, 2007

The Party Continues - Buying EWH

Selling VWO last week looks like a wrong idea now. It is now at 116, while I sold it at 109.45. So, I have become even more speculative now. I have bought EWH - the Hong Kong Index ETF. It is up 55% in 2 months, and I am buying it at its lifetime high. So I now join the army of China lovers.

Why buy EWH? Few reasons:
  • High likelihood that Fed cuts on Wednesday.
  • Since Hong Kong Dollar is pegged to US dollar, Hong Kong will follow US monetary policy. i.e. rates in Hong Kong will go down, whether HK authorities want or not.
  • Chinese Olympics next year - rally in China should continue till that time.
  • If China allows its citizens to invest in HK, HK will boom as it has been for the last 2 months.

Wednesday, October 17, 2007

The Party is Over - for the time being

If India crashes today - post the SEBI proposal to reign in P-Notes - I think markets worldwide take a hit. Why? Because it is the BRICs which are supposed to save the world from US housing disaster. Anyways it is becoming difficult for the DOW and S&P500 to break into new highs. Credit concerns still exist - witness the creation of the master fund by Citi. IFN was down 8% in NYSE. Lets see if Sensex tanks by 1000+ points.

I sold VWO yesterday at 109.45 - 30 min before SEBI came out with the notification. Call it luck. I bought it at 100.50. 9% profit in a month is not bad - is it? Thats the party.

YHOO bet low expectations yesterday, Intel had a blowout quarter, while IBM was in line.. Will this offset the impact of Sensex's crash on the DOW.

This Friday is the 20th anniversary of Black October.

Tuesday, October 16, 2007

Is the party getting over?

It is becoming difficult for DOW to get to new highs. Plus Ericsson warned majorly today. Yahoo is reporting today, and if previous quarters are any guide it will be a mess. Tech has been outperformer in the last month (see Nasdaq). If tech takes a hit today, then we have a problem. Then oil is also touching $88.

Note that when I mention in the previous post that oil is going to $60, it is pure speculation. I am not an oil analyst and have no clue on inventories of oil etc. Speculating is a useful art that I am trying to learn.

Tata Power went up by 20% today. Look at the difference between the valuation of Reliance Energy and Tata Power now. One can argue that Tata Power can also set up a subsidiary like Reliance Energy is doing with Reliance Power and get the same crazy valuation. I am speculating on Tata Power tomorrow.

This is getting crazy by the day. $5 billion companies gain 20% on no news.

Wednesday, October 10, 2007

Sensex at 18000

I mentioned here a month ago that Sensex will cross 18000.(,

I had predicted here 2 months ago that oil is crossing 85 this time.(

Oil is now falling to $60 by January. Why? Seasonality. Last year it fell to $50 in early January. Lets see if the pattern repeats itself.

Philosophy of Investing

What exactly is my philosophy of investing?

Almost everyone who is a professional investor has a philosophy. Some swear by technical analysis, while many swear by fundamental analysis. Some are growth investors, others are value investors, and still others are momentum investors. What is intriguing is that the different classes of investors often do not see eye to eye. Technical analysts think fundamental analysts are bullshitting while fundamental analysts think technical analysis is a joke. Value investors think growth and momentum investors are gamblers. Growth investors argue value investors are Buffets wannabes who often get stuck in value traps.

Where am I?

I think something is true about all the approaches. However, at a particular point of time, one philosphy is more true than others. My philosophy is to figure out which philosophy is the truest of all at any point of time with respect to any particular security or the entire market.

My target is to have a 20% return each year with minimal risk. I do not define risk in terms of volatility of the portfolio. Rather, I define risk as the ratio of the number of days when I have negative returns versus number of days I have positive returns, weighted by the daily returns.

I dont care whether that 20% return comes from fundamental investing, momentum investing, technical charting, or what not. What I care is the following.

A) Will the security give me 20% annualized return.
B) Under which philosophy am I investing in the security.
C) If I am wrong, I should NOT switch to any other philosophy to justify my purchase.

How did I come up with 20% benchmark. Well, Buffet has compounded the book value of Berkshire Hathway at 21% over the last 40 years. If I do 20%, it is great.