Category: Your Money

No, I think we have to go all out. I think that this situation absolutely requires a really futile and stupid gesture be done on somebody’s part! – Animal House

A history of German hyperinflation that explains why the EU can’t get out of the mess its in.

Stability is a silly and impractical goal in a capitalist economy.

The average hedge fund has lost 4.37% so far this year: investments moving in tandem with one another and extreme shifts, up and down, in price. (FT)

Meanwhile, we continue to insist on dividing the pie rather than growing it.

Good luck out there!

The worst case scenario of a EU breakup might just become a reality. The Germans seem hell bent on forcing the rest of Europe to be more like Germany. Buy if the chart above is any indication, countries like Greece and Ireland would erupt into a civil war if all the budget cuts that the Germans are demanding go through. The Germans want a common corporate tax that would take away the little advantage that Ireland has and a common financial transaction tax and a convergence of financial regulation that would upset the British.

The problem is not local to Europe. Its gone global and its not just the Rupee that is taking a whack, but even the Chinese RMB “continues to trade sharply down during intraday trading, only to be nudged up overnight by the PBoC fixing… From the data it seems that speculative capital is leaving China.” The Japanese economy is slowing down with core machinery orders dropping 6.9% in October.

So unless a ship filled with cash lands from Mars, or Merkel changes her tune, stay nervous.

Image via Wikipedia

The only upbeat news comes from a technical analyst, Tom DeMark, who opines that the markets might rise 5% by the end of December and fall by the same amount in January. See our Indian market outlook here .

Bank runs, when people pull their deposits out of a bank out of fear, that started with Greek banks has now spread to French banks. French lenders lost €100bn in short-term deposits in September alone. In the meantime, risks of a slowdown in Asia grows. Recessions in the U.S. and Europe may cut emerging East Asia’s growth rate to about 5.4 percent in 2012. Brazil has already slowed down from 7.5% growth registered in 2010 to 2.1% in Q3 2011.

And what is Germany doing to prevent a spiral down the rabbit hole? Doling out more austerity. Look no further than Ireland to see how austerity can devastate a country.

I’ll leave you with three things:

1. Always have a plan
2. Don’t forget that the ultimate goal of investing and trading is to make money
3. Learn from your mistakes and let it go

Seasonality affects stocks. It’s a fact that a number of pundits have tried to answer the ‘why?’ and the ‘how?’ of it. But first, lets look at the numbers in this handy chart:

Now carefully look at December and January. Its almost a guaranty that the market melts up in December and goes down in January.

If you are in the market, enjoy the rally till Christmas and get out! If you are not getting paid to be a hero, then why try to be a superman?

In fact, it looks like you can stay out of the market till April, or maybe comeback only in July? Something to think about…

As to the “why” and the “how”? Well, the US markets enjoy a Santa Claus rally (most of the time) and it does have affect other markets. Also, portfolio managers looking to do some window dressing might be tempted to play high-beta emerging market stocks, so India might be benefiting from that. But who cares? With the global market teetering on the European experiment gone bad, why take changes? Book profits instead!

Going Dutch!

Cargill, the privately-owned company still controlled by the MacMillan and Cargill families, is turning bearish on global commodities, firing 2000 people. (FT)

The ruling Congress party appeared to have put on hold plans to open up the country’s $450 billion retail industry to foreign supermarkets. (ET)

No Eurobonds, ECB will not be a lender of last resort, automatic sanctions for breaching 3% deficit ceilings. (Telegraph) Probably buys them time till March next year. Also, the original Stability and Growth Pact, adopted when the euro zone was formed in 1997, had the 3% condition built into it. It fell into disuse after (you guessed it) Germany and France did not comply with it themselves!

Germany gets rules, everyone else gets the unenforceability to allow them to accept the rules.