Today’s mass exodus from PSU banking stocks:
And from state-owned cos:
Even as the broader Nifty and Junior Nifty indices made record highs, the two public sector indices was barely hanging on…
Did the markets celebrate a Modi victory prematurely?
Author: shyam
The Nifty was well on its way to higher highs before Argentina happened. The index ended the week +0.08% (-1.25% in USD terms.)
Index Performance
IT was the only silver lining…
Top winners and losers
Ranbaxy got hit by the US-FDA ban. The price action in Godrej Consumer Products bears scrutiny…
ETFs
| JUNIORBEES | +1.51% |
| NIFTYBEES | +0.37% |
| GOLDBEES | +0.35% |
| BANKBEES | +0.20% |
| INFRABEES | -1.29% |
| PSUBNKBEES | -1.44% |
Infrastructure continued its slide and PSU banks were the worst hit…
Advancers and Decliners
Yield Curve
Higher and flatter…
Investment Theme Performance
| ADAG Mania | +3.06% |
| Velocity* | +2.32% |
| Long Term Equity* | +1.67% |
| Balance-sheet Strength | +0.76% |
| Momentum 200 | +0.49% |
| Efficient Growth | +0.13% |
| Quality to Price | -0.01% |
| Market Elephants | -0.17% |
| Magic Formula Investing | -0.26% |
| Growth with Moat | -0.32% |
| Consistent10* | -0.33% |
| Financial Strength Value | -0.81% |
| Enterprise Yield | -1.17% |
| Market Fliers | -1.48% |
Momentum themes were well on their way to stardom. But Argentina happened…
Sector Performance
Fertilizer stocks fell out of favor in a hurry…
Thought for the weekend
Customers are increasingly discovering and buying new solutions in a “bottoms-up” way. The bottoms-up buying model undermines the account control and selling motion advantages of traditional Big Tech companies. Most products, even infrastructure products, are now sold in some form of subscription. These changes in selling, pricing and customer management are hard for incumbents to embrace.
Source: Big Tech Is Going Down
We had discussed how an options trader can think of himself as The One Man Insurance Company (TOMIC.) Now Warren Buffett has gone out and insured a $1 billion basket ball contest.
The contest
The National Collegiate Athletic Association’s (NCAA’s) tournament consists of 63 games. A contestant who accurately predicts the outcome of each of those games wins $1 billion. The contest is sponsored by Quicken Loans. Warren Buffett’s Berkshire Hathaway has insured the prize money.
The ods
A blind guess has a one in 9.2 quintillion chance of winning.
If the average person submitting a bracket had a 78.6% chance of getting each game right, and the maximum 10 million people sent in their brackets. What is the likely number of correct brackets? One.
Buffett keeps the premium
Aleph Blog:
Every tournament has significant upsets. Someone who has a good understanding of how good the teams are will know how to pick the most likely team to win. It is tough to pick the upsets, and tougher to pick all of the upsets. There is no good model for upsets, or they wouldn’t be upsets.
This is the proverbial “fat pitch” of options trading. The chances of winning are so low but the payoff is so large, that both the option buyer and the option seller can agree on a reasonable premium and get the deal done.
Sources:
Tough for Buffett to Lose this One
Warren Buffett Bets $1B You Won’t Pick Perfect NCAA Tournament Bracket
China’s Flash Manufacturing PMI numbers for January came out yesterday and sent markets tumbling across Asia and America. The Dow ended down -1.07%, S&P -0.89%, European markets down about -1%. The Nikkei has opened down -1.45%.
Knee-jerk reactions aside, the PMI print is exactly what a re-balancing Chinese economy would produce. One of the items in their third plenum reform plan was to transition to an economy less dependent on massive government investment and more driven by consumption, innovation and market forces.
As far as the India story goes, China is the biggest consumer of commodities in the world. Its hunger for raw materials put into motion the “commodity super-cycle.” Until China came into the picture, commodities, as an asset class, was out of favor. The prices of most commodities are capped by the price at which a suitable substitute is available. For example, when aluminium prices shot up, aircraft and car manufacturers responded by switching to carbon-fiber. It was Chinese demand that put commodity prices into a different orbit.
As commodity prices correct, the pressure on the Indian current account will ease. This, combined with the recovering US and European economies will prove to be a tail-wind for the Indian services sector.
Irrespective of where the market opens today, in the long-term, a Chinese economy that is less reliant on investment driven growth is a net positive to India.
Source: Markit
Related articles
I am recently reading a book bombastically titled “The Option Trader’s Hedge Fund” (Amazon). In that the author says that the best way to look at option trading is to think of it as an insurance business. So if you are an options trader, you should think of yourself as The One Man Insurance Company (TOMIC).
It sort of makes sense because what you are doing when you are trading options anyways? You are buying and selling insurance of some kind with different co-pays and terms. If you are hedging your positions then you are “reinsuring”, etc.
The chapter on volatility was insightful. It discusses the impact of ATM options price in the near term, volatility skew, and term structure on implied volatility. Its a useful framework to have.
Overall, its an interesting book that’s worth a read.