Author: shyam

Hussman’s Questions

… we should keep in mind that GDP is just the sum of consumption, real investment, government spending, and net exports, and then ask what will drive that reversal. Have the credit strains in Europe been durably addressed? Can European economies presently be expected to expand? Is there now less need for fiscal restraint in the U.S.? Has the overhang of troubled mortgages in the financial system been worked out? Have savings rates rebounded or pressure on household budgets eased? Is consumer demand is sustainably rebounding? Is there pent-up demand for capital goods despite having drawn spending forward due to expiring tax credits last year? Are exports to the rest of the world expected to accelerate? Are profit margins likely to expand from already record levels in order to accommodate growth in corporate profits? Do companies expect demand to be strong enough to commit to large-scale or multi-year investment projects? …

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Tips are for Waiters

Mad Money

Image by Tulane Public Relations via Flickr

I don’t follow much of Jim Cramer, but he has a pithy saying: “Tips are for Waiters”. I bring it up now because people keep asking me to send out tips on what they should be buying/selling/etc. The problem with “tips” is that they are almost always money losers for the punters playing them. Even the big shops like Motilal Oswal can’t get it consistently right: their actively managed M50 ETF actually underperformed the NIFTY50 last year.

But we get why there is a demand for tips: research is hard work. It requires consistent effort and  access to information that is not readily query-able. Some investors don’t know where to start, for them we came out with Groups. It provides a visual launchpad for further research (more green blocks => good). But its definitely not for someone looking for a quick fix. However, we strongly believe that tips provided by “gut” traders do more harm than good and we want to stay away from it.

We stumbled on the alternative today: create a quantitative model to generate buy/sell signals and make that model public. This way the magic is replaced by methodology. So what we are working on now is a model based on technical analysis, that will be open-sourced, and its calls will available through StockViz. The trick would be to start with something basic and keep adding complexity as we refine it.

Stay tuned!

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India ETFs 2011 Scorecard

SYMBOL NAME 2011 Performance
KOTAKPSUBK Kotak Mahindra – PSU Bank ETF -42%
PSUBNKBEES Benchmark – PSU Bank ETF -41%
INFRABEES Benchmark – Infrastructure ETF -40%
RELBANK Reliance – Bank ETF -37%
BANKBEES Benchmark – Bank ETF -33%
JUNIORBEES Benchmark – Nifty Junior ETF -32%
M50 Motilal Oswal – M50 ETF -30%
NIFTYBEES Benchmark – Nifty ETF -24%
SHARIABEES Benchmark – Sharia ETF -20%
HNGSNGBEES Benchmark – Hang Seng ETF -3%
GOLDBEES Benchmark – Gold ETF 29%

If you thought a down 25% was bad, Indian banks took it in the chin in 2011. Public Sector Banks lost about 41% while the sector as a whole shed about 33%. So much for “safe” Indian banks. The actively managed Motilal M50 performed worse than the NIFTY. In spite of the year-end weakness, the yellow metal trounced the rest of the market fair and square.

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