Red de evacuación de aguas residuales

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This is perfect answer to why Bansant jee does not like commodities. Commodities businesses are subjected to many PE contraction/expansion cycles in it's life span.

When a smart man speaks we have to listen and think - if not follow his actions.

The most important quality for an investor is temperament,not intellect.A

temperament that neither derives great pleasure from being with the crowd nor against it

I keep trading in and out of stocks, but the technique used is TEXTBOOK - Peter Lynch's 'One up on the Wall Street' -

Identify No. 2, 3 or 4 players that are trading at a discount to No. 1 and sell the stock when the P/E of my stock matches that of the leader for 30 - 50% gains in 3 to 6 months.

Lynch bhai mentions this in his book when he talks about 'Stalwarts' - stocks that he sells for 50 - 60% gains.

A few examples -

- In 2006, ICICI Bank (inspite of owning insurance business) was trading at a P/E of 25 while HDFC Bank was trading at 30. Bought ICICI bank, and within 6 months, ICICI Bank and HDFC bank were trading at the same P/E, resulting in a gain of 50% in 6 months.

- Moved the money out of ICICI Bank into UTI Bank. UTI Bank was trading at a P/E of 20 in the beginning of 2007. Got out of UTI Bank when it's P/E matched that of HDFC Bank/ICICI Bank.

Time taken - 3 months.

- Bharti was trading at a P/E of 40 while Reliance Communications was trading at 30, even 2 months back. If you look now, Rel Com is trading at a higher P/E than Bharti.

This kind of 'valuation arbitrage' or 'P/E Matching exercise' is fairly risk free in a bullish market, when one deals with mostly large caps

Actually this is what I do but not every day not even every month but once ina quarter wjhen I think that it is worth a bet.

Since Banking is a new sector I am getting ina nd out of a few stocks maybe trying to get my feet wet but as you mentioned the main things that I look for while switching is that you always switch froma lower pedigree stock to a higher pedigree one and Kotak from CBoP and back again was one of those trades.

About why I do it is to use the opportunity we cannot make a living by trading otherwise and trades have to be trades if the stock goes up 12% I cannot say that it wil move up a bit more.

I have seen recent exchange of views on this forum and have following to say:

It is very important for an individual to first understand ―who am I?‖ It is not possible to be both Investor & Trader simultaneously, because your confusion will increase since you may for short-term gains, miss out on long-term potential and vice versa. (Those who claim to be successful as both investor and trader are either lying or they are Supermen) Once it is decided ―who am I?‖, it is very very essential to stick to the discipline/systems to be followed to carry your plans.

Now coming to the most common lot amongst us: those who: ―do not know who they are‖. They are RJ one day (hold positions forever), and a pure trader the next day.

Let me try to relate this to the real-life experiences I had with this lot.

Some of the characteristics of this lot (call them Mungerilals, just for an identity purpose, no offence meant to anyone living or dead) are:

1. They come to the markets only when they see it is going up and after they hear about how their neighbour/colleague/boss/junior/senior/cousins/uncles have made money in this rising rally.

2. We all know and understand that buying at bottom is impossible. But Mungerilals achieve something very unique to them: BUY AT TOPS AND SELL AT BOTTOMS!

Great feat, isn’ it?

3. Their portfolio consists of very few blue-chips, but most of junk stocks recommended by brokers/media/analysts and also by

neighbour/colleague/boss/junior/senior/cousins/uncles.

4. Most of the smart stop-losses Mungerilal applies, get triggered and then the market reverses trend! He is a firm believer that some "operator‖ somewhere knows about his stop-losses and blames him for losses.

5. Mungerilal would immediately sell blue-chip when he sees little profit, but will hold onto junk stocks for ever.

6. Mungerilal would also be required to sell his blue-chip holdings in order to meet margin calls. This is because he is lured into F&O trading by smart brokers, he is heavily leveraged to earn quick buck.

7. On the days he is lucky (day-trading) most Mungerilals would blow that money off partying. Mind you, Mungerilals, do not take pay-outs from brokers, so what he is partying off is only for gains in books.

8. Mungerilals who are lucky on a particular day (when they make some quick buck day-trading) are easily identifiable in dealing rooms. Look for the person who is most vocal, blowing his trumpet, rendering advice to not-so-luckies. On the down days, however he would be all quiet, sitting in a corner, going out for a smoke etc etc…

9. Mungerilal would be constantly looking for ―hot tips‖! Be it in media, brokers, internet, chat rooms, office colleagues

neighbour/boss/junior/senior/cousins/uncles. During bull rallies they subscribe to even capital market journals/magazines. (However, during bear phase of markets who knows where these Mungerilals disappear).

10. With the advent of technology, they will subscribe to internet trading. I have seen some Mungerilals, who trade just because they have subscribed to that fancy software (marketed smartly by brokers) and because they have to pay some fixed monthly/yearly cost (again brokers are smart- they say that this can be adjusted against brokerage!!).

11. Most of the Mungerilals would also subscribe to sms services and when they see some calls being successful, follow the advice blindly by taking huge leveraged positions.

12. If a day-trading position is in loss, they will take delivery. That’s how most of the stocks in their long-term portfolio are. Typically, they would have more than 50 to 60 stocks in their portfolio.

13. Mungerilal would never buy Reliance at 900 but he would go long when Reliance is 1140+ (that too with heavy leverage…) just because the broker says that it’s a clear break-out!

14. The relationship manager/dealer of their broker is their best friend (during bull rallies). They will be constantly in touch with this guy from 9:55AM to 3:30PM.

(Timings may change due to sun outage…!!). Warren Buffet says that ―Wall Street is the only place where people who own Rolls Royce seek advice of the ones who travel to work by subway/local trains‖. Now these dealers (20+ somethings) have only formal NCFM certification and have not yet seen bulls and bear cycles, so they lack experience. And moreover, they have ajob to increase trading turnover. If you don't call them they will call you and give you tips. But Mungerilal would blindly take their advice for granted.

15. They follow bulk-deals very closely. Mungerilal would easily buy a share because a particular HNI has bought it. Or sell their holding because a certain FII has off-loaded.

16. Mungerilals would have little knowledge of everything: fundamentals/PE

ratio/BookValue/Candlesticks/Chart Patterns/Global Factors/Fed Meeting/Crude oil/Opec and god knows what not…

17. Typically a Mungerilal would also know, by heart, Index

highs/lows…support/resistances of not only Indian market, but also

Dow/Nasdaq/Bovespa/Nikkie/FTSE….Most of the Mungerilals would get up late in the night to watch CNBC and see "global cues"

18. Some adventurous Mungerilals take advice of their

punditjee/astrologer/numerologists or devise their own method like deciding longs/shorts based on colour of tie/dress of TV Anchors.

19. I have also come across a new breed of Mungerilals, especially after May’06 carnage, their brokers have lured them into commodities trading on

MCX/NCDEX….Then there were calls of Gold US$1400, Oil US$100, Guar Gum

….and what not….Though since last week’s meltdown in global commodities market, I wonder where are they now?.

Having understood these traits, we might think ―hmmm….even I behaved like a Mungerilal at some point of time!‖. Let me clarify again here that I do not have any intention of hurting feelings of anyone (either living or dead!)

My sincere suggestion is that let us learn from our/other’s past mistakes and try not to act like Mungerilals. That would be a major success of this forum ―The Equitydesk‖……

Can I make a admission

" I agree with everything from the first letter of the first word to the last letter of the last word!"

At some point in time I was one of these Mungerilals (though in parts)... and we know how much that hurts once we are not a Mungerilal!

―Wall Street is the only place where people who own Rolls Royce seek advice of the ones who travel to work by subway/local trains‖.

Last evening I had a classic opportunity to have interactions with lots of Mungerilals at a social function. Thanks to the Bull Run, I was lucky enough to have met so many at one place together.

Mind you, the hot topics of discussion were of course Sensex having closed above 12000 and ongoing Cricket tournament in <ST1:COUNTRY-REGIoN w:st="on">Malaysia</ST1:COUNTRY-REGIoN>, in that order.

I asked all of them how it feels having made tons of money due to rise from 8800 to 12000. Almost all of them confirmed that they have missed the rally. Here is a snapshot of different responses:

a)the leveraged ones were so much in debt due to May’06 carnage, they had no money, so could not participate.

b)some were so bearish at 8800 they sold most of their blue-chips (but keeping those junk stocks for the long-term) as they believed ―sell‖ signals from their trusted technical analysts. And as per some chart patterns they believed it was best to get in only below 7000. Dr.Doom’s forecast also supported this view.

c)few who follow EM trends, fund flows and all that stuff fundamentally said yes we also came to 30% cash (still in cash ready to be deployed!) in June because of those usual firangi experts who found <ST1:COUNTRY-REGIoN w:st="on">India</ST1:COUNTRY-REGIoN> very very expensive at 8800 compared to many other emerging economies. (The same firangis are now saying we are fairly priced at 12000!).

d)One Mungerilal who has just got married confirmed he was scared to death after seeing May’06 sell-off that it was not possible to allocate more money to equity as an asset class. He said ―my Mother-in-law is right…stock market is like gambling‖

e)One guy who had courage to buy some stocks at about 9000 level, promptly sold it off (with some gains of course) because he was told by some analyst that there was a double top formation at 10940. He believed the prediction that markets would tank and not only retest, but breach June low…so he thought he could always re-enter at lower levels. This view was supported by another analyst following candlesticks…some hammer or star formation…(Our Mungerilal is very eager to light a candle on that analyst‟s graveyard)

f)couple of HNIs proclaimed (the guys who were so rich that losses in May’06 did not affect them much due to their inherited wealth) that big money is into commodities only, because of huge intra-day volatility. One of them even tried convincing all of us that ―yaar, what’s there in equity‖, its only a piece of paper. In commodities you can at least feel it, see it all around us, use it (I wondered what this gentleman would do with 30Kg Silver, 1 Kg gold or 100 barrels of Oil, or worse Tonnes of Urad Dal, Guar Gum!!!). I later found out that this guy was (fortunately) short on Silver and made some quick buck as it fell from 22000 to some 18000. His rival and envious HNI, rather privately, whispered to me that the same guy has lost huge bets in Crude Oil as he was damn positive of it going to US$ 100, but it corrected to some $64, and out of over-confidence he went on averaging till it was too much to handle! I immediately remembered Charlie Munger’s (Buffet’s partner) words: It is a wise policy to trumpet your failures and to stay quiet about your successes.

g)there was another class who were of the opinion that they were not convinced because this rise was on low volume, lesser institutional participation, poor advance-decline ratio. They are sitting in some cash to be deployed at next available correction. These guys have vowed to be in only fundamentally strong companies.

h)There was tragedy with one Mungerilal: He went long RIL futures, but as a hedge was short on Nifty (as suggested by some strategist). This guy booked profit in RIL, but due to greed and some forecasts of global slow down, kept Nifty short open….The last I heard was that he wanted to average his position on Nifty short….and the market is going up, up and away…(His wife told me they are planning a trip to Tirupati to offer prayers)

i)One Mungerilal sold off all his holdings to move into 100% cash after he heard Ahmedabad based brokerage expert analyst (who wears different hats---fundamental, F&O, technical) on CNBC that Indian demographical story/consumer driven demand is all bullsh*t, Left parties are taking us backwards, global recession is ahead.. This two minute genius talk (off-the cuff remarks) on TV, shattered all his conviction about India Story. I sincerely hope that that Analyst does not meet this Mungerilal in person…(I learnt privately that this Mungerilal was talking on his mobile to one Bhai about some “supaari‖)

j)Quite a majority was satisfied that they have started to recover their cost at least with the rising prices and are promptly selling.

k) One Mungerilal who is known as KING OF NIFTY OPTIONS for his various strategies (like spreads, condor, butterfly, straddle, strangle… and what not) informed me that he made net Rs. 1,100 in a month during August volatility (but was quite furious that for these trades his brokerage bill ran into more than Rs.25,000, later I overheard him telling someone that he would use “strangle”

strategy on his broker!

l) few Mungerilals confirmed that they will re-invest only after the Sensex breaches the previous top convincingly with high volumes, a net positive FII inflow and strong global markets. Also this has to have supportive F&O cues like implied volatility, cost of carry, open interest etc.

Consensus was that with lower brokerage (competition due to slashing by Kotak/ICICI Direct) they would be able to trade more.

Majority of these Mungerilals have over the past few months formed very strong opinions about variety of matters:

1.Fed will stop at 5.50% and start cutting rates from next year.

2. BoJ may raise quarter bps. EU may be cautious in their approach. German consumer confidence index is rising.

3.Nifty, if it crosses 3800 and closes above crucial figure of 3822 (of course with high volumes, there has to be a rider---a condition), next logical (?) target is 4600.

4.Dollar is going to be weaker.

5.Rupee will be largely in the range of 43.5 to 48.

6. Biggest threat to <ST1:COUNTRY-REGIoN w:st="on">India</ST1:COUNTRY-REGIoN> is twin deficits. PC will fail on FRBM.

7.Sensex will rise to a new high and then tank due to FII pull out.

8. US will attack <ST1:COUNTRY-REGIoN w:st="on">Iran</ST1:COUNTRY-REGIoN>. Gold is a must buy as a hedge against war/inflation.

9.FTSE index will tank due to uncertainty over Tony Blair.

10.<ST1:COUNTRY-REGIoN w:st="on">India</ST1:COUNTRY-REGIoN> will be a economic super-power by 2020

11. Be cautiously optimistic on ONGC because <ST1:COUNTRY-REGIoN w:st="on">US</ST1:COUNTRY-REGIoN> winter severity and heating oil demand will decide the course (?). Before playing on ONGC futures, keep a watch on Wednesday US inventory data and CNN weather forecast. My friend working with a major foreign brokerage is working on co-relational movements of Crude Oil on Nymex, Exxon Mobile & BP stock on NYSE with ONGC. He will feed me with inside information with Beta of the movements.

I‟m a bit concerned about attacks in <ST1:COUNTRY-REGIoN w:st="on">Nigeria</ST1:COUNTRY-REGIoN> on oil facilities though.

12.Oil if cannot cross US$78.40 will retrace to US$38.60, otherwise in a trading (?) range of US$42 to US$68. Bit bearish view on oil.

13.There will be a global equity meltdown (like or worse than May‟06) in FY‟07 or FY‟08 or early FY‟09.

I sincerely thought that these gentlemen were getting ready for full capital account convertibility of Rupee so that they can play global markets. I had an inferiority complex and promised myself to be in touch with the times.

One interesting character I met deserves a special mention: He has recently bought some version of licensed software which gives BUY and SELL intra-day signals based on some pre-defined patterns. It is being marketed by some Gujrat based company (no wonder that State has produced so many entrepreneurs!). He has been trying luck with it doing day-trading (I thought what he meant was day-dreaming).

I wanted to ask him a common-sense question: if it works that way, why the hell the man who invented this would make money out of licenses, wouldn‟t he sit in front of the screen from 9:55am to 3:30pm to literally mint and print money? I also wanted to quote the master: It’s not necessary to do extra-ordinary things to get extra-ordinary results-Warren Buffet. But I restrained myself as I do not want to hurt or discourage anyone. And as such, with my age, people do not mind me because they doubt whether I have a mind, leave alone whether it is open or not.

By the way, I forgot to mention that none of these Mungerilals have read a single FY‟06 Annual Report of companies they hold, which they confirmed having received over the past 3 months.

Two stock tips I got in this party: Consumption of whiskey, white-rum, vodka & beer as well as cigarettes seems to be on the rise. (Disclosure: I’m a teetotaler, non-smoker…..but love and hold ITC as a very long-term bet)

We all promised to meet again during Diwali for celebrating not only the festival but a magical Sensex figure (I wish to keep this a little secret…will share it only after the event!)

However, during the next Diwali party I will quote this to all the Mungerilals:

Even now I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children!—Warren Buffet

Thanks for patiently reading this long posting….

Real hard core investing is really painful. You make an investment and watch the portfolio regularly, it

Real hard core investing is really painful. You make an investment and watch the portfolio regularly, it