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Panic Alert :Level 3!

July 29, 2008

Toll in Ahmedabad serial blasts rises to 46

– THE HINDU,JULY 28,2008

Terrorists’ Message: Claim of security is hollow

– REDIFF, JULY 28,2008

Rupee in depreciation mode:RBI

-Economic Times, JULY 28, 2008

Next 9 months to be tough for markets

-IL&FS

Investors and businessmen are discovering to their horror just how empty the Indian government’s rhetoric of responsible budgeting has been. The damaging implications of fiscal indiscipline have so far been masked by a high rate of economic growth. With Fitch Ratings cutting India’s debt outlook to negative, the veneer is now peeling off

-LiveMint

serial bomb blasts in the Gujarat capital climbed to 45…security fears spread to other parts of the country on Sunday

-LiveMint

I don’t much subscribe to this journal. The same one, which you all are loyal readers.

Naah… I am not talking about any of the above sources. This journal has a very ominous name, and we all readily subscribe to it. Its called JOURNAL OF EXTREME PESSIMISTIC SOCIAL MOOD.

Sorry, for being sarcastic. And yes,  I strongly feel disgusted by this dastardly act. If, I was not bound by my own unwritted rule, of not spewing invectives at this place, then yes, this place would have seen a lot of unworthy words being thrown around. But now, is not the time to really involve in such futile actions. First, yes- the situation is bad, real bad. But then how we see it, is also a barometer of how we feel.

And we, that is you and me, your neighbour and my boss, my dog and your cat are all feeling one and only emotion- Fear. And extreme uncertainty. [Okay those were two emotions]. But today what rules the roost, is fear+uncertainty+pessimism.

Panic Alert

Panic button has been hit, no doubt. Absolutely. I am living in Chennai, and situation here is equally bad. In the past few days, news of a psychopath killer is makeing quite a lot of noise. On Aug 1,2, security and para-police force personnels from Assam, working in the state are going to make a beeline to return to their home state.

Pretty bad.

If I really had a barometer, and a way to measure it in history, I think, this had been the most, I repeat the most depressing of times since Emergency. Around four decades.

The Compounding Effect of Pessimism

Pessimism, fear, uncertainty like any other emotion spreads like a viral epidemic. And bad news look worse, and disasters are seen and looked like apocalypse. Ripe in these times are sms-es/fear mongering like fake sms-es which is happening quite a bit in cities like Chennai and Kolkata [the foolish B.A.C.K theory], rumor of bomb blasts, breakout of epidemics and higher rate of crime.

Not only crime rate goes up, but also, numbers and modus operandi of murders take a very violent and gruesome shape.

Surprisingly, Chennai, an otherwise placid city has registered quite a spike in crime rate.And I am counting that other parts of the country will also face the same.

We can be in some prolonged screw up, if an epidemic breaks out. I apologise for such fear mongering and being so cold blooded in talking about all this. But I am just looking back, deducing and forecasting. I would love to be wrong, and yes, don’t you worry, situations may not even worsen beyond these levels.

Whats the point, dude?

Good question. The point is this, that all these times signals of a degrading social mood has been there, and perhaps we are approaching the lowest point. Social mood is often a leading indicator of financial markets[which in turn is a leading indicator of national economics], hence when social mood has tested the lowest levels, it should be an early indicator of bettering of circumstances.

As I told, beforehand, I really don’t belong to the elite and esteemed readership club of JEPSM. I am highly optimistic, for I see, this, this very situation as the trough of a long trend of degrading social mood, in India. And this degradation did not pan out in the short term. It had been in the making for quite a long time. [Remember Nithari?, Remember Lynching of thieves by police?].

 And as always, socioeconomics has predicted it with quite some impact. Stock Markets have crashed like anything.

But now, I am seeing a huge reversal of trends.And I mean huge. But time involved may have just stretched it. I was betting August to be a building, rebuilding time. But prehaps around 2 more months, are in the offing. During which we might see, crime rates going higher.

But then, dont they say, even the darkest clouds have a silver lining? This silver lining is the final run through to the deepest and the most testing of the times. The times of immense fear and disappointment. Literally scaling the extremes. And when the extremes are skirted, can the reversal be far away?

Go the TEMPLETON way: Be the contrarian trader

I am a huge believer in contrarian investment. I believe at these times, when people are selling under combined bouts of panic, fear and depression, this is the best time to build up a portfolio. The assets are dirt cheap, markets are scurrying away and everybody is busy selling. So help them, buy what you would like to have [as Templeton used to say!].

Lets believe this situation, the entire crowd cant have the ice cream. Only a few can. And only those who will get to have it, are  they who are not in the crowd. Those who have broken every rule of the crowd and yet has kept one of his fingers on the market.

A contrarian trader, doesnt listen to crowd, at all [he doesnt watch investment news, doesnt read opinions and doesnt listen to Cramer’s Picks, figuratively]. But he watches the market. Like a hawk.

Be that hawk, who even looks for the prey at financial deserts like these, and lures in the baits when unsuspecting crowd joins in the frenzy.

Those who are thinking of entering the markets,assume this as the gift of financial gods, and make the best use of it. Those who are stuck in the market, tough luck! But hold on, I am bullish in short term[but bearish in ultra short term].

Keep hunting, keep looking and keep looking for the diamonds even in the unrelenting summer desert heat. For the brightest sun will help you to see the glitter from the skies.

My verdict: Short on extra short term. Long, Real long on short term.

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