|»5 Minute Wrap Up by Equitymaster|
On This Day - 5 OCTOBER 2011
A warning too little, too late?
In this issue:
Recently we recorded a short video with Asad Dossani discussing among other things prospects for Gold, Silver, Crude Oil...
In the video, Asad also reveals two derivative trading ideas that you could profit from.
Remember, this video is absolutely free to view!
Back in 2008, rating agencies found themselves in an embarrassing position after their best rated securities turned junk with the collapse of Lehman Brothers. The billions of dollars in losses to investors came at a time when rating agencies were still struggling to ratify their views. In 2011, the US' credit rating was downgraded when the economy's poor fundamentals were already reflecting in its currency's exchange rate. Moody's has chosen to downgrade PSU banking behemoth State Bank of India after it posted record low quarterly profits and stock price corrected by more than 35% in the past 12 months. What it all suggests is that the rating agencies have done too little of their job, too late.
Indian rating agency Crisil's latest update on poor profit potential of India Inc. too comes with similar baggage. At a time when interest rates have already peaked, warnings on debt burdens seem myopic. Also, the fact that companies may find demand moderating with uncertainty in global economy is well factored into stock prices. Further most of these concerns are very short term in nature and hardly impact long term valuations.
Hence for investors to take investing decisions based on opinions of rating agencies is a tough call. They are often at risk of following the herd and missing the underlying potential in asset valuations. At the same time, a contrarian opinion to that of rating agencies may not always yield results. It is best that investors take an independent opinion on the asset that they are looking to invest into so that they do not miss the bus on some really profitable opportunities.
As per the Ministry of Human Resource Development, professional colleges are the ones offering courses in
engineering, technology, architecture, medicine and teaching
The government is rightfully all excited about this breakthrough in the world of technology. A cheaper tablet would be a boon particularly for the student community which would be able to exploit the tablet technology without paying a higher price for it. But would the tablet really be successful? While it is too early to comment on that, however, the key thing to watch out for would be its performance. The ministry is excited that India would prove that it is not just China which can compete on price points. However, we sincerely hope that the quality of the product is much better than that of the Chinese goods. The latter unfortunately has a habit of letting down customers when it comes to quality.
So is this the time to buy or sell gold? In reality, nobody can answer that question accurately; the reason being that gold's value is almost impossible to quantify. It has few economic uses and thus, it's value is not determined by demand and supply. People buy gold for different set of reasons. Some buy it as a hedge against inflation, some buy it as a store of value and so on. As such, gold's value is based on how economic variables and other asset classes perform. And that's a very, very complex thing to predict.
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