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My conversation with Asad Dossani

Apr 25, 2015

In this issue:
» India's 'acche din' numbered?
» Banks far from seeing higher profits
» More stink in realty stocks
» ...and more!

00:00
5 minutes a week! That sounds ridiculously little time for doing something as serious as trading in derivatives. But when I got an email from my friend Asad Dossani earlier this week, I was trying hard to convince myself that this is humanly possible. Now as many of you already know, Asad is the editor of Alpha Trader. And he specilaises in recommending short term trading opportunities in currency and commodity derivatives. But like for many of you, the complexity of derivatives has always forced me to stay away from asking Asad how does he do it. To my surprise, Asad told me that he actually plans to share his secret of - How To Make Big Profits By Trading Just 5 Minutes Per Week. - through a Master Series.

Now I think this is a great opportunity that none of you should miss out on. And that is why I asked him to tell me a little bit more about what exactly he has in store. This is what he wrote....

"Most of us start out as long term investors. And then some of us decide that we want to take a small portion of our portfolio, and start a higher return higher risk endeavor. I'm talking about trading of course. If this sounds like you, then do read on...

Next week, I will be delivering a Master Series. This is a three part video series revealing how to make big profits by trading five minutes per week. You see, over the last two years, I've been working on this amazing trading strategy. And we've been implementing it live since July 2014 at Alpha Trader, with great results so far.

Asad Dossani
When it comes to trading, less is best. What I mean is that the less often you trade, the better results you can usually get. Too often, I have seen day traders have their accounts eaten by high transaction costs, and their performance suffer due to high stress levels from constantly monitoring the markets.

So I'm proposing something different. I'm proposing a trading strategy that requires you to trade just once a week. And it'll take you no more than 5 minutes to make your trades and carry on with your day. It's perfect for most of us who have full time jobs and families.

If you're ready to try something fun with the potential to make big profits, then sign up to the Master Series. I look forward to seeing you soon!"

So do make sure to mark your calendar for the Master Series on 1st May 2015.

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01:35
Coming back to equities, foreign investors are getting increasingly impatient about India. In an interview to a business daily, Jim Rogers pointed out why the government's reform promises are becoming a test of patience. There is a massive amount of liquidity floating around the world. This is the first time in recorded history all major central banks - Japan, America, Europe, Britain - are all printing huge amounts of money. And as a result, it is not just Indian markets that are going up. Markets in China and Japan have more than doubled in the last few years. The US markets are at an all time high. And if the Indian government fails to back its reform story without action, there is little reason for foreign investors to stay patient. According to Rogers, Russia has been one of the strongest and most attractive stock markets in the world this year. The economy has vast natural resources, it is not a debtor nation and, unlike India, does not have exchange controls. The collapse of oil prices has made Russia the most hated stock market in the world even though it is fundamentally stable. Thus without action from the Modi government, India's attractiveness to global investors is on the wane.

Do you think investors will soon get impatient with the government's staid policy measures? Let us know your comments or share your views in the Equitymaster Club.

02:25
  Chart of the day
The banking sector had been one of the worst victims of the slowdown in the economy. With the change in the government and economic environment, even as other sectors are looking ahead with hope, banking sector has a lot of mess to clear. However, a lot of the troubles in the sector are its own making. Indiscriminate lending and misuse of measures such corporate debt restructuring (CDR) are some such examples. While CDR aimed to put distressed projects back on track, it was used more as a mechanism to avoid classifying loans as bad. A recent rule that requires bigger provisions for restructured debt is an attempt to address the issue of issue of banks' of laxity in extending loans and lack of caution. While this may improve the fundamentals of the sector in the long term, as of now, it means higher lending costs for banks and hence a drag on their bottomline. And since the majority of bad loans lie with public sector banks, it will make the profile of public sector banks worse as compared to private sector peers. As per data from RBI, the gross NPAs of 40 listed banks added up to almost Rs 3 trillion at the end of January 2015. So one wonders if the NPA problem will give the economy and the banking sector some respite anytime soon.

Can the economy afford losing Rs 3 trillion to NPAs?

03:15
Just about a couple of days back we wrote in The 5 Minute Premium how the real estate developers effectively run a ponzi scheme by diverting funds that they raise from pre-selling properties. Today, we share an interesting account on how they deal with leverage. The traditional way to retire debt is to generate cash from operations and then repay. However, real estate firms have their own unique way here. They pay off debt by taking on more debt!

As the property market has witnessed slowdown over the last couple of years, property developers are unable to generate sufficient cash to repay debt. As a result, they are resorting to external finance from NBFCs and PE funds. And the irony is that these agencies are willingly lending money to developers believing that the property market would pick up soon. While refinancing debt is nothing new in this industry the fact that such transactions have increased drastically in the recent past should set alarm bells ringing. Either the refinancing agencies are willing to take the risk in the hope of higher return or there is a gross misjudgment on their behalf in assessing the current situation.

Imagine what could happen if the demand does not revive for the next 12-18 months? The refinanced debt will be due by then with huge accrued interest. The developer in this case would get away by foxing another refinancing agency. And the cycle would go on and on. What would that mean? Well, it means property prices would not come down anytime soon. Indeed, owning a home is a considerable challenge for a common man these days.

04:00
Barring the Indian stock market (down 3.5%) and Singapore stock market (down 0.3%), majority global markets closed on a positive note. The US stock market closed all time high levels; the rally was largely driven by technology stocks. Better than expected earnings propelled the US market at higher levels. Most of the global markets closed higher, ensuing positive lead from Wall Street.

European markets pared gains on the last trading day of the week, on the back of dull end to the meeting on Greece's debt troubles. However, major European indices finished the week in green. As per the data released by HSBC on Thursday, China's manufacturing activity declined to one year low levels. On the back of this, China markets pulled back some gains however closed higher for the week gone by. Japan's markets advance above the 20,000 mark, and hit 15-year high in the week gone by.

The Indian markets were down by 3.5% during the week on growing concerns over fourth quarter earnings and other global factors. In the last one week alone the currency has depreciated by about 1.8%. One of the reasons attributed to the fall in the rupee is the sell-off in equity markets by foreign institutional investors (FIIs). It is worth mentioning here that from an all-time high closing level of 29,682, the BSE-Sensex has corrected about 8.5% till date. The selling by FIIs has resulted in a surge in demand for US dollars. The outflow of dollars has put the rupee under pressure.

Performance during the week ended April 24, 2015
Data source: Yahoo Finance


04:50
 Weekend investing mantra
"The true investment objective of growth is not just to make gains but to avoid loss." - Philip Fisher

This edition of The 5 Minute WrapUp is authored by Tanushree Banerjee.

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