X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Are speculators to blame? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 14, 2008

    Are speculators to blame?

    This marriage's not made in heaven...
    ...but in the air. Companies that were fighting out a bitter battle for a higher share of the market are now talking of alliance to help them see another day. We are talking of the proposed association between India's largest and second largest airline companies - Jet Airways and Kingfisher Airlines. As reported in a leading news portal, the alliance is said to be 'of wide-ranging proportions that will help both carriers reduce costs, synergise operations and improve services'. Both Jet and Kingfisher have been accused of combining into a cartel to guide airfares in recent times. And now with officially combined operations, the bargaining power may further rise.

    Mr. Naresh Goyal, the Founder Chairman of Jet Airways says, "It is not a cartel. We are coming together to cut costs. It is for the first time two major Indian carriers are coming together in difficult times." While the idea to combine might be right, the fact that the two together hold around 60% of the Indian airline market share, the actions might not be so.

    Stocks up on rescue hopes
    While central banks all over the world are busy injecting liquidity into the financial system to ensure its smooth functioning, whether the same will start yielding the desired results anytime soon remains to be seen. Global stock markets, which tumbled like nine-pins in the past few weeks, are however seem to be viewing the interventions in a favourable light. This was amply demonstrated in the way stocks moved yesterday.

    The US Dow Jones Index jumped 936 points in yesterday's trades, its biggest ever single day gain. The effect is now seen in key Asian markets that are trading up in a range of 4% to 7%. The Nikkei (Japan) is in fact up by 13% currently.

    So, is the worst over? We doubt! The current problem is a creation of years of monetary and financial mismanagement. And it will take some while for the issues to be resolved.

    Are speculators to blame?
    Commodity prices have been increasingly volatile in the past one year. And what probably stand out the most is the gyrations in crude price, which flirted with the US$ 147 a barrel mark in July this year. The cost of a barrel (approx. 159 litres) now stands at US$ 78. And the prediction now is that oil is likely to touch the US$ 50 a barrel mark.

    Leaving crude aside, intense volatility in commodity prices per se has prompted various governments to ban futures trading as the problem was attributed to unabashed speculation. The major argument was that hedge funds and foreign investors were pouring in huge sums of money into commodities thereby inflating their prices and distorting spot markets for physical commodities.

    In the last one year, the problem became more acute as risky debt instruments led many investors to run helter-skelter before zeroing in on commodities as an investment avenue. However, this is just one side of the coin.

    The other one being that speculation cannot be the prime reason attributed to the surge in commodity prices. For instance, as has been stated by the Economist, many of the commodities in which prices have soared over the past few years, from iron ore to molybdenum, are not traded on exchanges thereby offering less opportunity for investors. Further, much of the rise in investments into commodities futures has been due to rising prices. Thus, without putting in new money, even if the price of a commodity went up, so did the value of a commodity-linked fund.

     

     

    Equitymaster requests your view! Post a comment on "Are speculators to blame?". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    Why NOW Is the WORST Time for Index Investing (The 5 Minute Wrapup)

    Aug 18, 2017

    Buying the index now will hardly help make money in stocks even in ten years.

    Trump Takes a Beating (Vivek Kaul's Diary)

    Aug 18, 2017

    Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.

    How To Read Your Mutual Fund Account Statement Correctly (Outside View)

    Aug 17, 2017

    PersonalFN simplifies the mutual fund account statement for you.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 18, 2017 (Close)

    MARKET STATS