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The Rupee sank to a record closing low on global investors' flight to the safety of the US dollar amid fears of euro area disintegration, and worsening of domestic inflation that could deter fresh overseas fund flows
Rupee fell 0.6% to a record closing of Rs 53.957 to the dollar as the greenback rallied across most currencies due to failure of political parties to form a government inGreece that puts the global financial system at risk. The euro slid to a four-month low of $1.283.
Further slide in rupee could bloat overseas debt of Indian companies and fuel inflation. That may force the central bank to intervene more aggressively, and come up with policy measures including the funding of oil imports from $295 billion of foreign exchange reserves.
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Doom and gloom are everywhere at the moment. Greece, a slowdown in China, and fears over the U.S. economy are rampant, but an analyst who is hardly one of the market’s great optimists is predicting the Dow Jones Industrial Average could hit 100,000.
Having gone back to the Great Depression to look for examples of major bull markets, Philippe Gijsels, the head of fixed income research and marketing at BNP Paribas Fortis, has come to a rather startling conclusion due to the amount of money being pumped into markets by the world’s leading central banks.
“If central banks continue to inject football field after football field into the markets and the economy, could this in the long-run lead to anything else than inflation ? Or are the injections just enough to compensate for the massive deleveraging in the financial sector and with the over indebted American consumer? Time will as always tell,” Gijsels said on Monday.
“This being said, what is certain is that we are looking at the largest financial experiment in history. An experiment of which nobody can really guestimate the consequences. There is simply no point of reference” Gijsels said in an interview with CNBC.com.
Up until now, Gijsels has been working on the assumption that a new structural long-term bull market can begin only once the world has rid itself of its mountains of debt.
He has gone back to four key periods in history to try to understand how the great deleveraging might affect stock prices.
“If we go back to the beginning of 20th century, we can distinguish four long-term periods. And I will not call them a winter, a spring, a summer, and an autumn. First there was the period after the big crash of 1929 until the end of the Second World War. What we are looking at here is a period during which there was literally no progress made,” said Gijsels. “After that, we had the period of rebuilding after the war and the ‘golden sixties’ that saw the Dow Jones [Industrial Average] increase tenfold over a period of 22 years.”
Up next came the 70’s, with their soaring inflation and oil crisis, leading to over a decade of sleepy returns for the Dow industrials before the good times returned.
“At the end of the period, 1982, the Dow (industrials) stood at 1,000, the same level as at the beginning in 1966,” Gijsels said. “In real terms the performance was even worse, as high inflation levels made for a very negative real return.”
Then we got the strongest bull market in history, from 1982 until 2000, when the Internet bubble burst with a vengeance.
“From 1982 until the speculative Internet top of 2000, the good old Dow (industrial average) went up more than 13-fold,” said Gijsels who is beginning to think something similar could happen again.
“Since 2000, market performance has been hit by a series of crises, which are in fact all one and the same crisis, namely a debt crisis. The consequence of the fact that there is just too much debt in the system. Each time when central banks inject liquidity through rate cuts, quantitative easing, or [long-term refinancing operations] we see a brief rally, which just as quickly falters as the pickup in growth proves unsustainable.”
The bad news is that we are still a long way from the current crisis ending, but when it does, Gijsels said, there could be massive returns for investors.
“For if history were once again to repeat itself and stock markets would once again see a tenfold increase over a period of 25 years, the next magical figure of 100,000 for the Dow could come into sight,” said Gijsels. “It sounds spectacular. However, this is the move that we have already seen twice over the last 80 years.”
“A large part of the move could be accumulated though the magic of multiple compounding. Another part through the less magical phenomenon that we call inflation,” he said. “To move tenfold in 20 years, we would need 12.2 percent on an annual basis in nominal terms. This looks like a lot, but it is doable.”
“All this, of course, is under the assumption that the dragons that haunt us can be slain over the next couple of years, and that the West succeeds more or less to keep its position in the world,” said Gijsels. “Otherwise we should maybe do this exercise for the Bovespa, Sensex, or, why not, Chinese market. Quite a number of challenges lie ahead in the coming months and years. However, to not believe in progress and human inventiveness would be really pessimistic.”
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What To Do Today........
Nifty....Today Face Resistence at......4995...5030...5075
Nifty.....Today Support at ....4920...4855...4805
Nifty Range...4200--------6600
TRACK ME RESEARCH......
NEXT TGT FOR
WE SHORT NIFTY @6100 TGT 5350 / 4800
OUR 1 TGT HIT NIFTY 5350 OUR 2 TGT ALSO
DONE 4850 NEXT 4600/4200
DONE 4850 NEXT 4600/4200
Our Opininon for Today's Market.......
1.Stock Specific Movement Expected Today ......
2.Midcaps Looks Good....
BUY SBI around 2090/2100 tgt 2120/2130/2150 sl 2085 sell below 2080
BUY AXIS BK around@ 1020 /1025 TGT 1035/1045/1055 SL 1010
SELL HPCL @ 305 TGT 301/297 SL 309 BUY AB 312
SELL BPCL AND IOC SL 1%
sell centx@ AROUND 284/285 SL 288 TGT 281/277/272 BUY AB 290
sell titan around 235 sl 237 tgt 231/228/225
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