and the zeroth law of robotics

zeroth law of robotics (this law was added later on to the series) : A robot may not harm humanity, or, by inaction, allow humanity to come to harm.


adaptation of the law to trading system :  A trading system may not harm operators, or, by inaction, allow operators to come to harm.




.....thus underlining the supremacy of the "deep pockets"

trading with three laws of robotics

i was reading 

Isaac Asimov's "Three Laws of Robotics"

it has occured to me that if a trading system is like a robot

it must obey these 3 laws meant for robotics.

here are the adaptations of the three laws of robotics

to the trading system

law one of robotics : a robot may not injure a human being or, through inaction, allow a human being to come to harm.

adaptation of the law to trading system : a trading system may not cause substantial loss to a trader or, through inaction, allow a trader to come to loss.

law two of robotics : a robot must obey any orders given to it by human beings, except where such orders would conflict with the first law.

adaptation of the law to trading system : a trading system must NOT obey any orders given to it by the trader in the heat of the trading - it should trade strictly as per its defined rules, except where such disobedience would conflict with the first law.

law three of robotics : a robot must protect its own existence as long as such protection does not conflict with the first or second law.

adaptation of the law to trading system : a trading system must protect its own existence as long as such protection does not conflict with the first or second law.

when to invest in upcoming-technology stocks?

buy the "cutting edge" technology stocks
only after their first major retracement.

by that time
they have distinguished themselves,
still qualify to be a multibagger
and are ready for the big flight!

by technology i don't mean I.T..
i am refering to the emerging technologies in any field.
e.g. biocon (biotech)
sintex industries (MDF : medium-density fibreboard)
mahindra reva (electric automobiles)
--
according to
amara's law
"we tend to overestimate the effect of a technology in the short run
and underestimate the effect in the long run."

are "the rich" really happier?

why are richer people
overall less happy?

first lets agree
that being rich
is itself a relative term.

the one who has more than the other
is considered "rich".

and the group
which has more than the average people on the planet
are "the rich".

had "rich" being an absolute term
even a satisfied comfortable beggar would have qualified for the term.

-

now we turn towards the question
"why are richer people
overall less happy?"

being "rich" is being "infected with the virus of comparison"

being "rich" puts you "at the permanent risk of not being rich"

comparative "rich'ness'" is more of a punishment than a reward!

the moment anyone feels
that he is "rich"
he sub-consciously "switches on"
a pressure to stay "above" others
and stay "rich".

the fear of not remaining rich
turns real!

the "rich" counter this fear
by building the "Safety cushion"
of "reserve riches"

this leads to the next fear
"how much cushion is enough"

thus, as if the fear of not remaining rich was not enough
it gets compounded by
the fear of the cushion being not enough.

this leads to an unending chase
of the "rich" by the hounds of fear!

this breathless chase, inadvertently leads the poor "rich"
into many one-way traps they find impossible to come out!

as if this was not enough
they find unexpected threats
from the winds of change!

--

so where does this lead us to?

should we not be "rich"?
are all "rich" unhappy?
are "poor" happy?

all three questions are traps!

till you use the word "rich" or "poor"
you are in a race
driven by outside factors....

relatives instead of absolutes!

happiness by absolutes has a chance
happiness by relativity has none!

the secret of getting real rich!

u don't get rich by earning MORE.
u don't get rich even by saving more.

strange statements?
not really!

lets see why.

when you earn more
you spend more.

according to the corollary of parkinson's law

"spending will increase to match the increase in income."

try not spending more
while trying to earn more.

there is strong chance that
so much of negative energy will accumulate inside you
that you will blow it all up in one shot.

the mentality or motivation of "earning more"
is basically an emotionally driven state.

"earn more" is a "feel good state"

so, u r not "earning more"
if you are not "feeling like earning more"!

therein lies the paradox.

you don't and won't consider yourself rich
even if you become one
till you feel rich.

and how to feel rich after gaining the riches?
simple....by spending!

to feel equivalent rich
you have to spend
and wrap yourself
in equivalent comfort and luxury.

and the moment you do that
you slip back to the earlier financial state.

only difference,
this time you may be worse
having gathered debt!

so, it is pretty clear
- you don't get rich by "earning more"

but why do i say that
you can't get rich by saving more?

even this is simple.
the psychology of "saving more"
is rooted in the mentality of "starving"

mind is a dog which is most dangerous
if "starved"!

it is most obedient
if "tricked, trained and befooled!"

the more you "starve" your ego by "saving more"
the more the "feel good" state deteriorates.

and it all collapses
at the wrong time
burying you under!

so?

what's the way to become rich?
real rich?

keep doing what you do.
keep earning what you earn.
consciously keep improving and keep looking for opportunities to grow
but don't de desperate!

don't be conscious to "earn more" or "save more"

just ensure
that you don't waste anything.
all wastage in life
translates into money.

as you eliminate waste
you will realise your real needs.
this will surprise you further
when you will realise that you are much more satisfied and in abundance
than you always felt!
and when this feeling of abundance comes
you will feel better and better.

when this happens
you would have automatically
acquired the state of
feeling rich without having to spend
or without having to possess.

--

u don't get rich by earning MORE.
u don't get rich even by saving more.
u get rich
by wasting less and less
and in the process
unshackling and relieving
your income
from the drags of reckless consuming.

from here on
whatever you earn
will multiply!

and the funny part is
you won't feel the g-force
of becoming rich!

retired before 40

i once attended a seminar
where i was hypnotised and asked

"what are your big dreams in life?"

with a little effort
i listed them

big house
big car
world tour
fat bank balance
freedom to buy anything
long vacations
no need to be in a job
retirement at 40

--

i came back
and as hypnotised
wore the eye-blinders like a horse
and entered the rat race!

while i was moving forward
i met some rats
returning from where i was heading!

the look on their faces were not so inspiring.

i slowed down
and eventually stopped.

"how's the place u r returning from?"

the rat i talked to
didn't reply.

he handed me his walkman

i put on the headphones.

it was jagjit singh's voice

"patthar ke Khudaa patthar ke sanam
patthar ke hii insaaN paaye haiN
tum shahar-e-mohabbat kahate ho
ham jaan bachchaakar aaye haiN

but-khaanaa samajhate ho jisako
puuchcho na vahaaN kyaa haalat hai
ham log vahiiN se lauTe haiN
bas shukr karo lauT aaye haiN"

i quickly handed him back his walkman
and i became a runman
back!

back home
i took out that dream list
and made some changes.

house in place of big house
car in place of big car
mental balance in place of bank balance
'wisdom to buy what i need' in place of 'freedom to buy anything'
'living as if on vacations' in place of 'long vacations'
'loving and enjoying my job' instead of 'no need to be in a job'
'google earth and earthtv.com' in place of 'world tour'

i am yet to turn 40
and i am
truely retired!

honey, it's money u r throwing!

http://www.thestar.com/News/Ideas/article/429617

the above article hides the secret to make money without any extra effort!!!

the future we ate!

"as we sat out at our
favorite fast food restaurant,
eating a feast of chicken
sandwiches and french fries,
we started to contemplate,
- how much is this lunch really costing us?
we knew the prices—$2.99 for each chicken sandwich
and $1.59 for each order of french fries
—but how much would this one lunch cost us
over 1 year, 5 years, even 10 years?
not to mention the calories we are consuming.
we checked our money calorie counter for the answer.
what a shock!
one chicken sandwich was 660 calories and the accompanying
french fries 460.
if we consumed a chicken sandwich and fries (or similar fast food)
five times a week, it would be equivalent to
291,200 calories per year, or 83 pounds.
the cost would be $1,190.80 per year.
but if we put that money in a mutual fund account for 5 years,
we would have saved $7,684.34,
in 10 years, we would have $20,327.45;
in 20 years, $75,354.70."


- the opening para from
Rich and Thin
by deborah mcnaughton and melinda weitstein

a consolation gift for those who lose!

majority of retail traders
venture into stock trading
alongwith their jobs
or small-time businesses.

all they seek is
a 5-10% return per month
over and above
whatever they are making
in their current occupations.

they come in the market
with dreams
and they get caught or ejected
with nightmares.

to these very friends
i share below
a difficult
but sure-shot method
which can give them
consistent monthly returns
approximately equal to
10% of whatever they are earning
in their current occupation.

i have tried it myself.
and it works.

the method i am about to share
is dull, bitter, down-market
unexciting, psychologically demanding,
but starts giving
immediate results!

the surprising part is
that it gives better results
when the markets are closed
than when the markets are open!!

no technicals required
no fundamentals
only awareness
and thirst to make that 10% extra
every month
month after month
lifelong!

there is no copyright for this method
only promise i seek from you is
that you will share this
with every needy person
friend or stranger or even foe!

since u r already agitated
waiting for it
here it comes.

whenever u take out a currency note
or a coin
or a cheque
or the credit or debit card

just ask yourself
would you like to earn the amount you are about to spend
more than
the thing or service you are about to spend it on?

if the answer is no
go ahead
and spend it.

if the answer is yes
put that coin, note, cheque, card
back in the wallet
but in a separate compartment.

i did this.
i do this.
i can't imagine myself not doing this for the rest of my life!

i made 12% the first month.
thereafter it keeps fluctuating between 10-35% per month.

i am SHOCKED at the amount
i used to throw
at things
i really didn't need!

every evening
i empty the saved money
or chits marked with amount i save on cards
in a drawer in my study
(i consider it spent and gone!
no available for spending!!).

at the end of the month
i trasfer that amount to a separate account
which i don't touch.

trust me,
when i see the balance in that account
i feel like the most intelligent financial planner of MY world!

the 10%pm dream

many of my friends in mudraa and beyond
ask me if there is a sure shot way
to get 5-10% per month return
a trader can expect?

to this
i used to reply
that while there are a few ways
which can give 60% return per annum
(which, in effect, means 5% per month)

and while there are a few ways
which can give more than that
over a period of a few years
especially if one can spot multi-baggers,

there is a severe shortage of methods
which can guarantee 10% return per month
consistently
month after month

every month!

reasons are four fold.

one, markets are sometimes trending
and mostly rangebound.

second, nobody can predict when the trend will shoot start.
and by the time the masses come to know
it is already half the way down.

third, nobody knows how far and for how long
the trend will continue.
this makes it almost impossible for anyone
to milk the rally more than a small portion.

fourth, very very small pecentage of traders
have got the technique, mindset, discipline, concentration and money
to squeeze good profit consistently.

so, while it is not impossible to consistently achieve good returns from trading
(mind you, i am not talking about investing)
it is a rare phenomenon.

a new trader should not run after 10%pm dream
and rather concentrate on learning to do ballet with the market
whatever returns he or she gets initially

otherwise, it will just be a case of
2 steps froward and 3 (if not more) steps back

simplest way to determine change of trend

the best way (so far) that i have found to determine the change in trend is as follows (i am still waiting since months to see it fail) :

if the line joining the base/feet of waves makes an angle equal to more than zero degree with horizontal, the up trend has not changed.

if the line joining the tops/ heads of waves makes an angle equal to or less than zero degree with horizontal, the down trend has not changed.

check the result in outer time charts to confirm.

e.g. if 2minute chart says, trend has changed

check in 5 minute chart and then in 30mintue and then in 1day-tick chart.

outer charts tell you the reality and extent of the trend change.

 

absolute simplest method to trade

buy an option in the direction of the trend

if u can time it with william or rsi or else, fine

if you can't time

any time will do.

stay in it

till the trend hasn't changed for sure.

you will lose much less

and make much more

if u follow this single method religiously.

never ever try to be smart going against the trend.

what's in front of you will be right much more often than what is not visible.

tricks by operators don't change the trend

they only add jerks to the trend to snap-out the weak.


caution : if it is not trending, stay away.

 

zakaah

it is ok if u and i search answers to our questions
in whatsoever religions we wish.
i was recently stuck in the groove of the dilemma
"is savings of wealth / money permitted by god?"
i had a notion (hear-say) that islam prohibited savings.
i searched
and i found
that i was wrong.
islam doesn't prohibit savings.
but it does make it mandatory to pay "zakaah"
simply translated
'zakaah' means "to purify"
here, it means the purification of wealth and soul.
zakaah is a form of "charity"
it helps in pooling of assets for its distribution and use for welfare and growth.
if you perform 'zakaah' you will be relieved of the guilt of earning while world suffers.
'zakaah' leads to freedom from hatred, jealousy, selfishness, uneasiness and greed.
how much 'zakaah' is payable on ones income?
well, i read somewhere that 2.5% of the net income is the minimum prescribed.
in sikhism, 10% is prescribed ("dasvandh")
--
it suddently hit me that if we pay tax honestly
it broadly ranges from 10% to 30%
we are infact paying a form of "zakaah"
the more we earn, the more "zakaah" we pay.
the trouble is that we have less and less confidence and faith on the government
that this "zakaah" will be properly and justly and assuredly well used!
--
anyhow,
just knowing about the "zakaah" has relieved me of certain burdens so much.
performing it actually, regularly and without any hesitation or smartness
is likely to give me tremendous peace and tranquility.

paper of fate, ink of opportunity! (bi)

fortune turned its back
on one of my childhood friend AV.

the life of the guy who was good at studies
and better at dreaming
was torn to pieces
by the hands of fate.

(not discussing what happened in detail to protect his privacy)

this man was reduced to dust.

he had little money left.
he had no confidence in balance.

his education had been cut short.
his experience was non-existent.
he had no background of business.
he had no heart left for one.

but he had a family to support.

suicide was not an option.

he prayed
nothing happened for good.
but he got the courage
to stay afloat.

he cried
nothing happened
but he got the solace
to hang on.

then he got a ray of hope
just one ray
small one.

there were lot of offices and residential businesses
near where he lived.
all kinds of shops were around
except
a xerox machine.

he bought a second hand machine
in instalments
hire the corner of a shop.

the first day
he made twenty rupees.

on a hundred and first day
he made two hundred rupees

five thousand days have passed
he has his own premises
he has xerox machines of all sizes on earth
besides many more types of machines.

the fate has said sorry to him
and made friends.

he has accepted the apology
with humilty.

drugs, anyone? (bi)

atleast one drugstore (medicine shop)
is required
for every locality.

there are lacs of lacalities in the country
(lacs of)
where there is no drug store nearby.

a million stores are waiting to be opened!

anyone interested?

if u don't have a pharmacy diploma
either go for one
or hire someone with one

there are many medicine wholesellers / c&fs / companies
which give stock on credit!

(getting permission for a drug store
is difficult
but not impossible.
see the movie "guru" for some motivation!)

corners for businesses exist.
but they are in the corners.
u need to search!

think small before u think big! (bi)

"its not in my blood."

is the reply of most of us

when asked

"why don't you do a business?"

how many of us fear the word

"business"

why?

fear of failure!

myth that business requires a lot of money

myth that business requires m.b.a. or some training

myth that to do business you have to be from a business family

myth that you have to have a business sense in the blood or in the head to be successful in business

fear of selling caused by fear of salesmen

fear of rejection!

the reasons for not doing are innumerable.

and one reason is enough to do it

"want to do it"

--

a word of caution"

after you are decided

start small.

think small before you think big!

learn to stand before you learn to walk

before you learn to run

before you learn to leap

before you learn to fly....

everything will come

naturally, gradually, automatically....

just go with the flow

slowly, under control!

think big once

make the rough road map

then shut it, forget it!

thereafter think small, 

do it

think some more

do it as well.

build the elephant in slices!

you successfully sold yourself while proposing

you successfully sold yourself in the interview

you successfully sell yourself everyday when you dressup

you successfully sell every word and line you utter

you have what it takes to be a big businessman

only start small

and keep walking

with the johnny walker spirit!

any doctor around? (bi)

thousands of mbbs, ayurvedic and b.a.m.s. medicos
are unemployed.

millions of people don't have quick access to medical attention.

demand is there

supply is there

paying capacity is there

so, what is missing?

....business sense?

....inertia?

....alignment?

....enterpreneur-spirit?

....looking for grapes to fall directly in the mouth?

if all such medicos were just to put a signboard outside their home

"XYZ clinic"

and spare one corner of a room inside for their practice

it might kick start or warm start a business

which can snowball into a decent one as the word of mouth spreads.

every trained medico is needed out there.

bread and butter (bi)

there is an old man in shimla
who wanted to do some business
but didn't have much money.
he didn't have money for shop
he didn't have money for raw material
he didn't have any mba
(rather he might not be even a matriculate).

but he had to do something
to support himself and family.

then
an idea struck him.

he bought ten breads
twenty butter packs
fifty paper plates
one knife
and located one wooden apple box.

he located a corner for himself in the city.
turned the box into a makeshift table
started making bread-butter toasts.

who would have bought those?

well, scores of hungry daily labourers passing that way
spotted him
and became his customers.

ten years down the line
you can still see that old man
doing the same thing
at the same spot
in the same way!!!

the only difference
- his turnover now is
rs. two lac per month
with a margin of rs.40000

he spotted a need
and aligned his resources to it!

(every street is paved with gold! - kim woo choong)

chai-samosa? (bi)

food is one of the three things

that will always sell

irrespective of any form and degree of recession!

earth is full of hungry souls.

there are always more taste-buds around

than the number of hands to feed them!

this is one of the fastest and sure-shot

business idea.

just find

something fresh and tasty and affordable to eat,

find your corner in the world

and start selling.

(if you can't take care of permission and logistics, forget what you just read

and stop searching for ideas.)

if you are good in making samosas

dream to sell a million of them a day.

McSamosa?!!!

if you can't cook anything

hire people.

if you don't want to do even that

look for a supplier!

and mind you!

there are millions of tea-thirsty people in every corner of this country

who have to do without one

just for the reason that there wasn't any supplier around them

when they needed it

or when they just wouldn't and couldn't have said no.

and don't jump to the idea of opening and selling five star tea straight away!

as CKPrahalad said

their is wealth

at the bottom of the piramid!

==========================

there is a business opportunity

at any place

at any time!

just need an eye for it!

specialize in what you do.

standardize it.

do it well.

keep improving it.

multiply it.

take car(e) (bi)

shockingly

almost every second car that crosses me

has one or more

small or big

dent(s)!

nobody likes a dent on the car!

then why don't people get it done?

is it time factor?

is it availability of places where ONLY dent/paint job is QUICKLY taken care of?

is it the approachability of those places?

nobody is focusing on this niche segment, especially in tier II and tier III cities.

why not and how about

opening opd's for small denting painting jobs?

how about pick and drop facility for the same?

how about doing it at owner's place?

how about mobile vans for the same?

how about the facility to do the job in the night and getting the vehicle ready by morning?

how about the business of refurbishing old cars? many people want to keep the old car provided it is renovated.

how about superfast washing bays at highly convenient on-the-way places?

per capita cars in india are very very less as compared to developed countries.

the future is mind boggling.

the numbers of vehicles will rise exponentially.

there will be severe shortage of roads.

traffic sense is terrific (!!!)

so there isn't going to be any dearth of patients for car opd's.

how about used car sale/purchase organised business.

how about building paid parking lots?

a dollar for the idea? (bi)

many of my friends (at times, even just-recently-strangers) ask me for some business idea.

it has happened so often that i am tempted to start a series on all the business ideas that pop in my head.

it is worth mentioning that the ideas i am going to share are for individuals (though later on these can be expanded to any level (afterall, if the concept of burgers can be converted into a worldwide chain, anything can be - no product or service is small, only the thought is the limit).

the ideas are based on the unmet needs and opportunities that i see all around me in daily life.

investment required may be as less as a few hundred bucks (even zero!)

this is a no-holds-barred and no-ego-in-business series.

this will be more tempting for the unemployed youthful souls with fire in the belly and hunger in their eyes!

message for friends, readers, well-wishers

i wish to conduct

training sessions on trading based on technicals

at select places in india and abroad.

i invite suggestions and proposals

from friends, readers and well-wishers

who share my passion in this field,

who have time, energy and resources

to act as facilitators, organizers or partners

for this venture

which may, later on,

take a more formal and evolved shape.

jagmohan singh

email : jagmohanshan@gmail.com

cell: +91 9418037474

is this the start of the end of the US dominance?

“There is no means
of avoiding
the final collapse
of a boom
brought about
by credit expansion.

The alternative is only
whether the crisis should come sooner
as a result of
a voluntary abandonment
of further credit expansion,

or later
as a final total catastrophe
of the currency involved.”

Ludwig Von Mises,
Human Action,
Yale University Press, 1949






(thanks to jatin for sharing this and much more with me)

the martial art of catching a falling knife

"never try to catch a falling knife"
has become a cliche'.

it has seemingly become
such an old fashioned statement
that
actually catching a falling knife
has now become a fashion statement.

only that everytime
this daring catwalk turns out to be
a robe malfunction!

the knives that fall by mistake
or because of some serious misunderstanding
are the ones that do rise back.

but such accidents are rare.

rarely do the knives fall
for no reason!

either there is some earthquake outside
or some butcher inside
the trading house.

and till that reason is there

they will keep falling

while dodging on the way!

knives of butchers (read operators)
move up and down;
in which case
both rising as well as falling knives
can be deadly.

still,
a knife is a knife.

always better to be picked
from the table.

if, however, you are a samurai
there is
one safe way to catch a falling knife -

and that is
to move your hand down
equal to the speed of its fall.

i.e. buying the crashing stock
expecting it to keep falling
and hence be mentally, spiritually and physically
ready to let it go
if it doesn't seem to be stopping.
and repeating the process
again and again
till its handle
is firmly in your grip!

trading is the only martial art
where a loose grip is a must! 

the real fundamentals - IX

can a company with "good fundamentals" sink almost overnight?

sounds like a wrong question.

not if you know

that satyam's fundamentals were as sound as the foundation of a dam

before it collapsed in the fall of 2008 !

it was then the fourth largest indian i.t. company

threatening to threaten the giants!

--

lesson = fundamentals of fundamentals are more important than the fundamentals.

rag pickers

many people hate rag pickers.

i don't.

i admire them
for searching for value
amidst heaps of abandoned bits and pieces.

not surprisingly
many a times
they find valuables therein.

but for them
those precious things
which got in the wrong heap
would have been either lost
or ended up
in the stomach of a fish
and hence on the table of a rich merchant.

--

i, too, from one point of view
am a rag picker.

well, not as well and as passionate one.
but definitely i am trying to be one.

every other day
whenever i am in mood
and have money in my pocket
i remove my "comfort" shoes
roll-up my "casual" sleeves
cover up my "impulsive" nose
and get into
a new heap
of abandoned
stocks!

amidst the soiled
dusty
greasy
worn
torn
broken
rusted
outdated
and
dead stocks

quite often
i do locate
a still-breathing
promising
potential stock
not deserving to be there
but in my portfolio!

i bring them home
wash them under the light of facts and figures
shake them up to hear the sound of promise
and put them on my investing table.

the real fundamentals - VIII

how and where do we get all this info?

- read a lot of business newspapers (rs.5/-)

- read as many business magazines u can lay ur hands on (rs.50 per mag on an avg)

- watch a hell lot of interviews of businessmen on business channels

- watch a hell lot of interviews of analysts on channels.

- read a heaven lot of good business portals

- use a lot of common sense, self-analyses (even at the risk of being wrong)

- visit companies and their offices and outlets, meet and talk to their employees, vendors, distributers; use their products.

-----

after all this

just close your eyes

and let ur inner voice do the talking.

------

practice practice practice

trust yourself........

the real fundamentals - VII

is a fundamentally ok CHEAP (ECONOMICAL) stock worth investing in?

---

i am sure u can answer this one after the discussion before this.

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being cheap or not cheap is immaterial.

what matters is

- potential

- leadership and management to exploit it

- growth

- right price

the real fundamentals - VI

is a company or business with great potential necessarily worth investing?

let's take an example.

is africa a small continent? 
no

is africa devoid of natural resources? 
no

is africa without human resource? 
no

does africa have consumption potential? 
mind boggling!

so, why isn't there explosive growth?

well......simple

the potential has to be exploited

somebody has to harness the potential

turn the potential into reality.

nodoubt against asian gdp of $21,504 billion

african gdp stands at just $ 2,092 billion

===

lesson : potential rusts without great leadership, good management.

=====

is it surprising, china is getting into africa big time?

not to forget bharti airtel's african safari!!!

the real fundamentals - V

is a well-managed company which has tremendous scope of GROWTH

necessarily a good company to invest?

lets take an example......

monsanto is a hi-technology company which is into research and production of

"super seeds" to feed "the billions" in future!

everyone knows its future potential.

everyone wanted to be on its bandwagon.

the result?

p/e ratio of 35 v/s 22 of peers!!!

meaning, people are already paying 35 times their share is earning?

meaning, people are just paying future price (35 times)!

people are simply betting on the bet!!!

---

nothing succeeds like success.

and nothing grows like growth.

people come to know about the growth

before the growth knows that its growing.

the rest of the act is completed by the operators.

result? unbelievably high price! poor bargain.

if you buy the dream, you have to wait for the morning

a decade away!

(no wonder monsanto india's share price shot to 2000/- in 2004, and is still there!

smart dumb people call it "consolidation")

lesson?

if its not a bargain

it is not worth it

even if it is a rocket!

the real fundamentals - IV

are all fundamentally sound companies good for investing?

lets see an example.

lets consider a sugar company which is fundamentally all ok.

is it a good idea to invest in it?

especially, when more and more people are becoming health conscious

and are realising the importance of reducing the sugar intake?

when more and more people are starting to use low-calorie sugar substitutes?

when the farmers are becoming more and vociferous in their cost of produce?

so?

what do you feel?

will you still INVEST in a sugar stock

except for DIVIDEND?

what if you have the choice to invest in a company which makes sugar-substitute?

--

what's the lesson?

fundamental strength is not something to go ga-ga about!

fundamental strength is a hygiene factor these days.

a company has to be, i repeat, HAS TO BE fundamentally good

to qualify for our attention.

but to win our money for investment

it has to be much more than "fundamentally good".

--

it has to have "growth" written on its forehead.

===========================================

now what if

the sugar company decides

- to spread its geographical reach?

- to integrate vertically - e.g. grow its own sugarcane, make sugar concentrates, make candies etc etc?

- to enter hi-refined sugar segment?

- to come out with "low calorie" sugar?

that's growth....and now it qualifies to be taken seriously.

otherwise, it is good for trading only.

the real fundamentals - III

there are three crucial questions:

1. is the business (say aviation or sugar or liquor or fmcg etc etc) good or bad?

2. is the management running the business good or bad or mediocre?

3. are the times good or bad?

if times are bad, no problemat all. rather, it is mouth watering.

if management is bad, it is a big problem,

but if business is wrong...........???

the real fundamentals - II

if the past performance doesn't necessarily indicate future performance

how come fundamental analyses based on the past and present figures indicate future figures?

--

before touching a company for investing

ask three more questions

- is it profitable? (if not, can it be profitable?)

- is it futuristic? (is it future-proof?)

- is it healthy? (even a profitable and futuristic business is bound to collapse if it is not healthy? poor corporate governance, unfaremeans, artificial unsustainable means, etc.)

--
as defined by wikipedia

"Fundamental analysis of a business involves analyzing its financial statements and health, its management and competitive advantages, and its competitors and markets."

.......seems like rocket science

.............enough complex to leave scope for alibis and excuses

--
don't analyse the mountains of fundamental data yourself.

don't reinvent the wheel.

learn to analyse the analyses of fundamental analysts.

there are hundreds out there, all nervous enough not to be wrong.

the real fundamentals - I

does high p/e ratio indicate good future? shaky future?

does high book to price ratio indicate bright future? dark future?

does high debt on the balancesheet indicate prosperity in future? bleak future?

......?????

well, it can be both!!!

one of the biggest myths of fundamental analyses is

"if u know the numbers and ratios, you can know the fundamentals of a company!"

i can show you n number of examples
when despite a bad set of numbers, a company gave 1000% returns in less than 2 years!

don't believe me?

just take out tata motors chart

share value on 20/2/2009 = 134

share value on 15/12/2009=1340

every ratio in the encyclopaedia of fundamental analyses (FA) was as red as it could have been.

still, it turned out to be as golden as it can be!!!

so, what is real FA?

what does it mean?

what all includes the real FA? what to look for???????