Saturday, May 23, 2009

The Crash Is Not Yet Over – And That’s A Good Thing!

I am an eternal optimist. Life is so much more fun and fulfilling when one is positive, smiling and making the most of every opportunity. Over time I have learnt to listen to myself and do things that most others don’t. If we want to create wealth, we need to apply that philosophy to every area of life. I’m sure those who didn’t listen to all those TV Gurus six months ago, must be smiling their way to the bank. At the same time those who didn’t benefit from the Crash, please don’t lose hope as it is still not over. 

I find it hilarious when people treat the government as some sort of messiah that will fix every problem. Millions of jobs being lost in America and major banks and automobile companies going bankrupt overnight isn’t something that can be fixed by any government. 

If we study history, we can see a common trait to all Crashes. In the beginning, most people talk about extreme euphoria and don’t believe it. Then after it sets in, within a quick time span there is an artificial recovery and many common people think, things are good again. But them main reason for that artificial recovery is that big investors and people on the inside, want to exit their investments and trap the ignorant masses. 

Way back in 1930, after the Crash of 1929, there was a similar recovery. Everybody started talking about how things were good and everything was back to normal. Economists and world leaders were saying, don’t worry anymore things are good.  However, post that things got much worse for a few years, before the world saw one of the most incredible periods of growth.

Once again the reason I am saying this, is not because I am pessimistic about India, but I don’t want our fellow Happionaires to take unnecessary stress and run behind a raging market. I don’t want you to be caught in a 800 points downfall and curse the markets and your decision. On the other hand if you have bought something at low levels or even at higher levels, you can surely keep it for the long term. If it is a good company, you have nothing to worry. 

As more financial institutions go bust in the West, money is going to dry up. The world is now soon going to see extremely high interest rates and higher gold prices. I won’t be surprised if interest rates in America rise over 10-11%. I know most economists won’t agree, because interest rates are so low there that money has lost its value. But we just need to wait and watch. Real money is becoming very scarce there. 

Jobs losses and foreclosures are on the rise. Even in India, lakhs of people have defaulted on their home loans, especially in urban areas. I was sitting with a banker with one of India’s biggest banks that had funded home loans and he very honestly told me that even if interest rates go down, they are hesitant to fund home loans as they have so many defaulters. He told me how the government was trying to bail out builders by lowering interest rates, but if people are afraid of losing jobs and have no money they wouldn’t buy such overpriced homes.

The Crash in real estate is yet to come in prime urban areas; it will take several decades, for real estate to reach back to the overpriced levels of 2008. Do not believe planted reports in the media about a real estate recovery. These have been planted by builders to misguide the masses. I like visiting construction sites and empty buildings for sale in the real world. The situation is so bad, that many builders are forced to announce low cost projects in distant suburbs just so they have some cash flow for survival. The real world is where we need to get our knowledge from and not from planted advertorials. 

In many ways, the full intensity of the Crash is yet to be seen by most people. It will shock many, but for the few who are informed it will be an opportunity not to be missed and an occasion to create immense wealth. I hope more Happionaires look at it that way and are prepared with knowledge to make the most of it. Do you agree? 

Have a great weekend and have fun with your family!

Yogesh Chabria 

"Cash The Crash helped me learn to analyze companies and I made over 30% be investing in the company shared. An  extremely entertaining and exciting read that every investor must read.” -Dr. Sunil Chopra

Have you read it yet? 


jayesh said...

I too have always had that sense of most popular media that lots of it is very biased. As of course there main revenue is advertising. One reason I really enjoy the Happionaire Blog here is because you are so frank and not afraid to express the reality. Also in my office many people now are becoming Happionaires and really I can sense a more friendly attitude coming into them.

One request, you mentioned about some training programs and workshops in Cash The Crash. I really want to attend them and get a chance to meet you. I have been a follower of your ideas for over a year now. When will it start?

rohit said...

Even i agree it is not over as yet, I am from pune and plenty of flats, shops and offices are lying vacant. But with so much money being sloshed around isn't it likely that asset markets will go up like they did in 2003-2007, I mean even then the U.S. did not increase int rates, I agree there will be very high inflation, but since the U.S. govt has bought so many bonds will it be possible for them to raise rates. Should one buy physical gold or etf's? History does repeat itself but in a different way.

Anonymous said...

According to Dr.Marc Faber, the printing presses of the world are printing so much money that hyper inflation is guaranteed over the next few years.He also says that the stock markets and real estates will see a artificial increase in asset prices because of the cheap money available in the west now.It will have a major crash once again in due course :-(

Vinayak said...

Exactly in a very similar way as equity markets across the world will underperform over next 3-4 years we will see a major move in gold. It looks like Clsa target of Gold at 3000$ an ounce might just be before people might have thought abt it

Lets see where we head from here

Dev said...


What about buying some media stocks + gold?

I guess both should do well.

I booked profits in some, will do more if this momentum stays on...

Plan to buy gold. Which ETF is good?
I heard that the value of every ETF is same. Then what is the difference? (Their commission? lol)

Sandesh Kamble said...

Yogesh has always helped and replied to our all queries.
But still we have some fear that what if we don't get an opportunity to invest at right time.
I understand that we should not look the sensex level but only the valuations of scrips. But at this time all companies are performing very well. But mid-cap and small-cap are performing superbly at this time. Anybody can easily get attracted by such rallies in mid-cap and small-cap.
I hope these companies which are giving returns of nearly 150% to 250% just in few weeks will come down to some lower level where we can again accumulate them.
My only concern is whether in near future, is there any possibility of such mid-cap, large-cap scrips to come down to their Oct-2008 or Mar-2009 low levels?
Because I noticed some scrips like Grasim, Bhel, Ambuja Cement which did not come down very much near their lows recently.
If we do profit booking now then by when should we start purchasing again? I mean at what level we should start buying?

Sandesh Kamble said...

I myself have purchased Gold ETF from Benchmark and Quantum ETFs.
Quantum allows you to purchase minimum 0.5gm of gold unlike others which allow you minimum 1gm of gold.
Benchmark being the old fund in GETF I feel it better. I dont know why but I would tell you to choose any GETF except Kotak and Reliance.

investor_sam said...

yogesh,how do you distinguish which is better if 2 stocks are both selling at 50 paise?

The Happionaire™ Blog said...

Jayesh- Always nice to hear about the Happionaire way spreading, but this is just the beginning and we still have a long way to go. Training programs and workshops should be starting soon- a couple of months at most. A lot of Happionaires have been telling me similar things and I do know there is a major need for it.

Rohit - US government has no money. It is bankrupt and just printing paper. Feel free to buy ETF or Physical Gold whatever you are comfortable with.

Vinayak, wait for six more months and you will be surprised at where gold can go.

Dev - Most ETFs are more or less the same. Look at the volumes and one with good volumes should be bought. Or alternatively if you have Rs. 100, you can divide it and buy each ETF. Doesn't really matter, when gold rises all of them will rise.

Sandesh when something rises 150%, a smart person will sell. We need to have some more patience and wait. Even now, things are a good buy if you are looking at longer term, but if we can increase returns by 30%-50% by waiting a bit, why not wait? In the coming months there will be more collapses. The media which was screaming about how the crash is over when markets rallied over 2000 points is once again hinting at the negative.

"Following the idiot box is a great way to get rich. Of course only idiots would believe that."

Sam - Ask yourself which business model is better and which you understand better and what is the value you are getting for the 50 paise you pay.

Yogesh Chabria

Dev said...

Thanks Sandesh and Yogesh for your comments.

But do i need to book profits or sell all out in a company like say tata steel (which i bought at multiple levels and it gives 30% return on my average buy price), given the fact that india needs lot of construction (and steel) for the rest of our life(?)?

Their European subsidiary is profitable beating all analyst expectations and debt is factored in the price.

This is a company which supplies steel to low cost cars and housing!!!


Do we need to worry too much on sectors like steel, cement and pure banking in INDIA?

Sandesh Kamble said...

Thanks Yogesh for your response.
Dev, I have the same query in my mind. I have few scrips like Peninsula Land, DSK, HDIL, Tata Motors, TISCO, Indiabulls Securities, Unitech, Bharati Shipyard and many more.
And the returns I am getting at this point of time is between 120%-325%.
Though I don't have big investments in these scrips. So even if I books the profits the amount will not be very high. So again my questions is same as Dev's. If investment is big and returns are more than 200% then we definitely can book partial profit. But if the investments is too less in particular scrips and the returns on them are more than 100% then does it make sense to book partial profit or sell the entire lot of that scrip?

D Prasad said...

When are you going write about Chameleon?

Could you please share some more stocks like you have done in past?


rohit said...

Yogesh- I agree that the U.S. is bankrupt and we should all be buying paper stocks since so much of printing is taking place :), what i am only doubtful about is, if they will raise rates on the first signs of inflation, I feel they will be reluctant to raise rates, which will lead to the collapse of the dollar and hyperinflation, or stagflation, Gold prices will surely go up but i am not sure if int rates in the U.S. will???

rohit said...

Yogesh-I agree that the U.S. is bankrupt, it is no secret, and I also feel that we will have hyperinflation and very high Gold Prices, but my only point is about high int rates, I feel they will be reluctant to raise rates which in turn will lead to high commodity prices and either stagflation or hyperinflation??

rohit said...

There is a view that trillions of dollars being printed will find their way into assets, and when the problem will increase more money will be printed, and asset prices will rise even further in nominal terms, what is your opinion, is it possible if there is excess liquidity.

Siddharth said...

Dear Yogesh,

I was reading through your book Cash the Crash yesterday when i came across the point where u said someone to keep a watch at gold as a major currency is weakening.

I just want to confirm whether you referring to US Dollar. As gold is inversely correlated to the Dollar and dollar is not looking as a safe heaven for people to park their funds with.

Pls advise.



The Happionaire™ Blog said...

Dev - I rarely give stock specific advise for several reasons. I can just say that please remember that I have learnt with experience that a company with heavy debt is always risky. I have made losses in the past and also have learnt from them. Recently a couple of months ago a company that was rich in cash has rewarded me over 100%. Old mistakes can lead to new wealth.

Acquisitions made during a bull market at the peak will come to haunt now.

Interest rates are going to rise mainly in the West from the near zero percent now.

Now is a good time to sell stock gradually. Even though India is one of the best places to be invested in, returns are too good to wait.

Sandesh, do not worry after making 150%-300% it makes sense exit how much you want. There will always be new opportunities. Never fall in love with just one company.

D Prasad - I will be revealing more about my friend, The Chameleon, when the time is right. At the moment, look at gold. It will surprise you and will bring a smile to all those who hold it. Do not worry about a few percent here and there if you are going to be rewarded in excess of 100%.

Rohit - Governments can only print paper and can't create real wealth. What do you think US government is doing? Printing paper or creating real wealth?

Siddharth - You have read things very well. Old rules about US dollar being inverse to Gold, Oil, etc. are going to soon be extinct.

Yogesh Chabria

Satish Patel said...

Chameleon had suggested to buy gold at 790-810 $ per ounce. Do you think we should continue to wait for those levels or go ahead and buy at the current prices. Please advice.

rohit said...

Sandesh my friend please do not worry about the amount, If you have Re 1 and you get 100% compounded returns 30 times you will have Rs 100 crore, so please do not worry about the amount

nadia said...

No amount is too small Sandesh and as Happionaires we all need to respect Laxmi. Almost everyone at the end of the day starts small and over time build up wealth.

Rohit has said it very correctly.

Sandesh Kamble said...

Rohit and Nadia, Thanks for the reply.