Fat Boys And You - How to Make Profit in These Market Conditions - Dec 2010

8/7/2019 Fat Boys And You - How to Make Profit in These Market Conditions - Dec 2010

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Snapshot of the Report sent on 24th Nov 2010


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Helpline Numbers Available (24x7)

For health check of your portfolio, please e-mail your portfolioto [email protected] or Speak to our research analyst.


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What Next?


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Shall we start doing bottom fishing? No, its timefor building/raising CASH allocation.

Conversation between our members & our analyst

Member: What do you think, where market is likely to go?Analyst: Based on our previous market outlook report, send on Nov 24th 2010, we are

expecting a correction of 25-30% in H1 2011. Correction might have started inNov 2010 and we might see a small relief rally in Dec 2010. Sometime after MOILlisting when the euphoria of retail investors will be at peak, we are expecting freshround of selling to start. We have been advising 40 - 50% of cash allocation and to

take profits in various counters.Member: I have not sold any stocks, do I get chance in Dec 2010 to exit?

Analyst: We would advice you to partially book profit, exit from few counters afterconsulting with us and make sure that you have at least 40-50% cash in hand by endof Dec 2010. There are high probability of year end rally to take place before nextround of selling but it is advisable to slowly exit few counters and raise cash levels.

Member: Most of the small/mid caps stocks has fallen down by 20-30% ormore, shall I go ahead and buy?

Analyst: Small qty of selective stock buying can be done at current levels but only aftermaintaining healthy cash levels of 40-50%. Focus must be on raising cash rather thandoing bottom fishing. Please avoid any kind of major buying at this point of time. Wewill keep you advising on when/what to buy when the right time comes.


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Do selective stocks buying in Dec10. At right time,we will advice you list of stocks to accumulate.

Member: Do I need to buy/sell TMP or MMP Stocks to raise cash levels? Do you

think these offline portfolio will be able to achieve their long term targets?Analyst: TMP & MMP are the offline portfolios maintained at our end and replicated by you.You just need to follow the changes done every month in these portfolio. In fact TMP &MMP are exposed 60-65% only in stocks and rest in cash form. You have to strictly followthese portfolios as and when they are changed. These portfolios will be able to achieve longterm goals in spite of downturn in the market because each portfolio has kept cash levels upto 40%.

Member: What shall I do with your reco coming in Dec & Jan etc? Do I need touy em

Analyst: While sending the reco, we will advice you on the exposure you need to take at CMP.of the stock. You need to follow accordingly. Also when right time comes, we will suggestyou the list of stocks you can accumulate.

Member: I wanted to hedge my portfolio using Future & Options, can I do that?

Will your trading unit www.stoplosstrade.com help me?Analyst: Hedging is a tool used by HNI & few fund houses. If you have discipline you can make

money in trading and well you can use Nifty/Stock future & option to protect yourportfolio & make money even in falling market. One must consult their technical analyst

before any kind of trading activities.


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Dont listen to Brokerage house bullish views, listento an independent research company - HBJ

Member: I have got a mail from my brokerage house saying that market will be

bullish in Jan-Mar11 and we can see higher levels, is it true?Analyst: A Brokerage house will always show good optimistic future to you because theydont want you to get fear and stop trading. Their income is your brokerage hence theywill show rosy picture even in dull market. Team HBJ Capital knows that our 1st duty isto protect your wealth and 2nd is to grow your wealth, hence what is TRUE is what wewill say. We may not be right always but yes, we will always try to be truthful.

Member: Penny/Small Caps are down by 20-40% from their peak, shall I goahead and buy them?

Ana yst: We o not a vice uying at t is moment in spite o attractive price ecausesentiments are very bad and after all markets are driven by sentiments so let the fall getsover, let the speculative money exit the counters, let the dust settled down before buyinganything. Usually fall in large caps are followed by fall in small/mid-caps but this time itis other way round, hence when index will fall further which is more likely, we will see

small/mid-caps going down further.Member: India is domestic demand driven country, we can de-couple from the

world and grow, why do we need to bother about US or UK problems?

Analyst: Our real economy is definitely a domestic demand driven because we dontdepends on exports but our stock markets are ruled by foreign money, hence follow thesmart money or fat boys.


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Speculative Money Exiting


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Fear of price rigging and murky dealings

At this juncture, traders just do not know which stock would be next to fall. Every stockwhich falls sharply, they suspect price rigging and some murky dealings.

Few days back, a bunch of stocks were reported to being investigated by CBI. Ruchi Soya, KS Oils, Karuturi Global etc aresuspected of price rigging. The news is that market operator, Vimal Rathod was accumulating shares of thesecompanies on behalf of NRI investor C Shivasankaran or Siva as he is better known, based on insider information. Themodus operandi was pick up stake in these companies, then engineer a massive fall in the prices, then pick up majorchunks of shares thro various shell companies and then take the price to new heights and sell the entire stake at thathigh. Price rigging is suspected to have happened with the promoters involved.

y i t e zero on t ese companies on y now iva o s sta e in ing e w ic was one o t e ene iciaries oRaja's largesse's in 2G scam. And once the CBI started unraveling this tight knot, it led to Sivas other murkyoperations and thus to Ruchi Soya and KS Oils and Karuturi. He has recently picked up (officially) a 2.99% stakethrough open market purchases in Karuturi Global. Prior to that, he picked up 11.63% in Ruchi Soya and then4.29% into KS Oils.

There was also the news on 2nd December of Ketan Parekh being very much active in the markets and this time around,he is said to have honed into stocks like Pipavav Shipyard, Amtek Auto, Orchid Chemicals, GMR Infrastructure, CairnIndia, Deccan Chronicles Holdings, Reliance Industries, Punj Lloyd, Indiabulls Real Estate and the list is endless.


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The traders are completely spooked

Thats not all. Last week, the Securities and Exchange Board of India pulled up promoters of four companies --WelspunCorp, Ackruti City, Murli Industries and Brushman India -- for allegedly rigging their own stocks. The promoters of

these companies allegedly colluded with stock market operators, Sanjay Dangi and his associates and the AshikaGroup, to manipulate their stock prices. Following Sebi's orders, stock prices of these companies fell sharply. AckrutiCity, Welspun Corp and Murli Industries fell by 20, 27 and 20 per cent, respectively, the next day. While manyoperator-driven stocks allow traders to make a quick buck, for retail investors who have invested in these stocks,things could be difficult.

How does one know if the stock is operator manipulated or sentiment driven?Di icu t tas ut w at one can o is eep a s arp eye on t e price movements. I s are price uctuates very s arp y an

price does not justify the fundamentals, clearly something is amiss. Small companies typically are breeding groundsfor such operators and best to stay away from them.

What about companies where promoters could manipulate the books to show bumper numbers?

Such manipulation is not sustainable over the long run, so watch out for quarter numbers and that should be able to giveyou even the slightest inkling of any manipulation. There are companies which have a tarnished reputation but to washthat blemish, they change the name of the company or float other companies. But unfortunately, character does notchange. So the same routine can be seen in companies whose promoters have a track record of insider trading.


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Follow the Fat Boys


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You can't beat the Fat Boys, you can join them.

Evidences mentioned below points to a top in the market during Dec 2010. You can also see

how Fat Boys has sold Puts in Oct10, brought down markets in late Nov10 and mostlikely to cover their shorts in Dec10. You can see how smart money who knows the rulesof the game is playing with retail money.

Back in October everyone was certain that the markets were going to fall. We suggested that nothing wasgoing to happen in Oct10 because the public were cautioned & buying puts as insurance and the FatBoys were selling them (writing Puts). At the same time the Fat Boys were going short (Selling Nifty

etc). We suggested a new highs in Oct10 or early Nov10 followed by a pullback (down ward) into the.

That is what has happened. Now we see the puts expired worthless and the Fat Boys are back knocking at thedoor, looking to cover their shorts. We have a nasty looking head and shoulders top forming as

well. The public and small funds are teetering on the precipice of another sell off. The tone of the mediahas turned more bearish and they are already trotting out the bears . This time there is no signs of tradersbuying protection against a market decline. We are already down 10% from the peak and Fat Boys aremost likely to cover their short position sooner or later which will create a temporary bounce in themarket during Dec10, call it relief rally or call it a pullback rally, but it will be short lived.


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If you are not with market movers you are a victim.

During last 3 weeks of Nov10 we have seen market falling by 10-12% from the peak. One can expect a

relief rally of 4-5% in Dec10 followed by further fall which will spread across 1st half of 2011.

We would advice you to build your cash position in Dec10 & go slow in fresh buying. Listing of MOIL whichis expected with 35-50% gain on Dec 15th 2010 will bring maximum euphoria among retail investorshence it will be best time for Fat Boys to start fresh round of sell-off.


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Just follow the Fat Boys (Market Movers)

Fat Boys made money in Oct10 by Selling Puts and making money in Nov10 by Selling Calls.

You can see in the previous page, Nifty chart for last 6 months. It graphically shows how we reached the point we are

at now. We have formed a head and shoulders top pattern because of the dynamics created when the public loaded upon puts in Oct10 months to try and beat the Fat Boys. The put options all expired worthless and the Fat Boys keptthe premium. Now in Nov10 public was not buying any insurance (they though since the market did not fell down inOct10 so it will not fall in Nov10 also). On top of that, they loaded long and are totally exposed. Coal India, IPOhas made good amount of money for retail investors and that was the best time when Fat Boys can start selling

because public were ready to buy anything & everything. Its very simple do just opposite to the whole masses.

Here's the thin A ear end rall followed b the fall.Look what happened when we topped out the rally in early 2010. Due to cyclicality, we fell back into February. If wetop out and start to fall now, we should fall all the way into February again and it won't be pretty. My point is that it istoo early to start down into the next cycle low. We have to be open to a solid year end rally occurring again this year.

Why do we expect year end rally?There are two fundamental reasons. First of all, we know Bernanke and co. want to see higher asset prices. Theyprobably don't want a stock market plunge putting a damper on our Christmas spirit and purse strings either.Secondly, there are a lot of Christmas bonuses tied to fund performance at year end. If you are the Fat Boys, why notlet the funds buy the price up into a strong, year ending close.


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Sovereign Debt Default


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Sovereign Debt Default / Bailout and ContagionRisk Graph - November 2010

Iceland, Greece & Ireland are bailed out. Portugal is next with Belgium and Spain to trigger a probable bailout of sortsduring the next 12 months. However it is possible that a line could be drawn under the bankrupting PIGIBS withSpain, especially if new mechanisms are introduced by the Euro zone for a more orderly partial debt restructuringthat is able to release pressures on the likes of Italy and France and therefore have far less of a contagion effect. Nextround of sell-off in stock market will be the side effect of debt default from Euro zone.


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New phase of debt crisis! Striking NOW! Europe was sinking deeper into a new, more severe phase of its sovereign debt crisis.

This crisis is unfolding despite Herculean rescues by the European Union, theInternational Monetary Fund and the U.S. Federal Reserve. Its striking right now.And its threatening to spread to allof the worlds big debtor nations, including the

biggest of all the United States.

The Real Trauma of The Irish Debt Crisis . Default insurance is the telltale indicator.

And right now, the cost of insuring 10 million of 5-year Irish government bondsagainst default has skyrocketed to an extremely high 600,000.

Thats 55 percent more than it cost for the same insurance in the aftermath of the

Lehman Brothers failure a time when it seemed the entire world was on the brinkof collapse.

Its 50 percent more than the cost of insuring equivalent Greek debt at the peak ofGreeces first round of financial difficulties earlier this year.

Its at least DOUBLE the cost of insuring the debts of deeply troubled lesser nationslike Romania, Lebanon, Latvia, and even Iceland.

Most shocking of all, todays 600,000 price tag for Irish default insurance is higher

than it was BEFORE the European Union and IMF first announced their intent toengineer a $113 billion rescue for Ireland just eight days ago.

Earlier this year, when Europe announced a similar bailout for Greece, traders in thiskind of insurance credit default swaps gave Greece at least a 30-day reprieve.Now, theyve given Ireland no more than three days.

Investors obviously dont believe promises by politicians anymore.


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Will U.S.A become like Japan? No Way!

Lets Start With a Little 1990s History in Japan

Japans economic malaise began with twin bubbles first in its stock market, which peaked in 1989, and then in realestate two years later. Since then, the countrys overall debt levels have skyrocketed to more than twice the countrysGDP its economic output has been rising less than 1 percent a year on average and consumer prices have fallenin seven of the last ten years.

And all that has happened in spite of the fact that the Japans central bank has kept interest rates at or near zero for nearly a

decade! Japan try other relatively experimental approaches such as quantitative easing, in which the central bankopenly buys loans, securities and other assets. For a few years it looked like a turnaround was coming, but thosehopes were dashed by the recent global economic meltdown. And today, despite all its efforts, Japan is still waiting fora sustained rebound.

We are lucky to be in India

The U.S. is also much different than Japan in terms of its demographics, trade balance, financial system, savings rate, andposition on the global stage. And even the fact that the Fed remains extremely concerned about the risk of deflationrepresents a level of commitment that Japans policymakers lacked in the first few years after their crisis. This battle isfar more global in its nature especially because Europe is wrestling with its own massive problems. Best way is toinvest in emerging economies like China, India, Brazil etc


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Top 3 Investment Avenues


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Buy Gold ETF & Crude Future

In general, commodities tend to have a up move when theU.S. dollar is weak, and a down move when the

greenback strengthens. With news of a compromiseon extending the Bush tax cuts, recent strength inthe U.S. dollar, and signals from China it may raiseinterest rates, commodities are likely to fall for shortterm.

Gold : Outlook for gold is bearish for short term &bullish for second half of 2011. The currentcorrection could be attributed to profit booking, stillwou prove to e sa est investment ve ic e. oushould wait for next 1-3 months and buy Gold ETFonly after the short term fall is complete. Allocate apart of the portfolio in order to diversify & mitigaterisk.

Crude: We can expect a short term correction in crudeduring next 1-3 months followed by upside. Go longin Crude future only after correction is done. Itseems to be momentum based buying but stilltechnically a "buy on dips" story.


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Short Nifty Future / Buy Nifty Put Options

There is no doubt that we are in the down trendwith minor ups in between. 100 EMA is

trading at 5946 & 200 EMA is trading at5885. If you want to trade or hedge yourportfolio, you can do so by following twostrategies..

1stTake a positional short position inNifty Future (you might need to rolloverfor next 2-3 months to maximize you gains).

2nd Buy Nifty Put Option prefer for Jan2011 series. In case of market correction,these options can multiply multifold.

For more about target & stoploss contactwww.stoplosstrade.com or call09886403791 (JK). Please consult yourtechnical analyst before taking abovepositions.


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Follow TMP & MMP/ Join HBJ Capital Ventures LLP

The Millionaire Portfolio (TMP) & Money Multiplier Portfolio (MMP)

Most of our members has already taken our two most popular offline portfoliomanagement services called TMP & MMP. These portfolios are managed by expertportfolio manager who keep track of each stock, add/remove stocks from theportfolio & share it with the members which is replicated by them. In spite of the

current market fall, our TMP & MMP were able to sail thru. It means you need ae cate port o o manager to manage your un s o ne. a e t s serv ces to

maximize your returns.

HBJ Capital Ventures LLP Investment Unit of HBJ Capital

After successfully running various investment packages & offline PMS, we have started

an asset management fund where your own HBJ Capital will manager your money.The minimum contribution for this fund by a partner is INR 50 Lacs, so if you areinterested you can approach us at [email protected] to join this call +919886736791 (Mr. Sandeep Jain).


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HBJ Capital Services Pvt. Ltd.

#912, 1st

F Main, Girinagar II Phase,rd -

Visit : www.hbjcapital.in

Contact: +91 80 65681133/34, Mob : +91 98867 36791

Bangalore |Chennai |New Delhi |Pune |Hyderabad

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DisclaimerThis document is not for public distribution and has been

furnished to you solely for your information and must notbe reproduced or redistributed to any other person.Persons into whose possession this document may come

are required to observe these restrictions. This material isfor the personal information of the authorized recipientonly.

The recommendation made herein does not constitute an offerto sell or solicitation to buy any of the securitiesmentioned. No representation can be made thatrecommendation contained herein will be profitable or that

.to be reliable but do not guarantee its accuracy andcompleteness. Readers using the information containedherein are solely responsible for their action.

HBJ Capital, or its representative will not be liable for therecipients investment decision based on this report. HBJCapital, officers, directors, employees or its affiliates mayor may not hold positions in the companies /stocksmentioned herein.

Documents

Fat Boys And You - How to Make Profit in These Market Conditions - Dec 2010