morning thoughts...
The markets remained highly volatile on back of greek and chinese issues and is likely to follow the same pattern in the coming week .
Technically the markets are following a sluggish pattern and will find supports at around 8300 on the lower side and resistance at 8430 on the upside.
The economic slowdown and debt bubble in China therefore sounds the red alert for commodity prices. Prices of commodities like iron ore have hit 5-6 year lows in recent days. And the correction is far from over!
Anyone looking at metal stocks from the PE perspective will find the multiple too high in coming quarters as earnings get depressed.
However, the secret mantra to investing in commodities is - being fully in cash at the top of a commodity or a business cycle and being fully invested at the bottom of it. In other words, as commodity prices crash, the opportunity to invest in commodity producers will become ripe. The logic behind this principle is grounded in fundamentals of the commodity cycle. When commodity prices rise, new capacity comes in to take advantage of it. The trickle then eventually turns into a deluge to the extent that it starts putting pressure on prices. The falling prices in turn put pressure on the debt servicing capability of the players with the maximum being on the one with the most inefficient cost structure. Eventually the debt gets written off, the capacity starts declining and within few years, the cycle starts again.
So, while everyone else worries about what happens next to Grexit and China's stock markets, keep your eyes firmly fixed on the most fundamentally sound companies in the commodity space.
Coming to the commodity levels bullions and energy can be added at lower levels whereas base metals remains a sell on rise.
Monday wealth gains
Buy gold , silver , crude
Buy bpcl 900 ca , yes bank 800 pa
Buy jbf inds , coal india , zee
Sell axis bank , bhushan steel
Buy nifty and bank nifty on dips and sell on rise - dual trades
www.astroeyes.blogspot.in
The markets remained highly volatile on back of greek and chinese issues and is likely to follow the same pattern in the coming week .
Technically the markets are following a sluggish pattern and will find supports at around 8300 on the lower side and resistance at 8430 on the upside.
The economic slowdown and debt bubble in China therefore sounds the red alert for commodity prices. Prices of commodities like iron ore have hit 5-6 year lows in recent days. And the correction is far from over!
Anyone looking at metal stocks from the PE perspective will find the multiple too high in coming quarters as earnings get depressed.
However, the secret mantra to investing in commodities is - being fully in cash at the top of a commodity or a business cycle and being fully invested at the bottom of it. In other words, as commodity prices crash, the opportunity to invest in commodity producers will become ripe. The logic behind this principle is grounded in fundamentals of the commodity cycle. When commodity prices rise, new capacity comes in to take advantage of it. The trickle then eventually turns into a deluge to the extent that it starts putting pressure on prices. The falling prices in turn put pressure on the debt servicing capability of the players with the maximum being on the one with the most inefficient cost structure. Eventually the debt gets written off, the capacity starts declining and within few years, the cycle starts again.
So, while everyone else worries about what happens next to Grexit and China's stock markets, keep your eyes firmly fixed on the most fundamentally sound companies in the commodity space.
Coming to the commodity levels bullions and energy can be added at lower levels whereas base metals remains a sell on rise.
Monday wealth gains
Buy gold , silver , crude
Buy bpcl 900 ca , yes bank 800 pa
Buy jbf inds , coal india , zee
Sell axis bank , bhushan steel
Buy nifty and bank nifty on dips and sell on rise - dual trades
www.astroeyes.blogspot.in
