Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

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Is a Recession Imminent?

Definition of a Recession: The textbook definition of a recession is two quarters of negative GDP growth. Some examples of recessions in...

Tuesday, 23 December 2014

BRIC Currency Crisis Bad for Indian Banking Stocks?

Weakness in the Indian #Rupee will most often translate into weakness for the Indian banking space as potential hawkishness forced on the #RBI in defense of the Rupee could hurt bank margins. The Rupee has weakened considerably since Russia raised interest rates to defend the slumping Ruble and more recently with China devaluing the Yuan.

Recent  topping action in the bank index could suggest a possible sell off in this space in anticipation of further Rupee weakness and potential hawkishness from the RBI. Just going back to August 2013 banks corrected over 30% when the Rupee fell to over 68 Rupees to the dollar and the RBI embarked on some serious tightening raising the overnight lending rate from 7% to 9%.


Tuesday, 16 December 2014

The dominoes keep falling one after another

Lets take a look at a few charts courtesy yahoo finance and market watch.com. First we started with the well over 95% crash in the Baltic dry index (#bdi).
Hottest Deals On Refurbished Apple Products | JemJem DMS Baltic Index I (DBIAX)
Then we had a over 40% plunge in #gold and #silver prices as symbolized by the respective ETF's:

share prices

This was matched by over a 40% plunge in base metals:

Followed by the dramatic over 50% plunge in #oil:
Symantec Corp.

This has translated into a rout in the junk bond market:
SPDR Barclays High Yield Bond ETF (JNK)
Which will most certainly nail banks which have exposure to this toxic stuff:
KBW Bank Index (^BKX)

No surprise then at the flight to quality bid emerging in US treasuries and the #dollar:
Treasury Yield 30 Years (^TYX)
PowerShares DB US Dollar Bullish ETF (UUP)

And carry trade liquidation should start any moment with a bid for the Japanese #Yen:

All in all we have sown the seeds for the great depression of the 21 st century and the U.S Fed and its fellow central banks can do absolutely nothing about it.

Monday, 15 December 2014

Deflation to trigger junk bond rout?

The deflationary collapse of oil is clearly threatening to take down other risky asset classes with it, most notably of late the junk bond market
SPDR Barclays High Yield Bond ETF (JNK)

the makings of a brand new financial crisis!

Thursday, 4 December 2014

Collapsing Oil price flat out deflationary

The recent 40% decline in oil the past 6 months is flat out deflationary. Look at the popularly traded oil ETF. This taken together with the collapse in other industrial commodities has generated a major deflationary signal. The collapse in the Euro also lends further support to the deflationary theme emerging.
United States Oil ETF (USO)
iShares Silver Trust (SLV)
SPDR Gold Shares (GLD)
The last time oil approached it's cost of production was just before the financial crisis of 2008. Just a matter of time before the collapse in gold, silver, copper, oil and other industrially sensitive commodities spreads to other risky asset classes like stocks.

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My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.