Sunday, August 31, 2008

NYMEX crude drops...

Here is the good news to one and all as the crude started sliding, despite a hurricane heading towards some of the off shore oil installations in the united States. The Hurricane Gustav poised to enter the Gulf of Mexico, threatening the crude to move as much as 3 per cent over the week earlier.

The NYMEX settled down 13 cents to stabilize at $ 115.46 a barrel mainly due to a strong US dollar but earlier the week saw the crude to shoot as much as $118.76.

The US stock market is anxious about how the Hurricane Gustav will move in the days to come and the holiday to stock market on Monday due to Labor Day will add fire to the anxiety. A clear picture will emerge only after 4-5 days to assess the possible damage that may be caused by the hurricane.

The US energy companies are already on the alert mode and shut down productions and evacuated personnel to avoid further damage to the properties. The US government is ready to release its stock pile in the event of shortfall in the production of crude.

Bad news for UK economy?

The British economy is set to be performing in a poor manner and arguably it could be the worst in the last 60 years period and certainly is not sweet news to any British. The assessment follows a warning from Bank of England policy maker Mr. Darling and by the end of this year, almost 2 million people could become unemployed; the catch point of the problem is that the slowdown will be more profound and longer lasting than it was already assessed.

Asian stocks gain

Snapping the four weeks loosing streak, Asian stocks started looking up again after the news about strong US economy. Shares of Motor companies like Toyota Motor Corp, Honda Motor Co., fared better. To cap it, Cnooc, China’s largest oil explorer gained a lofty 13 percent this week. To keep pace with it was another Chinese entity, called Sinofert Holdings ltd surged 23 per cent, making the shareholders very happy.

Sunday, August 24, 2008

Asian stocks in a jittery!

Asian stocks are again in the doldrums and fell for the fourth week and touching the lowest point since July 2006 mainly due to fall of technology and banking shares. Samsung Electronic Corporation fell almost 4 per cent owing to rising US whole sale prices and decrease in housing rates. Sumitomo Financial Group Inc followed suit with a reduction of 6.9 per cent in its value.
Asia’s most profitable carrier Singapore Airlines too saw the southward trend with 2.5 per cent shave off. Rise in the cost of gasoline is cited as the major reason for losses of the airlines. Rising oil prices forced the consumers to become spendthrift and with a higher inflation come an increased commodity prices.
Japan’s Nikkei 200 stock average too dropped 2.7 per cent and the overall bench mark indices saw a reduction in most of the markets. The maker of the top selling video games, Nintendo, declined 5.2 per cent to 49,000 in Osaka.
Banks got the beating!
United States housing plummeted 11 per cent last month to its nadir in 17 years and the prices paid to the US producers in July rose to 1.2 per cent. Morgan Stanley, Lehman Brothers Holdings and Goldman Sachs Group Inc hope to write off a combined $6.5 billion in the third quarter.
Mr. Ben S. Bernanke, the Chairman of the Federal Reserve outlined a proposal widely thought of as “ambitious” on Friday for overseeing the credit markets and preventing the return of the dreaded credit crisis and he described his efforts would involve an attempt by regulators to develop a more fully integrated overview of the entire financial system.
Nifty down
The Indian National Stock Exchange Index popularly called “Nifty” future lost 2.5 per cent over the week to close at 4324.1 points against the previous close of 4434.9. The Nifty August future is facing volatility with wild swings.

Sunday, August 10, 2008

Are you ready to sell your stock when it crashes?

In the financial circle, end of each quarter is treated with both passion and caution. Assume that you have purchased a stock expecting that its quarterly results would be very good and with everyone’s expectation on the positive side, the value of the stock soars naturally prior to the declaration of the results. This situation is called “generation of hype”. If the results do not meet the street targets, the stock bears the brunt.

Do you think when the outcome does not meet the market expectations, you have to necessarily sell the stock or in other words, the company’s performance is not up to the mark? Then how will you assess the performance of the company and in turn the performance of the stocks? What to look for?There are some basic factors to be looked at while assessing the soundness of the stock and its worthiness to sell. Here are some…

One time expenditure
If fall in profit is due to one time affairs like legal disputes, VRS expenses for employees etc, it may not be given more importance while evaluating the stock. The contrary is true in that if the profit is due to any one time boost like sale of real estate and buildings etc. it has to be taken with a pinch of salt.

Seasonal business
Profit in some enterprises fluctuate depending on the season like Hotel business, cement industry etc. and hence the performance of a quarter alone will not reflect the health of the company in toto.

Trends in input cost
The cost of inputs determine the profit of a company and this is true in case of airlines and automobile industries. When the price of fuel goes sky high, the aviation industry incurs huge loss while the higher cost of steel dents the profit of the automobile business.

Expenses for the launch pad
By launch pad, I mean the cost incurred to launch a new project or scheme, which is of course not a continuous affair. This could also be due to expenses involved in the research and development of the product. Hence an investor shall be choosy and evaluate whether the launch pad cost really had an effect on the chosen stock.

To conclude, quarterly figures of a company need not necessarily reflect the true financial strength. Sustainability in earnings and general business conditions are more important. It is the duty and responsibility of the intelligent investor to see if there is a systemic decline in the business or profitability. If proved so, you can make the right decision to sell them off. If the fall is temporarily due to quarterly figures not meeting the street prices, then need not get panicky and sell your stocks.

The prudent investor will weather the bumps patiently to get a smart return and the wait will be definitely worthy!