I couldn't resist writing on the chaos in the stock markets the world over. In 2008, crude oil was $145 per barrel and today its close to $50 per barrel.
In the last 2 days, stock markets have fallen anywhere between 3-5%. The new year has not taken off well!! Not a single industry / company, related or unrelated to crude oil, has survived the bloodbath on the stock markets. E.g. I don't see a direct correlation between stock prices of IT companies vis-a-vis price of a barrel of crude oil!
So at what price of crude oil will global stock markets focus on nothing but the fundamentals of a company and its future growth prospects. The answer - no price is the right price.
In a market mayhem, the mantra is 'Becho Phir Socho' (Sell First and Then Think). In the last few days, I have tried to make sense of why falling crude oil prices are creating so much havoc. Some of these commenatries are as follows (my comments in italics):
- OPEC countries have not reduced supply and global demand has fallen. I don't know if demand of a growing population (across the world) in the cold winter months could actually trigger such a massive fall in demand. I am also not sure if increased use of renewable sources of energy is creating the decrease in demand for oil
- Euro v/s Dollar parity is at a multi-year low. Since the dollar has been the world's global currency, why should its dominance become a problem overnight!!
- Greece will exit the Eurozone. This small country had people panicking 2 years ago too. GDP of Greece represents 0.39% of the World Economy. Can a country cause US stock markets to tank 3%! Wow.
- The 100 day moving average has been broken and hence the trend is bearish. Though I am not an expert in technical anaylsis of stock price movement, but if the markets turnaround in the next one week and if we use say a 120 day moving average, will the trend become bullish?
I can go on and on but none of the commentaries makes sense to me. My years (not comparable to the experience of market experts) in the stock markets has taught me one thing - any Tom, Dick and Harry on a business channel can explain just about anything of why a stock / index moved in a given direction post-facto and sound convincing. They talk with intelligent sounding stuff which the common man tends to accept as the truth. Even I sound intelligent at times. :-)
Conclusion: None of the experts on business channels place their money on their views. They even tell you that they have no personal investments in their recommendation. Take their views with a pinch of salt. Decide for yourself, place your bets, be disciplined in your entry and exit criteria for a stock. "Socho Phir Karo" (Think Before You Do).
In the last 2 days, stock markets have fallen anywhere between 3-5%. The new year has not taken off well!! Not a single industry / company, related or unrelated to crude oil, has survived the bloodbath on the stock markets. E.g. I don't see a direct correlation between stock prices of IT companies vis-a-vis price of a barrel of crude oil!
So at what price of crude oil will global stock markets focus on nothing but the fundamentals of a company and its future growth prospects. The answer - no price is the right price.
In a market mayhem, the mantra is 'Becho Phir Socho' (Sell First and Then Think). In the last few days, I have tried to make sense of why falling crude oil prices are creating so much havoc. Some of these commenatries are as follows (my comments in italics):
- OPEC countries have not reduced supply and global demand has fallen. I don't know if demand of a growing population (across the world) in the cold winter months could actually trigger such a massive fall in demand. I am also not sure if increased use of renewable sources of energy is creating the decrease in demand for oil
- Euro v/s Dollar parity is at a multi-year low. Since the dollar has been the world's global currency, why should its dominance become a problem overnight!!
- Greece will exit the Eurozone. This small country had people panicking 2 years ago too. GDP of Greece represents 0.39% of the World Economy. Can a country cause US stock markets to tank 3%! Wow.
- The 100 day moving average has been broken and hence the trend is bearish. Though I am not an expert in technical anaylsis of stock price movement, but if the markets turnaround in the next one week and if we use say a 120 day moving average, will the trend become bullish?
I can go on and on but none of the commentaries makes sense to me. My years (not comparable to the experience of market experts) in the stock markets has taught me one thing - any Tom, Dick and Harry on a business channel can explain just about anything of why a stock / index moved in a given direction post-facto and sound convincing. They talk with intelligent sounding stuff which the common man tends to accept as the truth. Even I sound intelligent at times. :-)
Conclusion: None of the experts on business channels place their money on their views. They even tell you that they have no personal investments in their recommendation. Take their views with a pinch of salt. Decide for yourself, place your bets, be disciplined in your entry and exit criteria for a stock. "Socho Phir Karo" (Think Before You Do).
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