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September 12, 2005
Questions about the IIF, Mon., Sept.12, 2005, 12:55 PM
I have received quite a number of questions about my call for a top on the India Fund (IIF). A couple came from Seeking Alpha, and a few from readers, including this one I just got.
Hi Bill. Just a quick question time pending on your end that I'm curious about and perhaps your other readers are as well. You claimed the IIF (India fund) would peter out and stall if not decline as it was up significantly and at a premium to its NAV. It has only surged further to the upside. What I'm curious to know is why the Katrina disaster and the surge of oil to $70 actually had that market churn higher. My studies show that as these markets mature and form stronger US ties their correlations to the developed markets tighten. Also studies show that in times of a crisis all markets react the same. This market went to new highs on surging oil and a beaten US market. I'm lost as to why my studies are proving futile in understanding global economy. India is a heavy importer of oil and as they get wealthier more cars and industry require oil. Why did I not get a buying opportunity?
If you could address this point it would be great since you already did a piece on IIF. Cheers /D"
D: I published a response on Seeking Alpha's blog because they wanted one too, and I've been too busy to do it here. I will try something quick right here, and then respond in detail in a week or two.
The IIF from the top that day that I noted a topping process to its subsequent low within a week or 10-days was -10.0 pct. So time horizon is important. If you are a trader, like me, who seeks gains of 7 pct to 14 pct say four to five times a year, then I made the correct call.
Then on Aug-30, all equity markets took off after-Katrina, which I've pointed out, including India, and IIF. As I have been saying, I expect that boost from Katrina will peter out, including for India; probably this month.
As to India and oil, I think the answer is in the tight floats of the few good quality stocks there. So they are very volatile. Right now they are being squeezed up. If six months ago, you had asked experts where they thought the economy and the equity markets with such a long period of $65-70 oil, not too many of them would have been forecasting a 10,700 Dow.
But Katrina has had its impact, and there will be after-shocks to come.
Here is a re-print of my comment today to IndiaStockBlog.com from Seeking Alpha.
The IIF traded down -10.0 pct immediately after I called a top in mid-August.
Now it has rallied again post-Katrina, and is up about +100 pct in the past 12 months. As I think you know by my strategic and tactical approach to trading, when RSI gets as high as it is for IIF, I look for exit points. I am never trying to nail the ceiling.
It could be a lot higher than my reach. Besides, I know that the keys of the cash register are within my reach. :-)
Posted by Posted by Bill Cara on September 12, 2005 12:54:35 PM | Category: Japan