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Showing posts from July, 2007

'CORN'y Connection

A common theme in investing is that, in the long-term, asset prices adhere to fundamentals. The road to adherence is often an irregular one, prices overshoot and undershoot along the way...but ultimately, they behave like obedient children.
Sometimes though, the relationships between asset prices are hidden from the eye. Peer through the layers and one might just be able to come up with a relationship that could form the basis of a trading strategy. 'Corn'y Connection, is one such linkage...

The Craze for Maize Lot of factors have driven corn (maize) prices of late. The rush of demand for ethanol has ensured that corn finally got its due. Apart from the fundamental factors of demand and supply, speculative demand for the commodity has served to increase the volatility in corn prices. Not surprisingly, corn prices have surged quite a bit (refer adjoining figure).

Along with the rise in corn prices, the 200-day historic volatility has increased significantly. Corn, and indeed other…

Is India Over-priced?

That is a question that is on everyone's minds, after the bellwether index, BSESensex hit its all-time high. A euphoric rise is followed by a 'correction'. And so everyone believes.

I believe that an investor with an eye on the long-term, should spend his time and energy in understanding the big-picture numbers, rather than short-term gyrations that is never under his control. The markets may be foolish in the short run...but it has the good habit of correcting itself in the long run. And numbers get their due.

In this post, I will take a look at the question from a fundamental perspective. I will not predict the Sensex level, which is something best left to the TV channels and the 'experts'. I shall present my perspective of the numbers as they stand today.

The table juxtaposes and compares major Asian countries on key fundamental parameters like EPS growth, the P/E multiple, Return on Equity and Return on Capital Employed. Finally, I have added the Price-to-Earni…