STREET TALK- MARKETS BEARISH

Probabilities: Where the markets might be headed

1. The 1-3 month view for the Nifty is super-bearish.

2. In the very short term, till after the Fed decision is priced in next Tuesday

night, the Nifty could see a rally of sorts.

3. Banks will lose a lot of money this year while their construction-companyborrowers

slow down, and in due course, also lose money while land+building

prices slip.

4. Since ten out of ten stock market crashes this century have always resulted in

economic contraction, so will this one see the near-same result. To check the

veracity of this statement, check the charts since the Harshad Mehta boom/crash

onwards. One big reason for a contraction is that the "collective mood" goes

terribly sour after a stock market crash. That makes people hold back spending

and focus on savings. Lesser spend means a genuine drop in production by the

manufacturing sector. Ofcourse, a drop in spending deeply affects the service

sector too. One doesn't go rushing to eat out in expensive restaurants. One

doesn't overspend on "party" clothes. One holds back a holiday to Europe, and

settles for something exotic within the country itself at half the cost. One holds

back from buying another house (for obvious reasons in the falling housemarket!).

One holds back from exchanging this two-to-three-year-old car for a

newer one. And one holds back throwing parties....

.. save for the marital anniversary party.

...That's key, come recession or stock market crash, to providing conjugal-dutyon- demand.

Action required by you:

>Exit ALL your deliveries and longs in futures.

>Use all rallies to short the Nifty and Bank Nifty.

>There is NOTHING to buy now on delivery. Nothing at all.

Not when each

company struggles with slowdown issues in the months and quarters ahead. Last

week only two chaps weren't able to push their merchant bankers to raise cash

from the public: Unitech and Jet Airways. But in future weeks, be sure that this

list will become 20 to 200 within 24 hours, but when the - - - - hits the ceiling. Not

right now.

GOLD trend

MONTHLY : BULLISH

The trend is still long but take note that the reversal stop has been upped today

to 12315.

Though it might drop off on a given day, it could rise after the Fed cuts next

Tuesday night.

But that last burst will just be that, the Last Burst in gold for many months.