KQ Newsletter #1

Your best 1900 rupee investment !” KQ Newsletter #1, Feb. 29, 2008
February 28, 2008

The KQ Newsletter–
Your best karma-changing resource on the web.
Issue # 001, Friday, February 29, 2008. Published Fortnightly.

  • Your best 1900 rupee investment

  • Watching the ‘Housewife Index’

  • “Gloom Boom Doom!”

Make your best 1900 rupee investment this year to increase your wealth karma… Watch the ‘Housewife Index’ for signals on the economy and investments, especially when it is ‘Old gold for new (stocks)’ … The Budget ’08–“Gloom Boom Doom” … Cry all the way to the Bank … Activate your wisdom chakra daily

Welcome to the first issue of “KQ”, and the near-ending of the financial year 2008. The past year has been hysterical as far as the stock markets investment universe goes. Signs are that the hysteria will continue for a while.

The Finance Minister will be giving his annual budget speech today and investors and markets are looking forward to some magic. However as the situation stands today, people are very hesitant to ‘invest’ because markets crashed, but this is a good potential investment opportunity. The question is–where? In this issue of “KQ” and going forward, I am going to be writing about these topics and healing money karma.

Many of the visitors on our website want to know more about changing karma for enhancing financial health and wealth growth. In addition to working with karma-changing energies and healing processes, there also need to be lifestyle changes, savings and financial planning. I will be discussing these and other life situation matters in “KQ”.

The “Housewife Index”

Today’s investment conditions are a natural outcome of the drunken stock market party past year and particularly the past few few months. Last November with the S&P CNX Nifty benchmark index at 5,900 and the BSE Sensex around 20,000, housewife-investors asked me if they should sell more gold and invest in the stock market.

It was a manic frenzy. Anyone who could scrape up money was buying up anything that was flying around–new, old, proven, unproven, past performance no bar! There was no consideration whether the stocks were bats or an eagles–everything was flying high! Investors were high on the prospect of a magic mountain of riches–the stock market. So sure were they, people were borrowing money on interest to invest in the stock markets.


Historically, over the past 10 years the value of the rupee against gold dropped by 60%. Or, stated in another way–in that period, gold prices have increased by about 160%. 10,000 rupees worth of gold bought in November 1997 would have been worth 26,000 in November last year–more today.

The buying frenzy, borrowing money on interest for stock buys, and the sale of old-gold to buy the “new gold” of stocks told me clearly–“Time to get out of the stock markets and get into cash, real money.”


  • Consider this: Trusting housewives and middle-aged moms are usually the last to take a decision about buying into a ‘good investment’. So, when they start selling their old gold to invest in stocks, or borrow money for this, it is time for a reality check–Who were these buyers driving up the market? What were they buying, and most importantly–Why? The answers were not encouraging at all.

As a hedge against inflation, you can hold actual pure metals. Jewelery is NOT an investment as it does not give back its inflation-adjusted cost price on re-sale. One can consider jewelry as an ornamental feel-good factor, but it is not an ‘investment’.

Precious metals like silver and gold have traditionally been a hedge against inflation. In reality it is a hedge against the mismanagement of finances by politicians who simply print paper money to bail themselves out from taking politically unpopular monetary decisions. This increase of paper money not backed by assets of value, is a major contributor to inflation.

While currently the prices of gold and silver are at a high, in real terms they are not overvalued. However, I expect that gold and silver prices will dip before going up again.

Here is an article that says the Indian gold boom may be over for a while… Government’s public sector enterprise MMTC plans to import about 30% less gold over last year. At the same time, it also plans to set up a gold refinery and medallion manufacturing units with retail stores countrywide.

The MMTC management is clearly bullish on gold. Evidence of this is that even though their short-term targets are lower, MMTC is looking at setting up a commodities exchange in collaboration with Indiabulls Financial Services. Precious metal trading will clearly form a significant part of these ventures. MMTC’s precious metals business tallied up at 13,300 crore rupees in 2006-07. By the end of this financial year (March 31, 2008) this business is expected to go over 17,000 crore rupees.

Clearly, gold is still good!

“Crying all the way to the bank”

Given this scenario, when I was asked what I was doing with my portfolio (the Sensex around 20,000 and the global economy uncertain), my answer was–“I am liquidating most of my portfolio and going into cash… money, before the stocks fall off the magic mountain.”

People were doubtful of my opinion. The Sensex was expected to cross 22,000 and reach 25,000 by March. I was told I was going to miss a great opportunity and it seemed to be proven when the Sensex crossed 21,000 in January. Those who followed my advice went crying all the way to the bank–‘oh, we should have/could have profited more…’, they said.

Then came January 22 and we saw the greatest intra-day Sensex fall where it plummeted to 15,332 down 2,273 points before climbing up again. Now, one month later, the Sensex dithers around 17,500: yo-yo-ing daily. (Incidentally those falls were good buying opportunities if you took them.)

The course of share prices rising or falling is not a straight line graph: there is an upward or downward movement followed by some retracement in the opposite direction before stocks again begin to move in the broader trend. A major drop in the indices can typically be anywhere from 15% to 30% or more. Here the value of the Sensex ran up from 14,000 to 21,000 or up 50% from January to November, practically without stopping for a breather. Another indicator that retracement was due.

“Gloom Boom Doom”

Dr. Marc Faber, (author and publisher of the ‘Gloom Boom Doom Report’ (, is a respected investment advisor and fund manager specializing in Asian economies. A regular on CNBC-TV18, he recently said in an interview: “I think in India, we could easily revisit around 14,000 first and then probably eventually between 13,000 and 12,000 on the index (Sensex).” You can read the CNBC interview here.

While I don’t necessarily subscribe to Dr. Doom’s figures, I would consider buying opportunities at 16,500 and below, of selected stocks that I had in my portfolio earlier and which had sound businesses, dominant market positions, and a good past track record.

I base this on the understanding that shares of these good companies should appreciate about 15% annually. This is an assessment based on past historical performance and current business plans of these companies. This would reflect in the Sensex going to 115% of the January 2007 level of 14,000 = 16,100– A reasonable target for the Sensex.

At the same time if the Sensex drops lower, that would be a further opportunity to buy fundamentally sound company stocks that are undervalued because of gloom and doom. No complicated calculations required!

More wealth protection options
and arbitrage funds

  • If you have invested in the stock market at higher levels, and can wait for a longer period- 6 months to a year, then you could simply wait for your stock portfolio to increase in value in time. You could consider selling off the non-performing stocks as the market rises periodically and invest in less volatile investments.
  • Another option, depending on your risk appetite would be to sell your holdings on stock market rises, and wait to buy back in at falls in the market.
  • A low risk option for money protection is to put your money in an arbitrage opportunity fund, choosing either the growth option or the dividend option. These funds play on the opportunities on differences of prices on the futures contracts of equities and their current prices. To learn more about these funds take a look at this article.

Check the performances of various funds before investing. Two well-rated funds are the JM Arbitrage Advantgage Fund and the SBI Arbitrage Opportunities Fund. Of these, the JM Arbitrage is has no entry load, and a 0.5% exit load if invested less than 30 days. According to the current SEBI guidelines, if investments in a mutual fund are made directly without going through agents or intermediaries such as brokers, banks, trading and brokerage houses, then no entry loads are chargeable.

Generally, investing in such funds is more advantageous than putting the money in a fixed deposit because of the tax advantages. At the same time, a certain portion of your investments could be in a longer term bank fixed deposit as bank deposits are considered more secure than mutual fund investments.

The two arbitrage funds mentioned here are treated at par with equity funds for tax purposes, while a fund like the Kotak Equity Arbitrage is a debt-oriented fund and has slightly different tax implications. To learn more about which is a better fund investment option for you, growth or dividend, and the tax implications of equity and debt funds this article gives useful information.

In general, dividends are tax-free when you receive them, but the fund house has to pay a tax before distributing the dividend. The growth option is better for longer term investments. Also, if you need an income stream, or want to invest money for a shorter period (few months) then you could look at the dividend options. A number of funds offer daily, weekly, monthly and quarterly compounding and payment of dividends.

  • As stock markets fall, the general tendency is for the money to flow into more ‘real and solid’ assets such as property, land, (real estate), and precious metals. Real estate is another opportunity for investment, but one must be very cautious to deal with reputed builders with a track record.

Please resist the urge to put your money into get-rich-quick schemes.

Gold exchange traded funds (ETFs) from fund houses like UTI and Benchmark, are one easy of holding 100% gold-backed assets without the trouble or expense of actually holding physical gold. Also, you can buy and sell small quantities from time to time according to your cash availability. A further advantage is that shares in ETF’s are not subject to wealth tax as they are not considered to be physical gold, even though they are backed by physical gold.

However, holding stocks of physical gold and silver has a palpably different level of security. Funds and even banks can fail but the comfort of holding precious metals has been a matter of record for over 6,000 years. Gold is the only class of investment that has maintained its parity for purchase of goods. For example, during the time of the Roman empire 1500 years ago, a Roman toga could be purchased for one ounce of gold. Today a good business suit or woman’s evening dress can be purchased for an ounce of gold. There is no other investment class that can match this record consistently over the past couple of thousand years.

Additional karma-changing measures
to preserve money, capital, and wisdom!

  • You can protect wealth energies by taking a pure silver wire and fixing it around the door frame of the main entrance to your house. The ends of the wire should touch the ground on both sides of the frame. This deflects unnecessary and wasteful expenditure energy while permitting accumulation of wealth.

Generally, between 5.75 to 6 meters length of silver wire would be enough for most door frames. Before ordering the silver wire from your local silversmith you should measure the actual length required and add a few centimeters extra to your estimate. If you specify a 1 mm diameter of wire, 35 grams of silver will give you about 6 meters of silver wire. At a price of around 22,800 per kilo, this silver wire will cost you around 800 rupees.

Of course you must also take additional prudent measures to give yourself a chance to succeed. It is essential that you formulate a savings, wealth-creation and investment plan educating yourself on various options and their risk factors.

========== Special Subscriber Discount Offers ========

  • You can also get KQ empowered 6 meters of silver wire for 2200 rupees from our Center. As a subscriber to KQ, you get a special discount coupon worth Rs.300/- and pay only Rs. 1900/- for your purchase of KQ empowered silver wire until March 31, 2008. That’s the best 1900/- rupee investment you would have made this year! It will pay you long-term dividends in wealth saved and created.


  • To clear up confusion and indecisiveness, do a daily salt water ’tilak’ at your third eye with your right thumb in an upward motion. This activates your wisdom chakra.
  • A reminder–check out the ‘Money Matters’ section on our web-site for free karma-changing tips and techniques. Also, take a look at the ‘Saturday Box’ saving method. If you have not already done so, go here for how to get a “KQ” empowered Saturday Box, or how make and activate your own Saturday Box.

Next issue— Put your wallet in ‘Money-save mode’, Beware the ‘Ides of March’, ‘ULIP=U-LOSE!’…and some more.

Be with the KQ Force!

Nalin K. Nirula

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