BULLS BEARS & OTHER BEASTS

Book Review by Vaastav Parikh

The Purple Money

ceo@thepurplemoney.com
About The Book

Book Name: Bulls Bears and Other Beasts

Author name: Santosh Niar
Category: Finance
Publishing Date: 2016
Key Learning

 “Deception is the key to win any war” – Sun Tzu

o When AS PS bugged on Lala through Owl
 “Your network is your net-worth
o Whether it was getting a job in a brokerage house or getting insider information, Lala
sneaked into everything with his amazing networking skills.
 “One should not live beyond one’s mean”
 o When Lala boasted his ability to buy 50,000 shares he knew his ego was talking and he
was far beyond his means.
 “Markets never let one guy play God”
o When Harshad Mehta believed he was capable of running an eternity of Bull run.
 “Don’t put your money into something you don’t understand” – Warren Buffet
o Back when Lala admitted that he didn’t invest a single rupee even though he was
dealing thousands of shares just because he didn’t understand how companies
operated.

Money for Jam

 Bridge loan means short term loan from the bank against the expected IPO proceeds

Another Bubble Bursts

 Interest rates were quite high at 15-16% in the mid-1990s
 Heavy borrowing by the government to balance its book also served to push up interest rates
 No one in the market can accurately predict the top of the peak and the lowest of the bottom

Caught in a Global whirlpool

 Connecting the dots. Pokhran, Chidambaram, Globalization.
 Harshad’s Second Innings

Swimming in the deep sea

 Another law of stock market physics – the faster the climb , the harder the fall
 Ranging from the ridiculous to the plausible

A New Bull Market with a New Big Bull

 Floating stocks refers to the shares held by persons other than the promoter of the company
 The story of Calcutta-based software firm that suddenly became a big hit with retail investors
 Only later did the buyer realize that software was a hosiery firm not a software firm
 Ketan’s strategy to buy under performing tech companies, boosting price and making hefty profits.
 price is something that investors are willing to pay at any particular point in time
 Stock are never traded on fair value

From Bad to worse

 Ketan directly transferred shares held by him into the brokerage’s account and receiving cash for them upfront
 the above facility was known as delivery-versus-payment(DVP)
 Ketan Parekh Scam
Back on the Slow Track
 Maruti IPO boosting investor sentiment even after 9/11
 Participatory notes
 Rakesh Jhunjhunwala
 New Government, New Tax Rules

In the Name of Wealth Creation

 The key to higher market capitalization is the fat stock price
 Cash Siphoning
 Ketan and his shady practices

Margin of Error
 In a margin financed trade, an investor would put up part of the money required to buy a stock, while the
lender would put up the rest
 Jockeys helping mid-caps boost valuations by dummy HNI.

An Assured-Return IPO?
 Double bottom is when a stock price falls very low, rises briefly, again falls to that earlier low, and again rises.
 The rule of thumb when it comes to grey market prices is that the premium is reflective of the minimum gains
an investor in an IPO can expect on listing day

The Denouement
 R-Powers IPO failure due to high prices and slower economy in general.
 Sub Prime Crisis igniting liquidity crunch globally reckoning markets.
 How FIIs made money through lending stocks held by investors in the form of P-Notes.
 Yen Carry Trade system
o Borrowing money in Japanese Yen at Lower interest rates
o Converting it into USD
o Investing in Indian equity markets through FIIs from TAX Heavens
o Cashing out profits in USD
o Converting USD to Japanese Yen to repay loan
 Banks charging hefty interest rates to mutual fund houses for short terms
 Suzlon and Mr.T
 Taking on companies with pledged shares

The turn of the Bulls

 Daiichi Sankyo’s Ranbaxy takeover
  Sold Ranbaxy to Sun Pharma in 2014 for half money

Satyam’s Big Lie

 Ramlinga Raju admitting to cooking books by showing fake revenues and bank balances
o Raju pledged shares to borrow money
o Promoters holdng falling to 8.6% making it vulnerable to takeover
o Bribing World Bank employees to get orders
o Lenders offloading shares when the scam came to the surface

Bulls Make Comeback

 The shift from traders to Investors after extreme downfall in stock prices
o Low float in sell side led to a new bull run
 Market welcomes Congress with an upper circuit
 QIP and fake rally of stock prices to set up a high floor price

A Reality Check
 Artificial hiking of share prices to make them eligible for future segment later regretting the
decision after realizing the vulnerability of stock once it is open to be traded on the futures in a
bear run.
 Promoters issuing equity warrants to themselves at a predetermined price and date in the
failing to execute since the steep fall in the prices.

A Level Playing Ground

 With SEBI’s introduction of DMA no front running was possible
 SEBI’s reform of initial deposits while filling an IPO as an Institutional Investor would change the
game significantly when Institutions will be forced to pay 100% upfront before allotment instead
of 10%.

Garibi Hatao, the SKS Way

 SKS microfinancing’s issue and the problems in the structure of microfinancing in
Andhrapradesh.

Fudging and Pledging

 SEBI’s intervention in making pledged shares quantity publicly transparent.
 Neither Bull nor Bear cartels can keep their dominance on one particular stock. A quality stock
attacked by a bear can be a positive sign for a value investor showing that the prices were
inflated earlier and it has now stabilized and the stock is at a fair value or at a bargain.
 Tax Evasion through GDR
 Mavi Investment (237)

Dalal Street’s Finest All Rounder

 “No matter how good the business, you must buy it at aright price”
FCCB
 The golden rule about fusnding is you must go for it when it is available.
 The FCCB way of funding
o Issue Convertible Bond in foreign currency expecting that rupee will strengthen
o Paying just the interest till the conversion date is nearby
o Inflating stock price with help of operator and expecting bond holders to convert their
bonds into equity
o Never paying back the borrowed money
o FREE CASH

The Heavy Hand of the State

 GAAR to take care of shady foreign entities.
 LIC being ONGC’s secret Santa

A New Entrant to the Game

 MCX & MCX-SX
 The liquidity code and how getting users fast can turn a vicious cycle into a virtuous one.
 Fed’s decision to cut down purchase of bonds
 The TRILLEMMA
o Slowing economy
o Increasing inflation
o Weakening Currency
 Resurgent India Bond with an excess return of 3.5%
 The NSEL scam

The Long Arms of Regulators

 Trading lessons

Epilogue
 Listed SHELL companies strategy to artificially inflate prices by using their shareholders money
to help them evade TAX.
 The hierarchy
o Promoters
o FIIs
o Retail Investors
o Swing Traders
o Day Traders
o Jobbers
 The impacts of Budgets
 The importance of Ruling Party