Risk to the demonetization scheme and solutions

Demonetization is an excellent and laudable step, but as said wisely, "Devil lies in the details". Somehow the bureaucrats responsible for executing the scheme, seems to have been clueless about some of the ground conditions, such as

1. Banks are free to open new account without any centralized verification of data
2. There are lot of fake Jan Dhan accounts, which were opened by banks, to meet their targets. 

These 2 factors have led to creation of multitude of fake accounts.

Example 1 - Bank Manager colludes with a business man and opens 200 accounts on the basis of fake documents with no verifiable details and fake address. Simply the business man will deposit money in those fake accounts

200*say 2 lacs each = 4 Cr deposited

Use withdrawal slips and withdraws 20k daily from each account. He will be able to convert his black into white in 10 working days

Example 2 - Bank Manager knew he has created 1000 fake Jan Dhan Accounts to meet his targets in the past. He looks around and colludes with his favorite customers to convert black into white


Consider this, there are 8 Cr JD accounts and most of them are with dubious details. Even with a highly optimistic estimate, at least 30% of them are either fake or non-verifiable. So, 2.4 Cr fake accounts. This is very dangerous for the scheme.

Solutions needed to be implemented with immediate effect

1. Banks should be barred from opening any new account without verifying address physically and without PAN card
2. JD accounts should be barred from any transaction beyond 10k per month. If someone wants more limit, let them have regular accounts or they would already have that, if they have more than 10k income. 
3. Set examples and create detterence by sending notices en-mass and do some arrests of bank managers also, so that the whole banking community, gets the message, loud and clear

Hack of using ATM in Indian Cash crisis

Use a variety of methods

1. Talk to gaurds of ATM, if they belong to a security company
2. cashnocash.com - useless most of the times

Biggest hack is use the night time, around 10 PM and then once you have drawn 2500 per card, again join the line. After 12 PM, you will one more chance. 

Was the scheme of demonetization leaked, 15 days beforeho

There have been lot of media news and clippings of news papers doing round that the whole plan was selectively leaked to a select few people and groups

Who is brijesh dubey ? where did he got information from?

Govt. need to answer these questions, so that the conspiracy theories going around can be stopped.  

Demonetization - Good/Bad and the future

First of all, this is not the first time, demonetization has been done. The major difference this time is that the currency value is very less. 1000 ruppee at time of Morarji Desai = 10 lacs now (perhaps)

Evaluation - Good Part

1. It was well kept secret. Indira failed in this test. She perhaps had a mole.
2. RBI was kept in sych
3. well shielded secret = NDTV was perhaps falsely created and Govt. never meant such extreme step, US election sheilded warth of international media
4. Weekday choosen - Weekend shopping not disturbed, enough time and resource at hand at bank
5. Illegal and fake currency game will be halted for a short while. 

Evaluation - Not so good part

1. Jewelry shops were not closed for say 3-5 days
2. Too much of time has been given - 3 months (Come on, don't think people are that stupid that they will not be able to convert black to white in 3 months)
3. Loop holes in terms of corrupt bank officials esp. private banks. Here small time managers, are doing lot of money minting by opening fake accounts or dubious accounts without PAN or invalid PAN. 

What can be done right now?

1. Announce to deposit notes within 15 days, say by 20th of November. Left out people can still deposit after 15 days, but with greater scrutiny.
2. People should not be allowed to deposit more than 1.5 times of last year income as per ITR. If someone still wants to do, a special process should be followed
3. Close jewelry shops for 5 days
4. Banks should be asked not to open any new accounts in next 15 days, without special requirements approved by say zonal managers etc. 

Overall Evaluation 

It is really a good scheme and pending for long time. Baba Ramdev negotiated for this masterstroke in 2011, with Congress. But the scheme was not designed well. Though there are enough knowledgeable people in the Govt. and it is easy to think in the hindsight than in foresight, Govt.and RBI need to become more agile and adaptable and keep on changing tracks, so that all the loopholes are plugged.

Future

Common people will embrace digital currency. Small entrepreneurs will find it comfortable to deal with digital currency. Bureaucrats and Politicians will forced to find new and legal ways to park money. Big businessman will have business as usual and will have minor tinkering in just their business models.

One major impact could be cleaning of black money in daily life. It will continue like that only in elections. CA's will get higher demand for innovating accounting books.

Yes, one more interesting impact, ISI has to burn their existing inventory of INR and print new lots. They will also look for more innovating ways in future. 

A relatively silent Diwali

Good news for India, mass education programs seems to be working.

This time, Diwali was relatively silent. It is still very toxic and makes sense to close the door with AC unit on, but atleast it has been marked improvement from last year. 

How long can the markets stay stupid?

"You can fool some of the people all the times, but you can not fool all of the people all the times".

Stock markets have one metric, which everyone agrees on, is the thermometer for them - PE ratio. Though I personally dont agree with this (i prefer EV/EBIDTA, sum of parts, as they capture interest of all the stakeholders in the ecosystem), but there are some hard proofs

(https://craytheon.com/charts/nifty_pe_ratio_pb_value_dividend_yield_chart.php)
This link states, we are at PE of 24.5

Some of these estimates point that any long term investor will loose 30% of their portfolio in long term, if they invest now in Stock market.

Simply the market is stupid. Everyone knows that we are in stupid territory of the market. But how long, we will be here ?? This is the biggest question and its answer lies in following factors

1. Alternative Investment Channels 
• Real Estate - will remain in doldrums due to peak valuations
• Lending - Black money has been curtailed, so returns limited here
2. Interest rates - Historic low
3. Growth Estimate of the underlying economy - Decent atleast for India due to Modi and the Monsoon is the topping on the cake
4. Global factors - This is the only factor, which is really complex to analyse

Any predictions will be futile, without having decent estimate of each and every factor. But with the assumptions that there will not be any adverse global scenario - Markets will remain stupid for some more time. 

We are again stuck on the question - How long??

Fundamentally, the DCF of dividends should have been the value of the underlying security. But this strategy might be good for US but not so for India due to the following reasons
1. High DDT (around 17% div dist tax)
2. Very less avenues for pass-through (such as REIT and Yieldcos in US)
3. Very high taxation in India - Due to high taxation, people- both shareholders and the promoters, want to hide - white income (though it is similar in US, but its perception, that US Govt. is good manager, while Indian Govt. is like a corrupt manager, so India charges too high for tax)

Now, consider the alternatives for investors
1. FD - lower interests day by day
2. Bond Market - Underdeveloped

OK, let's do the comparisons now
PE of FD of say 8% = 100/8 = 12
PE (avg long term, stock market) = 14
PE (Currently secured bonds of good rated companies) = 7-8%
PE (current market) = 25

Booms are brought by retail investors and the bursts are bought by the institutional investors. Sure, institutional investors are clever enough, they ride the boom and profit from it and then they say at one point of time that markets are about to loose steam and they will say, lets park our cash (FII will do so in US treasuries, once they increase interest rates)

One very good alternative, which is evolving is NCD of relatively secure companies.
PE of Corporate Bonds = 100/11 = 9 (say ..decently secure.... Muthoot N6 unsecured NCD ). The institutional investors are going to park their money in these NCD's and wait for the market to collapse on its own weight. NCD and term papers will take atleast 6 months to develop, till then market may remain stupid or may be even more stupid.

From here, the market, can go upto say PE=28, as there is no negative sentiment in the market till now, but if the balloon swells to PE=30, then it is going to burst for sure. For the moment wait for PE=21-22, and then invest again till market again go to PE=24-25. Keep on investing and exiting in this narrow range, till it goes beyond PE=25, and at that moment, switch off the trade account and shift everything to FD/NCDs. But beware of NCDs of the NBFC's especially the one in real estate or with any kind of link to real estate or long gestation equipment finance such as DHFL, Indiabulls, SREI as they might have lot of hidden transactions. Beware of Infra/Housing (not low cost housing) - lot of aggression and chances are people are making mistakes in biddings.

It will somewhere around March 2017, that market will loose steam as institutional investors, will stop buying shares at sky high valuations, which have already been deserted by the long term investors like me

Wait for March 2017 and merry profits till then!

How long can the markets stay stupid?

"You can fool some of the people all the times, but you can not fool all of the people all the times".

Stock markets have one metric, which everyone agrees on, is the thermometer for them - PE ratio. Though I personally dont agree with this (i prefer EV/EBIDTA, sum of parts, as they capture interest of all the stakeholders in the ecosystem), but there are some hard proofs

(https://craytheon.com/charts/nifty_pe_ratio_pb_value_dividend_yield_chart.php)

http://historic-pe-ratio.weebly.com/

This link states, we are at PE of 24.5

Some of these estimates point that any long term investor will loose 30% of their portfolio in long term, if they invest now in Stock market.

Simply the market is stupid. Everyone knows that we are in stupid territory of the market. But how long, we will be here ?? This is the biggest question and its answer lies in following factors

1. Alternative Investment Channels 
• Real Estate - will remain in doldrums due to peak valuations
• Lending - Black money has been curtailed, so returns limited here
2. Interest rates - Historic low
3. Growth Estimate of the underlying economy - Decent atleast for India due to Modi and the Monsoon is the topping on the cake
4. Global factors - This is the only factor, which is really complex to analyse

Any predictions will be futile, without having decent estimate of each and every factor. But with the assumptions that there will not be any adverse global scenario - Markets will remain stupid for some more time. 

We are again stuck on the question - How long??

Fundamentally, the DCF of dividends should have been the value of the underlying security. But this strategy might be good for US but not so for India due to the following reasons
1. High DDT (around 17% div dist tax)
2. Very less avenues for pass-through (such as REIT and Yieldcos in US)
3. Very high taxation in India - Due to high taxation, people- both shareholders and the promoters, want to hide - white income (though it is similar in US, but its perception, that US Govt. is good manager, while Indian Govt. is like a corrupt manager, so India charges too high for tax)

Now, consider the alternatives for investors
1. FD - lower interests day by day
2. Bond Market - Underdeveloped

OK, let's do the comparisons now
PE of FD of say 8% = 100/8 = 12
PE (avg long term, stock market) = 14
PE (Currently secured bonds of good rated companies) = 7-8%
PE (current market) = 25

Booms are brought by retail investors and the bursts are bought by the institutional investors. Sure, institutional investors are clever enough, they ride the boom and profit from it and then they say at one point of time that markets are about to loose steam and they will say, lets park our cash (FII will do so in US treasuries, once they increase interest rates)

One very good alternative, which is evolving is NCD of relatively secure companies.
PE of Corporate Bonds = 100/11 = 9 (say ..decently secure.... Muthoot N6 unsecured NCD ). The institutional investors are going to park their money in these NCD's and wait for the market to collapse on its own weight. NCD and term papers will take atleast 6 months to develop, till then market may remain stupid or may be even more stupid.

It will somewhere around March 2017, that market will loose steam as retail investors, will stop buying shares at sky high valuations, which have already been deserted by the institutional investors.

Wait for March 2017 or may be March 2018 and merry profits till then!

Finally PepperTap announced its demise

It proves our model at expressdwarka.com was the best

How IAS culture is hampering growth of India

I was going through one article

https://latasinha.wordpress.com/2012/01/04/ias-and-non-ias-services-under-government-of-india/

Well the author has nicely combed the past and future and the imperatives of current era

Frauds and miscommunication like Migsun Wynn in Real Estate in north India

Real Estate industry is going through slump and more so will happen after the sudden spurt of supply, which will come after the new bill.

Many of the builders like Amarpali have cheated people's money by projects like Hanging garden, Aawas Yojana etc.

Now a new project by Migsun Wynn has come. They advertised the rates as 1699 per sq foot, but consider these factors

1. It is rate of 25th floor
2. 25 floor storey building will sell on discount when most of the projects are 10-12 floors
3. The builders has released only very small portion of the full 8 acre plot and existing plan is very crowded
4. Cost of finishing of 300 is not included
5. Club fees is exhorbitant

Considering all these factors, cost of this project works out to be around 3000 on 10th floor, which is too high, as per current market. 

Amarpali La Residential is selling at 28 lacs (all in)

Steller Mi is selling for 30.5, all in 

So, the market is going for correction. Prices in Noida, especially greater noida are going to crash. Prices will return to the level of 2000 per sqft in Greater Noida as the supply is too much to be consumed anytime soon. Once, banks tighten noose, many of them will default and reduce the rates further. 

Advise to retail investors - Wait for 6-12 months, till you see bankruptcies

Sociocracy - Future of Organisation Management

We have learnt a lot about OB (Organization Management) during MBA classes. I remember a course I took at Keenan Flagler Business School was about roles and behavior in groups especially in business settings. This theory and practice form the basis of our basis of understanding of the so called "IDEAL ORGANISATION BEHAVIOR"

But this ideal OB has some inherent problems such as

1. Most of the things are driven from the top
2. Most of the people in the middle and lower ranks feel themselves as dis-empowered
3. Job descriptions are very rigid and people have little flexibility around them
4. People at the lower hierarchy feel that some of the decisions are not transparent. 

All this rigidity leads to issues in re-organisation or any change in the Structure of an organisation. Lack of transparency is more dangerous as this leads to - "SENSE OF DETACHMENT WITH ORGANISATIONAL GOAL". This is equivalent to "Sense of detachment from society" in sociology, which Durkhiem has famously coined as "ANOMIE"

Our large business organisation are not able to show effectiveness of  a startup due to this "Condition of Anomie" as described by Durkhiem.

But the solution to this lies more in something propagated by Weber in his organisation structure theory, but albiet on foundation of "Sociocratie" as coined by Auguste Comte, the father of sociology and my favorite among sociology thinkers.

1. Organisations have to structure themselves around roles
2. There should be complete autonomy within a role in terms of execution and implementation
3. Individual should be detached from the role he is handling

Individuals have to be replaced by the roles they do and the organisation itself has to be divided into a overlapping circles. This is something similar to "Organisation of Religious order", something similar to Hinduism. People (akin to roles) follow a religion, but they are independent to execute their form of worship. When I say, religion, it is more of a "loosely defined religion like hinduism / Cristianity" than as a "strictly defined religion such as Islam, which has very strict punishment for even those who leave it or dare to say anything about their god, even a picture or physical description".

NCR Real Estate market set for a crash landing with KMP

Palwal Manesar stretch of KMP is going to be inaugurated. What will be side effects

1. It will lead to a lot of supply of real estate in new areas such as Jhajjar / Bahadurgarh
2. It will make the hinterland of Najafgarh approachable from a new dimension altogether
3. L-Zone will become attractive as it will surely be connected to KMP in future

All this will lead to a supply glut in already over-supplied market leading to ultimate crash of rates in sectors such as Gurgoan, Noida etc.

Shocking PE of Kotak Mahindra and fallacy of Dividend Pundits in India

Castles in air are not built over night. It seems that the story around Kotak has taken a bit of time to build.

There is no denial to the fact that Kotak is perhaps best bank in India. They are also well placed to grow faster than almost everyone.

But then a PE of 60+ does not stand the test of reasonableness.

Another BS which one hears a lot now a day is the "Dividend should guide your stock selection". YES, this is correct, but not in India

Consider this, imagine EBIDTA of 100, then 33 as profit tax (assuming no depreciation), to declare dividend the company pays, 17% DDT
PAT = 67
CF to shareholder after Div = .83*67 = 55 (approx)

So, effectively the company is destroying value by declaring dividends, it is literally handing over the money to the "Government of India" not to the shareholders.

So, in a country like India, declaring dividends is not very wise steps. Then there are companies, which have found ways around. I have identified couple of these small and mid caps. 

BOB ( Bank of Baroda) - Over hyped or Justified

BoB is trading at PE of 16, while the other PSU banks are trading at mean PE of around 5-6. So, what explains this difference. Market (read analysts of big funds) say
1. They have done full provisioning of losses
2. Legacy - have no more losses to declare

This can justify a PE premium of say 20-30% but not 100%.

But perhaps markets are ignoring a fundamental issue. Have the current processes streamlined to get bank tame future NPA's. The plain answer is NO. BoB like other PSU operate by the same standards. Hence they are bound to get the same pace of NPA's again (even if we discount the UPA/NDA interference in bank operations). T

So, there seems to be bit of mis-information, which is being sold, instead of focusing on fundamentals. Correction is bound to occur. Waiting for trigger.

Petrol Pump - Is it a good business now

It was 2006, Reliance literally slaughtered the market share of PSU. A company which has just 1-2 years of track record, took 13% market share in 1 year of full fledged operations. PSU were clueless what to do. Thank god, that the PSU got a ventilator time when the price again zoomed and subsidy kicked in. With subsidy the kick backs again started in this dirty sector. The inefficiency and corruption within Oil PSU is none of a secret.

Now the wheel has turned again, prices are down for atleast next 5 years (and may be more if Elon Musk got the new Teslas firing). Private players are again pushing up their game

1. Essar is focusing on low volume outlets
2. Reliance on high volume

So, in a place like Rewari, where Essar has got 20 pumps in recent time, it hardly left anything for the new commissioning by PSU's. So, the market is getting crowded and competition is increasing. This will introduce margins squeeze for the PSU's which will squeeze the margins for the dealers also. In such a scenario, Petrol pump does not seems to a good business. 

World War 3 - Will it start from Alepo

I am keeping my fingers crossed but will take 3-4 days to announce if things are that bad.

Assad - Will not back out
Soleman - Shia need it back

Saudi/Qatar - Want to kill Shia hegemony
Turkey - after the kurds

Kurds has secret support from Israel and may be US

OMG...we forgot the ISIS.........so the war is going to be for display not for ISIS

Anna hazare / Kejriwal - Real Swaraj - Economics first politics later

It was 2011, when the whole of India was stuck to TV sets and the place called Ramlila Maidan. A new Mahabharat was fought. Finally Congress has to bite the dust in 2014 elections. Anyway, it was not Modi, who was winner, it was common people like Hazare, Prashant Bhusan, Yogender Yadav, Arvind Kejriwal, who were the real winner. They floated AAP and rest is history. Anyway, the key motivation was to get justice, equity in political powers. Part of it was achieved but what people forgot was Political power is of no use if they dont have parity and equity in Economic Power.

Unfortunately, in a country like India, Risk Rewards are not matched in economy. Take banking sector. I have been writing time and again that, NPA's are deep problems for the whole economy and not just one sector. Think from point of view of retail investor.

Retail investor ->Bank->Allocation to projects -> Return->Bank->Retail Investor gets share back

Now, this seems like very simple, but that is where simplicity ends. The risk rewards are unmatched here. Like any bottlenecks, this positive feedback loop has Projects as one of the bottleneck in the whole value chain. One likes it or not, the Projects in Emerging Markets are going to have inherent risks and hence require higher payoff say 15% (for the project to be viable). Now, the retail investor is getting only 10%. The 5% is risk premium. The promoter gets rewarded by by 5% differential (and then worked on his part of equity) for this risk.

But that is where the story become complex. The promoter only has rewards but no risks as normally what he does is use "Negative Equity"

"Project of 150 quoted as 100, and then 70% loan taken, finally pockets the 5 as negative equity"

When the balance sheets of banks are full of such loans, then does it make sense for retail investors to put their money with banks - No.

Though Marx said, Inequality in economic status (proletariat v/s Bourgeoisie) will lead to political revolution, I believe it be economic revolution instead of political revolution, as under

1. People will stop doing FD's in bank
2. People will stop investing in leveraged companies
3. People will stop following business news channels (hilarious it might seem but they also serve to the interests of institutional investors only and not retail investors as they always try to fool retail investors)
4. One of the extremes can be people can start their own lending clubs. I am not sure how but something similar to chit clubs or say bitcoin exchange enabled lending. Something which will use technology to remove banks as intermediaries

But these seems like Utopian luxuries as Parliament is full of Vijaya Mallaya and their cronies. Why will someone like Vijaya Mallaya be interested in curtailing role of banks.  

Leaders of Modern India - Please look into the issue and the solution for economy Swaraj

Future of Transportation

Saw 2 companies on CNN

1. Sabre - Is this improved Concord jets. No, it is totally new tech with something which I think is close to impossible.

They will cool down the air from 1000 dec celcius to -150deg cel in milliseconds. I am a mechanical engineer but this seems like impossible to me. If it is done then we will have our 15th anniversary on moon


2. Subtrans - Well i have been excited about my Maglev travels in Shanghai. But that is very costly and one of the white elephant of China with low ROI of economy. But this subtrans works without power.

What it does is very simple in terms of technology but difficult to implement in mass scale. They are basically using superconducting technology to create uniform distance. (they used liquid nitrogen for this)

Question - How will they implement this on a track which is not in Scandinavian / Seberian Terrain.


I personally believe that there has been no new tech in Transportation in last 100 years and something is about to come. Such as AI driver got driving licensce in US............

Positively Boring - Muted Market proves that it is bound for 8000

The market bounced back today, It will keep on tossing here and there but finally it had to settle at NIFTY 8000 levels.


Till then, just wait and watch, but keep on evaluating fundamental of companies. Stay invested and stay tight.

Finally! - The day has arrived

Today was special day for me. I have been trying to convince my people that we are looming for a recession from last 1 year. On 26th December, when I convinced one of my friend that we have to go neutral, if not short, on Indian NIFTY, but the market started bouncing in late January.

Everything apart, the fundamentals have started to kick in. People are starting to note the insanity in the markets. Heads will roll for sure.

For the moment the most exciting thing to plan for are

1. How can hedge fund short stocks of Indian companies. Someone need to take strong enough stand on some of these hidden companies. Say someone need to pledge around $50 m to short the listed bonds or ETF of any of the big Indian companies on markets outside 
2. Which are the firms which will get bankrupt in next 3-6 months period
3. How long will it take for the market to bottom out. 
1. Market still seems to be bit costly at PE of 19 for a conservative person like as I don't think markets can go to 25 or stay at 25 for long. I think anything 18-20, is worth investing on sector specific market, for 20+, it has to be stock selection only
2. Market should come in the range of a PE of 16-18, for investors like me to go full thrust. In other words, i am still waiting for 6500 level for NIFTY

So, I am keeping my fingers crossed for 6500 PE below 18-19, if it bounce more than 8500 (PE above 24), I will close everything and cry in corner and analyse, why and how I was wrong 

In between 6500-7500, will depend on lot of cues both domestic and global and new offerings. 

I will personally never invest anything above this level of PE. My ceiling is 20, for someone else, it might be 22 or 24

Are people misleading or being mislead

Some 6 months ago, I used to hear a lot of chatter from my friends, who had invested into
1. Apple Stock
2. Chinese IPO's

They used to sound as if they have gone through an epic story and they have had the treasure hunt. Whenever, we used to argue the fundamentals, they used to put flimsy stories. Something similar to

http://davidstockmanscontracorner.com/shanghai-composite-pe-ratio-reaches-44x-the-price-to-whatever-bubble/

But then most of the people, I see shouting from the top of the TV studios are no different. Invest in SIP...Invest in MF.........are some of the misleading and deliberate sermons beamed full day in and out on business channels, business columns and magazines. The common fact, which every investment professional knows is that when the market is trading above PE of 18, it is not a good time to invest for a retail investor.

Europe is gonna pay for this - Sexual Emergency of migrants

About an year ago, I saw some placards such as "Mama Mia Merkel" and they multiplied with Germany been advocate (if i can discount the local opposition within germany). I was very disappointed by the idiotic step of taking refugees. It was bound to give cultural mismatch issues

Now here is the result

Cologne New year assault
Pool Etiquette notice in Germany

and now the worst, a kid was raped because the rapist from Syria felt, it was his sexual emergency

And the biggest thing is the Muslim country media is giving 2 arguments.

1. Its OK, he was having psychological issues
2. Its OK, he had sex with an under-puberty age.

That is the biggest problem. This is just starting - Europe is going to pay for this deeply. No wonder Donald Trump is the new sensation in US.

Watch out for this space - Big predictions coming up soon

Well! since the time, i wrote last time, i was wondering why people are taking so long to understand the basics of distressed finance. I see the TV anchors of business channels shouting over the roof to buy this and that stock, with logic as funny as this is V shaped, this is W shaped.

I am seriously at loss of understanding, why there is no "NO NONE SENSE BUSINESS NEWS CHANNEL".


Anyway, there is something exciting happening in other part of the world

Venezuala gold reserves are down by $3bn and it is being rumored that they are going to pay of the Deutsche Bank with the gold swap. What we might see is a situation similar to India in 1991, when gold was sent in plane. But with Venezuala, the situation is different as this gold was never with them. Chavez struggled hard to protect this gold from bankers and he was quite successful, but his successor Mudro, lost it all.

What will be implications on Canadian Dollar ? Watchout

One more exciting thing is Allepo fall to the Assad. This is hinted by rumors of "Ballon drops practice for ground drops" by Qatar and Saudi. This is exciting as US has raised its hands way back in October, when it was rumored that Kerry has conveyed to Assad - "boy u can stay, but give me some face saving story".

What will be the implications on Oil? OPEC is no longer there, everyone is on their own

Scenario 1 - Shia v/s Sunni - Competition for gaining market share increase, which means Iran gets the Euro payments, it has been shouting for.

Strategy - Simply short oil again but not below $20 as they can't sustain this for long.


Scenario 2 - Shia v/s Sunni - Saudi takes the nonsense step of blocking some Iranian tankers or Persian Gulf traffic. This will temporary lead to increase in prices as signal of conflict but then "Big Daddy is not stupid". They increase flows from Africa and the inventories again will pile up. So, such an event can't sustain prices for more than 6 months.

Strategy - Long for 3/6 months and then again start shorting by taking into account the inventory levels

Scenario 3 - US/EU plays a foul - stops Euro settlement or SWIFT access by using some alibi or sanctions clause or highlight Iran-North Korea link. This can either lead to a arm-twisting scenario or a full blown out war. This will be a really dangerous scenario.

Strategy - Long