Ben Graham, my friend and teacher, long ago described the mental attitude toward market fluctuations that I believe to be most conducive to investment success. He said that you should imagine market quotations as coming from a remarkable accommodating fellow named Mr. Market who is your partner in private business. Without fail, Mr. Market appears daily and names a price at which he will either buy your interest or sell you his. Even though the business that the two of you own may have economic characteristics that are stable, Mr. Market’s quotations will be anything but. For, sad to say, the poor fellow has incurable emotional problems. At times he feels euphoric and can see only the favorable factors affecting the business. When in that mood, he names a very high buy-sell price because he fears that you will snap up his interest and rob him of imminent gains. At other times he is depressed and can see nothing but trouble ahead for both the business and the world. On these occasions he will name a very low price, since he is terrified that you will unload your interest on him.

Jobs data indicating that U.S. economic recovery might be picking up steam finally pushed crude oil futures decisively over the stubborn $80 a barrel threshold. Nymex’s benchmark West Texas Intermediate settled Friday at $81.50 a barrel, a seven-week high, after topping $82 in intraday trading. An unchanged unemployment rate of 9.7% and a smaller-than-expected drop in payrolls propelled both stocks and commodities higher on Friday. Earlier in the week, industry job data also came out better than expected, pushing crude just above the $80 a barrel mark. Any improvement in the labor market would translate into more commuter driving, more vacation driving this summer and generally greater energy demand, analysts said.

The elections in Iraq on March 7, 2010, are likely to serve as an important indicator of the prospects for a resolution of the long-running dispute over the administration of the ethnically mixed and resource-rich province of Kirkuk in the north of the country. The Iraqi Kurds have repeatedly called for Kirkuk to be transferred to the control of the semi-autonomous Kurdistan Regional Government (KRG), which already administers three provinces in the predominantly Kurdish north of Iraq. The other ethnic groups in Iraq – including the Arab-dominated government in Baghdad – are equally insistent that Kirkuk should remain under central control and that any oil or gas revenues should be divided between the entire population of the country rather than all going to the KRG. The failure to resolve the issue of the eventual status of Kirkuk threatens not only prospects for permanent political stability in Iraq but also hopes of extracting the province’s huge reserves and building new oil and gas pipelines from Kirkuk to Turkey, and from there to energy-hungry Western markets.

With Yemen’s oil revenues plunging, the government’s push into the gas market seemed like an economic saving grace for a state wracked by poverty and terrorism, but analysts warn more thought should be given to carving out the country's post-petroleum era. The infamous Christmas Day bomber’s attempts to blow up a jet approaching Detroit – which Yemen-based al Qaeda in the Arabian Peninsula claimed responsibility for – has drawn unwanted attention to the country’s vulnerability to terrorist movements. Dwindling oil and water resources, high poverty and illiteracy, a ballooning population, rebel uprisings and separatist movements have made Yemen ripe for extremism. Nestled in the southern tip of the Arabian Peninsula, Yemen is highly reliant on oil money, which accounts for 70 percent of the budget. But total reserves amount to about 2.8 billion to 3 billion barrels, which “really isn’t much to write home about,” S. Rob Sobhani, president and founder of Caspian Energy Consulting in Potomac, Maryland, told OilPrice.com.

It is astounding how many economists, government officials, and Wall Street strategists construe the current economic conditions as evidence of a bona fide recovery. It is a testament to the power of the rose colored glasses handed out by our nation's leading universities that such a feeling could be widely held despite the clear and present danger that compounds daily. The myopia leads us to enact policies that actually exacerbate our problems. The "remedies" are postponing, perhaps indefinitely, a true recovery. The oracles who have described the nature of this imminent recovery do so based on their conviction that consumer spending is slowly returning to levels that existed prior to the recession. New data released today seems to support this view, with consumer spending up 0.5% in January. However, missing from their analysis is any plausible explanation as to why consumers will be able to sustain such spending given the plunge in income and credit, and the lack of available savings. In fact, the same January spending report showed that personal income increased by only 0.1%, while the savings rate slowed to the smallest since 2008.

Crude oil broke through the $80 a barrel ceiling repeatedly during the week but kept falling back as hedge funds placed big bets on the Euro’s decline. The fiscal drama in Greece held global markets hostage much of the week as worries about the impact of the Greek crisis on the euro outweighed comments from Federal Reserve chairman Ben Bernanke about continued low interest rates in the U.S., pushing the euro down against the dollar and damping crude prices. The euro recovered some ground on Friday amid new reports of European aid for Greece after falling to a nine-month low of $1.3440 on Thursday. Germany’s state-owned bank KfW may take part in a planned Greek bond offering next week, according to market reports.

While the Iraqi government has made overtures to its Kurdish counterpart in the north to end an oil standoff, much remains in doubt without an actual law keeping the industry in check - rules which this time the Kurds are pressing for rather than Baghdad. For a long time, the northern Kurdistan region was seen as the most attractive oil market in the country but the latest bid rounds in December and subsequent contract signings in the south have made it suddenly “less clear that Baghdad actually needs an oil law with Kurdistan, because they’re actually doing pretty well on their own,” said David Bender, an analyst in the Middle East practice of the Eurasia Group’s Washington office. Iraq’s government initially pushed for petroleum-sector legislation, but lately the Kurdistan Regional Government (KRG) has been motivated to act “so they don’t get sort of left behind, with this new international oil interest in Iraq,” Bender argued.

The Libyan government has been sounding off lately about boosting the profile of its oil and gas market, but it’s questionable whether international companies will ignore the government’s missteps in the industry - not to mention the recent lackluster energy finds - and keep injecting money into the North African country. The head of Libya’s National Oil Corp., Shokri Ghanem, has his eye on expanding gas exploration and production in a bid to raise exports to Europe, as well as privatizing oil refineries and the petrochemical sector, according to an interview he gave this month to the Oxford Business Group. Once an international outcast for its penchant for terrorism and weapons of mass destruction, Libya now wants foreigners to take a greater stake in the oil market and in turn encourage local firms to play a larger role as well.

In the recently announced monetary policy review, Reserve Bank of India (RBI) Governor D Subbarao said, “A bigger risk to short-term economic management and medium-term economic prospects emanates from the large fiscal deficit.” In simple terms fiscal deficit is the negative gap between higher government expenditures and lower revenues. The government fills this gap by borrowing against government securities. In July ’09 Subbarao had said, “Managing the government borrowing programme to finance the large fiscal deficit posed a major challenge for the Reserve Bank.” So, is higher government borrowing bad for the Indian economy? The answer is quite subjective. Typically, higher borrowing requires higher debt servicing that is interest payments.

The Indian Security Market is farm fresh. It has not yet been tapped fully. Not many people think of having a business in this sector and investors are not even smelling the profit it holds. But it is an industry in the making. It has the potential to be a rather large sector in the very near future, given the lifestyle changes the world is witnessing. A small example would be the terrorist attacks. Now there might have been a drought or a killing or a mini-riot in the 19th century but was ‘terrorist’ even a word back then? Not really. However, the new century has brought with it a number of evils in the form of racism, fascism and ultimately terrorism. These are a few reasons why ‘security’ has found a new meaning in our dictionaries.

In the recent quarterly review of the monetary policy, the Reserve Bank of India (RBI) lowered the credit growth target for the banking sector for the current year to 16% from 18% targeted in October ’09. The deposit growth rate was also reduced to 17% from 18%. According to India’s central bank, the increased availability of funds to banks from domestic non-banking sources like capital markets, commercial papers and external sources like depository receipts and direct investments, have resulted in lower credit growth for the banking sector. The tepid corporate sector credit also saw numbers moving downwards. Preliminary calculations carried out by the RBI indicate that the total flow of funds from banks, domestic non-banking and external sources to the commercial sector during 2009-10 (up to 15th Jan ’10) was Rs 5,89,000 crore, marginally lower than Rs 5,95,000 crore in the corresponding period of the previous year.

Off late sugar companies and their share prices have been in the limelight. Stocks of most sugar companies have gone up significantly in the recent past in the hope of favourable developments in the industry. Briefly, world’s two largest sugar producers namely Brazil and India are expected to have lowered their production this year and the coming year. The impact is already seen on the global sugar prices. Indian sugar prices are inching higher and making multi-year highs. According to estimates, the world sugar production was about 154.2 million tonnes in 2008-09 as against the consumption of 164.6 million tonnes, leading to a deficit of 10.3 million tonnes. In India also, the situation was bleak as sugar production deficit reached about 7 million tonnes. No wonder sugar prices are trading at multi-year highs of about Rs 45 per kg.

The quarterly results of companies are out and many market pundits are evaluating the performance. Prima facie, however, the quarterly results seem to have failed to cheer market participants. Though strong growth was witnessed in some pockets, the overall performance of companies was not so great during the quarter. The year-on-year (y-o-y) growth numbers for different profit and loss items look very robust. One, however, should not forget that such growth has come on the back of a lower base. The December ’08 quarter (the so called base) was at the bottom of the commodity and the economic cycle. The performance of India Inc was really subdued during that quarter. Having said so, one can’t rule out the fact that the upward growth trend still continues for India Inc. For instance, the analysis of around 2,200 companies (excluding companies from banking and oil & gas sector) that have declared their quarterly results reveals that the aggregate revenue of these companies grew at 13.7%, reckoned on a year-on-year basis. And this growth rate is one of the highest in at least last the eight quarters. And this is higher than the growth rate of 2% to 3% seen in the previous quarters.

A highly organized sector, the Indian pharmaceutical industry is estimated to be worth $4.5 billion, growing at about 8% to 9% every year. The pharma industry in India ranks very high in Third World countries, in terms of technology, quality and range of medicines manufactured. Globally the Indian pharmaceutical industry ranks fourth in terms of volume (with an 8% share in global sales), 13th in terms of value (with a share of 1% in global sales) and produces 20% to 24% of the world’s generic drugs (in terms of value).

At a time when more and more offices are going paperless, governments in most of the developed world are doing the opposite. Finance ministers from Washington to London, Tokyo, Madrid, and, most pointedly, Athens, are attempting to paper over gaping financial chasms in the global economy by issuing ever greater quantities of currency and debt. But paper can only stretch so far. The key problem facing the western world is the 80-year decline in central banking discipline. In truth, these banks have become little more than the private piggy banks of their parent governments. Often furtively, central banks have "bought" ever larger amounts of government debt, which has allowed a consequence-deferred spending spree. The result has been decades of apparent economic growth and prosperity.

Over the past three or four years a strange phenomenon has developed in the global investment markets. With some exceptions, many asset classes, in particular domestic and foreign equities, commodities, and foreign currencies have tended to move in the same direction on a day to day basis. The mega-correlation has lasted so long that most now take it for granted. This leaves investors with relatively simple choices: when to get in to the market in general and when to park assets in cash and U.S. Treasuries. However, few recall that this pattern is relatively new in the annals of financial history. Fewer still realize the reason for the current anomaly.  From my perspective the most logical explanation is fear, which has become global, pervasive, and persistent. Traditionally, when investors fear inflation they buy stocks, commodities, gold, and foreign currencies, and sell dollars and U.S. treasuries.  When they fear deflation they sell stocks, commodities, gold, and foreign currencies, and buy dollars and U.S. treasuries. The problem is that right now, no one knows which one to fear. Depending on the news the pendulum swings from one extreme to another on a daily basis.

Crude oil prices took a dive on Friday after a week of gains from U.S. blizzards were undercut by another move in China to tighten monetary policy. China’s central bank raised reserve requirements for its banks for the second time this year as it tries to curb lending and avoid asset bubbles from forming in an overheated economy. China is the world’s second-largest importer of oil, after the U.S., and one of the world’s fastest-growing economies, so energy markets are very sensitive to any change in conditions there.

The European experiment with a trans-sovereign currency is facing its first acid test. The flashpoint today is Greece, which looks set to default on its debt barring some outside intervention. While many commentators have been squawking about the immediate crisis as if it were the end of life on Earth, I would like to zoom out and discuss the history and longer-term outlook for the euro and its parent, the European Union. The launch of the euro was a major milestone in the sixty year process of European federalization. Economic considerations have always led the charge, from a normalization of tariffs to a free-trade area to a customs union. Still, the launch of a pan-European fiat currency and central bank without a unified political apparatus behind it was always considered a risky move. Since its launch, the euro has outperformed expectations, establishing itself both as the world's secondary reserve currency and the second most traded currency after the U.S. dollar. Because of this stellar introduction, the euro has been proposed as the new primary reserve currency in place of a devaluing U.S. dollar. However, its unusual foundation presents risks to which most investors are unaccustomed.

U.S. lawmakers are toughening their stance on Iran’s energy industry with new economic penalties, but experts doubt the Islamic regime will pay much attention and is more likely to open the doors even wider to other players eager to replace fleeing investors. Long on Congress’ radar screen, Iran is being targeted by two bills: The Senate’s Dodd-Shelby Comprehensive Iran Sanctions, Accountability and Divestment Act passed in late January; and the House’s Iran Refined Petroleum Sanctions Act approved in December. The bottom line is these bills, once signed into law by President Obama, will pursue financial institutions and businesses that do business in Iran’s energy sector or help the regime build its refining capacity.

With today's unexpected decline in December payrolls, the cry for more job-related stimulus will grow even louder. But the sad truth is that any new stimulus or jobs bills will ultimately swell the ranks of the unemployed, thereby raising calls for an even bigger federal effort. If we are not careful, government regulations, subsidies, and spending, all designed to fight unemployment, could push the labor market into a death spiral. Regulation acts like a tax on job creation. By subjecting employers to all sorts of extra expenses when they hire people, regulations increase the cost of employment far beyond the wages employers actually pay their workers. In fact, some regulations are specifically tied to the number of workers employed. This provides some employers with a strong incentive to stay small and not hire.

With today's unexpected decline in December payrolls, the cry for more job-related stimulus will grow even louder. But the sad truth is that any new stimulus or jobs bills will ultimately swell the ranks of the unemployed, thereby raising calls for an even bigger federal effort. If we are not careful, government regulations, subsidies, and spending, all designed to fight unemployment, could push the labor market into a death spiral. Regulation acts like a tax on job creation. By subjecting employers to all sorts of extra expenses when they hire people, regulations increase the cost of employment far beyond the wages employers actually pay their workers. In fact, some regulations are specifically tied to the number of workers employed. This provides some employers with a strong incentive to stay small and not hire.

After starting the week on a firmer note, oil prices fell sharply toward the end of the week in a general market sell-off as investors sought the dollar as a safe haven amid worries about European Union economies. Debt problems that have plagued Greece are now spreading to Portugal and Spain, driving the euro down temporarily below $1.36 and bringing the dollar to an 8-month high. Because oil and other commodities are priced in dollars, gains in the U.S. currency usually translate into declines in oil prices. Even a decline in the U.S. jobless rate below 10% on Friday could not stop the downward trend in commodities.

The Middle East peace talks are at a deadlock. Negotiations between Israel and the Palestinians to move ahead with the plan established by the so-called Quartet – the US., U.N., EU and Russia -- have faltered and come to a complete standstill. Continuing with this inertia will have a long-term negative effect on the future of the region both from a political point of view as well as from a business perspective. With the exception of a few risk-takers, what company or business executive would be willing to invest in the Middle East once the region plunges onto the abyss amid renewed violence? And whenever trouble brews in the Middle East it tends to spill over into other parts of the world.  The risk that Mideast violence could spread to nearby Europe might have been one of the reasons that pushed Italian Prime Minister Silvio Berlusconi to say that Israel should be admitted into the European Union earlier this week. Berlusconi made the statement during an official state visit to Israel. Berlusconi, of course, is one of Israel’s strongest supporters.

Reserve Bank of India (RBI) Governor Duvvuri Subbarao last week announced a hike of 75 basis points in the Cash Reserve Ratio (CRR) to fight rising inflation, when he presented the monetary policy review for the quarter ended December ’09. The hike in CRR - the portion of deposits that banks are required to park with the RBI – would phase out Rs 36,000 crore worth of liquidity from the system in two stages, namely - 50 basis points from 13th Feb ’10 and another 25 basis points from 27th Feb ’10. On a global note, Subbarao acclaimed the increasing signs of stabilization wherein the Asian region showed a relatively stronger rebound. Improved global economic performance during the third and fourth quarters of 2009, prompted the International Monetary Fund (IMF) to reduce the projected rate of economic contraction in 2009 from 1.1% in October ’09 to 0.8% in January ’10. The IMF has also revised the projection of global growth for 2010 to 3.9%, up from 3.1%.

The entire world may want to congratulate India and China for their knee-jerk walk out of the financial slowdown. Double digit growth in India’s index of industrial production (IIP) for two consecutive months, rebound in gross domestic production (GDP) and reports of rising exports are all positive indicators of the Indian economy getting on a firm footing. But there are still some pain points in the economy. According to the latest data released by the Reserve Bank of India, bank credit for the fortnight ended 1st Jan ’10, grew by 13.7% on an annual basis. The corresponding growth last year was higher at 23.8%. It is certainly not a good indicator for the economy at large. If one looks at the year-to-date credit growth, which is a petty 9%, it’s a clear sign of sluggishness. Even at the peak of the crisis, the off take fell to around 13% last year. The second half of the financial year, traditionally, witnesses higher credit off-takes and with positives like burgeoning IIP and positive GDP expectations, the situation would keep improving from here, feel bankers and analysts.

There are a few upcoming industries which will soon spell gold and India’s food processing industry is one of them. Gone are the days when all Indians could think of was fresh food. Of course, that still tops the charts. But the new generation is open to a number of options and food processing is certainly one of them. Food processing has indeed come a long way. The Ministry Of Food Processing Industries (MOFPI) is the nodal agency of the Government of India for processed foods. It is responsible for developing a strong and vibrant food processing sector with emphasis on stimulating demand for appropriate processed foods, achieving maximum value addition and by-product utilization, creating increased job opportunities particularly in rural areas, enabling farmers to reap the benefits of modern technology and creating surplus for exports. In an era of economic liberalization where the private, public and co-operative sectors are to play their rightful role in the development of the food processing sector, the government acts as a catalyst for bringing in greater investment into this sector. This will guide and help the industry in a proper direction, encouraging exports and creating a conducive environment for the healthy growth of the food processing industry.

The year 2009 saw investor wealth double and in many cases even triple. This was the most powerful and phenomenal turnaround that any bear market has ever witnessed in the history of the stock markets. And the best part is that this is not the end of the road for this rally. All technical and fundamental indicators point towards a more robust growth in the economy and a more sustained rally in the stock markets in the year 2010. But a price has to be paid for this vibrant economic growth. Strong growth leads to stronger demand, which automatically translates into higher prices. And these high prices ultimately culminate into higher inflation. Inflation appears to be one of the many dark clouds in this otherwise spotless clear blue sky of stock markets.

We have seen a spectacular rally in most spices complex ranging from turmeric to cuminseed (jeera) to cardamom. Apart from these, spices such as nutmeg, mace, cloves, star aniseed, cassia rallied sharply in the spot markets in the last quarter of 2009. However, it has been a muted year for black pepper. Due to the arrival of new crop, markets have remained under pressure. Due to rising population and stable production, the carry forward stocks of most of these spices are depleting at an alarming rate. Steady uptick in exports and gradual improvement in demand are the main reasons for a sharp upside in this complex. The best example was turmeric was in the year 2009. Between 2002 and 2007, India’s turmeric exports moved up exponentially but domestic production was not rising at the same pace. In 2008-09 we saw a spectacular rally in the yellow spice with prices moving up to Rs 14,000/quintal from Rs 2,200/quintal, a rise of more than 600% in a year.

President Obama's State of the Union message only serves to reinforce my forecast that investors will continue to find better returns in markets outside America and in currencies other than the U.S. dollar. Indeed, the reward gap may well increase. Nothing in the President's speech indicated willingness to do the hard work of cutting spending. Rather, he reiterated his commitment to a costly new healthcare entitlement and more spending on make-work programs. Only days later, his budget acknowledged that, even before factoring in the cost of his proposals, the federal government is unlikely to be in surplus for the foreseeable future. In response, Moody's has issued a warning that the United States' triple-A credit rating is not unassailable. In short, the trend set some ten years ago will continue.

A great - and still growing - divergence appeared in 2009 between public statements by leaders and their public performance. The politicized, romanticized theater of increasingly populist “democratic” leaders and media seemed to be of a different planet from activities taking place in the real world. While a large part of the global population appears still transfixed by words, there is a growing perception that great fissures already rend the global strategic architecture. This is a trend which will compound during 2010.