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2. From the desk of CEODear HBJ Family Members,After the successful release of our previous 3 market outlook reports during last 10 months, we are once again back with the market forecasting report called The Market & Business Cycles. This issue is more informative, can be used for education purpose. It will help you to look at the BIG PICTURE of the world economy & various asset class.Last week, Ben Bernanke has warned about the US crisis. Market took it seriously, but later on nobody on the street was cheered about Obamas 447 billion dollars job package. Euro zone crisis is also deepening particularly, the Greece crisis has become worse. ECBs German member Jeorge Stark has decided to resign over dispute on helping Greece. All these concerns will dampen the investors sentiments. At home, India Inc. will announce Advance tax data for the second quarter on 15th September followed by RBI credit policy on Sept 16th.We know that we can never predict the future. But with Market Cycles we can anticipate the safe times and the dangerous times, the moment to take risk and the moment to conserve capital. Understanding the fact that bonds lead stocks, and stocks lead commodities will help in selecting the asset class to part our funds. The rich understands the economic cycle. Unlike the poor, the rich will start to park their cash in the stock market towards the end of the depression. The rich will wait patiently for 1, 2 or 3 years. They are not bothered by the daily fluctuation in stock prices. When stock market revive, they easily make 200-300% return.Remember, Economy changes but history repeats itself.You dont have to be a swami guru to predict the future. What you need to be is just a part of HBJ Family. At this moment, wait for further downside in the market. Keep cash in your hand, nowhere else. You are very close to once in a lifetime opportunity to invest in stocks!Regards,Kumar Harendra, CEO, HBJ Capital 3. Successfully predicted the market trends Is this a trend reversal? [Nov10 Issue] HIGH ALERT GIVEN ADVISING TO KEEP 50% CASH IN HAND & 50% IN STOCKS. Fat Boys [Dec10 Issue]ALERT GIVEN TO SAFEGUARD INVESTORS FROM THE FALSE BREAKOUT IN DEC10 The Sixth Sense [Feb11 Issue] PREDICTED SENSEX/NIFTY LEVELS OF 16K & 4800 BY JUNE11, ACHIEVED IN AUG11. The Market & Business Cycles [Sept11 Issue] PREDICTED SENSEX/NIFTY LEVELS OF XX & YY BY DEC11. 4. Market Overview 5. Interest rate near peak during Early ContractionInterest rates play a very important role in determining economic activity, the phases of the business cycle and theperformance of the stock market. Higher interest rates increase the costs to businesses and individuals. Companies mustpay more to borrow money for capital investments or to fund daily business operations. Higher interest rates also increasethe demand for money to invest in bonds, competing for money to invest in the stock market. 6. Indian Market Forecasting 7. Power shifting to Asian Economy! PERHAPS there are two of the greatest kept secrets in the West that are impacting our future that continue to be ignored. Lower interest rates destroy the economy reducing the value of money at a time when its value rises removing the incentive to lend money. Fact that Asia use to be the largest economy and financial capital of the world. Indeed, we are passing the torch from the West to Asia because that is part of the nature of all things. The Financial Capital Of The World and the Worlds Largest Economy are two titles that have often been shared, yet are never fixed. Perhaps at first you might respond thinking China or Japan may have held that title. Yet, to your surprise, India once also held this title around 1000AD. Today, India is one of the fastest growing regions and Asia is evolving independent of Europe and America. This is why the British were so interested in India. 8. World Market Forecasting 9. Are we heading for an equities bloodbath? Equity investors are in for a rude shock.The global economy is sliding back into recession and they are still not evenaware that these events will trigger another leg down in valuations, the third major bear market since the equity valuationbubble burst. Economic data is increasingly pointing to a double-dip recession and that presently there is too much optimism amonginvestors. So far the equity market has shrugged off much of the weaker data that abounds, and has not joined the bondmarket in a perceptive move. The equity market will though crumble like the house of cards it is, when the nationwide [US] manufacturing ISMslides below 50 into recession territory in coming months. During Aug11 it was 50.6 almost close to recession zone! 10. Sorry, the party is over! 11. Europe is on the doorstep of disaster.Europe is on the doorstep of disaster. If it breaks-up, the trade barriers will rise with regulations andfreedom of movement will cease as everyone will be pointing fingers at everyone else as the cause.That opens the door to WAR whether or not you want to even entertain that possibility.This decision that there is EITHER a unified Europe or it disintegrates will have to be made VERY soon.We are deeply concerned that the world will turn VERY, VERY Ugly and we are not talking about long-termstuff here.Japan found the magic formula to create a 26 year Great Depression.Central banks raise and lower interest rates in HOPE or affecting DEMAND. This method is neversuccessful because it is INDIRECT and is based upon a hope and a prayer.Because Japan lowered interest rates to virtually ZERO, they failed to stimulate DEMAND and all theymanaged to create was a massive exportation of yen largely to dollars called the YEN CARRY TRADE.They could earn 8% at the time in the USA and the domestic economy in Japan merely stagnated as capitalfled seeking profit elsewhere. Japan found the magic formula of how to create a 26 year Great Depression.Guess what! This failed theory that making interest rates really cheap will somehow stimulate borrowing andeconomic growth is so flawed because again it is based upon a domestic closed economy that does not existignoring what happens if money just picks up and leaves. 12. But this time, things are far worse! 13. Gold can spike high above $2300, now trading around $1855What makes markets go up and down is NOT the fundamentals it is people. Between1970 and 1974 gold rallied from $35 to about $200 on the same default. Nothing changed,but gold fell into 1976 to $103. Then it rallied to $875 into 1980. There was NO change inthe fundamentals.Rumors are echoing in the corridors of power in Wall Street and Washington whispersabout Fed Chairman Ben Bernankes secret plan for interest rates. The Fed on Aug. 9pledged to keep the benchmark rate near zero until at least mid-2013. Now, the rumor isthat "Helicopter Ben" is seeking to force down longer-maturity bond yields in a last-ditch attempt to boost the economy.Mind you, the 10-year note is only yielding about 2 percent now. But even on the rumor ofthis shift in Fed policy, Wall Street heavyweights are rumbling there could be unforeseenconsequences from such a move. Lower returns on Treasuries drive investors into riskierassets in search of a higher return. This can boost equities and most commodities including gold.Investors who have never even thought about owning gold before will rush into the metal.This could be the critical thrust we need to drive gold above $2,000 an ounce, then $2,300 and potentially much higher! And its not just gold. Commodities of all types precious metals, agriculture, energy and more are poised to rocket on Bernankesgambit! 14. The Market & Business Cycles 15. Economy works in a predictable cycle: Learn ItThe rich understands this economic cycle. Unlike the poor, the rich will start topark their cash in the stock market towards the end of the depression. The richwill wait patiently for 1, 2 or 3 years. They are not bothered by the dailyfluctuation in stock prices. When stock market revive, they easily make 200-300% return. The next thing they watch out for is the property prices.When property prices begin to show its first quarter increase, they will sell off The rich willsome of their shares and grab a few properties. In another 1 or 2 years, theirwait patientlyproperties appreciate in value and they easily make a few millions. When theeconomy reaches its peak, they will sell off some of their properties, keep some tofor 1, 2 or 3 earn rental income and park the rest of their money in fix deposit, surviveyears. They are through the depression (which can last for about 5 years!) and wait for thenext cycle! not bothered Guess what the poor will be doing? They do the exact opposite. Whenby the dailythe market is good, they got their pay rise and bonuses. They feel richand start to think of some investment. Usually, they will turn to a bankfluctuation inand listen to those unit trust managers who show them all kinds of track record stock prices.about the superb performance of their unit trusts. The poor will then put theirhard-earned cash into those unit trusts and become a victim of the next economydepression.Remember, Economy changes but history repeats itself. You dont haveto be a swami guru to predict the future. What you need to be is amember of HBJ Family. 16. Sector Rotation : Investing Strategy 17. Sector Rotation, a Proven Investing StrategyBonds Stocks Commodities,Bond has fallen down, Stock isfalling now, Commodity will fallin future & the cycle continues!At every time period, a certain sector will do well due to changes in the economic and market cycle. Due to thesechanges, an investor can invest in that sector that is doing well for that time period by buying a sector exchange tradedfunds (ETFs). The economy lags the market by 3 to 6 months as investors try to predict economic events.This was evidentduring the recent crisis.The market bottomed in March 2009 but the economic numbers began to pick up only muchlater. This happens because the market attempt to predict the economy well ahead. Remember that the market is made upof people with emotions and feelings.The stock market cycle tends to precede the business cycle by six months on average, as investors try to anticipate whenthe market will respond to changes in the economy. This means investors are more likely to beat the market, if they investin the sectors that line up with the current and next phase of the business cycle.By using the sector rotation model, one can intelligently invest in the markets and liquidate when the needs arises. Eventhough one cannot predict the market accurately, at least one can use this to intelligently guess where the market is headednext without relying solely on those economists. 18. RegularIncome For YOU E-Mail: Info@hbjcapital.com Call: +91 98867 36791 19. HBJ Capital Services Pvt. Ltd.#912, 1st F Main, Girinagar II Phase,BSK 3rd Stage, Bangalore - 85 Contact: +91 80 65681133/34, Mob : +91 98867 36791E-Mail: Info@hbjcapital.com | www.hbjcapital.com Bangalore |Chennai |New Delhi |Hyderabad 20. DisclaimerThis document is not for public distribution and has beenfurnished to you solely for your information and must notbe reproduced or redistributed to any other person.Persons into whose possession this document may comeare required to observe these restrictions. This material isfor the personal information of the authorized recipientonly.The recommendation made herein does not constitute an offer to sell or solicitation to buy any of the securities mentioned. No representation can be made that recommendation contained herein will be profitable or that they will not result in loss. Information obtained is deemed to be reliable but do not guarantee its accuracy and completeness. Readers using the information contained herein are solely responsible for their action.HBJ Capital, or its representative will not be liable for the recipients investment decision based on this report. HBJ Capital, officers, directors, employees or its affiliates may or may not hold positions in the companies /stocks mentioned herein.