We have published our latest market outlook report in Sept'11 with prediction of Sensex and Nifty levels.

2. From the desk of CEO
Dear 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 Obama’s 447 billion dollars job package. Euro zone crisis is also deepening particularly, the Greece
crisis has become worse. ECB’s 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 don’t 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?” [Nov’10 Issue]
– HIGH ALERT GIVEN ADVISING TO KEEP 50% CASH IN HAND & 50% IN STOCKS.
 “Fat Boys” [Dec’10 Issue]
–ALERT GIVEN TO SAFEGUARD INVESTORS FROM THE FALSE BREAKOUT IN DEC’10
 “The Sixth Sense” [Feb’11 Issue]
– PREDICTED SENSEX/NIFTY LEVELS OF 16K & 4800 BY JUNE’11, ACHIEVED IN AUG’11.
 “The Market & Business Cycles” [Sept’11 Issue]
–– PREDICTED SENSEX/NIFTY LEVELS OF 12-13K & 4000-4200 BY DEC’11.

4. Market Overview

5. We are in “Early Contraction/Recession” Phase

6. Interest rate near peak during “Early Contraction”
Interest rates play a very important role in determining economic activity, the phases of the business cycle and the
performance of the stock market. Higher interest rates increase the costs to businesses and individuals. Companies must
pay more to borrow money for capital investments or to fund daily business operations. Higher interest rates also increase
the demand for money to invest in bonds, competing for money to invest in the stock market.

7. Look for Sensex/Nifty PE of 14-15 by Dec’11
As on today Nifty is trading around 18 P/E - Historically market has never traded below PE of 8. Best time to
buy a stock is when you have money! Those looking for great deals can buy stocks around Nifty 4000-
4200 levels or Sensex 12-13K where PE will be around 14-15 by Dec’11.
Should I sell? Should I buy? -You have to stick to your plan. If the plan is to be long, then start getting in now, there
are lots of stocks that are cheap, available much cheaper than earlier.

8. Indian Market Forecasting

9. NIFTY traders should play with short-sell strategies
Prices always prefer to traverse the path of least
resistance....
The important event for the coming week is RBI will
meet on Sept 16th to review its monetary policy. They
have already raised the key lending rate 11 times since
March 2010 as a measure to fight against inflation.
Market will obviously react in a negative manner if there
is any further increase.
Drop below 5000 would certainly trigger more short
selling and NIFTY index may try to retest 4800 level. On
derivatives side there was unwinding of Put options and
heavy writing at 5100-5200 strike Call options, which
again indicates bearishness for the coming week.
The major reason behind the sharp increase in prices
can be attributed to excessive short positions in the
market, who rush to cover their positions. As a result we
witness sharp rallies but once the short covering dies
down, then the rally will lose its steam and prices fall
sharply. This is exactly what we have seen last week.
Prices always prefer to traverse the path of least
resistance and in our market that happens to point
southwards.

10. False Upside in Sept, Crash in Oct & Down in Dec

11. Another 15-20% correction due from here!
 How much market can fall further? – Another 15-20% correction from the current levels.
Look for Sensex 12,000-13,000 Levels & Nifty 4,000 – 4,200 Levels
 How long this market correction/crash will continue? – Maximum extent of
correction will happen during Oct & Nov’11. A dull & distress period from Dec’11 till Apr’12 is likely
before recovery takes place.
 How ugly are things going to get? –Worst than 2008 meltdown in term of sentiments
breakdown but NOT in terms of price correction.
 What we need to do right away to protect ourselves from it! – Stay Invested with
HBJ approved stocks, Arrange more & more Cash by selling some of your holding in Sept’11
bounce or from outside and Take Advantage of market fall during next 4 months to accumulate
wealth creating stocks.
 Do you suggest investing in GOLD ETF? –Yes, if you are looking for short term gains, you
should invest in GOLD ETF or Short Nifty Future or Buy domestic consumption based stocks. Bond
prices has already fallen, stocks are falling now, commodity will soon follow…….

12. Market is in “Decline” Phase, Similar to late 2008

13. Watch out for the following changes…

14. World Market Forecasting

15. 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 even
aware that these events will trigger another leg down in valuations, the third major bear market since the equity valuation
bubble burst.
 Economic data is increasingly pointing to a double-dip recession and that presently there is too much optimism among
investors. So far the equity market has shrugged off much of the weaker data that abounds, and has not joined the bond
market in a perceptive move.
 The equity market will though crumble like the house of cards it is, when the nationwide [US] manufacturing ISM
slides below 50 into recession territory in coming months. During Aug’11 it was 50.6 almost close to recession zone!

16. S&P chart showing similarities between 2000 & 2008

17. S&P : May go down by another 40-50% from here
S&P may drop down to 600 levels from 1154 today and Dow may fall down to 7000 levels from current
level of 10992 . This is in-line with the kind of drop seen in 2000 and 2008!

18. Sorry, the party is over!

19. European Bank run every bit as serious as 2007-2009 !
European policymakers would like you to believe we can never have another Lehman
Brothers-style implosion. Don’t listen to the policymakers! The markets are
telling you the exact OPPOSITE story!
Just consider …
Earlier this week, Greek 2-year note yields surged above 50 percent. FIFTY PERCENT!
Subprime credit card borrowers don’t even pay rates like that, which tells you everything
you need to know about how serious their debt crisis.
Italian bonds just fell in value for 11 straight days, erasing most of the gains notched after
the European Central Bank agreed to step into the breach and buy Italian and Spanish
bonds.
Belgian bond yields just blew out to the widest premium against core German bond yields
since the euro currency was introduced in 1999! That indicates the crisis is spreading even
Bottom line: Every beyond the so-called “PIIGS” countries.
reliable popular and Credit Default Swap (CDS), cost of protecting against losses on senior bonds issued by 25
esoteric credit market major European banks and insurers just surged to the highest level ever — 278,000 Euros
indicator is flashing per year for every 10 million Euros in bonds!
bright red … just like German Finance Minister Juergen Stark unexpectedly resigned from the board Friday in a
they did in 2007-2009! move analysts said was triggered by disagreements over the ECB's bond buying program to
stabilize interest rates for struggling nations Italy and Spain. The announcement of Stark's
departure sent stocks and the euro tumbling, as it raised only more questions over the Euro
zone's crisis strategy.

20. U.S. Economy sinking toward 2009 levels or Worse !
If all the problems were “across the pond,” as they say, then markets could potentially shrug off
some of the European selling. But they’re not! Here in the U.S., the economy is clearly slumping
toward recession for the second time in the past couple of years.
The hard evidence?
==> US created precisely zero jobs last month for the first time since the 1940s. ZERO! Job
losses were widespread across a wide range of industries, from construction to manufacturing to
retail.
==> The Conference Board’s consumer confidence index just sank to 44.5 in August from 59.2
in July. That was the worst reading since April 2009.
==> GDP grew at a rate of only 0.4 percent in the first quarter. The last time the U.S.
economy grew that slowly, the Dow was trading for around 7,500
==> Purchase mortgage application activity just slumped to its lowest level since December
1996. The last time this few home buyers were applying for loans, the Dow was going for 6,300.
It is impossible for
Bottom line: Major European and U.S. bank stocks are plunging to levels last seen
the U.S. to ever pay in the 2007-2009 crisis. Key economic data is slumping to levels last seen during
off its debt, in fact the 2007-2009 crisis. And credit market risk indicators are soaring toward levels
U.S. is bankrupt last seen in the chaotic days of 2007-2009.
So we ask you a simple question: “Why shouldn’t the Dow plunge back toward those
levels too?”

21. Now, Bank of America is also in danger !
Right now, BofA is caught in a vicious cycle of its own making.
The main reason: Back in January of 2008, it made the horrendous blunder
of buying the nation’s largest mortgage company, Countrywide Financial, just
before the mortgage market’s worst collapse in history.
Result: Bank of America’s main banking unit is saddled with $3.9 billion in
repossessed real estate. (Back in March 2009, even when its stock was in the
gutter and it was getting an emergency capital transfusion from Washington, it
had less than half that much in repossessed properties — only $1.7 billion.)
And the homes BofA has foreclosed on so far are just the tip of the iceberg. The
bank also has a whopping $20 billion in home mortgages that are in the process
of foreclosure, up a shocking 224 percent from March ’09.
Yes, for a few months last year, there was some hope of a housing market
recovery. But now those hopes have been dashed by the reality of sinking home
prices — down another 5.9 percent in the second quarter, their biggest drop
since 2009.
See how Bank of America is caught smack in the middle of this
storm? It has a total of $421.7 billion tied up in mortgages — more
than any other bank on the planet!

22. 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 and
freedom 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-term
stuff 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 never
successful 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 they
managed 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 capital
fled 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 and
economic growth is so flawed because again it is based upon a domestic closed economy that does not exist
ignoring what happens if money just picks up and leaves.

23. Gold can spike high above $2300, now trading around $1855
What makes markets go up and down is NOT the fundamentals – it is people. Between
1970 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 in
the fundamentals.
Rumors are echoing in the corridors of power in Wall Street and Washington — whispers
about Fed Chairman Ben Bernanke's secret plan for interest rates. The Fed on Aug. 9
pledged to keep the benchmark rate near zero until at least mid-2013. Now, the rumor is
that "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 of
this shift in Fed policy, Wall Street heavyweights are rumbling there could be unforeseen
consequences from such a move. Lower returns on Treasuries drive investors into riskier
assets 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 it's not just gold. Commodities of all types —
precious metals, agriculture, energy and more — are poised to rocket on Bernanke's
gambit!

24. But this time, things are far worse!

25. It’s about preservation of capital not returns…
When Standard & Poor’s downgraded U.S. government debt, everyone was stirring about the prospects of a big sell-off in
the dollar and U.S. Treasuries — but it didn’t happen. Instead, we witnessed a mass sell-off in nearly all other markets
around the world. Why? Because this is a global economic crisis … not a U.S.-specific economic crisis.
And as we found in 2008, there simply aren’t many safe places to hide in this depression-like environment. In the end, the
world’s deepest, most liquid capital markets and currency — U.S. Treasuries and the U.S. dollar — are favored, despite
the downgrade.
That indeed makes a clear statement: A downgrade to U.S. government debt is the equivalent of a
downgrade to the global economy.
The loss of “risk-free” status in U.S. government debt would likely spread to other sovereign ratings. After all, ratings are
relative — not absolute. Perhaps the more troubling part is the systemic damage it would cause. What’s more, a
downgrade of U.S. creditworthiness has all of the ingredients to ignite …
Flight of global capital back to the United States because it still has most liquid currency……
Many think the world is looking like a scary place again. The fact is, the world economy has been a scary place for four
years. And all of the evidence points to a continuation.
We should always seek out investment returns that compensate for risks taken. In this environment, which is highly
vulnerable to economic shocks, not many exist.
That’s why we continue to think we’ll see another aggressive flight of global capital back to the United States — home
of the deepest capital markets and most liquid currency. In crises, capital preservation is king.

26. U.S. Govt. has taken on too much debt it can't pay.
No institution on Earth has enough money to save the U.S. government now.
In 2008, investors were worried that consumers had taken on too much debt they couldn't pay.
This time around, investors are panicking because single largest institution — THE U.S. GOVERNMENT
— has taken on too much debt it can't pay.
Back then, investors could only hope that Washington would find a way to end the nightmare with bailouts
and stimulus.
This time, investors know that government “rescues” only delay the inevitable collapse. And they have
come to the shocking realization that no institution on Earth has enough money to save the U.S. government
now.
4 things happen just before major stock market crashes
1. Bank stocks are leading the entire market lower.
2. The economy is winding down; politicians and the Fed are scrambling to find a solution.
3. The Volatility Index — the VIX — is at levels not seen in more than two years.
4. Gold is setting one new record after another.
These are precisely the things that happened just before America's LAST great stock market
crash in 2008! and they're happening RIGHT NOW!

27. Unemployment Rate explain today’s markets.
The number of unemployed persons, at 14.0 million, was essentially unchanged in August, and the
unemployment rate held at 9.1 percent. The rate has shown little change since April.
U.S. GDP revised down to 1% in Q2

28. Defaults Ahead - Austerity is not working!
Since adopting tough austerity measures, the Greek economic activity is contracting more aggressively.
Its debt burden is growing, led by continued worsening deficits — precisely what the austerity plans are crafted to
reduce.
The risk premium in Greek government bonds is higher, government revenue is lower, spending is higher and Greece
needs even more money to stay afloat.
Put simply: Austerity is not working! One thing austerity is doing, though, is its killing global growth.
And that’s not good for the outlook of commodities. And historically, a common trigger for global sovereign debt defaults
happens to be … falling commodity prices.

29. The Market & Business Cycles

30. Economy works in a predictable cycle: Learn It
The rich understands this 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. 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 will some of their shares and grab a few properties. In another 1 or 2 years, their
wait patiently properties appreciate in value and they easily make a few millions. When the
economy reaches its peak, they will sell off some of their properties, keep some to
for 1, 2 or 3 earn rental income and park the rest of their money in fix deposit, survive
years. They are through the depression (which can last for about 5 years!) and wait for the
next cycle!
not bothered Guess what the poor will be doing? They do the exact opposite. When
by the daily the market is good, they got their pay rise and bonuses. They feel rich
and start to think of some investment. Usually, they will turn to a bank
fluctuation in and 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 their
hard-earned cash into those unit trusts and become a victim of the next economy
depression.
Remember, Economy changes but history repeats itself. You don’t have
to be a swami guru to predict the future. What you need to be is a
member of HBJ Family.

31. Very long term outlook : Power shifting to PRIVATE
Martin Armstrong the founder of Economic Confidence Model says that we are observing a shift of the confidence from
public (government) money to a confidence in private (corporate stock/bonds) money. During next few years we will
see the large amount of global debt (and each governments actions toward that debt) and the international capital flows
that result from the confidence or lack of confidence regarding the debt.

32. 100 Yrs Dow: DJIA is in bear market from last 11 yrs
Looking at the very long term:
A panoramic viewpoint makes it obvious that Markets go through long phases -- bullish, bearish and sideways -- lasting
anywhere from 5 to 18 years. We can notice that from year 2000 till today, Dow is in 11 years long bearish phase !
Last century saw three secular Bull markets:
The first lasted from 1921-29. The Dow went from 75 to 350+ -- a 367% gain over 8 years.
The post WWII Bull market 16 years later, and ran from 1945-63. It propelled the Dow from the low 200s to
1,000. That 354.5% gain occurred over 18 years.
The next Bull market began some 19 years later in 1982. The Dow starting at 1,000, and by the time the Bull
ended in 2000, the Industrials had peaked at 11,750 -- a whopping gain of 1,075% in 18 years.

33. Market to bottom out around Nov-Dec’11
The next 4.3 years….
The change on the horizon for
the next 4.3 years is going to be
very different. We are entering a
phase of the Private Wave where
confidence in government sinks
lower still. The irony of these
types of moves is that the
economic decline continues, but
the financial markets recover with
a twist. Capital becomes leery of
government debt and thus the
private sector rebounds in the
face of rising unemployment and
worsening economic statistics.
Market will bottom out around
Nov-Dec’11 followed by a dull
period of 4-6 months and
recovery after that. We can see
intermediate peak around Aug
2013 & major peak by Oct 2015.

34. 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 World’s
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.

35. Sector Rotation : Investing Strategy

36. Sector Rotation, a Proven Investing Strategy
Bonds  Stocks Commodities,
Bond has fallen down, Stock is
falling now, Commodity will fall
in 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 these
changes, an investor can invest in that sector that is doing well for that time period by buying a sector exchange traded
funds (ETFs). The economy lags the market by 3 to 6 months as investors try to predict economic events.This was evident
during the recent crisis.The market bottomed in March 2009 but the economic numbers began to pick up only much
later. This happens because the market attempt to predict the economy well ahead. Remember that the market is made up
of 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 when
the market will respond to changes in the economy. This means investors are more likely to beat the market, if they invest
in 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. Even
though one cannot predict the market accurately, at least one can use this to intelligently guess where the market is headed
next without relying solely on those “economists”.

37. We are in the “Early Contraction Phase”
To know how to rotate between assets, it's necessary to be a little more familiar with how the relationships between
different markets work. The simple version breaks the market down into three markets: bonds (or interest rates),
stocks and commodities.
Generally, bonds lead stocks, and stocks lead commodities.
Typical investment cycle consists of a bond rally, which is followed by a stock rally, which is then followed by a
commodity rally. The opposite is true as well -- weakness in bonds generally precedes weakness in stocks, which in turn
precedes weakness in commodities.
Not surprisingly, these relationships are due in large part to the causality between these different markets. In this cycle,
for instance, stocks are in the middle of their declining phase as rallying commodities put the squeeze on margins.

38. Stage IV : Gas & Electricals Utilities, Telecom

39. The 4 Stages of Market & Economy Cycles
The market cycle can be divided into 4
stages:-
1) Market bottom- This is represented by prices
dropping, culminating in a low.
2) Bull market- This begins as the market rallies
from the market bottom.
3) Market top- As the name suggests, this stage hits
the top as the bull market starts to flatten out.
4) Bear market- Here we go down again. This is the
precursor to the next market bottom.
The economic cycle can be divided into 4
stages as well:-
 Full Recession - Not a good time for businesses
or the unemployed. GDP has been retracting,
quarter-over-quarter, interest rates are falling,
consumer expectations have bottomed and
the yield curve is normal. Sectors that have
historically profited most in this stage include:
•Cyclical and transports (near the beginning).
•Technology.
•Industrials (near the end). Legend: Market Cycle | Economic Cycle

40. Contd.
 Early Recovery -Finally, things are starting to pick up. Consumer
expectations are rising, industrial production is growing, interest
rates have bottomed and the yield curve is beginning to get steeper.
Historically successful sectors at this stage include:
•Industrials (near the beginning).
•Basic materials industry.
•Energy (near the end).
 Late Recovery - In this stage, interest rates can be rising rapidly,
with a flattening yield curve. Consumer expectations are beginning to
decline, and industrial production is flat. Here are the historically
profitable sectors in this stage:
•Energy (near the beginning).
•Staples.
•Services (near the end).
 Early Recession -This is where things start to go bad for the overall
economy. Consumer expectations are at their worst; industrial
production is falling; interest rates are at their highest; and the yield
curve is flat or even inverted. Historically, the following sectors have
found favor during these rough times:
•Services (near the beginning).
•Utilities.
•Cyclical and transports (near the end).

41. Regular
Income For
YOU
E-Mail: Info@hbjcapital.com
Call: +91 98867 36791

42. HBJ Capital™ Services Pvt. Ltd.
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Contact: +91 80 65681133/34, Mob : +91 98867 36791
E-Mail: Info@hbjcapital.com | www.hbjcapital.com
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The recommendation made herein does not constitute an offer
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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
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