The document is a newsletter from the CEO of HBJ Capital providing an outlook on the global markets and economy. It warns that the US and European economies may be heading toward a recession as various economic indicators are slowing down. It predicts the Indian stock market will see further downside in the near future. The newsletter advocates keeping cash reserves for now and anticipates a buying opportunity will soon arise in stocks once market bottoms. It promotes understanding economic cycles to time investments in stocks and other asset classes.

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3. 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

4. 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 XX & YY BY DEC’11.

5. Market Overview

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. Indian Market Forecasting

8. 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.

9. World Market Forecasting

10. 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!

11. Sorry, the party is over!

12. 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.

13. But this time, things are far worse!

14. 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!

15. The Market & Business Cycles

16. 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.

17. Sector Rotation : Investing Strategy

18. 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”.

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Persons into whose possession this document may come
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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
recipient’s 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.