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Thursday, December 22, 2016

The New Superpower:Will America Falter?

The devil lies in the detail.


I fear to write this post yet I think there is a new World Order in the making.The coming decade will see the decline of America as a superpower and the rise of a triumvirate - China, Russia and allies.

The Factors:-

Decline of NATO
Europe is passe`.NATO as a military power has been in decline over the past decade and its hard to recall any intervention by them over the last decade.They have been more of an assistant to the US army,no firebrand generals,no strategy.

Their expansion into the ex USSR states has been effectively controlled by the Russian bear and the pro Russia feelings of US new President will ensure that Putin can get away with much more than just the annexation of Crimea,fostering an internal war in Ukraine and browbeating the Kazakhs,Uzbeks,Moldovans,Georgians,Chechens by showing them a new Red Army.

Donald Trump's failure in knowing his  Geography lessons
The pronouncements coming out of the transitional US government shows a Trump willing to cede his own backyard - entire South America to Mexico.

By promising to build verbal if not physical walls,Donald Trump's views might have resonated with the American public but it means a significant step back from countries with unsettled economic and political environments - Brasil,Argentina,Peru,Colombia,Chile.
The smaller countries that need support - Nicaragua,Guatemala,Guyana
The ex enemies that seemed to be turning into a friend - Cuba

Who fills the void?
China with its proxy Russia.The Chinese are buying up assets from Africa to America and everything in between.Russia might supply the military hardware and ideology.

Do not discount the locational value of Cuba just 80 miles off the mainland.

What previous US Presidents built as a buffer against communists etc will fall simply because of disinterest on the part of Trump.A lot of raw material and commodities comes from most of these South American countries.

The Affect
Chinese and Russians have so far been hacking into US networks now they have a chance to interfere physically,send in agent provocateurs`,spies that might mix in well with the white supremacist far right fringe of mid USA.

American exports will see decline in the long run,will not be able to have a strong say in the politics as previously.

USA as an island
America becomes an island where they just interact with Europe and those economies that need their products or from whom the US needs raw materials.They become too busy fending of lone wolf terrorists,hackers,rogue agents and start reacting with military hardware creating more friction

The rise and rise of China - Russia-allies
The chinese are simply printing notes and their government controlled companies are buying any available assets,from oil in Mozambique to diamond mines in South Africa to banana plantations in Brasil to sheep and cattle stations in Australia to telecom companies in India.

Russia is economically weaker but has better weapons tech and that is why the Chinese have taken on board their 'natural enemy' Russia.Russia is making overtures to Pakistan because its become  mercenary- supplying weapons to any country that buys without bothering about end use.Pakistan,Sri Lanka-Nepal are being literally bought out by paying huge grants.Bangladesh after Sheikh Hasina too will fall to this Chin-Russo combine.

India:Cause and Affect

Russia is joining the Economic Corridor to Balochistan's Gwadar port.It will benefit from a shorter route to the blue water Arabian Sea and the Middle east.India can only watch warily as China rings it in with bases across Myanmar,Sri Lanka,Karachi in Pakistan,all within a few hundred kilometres of the Indian coast.

PM Modi talks big but the sad fact is that the Indian Army is totally underprepared for War.
No artillery guns
Ageing Sukhois
Lack of infantry weapons - the INSAS rifle is too capricious and not enough killing power
Lack of combat boots - snowshoes
Main battle tanks lack firepower and armour
The ranks drained by fighting insurgency in Kashmir,northeast
Lack of talent as of all govt services the army has the most demanding work ethic and too little pay
Political use - from PM to ministers all talk of jawans' bravery yet the Budget goes down yearly!

There is a lot of detail left but I am sure you the reader is begining to get the picture and the reason why the Chinese army is becoming so aggresive and the only thing that can delay a Chinese takeover is if the paper printed by them leads to a collapse of the economy for not being able to manage their debt.

Xi Jinping is a true dictator and with Putin they have formed a master-servant relation,both do not count cost - both in terms of people or hardware as seen in Syria.

Unless Trump really gets the advisors who have a global perspective and listens to them,we will see the rise of a new World Order that will substantially change the economies of the First World to the Third World.

How long?
Five Years.


Thursday, November 17, 2016

Congratulations to Mr Modi for Creating Mini Recession

A little more than a month after the 'shock and awe' by Prime Minister Modi,the football match between Government and opposition,economists on each side as well as the debate in the street is still on.

Initially what looked like a brave step in the fight against corruption is frankly turning out to be a damp squib.Almost 75% of the cash seems to be back in the banking system(11 lakh Crores) and there is still half a month left.

It just shows how successful the Prime Minister has been in his 'PR" that people on the ground despite hardships have not rioted or been impatient in a big way.That feeling is slowly giving way to some anxiety although the person in the street is still unable to do the maths.

I hear those defending 'demonetisation' say that the 'pain is short term but gain is long term".Yet no one seems able to define the short term?

Worst is the new line taken by PM Modi which basically is a climb down and the government is seen pleading with the corrupt to bring in the unaccounted funds.From levying a penalty of 200% of the funds found now the new scheme says pay 50% tax and hold the remaining for 4 years to get away with your income from corruption!

An average working person in the highest tax bracket gets 30% deducted at source so those who did not choose the path of corruption might be feeling let down.

Rural India

As per Newslaundry.com -  5.3 bank branches per one lakh Indians in rural India 15 years ago. Today the figure stands at 7.8 bank branches per one lakh Indians.


This shows that a majority of rural India has very little access to banks and the organized financial sector. They rely heavily on cash and the informal credit system. 

Then, we have just 2.2 lakh ATMs in the country. For a population of over 1.2 billion people, that's a very small number. And guess what? A majority of ATMs are concentrated in metros and cities.


 For instance, Delhi has more ATMs than the entire state of Rajasthan

Given the poor penetration of banks and formal sector financial services in rural India, we believe that Modi's cashless economy ambitions are a distant dream. 


Its like Modi trying to promote a sprinter who cannot even break the national record yet is being told to break Usain Bolt's Olympic record.

I am not even commenting on the bungling by the RBI and consequent domino affect on all Banks.The new Guvernor,Mr Urjit Patel has been silent other than press releases to say that they are taking measures to tackle the situation.

Modi who promised to set things right within 50 days now says that the situation will improve slowly!!Its like his pre poll comitment to bring all the 'blackmoney' stashed abroad so each Indian gets 15 lakhs in his or her bank account.All of us are not waiting with bated breath!!

Even RBI projects a 50 bps de growth in GDP.The general consensus is >100-200 bps.

Point to be noted is that things were working with a lag so the effect did not seem so bad in the first month but now with supply chains cashless,farmers not able to plant in the winter(Rabi) season the inflation and price growth will come in to bite.

I fear stagflation due to these policies.Rise in inflation - fall in demand.Unemployment.Fall in discretionary spending.I think Mr Modi should be congratulated for creating a mini recession.

Rural India has been worst hit and all these emergency measures of putting up more POS terminals in villages cannot work before One Year as the financial institutions do not have the bandwidth.

The Banks spent years trying to keep customers out of bank branches and this currency demonitisation has shown how stretched their resources are.It will not improve immediately.

Bottomline...

This pain will become systemic and likely stay till Q2 of 2017 as RBI,Banks,NBFCs do not have any solution.

Cost of printing and replacing 85% of the currency is quite large

Unemployment in seasonal and manufacturing,lack of spending and consequent lack of growth in revenues for sectors will remove the positives of a good monsoon after two drought years.

Positively the banking system has been flushed with 'dead money' and the fear factor might force a lot of businessmen to do away with cash hoarding and follow a straighter path.

Interest rates 'may' come down although the Bank NPAs do not signify too much of a rate cut in the short term.

I doubt this step has dealt an ultimate blow to corruption or blackmoney by a long shot.India has paid a higher negative price than any estimation for this and will continue to do so.

Let us see if the Budget on 1st February 2017 can be an unexpected gamechanger?

India Demon(itized)...Why Do We Get This Sinking Feeling?

When my friendly neighbourhood grocer informed me one night last week that currency notes of denomination 500,1000 had been declared non legal tender,I laughed it off as another one of those bizarre rumours like Lord Ganeshna drinking milk that circulate from time to time.

The maverick politician has seriously done the unexpected this time.The long queues,the disruption to normal life and weddings and deaths was n unexpected corollary.A few weeks hence all the din will be forgotten and life will resume its old course.

Has it really changed the 'shadow' economy or dealt a death blow as the Government would have us believe?

There will be an affect certainly.But from where I stand I rather feel that its the small fry businessmen and big farmers in the rural belt that would have faced the consequences and not the big politician-businessman-industrialist-lobbyist.

They have been into  real estate,diamonds or offshore banking for many years now.

But I laud this government for putting the gloss and winning brownie points in "The Fight Against Corruption" while at the same time leaving the backdoor open for the connected ones to get away without fear or favour.

(A)The whistle blower's list of HSBC, Switzerland has not been made public till date?
(B)Election funding is still opaque(as in dark)
(C)Reintroducing bigger denomination notes immediately recreates the 'cashpile'.

The common citizen is forced to join the move or their patriotism and everything in between is questioned and chided for not been able to take the hardship.As if the everyday hardships in life were not enough!

"The poor get hand out,the rich get bail out,its those in the middle that get left out"
  Navneet Munot,CIO,SBI Mutual Funds

This quote to me catches the dilemma of the middle class perfectly.Pay all the taxes,surchages etc,give up any subsidies and see the cost of living escalate without any social security.

Still any step to fight the trillion rupee 'black money' market is welcome.The best brains of the Indian Administrative Service could not make the (demon)itisation work and its only the bankers who have been going all out to keep riots and violence from breaking out.

When will the IAS which has become a cozy power club be reined in?

When will Ministers become accountable for their work?

Can this country bear to have high income tax where a .77% of the population pays taxes and the rest enjoy?

How can we develop our infrastucture with such a handicap?

China's  per capita income stands at approx $8,000 against Indians $1,340 which 20 years ago was in India's favour.

As a nation we are not evolving.Religion,building temples or mosques,tribe,caste,gender stereotypes are being used as an election card to win votes,always has and continuing.

Not a single leader of stature that seems to be able to rise above chest thumping self agrandizement.Yet we talk of turning Kolkata into London or whatever!

PM Modi may be lauded as he is trying to instill some reforms,time will be the judge.I hope for India's sake his "Make in India" campaign becomes real and not just any slogan as we seem to be becoming a nation of traders,buy from China-thailand-US-Germany and sell here.

Can you recall an Industrialist of note to have started any manufacturing behemoth?

Please do not include the Bansals of Flipkart who are shoving PE money into advertisements and showing GMV(Gross Merchandise Value) as business success while having losses for over 8 years yet travelling the Globe preaching on how to be a successful entrepreneur.

A whole class of 'real' entrepreneurs that get into moddernizing Agriculture,Supply Chains is the need of the hour.

Tuesday, November 8, 2016

Personal Tr(i)ump(h) But Future Uncertain...!!

As I write the much reviled Donald Trump sits closest to becoming the next POTUS(President of the United States of America)...!!

How could the polls be so wrong?And WHY?

Being a psephologist seems to have become a bit of a rollercoaster as we saw with many election results in India.

JPMorgan says that a Trump win is more shocking than BREXIT.Carrying on from where I left off the previous post does this signify a change in thinking of people fed up with the sameness of political rhetoric and the same practised lines spoken from different podiums?Maybe.

Does it mean that Americans and the British all want to be left alone in a World fast becoming a small hop skip and jump from each other.Will there be new "Chinese Walls" all across and not just the Mexican border.

All I can say is that there is certainly an unorthodoxy of these amateur politicians in the offing.Prime Minister Modi shocked a nation by wiping of 6 lakh Crore rupees of black money from the system with one single announcement making the Rs 500 and Rs 1000 currency notes non legal tender!


Despite the short term pain Indians will learn to live with it but those mid level businessmen,small time politicians,criminals and sundry would have seen their wealth evaporate and about time too!
A statistic I came across says that majority of the taxes are paid by .77% of the population i.e. the working middle class that gets TDSed(Tax deducted at Source).

Globally we can look forward to high bouts of volatility but I am sure that Trump will try to tone down his abrasiveness and modify a lot of his more exotic proposals,after all he is a famous liar.

I wonder what will happen to all those American citizens who swore to emigrate to Canada?
I wonder who will pay for the Mexican Wall
I wonder if the peso will survive!!

But I do know that the markets are in for an exciting time and if you do not love "VOLATILITY",you are requested to stay away!


Saturday, October 22, 2016

BREXIT : Fuel for a further Disruptive Discourse?

The World is going Global . But is it ? Looking at the statistics over the past three to five years I find a surprising rise in fundamental tribalism.

BREXIT has just added another dimension as unsaid issues are finally becoming mainstream . Trump has openly said that he wants to protect the boundaries of the USA in terms of migration , travel and trade . The British are in their "stiff upper lipped" manner seem to be pointing the same way.

Curbs on student movement , increase in anti dumping duties globally are feeding into a movement that is making politicians across markets focus on their respective  vote banks .

Domestically too everyone from the Jats to the Patels and Marathas,Gujars are asking for reservation a curiously Indian system to keep jobs limited to particular communities irrespective of eligibility or talent.Is that a sustainable practise?

Can the World go back to an age of iron boundaries that prevent labour movement across them and will it really benefit the economy? As per Noriel Roubini , noted economist ,the weak recovery post 2008 although it did not lead to a great depression , it gave the far right a strong plank to take forward the disaffection of the working class to create this impression that others were responsible for job losses etc


The Top Five Factors being :-

a)Technology advancements over the last decade have created a vast underclass that hitherto was 
    doing well into a more belligerent mood across large swathes of the globe.Brexit does but
    reflect this new underclass that voted to keep themselves an island literally.

b)The rise of authoritarian regimes like China and Russia that tries to control even the internet

c)Weaker than expected recovery in USA , Europe

d)Wars fuelled by ideology - ISIS in Iraq and Syria , continuing unrest in Libya and Middle East

e) Election victories by the far right in Germany , France as well as the increased insignificance of
    world bodies like the United Nations

This new economic nationalism has heightened race , gender and income disparities to a level where none of the moderate , liberal political class has the strength to stand up and be brave enough to be different.

Elections in the only World Superpower are increasing critical to determining what sort of Leader emerges to give the directional guidance , will they have the willpower and the desire is an entirely separate question!

Again unfortunately I am only left with questions...

How will the Global GDP be in the coming two to three years

New War(s)....World War III...?

More "surgical"strikes by neighbours...?

All this time the burgeoning credit mess in China and the lack of instruments in the hands of Mario Draghi keeps Europe on tenterhooks.Haruhiko Kuroda has tried every means including negative rates to boost spending in Japan to no avail.

Yes the commodity prices have cooled down but as I travel and speak to a wide range of clients I cannot help but repeat that its an unstable world we live in.The markets are but a reflection and volatility is but sure in the coming months.

It so seems that financial,economic and political are  merging with religious intolerance,bigotry and environmental degradation to create an aura of uncertainty.The british have set in motion a monster that will be held up by far right forces to build moats around themselves and am sure even the most farsighted economist will be unable to translate the repercussions.

Till then let us stick to the present!!

Sunday, September 18, 2016

The Difference Between Hating to Lose AND Being Afraid to Lose(While Investing)

Over the years in my Banking and financial services career I have met(and keep meeting) many different kind of investors.Of them all I vividly recall a gentleman  - very aggressive in business,having scaled up his company to a turnover of millions in just a decade yet so timid in investing all that money he made that he could not think beyond Bank fixed deposits all the while knowing that his returns were net negative and not beating inflation!

I have also met retail investors who were filling to bet the kitchen sink on an idea that caught their fancy.

"Winning means being unafraid to lose" - Robert Kiyosaki,Rich Dad Poor Dad

Psychology I find is just as important in the field of investments as it is in business and sports.Most investors are more afraid of the IDEA of losing money than the actual loss.

So ask yourself this.....

A) Is the major part of your portfolio in low yield bonds ?

B) Balanced Funds,tax saving Bonds ,CDs ?

C) Have you bought Insurance products as an investment tool ?

I met a CEO of a small firm who had bought an insurance policy paying a premium of 1,00,000 per annum for 7 years and from the 8th to the 14th year the insurance company would pay him an annual gratuity of 1,35,000.So he pays 7,00,000 for 7 years and he gets 9,45,000 at the end of the 14th  year...!!Just do the maths...? I mean these are finance people so think about those in other fields.

Risk is in everyday living.Its all around.The secret is to take calculated risks and not being afraid to lose.


I would definitely not advise someone close to retirement to put all their savings in high risk equity,midcaps or sector funds,NCDs yet some amount of equity exposure is a MUST if you want to have enough at the age of 60 years to maintain your lifestyle.

Too many people live their entire lives being afraid of risk,being found out,comfortable mid - benchers since school days,happy with their anonymity.The sad part is that they do not even realise that they are not exploring their own potential.

I do not mean to preach.Had I known a decade back what I know today I could have comfortably retired to pursue my hobbies.Its very personal.

Yet the fear of losing makes people do complicated things which leaves them financially uncomfortable many years hence.

What is Luxury ? A fancy house?A Merc or a BMW or a Hummer?Latest gadgets?An endless list as it depends person to person

To me luxury is having the comfort of regular living without the daily pressure to meet deadlines and targets to survive.

As Warren Buffett has famoulsy said that one must create an alternate source of income along with your main source of livlihood  and one must always buy Assets.

That alternate source could be rental income,dividends,interest or creating a business that generates some returns.

It cannot be done without taking some amount of Risk.Research says that fear of public speaking is man's biggest fear but I feel that fear to invest in non - risk products is even greater,so although you may hate to lose ask yourself

AM I AFRAID TO LOSE ?

The Difference Between Hating to Lose AND Being Afraid to Lose(While Investing)

Over the years in my Banking and financial services career I have met(and keep meeting) many different kind of investors.Of them all I vividly recall a gentleman  - very aggressive in business,having scaled up his company to a turnover of millions in just a decade yet so timid in investing all that money he made that he could not think beyond Bank fixed deposits all the while knowing that his returns were net negative and not beating inflation!

I have also met retail investors who were filling to bet the kitchen sink on an idea that caught their fancy.

"Winning means being unafraid to lose" - Robert Kiyosaki,Rich Dad Poor Dad

Psychology I find is just as important in the field of investments as it is in business and sports.Most investors are more afraid of the IDEA of losing money than the actual loss.

So ask yourself this.....

A) Is the major part of your portfolio in low yield bonds ?

B) Balanced Funds,tax saving Bonds ,CDs ?

C) Have you bought Insurance products as an investment tool ?

I met a CEO of a small firm who had bought an insurance policy paying a premium of 1,00,000 per annum for 7 years and from the 8th to the 14th year the insurance company would pay him an annual gratuity of 1,35,000.So he pays 7,00,000 for 7 years and he gets 9,45,000 at the end of the 14th  year...!!Just do the maths...? I mean these are finance people so think about those in other fields.

Risk is in everyday living.Its all around.The secret is to take calculated risks and not being afraid to lose.


I would definitely not advise someone close to retirement to put all their savings in high risk equity,midcaps or sector funds,NCDs yet some amount of equity exposure is a MUST if you want to have enough at the age of 60 years to maintain your lifestyle.

Too many people live their entire lives being afraid of risk,being found out,comfortable mid - benchers since school days,happy with their anonymity.The sad part is that they do not even realise that they are not exploring their own potential.

I do not mean to preach.Had I known a decade back what I know today I could have comfortably retired to pursue my hobbies.Its very personal.

Yet the fear of losing makes people do complicated things which leaves them financially uncomfortable many years hence.

What is Luxury ? A fancy house?A Merc or a BMW or a Hummer?Latest gadgets?An endless list as it depends person to person

To me luxury is having the comfort of regular living without the daily pressure to meet deadlines and targets to survive.

As Warren Buffett has famoulsy said that one must create an alternate source of income along with your main source of livlihood  and one must always buy Assets.

That alternate source could be rental income,dividends,interest or creating a business that generates some returns.

It cannot be done without taking some amount of Risk.Research says that fear of public speaking is man's biggest fear but I feel that fear to invest in non - risk products is even greater,so although you may hate to lose ask yourself

AM I AFRAID TO LOSE ?

Friday, September 2, 2016

5 Reasons you hesitate to invest and why it will hurt in the Long Term

Investing is a subjective sport. Some do it for pleasure, most do it because they see someone else doing it! Many follow the legends of the investment world - both local and international.

For some its a style statement, for others a gamble. In a perfect world everyone over the age of 20 years and earning something would be salting away some part of the earnings for their retirement.

Most do not. I being a foremost example having found out the hard way and having started when I was over 35 years old.


The Reasons for not investing seem inane but here they go:-

A)Have no idea why they should save

B)After mortgages and expenses they do not have anything to save!

C)The only savings they know is to buy life insurance!

D)Savings and investing is a cumbersome process and too tedious

E)If business owners or professionals they are ploughing back their savings back into business

All valid arguments and true. With all the news flow its very easy to get caught up with the 'flavours of the season' be they Gold, Silver, Crude, Pharma, IT  etc

There is a logic in Asset Allocation - not all sectors or segments of the market perform at the same time.Nor will all your assets keep going up.

It is also important to identify what are ASSETS.A car is not an asset!Many even categorize owning a home as a LIABILITY.

Be what it may,parking your savings in  Gold,realestate,equities,startups,Art,Antiquies,diamonds,platinum is a surefire way to lessen the risk of any one sector failing to give you a return.

Then comes the risk element - unfortunately most Governments all over the world are taking a back seat as far as social work is concerned and allowing markets to determine the RISK and REWARD.

Staying invested,starting early that I learnt to my great discomfort allows you to enjoy the power of compounding(It takes a minimum of 8 years of investing to see visible signs).

This discourse is not aimed at professional investors but those accidental bankers like myself who grew up too late for this fact to take effect.

Get a professional Investment or Wealth Advisor and start......its never too late or you wake up one fine morning 25-30 years from now and realise that inflation has eater away all your fixed deposit interest...!!!

Monday, June 27, 2016

BREXIT...RREXIT and a Few Other Things

Despite all noises to the contrary the British decided to go back to being an island.

Reams of paper has been written on the repercussions,the erudite Mr Trump has also added his two bits hence nothing more to be said.Its complex and going ahead the complexity of the divorce will increase notwithstanding the regret of young Britishers,the Scots,Irish and the rest.


Its pretty clear that the human civilisation is rapidly coalescing into islands based on trade,nationalism,religion,colour.The ghettoisation is happening at country level.

The integrity of politicians is at an all time low.The ends justify the means.There is no other reason for the president of an Indian party to try and sow fear and divide the two major religions just so that his party can win state elections.In the 21st Century the winners are trying to re-write history.

The British empire was brutal and pillaged our national treasures yet they gave us public administration and the concept of democracy.But why do I feel that we are reverting back to our tribes?The Marathas will not hear any negative noise on Shivaji,the Rajputs on Maharana Pratap etc

Creating a cult round the leader is a singular Indian trait.Starting from Jawaharlal Nehru...Indira....Rajiv....MGR....Jayalalitha...Mamata Banerjee,they are raised on such a pedestal from where it is easier to see them as demigods and less as humans with human foibles and quirks.One N arendra Modi is the latest in a long line.He am sure has a vision for the country beyond his own personal agenda BUT that agenda is very individualistic and party oriented indeed.

Public relations and grandstanding have become an art.Yet the investor should not lose hope!

In 1990 the BSE index was 1,000+.Today it is 26,000+.Quantum of return?

Yet we have had floods,droughts,the Babri Masjid,Rajiv Gandhi's assasination,Harshad Mehta - Ketan Parekh scams,meltdown of the 'Tiger'economies of southeast Asia,the 2008 subprime crisis,the peak in oil prices and finally Brexit.

Picking companies and businesses to invest in is the key.If people buy cars then Maruti,Tatamotors,Mahindra will profit,if they buy bikes or scooters then Bajaj or Hero or Honda.

Sometimes its easy to lose oneself in the complexity of life,be it in the living or investing.Exercise,meditate or do Yoga.take a step back.Events will keep happening and some might seem like the end of the world.Its important to pick up the pieces and keep walking ahead,one step at a time.

“The tragedy of life is not death but what dies inside us while we live.”
—Norman Cousins

Wednesday, June 8, 2016

POTUS of the World...!!

If 'Don' becomes POTUS then we may just see the 'dawn' of a new era in relations between the USA and rest of the world!

I saw 'may' as I seriously doubt that he truly is dumb enough to follow through on his rhetoric of building a wall with Mexico,taxing chinese imports,disarming a nucleur Pakistan by force or cutting down on aid to partner countries that have for decades depended on the USA.

Some of his straight talk does make a kind of convoluted sense but realpolitik is not run by common sense or the CIA would not have backed the Marcos regime in Phillipines,got into the Iran -Contra tangle or the mess in Central and southern Afrca – Mozambique,Congo etc

For a businessman who has been bankrupt a few times and with the showbiz personality its strange that Americans are shedding their quasi sophisticated tag to back this tux wearing redneck.

For the rest of us watching beyond the Atlantic shores it does seem like comedy most times as the pronouncments of 'Don' on everything from gender issues to racial segregation seems like we are back in the 1800s living in the era of slave traders,witch hunting and all that connotes.

In China,Xi Jinping is taking a leaf out of Chairman Mao's style of governance,purging powerful military leaders,opposition in the guise of an anti-corruption drive.The 'iron curtain' remains in place with twitter,Faebook blocked at every anti-establishment word written.

For the past two years my blogs have said the same thing.Do not believe completely in the official China data.

Now I guess I must say the same about India.A growth of 7.6% simply does not reflect on the ground.No major reform has happened even after Two years of the Modi government despite noises to the contrary.

If they truly believed that their work spoke they would not need full page advertisements in the dailies and huge wastage of public money on celebrations.

Celebrations?

Prudence is good.Extra prudence is useless.The benefits of fall in crude prices never percolated down to the public,they have added additional 'cess' to clean India,for farmers but truly speaking how much of the public money will reach the destination is a big question in the meantime the Indian middle class which is bound to pay tax as its deducted at source keeps getting poorer.

Hinduism which for centuries was a unifying force is now the new weapon to garner votes.At least we Hindus could say that Islam conquered by force and did not give people choice but seeing these pseudo yogis on TV talking of beheading when one of them not too long ago tried to flee from the police disguised as a woman really doesnt say much for discipline.

India is growing through sheer dynamics,people,resources and some systems.That will keep on.But these Indian politicians have tasted Public Relations and an American high decibel style that does not bode well for the future as only billionaire politicians will have the financial means to get their voice heard.

Even the puniest politician will adopt machiavellian means to generate the funds.


But let us not lose hope,great things are expected from Team Modi and he still has three years left!

Saturday, May 21, 2016

Banking Sector's Indian Waterloo

Long after the subprime crisis in the USA had passed into the public's short term memory as a blip although it merely happened just eight years ago,Indian Public Sector Banks have brought out a lot of skeletons from the closet.


Overall banking earnings down 98%
Seven Public Sector Banks slipped into the red.during the quarter.
Punjab National Bank(PNB) set a record for the highest quarterly loss ever in Indian banking history.
Syndicate Bank wrote off Rs 8 billion due to a four year fraud.The Bank's Chairman and former director were arrested in a cash-for-loans scam in 2014.

Having myself worked in IDBI Bank,I have seen the restrictive practises,Government intervention,lack of autonomy and political leanings that do not allow the average manager on the ground to utilise his or her talent or even policies that work.When coupled with an unscientific merger between the lending institution – IDBI,its obvious that the organisation could not find direction and focus on its strengths.

Almost all PSU banks face militant trade unionism,lack of low cost deposits,exposure to high risk corporate lending or farm lending leading to lower margins than their private sector competitors.
They have also been used as the Government's very own “piggy”bank and dispenser of favours to businessmen of all hues.

The Vijay Mallya fiasco is but a small saga compared to the mountains of debt of some other corporate houses.Truly its the small guy/businessman/individual who faces scrutiny and remains cut off from credit where the businessman with political connections can scim of billions even with failing businesses(as seen in the Kingfisher airlines case).

So who amoungst the PSU banks will survive this crisis?

At this point the only survivor looks like State Bank of India.Merging its associates is the first step.Making it technology driven with more professional managers in the middle management would allow it to benefit from its strong and large customer base.

Although it does offer other financial services,none of the divisions have toplines large enough to matter.Nor has it successfully pushed the digital wallets or even e-banking till date.

Raghuram Rajan and the RBI has been commendable in forcing these PSU banks to provision for the NPAs but a lot more needs to be done and at least four to six quarters before anything could be said with certainty.

Do not be fooled by cheap valuations and cheaper stock prices.Most of these banks are trading below book value(BV).The key question is not why they are below book value.

The key question is 'WHAT IS THE ACTUAL BOOK VALUE'.

So everytime your broker recommends you to invest in them,this is what you should ask them!


Friday, April 15, 2016

Talking Heads,Bharat Mata and Drought

While slogging in the bank,we used to takeout our frustration on the 'cushy'lifestyle of those clients who worked at the sundry embassies and consulates at Chanakyapuri.Off work 4pm.A round of golf.A couple of pegs at 6 P.M.India International Centre(or Delhi Club),dinner with celebs and then parties.Five day workweeks.

Next came the executives at top NGOs who sixty years after independence still behave a bit like 'brown sahibs'.I remember helping them to open an account with another bank at Car Nicobar,post the Tsunami and got a closeup view of life at these charitable institutes!

Some such birds seem to have found a haven in the studios of media wallas as I seem to see the same faces,saying the same things at different times of day or night.Are they paid?is it for publicity?How are the panelists selected?Who does the selection?

Can they get Bhogled?

(I bet that's a new one that you haven't heard!!!!!)

The veteran IIM grad turned cricket commentator Harsha Bhogle getting his contracted cancelled at the last minute for not promoting Indian cricketers,as goes the rumour!

Anyways,

We have been having a surfeit of words from all the acharyas,shankracharyas in the woodwork,ministers wanting to re-culturise,re-nationalize the country,change the names of cities to some unprounounable mush BUT forgetting that the nation needs serious work to bring it out of the doldrums.Off course,as per most politicians they have completed their job and the country is doing fine.

Only those like us on the ground,poor fools,dont seem to be able to see any difference in the last couple of years.
Exports         NEGATIVE.
Growth in credit    NEGATIVE
Retail Inflation             UP
Yet one cannot go without saing BHARAT MATA KI JAI....!!

No longer are citizens shocked when politicians are seen accepting money on tape.Seen beating up the very common folk they are voted to protect.This "Laissez Faire" is the truly frightening aspect as we are becoming acceptable of the indiscretions of those in power.

Religion,politics,caste,creed all fail beneath the lack of water and food.While we in the cities have the luxury of turning on a tap(and leave it running),there are people trudging many kilometres to get a few litres of brackish,dirty water.No fodder for their cattle.No crops or food for their children.

All of us need to experience the distress and I fervently urge you the reader to go to the villages of India that are closest to you and experience the living conditions.We are a long way from being a superpower and in many cases even worse than conflict riven countries of saharan Africa.

Its we the people of this Nation who have to get up and do the job.The institutions are bogged down in bureaucracy.Some are still busy figuring out if Netaji is alive(other than his family).

In the meantime,Flyovers fall down on peoples' heads.People die of thirst.Cattle starve.The Prime Minister says the country's reputation has improved under his stewardship,the IPL tamasha carries on.

Is India the Marie Antionette of our times?

"If you don't have bread,eat cake"

I am taking a break from writing about stock markets.After all the rise and fall in the PE or RoI or EPS will not matter to those staring down empty wells and ruined crop fields.

Truly if there is a God up there,a Vishnu or Allah or Jesus......send this country a good Monsoon.

SOON.

Sunday, March 13, 2016

Sailing An Unsettled Ocean of Global Woes - II(Mini World War - 3)

When Warren Buffett bought a stake in China Petro,circa 2002 for $ 500 mn and selling it at a $3.5 bn profit in 2007 although he thought it was still undervalued,we all thought of a momentum in energy prices was round the corner.

Recently he has again made an investment in pipeline operator Kinder Morgan,though share prices have fallen since,it is interesting to note that his investments in Petro China and Burlington Northern Railroad were made when prices were depressed(as they are today) whereas his loss making investment in ConocoPhillips was made in 2008,era of high crude prices($120 then).

Offcourse it is stupid to judge as Mr Buffett buys value and stable cash flows,long term et all.Maybe I am just trying to find arguments to buttress my theory that average crude prices in the next Two years would be around $60 with many spikes and troughs!!

Having said that its very clear that the major risk to markets right now is not China but the MIDDLE EAST that is succumbing each day to the most virulent form of religious fanatisism that is already becoming a mini Third World War.The shia-sunni fight that has drawn in Turkey,Saudi Arabia,Iran,Iraq,Syria and the usual suspect - Russia,USA threatens the entire axis from Africa to Asia including Europe.
Image result for war pics from syriaImage result for war pics from syria
Scenes of a shelled Damascus with windowless gutted buildings standing like skeletons,a chemical attack by ISIS in Kirkuk,suicide bombers in Ankara,blasts in Medina all point to a situation fast going out of control.The migration crisis will only get worse.

The defence sector in India will be a bright spot as will armament suppliers in US,some banks that have managed their balance sheets as well.

Will Indian markets hold their recent lows.It is difficult to say with new developments in the Middleeast as well as China.Domestic exports are down 14% and industrial growth nothing to write home about.Going ahead we will see huge volatility and trading will be akin to treading on ice.Good businesses will flourish and overvalued ones will stutter.

I have always felt that the buzz created by PEs who invested in the local e-commerce players was overhyped and the drastic cut in valuations by JP Morgan on the likes of Flipkart is only just the begining . It is too early to write an epitaph for brick and mortar stores and 2017 will definitely see a resurgence in their sales growth.

My reccomendeations - Reliance industries and Larsen&Toubro(L&T) have done well and I expect more robust numbers and an incremental increase in share prices.

Let us wait and watch the unfolding war and the Trump bid.....!!

Saturday, February 20, 2016

Sailing An Unsettled Ocean of Global Woes

What an interesting two weeks the stock markets have had.The Indian Indexes have shed points worse than a dog shedding fleas!!

Crude has yo-yoed.Commodities prices kept the downward curve and Gold rose to a six month high.The war in Syria - Iraq has now spread to Turkey with blasts in Ankara.the 'Zika' virus is taking a physical and psychological toll in South America,especially Brazil.

"Investing in this market is only for those who understand that they have to bear short term pain for long term gain"

Especially so in the Indian context.NPAs or bad debts came out of the closet to bite the PSUs and send their stock prices tunbling below book value(BV).Adjusted Book Value(aBV) is offcourse far lower hence not much to be read into this data.

It was not even a well kept secret.The good news being that these Banks are now free to aggressively clean their Balance Sheets,sell NPAs to ARC(Asset Reconstruction Cos),take legal action against defaulters and get recapitalized.A lengthy process that will give value investors a good chance.

I would only look at SBI at this point for a staggered investment if it had to be a PSU at all.


I must also confess that I am clueless on the GDP numbers that do not feel like a 7%+ growth on the ground.Statistics can be made to supporthe Bu any argument and the calculations are magnificently confusing.

With the Budget on 29th February the expected "pre budget rally" is yet to materialise.The nifty having touched 6800 will stay above that should 7000 levels hold.Staying on the sidelines,buying through SiPs or using options to hedge your trades seems the only logical route.

Reliance Industries and L&T are the two largecaps that look a safe investment at current levels(RIL 940 and LT 1150)

I confess I have no idea what the Finance Minister will uncork from his "budget bottle" though a push for infrastructure,education and defence is doing the rounds.It would be very frustrating if he does not provide tax incentives for the middle class that pays the bulk of taxes.

Fundamentally the Indian markets seem the best bet for investment but will depend on what FIIs think and how weak the US $ gets after touching historic highs.

The volatility and unsettled conditions are likely to last for two more quarters at least.For a long term investor a fall to Nifty 6200 levels will create value in strong companies(my fair value for Nifty is 6500).

Lets wait for the budget.

Wednesday, January 27, 2016

Did You Talk To Your Child Today?

Every parent wants the best for their children.But how many really have a thought out plan to channelize the aspirations of your children into a real goal in the real world?

Growing up in late 20th century,my parents had this general feeling that I should study hard and things would somehow work out.I am glad to say they  were right.But it was by chance rather than through any assigned methodology.

But how has the world we live in has  changed.And fast!Technolgy is changing every six months.Jobs,vocations that were in demand last year are passé this year.Careers are evolving quicker and into newer fields.Uber,Amazon,Artificial intelligence,driverless cars,drones and more!!

So when did you last check with your child and what their aspirations are and likely to be?
I bet you did not.And if you are the parent(s) who did I am guessing you are still a little clueless on how to go about the whole process of fulfilling your child’s aspirations of the future.

Especially so if finance is not your strong suite.

Fret not,anyone with a little homework can build a sufficient corpus with time and patience.

Option 1

MUTUAL FUNDS are the best route for those with minimal knowledge of equities and a definite lack of time.Choose from fnds that invest in large corporate stocks,mid sized or just companies from a particular sector i.e Banking, Pharmaceuticals etc

Those wishing to take a lower risk can look at Debt Funds that invest in Government Bonds or Corporate fixed deposits where the returns too are lower.

Option 2

DIRECT EQUITIES have historically given the highest return over a period of 10 – 20 years and famous investors like Warren Buffet and Mark Mobius have become legends but this is for savvy investors who have the time and passion to minutely follow trends and predict the course of profitable companies

Option 3

GOLD has been a traditional investment in India for those who have daughters as marriages often entailed a substantial outlay in jewellery.The good news is that the Mutual Fund route can be used in this case too through ‘Gold Funds’.

Option 4

REAL ESTATE,another approach close to Indian hearts and one that has substantially appreciated over time but one must keep in mind the illiquid nature of real estate and especially the investment kind where you may not be able to find a buyer at the requisite time and at required price!

The key to any investment is longevity.Given time and the power of compounding even small investments made at regular intervals also known as SiPs(Systematic Investment Plans) can work financial miracles.

Everything is fine but I must say the most important part is what your children want.It is important to ask:-

Are you keeping the aspirations of your child in mind?

Are you imposing your own unfulfilled dreams on them?

Does your child have the inclination for the path they are on or is it your invisible hand that hovers over them?

The important thing is for your children to be happy and doing what they wish to do.Its their Life!

You can find more useful news at www.homework.axismf.com  as they have a comprehensive and succinct guide that will assist in taking decisions that have a bearing on the future of the next generation.