Markets, Economy and everything else...

Update

2010-12-10T19:30:00.000-08:00

Made some money on Coke after a 5 month long investment

Another week, another fall

2010-02-05T17:09:00.000-08:00

If only I had put money and shorted NIFTY (see my previous post). I would have made a nice sum. But to be honest, I think I would have closed the position at 5k NIFTY.

Anywho, NIFTY is now at 4.7k and change, time to seriously start tracking my shortlisted to buy stocklist. Since Mar 2009, since market started trending up, the only place where I put serious money has been in Telecom. Time to dust off that other buy list now, and wait

Time to make a quick buck?

2010-01-18T17:29:00.000-08:00

Shorting NIFTY looks extremely enticing right now. Buying a PUT option around these prices for a Feb or March expiry contract should be a profitable trade.

On the investment side, Bharti continues to remain tantalizing, while IT seems to be becoming expensive with each trading day

Update Jan 25: If only I had put my money where my mouth was. Nifty crashed from 5274 to sub 5000 levels. That would have made a good killing

WSJ: On Mumbai's Streets, Cabbies Fight To Keep Passengers Uncomfortable

2010-01-03T11:13:00.000-08:00

2010

2010-01-03T11:08:00.000-08:00

I would be focussing on commodity and energy investments in 2010. Primarily agri/oil/natural gas based. Valuations are a concern, but will keep on monitoring select opportunities.
Other one would be technology (and I dont mean IT Services here), that in my opinion is an evergreen story. Here however, investing in idividual stocks could be risky, so would be looking at broad-based investments (read as mutual funds) rather than individual stocks. Though I kick myself for not picking up MSFT at 16. I came very close and chickened out. Could have financed a cruise :(

About Oil, anyone has suggestions for good investments if one is bullish on oil? To remove political and ecological risks of investing in specific oil majors, I put money directly in Oil (USO and USL) but I think I could do better

Telecom Stocks

2009-11-29T19:06:00.000-08:00

Is it time to start hoarding Telecom Stocks? I personally believe so, and have been accumulating Bharti and Reliance Comm since Oct, and will continue to do so. Expecting to see substantial gains in 2 year period. (3G License allocations - fingers crossed)

Other than that, I am taking advantage of the rally in IT stocks to reduce my exposure. Slowly offloading, still it forms a large component of my portfolio. Staying in cash as much as possible otherwise.

Confession

2009-11-21T21:44:00.000-08:00

I am back.. I must confess, the main reason I kind of tempered down my enthusiasm to write after India trip in June was due to the my disappointment with misuse of public power I saw in India.
The sheer misuse of office made by the politicians/bureaucrats to make money at the expense of the public has been shocking. It is so shameful. People of my country DO NOT DESERVE the standard of living they are living in today. If only they were more aware of their rights. In contrast, the politicians live like kings. In this context, the jaago re campaign (HAVE YOU REGISTERED?) is commendable, but it should be taken to the villages of the country. Thats when it will start to matter and take root

During my stay in Goa, I happened to meet a few people around, and it was sad that almost every time conversations ultimately came down to one thing - politicians and their power. Political connections have become almost mandatory to succeed in the country (I noticed in Goa, but I dont think it should be any different anywhere else, in fact it would be worse)

Few of the things I noticed/experienced to explain my anguish:
My dad goes on a morning walk with his own gang of friends. I joined him for a couple of occasions. The discussions would invariably come to politics and misuse of power, from petty amounts to big
How one has to pay bribes to the order of 5-10 times annual salary to get government jobs. And apparently, this goes all the way to the top. People would talk about this as a matter-of-fact, it has become a way of life, the shock value is no longer there. Guess what this will result in - incapable people holding posts in the government, trigger to cause even more corruption to 'recover' that money! I felt ashamed to be even listening to this and not able to do anything :(

Another one is petty but is indication of how this misuse of public office has spread all over. A person connected with the municipality, I guess sanitation inspector, would usurp free food from the restaurants (actually have it delivered at his home)

Visited a local spice farm, which seems to be doing business worth a few crore every year. Would you be surprised to hear political name dropping there? Of course not. This time it was a politician outside the state Mr. Sharad Pawar. These names were dropped with pride. I would be ashamed to be associated with these names

I tried to buy some land in Goa when I was there. The rates* quoted were absolutely shocking. And guess who was selling - yes another politician. More than the price, this was the main reason for me to back out. This politician, who is not even in power, wanted to sell this land for over 50 lakh. I don't even want to know how he came to acquire it and what what cost

*Land transactions themselves are a murky business in most of the country. 70-30 split is the norm. This means you pay 70% through traceable means (cheque etc), and 30% in cash. The deed will of course show only 70%.
One of the sources of the massive parallel economy in operation in the country. I would not want to get into such kind of transactions.

People in the know, already have heard enough of Mr. Ravi Naik - one of the most corrupt politicians in the state. He owns possibly almost the entire Ponda and surroundings. Couple of things I heard
- this guy is now constructing a hotel, 20 m from the highway - who gave him that permission? what about parking and the traffic jam it is going to cause.
- this guy also acquired huge amount of land just outside Ponda, built a small temple in the area. When he was in power, then had a road built to the temple. The result? He has got the land developed at public expense! I hear he does not even pay any salary to the priest appointed at this temple!

Petty, but the most shocking. In Ponda itself, there are these poor roadside fruit sellers. Their licenses are threatened if they dont pay around Rs. 200 per day. To what level do we want to go.

There is absolutely no accountability. No sustained public/media pressure too (more on that in another article).
How does a honest person surive here?
I am sure it is much more worse elsewhere (Latest is Mr. Koda who has over a BILLION DOLLARS in ill-gotten wealth, who is yet to be arrested). With all this context, should we be surprised to see the Maooists/Naxalite movements?

Sad that over the last 50 odd years, we have only produced ministers, but hardly any leaders of note!

Check out these Jaago Re campaign ads

http://www.youtube.com/watch?v=M5ECJrnqPcI
http://www.youtube.com/watch?v=qQSz7nnTUP4&feature=related
http://www.youtube.com/watch?v=xtc-Vlg9edM&feature=related
http://www.youtube.com/watch?v=m07wELfHP_8&feature=related
http://www.youtube.com/watch?v=m1P81LumiOE&feature=related
http://www.youtube.com/watch?v=FrwBQPbol5Y&feature=related

Back from India visit

2009-06-05T06:54:00.000-07:00

Recently back from a trip to India. Lot to write about the experiences there, what I did, what I did not etc etc.

Newton's 4th law of motion - All that falls down, comes up (barring some bad apples)

2009-06-02T22:40:00.000-07:00

So much has happened in last 2-3 months.
- Totally unexpected jump in the markets.
- Totally unexpected election results
- Made an inter-state move of household
- and much more...(satyam... )

My portfolio is now up 26% over acquisition cost. Lot of this gain is courtesy my BFSI-weighted portfolio (helped a lot by ICICI Bank).

Another pleasing thing is my Hotel portfolio is looking good. My investments made in Indian Hotels around 26/11 (more to show solidarity) are paying off. I think I will donate the profits from Indian Hotels to charity since that investment was not made from a profit perspective.

Another biggest winner in the pack was my investments in JM Basic MF which saw impressive gains

These are my top 12 sector-wise holdings by market value. If you compare that with my Feb holding distribution, you will see substantial jump in Oil & Gas and reduction in Gold

More later, the biggest question now is, does one take profits off the table or not? Its been a long wait, have been patient for last 18 months, in fact shown some guts in adding to the portfolio in this period. Having survived the worst moment, do I chicken out now or is now the time to really reap the benefits. Catch-22 situation. Will ponder over it for a while, will stay put till then.

I did sell some itsy bitsy investments - sold M&M (with intention of picking it up again, below 500). Also sold Reliance Ind.

Lots more to write, will be back soon....

Back after a long hiatus

2009-04-27T21:46:00.001-07:00

I will be back blogging by this weekend after a 2 months long hiatus

Additions to the blog page

2009-02-22T15:34:00.000-08:00

Hangman at the top of the screen - verrrry addictive

How to play hangman - In the 'Your Guess' field, type a letter. If it is part of the word in question, it will go and fill up one of the dashes, else it will go to the garbage bin, and the condemned will move one step closer to being hanged (or hung;)

Basically on 10th wrong attempt, its all over

Word of the day to the left of the screen

Log on everyday to check the new word of the day, you can also hear how it is pronounced

Gold Bug

2009-02-21T22:27:00.000-08:00

Came across a nice article today on the net

http://247wallst.com/2009/02/21/800-or-1200-gold-panic-vs-inflation-etfs-gld-ugl-dzz-dgp-dgz-gdx/

Mutalik and Valentine's Day

2009-02-15T00:57:00.000-08:00

Just could not resist writing about this.

This is one of those rare times when self-declared social police have not been allowed to get away with such unlawful decrees. Thanks for media and ever present camera-men, the mangalore pub attack attracted lot of attention.

The underlying message is scary - we are being talibanized and we should resist it to the fullest extent.

My full support to those who came up with this 'pink chaddi' campaign i.e. Consortium of Pub-going, Loose and Forward Women :) http://thepinkchaddicampaign.blogspot.com/

May I say, I see a bit of Gandhism in this form of response!

I have been reading a few comments on this campaign on the internet. I had thought this would be very well received, but contrary to my expectations, it has received non-approval from lots of folks (males I guess). Shows how much conservativeness we have shed (not shed) even among internet users.

I am glad for people like Susan. Great work...

For those who do not know what I am writing about.. check this link http://www.npr.org/templates/story/story.php?storyId=100624625

Comments welcome....

Rock on...

2009-02-14T18:10:00.001-08:00

Listening to classic rock after ages..

Nirvana
Floyd
Led Zep
Dire Straits
Santana...

Feels good

Why is L&T interested in Satyam

2009-02-07T23:54:00.000-08:00

I am surprised that L&T is interested in Satyam. Is there another Maytas-like-under-the-carpet story which L&T wants to hide?

We know Raju diverted cash out of Satyam to invest in real estate, we know L&T too has interests in real estate (construction). Is there a link there? Maybe yes, maybe not.

Why it intrigues me is because of the rant by CMD Naik about IT companies a year back where he spewed vitriol (http://www.dnaindia.com/report.asp?newsid=1133228) against Indian IT companies, why now the sudden love for one of these, and that too Satyam where there is no knowledge of liabilities involved (I know L&T has been trying to come out with a public offer for L&T Infotech for quite some time now)

See some choice excerpts "But does Infosys have the technology? Can they do what L&T can? Can they build India’s defence, build ships, missilelaunchers, nuclear plants, satellites or radars? No. L&T is one among eight companies in the world who can."

"The least that the politicians can do is stop cutting ribbons in the outsourcing industry. There are more than 75,000 engineers working on design in India for foreign companies. They are the brains, and there are 150,000 other engineers working in the IT industry who are non-computer science engineers. Then the Bangalore Club complains that infrastructure there is cracking. Arrey tumko kisne bola tha 100,000 engineers leke aao Bangalore mein. Secondly, who asked you to recruit civil engineers? There are no civil engineers available to build infrastructure!"

Shrug! Though of course there is this other matter that L&T is right now looking at investment loss of around $100 million due to its Satyam holdings (currently 12% stake in the company). I f this does not lead to a controlling stake, there will be lots to answer to shareholders (actually either way lots to answer). I will still bide my time to get into L&T

On the global front, with the extreme slowdown (when cash rich Microsoft has to layoff people its time to really worry, Bank of America is sub-5$ ouch), expect strong protectionist measures all over, globalization be damned. There will be allout effort to protect/create jobs at the expense of globalization/free markets. This in turn will have its own negative effects everywhere For starters, expect H1B and effectively Indian IT companies to be on the hot spot Meanwhile, I have started directly investing in crude (seen by Oil & Gas jumping to #3 in my list), taking company specific risks out of the equation.

These are my latest holdings (Top 12)

Bhajji and Sachin visit the NSG commandoes

2009-01-26T16:29:00.000-08:00

Bhajji is looking hilarious, with his outfit atleast one size big and child-like grin on the face.

Satyam fiasco

2009-01-10T17:46:00.000-08:00

Enough ink (real and virtual) has been spent world over, writing about Satyam so I will not waste mine, other than a bit on corporate governance.
Some articles I have read, written by US based writers, have been painting India in a very bad light. It was kind of funny to see questions raised by these people from the country which is a home to the biggest scams in the world. Starting with Enron, Tyco and related Arthur Anderson fiasco, WorldCom, Maddoff, Sub-prime, sky high CEO compensations not linked to performance, .. I can go and on. To such an extent that recently, Nigeria, supposed to be the originator of most scams, was looking to be cleaner than US.
This same country is now taking a holier than thou attitude and raising concerns about quality of audits in 'third world or emerging market economies'.

Shame on you!

Yes, I agree, corporate governance is an issue, I am not making any attempt to condone it, the articles could have taken a neutral attitude, and not attack the country. There are good apples and there are bad apples. There are some other Indian corporates that have such high standards of governance and ethics that it could put lot of 'blue-blooded' US companies to shame.
And yes I do admit, I am not too surprised to see such fiasco in a country which finds itself among the top in the corruption index. Sad to say, but it is logical, unless corporate world is insulated completely from the political world. In case of Satyam, I think those worlds started meeting when a Satyam group company (Maytas) started bidding for infrastructure projects in the country. I am sure there are lot of gray areas towards contract awards, I would not be surprised to find that $1.6 Billion (or at least large amount of cash) did exist at certain point of time, and it was then moved to possibly 'win' those infrastructure contract. Corporate-Politics nexus is bound to be corrupt

Oh btw do you know who did the audits for Satyam? PriceWaterhouse Coopers... yes, the US based company.. who is governing this company and the audits they do? The US bosses are directly responsible for it. Look forward to a slew of suits against PWC should it come out that they did not act in good faith

I do hope though investigations are kept clean and transparent to the general public and justice meted out soon.

I am staying on the sidelines though for now in the market. I am afraid some more skeletons could come tumbling out from unforeseen places. Immediate risk would be other corporates where PWC is the auditor. Its likely they would like to come clean (or forced to come clean) about all their audit practices. I am waiting till dust settles on this before putting in more money. I would recommend putting in money only if you are convinced that the company is the bluest of blue chips or PSUs which are not likely to have such skeletons. Companies whose business is complex and gives opportunities for sleight of hand, or who have murky pasts would suffer

Lets see which shares from my holdings were trading up YTD

Do not treat these as recommendations

Mahindra & Mahindra 11%
Container Corporation 20%
Infosys 6%
TCS 12%

And what crashed?

Bharti -10%
L&T -6.5% (I think more due to the fact that recently they had picked up 4% in Satyam, ouch)
Reliance Communications -17.6%
Reliance Industries -6.6%

Take Care
Siddharth

P.S
I read a nice news heading - What's is the sanskrit word for Enron - Satyam

2008 Summary

2009-01-02T18:13:00.001-08:00

This is the distribution of my Top 12 holdings across sectors on a cost basis. I intend to continue to increase my Agro, Power and Oil & Gas holdings. Little concerned that BFSI is now almost 25% of my holdings, need to do something

Note - This is a more correct representation of the sectors I hold. What I have done is to drill down into the sector-wise holdings of the mutual funds I own, and accordingly adjusted my overall sector holdings.

Responding to demand for pictures :)

2009-01-02T18:11:00.001-08:00

For those of you who do not have a background to this, specially my non-Indian friends.

Amul is a milk-product company whose main product is butter. Its been in existence for a long time now (I think 30+ years) and is known for its smart marketing hoardings. They use the latest news developments around the world and some how link their product to it. Very smart.

Here there are celebrating opening of the Taj hotel in Mumbai after the terrorist attacks. 'Yeh Taj Nahin Jukega' translates to This Crown will not Fall (in a way proclaiming their leadership in the market too)

Udayan's Article about 2009

2009-01-01T15:19:00.000-08:00

http://www.moneycontrol.com/mccode/markets/udayanspeaks.php

Cricket...

2008-12-27T20:09:00.000-08:00

Either South Africa is playing incredible cricket or Australia is playing mediocre cricket or both... simply superb

Are war clouds floating around us?

2008-12-24T21:53:00.000-08:00

Whew how turbulent these last 4 weeks have been. Sounds like just 4 weeks, but wow!
Lot of roller coaster rides on lot of fronts, in my professional world where I was easily putting in 18 hour days, emotional/nationalistic front due to 11/26 event in Mumbai and then the shake-up in the Indian IT industry due to the Satyam fiasco

But first 11/26: I am happy to find that both, Indian Hotels and Oberoi opened withing 1 month of the event. Of course , the heritage wing of Indian Hotels is yet to open, but at this time I will take anything. It is heartening to note that 1 month after the event, Indian Hotels scrip has not lost much, its clawed back.

Now coming to the fall out of 11/26. These days, war cries seem to be the order of the day. Most of the noises are coming from Pakistan while India is maintaining the holier-than-thou approach. But with each passing day, situation does seem to be get more serious. Are we looking towards the next conflagration that is going to consume lot of lives? Are we eventually looking to World War III?

With things so tense, any small event can trigger an escalation. I really don't think Pakistan's civilian government has any kind of control over its military, nor does it have any control over its territory.

I think the time for so called 'surgical strikes' has passed. Any assets vulnerable to these 'surgical strikes' would long have been protected. Its pretty clear any kind of strikes would be met with a response and that's not good for either country. I think India has much more to lose (more because India does have something to lose, Pakistan is anyway going down the tube).

If that really happens, all bets on future direction of the stock markets are off. Most vulnerable to strikes would be the industry-rich Gujarat including Reliance who has most of its assets concentrated in that region (ouch!), Mundra Port, possibly deep sea oil assets of ONGC....

Not much can be predicted at this stage. We do need to teach Pakistan a severe lesson though. Congress cannot afford another terror attack before the elections (and if that indeed happens, we will definitely have an all out war on our hands)

Another interesting development was the Satyam fiasco (ADR: SAY) . How the mighty are falling. Satyam never was the epitome of ethics and corporate governance, but in an industry where companies like Infosys were setting such high standards of corporate governance, it was kind of rubbing of lot of other players too.

Now that the tide is ebbing away, its showing the true colors of some of the players in the industry. What was Raju planning to do with buying up Maytas (note Maytas is Satyam spelt backward) for 1.6 USD Billion? In these days where everyone is protecting their cash, Satyam is throwing money on a questionable deal on a company which belongs to the cash-sucking infrastructure industry? Go figure. It of course helps that Maytas' promoters are from Raju clan. Very sad. I read in the media that this is going to paint the entire Indian IT industry in bad light. I don't agree. I think that's stretching it too much. I think Indian IT industry is fast reaching maturity (in terms of global acceptance). Such events are actually going to help industry to consolidate. I remember around a year back, when discussing with friends, I said that eventually one or two players will make the break through an acquisition or something and others will fall behind. HCL Tech did do a big acquisition, beating Infosys (ouch!), and TCS and Wipro lapped up a few Citi assets, however what I never considered was one of the players shooting itself in the foot.

61% of Satyam is owned by 3-4 institutional players, and word on the street is that they are out there looking to sell this stake. Satyam is strong in few areas e.g. SAP. If one of the Indian players to pick it up, it would catapult them high in the industry stakes.

Whatever happens, heads are definitely going to roll in the Satyam world. To add to it, Satyam has been barred for 8 years for unethical practices by World Bank. If that is indeed the reason, I think Infosys would like to stay away from any kind of buyout deals.

With this kind of negative press, Satyam would be reduced to a fringe player for some time to come, which would help the other Indian players.

On another note, with oil touching sub-40$ levels, it does look extremely enticing to go long on energy stocks. I am seriously considering this move, currently investigating a few ETFs which would give me the exposure I am looking for.

Till then,

Peace and take care

Sid

P.S

I saw 'Rab ne...' this Tuesday after driving 40 min each way through treacherous snowy roads. This was one of the rare SRK movies I liked, no overacting, and the characters have been painted well

Back to Markets soon...

2008-12-17T19:53:00.000-08:00

After last 2-3 week of turmoil caused by 11/26, I would soon be back to posting Market blogs...Possibly this weekend.

- Sid
P.S
I donated money to help the brave fallen during 11/26 episode, have you? Do your bit

Touching thanks from the cops

2008-12-10T23:49:00.001-08:00

Cops had occupied a neighbouring apartment during the Nariman House seige! Poor folks must have felt hungry during the long vigil, and ended up eating food from the house. In parting, they left this message on the wall

'Sorry aapka khana khaliya... police' translated to 'Sorry, we ate your food... police'

(Courtsey: Times of India)

Hilarious quip from Alyque Padamsee....

2008-12-01T19:36:00.000-08:00

He said that "90% of today's leaders are incompetent, I would not even hire them as my secretary" How true!

Now that the elite of the country have been hit, hopefully there will be a stronger push for some reforms. Otherwise who cares for the 'aam aadmi'

Check out these blogs by some celebrities

http://www.aamirkhan.com/blog
http://bigb.bigadda.com/ (not really sure this is really THE AB)

Its almost over... whew!!!

2008-11-28T20:38:00.000-08:00

My salute to the brave soldiers who fell in the line of duty. It is the ultimate sacrifice, no other sacrifice is greater than the sacrifice of life. I have tears in my eyes and pride in my heart as I write this....

Jai Hind!

On another note, this is an interesting article from the Time magazine India's Muslims in Crisis

Indian Hotels crashes as expected...

2008-11-28T09:05:00.000-08:00

Its down 17%... I do hope investigators look for short sale positions on this scrip for clues. I bought a few shares to show solidarity

Wall street echoes my views...

2008-11-28T00:15:00.002-08:00

http://economictimes.indiatimes.com/Indias_political_leadership_to_blame_Wall_Street_Journal/articleshow/3768494.cms

This article vindicates my position (not that it was original thinking)

and then see this...get rid of this doofus... please!

http://www.indianexpress.com/news/Patil-goof-up--TV-cameras--compromise--rescue/391573

What the f***

2008-11-27T20:37:00.001-08:00

is Narendra Modi doing at Oberoi. This is cheap politicking and not the time for it!! Horrible and sick. He is out attacking Manmohan Singh
BJP is playing a smart game by promoting firebrand Modi and trying to exploit the anger, this is so sad. Sad politics. They are using this platform to promote him to the national level
How much of security cover is he getting? What the f****

I wished media did not cover it. Other politicians have stayed away from the media (thankfully) but not this guy!!! Now other politicians will not let him hog the limelight, all and sundry will start trickling in

Sigh!!!

Help Wanted: Real Leaders with Spine

2008-11-27T14:17:00.000-08:00

Its easy to say that we need to learn from US how it has managed to prevent any significant attacks after 09/11. However, that is not a fair comparison. US is surrounded by very friendly and stable countries Canada and Mexico

India on the other hand has the misfortune of being surrounded by failed or nearly-failed states all around

Pakistan in the west
Afghanistan in the north-west
Nepal in the north-east
Bangladesh in the east
Sri Lanka in the south

That is a tough ask. So unless we impose a war-like situation in the country and curb most of economic activity, it is difficult to have total control of the security situation.

However, that does not absolve our leaders (bah!) from their duty to the nation. There are lot of things we can do.

For starters show some spine:

Look at Manmohan Singh's address to the nation - where is the firmness in the voice? His tone was almost of complaining nature and apologetic, not of a man in control. I would have liked to see some spine here.

Look at the other clown, Home Minister Mr. Patil, who during the last terrorist incident, had time to change his outfit to make it more television friendly. Mr. Patil please remember a home-minister is not a TV idol!!! I heard him on BBC last night, his sound bytes sounded like a spokesman and not a man in charge...'errr I have been told.... err they did .hmm this...'

Mr. Patil - How do you even sleep at night? Do a favor to the nation, QUIT!!! This is a time when the political parties should come together to rally the nation and not squabble, but I would make an exception here, everyone should demand Mr. Patil's scalp.

I demand a change here. We need strong focus on internal security. We need young blood, we have too many old hags at the helm of the nation. Its time the young leadership takes over, learn from US and Obama. More importantly we need people with strong commitment to the nation.

Today politics is criminalised, I am afraid there is also political involvement in operations of this kind, and of course the bane of corruption, which goes beyond all scruples. I find it very hard to believe that our intelligence (another paradox!) did not have any idea about an operation of this scale. If I was an investigator in charge, I would make sure to scan through the hotel guest lists over past few months, with special focus on current guest list. I think some of these terrorists were already in the hotel as checked-in guests. Worth taking a look.

Intelligence and Security Infrastructure:

I am not privy to any information to comment on our security/intelligence infrastructure, but we should look to collaborate more and more with US and Israel agencies to learn from them. Use whatever technologies needed to gather information, and most important, have mechanisms in place to bloody act on the information gathered. I heard in news reports that there was strong indication that the Taj could be attacked and there was strong police cover for the Taj, which was relaxed recently because it started causing traffic snarls! Inexplicable!

How did these people manage to come through the sea route as it is claimed. Are our seas so porous? Is it that easy?

Are our police equipped with the latest weapons?

Crisis Management Doctrine:

This crisis again laid open our lack of planning and inability to react in time. No one looked in control, and still does not. We need to have strong mechanism in place to react to such events. It was sadly not seen, it took 10 hours for the commando team to reach the Taj. Till some top cops were killed, Mumbai Police did not understand the gravity of the situation and did not feel fit to call in the commandos! And I learn they were brought to the site in a BEST bus!! Shameful.

But, I will kid myself to believe for now that some one is in charge and has control of the situation. I doubt it, but it calms me down.

I want to see some one in charge

We should also make sure we continue our no-negotiations policy with the terrorists. I wonder if any contact has been established with them and if they have any demands. There should be no negotiations. I still hang my head in shame when in 1998 our foreign minister escorted a dreaded terrorist to Afghanistan in exchange for our hijacked plane.

Why are people who attacked the Parliament still in jail and not dead yet? We need stringent anti-terrorism laws, there will be noises around human rights abuse, but we need these laws and someone with the guts to implement them

I shudder to think what would happen in case of a nuclear attack or things like that. Among other things, are our nuclear establishments safe? What is safe for that matter? Given the recent nuclear deal with US, there could be an attempt to attack our nuclear establishments.

And why are we giving sound bytes on what's happening out there. Would not the terrorists want to know too? Why are we feeding them that information? Keep it under wraps.

Stock Markets:

This blog started with the intention of blogging on economy and stock markets. Given the happenings in our country, talking about stock markets and money seems too petty and irrelevant. But for what its worth, I think its pretty clear Indian Hotels is going to sink when the markets open (people will vote with their wallets and not emotions). I am a shareholder too, but I don't mind the loss. For me, its much more than a few thousand rupees. My full support to Tatas in rebuilding the hotel.

It would be a good idea to review all short positions in the stock markets, esp. hotel stocks, there might have been an attempt to finance this act through stock market operations

However, this is definitely going to affect foreign investments. In addition to direct economic factors like fiscal deficit, exchange rate, or even bureaucracy and corruption, additional parameter would start coming into play - that of internal security - risk premium on India-linked investments would go up. I am afraid there is a strong danger of India as a country going under long period of instability. Its scary!

Where do we go from here?

Immediate: Aim would be to get situation in control and put this behind us, however that still seems will take some doing. I don't think this crisis will be over so soon. I feel there are some more sinister plans behind this operation (I hope not, fingers crossed). We will be tested! Hostage situation still has to play itself out, and god knows if all the terrorists have been accounted for. Having apparently done so much planning till now, its hard to believe that it would get over soon. As days go by, I am sure more and more appalling horror stories of serious lapses are going to unfold. How well will the media and public take those lapses?

I wonder how they can separate genuine hotel guests and terrorists when they carry out the rescue. What if they 'rescue' terrorists?

Later: There is a danger we are all becoming callous and live from one event to the next. I think we are wrongly classifying it as strength of the nation, spirit of the nation. This too will be classified that way. That's bullshit. I think its callousness and stark reminder that we have lost faith in our leaders and everything linked with the government. We, the public, should stand up and start demanding action, credible actions. I heard a very interesting point raised on cnn. The person said people have pent up anger inside them, in normal cases it would have been released by torching a few buses etc, but that's not happened. How is that anger and frustration going to come out? If channeled properly, it can only help us. Media has the power to channelise this, and its time they stood up and be counted.

I do hope this does not lead to more clashes between Hindus and Muslims, there is increasing polarization among these communities, and such event would not help matters. National security and religion will become strong issues in the national elections, likely that economy could now become a distant third issue. I dread how parties like Shiv Sena and BJP/RSS are going to exploit this. Last thing we need is a more polarized India at this stage.

However if focus on national security results in one single party coming to power (even if it is not congress), I think its good the country. Enough of coalition politics. But will other political parties offer a credible alternative? (Jaswant Singh's act of escorting terrorists to Afghanistan was not exactly an act of bravery)

I also fear for Goa, which is also a coastal state, how far has the rot gone?

It has been my long term dream to contribute to social awareness and fight bureaucracy and corruption in whatever way possible in my country. Those things I can try and fight, but matters concerning nation's security, unfortunately, are beyond me. Why don't we hand over the home ministry to the US or the Israelis?

I am really hurt and angry! I am willing to consider any credible ideas to take action as a concerned citizen. Any ideas?

..... It hurts!!

2008-11-26T20:02:00.000-08:00

My heart goes out to all my fellow countrymen and foreign nationals who are going through the ordeal in Mumbai... more later. I am too outraged to write anything right now....

Feeling the pain of plagiarism!

2008-11-21T17:58:00.000-08:00

I am very upset today. I found that an article I had written around 2 years ago, has been rehashed and published by some one else as his own in a reputed forum. I am so very upset!

I never realized the evils of plagiarism, until now. Don't people have any scruples?

Grrrrrrrrr!!!!!

What do you guys think I should do?

How true....

2008-11-17T23:12:00.000-08:00

Something I heard recently from Infosys CFO V Bala..

"Cash is reality, profit is a matter of opinion"

He was talking about how Infosys focuses on strong cash flows and low receivable days

How true! I will always remember it

In the same token, "snow is reality, feeling cold is a matter of opinion" - inspired by the first of many 5 inch snowfalls of the season today (lame I know)

Miscellaneous thoughts about the economy...

2008-11-16T17:24:00.000-08:00

Interest Rate Direction in India
Last week's inflation figures finally started showing reflecting the reality of crashing prices, Wholesale Price Index (WPI) based inflation fell to single digit levels of 8.98% after 21 weeks of double digit inflation. This should give RBI more confidence in signalling interest rate cuts. If we see a scenario of sustained fall in interest rates, it could result in an interesting play on Gilt Funds (Funds dealing with government securities).

Debt securities typically face 3 kinds of risks

Credit Risk
Liquidity Risk
Interest Rate Risk

Gilt funds typically would face only the interest rate risk

Since interest rates and price of debt securities have an inverse relationship (when interest rates move down, price of debt securities go up to bring the yield in line with the prevailing rates), there is potential for decent capital gains to be made on the Gilt Funds

Should be an interesting play for next 6-12 months. Holding beyond 12 months would also give indexation benefits to potential capitals gains resulting in higher tax efficiency

Monetary Action
This weekend RBI announced some measures that would bring some benefit to the financial and real estate sector.

Given the high budget deficit figures, do not expect big bang government investment projects to get us out of this funk. Also, with the upcoming general elections in the country, I do not expect big ticket projects to be announced due the restrictions generally imposed by the election commission before the elections to prevent voter bias.

However, even if the government does not have much play on the fiscal side (taxes, spending), it does have some leeway on the monetary side (control money supply). Expect lot of action from RBI for some more time to come.

Agriculture and Retail Chains
One area where I am pretty confident about growth prospects is Agriculture and allied sectors (Logistics and Transportation, Water Management).
It is a populist measure as well, so I see lot of investments earmarked for Agriculture going ahead.

This along with the development of retail chain is going to be a blessing for our food chain infrastructure (I am not delving here on the impact it would have on our mom-and-pop kirana stores and the cudgels politicians are likely to take against big box stores). Do you know that 72% of our vegetable and fruit produce goes waste due to lack of proper storage and transport facilities? Food grain loss % figures too would not be far behind
Retail chains would bring in lot of investment in hinterland to build warehouses/cold storage/transportation infrastructure to get the produce on the shelves. This should trigger a boom in the hinterlands, and more wealth should start trickling there resulting in more equitable growth. Yes, I know there are challenges around small farm holdings and restrictions on corporate farming, but I am hopeful.

Listed companies I am hoping would benefit among others are Mahindra & Mahindra, Jain Irrigation and ITC

Other interesting sector, this time globally, would be alternative energy sources. Fortune carried an article recently. I am considering deploying a small portion there.

Going ahead, which markets you think would be the first to recover?
Would it be US - which is being most aggressive in tackling the crisis, where most of the money has fled to, and would soon be looking to be deployed into meaningful investments?

Or would it be emerging markets like India, which do not face the same fundamental issues like US, but suffer from the credit crunch which is a global malaise?

Right now, my money is on the US. Let's see!

In passing, Tata House seems to be in a wee bit of trouble. They have huge loans to service from Tata Motors and Tata Steel. Tata Group has done lot of acquisitions recently when the credit was cheap (Corus Steel, Rover, Jaguar). Other group companies too have made acquisitions. Group companies have been hammered in a big way (but hey who has not been hammered). Companies like TCS, India Hotels, Tata Chemicals too are down. TCS was expected to the cash generator for the group.

Happy investing in these interesting times!

Do leave your comments

First snow accumulation

2008-11-09T19:59:00.001-08:00

We had our first snow accumulation for the season this weekend.... long winter ahead

Yes, we can !!!

2008-11-04T20:35:00.001-08:00

Obama Wins!!

(I hope I am not violating Amul copyright by putting this image here)

Source: http://www.amul.com/2008hits/page13.html

Should Governments get into a tizzy over falling capital markets?

2008-11-02T17:36:00.000-08:00

We have seen governments from lot of countries, especially US and off late even India, trying to talk up the stock markets.
This could seem very elitist than populist, specially for those of us in India. We have been bred on leftist talk about capital markets being elitist (or should I say 'capitalist'). While in the US, almost all households have stock market investments, including retirement accounts, in India, only a fractional percentage of Indian domestic saving is channeled to the capital markets. And only recently some thaw is seen in regulation allowing PF retirement funds to be privately managed, not sure if they would be allowed capital market entry though

Last couple of weeks Mr. PC (Hon'ble Finance Minister) has given some peppy wordbytes on a daily basis.

"Don’t sell in panic"

“Investors must take informed decisions. Before you sell, you must remember that for every seller there is a buyer. You must ask yourself why the buyer is buying in these times of perceived uncertainty and, therefore, ask yourself the further question whether there is a need to act in haste or in panic. In my view, there is no reason at all to act in haste or to give room for panic.”

Compare this to Harshad Mehta time when Mr. Singh and PC were responsible for comments like

"....would not lose sleep over the daily movements in stock market"

"....capital market is as important as Khan Market (an up-market shopping centre in Delhi)."

So is it worth Government of India time to try and talk up the market?

I think it is.

Remember, stock markets are an important avenue for entrepreneurs to raise long term money from. It's an important vehicle for funding economic growth. Remember India does not have a vibrant long term bond market, nor does it have a strong venture capital base (I doubt private equity funds will look at emerging markets for a long time).

So many projects have been shelved because the money for these projects was supposed to come from IPOs. Reliance Power was the last one to squeeze through. Its been uphill since then. There are absolutely no takers even for well-priced rights issues - Hindalco, Tata Motors and Suzlon would concur. With credit markets seizing up and stock markets crashing, where is credit (blood for economic activity) going to come from? Result - Faltering economy

Even though India may not be directly affected by the sub-prime crisis, we are definitely affected by its by-product - the credit freeze. I am afraid, this is definitely going to cause a slowdown. While banks may not go down, I am not sure about some of debt mutual funds, I read an article in ET today where Kamath (ICICI) is saying mutual funds have lent out over 630,000 crore (!), lot of it to real estate sector, and if there are redemption pressures, its going to cause problems. No wonder, RBI has opened a temporary funding window to them too.

Global plans of so many entrepreneurs are on hold due to non-availability of credit, and those with existing foreign debt exposure will have a double-whammy of

- Falling rupee (This could be another reason for FM's talk, to slow down FII selling, putting lot of pressure on the rupee)

- Difficulty in rolling over existing debt

Where do we go from here?
I don't think last week's rally signified the end of the downturn, I am sure we will see lower valuations again. RBI cut some repo and CRR rates again this weekend, do I see that as a glass half-full (things will now improve) or glass half-empty (RBI is getting worried about the economy, things are worse....). I think we will see a rally at least beginning of Monday's trading. Rest of the week will be dictated by global cues.

Luckily, from what I read, there are not too many panic redemption seen in mutual funds, however I doubt strong inflows are seen. That places mutual fund houses that are sitting in piles of cash in a good position. Fund houses like Reliance and Sundaram have been sitting on around 25% cash since Jan, and have been deploying them slowly. Expect these funds to show marginal out performance over the rest (assuming they don't keep on sitting on it, but deploy it at a good time)

Economy
I am worried we might have frittered away last few years of robust tax collections in subsidies without seeing any structural changes in the economy. Infrastructure pains remain - partly contributed by land acquisition problems (long live democracy)

Remember the jokers in the pack - Indian general elections, Raj Thackrey (some one please talk sense into this guy), and security situation in the country.

Look at the abysmal human development index ratings of our country. Millions do not have access to basic human rights! How much I long for a strong consensus leadership emerging at the center, and all focused on nation's growth.

I digress, let me conclude here....till next time I keep dreaming of an able and visionary leadership at the top

Side note - Kumble retired yesterday, I think it was well timed. Thats going to put focus on Laxman, Sachin and Dravid now

... And all fall down

2008-10-25T19:11:00.000-07:00

How turbulent these last 2 months have been. September and October 2008 (possibly subsequent months too, hope not) will be known as the months which finally dealt a bloody blow to the shaky financial markets.

We had some drama around US Senate approving/not approving the 'bailout' package (These days it is known as the TARP - Troubled Assets Release Program) which saw the markets swinging like yo-yos. However, the swings of that week turned out to be nothing compared to the relentless selling that has happened since. Some stocks are quoting a such ridiculous valuations that its beyond belief. Every fall seems to be an enticing opportunity, only to fall another 10% couple of days later.

No asset class is safe, neither oil, nor base/ferrous metals, nor precious metals, nor fixed income debt instruments (with counter-party credit risks at all time high, Fixed Maturity Plans expected to lead us into the next financial crisis, atleast wrt India). Not even plain-jane bank deposits (though we have come forward some way since the feared run on banks couple of weeks back e.g. ICICI). So where do people keep their money. Even keeping money at home is going to erode away its value given the 11% inflation.

.... Did I mention inflation... This is one paradox I cannot understand. With all prices tumbling down, how the f**** are we still seeing a double-digit inflation so many weeks into the credit crisis? Puzzles me no end!

This seems to be a once in a life-time crisis to which not too many people know how to react/cope with. I have been 'buying on the dips' so as to say, only to find the investment losing value with every passing day.

If 3800 Nifty levels looked like strong support only a month back, now 3800 Nifty levels represent a 50% jump from present levels!!!!! What we are facing here is unprecented fall in valuations. At current levels of 2500 Nifty, we are looking at 9x Nifty earnings, a far cry from 28x from Jan 2008 levels. In Jan 2008 Nifty was 6000+ levels.

Whether these falls are fundamental in nature or technical in nature is difficult to judge. There are talks about lot of hedge funds facing massive redemptions, forcing them to sell their assets.
I think its safe to admit, part of the rallies in global markets was driven by the ample liquidity available. Liquidity chasing everything, all kinds of asset classes. Liquidity, which also was responsible for the subprime credit crisis.
It is this liquidity which is being sucked out by a giant vaccum cleaner. That vaccum cleaner is located in the United States.

.. That brings me to another conundrum, strength of the dollar and associated falling commodity prices. When US is looking down the barrel of an all time high budget deficit, why is the US dollar strengthening? Most of the financial companies engaged in a world wide orgy of liquidity are US based, now they are all reeling that back in, at whatever price they can get. Does not the huge budget deficit in the US concerning anyone? I was expecting a run on the dollar, biggest threat being the Chinese with 1+ trillion dollars in foreign exchange reserves. Instead, I am seeing a stronger dollar.

Indian Rupee has moved from levels of 39 to a dollar last year to all time high of 50 this week!

Over 6 trillion of $ all over the world are coming home to US, resulting in a stronger dollar. On the flip side, this movement of liquidity could see the export driven US growth vanishing.

Gold is supposed to be the place to be in such turbulent times, but its falling instead, partly due to stronger dollar!

There are so many companies whose valuations are biting the dust. Few of them are quoting at values way below their book values, sometimes even below the cash/investment value they hold. This means a stock A, has (liquid) book value of 10 INR per share, and market is valuing that 10 INR at say 8 INR! This means market is no longer looking at companies as a going concern basis? And the company I am talking about has a 20% ownership stake by Government of India. Go figure!

I have not seen such times before so I will no longer go and suggest to continue accumulating. I still continue to accumulate stocks in my portfolio, but at a much slower pace, partly to do with the fact that I want to hang onto my last tranche of investible funds for better valuations.
As of today, my non-Infosys equity portoflio is down 30%. It means at Nifty levels of around 3300, I break-even, which is not too bad. And if I include my Infosys holdings, I am still up 17%!
I have been judicious in split between equity and non-equity investments on the side of being conservative, so these falls are not giving me sleepless nights.

If turbulent times continue and US continue to falter, Gold however still looks to be as the only asset of hope! (I have increased my Gold holdings) Else if all else fails, go back to basics, take up farming!

Wish all the readers better returns going ahead

This is the distribution of my holdings across sectors on a cost basis. I intend to increase my Agro, Power and Oil & Gas holdings

Leave you with couple of these interesting articles

http://www.equitymaster.com/ht/detail.asp?date=10/23/2008&story=10

http://www.equitymaster.com/sfth/detail.asp?date=10/25/2008&story=3

Paradox in Monday's Economic Times

2008-10-12T17:20:00.000-07:00

Look at the attached screenshot. The headline story is 'Timing is Everything' and then look at the corner for Kotak's ad touting a systematic investment plan saying 'Timing isn't everything' - lol

Stock Markets - Where do we go from here?

2008-10-12T09:25:00.001-07:00

Indian equity markets, following the global downtrend, are down around 50% from its peak made in Jan 2008. According to the technical analyst, its very rare that a peak retracement goes beyond 50% historically. However, this time, the global fundamentals are still shaky. Even in India, this month's IIP numbers show a minuscule 1.3% growth, and there are talks going around about credit freeze percolating to India too (call rates shooting to 24% is an indicator)

One biggest strength we can rely on is our Reserve Bank of India. They have shown to be always ahead of the curve, and have been conservative in their management of the monetary policies. It is this conservatism that is going to help us in these times.

Another point, which I see is not talked about so much on the internet where most of the mind share has been taken away by the credit crisis is the rapid depreciation of the rupee. This is going to impact those big corporates who have borrowings in foreign currencies through FCCBs etc. They now have to pay more rupees to convert to the $ repayment amount. We will see the impact of these on the financials soon.

Crude is down, so it is going to ease inflation fears

Another biggest joker in the pack is the upcoming general elections in India. We can ill-afford uncertainty at the top in these times. And if the elections throw up a hung verdict, heavens bless us.

What I am doing:

Using up small amount of gunpowder (cash) every week to deploy it in the markets, but given the high level of uncertainty at individual stock level, I am focusing more on mutual funds to achieve diversification.

Elections should throw up even more cheaper investment opportunities

Beleagured ICICI Bank....

2008-10-10T22:54:00.000-07:00

Unbelievable!
ICICI Bank is down 26% for the week ending 10/10/2008, and around 75% down from its all time high made in Jan 2008!
Its down around 60% from its secondary offering made in July 2007.

Here is another statistic, its price to book value is now less than 1! Market cap is now below Net worth (Reserves + Share Capital)

Is it an unfortunate victim of the general global lack of confidence in financial institutions - IDFC, who has one of the most pristine asset quality is also down 70% for the calendar year! - or is there really something specific to worry about.

Assurances have been given by everyone, right from K V Kamath to Chanda Kochhar to P Chidambaram to RBI about the health of the bank. Those assurances have to be taken with a pinch of salt, no one in their right mind in government would go out and say that there is a problem with the nation's second largest bank.

Fact is ICICI has been notorious for aggressive selling of its products, and by extrapolation, we can assume, would have taken some risks in their overseas investments too. Are the chickens coming home to roost? On a networth of around 10Bill USD, it has a foreign book of 5 Bill USD (total asset book is much bigger though)

The lines outside the ATM banks and the steady fall in the stock price is indeed unnerving. I do hope these are technical falls and not really based on fundamentals. Banks at end of the day are as strong as the confidence its stakeholders have in it, the fear mongering of a bank collapse can be a self-fulfilling prophecy. No bank, however strong, can survive the demands on cash made by its depositors. No bank maintains high levels of liquidity, and with global credit markets tightening (India is showing signs of it too, call rates went up 20%+ last week prompting a CRR cut by RBI) it only adds to the woes.

I do wish SEBI does a probe of the activity in ICICI bank and publishes its findings soon.

The shareholding of ICICI bank makes interesting reading. Majority of its ownership resides with foreign entities!

Deutsche Bank Trust 28%
FIIs, NRIs, Foreign Banks, Companies and Nationals, OCBs 41%
Insurance Companies 10.75%
Bodies Corporate 5.88%
Mutual Funds 5.66%
Individuals 7.22%

For the well-being of the country's financial health (and mine too, I have been accumulating ICICI bank for a while now), I do hope it turns out fine. In worst case scenario, I dont think government would allow the bank to fail, it might be forced to merge with some other Indian bank (HDFC ?). So the depositors have no need to worry. However, if this were to happen, most likely the shareholders would be wiped out.

Fingers crossed! I continue accumulating the stock...