I, personally, do not need advice on why I should be in equities, or timing, so thanks.

This comes from having been in the equity markets since 1979 individually and since 1957 for my dad. So seriously, no complaints. I have been of the view that when you have money you invest, when you need money you sell. Long term and short term is only when you assume that you are not EARNING any money, and treat money as a fixed amount. This is true only for retired people -not for the regular earners.

Be that as it may, there are times when the market beckons. I run a website in an extremely lazy fashion, so I am going to give you some hints – please go and work on those hints. Check out the numbers:

– India has reduced its Debt to GDP ratio over the past 9-10 years. This is good news – and actually ignores inflation (inflation affects both the numerator and the denominator).

– the market has some very good value scrips – if you leave out some FMCG (Itc, hul, colgate..), Pharma (Gsk), TCS, – we are at 2008 levels. All of us know inflation has ripped us apart since then, right?

– market is a slave of cash flow and decent corporate management. I am saddened by the poor corporate governance in India (the parliament undoing all the good work of the Supreme Court is so tragic) but I am still optimistic about many many good Indian corporates.

Tata Motors is actually suffering the India rating. If Mr. Mistry, renames it JLR  Motors and lists it in London, or preferably in US, the prices will double. Remember 60% of its revenue is in hard currency, and all its ratios have improved over the past 5 years (go and check it out, I am too lazy to do it for you). If you are too lazy to do it, there is always Naren Sankaran who will do it for you. Or Anand – now looking after Bluechip at good old Templeton.

I am optimistic about many scrips, just picked Tata Motors out of the whole box. Will I name them? No. I hate meeting the regulator – especially when he calls me for me to defend myself (so far it has not happened, thank fully)…..

Let me be frank. I hate meeting the regulator for whatever reasons – unless of course I need to sell something to them…

 

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  1. Sir what’s your view on Tata investment corporation
    with a book value at close to 900 and 5% dividend yield looks very attractive

  2. A rally in FII controlled stock market. A marginal retracement in the badly battered Rupee. That is all it takes for the economic pundits to say that Indian economy has bottomed out and the Raghu magic has started.

    Is it true? In my opinion it is too good to be true. What is true is that Raghu has done some home work and has come well prepared. He has taken a gamble. Whether that is a calculated gamble or not will be known in due course. The outgoing Governor is spot on when he says Raghu should try to come out of the chakravyuga in Indian Economy. We will see in detail later in the article.

    Let me summarise clearly. What is the problem now?

    1. High Current Account Deficit
    2. High Fiscal Deficit
    3. Low Rupee Value
    4. Corporate Balance Sheet Stress
    5. Banks Asset Stress

    Simply put this is all due to a single reason, and that is corporate greed. The growth which we see now is a myth and you ask anybody. Except a handful of people everybody else is feeling a lot insecure today than 10 years back. Even for the rest, the secure feeling they have is mostly false. The perceived value of their real estate asset is the reason for their brave face and that too will go in few months time from now.

    Before go into further details, please read the following article http://www.thehindubusinessline.com/opinion/the-qe-that-no-one-noticed/article5101290.ece?homepage=true which says that the The size of the RBI’s balance-sheet in March 2002 was close to Rs 3,50,000 crore. In March 2013, it had ballooned to as much as Rs 22,00,000 crore.

    This mindless expansion has increased the inflation hugely and any economist who has a different view should be either a idiot or a cheat. In India the problem is without applying the basic economics everybody is talking about out of box solutions. Because these cheats very well knew that the basic economics is not supporting their cheating ways. Hence, if any corporate or bank guy says that RBI is following a tightening monetary policy, either he should be a lunatic or cheat. And since a majority of them falls under the category of cheats. What are their arguments?

    1. India needs 9% growth every year because the population is huge and inflation is not at all a problem and many people has come out of poverty because of monetary expansion.

    I am asking why there should be 9% growth and how it can sustain? The corrupt politicians fell into the trap and to satisfy the corporate crooks they made this expansion happen and now we are in the situation where we are now.

    In 1990 if they fix 10 Rupees per day as poverty line limit and if they use the same 10 Rupees per day as poverty limit now in 2013, then we have no other option then to doubt their pa knowledge. The figures I use may differ. But the matter of fact is we need to calculate accurate figures there and try to fix the poverty line and then decide how many came out of poverty? This should also includes the life style of current years. This should also include the kind of social security we have. Even a dog cannot believe that quality medical facilities and education facilities are available free in India.

    Let us see, how this expansion spoiled the country. This is nothing new.Easy money flows to banks first because rates are low. Due to inherent weakness in the Indian system the money is not properly monitored and so most of this money went into unproductive areas. This very well explains that except the Golden Quadrilateral which is the contribution of BJP, we have not built any infrastructure. The money thus printed only helped a select set of corporates and they are the people who having tasted the cheap money is still asking for cheap money. I can give some names. You can add entire CII and FICCI goons in that. Not to forget the Real Estate Mafia. The easy money flows into real estate naturally because the sector is run by black economy. The easy money finds real estate as the parking space. The 2000’s is the time where government pushed the housing loan in big way. This along with the balance sheet expansion shows that it is a planned conspiracy by the government. The government supported real estate by giving income tax concessions and also it gives virtually free hand to the real estate goons to loot the country.

    One interesting observation I make here is that entirely 90% of Indian upper middle class is heavily invested in real estate and 50-60% of middle class in invested in real estate. Now these people who has heavy presence and influence in media and other places are supportive of government’s expansion policy only because it further increases their real estate asset value. This personal interest is stopping them from seeing the real effects. ‘The emperor is naked’ effect.

    Coming back to the point, the bad thing about the easy money is that it asks for blood continuously. This we are seeing in US and Japan as well. First you reduce rates. Then when you hit 0 % rates, then you buy bonds ( Japan). We are going against the basic economics here and these countries are finding it hard way. In India’s case, this is further complicated. These countries with huge money printing still do not have run away inflation. But we do have all the extra problems.

    We, Indians by nature are not disciplined. So now almost all corporates lost the ability to do the business with decent returns. We found real estate is the best investment and almost all the corporates in India dabble in real estate. The problem is that the corporates compare the profit they make in their core business with real estate and conclude that real estate is the best business, or conversely they expect the same profit margin of real estate in their core business also. We do not know who spoiled whom. Finally everything is spoiled.

    The effects are showing now. This has become a ponzi scheme. Now to continue this business we need the following:

    1. The inflation has to go up in the same rate ( 10% per annum)
    2. People earning also should go up in the same pace

    We know the later cannot happen. Even the inflation also cannot go up at this rate, and if we continue at this rate, then we are staring at Zimbabwe kind of situation in few years from now. Please google search for inflation in Zimbabwe to find the scary things.

    To cut the story short, the income levels are not increasing. The government cleverly avoided investing in education and health care. It is strange that Indian governments, instead of building hospitals giving insurance cover to people for private hospitals. We, like a beaten to death dog, not asking any question. All education is privatised and shamelessly ask us to go for education loan in nationalised bank which again has our money.

    Now to cut the story further, Raghu is expanding our balance sheet further. Basically in my opinion he is buying time for Congress until the elections.

    But still I trust Raghu for the following reasons

    1. He may know all this and he may want to really help the country.
    2. Based on the above assumption, by buying time he may want to
    a) Prick the RE bubble
    b) Discipline the corporates
    c) Control the inflation
    3. The noises he made so far made me think that he intends to do all this given above.

    But again, he has to face heavy opposition from

    1. Corrupt Government
    2. Corporate Mafia
    3. People ( yes, having invested huge in Indian real estate, we Indians ourselves may not allow him to do right things. It is strange but it may happen)

    However in short term, the SWAP things can go against him if he cannot deliver in Rupee front. Because the hedging cost is borne by RBI now and he is giving fixed cost of 3.5% to the banks now. As usual banks are going to splash the money to real estate brokers as we are in brokocracy ( we are not a democracy). So the real risk is that RBI will have to borne the hedging cost. That may complicate the situation further.His brave pitch against corporates (promoters) may look good initially. But he will be taught a lesson or two from our corporates shortly.

    I may continue the article 🙂

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