"The Devil, can
sometimes do a very gentlemanly thing."
—Robert Louis Stevenson (Scottish, 1850-1894)
Word
for the day
Manna (n)
Any sudden or unexpected help, advantage, or aid to success.
Malice
towards none
UP government, in
contemptuous defiance of the Central Government notification, has declared that
they will accept land registration fee in currency that is no longer legal
tender.
Does this tantamount to
sedition?
First random
thought this morning
Many Indians who sounded like ardent devotees of PM Narendra Modi
before 2014 Lok Sabha elections, are literally abusing and cursing him. Even
some Gujaratis who cheered him at Madison Square in New York, are regretting
their enthusiasm.
On the other hand, the world leaders who treated him like a pariah
during 2002-2014, are embracing him like no one.
I ask - who was wrong about PM Modi before 2014 and who is wrong
now?
Mistrust & Unpredictability
Indubitably, the demonetization of HDNs may go down as a watershed
event in the India's economic history; that is even if the experiment fails
Beyond trade disruption and demand deferment for few months, it
could bring some lasting changes to the economic behavior of the Indian
consumers and businessmen.
This may provide some good opportunities to the investors.
Assigning any more importance to this event at this point in time may not be
relevant.
As I suggested yesterday (see here),
the main challenge in formulating an appropriate investment strategy today is
to incorporate the rising "mistrust and unpredictability" in the
overall economic environment.
In an environment where the policy direction is totally
unpredictable and you cannot trust, amongst other things —
·
the commitment of politicians to their
ideologies and long stated policy stance on even core issues;
·
the experts' opinions about the socio-economic
trends;
·
corporate governance standards of most reputed
companies;
the investment strategy, for a small investor like me, must
include the following five doctrine, even if it makes the strategy little
dogmatic:
1. The companies with
business model that relies heavily on the policy arbitrage are to be totally
avoided.
2. The companies that
enjoy valuation premium based on the legacy of promoters should be adequately
discounted.
3. The discount on the
commitment of politicians to a particular ideology or policy stance should be
raised to a minimum of 50%.
4. All expert opinions
must invariably be backed by self assessment. In cases where self assessment is
not possible, equal reliance should be placed on experts' views and traders'
positions (fundamental and technical analysis).
5. Let your imagination
run wild in making investment assumptions, leaving almost nil scope for a black
swan event.
From the recent utterances of PM Modi, PM May, Chancellor Merkel,
President designate Donald Trump, etc. it is clear to me that the global trade
order is due for a reset. In my view, therefore, overwhelming the investment
strategy by demonetization impact may tantamount to missing the forest for
trees.
Tomorrow, I shall share the opportunities (and threats) I see due
to demonetization.
I promise to share my updated investment strategy before end of this year.
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