Some food for thought
"The first sign of corruption in a society that is still
alive is that the end justifies the means."
—Georges Bernanos (French Author, 1888-1948)
Word for the day
Behemoth (n)
Any creature or thing of monstrous size or power:
First thought this morning
For past one month at least the newspaper readers in NCR area
are being welcomed by 4-5 full pages of advertisements by State and Central
governments. The faces of the Chief Minister and Prime Minister are displayed prominently
in these colorful insertions.
These advertisements mostly relate to the
"development" work done by the respective government in their tenure,
new projects launches and/or the promises to launch new development projects.
Besides, Delhi, the advertisements of the state of UP are also very prominent.
A recent series of half/full page advertisement in NCR editions
of national dailies related to regularization of unauthorized slums/colonies in
Delhi. Another full page advertisement highlighted the development works in
prime ministers' Lok Sabha constituency of Varanasi. The claims included
trivial municipal improvements like cleaning of drains, planting of saplings on
roadsides, installing LED street light, etc.
I feel it is totally unethical and highly undesirable, for the
following reasons:
(a) If development
has taken place in an area, the beneficiaries of such development (the people
of that area) would automatically know about such development work. They need
not be "informed" via pompous newspaper advertisements.
(b) If the publicity
of development (or promise of development) in one constituency is done at
public expense, then all elected representatives should be allowed to publicize
the work done in their constituencies at public expense too, for the sake of
equality and justice; which is not the case at present.
(c) Such wide and
blatant publicity of development in one constituency or area should be
construed as "allurement" of voters of other constituencies where so
called development work has not taken place. This is unlawful.
It would only be appropriate that Hon'ble Supreme Court and
Election Commission take note of this practice and completely ban such
publicity at public expense. Political parties and representatives may do so on
their own expense subject to overall expense limit fixed by the Election
Commission.
Chart of the day
2019: First strategy review
In mid December I shared my investment strategy for 2019 with
readers (see here).
Since then markets have seen lot of turbulence. Some popular stocks taking a
decent beating and many credit funds have also witnessed write downs. Some readers have asked, if I am reviewing my
strategy in this light.
In this context, I would like to state the following:
(a) I have reviewed
my strategy in light of the recent developments. I am fully satisfied with the
following, and consider absolutely no need for any change in the strategy:
(i) 15% allocation
to gold.
Gold has been one of the best performing asset this year so far.
(ii) 15% allocation
to debt, entirely in the accrual products till benchmark yields cross 8% mark.
(iii) 70% allocation
to equity, with 30% in tactical cash to be invested in April 2019 or 9200 Nifty
level whichever happens earlier. Within equity allocation, the strategy to
focus on mid cap stocks, with decent solvency ratios and operating leverage
also seems right as this segment has already seen decent correction and
valuations look much better as compared to December 2018.
Incidentally, the market sentiment has turned excessively
fearful. The smallcap (Nifty Smallcap 100) has given up most of the gains and is
now flat for past 4yr. Midcap is returning 5% CAGR and Nifty is returning 6.8%
CAGR.
I had mentioned my sectoral preferences as "large PSU
banks, pharma companies with domestic focus, construction companies with stretched
balance sheets, which are most likely to survive, and real estate ancillaries
like cement, tiles, sanitary, plywood, electric fittings etc."
I have reviewed this in light of 3#FY19 results and do not see
any need for change in the stance.
I shall be looking to buy stocks from these sectors over next
2-3months.
I would like to reiterate that I am not at all worried about the
post election political situation in May 2019. Any major correction in market
due the election outcome would be a great trading opportunity in my view. I
would not be averse to using leverage to take advantage of this trading
opportunity, if it does present itself.
I am mindful of the possibility of a significant global market
correction. My strategy of holding gold, pure short term accrual debt
instruments and a substantial amount of tactical cash in equity allocation is a
reflection of this caution.
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