Two years ago, my car cleaner asked for a loan of Rs75000 for
building an additional room in his one room house. He said his children are grown
up and need a separate room to study and sleep. I gave him money with the
condition that he will return in 1yr. In February this year, I asked him to
return the money. He promised that he will give within a month. Then this
lockdown happened and he was barred by the RWAs to clean the cars of the
residents. No one paid him for 3months. I do not know how he survived in this
period, but he handed over me a cheque of Rs75000 last week. I deposited the
cheque in my account, but it was returned due to "insufficient
funds". When I told him, he told me to deposit the cheque again, which I
did. It returned unpaid again for the same reason.
I have not confronted this guy again. I know both his children
are good at studies and a separate room to study and attend online classes will
be very useful for their studies. Mentally, I have gifted this money to his
children. But this is not the story. The story is that my bank has charged
Rs236 (Rs100 each for two cheque returns plus 18% GST) to my account for the
two instances of the cheque return. Imagine the agony of a person whose debtor
has defaulted and he is being charged by his bank for the fault of his
defaulter!
A recent story published in outlook money magazine (see
here) alleged that the banks which suffered hugely due to defaults by the
Indore based Ruchi Soya Limited, were forced to lend even more to the Patanjali
Ayurveda group for acquisition of the defaulter company. The minority
shareholders who have seen their investments in these banks having eroded by
over 50% shall suffer even more when the company defaults again. The lenders
and investors in these lenders shall have same feeling as I got when I saw the
debit of Rs236 in bank statement.
A few days ago, one of the legendary investor/trader of Indian
stock markets repeated his staple opinion about the Indian economy and stock
markets for the nth time. Imitating the global legends like Peter
Lynch and Warren Buffet, he exuded confidence that in the "long term"
blips due to these market disruptions will lose their relevance and trend
growth will only matter. As usual, media highlighted his views and his ardent
followers added some degrees to their confident.
I have nothing to disagree with the legend. However, at the same
time, I draw nothing from his views and suggestions that will compel me to
change my investment strategy or process. I formulate my strategy keeping in
view my resources, needs, aptitude, limitations, risk appetite, emotional
strength, access to information, and analytical ability, etc. I have always
refused to read bestselling books on investments written by the legends like
Benjamin Graham, Philip Fisher, Peter Lynch, Robert Kiyosaki, Warran Buffet,
Charlie Munger et. al. I believe that their experiences and thoughts evolved in
a different socio-economic environment and they worked in a different
regulatory and legal framework. My environment, opportunities, and abilities
match to none of theirs.
Besides, the current environment is very different than in which
they operated. No wonder Warren Buffet led Berkshire Hathways has been one of
worst performing funds in US in past one decade. I do not know about the
performance of our own legend, but as per publically available information, his
portfolio has also performed too well in past one decade. One decade is a
reasonable "long term" in common parlance.
The Benjamin Graham would not have anticipated that investors
holding US$17trn worth of bonds will be willing to pay for holding those bonds
for 7-30years (negative yield); buyers of crude oil will have to Pay US$37/bbl
for not taking delivery due to shortage of storage; analysts will peg
"reasonable valuation" to the "average valuations" of past
3-5yr rather than DCF because the traditional valuation method cannot operate
with negative or zero interest rate and zero residual value of assets; and the
person (or bank) suffering from debt default will be asked to suffer more by
paying charges!
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