Do it yourself

Besides other things one thing that the year 2020 has established is the need for global manufacturing to rebalance its over reliance on China. This need was being felt for past many years, but the following factored appeared to have reinforced this need in 2020: (a)   Major global economies like US, Japan and India took some aggressive tariffs and non-tariff measures to correct the imbalances in their trade with China. (b)   Pandemic induced mobility restrictions exposed the vulnerabilities in the global supply chain and prompted businesses to diversify their manufacturing more widely. (c)    Geopolitical aggression shown by Chinese establishment is now increasingly perceived as potent risk for global supply chain. Political unrest in Hong Kong has may have also embellished this perception. A recent survey conducted by UBS highlighted that “70% in the China CFO survey and 86% in the US CFO survey said they had moved or plan to move a part of t...

Global economy The year 2020 witnessed the global economy contracting by 3.5%, the worst peacetime performance after the great depression. IMF has recently forecasted a “strong” (5.5%) revival in 2021 and “normalization” (4.2%) in 2022. Which essentially means the global economy would be growing at less than 1% CAGR over two years (2020-2021). This rather long pause in global growth means serious setback to the development goals of poverty elimination, climate change and inclusion. The fact that this “pause” in growth could only be achieved with trillions of dollars in fiscal and monetary stimulus, highlights that the legacy of global financial crisis (GFC) and subsequent quantitative easing might have materially weakened the growth drivers of the global economy in past few decades, e.g., development of human capital, globalization of trade and commerce, poverty alleviation, productivity growth, etc. The new global survey of 295 economists from 79 countries, commissioned by Oxfam, ...

 Over the last weekend, I attended a lecture on the doctrine of Karma, read couple of books on philosophy of investment, and observed zillion of nuggets of investment advice, apparently written by highly successful investors and/or advisors, on my social media timelines. Admittedly, all this was quite befuddling for me. Everything, I read or heard caused an overflow of conflicting thoughts and emotions. I spent the entire Republic Day holiday in extricating the entangled thoughts. I am not sure, if I attained any degree of success in my endeavour. Nonetheless, I understood the following very clearly– (i)     Like any other Karma, the process of investing in financial products is personal to every individual. No two individuals will have exactly same investment plan – strategy, goals, process and outcome. The similarities between religion (morality, ethics etc.) and investment end here. (ii)    Investment advisory issued (free) to common public is mostly...

I received lots of comments on the yesterday’s post ( Investing lessons from down under ). Most commentators agreed with my view that a good portfolio must be a balance of consistent compounders and emerging businesses; whereas few expressed strong disagreement. Unsurprisingly, amongst those disagreeing were both types of investors – those who prefer to stick with consistent performers; and those who prefer emerging businesses with a potential of abnormal returns in short to mid-term. I find myself totally disinclined to argue with any of the commentators, since I strongly believe that investment is essentially a personal endeavour. Each investor will have a different strategy based on his/her personal circumstances, requirements, and aptitude. The widely followed investment strategies are basically templates. Individual investors customize these templates to make an investment strategy most suitable for them. I however would like to discuss one thing that stuck me hard while readi...

 The recently concluded tour of Indian cricket team to Australia has been remarkable in many ways. I am sure, the cricket administrators, analysts, strategists and guides in the country would analyse the outcome of tour from the viewpoints of future playing strategies and improvement in fitness regime, and career path for the young promising players who may not get adequate opportunities due to limit of 11 playing members in the national team. On my part, besides thoroughly enjoying two months of engrossing game of cricket, I have drawn some key inputs for investment strategy purpose from this tour. Pujara vs Pant debate is meaningless One of the prominent topics of discussions, before final day of the Brisbane test, was the “slow” batting of Cheteshawar Pujara; though the victory at Gabba ended this debate with tins of praise being heaped on Pujara for his grit and resilience. A loss or draw at Gabba might have seen strong criticism of Pujara. On the other hand, Rishabh Pa...

 The recent macroeconomic data indicates that Indian economic activity may soon reach to its pre Covid level. The latest reading on Nomura India Business resumption Index is 93.4, just 6.6% below pre Covid induced lockdown level. The media headlines and official commentary claims it to be a “V” shaped recovery, implying that one year may have been lost, but Indian economy is nearly back to “normal”. There is section of experts which is terming it to be a “K” shaped recovery rather than a “V” shaped one; implying that one part of the economy has raced much ahead while the other continues to slide. Some noteworthy data includes: Fall in consumer and wholesale inflation, highlighting easing of logistic constraints. The inflation is now within the RBI tolerance band, and has prompted the governor to emphasize that surplus liquidity would need to be sucked out of the system. The very steep yield curve has started to flatten a bit. IIP growth is now back to February 2020 level. In De...

One of the distinct childhood memories is about the Uncle, who used to visit foreign countries for work almost every year. After every foreign visit, he would host a family dinner. At the gathering he would explain the difference between heaven (Europe and USA) and hell (India). He would make every adult regret for taking birth in India and make every child aspire to settle abroad. We (me and my brother) were usually not interested in what Uncle is saying. Our interest was limited to the last act – opening of goodies bag post dinner. He would very generously distribute the “gifts” he had brought from “foreign”. These gifts would invariably include – bathroom sleepers, shaving and dental kits, cosmetics and writing instruments picked from the hotel room he had stayed and flight he had travelled; bottles of perfume; some clothes; small toys; and souvenirs, mostly bought from dollar stores (this I know in hindsight after travelling myself). Three essential things were bottles of liquor ...

The latest earnings season has started on a very buoyant note, led by some IT companies. In line with the high speed macro indicators, most brokerages have upgraded their earnings estimates in past one month. The present estimates are building in a very strong earnings recovery over FY22-FY23. The estimates for the current year FY21 have also been upgraded sharply from a contraction of 5% to 12% to a growth of 5% to 12%. Currently, the market is estimating an earnings growth of 24% to 38% in FY22 and another 18% to 22% growth in FY23. It is important to note that these estimates assume GDP growth of -7% to -7.5% in FY21; 9% to10% in FY22 and 4 to 5.5% in FY23; interest rate bottoming in FY21 and elevated inflation of 5 to 6% over FY22 and FY23. This implies less than 3% CAGR of GDP over three year period of FY20-FY23. Whereas, the present estimates imply ~19% CAGR in Nifty EPS over FY20-FY23. Apparently, there is disconnect between the macro forecast and earnings forecast. In past ...

Will jet fly high again? One positive impact of Covid-19 pandemic for me is that it has increased my productivity significantly. I am saved from excruciating travel, which many times is completely unnecessary and avoidable. I am able to devote the time, money and energy saved from travel to useful and productive tasks. I am reasonably confident that this positive impact of the pandemic may sustain in foreseeable future also. In last two days, I did video meetings with five corporate managements, located in Gujarat, Maharashtra, Andhra Pradesh and Bengaluru. In pre pandemic era, I would usually travel to meet companies for understanding their businesses. A one hour meeting in Bengaluru would mean, waking up at 3AM to catch a 6:50 flight, and reach home by 10PM. No longer is the case. I logged in at 3:58PM for a 4PM meeting from the comfort of my home; and was done at 5:10PM, well within time for the evening tea with my wife. Saved, Rs15000, 20hrs of time, 1500 calories, and stomach ...

 RBI released the 22 nd edition of its biannual Financial Stability Report (FSR) on Monday, January 11, 2021. The report highlights some key trends that could influence the financial markets in months to come. I note the following red flags raised in the report, which in my view could be relevant to my investment strategy: Uneven and hesitant recovery, with disconnect in real activity and asset price Economic activity has begun making a hesitant and uneven recovery from the unprecedented steep decline in the wake of the COVID-19 pandemic. Active intervention by central banks and fiscal authorities has been able to stabilize financial markets but there are risks of spillovers, with macrofinancial implications from disconnect between certain segments of financial markets and real sector activity. In a period of continued uncertainty, this has implications for the banking sector as its balance sheet is linked with corporate and household sector vulnerabilities. COVID-19 pandem...

 Ricky Ponting, the former captain of the Australian cricket team, commented during a TV show on Sunday that Indian team may not be able to score 200 runs in the fourth inning of the third test match played in Sydney. Ponting was obviously trolled badly on unforgiving social media for his “prejudiced” and “audacious” forecast. India went on to score more than 300 runs and even managed to draw the test. Ponting later clarified that his “view” was based on the condition of the pitch on fourth day. The pitch did not deteriorate on fifth day as expected. Nothing much should be read into his statement. He need not have presented his defense. The social media would have forgotten his statement in couple of days, anyways. The stock market experts (strategists, analysts, fund managers and seasoned investors etc.) who stick their neck out and make forecast about the market trends and likely levels of benchmark indices often face the situation like Ponting; especially for past 2 months tho...

 Besides digital transformation of global economy, sustainability is the other theme that had dominated the investment strategies in past three years. The global energies have remained focused on enhancing the role of digital capabilities in our day to day life, and making the growth sustainable in terms of the pressure on natural resources and dispersal of harmful waste in the environment. Scrolling through my social media timelines, I gathered some interesting instances of “sustainability” theme dominating the investment discourse. ·          Market capitalization of Tesla Inc., the US company making electric cars, among other things, has topped market of top 10 global auto makers; even though it’s annual revenue is about US$28bn (vs. Toyota revenue of US$572bn). ·          The stock price of Orsted A/S, a Danish largest energy company in Denmark and world's larg...