Some random thoughts

Thought for the day

"He that studieth revenge keepeth his own wounds green, which otherwise would heal and do well."

—John Milton (English, 1608-1674)

Word for the day

Wanderjahr (n)

A year or period of travel, especially following one's schooling and before practicing a profession.

Malice towards none

How to bring Vikas in India?

Grow Taiwanese mushrooms that sells @US$1200/kg.

First random thought this morning

The allegation of BJP leadership that Pakistan is trying to influence Gujarat elections has distinct reflection of the recent episode of US-Russia spat of interference in presidential elections.

But from a different viewpoint, this also indicates complete Congressization of BJP. During 1970s and 1980s, it was very common for the Congress leadership to blame everything wrong occurring in the country on "external forces", implying Pakistan.

Some random thoughts

Unsuitable boy

From reading recent research reports on Indian companies and industry segments, I get a feeling that the Chinese authorities' commitment to conserve environment is one of the key drivers behind the bullish sentiments.

I understand it like this.

There is this good looking guy who is very indulgent, has proven criminal tendencies, and is financially very unstable. Sick by his ways of life, his wife decides to divorce him. Hearing the news, the parents in the locality queue up in front of his house with request to marry their daughters.

Ominous, undesirable, unsustainable, ridicules.

Taking the easy road

In the blockbuster Hindi movie DDLJ, the heroine is deeply in love with a guy against the wishes of her father. Her mother is afraid of her husband’s retribution and advises the two lovers to elope. But the hero, who is equanimous and noble, tells her that the path suggested by her appears easy but it would lead nowhere. He would rather prefer the path of courage, honesty and integrity which though arduous definitely leads to the desired goal.

Swami Jagadatmananda in his famous work “Learn to Live” extolled the readers - the sincerity and honesty of the means to achieve a goal is equally important as the goal itself.

Our government however usually does not concur with this thought. It rather prefers to take the easy road.

Banning the condom TV commercials between 6AM to 10PM, one such easy way of getting out of a tough situation. The right way could have been to discuss with the latex manufacturers and marketers to make commercials educative and plain, rather than seductive. The effort should be complemented by making it mandatory for all schools to educate children (12yr and above) about safe sex.

Padmavati is another such tough situation from which the government is trying to wriggle out taking the easy road.

Not guilty till caught

A number of teen deaths have been reported from across the country which were motivated by the mobile game Blue Whale. (Mis)Use of mobile phones for watching pornography has also been a matter of intense, legal, legislative and social debates.

TRAI has fixed minimum age of obtaining a mobile connection as 18yr (the legal age for entering into a legally enforceable contract).

Age conditions (minimum 13yrs of age) are in place for using popular social media apps like Whatsapp and Facebook.

Regardless, a number of TV commercials show school going minor children owning and using mobile phones.

It is also a common practice amongst school teachers to form a Whatsapp group of their students, even if the students are of less than 13yrs of age and hence not legally permitted to use mobile phone and social media apps.

Recently, I happened to meet minor son of a very senior police officer posted at IT Cell. The child has a personal mobile phone and is present on all social media sites!!

I confronted the officer that recent amendments to the Motor Vehicle Act, make the parents responsible, if their unlicensed minor child is found driving their vehicle. Why a similar law should not be made to punish the parents who allow mobile connections taken in their name to be used by their minor wards.

I wonder what is the punishment, if a child lies about his/her age to open a Whatsapp or Facebook account?

The point I am trying to raise is that "Compliance" needs to be developed as a habit in citizens and not as a "Condition", if we want to have a civilized society that respects each others' rights and everyone adheres to their duties and obligations.

Crimes like domestic violence, crime against women, tax evasion, disregard for traffic rules, violation of environmental laws, littering at public places, will exist and perhaps continue to rise till the belief in the principle of "not guilty till caught" is allowed to sustain.

Set the clock right

Thought for the day

"Truth never comes into the world but like a bastard, to the ignominy of him that brought her birth."

—John Milton (English, 1608-1674)

Word for the day

Dundrearies (plural noun)

Long, full sideburns or muttonchop whiskers

Malice towards none

"When nothing is done, nothing is left undone."

—Zen Proverb

First random thought this morning

From W. C. Bonnerjee (1885) to Acharya J. B. Kriplani (1947) to Rahul Gandhi Gandhi (2017), the Indian National Congress has travelled a long distance.

A cursory glance at the list of Congress Presidents from 1885-2017 (see here) shows that it is the only second instance that the party president post has moved from one relative to the other. The first instance was not truly handover as Rajiv Gandhi was elected party president after the demise of Mrs. Indira Gandhi. So the latest transfer of power is the truly first instance of dynastic transition. Things have not been as bad these are made to look. Nonetheless, the damage has already been done in 20yr leadership of Mrs. Sonia Gandhi.

Set the clock right

A lot has already been said, reiterated, doubted and clarified regarding the provisions of the Financial Resolution and Deposit Insurance Bill, 2017 (FRDI Bill). I do not think I can add any value by discussing the provisions of the Bill.

I would therefore like to address a related but larger issue.

In my view, what FRDI essentially seeks to do is to bring all financial institutions, regardless of their ownership structure, under a common surveillance mechanism, so that a prompt action could be initiated.

This is in line with the best global practices adopted post global financial crisis (GFC) a decade back.

This is also critical in view of the recurrent episodes of huge amount of NPA accumulation, threatening the financial stability and hampering the growth of the economy.

From this viewpoint, this legislative is not only important but necessary also.

Insofar as the provisions relating to "Bail-In" are concerned, in my view, the tradition in India, especially in post independence era, is to follow the legal and commercial practices prevalent in the western hemisphere, sometime promptly, but in most cases with a lag. Any financial and bankruptcy resolution in the developed world would normally have a 'bail-in" provision. In some cases it has already been used in past one decade. It is therefore inevitable that the depositors and savers in India will have brace up for this potential risk.

However, given that most of the banking and insurance business is likely to remain in public sector for next 10years at least, the implicit sovereign guarantee shall give some comfort to the depositors.

I would however like the government to clarify the following before implementing this Bill.

(a)   Has the Nationalization of Banks and Insurance business in India, outlive its stated objective? If the objectives have been met, why not close the chapter and privatize the PSBs, SBI and public sector insurance companies. And if the government has failed in achieving the objectives of adequate capitalization, financial inclusion, regional and social equity, depositors' security, and regulated lending, why not admit the failure and privatize it.

(b)   For past many decades, the poor people have subsidized the large bank borrowers, through long bouts of negative rates and frequent bail-outs. How do the government proposes to compensate them. Why not give the ownership of banks to employees and small depositors.

Comments welcome.

"Bail-In" keeping people awake at night

Thought for the day

"They also serve who only stand and wait."

—John Milton (English, 1608-1674)

Word for the day

Pervious (adj)

Open or accessible to reason, feeling, argument, etc.

Admitting of passage or entrance; permeable, e.g. pervious soil.

Malice towards none

In states representing more than 50% of the eligible voters, The Congress Party may not even come close to forming a government in next 10yrs at the least.

And some studio experts are intensely debating imminent revival of Congress Party's fortunes!

First random thought this morning

The incumbent government misses no opportunity to claim that national security and integrity is top priority for them and they have zero tolerance on this issue. They have allowed no opportunity to dissipate in showcasing their resolve behind the famous surgical strike in PoK.

There have been many instances where stringent action has been taken on students and artists under stringent Sedition law (Section 124-A IPC), even for making speeches inside university campuses.

But when they publicly accuse some senior politicians to be conniving with Pakistani elements, why do not they back it up with proceedings under Sedition law.

"Bail-In" keeping people awake at night

"Bail-in" is the latest in the series of "threats" presented by the incumbent government to keep people awake at night.

The concerns have arisen from some provisions of the Financial Resolution and Deposit Insurance Bill, 2017, (The FRDI Bill), which was tabled in Parliament this August, have given rise to concerns over protection for bank deposits in the proposed law.

The government recently implemented the Insolvency and Bankruptcy Code (IBC) that aims to promptly resolve the solvency issues of commercial entities in non-financial sector.

On the similar lines FRDI aims to make sure that if a bank, a Non Banking Finance Company (NBFC), an insurance company, a pension fund or a mutual fund faces insolvency, the matter could be resolved swiftly with least disruption to the financial system and various stakeholders. The resolution is proposed to be managed by a new entity namely Financial Resolution Corporation (FRC).

As per the proposed legislation, as and when a need for FRC intervention arises in case of a financial firm, the proceeds from the sale of assets of the failed institution will be distributed in the following priority order: (1) insured depositors (i.e., deposit amount upto Rs one lac insured by Deposit Insurance Corporation), (2) resolution costs, (3) workmen dues and secured creditors, (4) wages to employees, (5) uninsured depositors, (6) unsecured creditors, (7) government dues and (8) remaining secured creditors, (9) remaining debt and dues, and (10) shareholders.

The lower priority of repayment to uninsured depositors (i.e., deposit amount over Rs lac) is what is bothering a lot of depsoitors, especially middle class depositors.

The understand the issue in proper context, the following need to be noted.

(a)   As of March 2017, about 62% of the gross household savings in India were in the form of bank deposits and another 25% was in the form of insurance funds.

(b)   The bank deposits have seen a sharp jump from 44% on March 2016 to 62% in march 2017, due primarily to demonetization.

(c)    Along with deposits, the financial liabilities of households in India have increased to the decade high of 31% (FY16 28%), post demonetization.

(d)   The average term deposit in India is about Rs3,53,000 and average savings bank balance is about Rs36,000 as per the latest data available from RBI.

(e)    About 70% of all schedule commercial banking bank deposits are held by SBI and Nationalized banks. Private banks hold about 24% and RRBs and Foreign Banks holding 4% each.

(f)    The Deposit Insurance Corporation has paid claims amounting to Rs5000 crores since 1962 and has a balance of Rs80,000, sufficient to cover about 92% of all account holders.

(g)    Approximately 30% of all bank deposits are insured, in line with the global standards.

(h)   If the deposit insurance in enhanced from present Rs1lac limit, the coverage will improve dramatically.

So should someone be worried about his money being used to "bail-in" the bank or NBFC he has deposited money with?

I guess not now. More on this tomorrow.

 

 

 

Choose your economic model

Thought for the day

"In fact, you couldn't give me anything to make me go back to being a teenager. Never. No, I hated it."

—J. K. Rowling (English, 1965-)

Word for the day

Literatim (adv)

Literally. Letter-for-Letter

Malice towards none

Mainstream media loves to designate every election in the country as the litmus test for NaMo. They have even extensively covered elections to Delhi University Student Union and Local Bodies in a number of states, hoping whatever.

They may please note my RWA is holding elections early next month:)

First random thought this morning

While all the parties to the Ayodhya dispute are eagerly waiting for the Supreme Court's judgment, no one is apparently ready to take verdict that goes against them.

This means what?

(a)   No one actually believes that this matter could be decided by the court.

(b)   No one is actually interested in this matter getting resolved. The pending court case is just a delaying tactic.

(c)    Both (a) and (b)

(d) None of the above

Choose your economic model

It is widely expected that the vehicle that transited most economies from underdeveloped to developing to middle income is fired by two engines - real estate and exports. Technology advancement and higher productivity have mostly played a supportive role in (a) enhancing export competiveness; and (b) raising affordability levels of households for buying houses.

For most larger economies the improvement in social indicators inclusiveness, sustainability, equity, quality of life etc. appear to have followed the economic development with lag (often in decades).

To keep things simple, I therefore like to assess the efficacy or otherwise of any economic development model on these two basis.

As the economy begin to open up in 1991, Indian exports started to rise noticeably. The growth however gained tremendous impetus from 2004 onwards. A lot of this I would like to contribute to the brave reform efforts made by the NDA government led by AB Vajpayee during 1998-2004.

Developing industrial and trade infrastructure at unprecedented pace through privatization of most core sectors was hallmark of that government. The technical capabilities developed, though under compulsion due to international sanctions post 1998 nuclear tests, during that period also aided the exports growth in engineering, technology and pharma sectors.

Stronger currency, stronger fiscal and stronger current account resulted in sharp decline in interest rates in the subsequent years. Low rates, higher employment level, rising wages, better connectivity and accessibility all combined to lead a strong growth cycle in real estate.

The subsequent government however could not manage the growth well, especially in terms of regulating the credit, resource allocation and managing fiscal balance. Fiscal profligacy (high subsidies and unproductive welfare spending) for political advantage soon frittered away the low rate advantage. The global financial crisis also played an important part as exports slowed down and capital flows were affected.

The consequences are half dead real estate sector, exports moving in slow lane, humongous pile of nonperforming assets, poor investment growth, stagnant real wages and falling employment level.

In past three years, the incumbent government has made some progress in sorting out these issues. Unproductive subsidies have been rationalized (even at the cost of political advantage), inflation has been mostly reigned, resource allocation has been mostly regularized, NPA mess has begin to sort out, real estate sector now regulated is coming out of slumber, export decline has been arrested, and may begin to look up.

 

But I would like to add here, it is the Vajpayee model of development and not the Gujarat model of development (if there is any) that has succeeded. The learned economist Dr. Manmohan Singh's model of development is seriously questionable, in my view. Comments are welcome.

 

 

"To cut" or "To raise"

Thought for the day

"It takes a great deal of bravery to stand up to our enemies, but just as much to stand up to our friends."

—J. K. Rowling (English, 1965-)

Word for the day

Gerontocracy

A state or government in which old people rule.

Malice towards none

Ravan was son of a Brahmin and devotee of Shiva!

So what's the point?

First random thought this morning

While Baba Ramdev was kept busy fighting war on MNC tooth paste, confectionary and cosmetic brands, the global mobile phone makers (mostly Chinese), automobile makers, and readymade garment sellers have "plundered" billions from "gullible" Indian consumers.

Moreover, even on cosmetics, hair oil, ayurvedic products like Chyvanprash etc., confectionary and grocery etc. also, Baba may be competing more with pure domestic players like Dabur, Emami, Parle, LT Foods, DFM, Baidyanath, Marico, etc., rather than P&G, Colgate and HUL.

Should someone call his bluff and restrain him for carrying out a mostly misleading campaign?

"To cut" or "To raise"

When the members of Monetary Policy Committee (MPC) of RBI meets today for the Fifth Bi-Monthly review of monetary policy for FY18, the question before it might be "to raise or not to raise" rather than "to cut or not to cut".

An overwhelming majority of experts is forecasting a status quo on rates.

A near unanimity amongst forecasters over the likely decision of MPC on policy rates is rather unusual. Overwhelming consensus on any issue involving human intervention always bewilders my strategist mind. Consensus on economic issues is even more perturbing as it is against the basic concept of market.

In my view, MPC is presently faced with unprecedented complexities in policy making. Though the stated objective is to manage inflationary expectations, MPC must deal with prospects of worsening twin deficit, slowing growth and likely global liquidity and rate events.

As the recent GDP data (2QFY18) showed that Private consumption growth (6.5% in Q2) was weakest after Sep 2015 despite festive season and some pick-up in rural demand. The consumer confidence pointed that the urban consumer sentiment has stayed weak over this period, which suggests that the impact of 7th Pay Commission has mostly been digested, and a decent stimulus may be needed to encourage private consumption.

Government consumption growth dropped sharply to 4.1% in Q2 (17.2% in Q1) as fiscal deficit concerns prompt some belt-tightening. The rate hike by some banks on bulk deposits amply highlight the tight liquidity conditions. This tightness in my view is mostly due to the government's fiscal management jugglery (delay or deny tax refunds, delay contractor payments, delay subsidy payments and defer consumption and investment). This will reflect badly on FY19 fiscal, which may face political pressures also as general elections draw near.

The 4.7% growth in investment demand (GFCF) was the best in 5qtrs but as a proportion of GDP it remains ominously low. Given the still very low capacity utilization level and fiscal constraints, the visibility of investment demand recovering in FY19, without a significant stimulus, appears low.

The stimulus in turn will depend on improvement in revenue collections, which may largely be a function of consumption growth and revival in export demand. Exchange rate may play a critical role here. Many experts believe that a more than 10% correction in INR value would be needed to improve the competitiveness of our exports.

While the need for a monetary stimulus (rate cut) may appear overwhelming, as the finance ministry officials have also been insisting, the specter of inflation is rising (may rise aggressively if INR depreciates 10%) and trajectory of rates in global markets is no longer heading south.

 

So, my sympathies with MPC, especially the market economists sitting on the committee, who would obviously want an aggressive easing.

Driver of rally suffer from fatigue

Thought for the day

"It is our choices... that show what we truly are, far more than our abilities."

—J. K. Rowling (English, 1965-)

Word for the day

Complicit (adj)

Choosing to be involved in an illegal or questionable act, especially with others; having complicity.

Malice towards none

There is no Punjabi pride working for Virat Kohli. Who will root for a Bharat Ratna for him?

First random thought this morning

Nothing could be more unfortunate that the fact that after 70yrs of independence from alien rule, we are still debating who, how, when and where should sing the National Anthem.

The courts of law, already saddled with millions of pending cases, are busy hearing these mostly frivolous cases and passing some ridiculous orders. State administrations have to force students, and even older citizens to sing the Anthem, and stand up when singing.

Don't you think, this is one of the three major failures of our political establishment in post independence era, besides failure to eradicate manual scavenging and prevent female infanticide.

Driver of rally suffer from fatigue

The current bull market in Indian equities, that started in August 2013, is mostly driven by macroeconomic improvements and political changes.

The twin deficit situation improved materially. Interest rates fell over 200bps. RBI successfully targeted inflation and tamed it effectively. INR decline was arrested and forex reserves improved significantly. Change in political leadership led to improvement in sentiments and confidence. Some key pending economic reforms like GST, regulator for real estate sector, modern bankruptcy law, have been implemented.

The upmove has been strongly supported by abundant liquidity in the global financial system, declining domestic investment demand and poor real estate market.

The corporate earnings though have not shown any encouraging trend in past four years.

All these driver of the current bull market in India appear fatigued now. For example—

(a)   The current account deficit improvement that started with drastic steps taken by the then new RBI governor and the then Finance Minister working in tandem, has peaked at 0.7% of GDP a few months back and is forecast to deteriorate to 1.75% by 2020. Higher energy import bill and lower export growth are primary reasons for the deterioration.

(b)   The gross fiscal deficit of the central government is peaking in range of 3-3.5% of GDP. It is highly unlikely to improve any further from here. To the contrary there is a strong case for it to deteriorate in next couple of years as we approach the next general election.

(c)    Inflation expectations are rising.

(d)   The chances of any further cut in interest rates appear dim. Bond yields have risen sharply over past few weeks. INRUSD also likely bottomed close to Rs64/USD.

(e)    The global flow look uncertain as central bankers in the developed world look to contract their respective balance sheets.

(f)    The popularity of political leadership is at the peak. The improvement in sentiment and confidence of businesses and consumer seems to be peaking close to decade high level.

(g)    Investment demand continues to struggle.

(h)   The impact of wage hike post implementation of 7th pay commission and OROP has been mostly factored. The implementation by PSUs and state governments may occur over next 12months.

(i)            Earning downgrades continue, though at a slower pace. But given that the consensus is estimating a 25-30% earnings growth over next one and a half year, the disappointment is more likely there.

 

 

Bull markets are all same, or are they?

 

Thought for the day

"Youth cannot know how age thinks and feels. But old men are guilty if they forget what it was to be young."

—J. K. Rowling (English, 1965-)

Word for the day

Hearth (n)

Home, Fireside

The floor of a fireplace, usually of stone, brick, etc., often extending a short distance into a room.

Malice towards none

Controversy over Padmavati is not yet settled and an MLA and former minister in Bihar, hs threatens the Deputy CM, and the Deputy CM had to shift the venue of his Son's wedding.

"Law & Order"— is anyone bothered?

First random thought this morning

Last week I had the opportunity to interact with school children of a government school in a small town of UP. While I was sharing my experiences and thoughts with intermediate students, a young teacher raised a question. She asked, "why do we celebrate achievements of Indians living abroad, like Satya Nadella, Sundar Pichai et. al. These individuals indubitably have done very well for themselves. But what have they done for the country. And for that matter why are we celebrating an Indian girl winning Miss World title. The girls who won this title in past, have not really done anything for the country or countrymen to feel proud about, unless you want to feel proud over Priyanka Chopra playing a role in an English TV serial?"

As the question was fired out of blue, I could not answer this young lady. But I do want to satisfy her inquisition. May I seek your help!

Bull markets are all same, or are they?

In my view, most human being are naturally inclined towards positivity, progress, and prosperity. The cynics and skeptics are usually in abysmal minority. Celebrating rise in asset prices causing increase in wealth hence is a natural human reaction.

Bull markets are therefore usually welcome. The up cycles in real asset prices are mostly celebrated uniformly. However, the bull market in financial assets are fiercely contested, almost always. The current instance is no different. The reasons could be varied and justified. But that is not the point I want to discuss here. My point is limited to analyze the current bull market in India to optimize my returns on my investment portfolio.

In my view, though most bull markets in equities look the same from 35k feet, a closer look would reveal a different set of drivers in each case. It is important to note because it is the fatigue of these driver that eventually causes the reversal in price trends.

For example, the key driver of previous bull market in Indian equities (2003-2007) was the surge in credit. An unprecedented investment cycle was unleashed by easy credit.

Asian Financial crisis and successive poor monsoon resulted in economic growth plummeting in 1997-2003 to an average of 5.4 per cent. Economic sanctions post 1998 nuclear tests also played their role. The government responded with fiscal compromises and massive economic reforms. The government gave away its control over key sectors like roads, coal, energy, telecom, ports, airports and opened multiple areas for FDI. Implementation of VAT at state levels and expansion of Service Tax augmented the revenue considerably.

Consequently, fiscal discipline was restored after FY03, with the next five years up to FY08 witnessing a major reduction in the combined fiscal deficit from 9.3% of GDP in FY03 to a then record low of 4.7% in FY08. Lower fiscal deficits led to materially lower interest rates, which promoted higher investment and growth, which, in turn, increased revenues and thus further reduced deficits. Economic growth soared to record highs to average 8.7% during 2003-08.

The equity market celebrated its best bull market in history with Nifty rising from a low of 920 in April 2003 to a high of 6357 in January 2008 a 7x rise in less than five years, regardless of the most popular PM losing elections.

 

The market faltered when fiscal discipline was set aside in FY09 (combined deficit @ 10.6%) and the easy credit (rates begin to rise and NPA begin to build up) and freedom to operate to infra developers (scams in telecom, coal, real estate, roads) that drove the market started to falter. Global financial crisis pushed the markets deeper into abyss. The house of cards collapsed, with an unusually large number of infra builders losing over 80% of their market value and lenders left to collect the debris....to continue tomorrow

 

Market Cap to GDP

Thought for the day

"There is no less invention in aptly applying a thought found in a book, than in being the first author of the thought."

—Pierre Bayle (French, 1647-1706)

Word for the day

Nonbook (n)

A book without artistic or literary merit or substance, especially one that has been developed primarily to exploit a fad or make a profit quickly.

Malice towards none

Regardless of the outcome of controversy around Padmavati movie, one thing is certain that 10yr hence the legend of Padmavati will have a face and that will be of Deepika Padukone, much the same way as Anarkali is imagined as Madhubala!

First random thought this morning

I can confidently say that movies inspire a lot of people in India, and may be elsewhere also. The inspirations people derive from movies vary from fashion, career choices, relationship management, political choices, crime ideas, and even life changing idea, e.g., committing or not committing suicide, etc

What I understand from media reports, the case of a young girl that unfortunately died of dengue in a Gurugram corporate hospital is very similar to what was shown in a 2015 Hindi movie starring Akshay Kumar.

I am not sure whether the movie was inspired by some real life instance (s), or the Hospital's conduct is inspired from the movie. Regardless, there is a case for implementing serious reforms in the healthcare sector.

Market Cap to GDP

One of the most popular data point used by the market participants to justify (or otherwise) the current market level is GDP to Market Capitalization ratio.

The latest argument in this context is that the last bull market peaked at 103% Market Cap to GDP ratio. The current ratio being 87%, there is still scope for market to move higher.

I have never fully understood the rationale behind applying this criterion to equity markets, especially Indian markets, for the following reasons.

(a)   This argument assumes near perfect correlation between economic growth and stock market performance. This assumption may not be correct in most circumstances.

(b)   This argument completely ignores the rise in private equity investments. In Indian context for example, the equity investment in self owned enterprise and home equity has risen sharply in past one decade, as compared to the decade prior to that. Besides, the size of unlisted private businesses has increased significantly. Factor in the estimated market value of Amazon India, Vodafone India, PayTM, FlipKart, Honda India, Hyundai India, LG India, Samsung India, Apple India, etc. and you will find this ratio running much higher than what the chart below shows.

(c)    The rise in market cap purely due to PE re-rating due to excess liquidity or other reasons, may not actually represent any improvement in underlying economic fundamentals.

 

(d)          The equity valuations of stressed companies and lenders to these companies may not be adequately reflecting the realizable value of assets and future business potential