Do it yourself

For past couple of weeks I have shared many random thoughts and feedback from my sources, and views of some experts regarding the current state of affairs in India. As promised, I shall now present my thoughts on investment strategy for post lock down period. Key message 1.     The current crisis is unprecedented in the sense that it has seriously impacted the liquidity, solvency and viability of a large number of businesses, all at the same time. The number of businesses going out of business before this crisis ends would therefore be much larger than the crises faced by global economy in past 75 years since the end of WWII. 2.     The only way out of this crisis is to inflate a colossal bubble in asset prices, which is equally unprecedented. I believe that the foundation of next big global bull market will be laid in next 12 months. Like every time before, the next bull market will be much bigger than the previous one. We shal...

For past one month, I have been struggling to suitably modify my investment strategy to factor in three things: 1.     Narrow physical global borders and wider and more liberal and freer international information highways. 2.     Zero cash flows for businesses for a protracted period. This factor used to be an integral part of equity valuation during the days of strong trade unions in 1960s to 1980s. 3.     Potential new leadership that will drive the markets in 2020s. During my quest, I remembered an event from my childhood, when we used to live in Agra town of UP. It was summer of 1979, when suddenly one day one of my uncles came to our house and announced that he will take everyone in the family to show the latest Bollywood blockbuster Gol Maal . Those were the days when children were least interested in indoor things like Cinema and TV. To lure the children, the uncle promised a grand treat post movie show. ...

I have narrated this story many times before. This is in fact one of my favorite instance from Hindu mythology. Once the forces of good (Sura) and evil (Asura) had a protracted battle. The battle lasted so long that both the groups exhausted all their resources and valor. Completely tired, wounded, frustrated and exhausted, they approached the savior Lord Vishnu. The Savior advised them to go and explore the great ocean (Sagar Manthan) to find new resources and vigor to make a fresh beginning. Following the advice, both the groups went to the great ocean and explored it extensively. During their exploration they discovered huge amount of wealth and resources that included the Amruta (nectar) that would immortalize the consumer and Vish (venom) that would destroy whoever consumes it. Realizing that if the evil forces get the access to Amruta and other resources found during the exploration it would seriously jeopardize the interest of the forces of good, Lord Vish...

The rise in stock markets world over must be baffling the investors as well analysts alike. At this time - when the world is staring at a high probability of deepest ever recession in global growth, disproportionate demand destruction; severe financial stress for households, prolonged disruption in global trade; colossal debt defaults; unsustainable monetary expansion; and total collapse in consumer sentiments - rise in prices of high risk asset like equity is definitely perplexing. It is however neither unprecedented nor surprising to me. During July 2007 to December 2007, Nifty had recorded its highest ever levels, despite the sword of sub-prime collapse hanging on its head. What we are witnessing is a similar phenomenon, commonly known as distribution pattern in technical analysis parlance. As an investor, I need to persistently remind myself the following and many other similar things: Many tenants are refusin...

Continuing from last week (see here and here ), I would like to share some of my random thoughts on what this outbreak of COVID-19 could potentially mean for India, particularly in the short to medium term. The present state of affairs India is in the state of total lock down since past 3 weeks. In this period about 40-45% of the overall economic activities which are exempted from the lock down stipulations are only working. Presently it is estimated that it may take 3-6 months before the economy could return to the pre March level of activity. It is important to note that the Indian economy had been consistently slowing down for past 3 years, especially due to the impact of demonetization (November 2016) and GST (July 2017). Unusual weather pattern have resulted in wide divergence in the regional economic performances. The rural stress in the regions that suffered from poor weather (flood, drought, etc) has been elevated; even though the overall farm sector g...

The outbreak of COVID-19 pandemic has shaken the collective consciousness of the global community. Since WWII there have been many crises that have impacted more than region of the world. But this novel coronavirus is perhaps the most widespread and deep crisis that the humanity has faced in past 75years. The global financial crisis (GFC) of 2008-09 had impacted most global markets, but the impact on human life was not this serious. This crisis has occurred at a time when the global order was resetting itself in the aftermath of the GFC. The central bankers were finding the ways to exit the unsustainable monetary policies adopted to mitigate the impact of GFC. The global trade imbalances that have persisted for almost 3 decades were correcting as China, US, EU, Japan, Russia, OPEC etc were actively engaged in aggressive trade (re)negotiations. Old trade and geopolitical blocks were weakening and new blocks were being formed. China had accelerated the drive to assume global l...

Little more than a decade ago, a global financial crisis engulfed the global markets. The impact of the crisis on financial markets was mitigated in couple of years by collective efforts of the governments and central bankers. However, the social, geo political and economic impacts of the crisis largely remain unmitigated. The "Reset" button pressed by the crisis has resulted in widening of socio-economic divide across the world. The geo political tensions have intensified materially. The rise in protectionism has adversely impacted the global trade. The rising unemployment in Europe and most commodity dependent economies in Asia, Africa and Latin America, declining growth in China, substantial cut in developmental aid to least developed nations due to fiscal pressures, has caused widespread human suffering for over a decade now. The onslaught of novel coronavirus (COVID-19), in my view, will accelerate the "Reset" process leading to a new global or...

The new financial year is beginning on a rather somber note. The auspicious festivals of Navratri, Ram Navami, and Easter are also failing to lift the spirits of the people locked down in their homes. Offices, factories and shops are shut. No one has rushed to complete the usual year end compliances. Naturally, the financial markets are also despondent. As an investors, my first instinct is to complete erase the memories of FY20. For an overwhelming majority of market participants, it has been a difficult and mostly forgettable year. Not only equity but the debt portfolios have also caused similar degree of pain for many investors. The fact that the previous year (FY19) had not been great either for most investors, exacerbates the concerns even further. However, the student of markets in me is telling me not only to remember this year but rewind it every year to avoid mistakes that would have been made in past couple of years. The following lessons in particular must...