What would an alien say

Some years ago, I wrote that if an alien were to visit Earth - and that sets the stage for how we should see things - they would say that English was invented in the US.

And now it occurred to me that if they were told that there was a global financial crisis in 2008-9, they would say - - ah, it started in Europe and Japan. No wonder they are doing so poorly.
That's quite something - somehow the originator of the crisis is faring rather well right now, and geniuses, and capital following them are still flocking to the US.

What would they say about India?
- may be, why are people leading such sorry lives, especially in very some sorry state of being.

An alien was at Sanjay Bakshi's seminar a few days ago, and she told me that - this is a very large number of people who seemingly dont want to find the next best investment idea... but want to learn about psychology and human fallacies. Pissed off biases and such.

Seeing the forest

As I try to make sense of why my portfolio has done so well, I realise that my concentrated portfolio has done well because of luck, and a very strong tide.

It's easy to say that my chosen X company has done well, performed well, and is building a foundation for future growth; but when I see the forest, I notice (almost all of a sudden and rather scarily) that too many companies have grown manifold.

It reminds me of the 2010-2012 time frame when people looked back at the 2004-2008 boom and said that you could throw darts to choose your companies and you would have doubled and tripled your money in quite a few names.
Pharma, housing finance, finance, textiles, chemicals, consumer products (but not FMCG), some auto, agrochemicals - a ridiculously large number of companies have been priced very strongly - and at times those prices seem to reflect true value, and in other cases they have gone way beyond their optimistic values.


And yet, infrastructure, telecom, hospitality, some auto, public sector banks, have performed rather poorly - - here, the prices seem to reflect the capital destroying capabilities of these companies.



The question is: Will today be a day when I will look back and say - man, this was never sustainable, and I was being too rosy about my own companies and it was all luck
Or
yeah, sure, there was a big correction but quite a few companies became stronger through the ensuing period even though I was lucky to have made returns up until this period.


The tide is bound to go out.
I have to focus on keeping my focus on the facts.

We are only human

How much will our world change?
Will Brexit mean that the UK actually wins against a disintegrating european Union? Already, German current account surpluses are ridiculously high, and the euro only keeps aiding it; history shows that when the tide turns, the impact of one strong parameter can really unsettle an economy.

The number of stories about China's shadow banking and shadow investing - - investing using apps, debtors not being able to pay money to P2P lenders, who then cant pay the gullible small guy who gave money away using an app chasing a yield 3x that what a bank offers;
Chinese companies using devious ways of routing money using LCs and collateral to invest in foreign assets that dont make any strategic sense - - why would the largest jewellery company want to buy an Australian utility?

Why would Tencent buy a stake in Tesla after Tesla buys out the sister solar company, and trades at an absurb valuation?

Meanwhile, in India, there is a sense of complacency creeping in... 'this company will grow because it has the most superior distribution model, and the CEO is fantastic... yes, it deserves a 35x PE multiple because it is a good quality company'
'this guy is a star investor, and as head of a diversified conglomerate he has made some very shrewd moves... the company is going to be one of the biggest in India.'

Odd global investors have started putting money directly into Indian companies/ projects
And quite a few companies are raising foreign debt at super low rates, low covenants, and extended maturities...


And on the technology front - - driverless, VR, crazy amounts of data, an increasing reliance on consuming data, an extremely interconnected and public life, new materials, 3d printing, drones, new terrorism tactics, new ways of routing money and raising money... all these things vs just 12-15 years ago of a very nascent internet, and no google just shows that the world is going to be starkly different by 2030.
And hopefully, the humans and the planet is safe then - that will make for interesting times.


On a personal front, returns have been too high, and I will be punished.
March 2017 - - just a little less than three in 60 or so... luck has to run out.

How do you feel?

It seems to me that its not the world thats so bad.... sorry...
It seems to me that people are beginning to believe the India story, and that housing finance will be availed by multitudes soon
And that farm incomes will rise, and govt will spend and enable infrastructure investments.

It seems that nobody is worried about an acquisition going wrong
Or the Eurozone breaking up
Or China's consumption sharply dropping, or them devaluing the currency aggressively
Or the effects of bad climate

It seems to me that I have been wrong for more than 6 years now - perpetually worried that something bad is around the corner.

But history has proven that these are fertile grounds for new villains, accounting scheming, and promoters enriching themselves.

That said, I do what Howard Marks says, staying cognizant of potentially bad stuff but moving ahead with caution.

Coming to valuations, future upside is getting based on business performance, and highly dependent on something not going bad... But things have a way of going bad.


I predict that some of the foreign borrowings, and M&A activities will soon haunt companies, not to mention the unsustainability of very rich valuations...

I keep telling myself what my friend AR says: All money made from the stock market is often just a short term loan from Mr. Market.

The pendulum is towards optimism for India, but very far from euphoria.