"It's not supposed to be easy; anyone who thinks it's easy, is stupid."
This confused me; yes, it was hilarious, but I couldn't figure out why it was funny.
In the middle of this COVID pandemic crisis, I really get it.
In fact, I have been 'getting it' for the last 2 years where drawdown after drawdown faced me in my investment portfolio.
And yet, I can humbly say that value investing works. Buying with a margin of safety works. And as my friend AR reminds me, (the same as I remind some of my people), the journey is supposed to be fun; and I must say that the fun is back.
In 2008-9 when the great recession struck, I was still in India, but I began reading about financial stuff, and one of the things that hit me was that the US GDP was $14T in 2010 or so.
As I write this, they are pushing $21T.
What I have often seen now is that people misunderstand GDP as a stock number, but is in fact a flow number; that country's revenue line is $21T or so; in the meanwhile, India went from $1T to almost $2.7T now - which is fabulous when it's measured in % change, but while the US increased its yearly output/ consumption by $7T; we managed to increase the annual output by $1.7T.
The way all this has influenced me has been:
I would like a substantial portion of my wealth to emanate from countries where capitalism is important, to where the best minds of the world are attracted and where the rule of law and recourse can be counted upon.
As I look back at these past years investing in India, I have seen the retrospective taxation by the GOI, I have seen a mass cancellation of mining and telecom licenses, an overnight eradication of hard currency from the system, a closet full of skeletons tumbling out (be it over-indebted loss making PSUs, fancy and sometimes trusted business names, companies with connections with the underworld, prominent business folk running away from India), a Chief minister of a state unilaterally cancelling a bunch of projects/ contracts that his predecessor entered into, and behind which those companies invested substantial amounts of money, a non-existent telecom player surreptitiously buying a pan-India telecom license from another company which is essentially bankrupt now - meanwhile, said telecom company is now the biggest in India and nobody mentions how it got a pan-India license, a complete and total illiquidity in the wholesale financing market for non-banks, a humungous backlog of bad loans by the public and private sector banks (which includes many cases of blatant fraud and complete oversight in other cases).
Many folk in the business circles call this a 'trial by fire'; a change in the way India will operate, where there is a fear of the law, where a businessman cant keep looting public money, where politicians are accountable, where the mythical magical Indian middle class will finally emerge, and how the companies that survive will reap and spread these benefits to the population.
The beauty of capitalism is that some companies adapt and continue chugging along, they manage to change with the times - by enabling a certain culture, or by borrowing cheap in the overseas markets, or by diversifying their field of operations, or by narrowing their focus on the things that matter - all the while figuring out how important people and balance sheets are.
COVID
The more things change, they more they remain the same.
There is a flurry of activity in webinars, politicos, news and the like about how life is going to change, about how there is a growing resentment towards China, how global supply chains will change, how a lot of these first world countries will make contingency plans to deal with such a pandemic again - and I believe that while things will change, the forces of the free market are so strong that it will be difficult for a country to begin erecting trade borders with tariffs/ embargoes.
Eventually, money flows to some of the best companies in their geographies/ fields; while this may be the new gold rush towards specialty chemical companies in India or SE Asia, only the better companies will thrive as has always been the case when market dislocations reach equilibrium.
What could be?
I wonder - is it high time that the Eurozone breaks up? I believe it has gone on for far too long. How can Portugal continue caring for Greece continue caring for Germany and so on?
How could it be that the US has the ability to pay 1% p.a. for 10 year money? That said, how did Japan do it for all these decades?
As LL predicts, will China finally move towards a free-r market system where the government only plays the role of peace-keeper and co-ordinator? Could the RMB become a major international currency? May be the route to that will be after a strong devaluation in the RMB...
My life
While the country around me is struggling with making ends meet, or trying to get back home, where 70% of rural India does not have access to running water (and the WHO can keep shouting 'please wash your hands) I am sitting in a privileged position where I am reaping the benefits of the work done by my ancestors.
What is my dharma towards the world?
There is a new being entering my life in 2-3 months, how will that bugger change me?
And how does all this tie-in with my investing style?
Lessons:
A more diversified portfolio.
A more stringent quality check on promoter quality.
Knowledge that more things can happen than will - the next crisis will be really different; it might actually be a crazy bubble in gold?
The relation between price and value is still sacrosanct; but the thing I need to learn is change in value over time and how Mrs. Market perceives companies where value is changing.
Do I own too many companies today?
Am I too lenient towards my smaller holdings, and I just let them run...?
Will Real Estate offer me the rewards I can imagine today?
Or - is the primary lesson that I cannot allow my sleep to be hindered, while I had this condition earlier too; I guess I was too naive. As is said, I should be able to learn by the time I get through the first 30 years or so.
My companies
Cheap, ready/ readying for the future, becoming stronger, have proven to be good at their work and will soon face new crises of their own.
Auto, Finance, Wealth, Chemicals, Consumer Brands, Real Estate, Pharmaceuticals - but the string running through them is: cheap, good runway, good balance sheets, global operations and yet - not very high on ROC.
Is this a big mistake? Or is it my inability to pay up? Or is it my inability to connect high ROC and low growth?
A thought that has stuck with me is: " My portfolio is the best." What this means is that each investor or fund manager surely believes that his or her portfolio composition is the best that could be done; and interestingly, the permutations that it throws up for the number of companies that are deemed investment-worthy is extremely high.
All of which implies that we can only do a certain amount of justice with the cards we have been dealt.
The smartest and most hard working or most experienced investors can still say that they have looked under far more rocks than the newbies, but there is simply a lack of time or initiative or luck with most of us.
And all this leads me to the superinvestors of Graham and doddsville. This is THE document which got me here and where WB postulated that all his fellow monkeys had their own set of companies and varying styles of investing but the central tenet was that things need to be bought with a margin of safety and that price is what you pay and value is what you get.
So, this is where I stand.
We are surely on the cusp of the next round of 10x and 100x in this country.
We are also relatively lucky that while the world is being extremely carefree about the perils of modern monetary theory, we have thus far reined in our looseness.
While there are clouds of a strong devaluation of the rmb, or a break up of the euro zone or extremely high inflation or stagflation in the US, I can see that the Indian economic engine can surely find a way of finding niches and chugging along.
We are still on the ground floor when it comes to per capita wealth, and we still live in the country where the urge to pee in peace is greater than the urge to pray.
Dharma
To have fun while attempting to increase knowledge and wealth.
I am sure I'm going to do well, but as CM says, envy is the deadliest sin.
This COVID mania ought to pass.
We will soon have a bigger problem on our hands...
This confused me; yes, it was hilarious, but I couldn't figure out why it was funny.
In the middle of this COVID pandemic crisis, I really get it.
In fact, I have been 'getting it' for the last 2 years where drawdown after drawdown faced me in my investment portfolio.
And yet, I can humbly say that value investing works. Buying with a margin of safety works. And as my friend AR reminds me, (the same as I remind some of my people), the journey is supposed to be fun; and I must say that the fun is back.
In 2008-9 when the great recession struck, I was still in India, but I began reading about financial stuff, and one of the things that hit me was that the US GDP was $14T in 2010 or so.
As I write this, they are pushing $21T.
What I have often seen now is that people misunderstand GDP as a stock number, but is in fact a flow number; that country's revenue line is $21T or so; in the meanwhile, India went from $1T to almost $2.7T now - which is fabulous when it's measured in % change, but while the US increased its yearly output/ consumption by $7T; we managed to increase the annual output by $1.7T.
The way all this has influenced me has been:
I would like a substantial portion of my wealth to emanate from countries where capitalism is important, to where the best minds of the world are attracted and where the rule of law and recourse can be counted upon.
As I look back at these past years investing in India, I have seen the retrospective taxation by the GOI, I have seen a mass cancellation of mining and telecom licenses, an overnight eradication of hard currency from the system, a closet full of skeletons tumbling out (be it over-indebted loss making PSUs, fancy and sometimes trusted business names, companies with connections with the underworld, prominent business folk running away from India), a Chief minister of a state unilaterally cancelling a bunch of projects/ contracts that his predecessor entered into, and behind which those companies invested substantial amounts of money, a non-existent telecom player surreptitiously buying a pan-India telecom license from another company which is essentially bankrupt now - meanwhile, said telecom company is now the biggest in India and nobody mentions how it got a pan-India license, a complete and total illiquidity in the wholesale financing market for non-banks, a humungous backlog of bad loans by the public and private sector banks (which includes many cases of blatant fraud and complete oversight in other cases).
Many folk in the business circles call this a 'trial by fire'; a change in the way India will operate, where there is a fear of the law, where a businessman cant keep looting public money, where politicians are accountable, where the mythical magical Indian middle class will finally emerge, and how the companies that survive will reap and spread these benefits to the population.
The beauty of capitalism is that some companies adapt and continue chugging along, they manage to change with the times - by enabling a certain culture, or by borrowing cheap in the overseas markets, or by diversifying their field of operations, or by narrowing their focus on the things that matter - all the while figuring out how important people and balance sheets are.
COVID
The more things change, they more they remain the same.
There is a flurry of activity in webinars, politicos, news and the like about how life is going to change, about how there is a growing resentment towards China, how global supply chains will change, how a lot of these first world countries will make contingency plans to deal with such a pandemic again - and I believe that while things will change, the forces of the free market are so strong that it will be difficult for a country to begin erecting trade borders with tariffs/ embargoes.
Eventually, money flows to some of the best companies in their geographies/ fields; while this may be the new gold rush towards specialty chemical companies in India or SE Asia, only the better companies will thrive as has always been the case when market dislocations reach equilibrium.
What could be?
I wonder - is it high time that the Eurozone breaks up? I believe it has gone on for far too long. How can Portugal continue caring for Greece continue caring for Germany and so on?
How could it be that the US has the ability to pay 1% p.a. for 10 year money? That said, how did Japan do it for all these decades?
As LL predicts, will China finally move towards a free-r market system where the government only plays the role of peace-keeper and co-ordinator? Could the RMB become a major international currency? May be the route to that will be after a strong devaluation in the RMB...
My life
While the country around me is struggling with making ends meet, or trying to get back home, where 70% of rural India does not have access to running water (and the WHO can keep shouting 'please wash your hands) I am sitting in a privileged position where I am reaping the benefits of the work done by my ancestors.
What is my dharma towards the world?
There is a new being entering my life in 2-3 months, how will that bugger change me?
And how does all this tie-in with my investing style?
Lessons:
A more diversified portfolio.
A more stringent quality check on promoter quality.
Knowledge that more things can happen than will - the next crisis will be really different; it might actually be a crazy bubble in gold?
The relation between price and value is still sacrosanct; but the thing I need to learn is change in value over time and how Mrs. Market perceives companies where value is changing.
Do I own too many companies today?
Am I too lenient towards my smaller holdings, and I just let them run...?
Will Real Estate offer me the rewards I can imagine today?
Or - is the primary lesson that I cannot allow my sleep to be hindered, while I had this condition earlier too; I guess I was too naive. As is said, I should be able to learn by the time I get through the first 30 years or so.
My companies
Cheap, ready/ readying for the future, becoming stronger, have proven to be good at their work and will soon face new crises of their own.
Auto, Finance, Wealth, Chemicals, Consumer Brands, Real Estate, Pharmaceuticals - but the string running through them is: cheap, good runway, good balance sheets, global operations and yet - not very high on ROC.
Is this a big mistake? Or is it my inability to pay up? Or is it my inability to connect high ROC and low growth?
A thought that has stuck with me is: " My portfolio is the best." What this means is that each investor or fund manager surely believes that his or her portfolio composition is the best that could be done; and interestingly, the permutations that it throws up for the number of companies that are deemed investment-worthy is extremely high.
All of which implies that we can only do a certain amount of justice with the cards we have been dealt.
The smartest and most hard working or most experienced investors can still say that they have looked under far more rocks than the newbies, but there is simply a lack of time or initiative or luck with most of us.
And all this leads me to the superinvestors of Graham and doddsville. This is THE document which got me here and where WB postulated that all his fellow monkeys had their own set of companies and varying styles of investing but the central tenet was that things need to be bought with a margin of safety and that price is what you pay and value is what you get.
So, this is where I stand.
We are surely on the cusp of the next round of 10x and 100x in this country.
We are also relatively lucky that while the world is being extremely carefree about the perils of modern monetary theory, we have thus far reined in our looseness.
While there are clouds of a strong devaluation of the rmb, or a break up of the euro zone or extremely high inflation or stagflation in the US, I can see that the Indian economic engine can surely find a way of finding niches and chugging along.
We are still on the ground floor when it comes to per capita wealth, and we still live in the country where the urge to pee in peace is greater than the urge to pray.
Dharma
To have fun while attempting to increase knowledge and wealth.
I am sure I'm going to do well, but as CM says, envy is the deadliest sin.
This COVID mania ought to pass.
We will soon have a bigger problem on our hands...
