EMC18 - The End of Western Dominance...

Feb 10, 2018

Dear Equitymaster Reader,

It's the first day of the Equitymaster Conference 2018, here at the beautiful Taj Mahal Palace Hotel.

People are taking their seats for today's first speaker, Dr. Marc Faber in the Crystal Room (I'd like to share a picture with you, but apparently I'm not allowed).

We have 7 speakers in total, covering everything from stocks, real estate, gold and Bitcoin.

It's going to be a long day...

The End of Western Hegemony

First up on the stage today is Dr. Marc Faber.

The big idea Dr. Faber's talk simply that, "we live in a new world." We are witnessing the end of Western economic and political hegemony. Wealth and power is returning East, and it's an incredible opportunity.

If we look at China, we can get a glimpse of India's growth potential...

Today, the GDP per capita of India is about $1,700 versus $8,100 in China. But surprisingly, in 1990, those numbers were $364 and $318 respectively.

So why did India fall behind?

Dr. Faber thinks one big reason is because of government.

"Government is a cancer."

And in India, the government has already succeeded in creating a "bureaucratic nightmare."

So government needs to get out of the way, or get smarter about policies that encourage growth. But the problem with governments is, the only thing they know how to grow is government...

Dr. Marc Faber opened his talk with a quote from Oscar Wilde, "The bureaucracy is expanding to meet the needs of the expanding bureaucracy."

Despite this, he is long-term bullish on India.

Ultimately, India's demographics will overpower the bureaucracy.

After the current correction takes its course, one sector Dr. Faber would invest in is financial services.

Could 2018 Be An Election Year?

The second speaker today is Ajit Dayal, founder of Equitymaster.

Like Dr. Faber, Ajit thinks India has a fantastic long-term future, there's no doubt about it.

But short-term, it could be a bumpy ride...

Ajit predicts the BSE 30 Index could fall as much as 20% in 2018.

For what it's worth, Ajit admitted his prediction for the BSE 30 Index in 2017 was wrong...

So we might not see as bad a fall as he's predicting, but we could also see something much worse!

Beyond 2018, Ajit thinks you could make fantastic returns with Indian stocks. In fact, 90% of Ajit's exposure to equities is in the Quantum Long-Term Equity Fund.

Ajit also predicts 2018 could be a surprise election year.

"The Rise of Pakodamics"

With the first two speakers largely bullish on India's future, here's Vivek Kaul with some harsh truths to share...

India is one of the most unequal economies in the world, and it's getting worse. Without wealth "trickling down" to the common man, India's economic future will be bleak.

In 2017, the Indian economy created 2 million new jobs, but according to the Center for Monitoring the Indian Economy, 11.5 million job-seekers entered the market.

Modi puts a lot of faith in India's entrepreneurs to create jobs, recently saying: "if a person selling pakodas earns Rs 200 at the end of the day, will it be considered employment or not?"

But here's the problem, nearly 40% of Indians are already self-employed.

Pakodanomics isn't working and according to Vivek, there are no easy solutions.

Tanushree Predicts Sensex 100,000 by 2030, But First... a Bloodbath!

Editor of Stock Select, Tanushree Banerjee is next to speak.

Tanushuree thinks market sentiment has shifted from FOLM to FOMO (a fear of losing money, to a fear of missing out), and that's not a good thing.

The Indian stock market's incredible returns in recent years have been attracting too much money, too soon. It's the perfect environment for a correction.

In fact, Tanushrees predicts we could see Indian stocks crash as much as 30%.

But over the long-term, she's still an Indian bull. She finished her talk by predicting Sensex 100,000 within the next 10 years.

The best way to invest is for the long run, and own "safe wealth creators."

A "Triple Tsunami" Smashed This Market...

Next up is real estate investing guru and editor of Real Estate Fortunes, Ashwin Ramesh.

Over the last year or so, the Indian real estate market experienced an unprecedented "Triple Tsunami" in the form of Demonetization, RERA (the Real Estate Regulation and Development Act) and GST.

It's hurt the market significantly, and in the short to medium-term there could still be some pain. But longer term, the outlook is good.

In fact, thanks to RERA trust is coming back to the market. Risk has been shifted from the investor to the developer. This is ultimately a good thing.

All that's required as an investor is simple: patience.

Gold Versus Bitcoin

We have two speakers next, Chirag Mehta, a fund manager at Quantum, and Prasheel Vartak, editor of Crypto Confidential.

First Chirag makes the case for investing in gold.

If you want certainty in an uncertain world, gold is the answer.

Is been the world's best insurance policy for the last 5,000 years.

Typically, when markets have corrected, gold has done well. For example, after the 2008 crash when stocks fell about 60%, gold was up about 30%.

But gold has been flat for the last 5 years...

Chirag says, ultimately that doesn't matter. You don't buy gold for gains, you buy it for protection.

Prasheel calls Bitcoin "digital gold." It's just like the real thing, only more portable and easier to trade.

95% of cryptocurrencies are garbage, and the recent market rout is a good thing, it'll clear out the bad coins and strengthen the market.

Other cryptocurrencies Prasheel likes include Ethereum, Bitcoin Cash, Ripple and Monero.

Investors also need to look at the technology underlying cryptocurrencies, the "blockchain."

Though coins may come and go, blockchain is going to stay around, and savvy investors who understand its potential could make a fortune.

Prasheel recommends reading a book called "The Internet of Money" to learn more about blockchain.

Day One Down...

That brings a close to today's event.

The general consensus among speakers is that the long-term outlook for India is good. Over the next 20 years, India stocks could create a lot of wealth.

But one interesting caveat to that came from Ajit, though investing in India should be very profitable over the coming years, India might not be such a pleasant place to live, and if you can, you might want to invest from Canada, the UK or so on.

With that in mind, I'm off to take in the night sights of Colaba while the going is still good.

Until tomorrow...


Colm O'Dwyer
Roving Reporter, Equitymaster

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