Stockbrokers to drive taxis, tractors
(Mar 7, 2009)
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In this issue:
"You're going to see stockbrokers driving taxis. The smart ones will learn to drive tractors, because they'll be working for the farmers," believes Jim Rogers, the legendary investor and commodity guru. Rogers was speaking for an interview with Business Week. He further says, "It's going to be the 29-year-old farmers who have the Lamborghinis. So you should find yourself a nice farmer and hook up with him or her, because that's where the money's going to be in the next couple of decades."
» Jim Rogers', Roubini's dire predictions
» Marc Faber bullish on...
» India's most trustworthy companies
» Former FM sees GDP growth to pick up pace
» ...and more!
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Rogers believes that the US government is making the crisis even worse by not having a clue as to what is going on. "These are people who think the only solution is to save their friends on Wall Street rather than to save 300 million Americans," he says. On his cure for ending the crisis, Rogers asks the US government to let the bad banks and borrowers go bankrupt. "Stop bailing them out," he cries out.
Rogers' companion in predicting the current crisis months before it erupted, Nouriel Roubini, an economics professor at the New York University, has also made some dire predictions. As reported on Bloomberg, Roubini said that the global recession might continue till the end of 2010 given that the US government has been very slow in rectifying the malaise and the efforts have been 'too little'. While speaking at the India Today Conclave in New Delhi, Roubini said, "Governments are falling behind the curve. This recession can end up becoming even worse."
Roubini also believes that emerging economies like India and China will slow down sharply, and the global economy to contract by 1% or grow 0.5% in 2009 before recovering to about a 1% growth in 2010. His warning to the US government - "If you don't take the right policy action, this U-shaped recession will turn into an L-shaped recession like in Japan in the 1990s."
Well, all expert predictions are not so dire! Dr. Doom, as Marc Faber is called, thinks that some stocks are heading for a boom. "Commodities are very cheap in real terms," he said in an interview with CNBC. Faber is extremely bullish on the oil servicing companies, as he says, "Oil has a huge geo-political aftertone. The US and China need oil - and they need to become less dependent on the Middle East. That should stimulate exploration."
In a recently concluded poll on Equitymaster website, we had asked readers to vote for India's most trustworthy companies in terms of their financial reporting. And the results we got were well justified. While the Tata Group ran away with the top honours (as it had done in our previous poll on 'India's most admired companies'), it was closely followed by Infosys.
Rankings for India's most...
|Aditya Birla Group
|Mukesh Ambani Group
|Anil Ambani Group
What is interesting to note is that while the stock price of the companies run by the Ambani brothers had zoomed to unjustifiable levels before the stock markets plunged, the general consensus has been that the financial disclosures of these companies (Mukesh Ambani group and Anil Ambani group) leave a lot to be desired, as they were placed at the lowest end of the rankings.
Love them, hate them, but you can't ignore them! We are talking about India's public sector companies (PSUs), which have been talked about in today's Economic Times (ET) as being 'hot property' amidst the slowdown. The ET report says, "At a time when many leading private sector companies are seeing dips in profitability, if not outright losses, PSUs are going from strength to strength. Unwieldy size now comes across as reassuring solidity and economy of scale. No wonder investors too have rediscovered their virtues."
PSUs, in fact, while always being the whipped boys of Indian capital markets have turned out a better performance over years when we compare them with private sector companies. The BSE-PSU index, for instance, has returned 350% over the last eight years as compared to 137% returns of the BSE-Sensex (which is 70% made up of non-PSU companies). Now that's bang for the buck!
Indian women could do with some more reasons to celebrate Women's Day tomorrow. Like having more representation in top corporate jobs. Although India has institutions like ICICI Bank that have set the benchmark of having several women on top executive positions, it still lags behind other developing nations with regard to glass ceiling for women leaders.
Being one of the fastest growing economies in the Asian region clearly does not translate into bigger and more powerful roles for women in India. As per Indian Express, in India, only 24% of senior management positions in private business are held by women and India's performance is well below the global average. Amongst the BRIC nations, 42% of top managerial positions in Russia are held by women, 31% in China and 29% in Brazil.
We import more than 70% of our crude oil requirement and periodically make noises about improving our 'energy security'. But when it comes to getting our act together in providing tax breaks to oil explorers bidding for the crucial NELP blocks, we can't get our act together. The next round of NELP auctions is around the corner and the finance and the petroleum ministries have yet to sort out between themselves whether natural gas production is eligible for the same tax breaks that oil production enjoys.
Ever since Reliance Industries' found gas in the KG basin, the prospects of discovering natural gas in India seem bright. So, it is baffling why the matter is not being sorted out quickly. 'If you want to attract customers, you give them a good deal' - every businessman knows that. But not the government of India!
As reported by a leading business daily, former finance minister, P. Chidambaram (now the home minister) says the Indian economy will be back to clocking 7% growth by 3QFY10, and will subsequently grow by 9% in FY11. He has also emphasised on the following factors to achieve strong growth " savings, public investment in infrastructure, lower government expenditure, stimulating domestic consumption and exports.
As for the stock markets, he said, "The 21,000-mark euphoria has gone now. When my government assumed power, the Sensex was at 4,400 points and today at around 8,000 points - it has still given a 15 per cent annual return." Now, that's boasting for something that cannot at all be said as an achievement due to the government!
Just a couple of days after American art collector James Otis sold Gandhi memorabilia to Indian businessman, Vijay Mallya, he is making headlines again. Claiming that he has other Gandhi belongings, Otis has offered to donate the same to India but on one particular condition. He wants the Indian government to increase spending on healthcare for the poor.
While this proposal somehow seems to be like blackmail, we won't complain. We believe that this is an innovative way to get some good work done by the government. The other items in his possession include a letter which was written by Mahatma Gandhi in 1934 and his blood report which was issued just nine days before his death.
India's benchmark index, the BSE-Sensex, put up a dismal performance during the week. It saw a decline of 6.4%, second only to Hong Kong where stocks declined by 6.9%. Japan too fell 5.2%. China threw up a surprise amongst the markets in the Asian region, gaining a robust 5.3% during the week. Worries over General Motors and Citigroup pushed the US Dow Jones Industrial Index and S&P 500 lower. The Dow Jones declined 6.2% during the week. But this was not greater than the UK which saw its benchmark index FTSE decline by a hefty 7.8%, sending it plunging downwards.
|Source: Yahoo Finance
||Source: Yahoo Finance
"The foibles of human nature that result in the mass pursuit of instant wealth and effortless gain seem certain to be with us forever. So long as people succumb to this aspect of their natures, value investing will remain, as it has been for 75 years, a sound and low risk approach to successful long term investing" - Seth Klarman
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