It will get better. Guaranteed.
(Dec 15, 2008)
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In this issue:
"I really hate seeing our clients get knocked back by 30%, 40%, 50%, in the equity portion of their portfolios. It's really not a happy long-term situation. But it will change. It will get better. I guarantee it!"
» Charles Schwab speaks
» God can help save your portfolio
» Power minister in denial mode
» RBI's reminder to the govt.
» ...and more!
"It will get better definitely after Obama has his team together and is able to submit to the public what he's going to do. He's got some wise people around him who will probably put together a pretty comprehensive and thoughtful strategy, and I think that will add exactly what we need to improve confidence."
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This is an excerpt of Fortune magazine's interview of Charles Schwab, the legend who is credited with reinventing the brokerage industry and who has seen nine such periods of extreme pessimism.
When asked about his views on stocks, he says, "By any measure they're absolutely cheap. Could they get cheaper? Yes. Just because a stock is down doesn't mean it's a great buy. But after 18 months of decline, the equity markets are really, really cheap for the long term. You still have to remain well diversified, and you have to think about asset allocation. You've always got to think about having some fixed income in your portfolio as well as equities."
Our favourite is this - Mr. Schwab's views on Alan Greenspan who has been blamed left, right, and centre for sowing the seems of the current crisis - "Alan was an astute Federal Reserve chairman. He did a great job. I think there was one aspect that he truly missed. I don't think he ever watched television, but every day you could see those ads offering mortgages at a teaser rate, 2%, no tax returns required, no down payment required, no this, no everything. That was right there on television every day through 2004, 2005, 2006, and 2007. It was unbelievable. Right in the face of our regulatory people. What were they doing?"
Probably busy printing more dollars?
Well, if you do not believe Mr. Schwab and still wish for things to turn out well, pray to God! Since the current financial crisis is being touted as the worst since the Great Depression in the 1930s, it only seems apt that people are turning to God to put an end to the same. This has been seen in the US, where an increasing number of worshippers are flocking to churches. And not surprisingly, prayer requests have doubled with most of them aimed at getting or keeping jobs!
Before making any investment decision you need to be convinced of your action. "The stock market requires great conviction, as surely as it victimises the unconvinced," said the renowned investor Peter Lynch. You will know that you are convinced when you buy outstanding businesses when they are available cheap.
Are you in a denial mode (regarding your stock market losses)? Do not worry. You have India's power minister for company. The gentleman still believes that India will achieve the 'power for all' status by 2012. This is despite the serious delays that projects are facing currently. Remember, for achieving this, the country needs to add around 17,000 MW (mega-watts) of generation capacity annually over the next four years. This is when we have not added more than 5,000 MW on an average since Independence!
Bloomberg reports that the World Bank plans a US$ 14 bn lending program for India over the next three years aimed at speeding up infrastructure programs and supporting the nation's seven poorest states. While this is good news for the poor Indian sates, we are concerned of the bureaucracy that aid-organisations like World Bank have shown in the past. Economic experts believe that the bank, in lieu of its lending, has consistently imposed policies on developing countries which have been damaging, destructive and anti-developmental. Watch out, India!
A manager once asked an accountant, "How much is 2+2?." The accountant replied, "What would you like it to be?" Perhaps that is a bit unfair to the accountants given what some analysts do!
Well, a few months back, with the oil prices zooming to dizzying heights, predictions flowed thick and fast. The prediction of Goldman Sachs' Arjun Murti was the most famous one. "Crude will reach US$ 200 per barrel," he prophesized. Mr. Murti now believes the number is closer to US$ 45.
What went wrong? We believe it was inattentiveness to conflicting evidence. The original report was based on the inputs of analysts spread all round the world. When collated, the numbers pointed towards one direction - upwards. However, at the same time there were reports of how tankers filled with oil were floating near Iran. Apparently, there were few takers of the actual commodity at prices well in excess of US$ 100 per barrel. But those were small reports.
Bull runs in all asset classes begin with fundamental drivers. But somewhere down the line, participants get caught up in the euphoria and forget to apply sanity checks.
Are you one of those disturbed by the state of security in the country? If yes, you must know the reason for the same. Our politicians - the self proclaimed VIPs and VVIPs! With a large battalion of the National Security Guards (NSG) occupied to safeguard the politicians, there are few left for securing the common man.
A glaring example of this is Punjab's Chief Minister who, as reported by The Times of India, is guarded by - hold your breath - 1,000 armed guards. Overall, around 12% of Punjab's police force is being used to provide VIP cover to politicians, and industrialists.
There has been a tremendous outrage against the killing of over 180 innocent people in the recent Mumbai attacks. And we heard a number of politicians vent their stupidity, anger, frustration and condolence for the deceased. But is anyone taking account of the number of deaths that India records every four days...that is 45 each day and 16,425 each year!
We are referring to the country's farming community that is witnessing a large number of suicide deaths everyday despite the government offering a bailout package to the indebted. Hope the policymakers wake up to this tragedy!
The Reserve Bank of India (RBI) is doing the tough job. That of reminding the government that stimulus packages come at a cost - a cost that may be feasible for economies like China that have a war chest of foreign exchange reserves and sound government finances. But if the Indian government were to go overboard with its pre-election generosity; it could burden the government's coffers heavily.
The RBI has in a recent statement been very candid about how the rise in expenditure and deceleration in growth of tax revenue due to moderation in real economic activities is set to mis-balance the budget. The government's recent fiscal stimulus package of over Rs 300 bn, although less than a percent of the country's GDP, will have a severe adverse bearing on central finances.
Stocks in India closed strong today. The BSE-Sensex gained around 140 points (1.5%). Other key Asian markets like Hong Kong (1.9%), Japan (5.2%) and Korea (4.9%) also closed with gains. Stocks in Europe have also opened the day in the positive. Gold is trading at US$ 828 an ounce in the international market, up US$ 6 over last Friday's close.
India's common man's car has turned 25. Maruti 800, which heralded a new revolution in India, putting the four wheeled personal mobility within the reach of millions of Indians celebrates its silver jubilee year this month. While time has moved on, with the stodgy box like M800 paving the way for its sleeker and state of the art cousins, the memories are not going to die down soon.
India has clinched victory from the jaws of defeat against the Englishmen in the first cricket test match at Chennai. Chasing a daunting target of 387 runs, the Indians managed victory with 6 wickets to spare, thanks to solid batting by the maestros Sachin Tendulkar and Yuvraj Singh. Way to go, India!
|Maruti 800 - In 1983...
||...and in 2008
"So you think that money is the root of all evil. Have you ever asked what is the root of all money?" - Ayn Rand
|| Today's investing mantra
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