|»5 Minute Wrap Up by Equitymaster|
On This Day - 10 DECEMBER 2012
Are 90% Indians 'idiots'?
In this issue:
Visit our Warren Buffett Page for a whole range of resources on the Oracle of Omaha...
Start with the Lessons from Buffett and go on to take the Quiz to see how well you know his investment style! Also, get details of books recommended by him, and access an opportunity to Invest like Buffett himself!
We choose not to take this opportunity to vent out spiteful rebuttals. Vehemently rejecting his remarks will only prove his point. If we really want to prove that we are a country of intelligent and rational people, we need to understand his '90% Indians idiots' comment in the context of his overall speech.
Firstly, the point he was actually trying to drive home was that Indians easily fall prey to malice perpetrated in the name of religion. We have a continuous history of communal riots that supports this claim. In fact, he points out that it would barely take Rs 2,000 to incite communal riot in the national capital. This exposes our vulnerability to menacing forces that aim to gain mileage by channelising communal hatred.
But this is not just about politics and religion. Take the world of investing. Very often small investors are taken for a ride by brokers and big banks that have their own secret axes to grind. Why is it that despite some major bull runs in the Indian equity markets over the last decade, a majority of small investors have not made much money? The worrying part is that even after burning their fingers so many times, retail investors continue to fall prey to dubious recommendations.
Even the 2008 financial crisis was a result of opportunistic behaviour by big private banks. In fact, if an ex-employee of Goldman Sachs is to be believed, several managing directors at the controversial firm privately referred to their clients as 'muppets', which means stupid.
Be it the case of Indians in the context of Mr Katju's comments, or be it the investor community, the real problem is that, more often than not, we are all treated and manipulated like 'idiots'. This is what should really outrage us.
There's another much cheaper option though. Active management of the country's twin deficits by the Government so that exchange rate volatility is nipped in the bud. Otherwise, be prepared for even more volatility in rupee dollar rates.
One of the reasons attributed to this is that there is a time lag between investment and capital goods production. Capital goods output is captured first and the investment gets recorded in the books only after the production takes place. Further, growth in investment appears to have mainly come from the construction sector. Overall, although capex plans of India Inc have not come to a halt, there has been a slowdown. And a pickup in GDP and investment climate will certainly have a favourable impact on capacity building as well.
Most large cap Indian IT companies share prices got pushed down on the Indian bourses during the last two trading sessions because of the near term negative sentiment. However, these sentiments in our opinion are merely short term in nature because of delays in discretionary IT spend. The need for IT services across the world and the cost advantage enjoyed by Indian IT vendors should keep the Indian IT growth story intact for the long term.
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement
Disclosure & Disclaimer: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. The Author does not hold any shares in the company/ies discussed in this document. Equitymaster may hold shares in the company/ies discussed in this document under any of its other services.
This document is confidential and is supplied to you for information purposes only. It should not (directly or indirectly) be reproduced, further distributed to any person or published, in whole or in part, for any purpose whatsoever, without the consent of Equitymaster.
This document is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity, who is a citizen or resident or located in any locality, state, country or other jurisdiction, where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject Equitymaster or its affiliates to any registration or licensing requirement within such jurisdiction. If this document is sent or has reached any individual in such country, especially, USA, Canada or the European Union countries, the same may be ignored.
This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Our research recommendations are general in nature and available electronically to all kind of subscribers irrespective of subscribers' investment objectives and financial situation/risk profile. Before acting on any recommendation in this document, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the securities referred to in this material and the income from them may go down as well as up, and subscribers may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Information herein is believed to be reliable but Equitymaster and its affiliates do not warrant its completeness or accuracy. The views/opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice. This document should not be construed as an offer to sell or solicitation of an offer to buy any security or asset in any jurisdiction. Equitymaster and its affiliates, its directors, analyst and employees will not be responsible for any loss or liability incurred to any person as a consequence of his or any other person on his behalf taking any decisions based on this document.
As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
Equitymaster Agora Research Private Limited (Research Analyst) 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407