May 20, 2008|
Buddha's teachings, Buffettology & more
Buddha's teachings hold relevance
Stock markets in India were closed yesterday on account of Buddha Purnima (birth anniversary of Gautam Buddha, the founder of Buddhism. While we enjoyed the holiday that came along with it, Buddha's teachings and their relevance in an investor's life were a part of thoughts that surrounded us. This great master taught the world the 'Four Noble Truths', which incidentally hold relevance to investing as well. These noble truths were -
that suffering is an inherent part of existence - gains and losses are part of stock market investing and one can never be an investor without experiencing the two (the key is to learn from mistakes and try to never repeat them);
that the origin of suffering is ignorance and the main symptom of that ignorance is attachment - so true for speculators who disguise themselves as 'investors' while not giving any heed to the fundamentals of investing and are rather guided by attachments with 'herds', 'momentums', and minute-by-minute stock quotations;
that attachment can be ceased - by proper understanding of the investment process and the actual investment target (company). If the decision has been made after a proper study and analysis and that the decision pertains to long-term wealth creation, 'the 'attachment' can be removed;
that following the 'Noble Eightfold Path' will lead to the cessation of attachment and therefore suffering- this eightfold path includes: right understanding (also relevant for investors), right thought (relevant), right speech (non-relevant), right action (relevant), right livelihood (not relevant), right effort (relevant), right mindfulness (relevant), and right concentration (relevant).
Read what the other 'master' has to say on investing
Buffett eyeing a European treat
The legendary investor Warren Buffett is said to be on a lookout for investment targets Europe, specifically eyeing the German family-owned businesses. As reported on CNN's financial website, Buffett has indicated that "any potential acquisition would have to meet expectations though, including a demonstrated and consistent earning power, a pretax profit of at least US$ 77.9 m a year and no danger of disappearing 'over the next five to 10 years'."
As a matter of fact, Buffett's company Berkshire Hathaway has around US$ 35 bn in cash that it is looking to invest. In a recently held shareholder meeting, Buffett had asked investors to 'think small'. He made a simple point to investors - "As an investor, you don't need to predict the economic cycle (or even pay much attention to it). Instead, you should focus on evaluating individual businesses if you pick your own stocks."
Read what the richest man in the world has to say to investors
Coupling or decoupling? Choose for yourself!
A leading business daily talks about how equities in emerging markets have recouped all their year's losses and have risen above their end-2007 levels. The paper goes on to talk about how 'investor confidence' has not given in to any pain arising from rising crude prices. And suddenly, it seems that 'a strong case that emerging markets are well-placed in any scenario going forward can be made.' So, where have all talks of emerging markets facing risks of a US slowdown, rising commodity (and oil) prices and their consequence on inflation, have disappeared?
We disagree with the fact that 'emerging markets are well-placed in any scenario going forward'. The globalization of the world has led to an even greater alignment of the world financial system, of which emerging markets are now an important part. So, whatever happens in the developed markets of the US and Europe is bound to impact their peers in the developing world.
Rising food, oil and metal prices are bound to fuel inflation across the world as economies have become more inter-dependent. And markets are likely to behave more equally than ever before. Let's not forget what history has to teach. Not at least what we have seen in this year itself.
A 'not-to-do' list for investors
That car got pricierRead our analysis of Maruti's FY08 results
Maruti, India's largest passenger car manufacturer has hiked prices of its products across various models between Rs 1,000 and Rs 18,000. The company has cited input cost pressure and its impact on profitability as the rationale for passing on the price rise to consumers.
The company, which on an average sells almost 64,000 m cars in India each month (58% of India's total monthly car sales), has been facing the brunt of higher steel and aluminium prices on its cost stricture. This was evident in the 1.5% contraction in its operating for FY08, the results for which were announced just around a month back. While the latest round of price hike will pare the pressure to an extent, it is not expected to have a major impact on profitability, as material prices show no signs of cooling off.
Microsoft's at it, again!
Consolidation talks in the global technology industry seems to be gaining pace. Just a week after HP, the world's fifth largest software services company announced its acquisition of EDS (the world's second largest after IBM), Microsoft has raised its voice again for acquiring Yahoo. The company had withdrawn its offer for Yahoo just a couple of weeks back, citing that the consideration demanded by the latter 'did not make sense'. As a matter of fact, Microsoft had bid for the Internet business' second largest player in January this year, for a consideration of US$ 45 bn. However, after much deliberation internally, and taking into account Yahoo asking for a further US$ 5 bn (which Microsoft believes defies economics), the latter has withdrawn its bid for the former.
Readers would do well to note that Microsoft has been trying to break Google's hegemony in the Internet domain but has actually struggled to compete with the latter for billions of dollars of advertising shifting to the Web. We believe that a takeover of Yahoo by the former would be 'the' defining moment for consolidation in the tech industry.
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