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A Red Brick Road - Views on News from Equitymaster
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  • Nov 1, 1997

    A Red Brick Road

    These are confusing times, indeed. Not only has it become difficult to figure out where to put your money - safely and profitably - but it is also very confusing to figure out who to vote for. And both these issues are important today. This money part of the decision-making is fun. The other part - of deciding who to send into the political arena - is likely to be thrust upon me any day now. Not only is this voting decision involuntary, it is a lot less fun. I mean if I need to see grown men throwing microphones and chappals at each other, I could tune on to some Laurel and Hardy shows - at least the comedians make you laugh! But now I need to elect people to mis-represent me for another term in Parliament - people whose actions make me cry!

    Let's start with the money part, it is less painful. I considered buying some of these bonds of 12% and 13% with 500% greenshoe options (greenshoe, in English, means if you give me more money, I will keep it!) but decided against it. Why give my money to someone who is not sure how much they want, how much they will get, and how much they actually need? Why don't they decide these things first and then come to me to raise money. It's a bit like that politician seeking my vote and saying hum aap ki dhekbhal karange. If the guy can't duck a flying microphone in time, what good can he do for me! In any case, the last time I participated in one of these "give me all you want and I will keep all you give" schemes, the stock market collapsed and the NAV of my investment fell by 40%.

    Besides, with interest rates so low and no good guys to lend to, who will all these institutions give the money to? Election trusts? No, if I wish to give money on interest I may as well get a hold of one of those blue-chip fixed deposit schemes and keep it there. Admittedly, the only thing blue about most of these companies seems to be the colour of the faces of the promoter/directors as they yell at their marketing and production executives for having got the economic cycle wrong yet again. Just how we feel when the Congress says they are the right choice this time around and claim to have given us independence fifty years ago and promise us a bright future in the next fifty years. I would like to believe anything but not the same lie we have heard for the past fifty years. No, maybe its time to move away from these traditional low-risk choices which seem safe but do a lot of damage.

    Maybe I should consider an investment in equity shares. Not very original, I must admit. We went rushing into this class of investments as the issuers churned out prospectuses that made the BJP's manifesto look like a badly worded children's book. True, both were glossy on the outside. The prospectus had a photograph of some well endowed model with many assets, while the BJP seems to have made good use of the man in the mask and presented him as the honourable saviour. It worked for a while: thirteen is my lucky number but not ninety-two. Assuming that the country spends Rs 1 lakh per month on each of those ninety-two elected representatives, that translates into depriving 52,571 street children in Bombay an opportunity to lead better lives for every day that those people remain in power. No, voting the BJP in may be too heavy a price to pay. Sometimes, in the interest of cricket, missing a chance to make a century is good if the other guy is the faster scorer who can take the country on to victory.

    But just as there is a limited choice for investing in equity shares (200 shares account for 95% of the market cap, 5 shares account for 95% of trading volume, and 1 share will account for 40% of the growth in earnings of the BSE-30 for FY98), choosing a good person to vote for is a bit like finding the Indian equivalent of Deng though we did find dung and some animal husbandry scum. No, these regional things are no good. That leaves us with the only other truly national party: vote for the communists.

    The communists have no caste or religious platform so that means we will have no riots in the country. There won't be any bank or insurance strikes because the management will be run by the unions and the unions will be communist - who knows you may even have Sunday banking and one-day recovery on insurance claims before the Insurance Act is passed. And the price of petrol and diesel will fall because the communists were the only sensible people to point out that the oil pool deficit was a financial mirage and that the government was making a lot of money through taxes on every drop of oil they sold to the unsuspecting proletariat. But the icing on the cake is that the communists are more democratic than the parties which claim to be democratic. They were the conscience keepers when the 13-drawer hanging-on-the-wall cabinet told the umpire to call the match off due to foul breath and bad history.

    Actually, the best part of this decision to vote for the communists in the forthcoming election is that it also helps one decide where to invest. Buy gold - lots of it. The Never Been Formed Companies have taken thousands of crores away from us in the form of deposits never to be seen again, the primary issue folks have taken our money and built granite office buildings, the FIIs are so dazed about what is happening in their own countries that they will be unable to keep this liquidity bubble going for much longer. The central bank is so confused about what to do with the Indian rupee that they will do nothing - and that will lead to a drift and then a fall. That leaves us with gold. And if you vote communist, you will be doing what all the sattawallas do between the NSE and the BSE, between the GDR and the domestic markets - playing the arbitrage game. If you vote the communists in and they mess the economy out of shape, the price of gold will rise dramatically and you will be rich. But if your vote to the communists turns out to be good for the economy, melt the gold and get your wife some jewellery and you both will be happy. After all, she must not be too happy with all the NBFC and blue chip certificates that you are now using as wall paper.



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