|» INVESTING IN INDIA|
The Narendra Modi government has still to prove whether it will be friendly to the businessmen who funded its election campaign - or whether it will be friendly to the 300 million people who voted for a new, improved version of India.
Yes, that hope may materialize - but what if it does not?
Is there any probability that the expectations are way above the possible reality?
Is anyone even discussing that?
Look out for the charlatans and hypocrites!
And - while there may be debate on the message and the merits of the message - there can be little debate on the messengers: Most of the messengers are part of a warped and crooked financial system which is out to steal your wallet.
These financial experts have done it in the past and SEBI did not shut them down.
Like the eternal cockroach, they have survived - and they will steal from you again.
The anchors are not doing their job of asking the relevant, hard questions to their chief guests.
For example: the one statistic that every guest taunts at the fact that:
"The retail Indian investor is under-owned in equity".
We agree: the retail investor does not own enough equity.
But the anchor should ask:
"Excuse me, but is your firm responsible for the fact that Indian investors have stepped away from equity as an asset class?
Were you the lead manager of the Morgan Stanley India Fund in 1994?
And, by the way, were you also a lead manager in the more recent Reliance Power IPO in January 2008 - please can you explain the rationale for that valuation?
And, while I am listing out the 'errors of judgment' made by your firm, please can you give us a sense of whether your firm was involved in launching or distributing the various 'sector" funds and "India is a Tiger" funds which decimated investors in 2006, 2007, and 2008?
Any of you have insurance companies which sell ULIPs? How did that do for the agents - and how did that do for the investors whose money was used (without their knowledge) to pay the agents for roping them in?
Did your real estate funds give that spectacular performance that was so implicitly promised?
And can you describe how your PMS products were run - is it true that your employees were given goals to "convert capital to revenue in 12 months" which is a way of saying that make the client trade so much that his corpus gets converted into broking commissions - and damn the residual value of the corpus?
And while we are at it and since you all seem so super smart and honest - do you have any view on the recent irrational and idiotic rule from SEBI that wishes to, effectively, reduce the number of fund houses that can launch mutual funds? Does your CFA degree have a charter of being honest to your clients? Can you tell me, honestly, that this is a great move for your clients and for investors in general? Or are you a part of this financial mafia that believes the customer must be raped by a select few?
I hope you will pardon my frank questions - and I hope you will not feel insulted that someone should ask how come you are so rich when your clients are, typically, poorer from your advice?"
Buyer beware...but buy you should!
But, my dear reader - don't hold your breath for such important questions.
Your Friendly Business TV Channel anchor plays along with the web of lies that emanate from the well-heeled guests.
Today's guest is tomorrow's advertiser: when the next bull market starts and the IPO machine pumps and dumps you the next DLF, Suzlon, and Reliance Power, those advertising revenues will be chased.
A roaring bull market is good for all - but not for you, oh, sunken investor.
Because you, my dear retail investors, are the insects the financial firms wish to capture and squeeze your wallet for its contents.
We know that the market is surging.
But has your anchor told you what else is rising - besides their ratings?
Have the guests on their shows told you what else is galloping - besides their bonuses?
Note how, as the stock markets were reaching new highs on the expectations of a Modi win, the research analysts at all these financial firms revised their earnings upwards to conveniently match the surge in prices (Table 1).
Note how, as the market begins to surge from February, 2014, the research analysts at the financial firms (run by the people you see honored on your Friendly Business TV Channel) decided to "up" their earnings estimates to match the mood of the market. As a result of these adjustments to earnings, stock prices now look "cheap". After the 17.5% increase in the estimated earnings for the year ended December 2014 and the 15.3% increase in the estimated earnings for the year ended December 2015, the P/E ratio of the market at 14x this year's earnings and 12x next year's earnings looks "reasonable".
Don't get me wrong: there is nothing wrong with having surging expectations and there is nothing wrong with waving the flag and telling investors to buy shares.
But does the financial service industry have a right to make the retail investor feel stupid for being "under-invested" in equity. It is criminal to pretend that the "under-ownership" of Indian equity shares is due to the dumbness of the Indian retail investor.
The fact is that the same people who now appear on TV lied to you and misled you.
They were not punished. They were rewarded.
You were taken to the cleaners.
Your Favourite Business TV Channels are doing a pretty lousy job of protecting you from the financial mafia.
The regulator, meanwhile, has no concept of how to regulate the industry: their committees are populated with the same people you see on TV.
Buyer Beware: you are dealing with a bunch of intellectually dishonest fraudsters.
But, yes, do look at buying into the Indian stock markets after much study, much research, and much thought.
And after you have switched off your TV for one week to let the falsehood you hear drain away, so that it no longer clouds your rational judgment.
Then - and only then - make your decisions.
You have been cheated and lied to - and, yes, you must own equity shares or equity mutual funds in your portfolio: but you need to step back in very cautiously.
Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)