Table 1: Only Brazil and Gold made you money since July 31, 2007
There are various ways to harm nations and their people.
One can send terrorists across the border by land, as many in Kashmir have discovered.
One can send terrorists across the border by sea, as we in Bombay have discovered.
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Not that harming people of one's own country is a monopoly of 'enemy states'.
Politicians, dictators, and leaders around the world have probably done more harm to their own people than any cross-border terrorist could ever imagine.
Stalin, when he ruled Russia, oversaw the killing of millions.
Mao did the same in China.
As did the Khmer Rouge in Cambodia.
And while countries like India have been spared the vicious dictatorships of China and Russia - the role models of People's Power - one can argue that failed policies of the government have led to the death of millions of Indians, mostly in villages.
The point is that you don't have to be a 'foreigner' to kill your own people.
Indians murder Indians.
Chinese have murdered Chinese.
Russians have murdered Russians.
And the American government, in its own way, seems intent on decimating the wealth of its people. For the benefit of the few.
How global trade can cause harm
But death can also slip across borders via the legitimate movement of goods.
A recent report on Bloomberg noted that drywalls used in construction in homes in the southern states of Florida and Louisiana were emitting sulphur fumes which were corroding the electrical wires and fittings, leading to a risk of fires. Fires which can spread pretty rapidly and destroy families.
A reported 200,000 homes have been built with these Chinese firewalls.
During Diwali, I was amazed at the increase in fumes during the lighting of fire crackers. Many of these firecrackers, I was told, are made by the Chinese.
Hmm, I pondered, could this also have increased the risk of poisonous gases spread across various parts of India?
AIDS is also a product, in some sense, of global trade.
Of the flesh variety.
SARS was a Made in China event and H1N1 began in Mexico.
India exports mosquitoes that give malaria so they need to spray every aircraft that leaves Indian airports with sprays that kill the mosquitoes (and a few asthmatic human passengers J).
But the unkindest cut must be the damage that global capital flows can bring about.
Billions of dollars of money skims the surface every day across so many asset classes across so many geographies, looking for those fleeting mis-priced opportunities.
But in their rush for "alpha", the capital ends up like a dog chasing its own tail.
This mythical alpha is the so-elusive 'excess' return: the extra return that an expert promises you over and above the return you would get from investing in the overall markets.
So, in their search for "alpha" the global capital flows seek out superstar fund managers in the super growth nations of Brazil, China, India, and Russia.
These superstar fund managers have fee structures that are built to reward the managers far in excess of their falsely claimed brilliance.
By the time the investors find that out, it is usually too late.
Source: Bloomberg -
|(all in USD)
||% change for month ended October, 2009
||% change YTD in CY 2009
||% Gain/Loss since July 31, 2007 (Bear Stearns funds in trouble)
|Quantum Long Term Equity Fund
|India - BSE-30 TRI
|Brazil - Bovespa
|China - SHCOMP
|Russia - RTSI$
|MSCI EM Free
Meanwhile, QIP after QIP is launched.
Companies which deserve to be in the dustbins of corporate governance or corporate performance are touted as the companies 'best-positioned' to seize the India opportunity.
Table 2: A sell off will hurt India - foreign activity still dominates
||Net foreign Activity (US$ m)
||Net Local Fund Activity (US$ m)
||Total (US$ m)
||Change in BSE-30 TRI in that Period (% USD)
In Calendar Year 2008, foreign investors sold USD 13 billion worth of shares in India.
The BSE-30 Index fell by -61% in US Dollar terms.
Now, in the past 10 months of this year, the foreign investors have brought in USD 14 billion already.
The BSE-30 Index has gained by +71%.
Actually, I am not sure if you can call them foreign 'investors'. A better name may be 'punters and speculators'. The source of the money happens to be from outside India.
But, like the drywalls from China; the mosquitoes from India; the H1N1 from Mexico, these short term capitals flow can cause significant damage to India's stock markets.
The good news, though, is that any such collapse will be a "price" risk: the businesses of many of the companies will continue to do well
And, over time, share prices will head back to more robust levels.
So, don't worry about a decline in the share markets; just stay put and you will do well out of that.
Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)
||Quantum Long Term Equity Fund
||Quantum Gold Fund
(NSE symbol: QGOLDHALF)
|Quantum Liquid Fund
|An investment for the future and an opportunity to profit from the long term economic growth in India
||A hedge against a global financial crisis and an "insurance" for your portfolio
||Cash in hand for any emergency uses but should get better returns than a savings account in a bank
||Keep aside money to meet your expenses for 6 months to 2 years |
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