H2 CY23 - Peak & Insecurities

This is how markets operate every time. 

Zero, Zero, Zero, and then 3x. And at peak, usually brain gets high, and doesnt want to sell. One of sayings in market is - bech ke pachtao, rakh ke nahi! 

Same happens when markets are falling down, and brain gets gripped by fear, and doesnt wants to buy! Read "Your money and your brain" - by Jason Zweig

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G says KCP - Knowledge builds conviction, conviction builds patience. 

A health coach or doctor can give only gyan (and some band-aid). Patient needs to modify ones lifestyle oneself. Until the patient reads, explores and experiments, to build his own conviction, he wont learn - and will always be in confusion/conflict - looking for one or another doctor or baba. Doctor unfortunately cannot give health. 

Fund managers, however, may create wealth for patients. But till patient reads, explores and experiments to build conviction, he wont understand or ENJOY THE JOURNEY. And just looking at wealth number grow on screen is meaningless insatiable screen p0rn - without utility.   

Unfortunately, fund managers (with their own insecurities) are only inflaming the insecurities of patients, by JUST talking about end product - wealth. A patient, who is sick at 10L, would never be healthy at 10c, till root is addressed. Its not an asset issue - its mindset issue.

15% on 1 is 15L - beyond that life is for learning, exploring, joyful light work, joyful engagements, beauty, leisure.... Compounding, but blissfully detached

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Images/videos are already deep fake. What if trust in Reserve Banks' currency is broken. What if, money/wealth may somehow perish in this format. 

The only WAY OUT - is to LEARN INWARDS, and fill in the voids / insecurities.    

 

H1 CY23 - Circling the Wagons

Pabrai gave this magmun opus talk, summarizing Buffett's last 70yrs.

Link 

In nutshell, most of Buffett's returns are coming from 11 companies and 1 person (Ajit). 

And selection / future performance was a random event. It cant be predicted, just guessed with conservative assessment, folded hands, being in the market for long and random luck.

Graham also got his lion's share from GEICO investment.

Same, with Nick Sleep - most from amazon investment. 

One company, held very very long, and hopefully successful, changes the course of returns. 

--The End --

H2 CY22 - Psychology of Money

This year is washout for most funds. 

Continuing my analysis from 2015, this is eight year, making 8-y returns "dim" for most of funds - grounding the "expectations" of most people. Dancing, singing, seminars, giving lectures doesnt mean surety of returns, or entitlement of returns. Most return, even for Buffett, despite all dancing/singing/circus, appears to have come from ONE MAJOR DEICISON IN LAST 20YEARS  - buying Apple, in plenty, sometime in 2017!!  

Return OF capital, is becoming more important than Return ON capital, with OpenAI and Boston Dynamics stunts - looks like many many people r sleepwalking into losing livelihood.  

Psychology of Money

Psychology of Money is most powerful book to be read/ to be shared with kids - more important than Graham. Money requires less of rocket science, more of Self-management. 

People exhibit rocket science intelligence - aka common biases like - 

1) "I should make x returns" - This ET article, link, did good analysis for last 4 decades, busting expectation myths.   

2) "I think Ashwariya is better than my current girl" - the fantasy bias.

3) "I want my current girl, with face of Ashwariya, body of Angelina and ... " - u get the point, fantasy bias#2

4) "लगता है मेरी गाड़ी slow है, बाकि सब गाड़ी  तेज़ हैं "  - the instagram bias - everyone's  life looks beautiful on Instagram. Fish sees the bait, never the hook. 

5) "You should drive like this" - pillion rider fantasy - no understanding of nuances.

6) Ignoring/not researching shenanigans of fund management - not knowing, what one doesn't know- Ostridge in the sand bias.

7) "Property gave X% since 1950" - as if its going to repeat in next 70yrs, without understanding credit cycles or micro-markets - Repeatability bias + Regency bias

.. and many more. 

Morgan Housel ends the book, with examples of his decision making - how he kept is investments simple, in index funds + zero debt + operated on low expectations.  And how his dad quit medicine with frugal lifestyle and low expectations. 

Most important thing is leading relaxed life, with relaxed people with self-knowledge, with whom one can enjoy the life. 

Less of dance/singing/intelligence of cartoon managers .. More of mathematical laws of COMPOUNDING + FRUGALITY and good psychology. And tons of gratitude 🙏

H1 CY22 - Invested with Gratitude. And some data for disenchantment

🙏

We invest in companies which are inexpensive and compounding AND available cheap for a reason. Under unknown circumstances, and huge mortality of businesses /  economy, I accept the returns, with gratitude - not with entitlement.  

Aim is to compound - some periods r fast, some r slow. Being alive for long is more important, than playing recklessly.

Currently, Im holding somethings where the probability of success is high - however, Im uncertain of monetary system or lockdowns or whatever is happening around... So diversify away from the system. And unalign the mind from dependence of money.  

Data for disenchantment

Some very interesting data emerged out of analysis of past 5-7yrs -  

 - For 2016-2020, 5y period, almost all funds came down to zero return due to covid selloff in march2020. 

 - Very few were able to raise money in 2020-2021 

 - Mkts recovered in 20-22, overall giving very modest returns for (5+2)year period, assuming no additional capital in downturn. 

 - Most of superior IRR came from buying 20cents things in covid downturn period. 

 - Unsurprisingly, retail panicked in covid, and sold off at wrong time. 

 - And as a matter of caution, many FMs also exited, surprisingly. 

Understanding these numbers need some deep analysis, for which I used following - 

- PMS Fund returns are NOT= individual returns. Fund IRR majorly depends on ability to do marketing during downturns - with new capital, buying dollar for 20cents, massively spikes up IRR. Retail, who added during downturns, made good returns.  

- Fund House IRR data is easy to find. However inflows/outflows r difficult to find, and very different for different Fund Houses.  Hence comparing 2 funds, without taking fund flows into account, is totally incorrect exercise.

- How funds are merged/closing their schemes also needs to be taken into account.

- Context of period needs to be taken into account - markets rising from 2013 bottom or 2020 bottom will show excellent returns. But 2015 or 2016 onwards, numbers will change drastically. Sometimes, 4y or 7y is better way to look into things, but marketing decides narration. 

This entire comparison workout is IMPOSSIBLE exercise  - and anything else is INCORRECT way to think. 

Wrong analysis, wrong periods, wrong narratives r used to justify the marketing. Too much greedy narratives r floating all over in IT-salaries / crypto / startups / funds /real estate - and without good data analysis / insights, this is all a marketing mirage. 

IMO, best option is to sit with the FM and educate oneself. 

-- The END -- 

H2 CY21 - Follow The Process

The process is simple - 

• Frugality
• Buy 50c to dollar
• Compounding
• Patience
• Play the long game
• Many bets over 50yr, load when conditions permit
• Survive
• Follow rules irrespective of fads

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The cos r doing well and allocation is excellent.  

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THE END

HI CY21 - Tsunami

Notes to myself

• Its not easy. It looks simple to talk about 2 stocks, but the work needed to filter AND hold is not easy process. 
• Most people are not fit to be in markets, which is good for us, those who want to be in market. Most want FD returns - we want non linear returns. If we want 5x, we need to train our minds to bear 1/5x also - and take decisions when 1/5 comes! Without discipline + training + validating the thesis, it wont happen!
• 2-4 best ideas in PF are enough! If 1 goes kaput, other 2-3 will ensure adequate returns. 
• And its not a finance game. Its a psychological war. 
• Decisions become difficult to make at every successive price point. 
• ROE x Reinvestment opportunity within business (aka headroom for growth) x compounding timeframe is only truth which works. 
• When Tsunami is coming, dont stand dreaming with a cup.
• Follow the known money making mentors - not unknown advertisers!

Updates

The 2-horse cart is working on full horse power. Somethings have got preponed, somethings delayed naturally. But overall results are joyful. Allocations are perfect. 

Returns are joyful chiefly due to timely decision to buy NewCos which we were studying for last 4yrs + preponement of govt policy + some global lucky events + *courage* to invest more capital when there was blood. 

Rice updates - it did very well in last 2-3yrs despite what ticker tape shows-  

• There was a crash in crop prices by 8-10rs in last 2 seasons, which is equivalent to 500c-600c shortfall in profits 
• India's most important trading partner, Iran is out of market as its debarred from buying
• Onslaught of cases after cases (2 battles won, 1 left) - Insignificant useless noise IMO. 
• The way they performed in q4, when one director was imprisoned is commendable. They sowed the seeds for the next yr very very well.
• In between, Crona and employee/logistical issues

Its facing troubles just like ALIBABA where biz is excellent/growing/moat increasing, but company is facing resistance from someone unnamed. They r doers, and winners. Underlying compounding is working well. Under such circumstances, mgmt has done very well and is entitled to my appreciation. (This is not to say that we wont sell off or change allocation when right time/opportunity appears)

Reading Nick Sleep and Thomas Phelps, sitting on lazyboy armchair is AC room or watching Munger buy struggling ALIBABA is orgasmic - but operating with same mindset, when decision making needs to be executed in portfolio,  is something else!

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Hopefully, tsunami is coming in all assets. More later.   

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Etc

I got to know about divorce of a friend. Being along with a tantrum throwing old-toddler doesn't yield anything in the end. So cut off ALL obnoxious people early - stay with peaceful, easy, light, happy go getters, believers, who produce and share generously and live harmoniously. This is more important that making money in the end!

--The End -- 

H2 CY20 - Status Quo

 Status Quo - Cos doing well. Nothing much to add. 

-- The End -- 

H1 CY20

Foodcos are doing bumper in the worst environment when everything was stalled. Some are compounding in nature, some are event based themes. (A article written sometime back, for curious minds - link)
Holdco was converted, as discount between holdco and underlying asset filled up + financial institutions face another major risk now - anarchy.  

General
Most of industries are in bad shape, RE is dead (and hopefully black money buried should sink - if not by value, by time-value), banks r disingenuous and deceptive in numbers (a small blip has wiped out profits and assets for over smart bankers), and their main customer base - middle class doesn't/wont have jobs or purchasing power and industry doesn't need capital with over capacity and shrinking volumes. Market valuations are disconnected from the ground.  

Whether investors will be hit by inflation, or deflation or currency debasement or nationalization of assets or anarchy, is unknown - the situation is precarious. And many equity or debt assets may be useless. 

The only thing which may somewhat work is some compounding equity, some Gold or alt-currencies, and some agricultural land for self-use. 

--The End -- 

H2 CY19 - Water Water Everywhere, Not a Drop to Drink!

Businesses cant do well when the house is on fire. It is stupid to have a million dollar in bank, when kids/girls are not safe.

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Holdings are doing well despite present ongoing scenario - they are the basic ESSENTIALS, and should glide through well - but businesses cant grow in environment of social unrest. Recession proof FMCG is facing major heat now and should be visible in this quarter.

I dont find opportunities in this market*. Buying at 60c and selling at 90c is not the game I wish to play. And dollar-compounding businesses are either less or are expensive. Most businesses are either facing

• Demand destruction 
• Balance sheet destruction, esp the loved banks and tiger-riding NBFC cowboys, 
• Size of debt on balance sheet is not remunerative to take a bet, 
• Business returns are not great
• Businesses facing bureaucratic onslaught (Against the on-going narratives - the costs of doing biz has gone up).

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I am fearful of the ongoing environment, and not sanguine about future of many industries, chiefly due to tech change or trade wars. And so is felt by private investors and businessmen. As I mentioned in my last note, follow the money - follow the people who have made money - who r not rent seekers or tv boys - follow the people who r investing their capital, who sink and swim with their personal capital, who have skin in the game. Rest all talk is cheap.

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* Good work exists when less is done, and for oneself! Found that Quarantino talks about making only 10 movies in his lifetime - just like Buffett's punchcard. Will follow this, unless something worth doing comes on the table. 

-- The End

H1 CY19 - The bars are empty!

Credits - https://travel.jumia.com/

Recently, Rakesh Jhunjhunwala succinctly described the mood of the current economy when he said - Nifty is touching all time high, but all the pubs are empty! 

Mass plant shutdowns (in auto sector), auto dealers shutting down their shops, FMCG slowdown, pharma facing adulteration issues, NBFCs rockstars asking for "first 10% loss should be borne by the Govt" - its gloomy. The govt, seems to be interested in raising taxes upwards. The industry concalls do not give any idea why this degrowth is happening or when the things will rebound. 

In this gloom and doom, I think food sector is the only oasis. Q4Fy19 results also points out that only the food segments did well - when even FMCG was getting butchered. 

Overall, blood-on-streets season continues, THINK and do whatever best u can!

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Last year, around september, when NBFC crises began to emerge, many people had multiple issues with MFI/SFBs. Common narrative was - ".. but what if xyz happens". Thats the nature of narrative. Most of narrators dont have skin in the game - and wont ever have, as they are not trained for decision making in stressful times. And its not their own money - so, safety aka no-volatility-of-stock-prices is desired.  During such times, the best thing for a person knowledgeable about a industry, is to buy more and more. Same happened in Sugar sector last year, when there was zero visibility - and now suddenly the story seems to have become tad optimistic.

As a rough guide, 

• I have learnt that PRIVATE INVESTORS (putting their own money to work AND having no other commercial product to sell to investors) act and think like smart businessmen. 
• They put in their own money behind their opinions. (Just let this thought sink in, as there is no other bigger accolade than this!)
• They are not answerable to anyone, except themselves. This looks mundane, but relieving your brainpower by NOT answering to everyone's common over-heard narratives/emotional swings/greed/fear/drama, is a superpower. In super emotive markets, weeding off emotionally-moody and weak is the best thing to do.  
• They dont worry about price fluctuations - and they think about stocks like businesses to be acquired, to be run, over decades. This viewpoint itself makes buying during volatility easier. 
• Willingness to put in one's money, leads to through research, which leads to conviction, concentration and patience
• They are temperamentally most stable people - not looking for small adventures/engagements/entertainment or small wins to feel good. This also reflects in the fact that they can bet big when the opportunity arises, as they can buy for years, without worrying for a quick exit.  
• They are conservative - after all its their own money. Longevity and survival is important than winning annual marketing games. 
• There is lack of involvement into other entertaining options like futures/options or smart quick money making deals. 
• They understand power of focus. They understand not getting involved into other commercial businesses.

I have learnt that being along with 2-3 self-made private investors, is better than following 10k people. 
Find them. Copy them. 

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