Will male child preference lead to skewed gender ratio ?

 India, China and Asia as a whole has this practice of preference of male child. 

Found someone did excellent math on this 

If we call the current number of women the population size P, the number of boys B that will be born is P as well - one boy for every mother.

Consider the number of girls in a family, we'll call this G. The higher G, the fewer families there are with this amount of daughters:

G Fraction of families with exactly G daughters
0 1/2 (the families whose first child is a boy)
1 1/4 (second child is a boy)
2 1/8 (etc.)
3 1/16
4 1/32
5 1/64
. etc.
.

Summing over all G, we find the total number of daughters H:

H = sum( fraction of families * number of daughters in family )

= sum((1 / 2^(G+1)) * G) * P with G from 0 to infinity.

sum((1 / 2^(G+1)) * G) with G from 0 to infinity equals one, so the number of girls is also equal to the population size P.

Of course letting G approach infinity requires P to approach inifinity as well, but we are interested in the fraction of daughters.

You may object that in practice, women will of course not have a near-infinite amount of children. Let's say all women call it quits after 5 daughters. In that case the G=5 families are 1/32 of the population, just like the G=4 ones. Manual summation gives us 31/32, so

G = 31/32 * P

The number of boys is also reduced; 1 out of 32 women never has a boy, so the number of boys B is also

B = 31/32 * P

Credit to https://www.quora.com/profile/Jelle-Nauta

Bikaji IPO Analysis

PE of 100+ is too high in the current market scenario

But the QSR segment, as a whole, is priced at a premium 

Biggest issue with Bikaji is growth - Not able to find the same

Frugal Valuation and Conservative Investment

 I have been personally very frugal in doing valuations and risk averse, kind of very conservative approach

Found some similar gyan worth sharing

Some good Screener 

Credit - @coolfundoo

What's next ? Fed delivered 75 bps as expected but terminal value will be higher

 A very important thing markets are ignoring is that Fed has clearly told that terminal value will definitely be higher even if the incremental increases in the interest rates are lower. 

What does this mean

1. There will be increments

2. Individual increments will be lower

3. Terminal Value will be higher than previously expected

The current inflation is sticky and its not going to go away very soon. Even if we assume that 50bps will continue for only 2-3 months from next month, there is a high probability that 25bps may continue for a bit longer. 

There are high chances that the 1-year Treasury rates will be greater than 7%. This will be a dangerous scenario for the market. 

For India, this will be a scenario where FIIs will find it hard to stay in India with such attractive returns at home. 

Safir Anand Twitter Space - 31.08.2022

Market Lookout

1. FED will squeeze liquidity for sure for controlling inflation
2. Recession will be there but it might be short lived
3. NIFTY will never go to 12k and people wasting time 
4. Opportunity for investment is always there irrespective of NIFTY levels

Will money move to FD/Real Estate if interest rate decrease  - - Inflation will come down and money might stay with equities only

Sectors that can perform well - 

1. Infrastructure
2. Defence
3. Real estate

Infra companies like DLF are bullish on growth

Signs of Growth of Infra - Dams, Roads

Don't follow people, who keep on changing their statement every now and then 

PSU Banks can overperform 

1. Technology is substituting for lazy staff and inefficiency
2. Many are trading below book value
3. Drastic Change in Fundamental
4. Good Amount of Reserves

Sold Big Caps in IT and buy small caps

Oil is a very complex sector and very difficult to predict and stakeholders have conflicting interests. Hidden sides with WTO and global geopolitics, so almost all oil Pundits end up making mistakes. 

The stock market is a slave to earnings in long term. Earnings will keep on diverging and converging for sectors. 

In the extremely short term, the market is decided by the emotional quotient 

LIC has historically bailed out the market to support the government but now it is independent. 

TARAJU = Price / Value

Zamato demand is coming from long-term money on institutions and it seems that there is there from Institutional Investors

Institutional Money is a good tracker for checking the long-term outlook

Interest and Experience in evaluating the individual company matters. Evaluation takes time and patience. 

Keep tracking the company and stay with some cash when the market looks costly. Always look for what to sell from your portfolio. Keep the portfolio updated as per research. 

Don't connect research with the market. Markets are mad in the short term

1/3 will always outperform 2/3 companies

Select your sector of expertise and gain insights

Even big funds find it tough to evaluate many companies

Don't follow anyone's portfolio as the time of entries are different for different people. 

Even RJ and WF failed multiple times, but they keep on refreshing their portfolio

It is like a chess board, at every move, the chess board will change

MNC Manufacturing was a trend in the past

Smartest Investors - They put their foot in the door with minuscule shareholding. They start with a 1000 increase to 10000 and then to 100000 of these extremely cheap stocks.

Bogey Model - will force you to read more and analyze more, 

Check the growth of market share, market share will need a lot of time to analyze - Don'tThe best get dazzled by the Hype around new technology or project (3D Printing Example)

Best target company will have no direct news - It will have only indirect news

Reliance acquisition of Campacola will force them to acquire more brands and put pricing pressure on the commercial space

Reliance will make new private labels and fight with big brands by buying small brands

Gurdutt - no one likes him, goes to Wahida Rehman, 

Going away from the crowd - analyze in peace, 

Fund 

1. don't buy very small companes
2. No exit
3. Premium has to be paid if big fund buys
4. Retail Investors have some advantage over these funds in terms of buying at reasonable prices without increasing the prices

Example - Aerospace, Industrial Safety .......invested and forget and then it started increasing, analysed in depth, invested more........Rs 50 Rs..........Rs 700 ............Rs 2000.........DII..........Rs 

Past Examples - Avanti Fields, Unique Hotels, Apollo

We should not be fazed by the lack of buzz around the small company. Dilemma is when it starts to increase, we may make a mistake as things and fundamentals may change at that point of time.

phoenix resorts in Goa - I invested .......market cap 12 Cr.......partnership (3cr+3cr) 50%......news came....more land, south India......promoter mentality was not changing and increasing growth........Rs 24.......today 46

tomorrow - management may change..........has to be revisited again

So, it is again the chess board scenario, keep on evaluating the chess board again and again

Source

1. Brokerage Reports - 
2. Individual Investors

Same data can be interpreted by different people differently 

Telecom is not a wealth creator - there are different questions and opportunity interpretation may differ

Zuric Axiom - there should be something for the next guy on the table, else the stock is bound to fail

Many pockets of efficiency - mispricing

Nitin 

FII has returned back but the structural return is not very clear. Outflows of FII show worse of selling is over but the knee-jerk reaction is possible due to US. FIIs looking for growth economies but the flow will be sector-specific and not in a broad manner. Every bull run has a flavor and we have to identify those sectors. 

Picking Stocks in Market - Already illustrated by oil example that pick up only what you understand

ICICI Bank outperformed HDFC

Market rise yesterday was not justified, 1600 points is absurd, Fed comments have real effect, SENSEX has not fallen enough, 

Like Prashant Says - (Psychology + Temperament) matters 

Nitin - Volatility is a friend of investors, buy long-term targets, take out money from the market in squirrel cash, only use it when the world is worried, and keep on taking out money from the market

 

Markets zooming back

 What's driving the market? Long term head winds still remain there but markets have zoomed back to 21 PE

Advise 

1. Staples

2. High Yield bonds

3. 2 wheeler 

Researching Zomato a lot, hope to see the level of 35 for me to jump in 

Where are we right now in terms of market cycle?

Globally - The last quarter of the US is negative GDP growth  

US is about to enter into a technical recession as last quarter was negative GDP growth and this quarter may again be negative

Is India decoupled significantly - Yes to a large extent but some sectors are strongly coupled such as IT

1. Young population
2. Consumption-driven economy
3. Large RBI chest - If RBI doesn't defend INR

So, everything depends on how fast the mop-up of liquidity happens by regulators? The froth of liquidity is still very high. So, what are good indicators of this speed? 

Leading indicators, not lagging indicators - -Keep a tab on Fed Balance Sheet as well as other important global peers

Which sectors will be bad to enter into ?

Discretionary (high beta) - Banking, IT, 4 wheeler

Good to enter

1. Consumption - 2-wheeler, staples 
2. Value-Oriented sectors - Pharma, Energy, 

If inflation still remains out of control - Gold is good insurance against global turmoil

Demand for real estate will definitely go down with the recession but part of this will be countered with the inflation froth

When will redemptions of SIP start happening?

 Retail investors have been holding hard by continuously pumping in money when the FIIs have been withdrawing in FY 21-22.

FII flows started a negative trend started on Oct 21 but the DIIs were on an upward trend. Hence, the market has not gone down substantially. 

But the cracks in the DII story has started, 

 

The first to be impacted will be the Non-MF DII Inflows. These are basically retail investors, who are directly investing in the stock market by buying shares.

 

These are basically inexperienced people catching a falling knife

 

They have done buying at very high valuations. They have already burnt their fingers. They will basically start evaluating their returns and perhaps will start panic selling about 1 year from the highs of say Oct 21. So, that panic selling may start say around Aug-Sep.

 

But the real question is when the redemptions in SIPs will happen. Experts say – Never.

But the cracks already started in the SIP story as the May 22 inflows are lower than April -22.

Update - FII are again net sellers this week

https://www.indiainfoline.com/article/news-top-story/weekly-round-up-of-indian-equity-markets-122062400140_1.html

Keep a tab on the volume of transactions in market - Especially ratio of Retail / Institutional transactions

Nifty PE at 18.92 - just moments away from my Aha moment

 

 I have been sleeping and yawning for a long time, but have become very busy for the last 1 month. 

All my triggers are now sending me emails and alerts - WAKE UP LUCKY, IT's TIME TO WAKE UP

 

Yes, PE has gone closer to my target range for long-awaited market entry. 

2013 – I was out of India and busy with hectic international travels across Asia. My only engagement outside the family in India was AAP moment and supporting the volunteers on the ground

 

2016 – I shifted to India and was busy with the hustle

 

2020 – It happened so fast that I could not make my Hypothesis for investment

 

This time around I am totally free and eager to get my hands dirty

Questions - How long it will take the US to mop up the money back? Interest rates are required to be significantly higher than the inflation rates. 

If the interest rates are increased significantly 

Debt - Huge MTM losses (long-term debt will be loss-making as interest rates will go up)

Gold - If inflation cools down then it may go down but for the moment, it seems unlikely that inflation will decrease soon, so gold may remain inflated for some period

Real Estate - May stay inflated for a longer period as mop-up is not so easy 

Excess liquidity has to settle somehow - The question is speed and speed is decided by regulators not the markets, so bottle cap tightening is out of market scope

Portfolio Plan with PE at 20

 PE = 20, https://primeinvestor.in/nifty-pe-ratio/

market may have a trailing effect 

My threshold is 18-19 to touch equity, but I have to start somewhere, 

so I will begin my build-up game

Where to start? 

Index-linked direct plans, as I don't have time

Debt 

Indian Railway Finance Ltd                          7.61%

National Savings Certificate (VIII Issue) 6.80%

SBI Regular Income Corporate Bond            6.34%

5 Year Time Deposit on Indian Post          6.70%

Kisan Vikas Patra​​                  6.90%

Indian Oil                                                        6.14%

Source - Bondskart.com

House of Cards - USD

Printing ......Printing............40% USD printed in just last 1 year.......

I thought Obama had a poor legacy of the great financial recession 2008 and had gone to deficit of 500bn and then Trump had his own unique ways of doing things and pushed the US deficit to $800, but it seems the Biden Administration is no mood to stop the spending. 

We are currently into a globalization trend where the US keeps on printing USD and the India/China of the world keeps on serving and providing goods in exchange for these USD.

What kind of strange system is this?

This is pure nonsense for the India/China of the world to buy more USD. 

But guess what, still 60% of world reserves are in USD 

Are things changing

1. BTC getting legitimacy 
2. China has already called on the US blackmail and so will India, sooner or later
3. USD share in the reserves will decrease

Will this change be fast enough?

It depends on what Biden does but it any signal will lead to sudden bursting of the bubble and depreciation of USD

Key Triggers to watch for

1. China / India to look for other currencies
2. Digital Yuan acceptability
3. Sudden increase in gold prices or commodities

Uncommon Common Sense from History

History is full of case studies related to evaluation of common sense starting with Hummarabi code to the present day Machine Learning. However, there are some notable cases, which have deep influence on me. 

The earliest documented interrogation into common sense is from Socrates Questioning. One of student, Plato documented this method where his teacher would assume a role of an ignorant mindset, in order to compel the student to assume the highest level of knowledge, through 

1. Acknowledge Contradictions
2. Recreate Inaccurate or unfinished ideas
3. Critically determine necessary thoughts

This interrogative technique leads to following 2 important concepts

1. Basic Knowledge = Fundamental Concepts + Principles + Theory + Issues + Problem 
2. Attaining Knowledge = Systematic + Disciplined + Deep Evaluation

When it comes to common sense, it is hard to miss out on Thomas Paine. He wrote 2 very interesting pamphlets in 1770s - the Common Sense and the American Crisis. Almost all his writings are captivating and as historian Greene once said - "Fundamentally, we are all children of Paine" 

Indeed the late 17th century provided one more important relevance from Benjamin Franklin, who developed - "Balance sheet of Decisions" which is crude form of "Risk Probability Matrix", which we use frequently in consulting.

Common sense has been applied to even most obscure subjects such as sociology, which is one of my favorite subjects. It is really a pleasure to read Emile Durkheim, Mead, Talcot Parson etc and observe how they deduced common sense on complex social interactions. The same concepts have been illustrated in "Art of War" by Sun Tsu in study of warfare, which has deeply influenced the Chinese thought process over the ages.

Indications from Bond Yields in India for savers in Fixed income returns products

 Just couple of weeks ago, everyone was surprised by the absence of RBI in the market when the yields moved upto 5.97% and now all of a sudden 179/180 bn INR of 10-year benchmark bond was purchased by primary dealers. Still prices of bonds increased ?? Very strange

The hint lies in the yields of 6.02% which seems is not comfortable level with RBI. It seems RBI has put its foot down on yields and market has sniffed the discomfort of RBI.

Also, it also indicates that there are concerns around oversupply of Govt. debt in India and that 12 tn INR plan is still on the books. 

Anyway, it seems the real inflation will cross 7% sooner or later. What this means for savers and retail investors in fixed income products

Effectively fixed income products are giving negative returns of around 1.5% (5.5%-7.0%). There are losers and winners due to this negative real rate of interest. 

Questions to ask before taking advise

 Very good and insightful article

https://www.forbes.com/sites/phillewis1/2020/08/25/5-questions-you-should-always-ask-before-taking-anyones-advice/#34c9c65d2589

The most critical thing is the experience of the advisor and the skin in the game. 

The traditional consulting model of putting up the generalistst and fees upfront model doesn't fit this. 

What may spoil the market party ?

Fact - Market is in a party mood

Reasons

1. Hopes for a V shaped Recovery 
2. Heavy Retail participation (what to do when WFH)
3. Song of India overtaking China playing too frequently and too hard

Disruptions

1. More or less clear that Recovery will not be V shaped as some sectors such as Tourism, Travel, Hospitality may be silent for long and some sector will have deep tech disruptions
2. Retail participants will get bored and move to other excitements and fun stuff. 
3. Even a slight correction may have a catastrophic effect on retail participation

I march I wrote this article

http://luckylehana.blogspot.com/2020/03/covid-19-lauchpad-for-economy-40.html

and I still hold my strong belief that this is once in a century kind of event and will wipe out may be 25% of the NIFTY companies and may be around 50% will have deep pain at least for more than 3 quarters.

Regarding Indian Dominance song, there is an excellent article by Prof. Rama here 

https://outlookbusiness.com/specials/what-does-india-need-to-do-to-ace-manufacturing-6001

Actually WSJ just wrote an article on the faltering consumer story of Indian Middle Class here

https://www.wsj.com/articles/covid-19-hits-indias-already-faltering-consumers-hardest-11597921200?mod=wsjtwittertest19 

Regarding Valuations, I think it makes sense to identify companies in public market from Private Equity point of view, in the current scenario as expressed in this article

http://luckylehana.blogspot.com/2020/08/changing-fundamentals-of-value-investing.html

there are some interesting companies such as ITC, which always amuse me and there is an excellent article on the same 

https://finshots.in/markets/whats-wrong-with-itc/?utm_medium=Whatsapp&utm_source=Finshots_App_User

This article tear down the business and try to highlight the dichotomy of value based investing

Changing Fundamentals of Value Investing

 Value Investing has long been postulated as holy grain of investments in public markets. I come from PE (Private Equity) background, where they don't give any weight-age to traditional value investing parameters such as 

1. Book Value
2. P/E Ratios

I was always thinking that there is a disconnect between the real economy and market. However, offlate, it has been observed that the analysts in institutional investment funds are more focussed on traditional PE concepts such as 

1. EBIDTA
2. De-risking of Cash flows
3. Stakeholder Analysis (eg. Power Plant, Mining)
4. Impact - Influence Matrix Analysis

It seems that Post COVID public markets investment is no different than the investment theme of Project Finance / PE Funds where they put in extra efforts to evaluate these parameter

Concepts like book value has totally lost relevance. I am not sure why these people on CNBC or market news media keep on shouting P/B etc. 

Value Investment has moved ahead of traditional / bookish evaluation as we are amid a once-in-century kind of event.

Advisory post COVID public markets

1. High Retail participation may have propelled the markets to unrealistic valuations, which are absurd
2. Be focused on staples and tech story
3. Don't use Value Investing (as it is taught or professed)
4. Cut the crap and be focused on EBIDTA similar to PE/Project Finance

RBI toffee of 90% LTV limit on Gold loan

Today, RBI did something phenomenal - LTV was increased from 75% to 90%.

As usual, Retail investor got excited and bought Muthoot at such high valuations and increased the share by 5% and then the institutional investors cashed in and booked the profit. Retail investors once again found on wrong foot. 

Anyway, gold loan is a complex business and that is why it is very difficult to disrupt this business. Even the marquee VC investors and their portfolio Rupeek.com has failed to disrupt the market

The complexity of the gold loan business is due to 

1. Requirement of physical custody of gold
2. Low margins 
3. Requirement of stringent testing amid so many frauds
4. Special Jewelry which is made fraudulently just for gold loans (This is the category which is evolving very fast over last couple of years)

Muthoot and other NBFC's have developed skills and expertise related to gold loans and RBI has made their job easy by putting up 75% limit in the past. This limit derisked the gold loan business and these NBFC's expanded very fast. Cash for gold was booming due to increase in value of gold in last couple of years. Recently, due to COVID, banks also expanded very fast in gold loan as it was low risk business

It seems this move was instigated by the bankers lobby as the NBFCs were left high and dry. RBI have tied both legs of NBFC's by 75% LTV and made the banks to run full fast by 90% LTV.

Is this fair?

Is this prudent ?

Isn't this repeat of 2013 movie of sudden drop in gold prices ?

Why not NBFC, they dont have any public money?

RBI has far too many questions to answer on this unwarranted step. Without going into this argument, it is interesting too into the after-affects. 

Today's change disrupted the market irreversibly and made gold loan as risky business

1. Banks will now be confused as they will not be able to take so much of risk of higher LTV and lower LTV will not fetch them business
2. Big NBFC's can't trust their employees for accurate testing and give 90% LTV
3. Smaller banks like CSB, Federal, Fincare may take a good pie but again at the risk of default. (Is RBI really prudent in this step??)

Future Projections

New contours of competition will evolve as under 

1. Banks will project themselves as low interest high LTV lender
2. NBFC's will get confused first and then they will develop their own positioning with multiple products with multiple LTV's

LTV will become a real weapon for competition and gold loan will now shift towards personal loan and quality of borrower along with the quality of gold will become the new criterion for evaluation of the loan quality. 

What will AGLOC do ?

Will Muthoot Mannapuram file case against RBI?

Can this be treated against the Article 19 of constitution ?

Article 19 (1) (g) guarantees that all citizens shall have the right to practice any profession, or to carry on occupation, trade or business.

Is this strong enough ground to challenge RBI ? 

Indo-Chinese Organisations for people to people contacts

Around 10 years ago, I was living in China with my wife and she developed some medical complications, which we googled and found were similar to Vertigo (google used to work at that time in China). We have to take help of our colleagues to find the right hospital and the right doctor and to explain the exact nature of the symptoms. 

They gave a very good medicine - Vertigo Calm (a TCM) 

A month later they gave - Gingoba Biloba (a TCM)

10 years fast forward, my wife again developed similar symptoms. We tried n number of doctors and medicines but nothing seemed to work. Finally one of my colleague and a Chinese friend fetched both these medicines one by one from China. 

I have studied, worked and lived in China for long and feel a deep connect with Chinese people. Though there are border tensions between India and China and deep mistrust between the governments but I still believe that the destiny of both the Asian Countries are connected. Both the countries are immediate neighbors and next superpowers and both have to live peacefully with each other. Infact, I strongly believe that both countries can never go for a war. The current scenarios are due to historically follies of British cartographers and both the countries need to move ahead of the historical follies.  

At the same time, there is lack of strong people to people contact organisation between India and China. I casually google through and found some organisations, which are focused on 

1. Trade
2. Economy
3. Culture
4. Specific Causes
5. Policy Making and Research

But there is no organisation, which is focused on 

1. People to people contact
2. Helping Indians in China or Chinese in India for petty issues related to passport, local police, rentals etc. 

Hope, one day, the dark clouds will get over and genuine people to people contacts will start between two great nations. 

Similarities between Wirecard in Germany and Satyam in India?

 No price for guessing - E&Y/PWC has been at the forefront of both of these scams. 

How long will regulators take to 

1. Do audit of auditors
2. Break the monopoly of Big4
3. Punish Individuals within the companies
4. Impose penalties and limited ban on these companies

Both the above mentioned cases are strikingly similar in the sense that fraud account entries were created and money was show there when it was not there. 

This was a basic audit check which even a Preet Vihar / Laxmi Nagar - Rs 100 per hour CA is also doing on all the firms, he is auditing

How can a firm, which charges - Rs 10,000 per hour (whole team) could have missed such a fundamental thing?

Does this point towards something intentional ?

Is this prevelant or a one of event?

How much cut the team gets or the Big4 company gets for such acts ?

Uber - 3000 people fired with 3 minute Zoom Call

This is the new normal in the world due to ongoing "Once in a century" kind of event. Companies have no option as they are not supposed to do Charity and have to compete in hyper competitive era.

But from individual point of view, it is really devastating. There are normally 4-5 stages, whenever something like that happens to us

1. Denial
2. Anger
3. Bargaining
4. Depression
5. Acceptance

The only sober advise for such people can be that instead of getting to stages one-by-one. It is better to directly jump from 1->5 or Denial -> Acceptance.

Coming back to the macro economic view, monthly salaries are not very good for the economy also, as salaried people are bound to be risk averse and less innovative. This is not good for both the economy as well as civilization. I once read a very interesting question in my school book that who are the people, who are most important to the civilization. It is not the billionaires but the picaso, pluto, innovators and the scientists, who helped the world to move forward. IT has enabled these thinkers and innovators to earn big bucks such as the case of Facebook, Twitter etc...

Even if one is salaried person, hate salary like hell. There are 3 addictions mentioned by Naseb Taleb

1. Carbohydrate
2. Drugs
3. Monthly Salary

Drugs are widely discussed, but why the Carbohydrates and Monthly salaries are not discussed, is lack of intelligence in popular media

Once more, I am sorry for using harsh words for someone who might have lost job, but try to think on these lines and prepare for a greater goals for future, while managing your current with basic lifestyle.