BOB ( Bank of Baroda) - Over hyped or Justified

BoB is trading at PE of 16, while the other PSU banks are trading at mean PE of around 5-6. So, what explains this difference. Market (read analysts of big funds) say
1. They have done full provisioning of losses
2. Legacy - have no more losses to declare

This can justify a PE premium of say 20-30% but not 100%.

But perhaps markets are ignoring a fundamental issue. Have the current processes streamlined to get bank tame future NPA's. The plain answer is NO. BoB like other PSU operate by the same standards. Hence they are bound to get the same pace of NPA's again (even if we discount the UPA/NDA interference in bank operations). T

So, there seems to be bit of mis-information, which is being sold, instead of focusing on fundamentals. Correction is bound to occur. Waiting for trigger.

Petrol Pump - Is it a good business now

It was 2006, Reliance literally slaughtered the market share of PSU. A company which has just 1-2 years of track record, took 13% market share in 1 year of full fledged operations. PSU were clueless what to do. Thank god, that the PSU got a ventilator time when the price again zoomed and subsidy kicked in. With subsidy the kick backs again started in this dirty sector. The inefficiency and corruption within Oil PSU is none of a secret.

Now the wheel has turned again, prices are down for atleast next 5 years (and may be more if Elon Musk got the new Teslas firing). Private players are again pushing up their game

1. Essar is focusing on low volume outlets
2. Reliance on high volume

So, in a place like Rewari, where Essar has got 20 pumps in recent time, it hardly left anything for the new commissioning by PSU's. So, the market is getting crowded and competition is increasing. This will introduce margins squeeze for the PSU's which will squeeze the margins for the dealers also. In such a scenario, Petrol pump does not seems to a good business. 

World War 3 - Will it start from Alepo

I am keeping my fingers crossed but will take 3-4 days to announce if things are that bad.

Assad - Will not back out
Soleman - Shia need it back

Saudi/Qatar - Want to kill Shia hegemony
Turkey - after the kurds

Kurds has secret support from Israel and may be US

OMG...we forgot the ISIS.........so the war is going to be for display not for ISIS

Anna hazare / Kejriwal - Real Swaraj - Economics first politics later

It was 2011, when the whole of India was stuck to TV sets and the place called Ramlila Maidan. A new Mahabharat was fought. Finally Congress has to bite the dust in 2014 elections. Anyway, it was not Modi, who was winner, it was common people like Hazare, Prashant Bhusan, Yogender Yadav, Arvind Kejriwal, who were the real winner. They floated AAP and rest is history. Anyway, the key motivation was to get justice, equity in political powers. Part of it was achieved but what people forgot was Political power is of no use if they dont have parity and equity in Economic Power.

Unfortunately, in a country like India, Risk Rewards are not matched in economy. Take banking sector. I have been writing time and again that, NPA's are deep problems for the whole economy and not just one sector. Think from point of view of retail investor.

Retail investor ->Bank->Allocation to projects -> Return->Bank->Retail Investor gets share back

Now, this seems like very simple, but that is where simplicity ends. The risk rewards are unmatched here. Like any bottlenecks, this positive feedback loop has Projects as one of the bottleneck in the whole value chain. One likes it or not, the Projects in Emerging Markets are going to have inherent risks and hence require higher payoff say 15% (for the project to be viable). Now, the retail investor is getting only 10%. The 5% is risk premium. The promoter gets rewarded by by 5% differential (and then worked on his part of equity) for this risk.

But that is where the story become complex. The promoter only has rewards but no risks as normally what he does is use "Negative Equity"

"Project of 150 quoted as 100, and then 70% loan taken, finally pockets the 5 as negative equity"

When the balance sheets of banks are full of such loans, then does it make sense for retail investors to put their money with banks - No.

Though Marx said, Inequality in economic status (proletariat v/s Bourgeoisie) will lead to political revolution, I believe it be economic revolution instead of political revolution, as under

1. People will stop doing FD's in bank
2. People will stop investing in leveraged companies
3. People will stop following business news channels (hilarious it might seem but they also serve to the interests of institutional investors only and not retail investors as they always try to fool retail investors)
4. One of the extremes can be people can start their own lending clubs. I am not sure how but something similar to chit clubs or say bitcoin exchange enabled lending. Something which will use technology to remove banks as intermediaries

But these seems like Utopian luxuries as Parliament is full of Vijaya Mallaya and their cronies. Why will someone like Vijaya Mallaya be interested in curtailing role of banks.  

Leaders of Modern India - Please look into the issue and the solution for economy Swaraj

Future of Transportation

Saw 2 companies on CNN

1. Sabre - Is this improved Concord jets. No, it is totally new tech with something which I think is close to impossible.

They will cool down the air from 1000 dec celcius to -150deg cel in milliseconds. I am a mechanical engineer but this seems like impossible to me. If it is done then we will have our 15th anniversary on moon


2. Subtrans - Well i have been excited about my Maglev travels in Shanghai. But that is very costly and one of the white elephant of China with low ROI of economy. But this subtrans works without power.

What it does is very simple in terms of technology but difficult to implement in mass scale. They are basically using superconducting technology to create uniform distance. (they used liquid nitrogen for this)

Question - How will they implement this on a track which is not in Scandinavian / Seberian Terrain.


I personally believe that there has been no new tech in Transportation in last 100 years and something is about to come. Such as AI driver got driving licensce in US............

Positively Boring - Muted Market proves that it is bound for 8000

The market bounced back today, It will keep on tossing here and there but finally it had to settle at NIFTY 8000 levels.


Till then, just wait and watch, but keep on evaluating fundamental of companies. Stay invested and stay tight.

Finally! - The day has arrived

Today was special day for me. I have been trying to convince my people that we are looming for a recession from last 1 year. On 26th December, when I convinced one of my friend that we have to go neutral, if not short, on Indian NIFTY, but the market started bouncing in late January.

Everything apart, the fundamentals have started to kick in. People are starting to note the insanity in the markets. Heads will roll for sure.

For the moment the most exciting thing to plan for are

1. How can hedge fund short stocks of Indian companies. Someone need to take strong enough stand on some of these hidden companies. Say someone need to pledge around $50 m to short the listed bonds or ETF of any of the big Indian companies on markets outside 
2. Which are the firms which will get bankrupt in next 3-6 months period
3. How long will it take for the market to bottom out. 
1. Market still seems to be bit costly at PE of 19 for a conservative person like as I don't think markets can go to 25 or stay at 25 for long. I think anything 18-20, is worth investing on sector specific market, for 20+, it has to be stock selection only
2. Market should come in the range of a PE of 16-18, for investors like me to go full thrust. In other words, i am still waiting for 6500 level for NIFTY

So, I am keeping my fingers crossed for 6500 PE below 18-19, if it bounce more than 8500 (PE above 24), I will close everything and cry in corner and analyse, why and how I was wrong 

In between 6500-7500, will depend on lot of cues both domestic and global and new offerings. 

I will personally never invest anything above this level of PE. My ceiling is 20, for someone else, it might be 22 or 24

Are people misleading or being mislead

Some 6 months ago, I used to hear a lot of chatter from my friends, who had invested into
1. Apple Stock
2. Chinese IPO's

They used to sound as if they have gone through an epic story and they have had the treasure hunt. Whenever, we used to argue the fundamentals, they used to put flimsy stories. Something similar to

http://davidstockmanscontracorner.com/shanghai-composite-pe-ratio-reaches-44x-the-price-to-whatever-bubble/

But then most of the people, I see shouting from the top of the TV studios are no different. Invest in SIP...Invest in MF.........are some of the misleading and deliberate sermons beamed full day in and out on business channels, business columns and magazines. The common fact, which every investment professional knows is that when the market is trading above PE of 18, it is not a good time to invest for a retail investor.

Europe is gonna pay for this - Sexual Emergency of migrants

About an year ago, I saw some placards such as "Mama Mia Merkel" and they multiplied with Germany been advocate (if i can discount the local opposition within germany). I was very disappointed by the idiotic step of taking refugees. It was bound to give cultural mismatch issues

Now here is the result

Cologne New year assault
Pool Etiquette notice in Germany

and now the worst, a kid was raped because the rapist from Syria felt, it was his sexual emergency

And the biggest thing is the Muslim country media is giving 2 arguments.

1. Its OK, he was having psychological issues
2. Its OK, he had sex with an under-puberty age.

That is the biggest problem. This is just starting - Europe is going to pay for this deeply. No wonder Donald Trump is the new sensation in US.

Watch out for this space - Big predictions coming up soon

Well! since the time, i wrote last time, i was wondering why people are taking so long to understand the basics of distressed finance. I see the TV anchors of business channels shouting over the roof to buy this and that stock, with logic as funny as this is V shaped, this is W shaped.

I am seriously at loss of understanding, why there is no "NO NONE SENSE BUSINESS NEWS CHANNEL".


Anyway, there is something exciting happening in other part of the world

Venezuala gold reserves are down by $3bn and it is being rumored that they are going to pay of the Deutsche Bank with the gold swap. What we might see is a situation similar to India in 1991, when gold was sent in plane. But with Venezuala, the situation is different as this gold was never with them. Chavez struggled hard to protect this gold from bankers and he was quite successful, but his successor Mudro, lost it all.

What will be implications on Canadian Dollar ? Watchout

One more exciting thing is Allepo fall to the Assad. This is hinted by rumors of "Ballon drops practice for ground drops" by Qatar and Saudi. This is exciting as US has raised its hands way back in October, when it was rumored that Kerry has conveyed to Assad - "boy u can stay, but give me some face saving story".

What will be the implications on Oil? OPEC is no longer there, everyone is on their own

Scenario 1 - Shia v/s Sunni - Competition for gaining market share increase, which means Iran gets the Euro payments, it has been shouting for.

Strategy - Simply short oil again but not below $20 as they can't sustain this for long.


Scenario 2 - Shia v/s Sunni - Saudi takes the nonsense step of blocking some Iranian tankers or Persian Gulf traffic. This will temporary lead to increase in prices as signal of conflict but then "Big Daddy is not stupid". They increase flows from Africa and the inventories again will pile up. So, such an event can't sustain prices for more than 6 months.

Strategy - Long for 3/6 months and then again start shorting by taking into account the inventory levels

Scenario 3 - US/EU plays a foul - stops Euro settlement or SWIFT access by using some alibi or sanctions clause or highlight Iran-North Korea link. This can either lead to a arm-twisting scenario or a full blown out war. This will be a really dangerous scenario.

Strategy - Long