Dec 31

WISH YOU A VERY HAPPY 2017

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I wish all my readers and their families a very Happy 2017.

01 Jan of every year is just a milestone kind of thing, same as birthdays and anniversaries. They become pegs around which we hang our decisions.  Actually how many of them do we follow, is the only material fact. I had made a few resolutions in my last new year post on 01 Jan 2016. Let us examine those before I write further.

I generally remained healthy, by ensuring I burnt atleast 500- 700 calories a day either by swimming or walking or playing. Except that last month, when I overstretched my biological years vis a vis how my heart felt  at Blu O while bowling with my young college going son and his friends. The adrenaline of being able to beat all of them at a new sport was enough for me to use the “happy hours and power of free”  to do 4 rounds. But it resulted in a shoulder rotator cuff injury and I  have a  pain in my right shoulder even after two months. LESSON:  Being healthy is good. Respecting the limitations of biology and not feeling like Vin Diesel even better.

I was unable to read 100 pages a day. It was a tall target to start with.  I managed about 30 pages with all my committments. Still about 10000 pages worth of knowledge. Not bad. If I can just manage 20-30 a day with my professional committments, I will still be OK.

I actually did not watch TV news. Someone had to tell me that Arnab Goswami had left/was thrown out of Times Now. I thought, either way my life was not affected. I enjoyed my movies and TV series like Homeland and Suits.

I read little of newspapers except Op Eds. Changed four newspapers in the bargain to settle at the Hindu because of less ads and more readable portions.

I managed not looking at my portfolio and avoided watching financial channels on TV. Today, after an year,  I have taken a copy of my portfolio for record purposes. I am up about 10% overall, despite demonetisation, despite Sensex not going anywhere, despite economists saying we are sinking. 

Some Investment Thoughts for 2017

1.    Peg down Your Expectations of Returns.  We are entering an era of low interest rates, low inflation in India couple this fact with higher interest rates in USA. Hence, banks will give you less than 8% or even 7% and Equity and Mutual Funds should accordingly give you 12-16% returns. 

2.    Black Money.   Govt is taking steps in the right direction. The PM has made enemies out of the old order which was thriving on it. There will be resistance, opposition and whatever is possible to not let it happen. The amendments to Mauritus, Singapore and Seychelles double taxation avoidance agreements (DTAA) is the first step in the right direction. De-registering political parties which were merely like shell companies laundering money is the second big step. Cancelling and examining NGOS and their foreign currency accounts is the third step.  NGOs are also a route for the government servants to route their bribe-money.

3.   Real Estate will have a fall out because of demonetisation. How much is yet to be seen? A lot of us who have only white money also have to deliberately take out cash, much against our wish and pay it as such while buying a house from secondary market. Can the FM or PM do something about it? Yes, atleast money being withdrawn in a big amount in cash will invite a scrutiny and reasons. A dissuading factor.

4.  Bullion/Gold.   No effect.  One may keep getting an annual appreciation in real terms of 2%.  Long term consumption and fixation of India on gold and M/S Joy Allukkas and Muthoot will come down. 

5.  Per Capita Income.  Will rise northwards. But at a slow pace.

6.   Organised vs Unorganised Sectors. Focus of industry due to organic as well as inorganic reasons will shift from the unorganised to the organised. This major shift will force the “black businesses” like furniture, construction, sweet shops, private practices of doctors, lawyers, accountants, event managers etc to become “white or grey businesses” and have economies of scales and deal through cheques and banks. Opportunities for listed companies, running well will be immense in areas which I have pointed out.  And the way PM Modi is going, he is looking at choking the unorganised sector which runs on cash and force them to become organised and give benefits to the workers and pay by cheques into their accounts. GST will further benefit the organised sector. Let us take an example, the paint industry. It is controlled by the Big Four. It is a proxy play for Indian Real estate (Have you seen an unpainted new house?) It is a proxy play for Indian Automobile market (Have you seen an unpainted car from the factory?) It is a proxy play for the heavy infrastructure growth like bridges, flyovers, metros, trains, planes. They all need a coat of paint. And need it periodically. The per capita consumption of paint in India is still very low 2.6 litres. In developed countries it is at 12 litres or so.  So all in all the long term picture is rosy. Therefore, go and buy 50 shares of Asian Paints, 60 shares of Nerolac, 40 shares of Berger and 10 shares of Akzo Nobel and see them after 10 years. They are available at reasonable multiples as on date. What you would be  doing is owning 95% of India’s  organised paint industry.   If you are looking at 12-15% CAGR with oodles of safety, Paint Industry is your space to be but buy all four or none. In the proportion I have given. 

7.   Equity Ideas.  Invest in GOOD FRANCHISEES/BUSINESSES SELLING CHEAP. Although, good businesses as a practice will never sell cheap. Why should they? Look around you, good workers, good bosses, good students, good products, they all command premium. But once in a while due to external reasons or own stupidity those premium people/ products do sell cheap. And that is the time bargain hunters load up. As of now, apart from para 6, i find Kitex Garments and Wonder La Holidays and IPCA Labs reasonably priced for FY 19 and beyond.

All the Best. Ta Ta

PS. A lot of my readers say that I always talk of 10 years and beyond. They just need to revise my earlier blogs on what is long term and short term in equities. If you seek returns in one year time frames then you may be better off gambling.

And what’s my new year resolution for 2017???? May be kill whatsapp from my phone. Apologise to all groups and leave them even if people think I am a snooty ass. WTF my life, my phone.

 

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6 comments

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    • Shrinjay on January 5, 2017 at 4:32 am
    • Reply

    In the highly charged “economic environment” since Nov 08, 2016, with dozens of “economic activists” surfacing by the day, your article is refreshing….for its simplicity and clarity.

    A few clarification to overcome the economic illiteracy that I possess

    1. Double Taxation…… was this deliberately done to help black money hoarders or was it for overall better economics
    2. Buy all four or buy none???
    3. You are positive on PMs initiatives…. do you believe it would succeed and what more is required.
    4. Cashless….I believe would root out two biggest evils crippling our economy…. bribe giver and seeker both lose on the medium of transaction and the tax evader would not know how to hide his wealth. But will cashless happen….the ice cream vendor at India Gate is afraid that his earning would become accountable and he would have to face the wrath of the dreaded ITax dept or go through the complex procedures. Abolishing I Tax?? Would that give impetus to cashless?

    Regards
    Shrinjay

      • Fauji on January 25, 2017 at 1:55 pm
        Author
      • Reply

      Thank you Shrinjay. I am sorry for the delayed response. Mea Culpa.
      Congratulations on your award too.
      Your comments are very relevant and appropriate.Let us take point by point.
      1. Double Taxation. The aim was to get money into the system. What people avoided in VDS, they could deposit this time.
      2. Buy All four or none. I would suggest buy all four. This way you buy 95% of the organised paint market. Whenever, there is a change in market share/sales/profit,by and large it happens between the existing players. But one must not rule out a cowboy type gunslinger who comes from outside and redefines equations eg Nirma and Patanjali. But this usually happens in B2C sectors. Paints and Decoratives are still B2B in India and the world. Automobile companies take directly, we use a painter to buy. But if you have to only invest in one or two then go for Asian, Berger, Nerolac, Akzo Nobel in that order.
      3. PMs Initiative. Yes I am positive. In the long run, it ensures that when I withdraw, the money can be tracked. Also, if the deposits in someone’s account are not consistent with his tax returns, he will atleast now pay taxes.
      4. The wrath of IT department is frightful for evaders. Genuine tax payers with known sources of income and tax paid correctly are usually not harassed. Cashless is impossible. No economy in the world is cashless. The ice cream vendor does not have to worry, but the panwalla in Khan Market should certainly be worried. He makes 300% on every paan everyday, all cash. An Uber driver who earns 80000 per month should be worried.
      Pay taxes honestly and sleep peacefully is the mantra which FM and PM are trying to give.

    • Manoj on January 2, 2017 at 3:41 pm
    • Reply

    Thanks you

      • Fauji on January 25, 2017 at 2:00 pm
        Author
      • Reply

      Thanks

    • Snehal Dani on January 1, 2017 at 10:55 am
    • Reply

    Your .message ; as usual ; makes eminent sense !

    1. Thank you Mr Dani.
      Regards
      Neeraj

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