Sunday, May 27, 2012

Think different

This, for me, is astounding.

Tim Cook decided to forgo the quarterly dividends accrued on the 1.125 million shares that are due to him in 2016 and 2021. True, this would have been over a period of 36 quarters, but this is still a huge amount of money. More than what most of us will make over a lifetime. And the major point being, no one asked him to! 

There was no pressure from shareholders, the company is doing insanely well and I doubt this was even in anyone's mind. As far as I can see, Tim Cook is basically doing this so that no one can (someday in the future) turn around and say that he instituted the dividend program to enrich himself.

There might have been other CEOs who've taken paycuts but those are generally in companies in some form of crisis or the other, like the $1 salary of various Wall-Street CEOs. But this form of simply walking away from a huge pile of cash is something that I haven't yet seen in my admittedly fledgling working life.

Contrast this with these notes from Dell: Michael Dell is making hay while his company drowns around him.

(As an aside, I'm sure Dell regrets the day he ever made that quote about shutting down Apple and returning money to the shareholders. One slip, and unfortunately that's how most people remember him for now.)

Will we hear someone from India doing the same? Forgo money that is legally and with utter validity due to him? Have we ever had something like this, ever?

Look forward to your thoughts! 

Wednesday, May 23, 2012

What happens when a country defaults

Excellent informative graphic from the FT:

Click through for a nifty primer...

Tuesday, May 22, 2012

Stock Manipulator, SEC Nemesis - At 15 years of age

Fascinating article, all the way back from 2001, about a 15-year old guy scamming the market (and making serious money) at the height of the dot-com boom.  I never did realize how crazy that time had been, but this article gives a great insight into it. And of course, Michael Lewis does a great job reporting. 

What have you done lately? 

Friday, May 18, 2012

India is poor(er) because you buy gold. Seriously!

OK, so the title isn't exactly right. What is basically says that because Indians spend a lot on gold, they don't put nearly enough in savings, instead demanding ever-increasing quantities of gold. Which of course screws up the current account deficit. 

I wonder how much of this is due to Keralites. Rather a lot, I'd wager. Mallus beat the rest of India hands down in purchasing gold...

Wednesday, May 16, 2012

Mumbai real estate prices: Up or Down?

Seemingly contradictory news clippings of real estate prices in Mumbai going (a) Up and (b) Down on the same day. How did this happen? As usual, statistics and how much, and where you read the article in question play defining roles:
1. First up, this infographic in the printed format of Economic Times dated 14th May, 2012 tells you that real estate prices in Mumbai are up17% for the March quarter FY12 as compared to the same for FY11. They also compare prices to June 2008 and June 2009, which to me makes absolutely no sense, but I guess its their paper. Then it says that this is "despite increasing inventory levels" when RIGHT BELOW THE WORDS THERE IS A GRAPH SHOWING DECREASE IN INVENTORY. Basically inventory in Q4 was same as Q1, having briefly first decreased, then increased and then decreased again. Sales are up on flattish prices, with a q-o-q increase of 3% (prices) and 20% (sales).

Here's the infographic:

2) If, on the same day (same night actually), you had gone to their website and read this link, you could have been forgiven for thinking that prices in Mumbai had actually gone DOWN. 

To paraphrase:
Mumbai's residential property market has shown a negative growth of -9.1% during the year ended March 2012, according to the latest Knight Frank Prime Global Cities Index that compares the performance of prime sales markets across key global cities.
Most of the prospective home buyers in Mumbai are on waiting for an anticipated price correction in the backdrop of oversupply scenario in some of the areas of the city and rising inventory level of nearly 120 million sq ft being under construction.
This got a fair deal of publicity, where a lot of people were talking about the much-awaited real-estate correction finally happening. Or starting, at least. But everyone in my firm were also wondering where in the hell had prices actually fallen? Everyone attested to the fact that prices in their respective areas (most of us live in the suburbs) had not budged, if anything, they had increased. So where?

Also, this kinda left me confused, have prices gone down or up?  The catch, dear readers, lies in the details. Read the above paragraph again. The article is performace of prime sales markets. What does that mean? If, like me, you read this for the first time, you'd think that Mumbai on the whole is taken as a 'prime' location and therefore they're talking about the city as a whole. Right? Not quite.

3) Then, I read this, on moneycontrol, where for the first time, I saw what the definition of prime sales market meant. Prime property corresponds to the top 5% of the mainstream housing market in each city.
And that, to me, was an A-ha! moment. So prices fell by 9% in the Southernmost of South Mumbai and despite the overwhelming influence those prices would have on the median, the overall prices across the rest of Mumbai increased by some amount! 

Basically, all your real estate prices in suburbs, Thane etc. etc. remained either constant or increased. And some people in South Mumbai sold their apartments for fewer crores. Move along people, still no way to buy a flat in Mumbai...

Here's the kicker. If you go to the Knight Frank website, on the home page, the very first article (as of today) is : Average cost of flat in Mumbai is Rs. 2.60 crore



Tuesday, May 15, 2012

Highest & Cheapest Gas Prices by Country

Information as on 15th May, 2012. Directly taking this from The Big Picture blog.

(Click to expand picture)

Most expensive gas ranking:Price per gallon of premium gasoline: 
Hong Kong$8.89
United Kingdom$8.84
Czech Republic$7.59
South Korea$7.57
South Africa$5.72
United States$4.19
United Arab Emirates$1.89
Saudi Arabia$0.61

So India lies at the 19th position out of 56 countries (from lowest to highest), so we're pretty well placed. Few assumptions I made: Gasoline in the US is Petrol in India, so $6.06/gallon works out to roughly Rs. 80 per litre (assuming USD-INR conversion of Rs. 50). That still seems to be a little on the higher side, considering price on the street is around Rs. 71 now. Converting that to dollars we get, $5.37/gallon, which takes us to 15th place. That's not half-bad is it? Are we ready for some more pain in case prices are hiked?

(Note to self: See how every dollar/rupee increase in price cuts down our fiscal deficit)

Here's the 57(!!!) page slide-show by Bloomberg on the same. 

Sunday, May 13, 2012

Lunatic FDs!

This is just wrong. Maybe his message is correct, but asking people to completely abandon FDs in favor or stocks has to be crazy. Let me put this succintly - If you consider yourself one of the average investors on the street, you WILL lose money. 

Let's run through this article in short, yes?
  • Pick stocks rather than an index, something that you understand
  • The problem is that people on the whole DO NOT UNDERSTAND what they are picking and why. I wager that at least 75-80% (and this is an understatement) people on the street pick up or dump stocks because they "heard" that it is going to go up or down, rather like what Mr. Ramesh Damani is telling them. I assume he has a good enough track record behind him, which is why he's on the show. But people, in general, have neither the time nor the discipline to go around researching stocks. That's why you buy index funds, mutual funds, etc. (not that they've been on a roll the past 3-4 years, but still) And more importantly, when do we exit? 
  • Suggests investment in media stocks (I'm assuming he's long on them), don't buy indices
    • The past 2-3 years would back him up, don't buy indices. But buy media stocks for the future because he tells you to. Let's see how they've performed over the past 4 years, yes? 
    • CNX Media
      • 12/05/2008 - 1827.71
      • 12/05/2009 - 924.07
      • 12/05/2010 - 1633.96
      • 12/05/2011 - 1427.26
      • 11/05/2012 - 1152.65
    • Over the same time, the NIFTY has moved from.... just look at this:
    • That's a return of -36.9% over the last five years as compared to a measly loss of -1.7% on the NIFTY. Put in 9-10% inflation and suddenly bank deposits look rather creamy, don't they? 
    • Of course, comparing the past to what his prediction of what will happen in the future is a dirty trick, so let's look at his past, yes?  (To make it clear, I don't know the guy or of him, so this isn't a personal attack, I'm sure he's made a millionaire of himself and his customers, but people shouldn't be shouting down generalities...)
    • Jan. 14, 2011 - Did not directly recommend, but said Tata Elxsi and Geometric Ltd. are "going to do well". Prices were Rs. 281.4 and Rs.75.4; current prices are Rs. 199.35 and Rs.62.60. Ouch. (Elxsi did pay a dividend of Rs.7 and Geometric of Rs. 1.2 that lessens the hurt a bit, but not nearly enough to keep on track with inflation, yes?)
    • But the last year's been bad for everyone, so let's go back a bit more? In Jan. 2007, he recommended ICICI Bank, Bharti Airtel, Hitachi, HPCL and BPCL. He hedges a bit on Container Corp. and Bharat Electronics, so I'm not inculding them. Let's say I bought 10 stocks of each on reading that. How did it go for me? (To be fair, in that interview, he also says that all bull markets come down with a bang, and that there will be a very serious fall)
    • Price Bought  Today's price       Profits  Dividends         Total
      ICICI  8974.5 8132.0 -842.5 580.0 -262.5
      Bharti Airtel 6343.5 6144.0 -199.5 30.0 -169.5
      Hitachi 1008.5 1316.5 308.0 30.0 338.0
      HPCL 2783.5 2994.0 210.5 442.5 653.0
      BPCL 3343.0 7003.0 3660.0 490.0 4150.0
      22453.0 25589.5 3136.5 1572.5 4709.0
    • So over a 5-year period I've made a total return of 21% (out of which almost 88% is from just ONE stock), which translates to 4.2% every year. Again, bank deposits anyone? 
    • I'm assuming holding onto these stocks till now, because I couldn't find any interview/material where he tells people to sell the stock. If anyone comes across that, please let me know? 
  • Dividend yields on equities often beat inflation - I guess we disproved that above, yes?
  • Government inaction is hurting aviation and telecom stocks in the country (I'd say there's too much action on the telecom front, rather than inaction)
  • Pessimistic about infrastructure
Forget about the rest, what I wanted to drive home is that do not listen to people who blindly say don't do this and don't do that. In the current scenario, where you get a risk-free return of 9% p.a. on your FD (9.5% until the recent RBI rate cut), do you not think that you should be allotting some percentage in them? If you have the time and energy to study the markets, then more power to you. If you don't, then listen to experts but please do some basic research before putting your money. Or else, I daresay bank FDs are the best place for you.

Hey Mr. D, this isn't an attack on you personally, but for some reason that statement just pissed me off. I've been earning only the past three years and you know how the market has been in that time... Makes me wish I'd put money some FDs, which I haven't. Just starting to now. In spite of all its faults, I'm in the market one way or another too. Let's see how that ends up! 

Also, read this: How can investors avoid fooling themselves? via WSJ

Saturday, May 12, 2012

Why you should ideally not be investing

Or as this infographic says: The high cost of bad buy/sell decisions.
As it is, why not start off with why you shouldn't read this blog or any other blogs, but just invest in a normal index fund. Of course, returns may vary wildly depending on the precise moment that you began investing, but for now, let's go with this yes?

Infographic via Visual News: