Cash is King

Cash is King

Hi folks,

Guess that I've been busy enjoying life while someone pointed out that I've not been regularly posting anything in any of my blogs.

Interesting to observe that my blogs are ALWAYS read when I don't post anything! Looks like I should post more infrequently.

Anyway, while I was away, our Indian markets seem to have "re-coupled" (if at all they had "de-coupled" in the first place) with the rest of the world, and have indeed started outperforming the major global indices on the downside!

A bear market is extremely good for real long-term investors for some interesting reasons:

• Gives you lots of time to read, write, go around golfing, goofing, blogging, bugging, begging, borrowing, etc.
• Makes you learn a lot about investing (though at a rather high cost)
• Enables you to crib about all the money that you could have made had you sold out at Jan '08 levels
• Enables you to advice others on the list of scrips that you can buy at current levels and make tons of money over the long-term (at last, long term means a really long term!)

Considering the free time that the bear market provides, it is time for you to read this wonderful article by Mr. Sanjay Bakshi (originally written in 1999) - Worth saving and reading once a quarter!

• http://ppfas.com/media/articles/sanjay-bakshi/volatile-market.pdf

Regards,

N

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ET Editorial or CPI (M) Press Release???

ET Editorial or CPI (M) Press Release???

Please read this view on the edit page of Economic Times, Chennai (dated June 30, 2008):

• http://epaper.timesofindia.com/Repository/ml.asp?Ref=RVRDSC8yMDA4LzA2LzMwI0FyMDE0MDI=&Mode=HTML&Locale=english-skin-custom

I've been a regular reader of Economic Times for well over a decade. Have agreed (or occasionally disagreed) with their views but have always respected their thought processes.

The above article left me speechless. If it was intended as a satirical piece, I didn't quite get it. May be I'm getting too old. Alternatively, if this article had been a press release by the CPI (M) folks, originally written by people like M/s Karat, Raja, etc., I could possibly begin to understand it.

But coming from ET, of all the places! What can I say???

This article actually suggests that Mutual Funds should deploy their cash holdings (which, incidentally, belongs to investors like you and me - not to the general public of India) into shares. The reason: "To change the sentiment in the market".

Since when did "Changing the sentiment in the market" become the objective of the fund managers? I was under the mistaken impression that fund managers were supposed to maximise returns on my hard-earned money invested with them in accordance with the original mandate of the specific fund / scheme. If the fund manager feels that this is the right time to go out and deploy cash to meet the scheme objectives, by all means let him/her do so.

However, if the fund manager thinks that markets are likely to tank further, thanks to factors like:

• Panicky FIIs, who are getting out of emerging markets to handle their own self-created mess back home
• Zooming commodity prices, especially that of the rude crude!
• Imported inflation
• Political uncertainties
• Likely earnings downgrades

then, ... ... ... ...

The fund manager ought to wait a few more days / weeks so as to buy exactly the very same shares that he/she thinks is worth buying at an even lower price.

Economic Times, I certainly expected more from you - I didn't expect you to get swayed by such things like "market sentiment" to give such imprudent recommendations to fund managers of AMCs.

Regards,

N

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GM hits a new low!

GM hits a new low!

Recently (a couple of days back) General Motors hit a half-century low level on the exchanges - less than $12 per share, last seen in 1955 - the year in which Bill Gates was born! Talk of coincidences!

Read this link for some interesting details and statistics:

• http://biz.yahoo.com/cnbc/080626/25392542.html

What is this piece doing on this blog?

Simple - When we make investments in what we consider bluest of blue chips, we may perhaps be absolutely right - at that time.

We must, however, have the discipline to keep reviewing the investments periodically (don't bother watching the ticker every day or every hour) - at least once every few months. If the situation that warranted the original investment has changed, we must be willing to go right ahead and be willing to sell the scrip, irrespective of whether we are making some money or we are losing money on the original investment.

Regards,

N

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Catch them young!

Catch them young!

Financial planning, fiscal prudence, investing skills, knowing the benefits of the power of compounding - These are all terms that each of us should know. More importantly, these are things that all our kids should know.

When should we start teaching them? This is a very popular doubt among parents across the world. Here's an article that addresses the issue eloquently. Read on and also pass it on to your friends for their benefit:

• http://www.outlookmoney.com/scripts/iih021c1_new.asp?sectionid=10&categoryid=65&articleid=7506

Regards,

N

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Buffett on Booking Profits

Buffett on Booking Profits

The markets are turbulent. Share prices, as usual, are going up and down like crazy! In the melt-down since January, much of your paper profits have evaporated into thin air. Some of your scrips are still quoting at levels which enable you to get out with some profits. Other scrips are well below your original purchase prices.

What should you do now? Should you sell? If so, which ones? If not, when should you sell?

This has always been a major problem for investors. They get to know what to buy and when - either based on their own research, or based on "expert interviews on TV", "Wonderfully written articles" in business papers, broker recommendations, tips, etc. On the sell side, there's hardly the same quantum of advice available.

Hence, it is worth listening to the ever-green Sage of Omaha:

Warren Buffet, Mr Buy-and-Hold himself, has been known to sell. In a letter to Berkshire Hathaway shareholders in 1987, he wrote: "We are quite content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business."

In other words, he would sell when a holding rises to a price well beyond what he thinks it's worth. He has also been known to sell at a loss to raise money for a potentially more lucrative opportunity.

Becoming fixated on what an investment used to be worth is a loser's game. The money that is gone is gone, and there's nothing you can do about it. Far better, then, to focus on where your investments are now and find the best opportunities for the future.

So, when should you book profits? Ideally, when your investment goals are achieved. If a goal is achieved you should book profits and keep moving.

Hope that this gives you some nice clues on when to sell and what to sell from your wide range of winners & losers!

Regards,

N

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