Satyam case besides being the case of extreme fraud, is an illustration of the Warren Buffett saying that a rising tide lifts all. It is when the tide runs out, you come to know who was swimming naked. As long as the real estate prices were rising globally as well as in India, Ramaligam Raju of Satyam was able to continue with his fraud and siphoning of funds from IT to real estate was taking place smoothly .
If the real estate bubble had continued to expand, the very same share holders who hauled him over burning coals, would have applauded him for his vision & audacity for buying the sister real estate cos. of Satyam.
But as is the case in such scenarios, what goes up has to come down. Hence the fall in real estate prices globally as well as in India leading to unraveling of the Satyam scam. When the buying of real estate cos. was declared, nobody saw any sense in it as every Tom, Dick & Harry knew that the real estate market had collapsed.
And as is said rightly the cat was out of the bag with the announcement of buying of sister real estate cos..
Sunday, February 8, 2009
Wednesday, January 7, 2009
Demand & Supply- two words which explain almost eveything!
Demand & supply:
The most important words in economics which explain the irrational rise in price of assets, commodities etc. – the rise in price of crude oil from $10/ barrel in 2000 to $147 / barrel in 2008 – is partly due to increased demand. Even the irrational increase in equity prices in bull market is a case of demand being much more than the supply of shares- the buyers outnumber the sellers -a classic sellers market and hence weeds get sold as flowers2006-2007. And in the bear market, it is the vice versa- the sellers outnumber the buyers and hence the supply of shares is much more than the demand. The result- dramatic fall in prices. A classic buyers market- and hence flowers are being sold at the prices of weeds as in 2008.
The most important words in economics which explain the irrational rise in price of assets, commodities etc. – the rise in price of crude oil from $10/ barrel in 2000 to $147 / barrel in 2008 – is partly due to increased demand. Even the irrational increase in equity prices in bull market is a case of demand being much more than the supply of shares- the buyers outnumber the sellers -a classic sellers market and hence weeds get sold as flowers2006-2007. And in the bear market, it is the vice versa- the sellers outnumber the buyers and hence the supply of shares is much more than the demand. The result- dramatic fall in prices. A classic buyers market- and hence flowers are being sold at the prices of weeds as in 2008.
Thursday, December 4, 2008
Very successful investors!
Who are the people who have these qualities and have used them to make a fortune?
• Benjamin Grahm- the father of Value Investing and author of excellent books on investing like-The Intelligent Investor.
• Warren Buffett- the richest person in the world ,proprietor of M/s Berekshire Hathaway, prodigy of Benjamin Grahm and he has made his fortune through growth+ value investing.
• Peter Lynch- the legendary fund manager who did not have a single negative return year during his illustrious career and has written excellent books on investing like One Up On Wall Street.
• Philip Fischer- proponent of growth investing & has written excellent books on investing like Common Stocks, Uncommon Profits.
• Chandrakant Sampat- legendary investor and only person in India-I know -who was able to predict the imminent collapse of the I.T. bubble in 1999 ( you might say that is so because I know very few people and I would agree with that). Again along with me, one of the few people that saw the dangerous levels of equity markets in 2008.
• Ram Deo Agarwal- the founding M.D. of Motilal Oswal Securities & legendary investor.
• Moti Ram Oswal- the founding M.D. of Motilal Oswal Securities & legendary investor.
• Rakesh Jhunjhunwala – who was one of the few people to see the imminent bull market in P.S.U.’s stocks in India as early as 2000 and that after the collapse of the I.C.E. ( information technology, communication & entertainment )bull run.
• Benjamin Grahm- the father of Value Investing and author of excellent books on investing like-The Intelligent Investor.
• Warren Buffett- the richest person in the world ,proprietor of M/s Berekshire Hathaway, prodigy of Benjamin Grahm and he has made his fortune through growth+ value investing.
• Peter Lynch- the legendary fund manager who did not have a single negative return year during his illustrious career and has written excellent books on investing like One Up On Wall Street.
• Philip Fischer- proponent of growth investing & has written excellent books on investing like Common Stocks, Uncommon Profits.
• Chandrakant Sampat- legendary investor and only person in India-I know -who was able to predict the imminent collapse of the I.T. bubble in 1999 ( you might say that is so because I know very few people and I would agree with that). Again along with me, one of the few people that saw the dangerous levels of equity markets in 2008.
• Ram Deo Agarwal- the founding M.D. of Motilal Oswal Securities & legendary investor.
• Moti Ram Oswal- the founding M.D. of Motilal Oswal Securities & legendary investor.
• Rakesh Jhunjhunwala – who was one of the few people to see the imminent bull market in P.S.U.’s stocks in India as early as 2000 and that after the collapse of the I.C.E. ( information technology, communication & entertainment )bull run.
Monday, November 17, 2008
Excellent returns from equities in next few years- now is the time to invest & make a fortune!
What qualities should an investor have for success ?
Reasonable level of intelligence.
Sound principles of operation and not allow emotions to corrode them.
Above all and the most important, firmness of character. It is this firmness of character which enables a operson to buy at the peak of panic in a bear market. And to sell at irrationally high prices at extremes of bull markets.
This is so because it is the decisions of the investor which affect his performance.
You are neither right nor wrong because the crowd agrees with you. You are right because your fact and figures are correct. This quality gives an investor to have faith and confidence in his decisions and ignorer what the crowd is doing. As always happens the general crowd of investors will be buying shares at the peak of bull market and selling at troughs of bear market.
As Emerson had said, it is easy in the world to live after the world’s opinion, it is easy in solitude to live after our own but a the great man is one who in the midst of a crowd keeps with perfect sweetness his independence of solitude.He who keeps his cool when all around him are losing their heads and above all blaming it on him, he will be man enough to make a fortune in equity markets.
He who can be comfortable without being part of the crowd. This gives an investor the ability to be even minded
Zig when others are zagging and zag when others are zigging. In continuation of what has been written above, an essential quality than an investor must have is to able to sell at bull market highs when everybody is buying i.e. Zig when others are zagging and buy at bear market lows i.e. zag when others are zigging.
Reasonable level of intelligence.
Sound principles of operation and not allow emotions to corrode them.
Above all and the most important, firmness of character. It is this firmness of character which enables a operson to buy at the peak of panic in a bear market. And to sell at irrationally high prices at extremes of bull markets.
This is so because it is the decisions of the investor which affect his performance.
You are neither right nor wrong because the crowd agrees with you. You are right because your fact and figures are correct. This quality gives an investor to have faith and confidence in his decisions and ignorer what the crowd is doing. As always happens the general crowd of investors will be buying shares at the peak of bull market and selling at troughs of bear market.
As Emerson had said, it is easy in the world to live after the world’s opinion, it is easy in solitude to live after our own but a the great man is one who in the midst of a crowd keeps with perfect sweetness his independence of solitude.He who keeps his cool when all around him are losing their heads and above all blaming it on him, he will be man enough to make a fortune in equity markets.
He who can be comfortable without being part of the crowd. This gives an investor the ability to be even minded
Zig when others are zagging and zag when others are zigging. In continuation of what has been written above, an essential quality than an investor must have is to able to sell at bull market highs when everybody is buying i.e. Zig when others are zagging and buy at bear market lows i.e. zag when others are zigging.
Tuesday, September 23, 2008
A Tribute To Masters
My sincere acknowledgement to the following investment legends whose writings have decided & shaped my career. I take liberty to borrow their thoughts, so that their knowledge and wisdom may benefit a lot more people.
Benjamin Grahm
Warren Buffett
Peter Lynch
Philip Fischer
Let me start with a joke, which shows the importance of having the correct knowledge. Once - in late P.M. Indira Gandhi’s time- Mr. Zail Singh & Mr. Buta Singh were to go to America. So Mrs. I.G. decided to give them a crash course in English. After a few days , she decided to conduct a surprise test interview to check their progress. First she called in Mr. Buta Singh & asked him, what word is formed using the alphabet given below?
M
Mr. Buta Singh gave the correct answer. When he came out, Mr. Zail Singh eagerly asked him what he had been asked, as we all do when we appear for an interview. Next was called in Mr. Zail Singh.
Mrs. I.G. ,being the shrewd lady that she was, asked what word is formed using the alphabet given below?
W
Mr. Zail Singh Had been partying a lot and neglecting his studies –like most of us in India do, when we are to travel abroad. He scratched his head. Thought a lot. And at a loss for an answer, he replied, ‘lakde to buta di Ma hai, per a puthi kyo piyi hai? ( looks like Buta’s mother but why is she lying upside down).
MULTI BAGGERS
Using the principles of value investing, some of the multi baggers in my portfolio have been (year of purchase 2000-2003) ( This term Multi Bagger will be elaborated later) :
Company Purchase Mkt. price as 52 week high
Name Price on 31.12.07 (Rs.) (Rs.)
Hindustan Zinc Rs 15 75 1200
Gail Rs 60 430 650
ONGC Rs 330 1800 2600
Kochi Refnry Rs 35 310 450
GE Shipping Rs 50 320 560
Later we will discuss how to identify such multi baggers.
Benjamin Grahm
Warren Buffett
Peter Lynch
Philip Fischer
Let me start with a joke, which shows the importance of having the correct knowledge. Once - in late P.M. Indira Gandhi’s time- Mr. Zail Singh & Mr. Buta Singh were to go to America. So Mrs. I.G. decided to give them a crash course in English. After a few days , she decided to conduct a surprise test interview to check their progress. First she called in Mr. Buta Singh & asked him, what word is formed using the alphabet given below?
M
Mr. Buta Singh gave the correct answer. When he came out, Mr. Zail Singh eagerly asked him what he had been asked, as we all do when we appear for an interview. Next was called in Mr. Zail Singh.
Mrs. I.G. ,being the shrewd lady that she was, asked what word is formed using the alphabet given below?
W
Mr. Zail Singh Had been partying a lot and neglecting his studies –like most of us in India do, when we are to travel abroad. He scratched his head. Thought a lot. And at a loss for an answer, he replied, ‘lakde to buta di Ma hai, per a puthi kyo piyi hai? ( looks like Buta’s mother but why is she lying upside down).
MULTI BAGGERS
Using the principles of value investing, some of the multi baggers in my portfolio have been (year of purchase 2000-2003) ( This term Multi Bagger will be elaborated later) :
Company Purchase Mkt. price as 52 week high
Name Price on 31.12.07 (Rs.) (Rs.)
Hindustan Zinc Rs 15 75 1200
Gail Rs 60 430 650
ONGC Rs 330 1800 2600
Kochi Refnry Rs 35 310 450
GE Shipping Rs 50 320 560
Later we will discuss how to identify such multi baggers.
Thursday, August 14, 2008
Bear Markets. WHAT IS INVESTING ?
Investing Is Laying Out Money Now To Get More Money Back In The Future. Value Investing Has Been Explained Earlier.
Investing Relies On The Price Paid Being Less Than The Value Of The Purchase.
In A Bear Market…., Which Is The Ideal Time To Invest, People See That The Good Companies Are Selling For Silly Low Prices.
But Just Like A Person Who Sees Rs. 100/- Lying On Road Thinks That It Can Not Be A Genuine Rs. 100/- Note, Otherwise Somebody Would Have Picked It Already. Hence Ignores It. The Same Approach People Apply In A Bear Market When they do not buy shares of companies selling cheap.
In A Bear Market Its Easier For A Person To Admit That He Has Committed A Murder Or Has Stolen Something Than To Agree That He Owns Shares of a co..
While investing in equity of cos. One has to have an investment time frame of approximately more than five years.
If one requires the money in future say after 1 year or before 5 years, then it is better that one does not invest in equities.
Because after you have invested, equity markets may fall sharply and as you might require the money after a short period of time, you might be forced to sell at a loss. This is what happens in practice.
Investing Relies On The Price Paid Being Less Than The Value Of The Purchase.
In A Bear Market…., Which Is The Ideal Time To Invest, People See That The Good Companies Are Selling For Silly Low Prices.
But Just Like A Person Who Sees Rs. 100/- Lying On Road Thinks That It Can Not Be A Genuine Rs. 100/- Note, Otherwise Somebody Would Have Picked It Already. Hence Ignores It. The Same Approach People Apply In A Bear Market When they do not buy shares of companies selling cheap.
In A Bear Market Its Easier For A Person To Admit That He Has Committed A Murder Or Has Stolen Something Than To Agree That He Owns Shares of a co..
While investing in equity of cos. One has to have an investment time frame of approximately more than five years.
If one requires the money in future say after 1 year or before 5 years, then it is better that one does not invest in equities.
Because after you have invested, equity markets may fall sharply and as you might require the money after a short period of time, you might be forced to sell at a loss. This is what happens in practice.
Saturday, July 5, 2008
Warren Buffett - What is his role as a shareholder? And equity market losses.What qualities are required to be successful like warren Buffett?
What does owning a share of a company mean?
Owning a share of a company means that literally one owns a share of that co. – is its shareholder.
If a co. has say 100 shares and one owns 10 shares of this co. then he is 10% owner of this co..
To invest for the long term as a part owner of the co. is very important to make huge profits by investing in equity of cos..( See previous blog growth of cos. )
What does to invest for the long term mean ?While investing in equity of cos. One has to have an investment time frame of approximately more than five years.
If you require the money in future say after 1 year or before 5 years, then it is better that you don’t invest in equities.
Because after you have invested, equity markets may fall sharply and as you might require the money after a short period of time, you might be forced to sell at a loss. This is what happens in practice.
What qualities should an investor for success in equity investing like Warren Buffett, Peter Lynch, Philip Fischer?Reasonable level of intelligence.
Sound principles of operation and not allow emotions to corrode them.
Above all and most important, firmness of character.
This is so because it is the decisions of the investor which affect his performance.
p.s.- these ideas are the ones used my the above mentioned investment legends.
Owning a share of a company means that literally one owns a share of that co. – is its shareholder.
If a co. has say 100 shares and one owns 10 shares of this co. then he is 10% owner of this co..
To invest for the long term as a part owner of the co. is very important to make huge profits by investing in equity of cos..( See previous blog growth of cos. )
What does to invest for the long term mean ?While investing in equity of cos. One has to have an investment time frame of approximately more than five years.
If you require the money in future say after 1 year or before 5 years, then it is better that you don’t invest in equities.
Because after you have invested, equity markets may fall sharply and as you might require the money after a short period of time, you might be forced to sell at a loss. This is what happens in practice.
What qualities should an investor for success in equity investing like Warren Buffett, Peter Lynch, Philip Fischer?Reasonable level of intelligence.
Sound principles of operation and not allow emotions to corrode them.
Above all and most important, firmness of character.
This is so because it is the decisions of the investor which affect his performance.
p.s.- these ideas are the ones used my the above mentioned investment legends.
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