ExpertDabbler

‘What should I do with this stock?’ is not a new book title by Po Bronson. It is the ubiquitous chorus in the boards of moneycontrol nowadays. If only someone can start an agony aunt equivalent for share trading, he would be a millionaire.

For those new to the world of stock market gyrations.
There is this company called Prajay Engineers in Hyderabad. Once upon a time, Real Estate stocks were the darling of the Lehmans and Sachs, the sweetheart of the Merrills, and in general the Triloka Sundaris of the Indian stock market, with Rathi being DLF, and Rambai being Unitech. Home loans were fast, furious and cheap. Prajay was quoting at Rs.260 at that point and I really wanted to buy this stock. The only reason we chose not to buy was… we could not. We would not have got 20 shares for each person with the kind of ‘share capital’ we had. And so we stayed away.

Two bad quarters after which comes the US credit crises and the same share is now available at about 23 Rs – much less than a kg. of tomato costs in our Annachi shop. Too bad we can’t use Prajay’s shares in our Sambhar nor can we ‘buy and hold’ tomatoes for like 5 years.

I honestly think this stock is much more valuable than the so many other stocks who have more debt than what Perumal in Tirupathi owes to Kuberan. But who cares? The market does not think so! And that’s what counts.
How can a company with an avg. EPS of about 18 Rs. with its book value is Rs.152, can go at Rs.23? That’s stock market for you! Sanity and market do not go hand in hand.

If someone asks me if I had made money in the market in the last nine months, the answer is no and I will likely remain that way for the next three to five years, and its not out of my choice! The only consolation factor remain what I’ve learned so far. You can’t learn that without putting your own hard earned money. Suddenly, some esoteric numbers will make your life so damn interesting.
The other reason being, if only I had invested in some other stocks by following the trend or technical analysis, I would’ve gone the way of Lehman and Merrill pulling some co conspirators along the way. Now at least I am still investing a little a month, and the story continues, albeit with a tinge of sadness.

Some say stock markets are like casinos. I would say stock markets are like the Sani Bhagavan that we fear, respect and despise at the same time in our mythology.

If the market works in your favour for like seven and a half years, chances are you need not work again in your life – ask Rakesh Jhunjunwala. On the other hand, if the market goes against you for as little as seven and a half weeks, you will have to work for a decade more, ask all the NRI’s who lost money during the October crash in US.

BTW, if you are an IT employee, you will know that almost any website might get blocked in your company, but not ICICI direct, geojit, sharekhan etc. Ever wondered why? Because those sites are more important to your managers than you can ever imagine!

Amazing!
I guess it takes real genius to give a ‘Sell’ target of Rs.394 when the stock is trading at Rs.250 levels.

One of my acquaintance who works there is not optimistic about the company.
Remains to be seen in the days to come.

Worldwide Kisukisu headlines

- One important cabinet minister from TN holding a very important portfolio, who also goes by the name of a famous Shiva temple venue is all set to be replaced by a former RBI governor who goes by the name of Lord Vishnu. Good riddance!

- The shares of a well known bangalore based mid sized software company which is into embedded communications solutions is likely to go up as the SAT has approved its buy back plans. It is well known that the shares of the company plummeted from 550-600 in Dec’07-Jan’08 to as low as Rs.84 in Feb ‘08.

- The worldwide well known web search company launched yet another product which lets people see websites. The product as such is lightweight and cool. But two years back, people said they are going to kill PayPal with their checkout product, now Firefox and IE is expected to be killed with the latest offering. But all this killing talk seems to be just talk. As such the company believes in Ahimsa and haven’t killed anything yet, not even the spam ridden Yahoomail.

- Desi ka pundits portal had a piece about how a galeej Times news paper of India had stolen yet again a photograph from Flickr. The photographer cum blogger, like all bloggers including this writer had lamented about ethics, copyright violations blah blah in his blog. Not sure if the Windows and the Adobe Photoshop the blogger used was an original one or pirated.
Bloggers in general are not exactly exemplary in respecting IP laws. In matters between MSM and bloggers, the issue is always big vs small, not fair vs. unfair.

Bloggers Kisukisu
- The taste of a young research minded blogger makes anyone say ada paavi. The video he sent recently is actually (A)g(h)ory.
- Another blogger is celebrating his b’day today.
- One blogger remains the ultimate source of all news and information - from a shop lifting case by an Indian H1/Li junta in Tampa, Florida to the premiere of Slumdog Millionaire in LA, he knows it all. Adengappa!

With the sensex falling everyday, talking about the market is taboo. But heck, i like this taboo topic at least.
Agreed the inflation is in double digits, the FIIs are selling but the world has not stopped yet. And most likely it will not.
This too shall pass.

I am curious to know the fate of the following in the coming months/years:

Tata Motors
Amara raja Batteries
JK Lakshmi Cement
PNB, Canara Bank and the gang.
India Glycols
ABG Shipyard
Bharati Shipyard
ITC
Idea (possibly a debt free company post spice merger)
Marico
Quintegra Solutions
Wipro
Sasken
ICSA

One can have fun by periodically investing some savings in any of these stocks for the next five years. People who make money are those who buy less and sell for more. I believe that is not going to change because of sub-prime mortgage. Just like irrational exuberance, irrational pessimism do not last either.

PS: I am having lot of fun looking at real estate stocks and Reliance Power everyday. Prajay Engineering is attractive though.

Where is Ramarajan now? Not that I am a fan. But I know for sure he made a lot of money when his market was at the peak.

The junta which said Kamal was the 9th wonder and 10th wonder during Dasavadharam’s audio release(albeit a deserved praise), would’ve heaped glorious songs exactly like these for the likes of Mike Mohan, Suresh, Ramarajan too. What happens to them after they are sidelined by the ‘industry’? How do they survive?

Every society worships the rich and famous. As a consequence, a lot of people are determined to become rich and famous soon no matter what. They think, if they get big and rich, they will die a rich man or woman. Of the several thousands who strive, some do eventually succeed. But even those who succeed are not equipped enough to manage and channelize their new found wealth. Thats a different ball game which requires a completely different skill set.

I met a person yesterday. The man should be around 50 years old. He has not had to work for somebody till date. He has about 5 houses in Chennai - usually purchases house by paying cash in full. He has managed to provide education for his two sons, and lives a comfortable life. He says he has been able to do all this with share trading. He does not even own an office. He has one Honda City and Ford Fiesta for personal purposes.

This is not to suggest all those who invest in the stock markets end up this way. The kind of self-discipline needed to make money in the BSEs and NSE is not something to be scoffed at. The point is, this guy will never be declared rich nor famous. He would never give newspaper interviews, much less TV coverage. Nobody would peak their nose in his private life and see who he sleeps with.

Yet, i bet this guy will die a richer man than Ramarajan.

You can earn all the money in the world, but if it’s just going to do down the drain, whats the difference??

WSJ as in Wall Street Josiyar. DSJ stands for Dalal Street Josiyar.
I wonder what’s so different between these blokes and the marathadi Josiyar?
Apart from the obvious differences like MBA education, English speaking ability etc, there are lot of similarities among the two.

- Main content providers for newspapers and television channels.
- Very dynamic - can change their views every other day.
- Can generate a lot of noise which pass off as wisdom.
- Can give 1000s of reasons AFTER an event happened but rarely in advance.
- Their business depends on people’s insecurities.
- Use jargons like Patterns, Peyarchi respectively, and
.
.
.
- Make life miserable for gullibe people.

We are better off without them.

It all started with an ambitious sounding e-mail with an even more pompous subject line - Project Buffet.

Project Buffet is a cute little experiment by yours truly and a few aathma nanbargal. The funda is simple - every month each guy will contribute 5K and together we would buy stocks. Yours truly is the fund manager. It had two investors till last month and all set to go up to four in the days to come.

So how successful has been this experiment so far? At this point, we have not made much profit, but we have not lost money either. Me thinks thats kinda cool in a market which has fallen 20% from its January peak.

What we don’t do,
- with due respects to Milind Karandikar, we do not subscribe to technical analysis,
- we do not go by any brokerage or securities firm recommendations
- we are not planning to get BMWs tomorrow so no hurry.

We believe the process is as much fun as wealth creation.

I am well aware of the pitfalls of handling money with friends. I guess I know the folks involved so am comfortable for now.
Will keep my readers posted on the outcome. Right now, we are having fun with this experiment.

Ellam buffet mayam, peter lynch mayam

What happens when a 24 year old, 3 years experienced software pro gets a CTC of 8 lakhs plus?
She has no precedent in her family who can guide her on how to handle all the new money. Nor is she taught about the importance of financial prudence in school or college. While a fat pay cheque is a good thing, it does come with its own perils.

As the economy sees GDP growth rates of 8% for the nth consecutive year,and with the industry facing acute shortage of manpower, more and more young people are earning a lot more per annum than their fathers and forefathers ever did in a decade. Where does this lead to? As is always the case with most youngsters, they end up learning things the hard way.

Almost always, the jobs that most of these MNCs dish out just plain sucks or is too demanding. This is not to say that work with lesser pay packets are revolutionary. What I am stressing here is, a crappy work can make you more cynical, and more frustrated in the long run, and a fat salary can just make more people enter into quirksmode. Typically, people would respond by trying to compensate their dull day life with exciting things in life that money can buy - fun nights or weekends, lavish lifestyle etc. just to went out their frustration.

Soon this 8 lakhs per annum CTC leads to parties, buying expensive clothes, a car on EMI scheme, new mobile phone every few months, LCD television, monthly mobile bills big enough to can get a mobile phone, move to ridiculously expensive apartments - purchase or for rent. The term ‘compensation’ is more in line with the compensation for loss of happiness than for the time spent and knowledge gained.

Let’s see the less glamorous facts.

First, 25% of that CTC is what i call ‘God money’. You know it’s there but you can never see it - e.g., Variable Pay, PF etc.

Second, 33% of the balance will go to the tax man (or to the Home loan lender - essentially the money will go out of your hand and will be taxed again if and when it returns to you).

Third, your job was secure only till your last payslip, in other words, not any more. You never know when USD will go below 35 rupees, how much loss can your investment banking employer/client can absorb on sub-prime crises before axing you, and when your boss can get so cranky that you cannot stand.

Fourth and very importantly, the opportunity cost incurred is enormous. For one, not many can move to less paying but more potentially rewarding vocations in future (higher studies) because of societal and financial/lifestyle pressures.

If X wants to pursue a full time MBA in a good B school, he knows that he cannot because he absolutely needs the paycheck NOW to pay his home loans, car dues, credit card bills, mobile bills etc. This leads to even more frustration and consequently he requires more exciting things to keep him happy. All these are classic illustrations of ’salary trap’. Unfortunately, i find more and more fellow MNC folks falling into this trap. And it looks like there is no way out.

Frankly, i bet almost all of the salaried class would’ve, at some point or the other, felt trapped by their monthly pay checks. At least I’ve felt the same now and then. And this is true indeed, only the degree of entrapment varies.

So what’s the way out? Well, the way out will depend to a large extent on the degree of entrapment. And that can be deduced by a simple method. If you think you’ve been trapped as well, imagine a doomsday scenario. Just think you will be out of your job by EOD today. How long do you think you can survive with your own resources? An honest answer to this question will show you the dire straits or financial paradise you are in. If you are financial paradise material, then you do not belong to salaried class.

Once you know where you stand, just accept that as a fact. Realize that it’s gonna take sometime for you to come out of the mess - a year or two. Remember you did not get into the mess overnight.

Here are some common TO DO items which i sincerely think that you can do to help yourself:

Make sure you close at least 10% of your outstanding credit card dues every month. I know many jithan’s who dodge with balance transfers, but hey, a debt is a debt. Just because it’s interest free does not mean you will ever be worry free. The sooner you make it to zero, the better off you are. Credit card interest rates in India can be as high as 36% per annum - legal kandhu vatti.

Make sure you save at least 10% of your salary per month.

No matter what the tax benefits on your home loans are, target to close at least 10% of your outstanding principal every year.

Develop interests or hobbies which are engrossing but which does not cost a bomb. There are tons of hobbies and pursuits satisfying this criteria.

Never, never trade in stocks using margin funding. Avoid day trading in stocks per se. Day trading in stocks is not investing.

Get a decent health insurance cover for your family members.

All the above gyaan is not to prevent you from enjoying your hard earned income. My only concern is, know what you are getting into. Balance and moderation works well in most of the situations in life, but it works best in these aspects.

It’s great to live king size today, but make sure you and your family do not end up living pauper size tomorrow.

Take Canara Bank, when compared with some of the valuations of other stocks, Canara Bank’s numbers and the present price sounds too good to be true.

# Been in the business for long
# Sells for something as low as 1.5 times the book value
# has a decent, infact a good EPS
# has a pretty good YoY growth in profits
# atrociously low PE ratio

and the people were dying to get hold of the likes of Reliance Power, Unitech etc

Onnume puriyalai!!

I think the toughest thing to do in stock markets is keeping our own counsel.

Disclaimer:
I am no expert in stocks and i hold Canara Bank shares.