Have we hit Peak Finance
Published on: 19 Nov, 2018 The combination of a rising fiscal deficit & tighter monetary policy in the US is pushing the world’s risk free rate upwards thus reversing a 40-year trend of money become ever cheaper. Alongside adverse developments in global trade and politics, this could change the way we think about risk-reward tradeoffs. […]
The role of Outsiders in investing
Published on: 11 Nov, 2018 The success of non-establishment figures in reshaping the investment landscape in America over the past 40 years gives India a useful template. The outsiders have already made their mark in the VC and PE space in India. Now such thinkers seem likely to make their mark in the public market […]
The Indian Stockmarket is Unique. Here is the Data.
Published on: 7 Nov, 2018 No other large stockmarket is as overwhelmingly macro driven as India’s. Arguably, this is because of the high cost of factors of production and the influence of the Indian state in every aspect of business life. To make money in India, investors need to understand the macro as much as […]
Social Media, not Fake News, Damages your Portfolio
Published on: 30 Oct, 2018 Sixty years ago Solomon Asch showed that we start believing in nonsense if enough people around us are believers. Social media has amplified this problem manifold and thus become a hazard to HNWs’ portfolios. Cutting oneself off from social media and using simple behavioural rules mitigates this problem to a […]
The end of QE and fund management
Published on: 26 Oct, 2018 Over the last ten years macro factors drove the majority of stock returns in India thus reducing the importance of investors’ skill/judgement. The end of QE is likely to reduce overall market returns but the out-performance of skillful fund managers will almost certainly be higher over the next ten years […]
Fooled by probabilities and by Indian NBFCs
Published on:20 October, 2018 There are plenty of cleverly crafted games in which you win most of the time and are rewarded with small payoffs. However, in such games there is always one scenario (which is not the base case scenario) where you get wiped out completely. Investing in NBFCs resembles these games of chance. […]
What do we expect from a CEO
Published on: 19 Oct, 2018 Rather than being a corporate Superwoman, the Effective CEO is an honest, industrious, well informed executive who is aware of her limitations and understands that her conduct and her incentive structure sets the tone for the rest of the firm. “Buffett manages his CEOs just like he manages his stock […]
Spotting the Liar in the Boardroom
Published on: 12 Oct, 2018 Alongside our forensic accounting model, we also use questioning techniques popularised by the CIA to figure out whether the CEOs we are meeting are making things up. “He that has eyes to see and ears to hear may convince himself that no mortal can keep a secret. If his lips […]
The Hero Delusion in Sport, Business & Elsewhere
Published on: 5 Oct, 2018 Evolution has trained us to use ‘thumb rules’ to simplify complex decisions. However, when these thumb rules don’t work, we are prone to delusional thinking. Our belief in heroes is one such delusion. Evolution has taught us to take mental shortcuts In our second piece for The Ken, my friend, […]
Accounting fraud and liquidity crunches are bedfellows
Published on: 29 Sep, 2018 Major accounting frauds typically come to light when liquidity tightens. Given the over 2% point jump in money market rates in India in the last 12 months, the probability of major accounting fraud coming to light in the Indian stockmarket is growing. “In many ways, capital markets are designed to […]
Elections are irrelevant for equity investors
Published on: 20 Sep, 2018 Exhaustive research by American political scientists, Chris Achen & Larry Bartels, shows that elections neither produce responsive governments nor do voters elect leaders who can tangibly impact economic outcomes and stockmarkets. “An understanding of the importance of the desire for recognition as the motor of history allows us to reinterpret […]
Reverse Positioned Brands
Published on: 10 Sep, 2018 “The writer-physician Atul Gawande has written about the phenomenon of ‘positive deviants’ in the medical profession, that small set of players who are mired in the same environmental conditions as everyone else but stubbornly refuse to allow themselves to be constrained by conventional wisdoms, and as a consequence are able […]
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