Russia Trip - Magical in multiple ways

There are some trips that happen on one pretext, and end up being memorable for something quite the opposite. 

Russia was never on my bucket list. But watching a football world cup was, and that FIFA 2018 happened in Russia was the only reason we went to Russia. Small group and an unknown country, and with Jinesh and Akar around, things were naturally gonna be fun. Add Alps and Billoo and we had a quorum which was just right for a small group.

The flight was uneventful, and once in Moscow, we only marvelled at an unexpectedly clean city. We had an Airbnb in a very pleasant quarter of the city, right by the river and in an upscale building.

Yes, between three rooms, there was only one common bathroom, but that was a very small issue. Else, it was perfect. The interior of the house, very Russian, with floral wallpaper. And the location - in a residential area with upscale shops & dining options. 

We watched the Spain versus Russia game, and cheered the Russian team to victory, only because we wanted to see the celebrations on the streets and on the way out of the stadium. Our first WC match turned out to be great. Luckily, we even had the opportunity to book a table in a big arena where we saw two very thrilling matches, with high quality football on display. And then being able to visit some very scenic sights, including the Kremlin and the St Basil's cathedral at the Red Square. Yes, we didnt do more of the touristy stuff, but snuck along roads and lanes which were full of football enthusiasts, and that was good enough for us.

St Petersburg was a different experience for us. While Russian cities scare you, because the reputation of the Russian rules and the 'monarchy' precedes the visit, the experience was amazing. I remember telling everyone that St Petersburg rivals my experience in London and my desire to re-visit a place over and over - it was that good. The city is a museum on the streets. Vienna comes close, but this is quite simply enthralling.  

And it is dotted with multiple other attractions - from swanky nighclubs (which you can head to in cheap uber fares), to great cafes (one right next to our flat), serene parks (in which we lay our heads down and snoozed) to amazing churches - it has it all. The food scene was great - amongst other things, we had one of the best hot chocolates in all our trips here. The touristy thing wasnt bad either - seeing the bridges split up as ships pass through was simply out of this world. And the people - so very helpful. Donno if it was football that made these residents be on their best behaviour, but it was simply awesome to see Russian residents try and break the language barrier and help us. 

Has Franklin Templeton Convulsed an entire Mutual Fund Industry - Article on BloombergQuint

Franklin Templeton on Thursday announced the winding down of six of its debt funds. This is an unprecedented move, in that the last time we saw a fund being wound up was with Sahara Mutual Fund in 2018, which was on the directive of the regulator. These are not small schemes, not that it is okay to do this if the size is small. The six schemes put together, as per the March factsheet, have assets under management of nearly Rs 30,000 crore. It has been reported that the redemptions that Franklin Templeton received continuously in the last few weeks were much higher than average. It is possible that these would have left Franklin Templeton with no choice but to take this step. Let’s face it – if there is a continuous redemption pressure on a fund that houses low liquid AA or A-rated securities, it is just a matter of time before things go awry if the pressure of redemption is intense. That seems to have happened in Franklin Templeton’s case. Just that instead of taking any other course of action, Franklin decided to take the extreme step of shuttering its funds. 2015 was a turbulent year for Franklin Templeton debt schemes because of the perceived exposure to stressed sectors. This seems to have seen a replay in 2020, with redemptions of an even higher magnitude. What Does This Mean? Theoretically, the money that investors have parked in these schemes is locked. Yes, you read that correctly. If you had money in any of the six schemes, it is locked. It is an entire scheme, and not a small part of it, side-pocketed or segregated in a sense. When did you hear that last? There shall be no fresh investments or redemption in these schemes and investors will receive their money back as and when liquidity is available, either by selling securities to other prospective buyers or receiving maturity proceeds. Like I said, theoretically, the money is locked till the maturity date. What is likelier is that in the following days some of these portfolios could be sold, as an aggregate, to willing buyers and some money would be returned to investors. What Happens Next? I fear that this will have some implications on the industry at large. Franklin has had a long track record, and thus the funds were of a large size. When such a thing happens, investors may quickly take the first step towards perceived safety – and that is redemption. Money in the bank. It is highly doubtful that every investor will see this as an isolated event occurring with Franklin alone and sit tight. If indeed the situation worsens, no one likes being considered an ostrich. The credit risk category saw the redemption of close to Rs 5,500 crore in March. So there is a steady stream of pullouts from the category anyways. With events like these, the fear factor will zoom ahead. Would the regulator allow this? An event like this, even in smaller-sized funds would create a flutter. This one has the potential of creating an avalanche. The regulator and the industry, under fire since the Essel Group situation of 2018-2019, would be very keen to avoid such a scenario. One only hopes investors act with a rational mind, and don’t start redeeming monies from other sound funds. That will be counter-productive, for the investor and the industry.  Niraj Shah is Markets Editor at BloombergQuint ReplyForward

Keep expenses low - its as important as generating returns

Keeping expenses low can become as important in the overall growth of a healthy portfolio, as choosing the right investment avenues. Any investor looks at two aspects - one is whether he can generate excess returns in his investments and two, whether these returns can be generated at a lower cost. Statistics dont lie - over a long period of time, say thirty years, a one per cent expense ratio on your investment which earns you around ten percent returns compounded can result in returns getting reduced by as much as twenty five percent, compared to an investment which does not have an expenses. 

A zero expense investment is a mirage, or a rarity. Hence investors should try and do the next best thing, which is try and keep expenses low. Portfolio, this week, spoke to experts from Ambit Capital and Kunal Bajaj of Clearfunds about how is it that an investor can keep these expenses low, particularly while investing in Mutual Funds. Mutual funds or stocks or any good investment made for a long period of time benefits because of the power of compounding. While the Power of Compounding is your best friend, compounding costs are tyrannical, and act like cancer that eat into your portfolio. Hence, felt the experts, buying mutual funds direct, and trying to get the expense ratio as low as possible, is one terrific idea to reduce the expenses.

Kunal Bajaj said that over 30 years, if you pay just 1% fee for your investment in mutual funds, you are left with 25% less. And this money goes to the distributor or the advisor or the bank relationship manager. This money is your money, and someone else kids are going abroad to study on the back of your savings.

Ambit Capital felt that with an assumption of large cap mutual funds giving similar returns as Nifty ETFs from here on, a lower expense ratio will end up working in the investors favour. Saurabh Mukherjea went on to say that out of the 100 large cap mutual funds, 3-4 funds have proven ability to generate consistent alpha. The rest, he said, meant buying a glorified tracker fund, whether one likes it or no

The authors' math brings out a comparison between two funds. The illustration assumes an investment of Rs 1 lakh over forty years, earning a return of 15%. The first fund has an expense of 2.5 per cent per annum while the second has an expense ratio of 0.1 per cent per annum. 

The First fund's corpus exceeds that of the first fund by 

24 percent after ten years

53 percent after twenty years

80 per cent after thirty years 

133 per cent after forty years

Can you believe the difference??!!!!!

A twenty year old who invests Rs 1 lakh in a fund, with an assumption that the fund can earn 15 percent returns on average through the cycle, will end up getting 1.1 crores from the first fund against earning 2.58 crore from the second. The funds may not return 15 percent, and may end up returning lower or higher, but the impact of the expense will still be meaningful.

Buffett’s 2017 letter to shareholders

The 2017 annual letter of Berkshire Hathaway Inc, an annual release awaited by millions of investors and shareholders, has the usual flair and wit of Warren Buffet, the Oracle of Omaha. Be it his views on what he called a purchasing frenzy of businesses by CEOs, and Buffett tearing into investment bankers applauding such moves with a "Don’t ask the barber whether you need a haircut", or a jab at hefty fees-charging fund managers with "Performance comes, performance goes. Fees never falter", the letter had it all, just like the previous years. This time though, it is conspicuous by the absence of a few mentions that a lot of people anticipated, some correctly and some not so correctly. It was amusing to see a few people believe that there will be some indications about who the successor to Warren Buffett will be, when both were elevated to positions of Vice-Chairmen as recently as January. However, almost everyone believed that we would have the Oracle of Omaga speak about the joint healthcare venture with JP Morgan and Amazon, which didnt find any mention, as also his thoughts on Wells Fargo, Apple or IBM. Yes, he didnt speak about Bitcoin either, but he has voiced his opinion on Bitcoin a number of times recently, and thus not out fo the ordinary for him to skip that subject entirely. 

Warren Buffett's comments on the drought of acquisitions were interesting. 

"In our search for new stand-alone businesses, the key qualities we seek are durable competitive strengths; able and high-grade management; good returns on the net tangible assets required to operate the business; opportunities for internal growth at attractive returns; and, finally, a sensible purchase price. That last requirement proved a barrier to virtually all deals we reviewed in 2017, as prices for decent, but far from spectacular, businesses hit an all-time high. Indeed, price seemed almost irrelevant to an army of optimistic purchasers.

By the comment above, as also by some other references, Warren Buffett seemed to be emphasizing on the run up in stock prices over the last 12 months, and the need for investors to be careful with investing in the current times, though not mentioned in as many words. He did bring up the ideal investor behaviour required during periods of greed and fear, stating his vintage opinion that investors need to focus on a few simple fundamentals while the mob fears or is over-enthusiastic.

"Though markets are generally rational, they occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period – or even to look foolish – is also essential"

Buffett devoted three pages of the letter to his 10-year bet with Ted Seides of Protégé Partners. In Berkshire’s 2005 annual report, Warren Buffett had argued that active investment management by

professionals – in aggregate – would over a period of years underperform the returns achieved by rank amateurs who simply sat still. He had explained that the massive fees levied by a variety of “helpers” would leave their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index fund. Ted Seides took up the bet then, and as things have turned out, hWarren Buffett won the bet. His winning of the bet was not emphasized as much as the message that the outcome of the bet has thrown, according to Warren Buffett. He plays out his thoeory clearly when he concludes the mention with two lines titled the bottomline.

The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers

who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds

Warren Buffett predicts that the outcome would not differ materially in the future, according to his estimates. "The disappointing results for hedge-fund investors that this bet exposed are almost certain to recur in the

future"

From a Berkshire Hathway ahsareholder's perspective, Warren Buffet predicts volatility in reported earnings going ahead. All of Berkshire Hathway results will now come on a Friday eveningor saturday morning, due to a new accounting rule which forces them to report the net change in unrealised investment gains and losses, which they say can see swings of $10 billion or more within a reporting period. Having said that, Warren Buffet did emphasize that investors of Berkshire Hathwat should focus on increases in the normalized per-share earning power, something that both he and Charlie Munger focus on. And in a very modest way, he credited the re-writing of the US Tax code for a large portion of gains in 2017.

Confidence inspiring rally?

Does this set of winners give you confidence?

The move in the midcap space in the last one month is hardly awe-inspiring. The set of stocks which have gained recently arent exactly the names which inspire confidence in the nature and safety of the rally.

The question mark really is - can this last? Well, the famous saying is that the markets can stay irrational for longer than you can stay solvent. However, I am writing this piece after being surprised by the movement in select stocks for a few days now, and I finally reached a point where I had to highlight the trend.

As you read this, some high beta names are starting to correct. This may be short-lived and my words my come back to bite me if the rally continues. I am sure people at various stages of the runup in the stock of R Com would have said that the move is unsustainable. And yet the stock continued to rise.

Sample this - the combined M-Cap of the Anil Dhirubhai Ambani Group moved up from about slightly less than 10 billion dollars to over 12 billion dollars in a span of less than 15 trading sessions.

	M_cap on 19th Dec	M-Cap on 2nd Jan	% Change in M-Cap
Reliance Comm	3173	9015	184
Relaince Naval	2626	4344	65
Reliance Power	10379	16087	55
Reliance Capital	10723	15078	41
Reliance Infra	11657	14806	27
RNAM	16536	17604	6
Reliance Home Fin	4378	4520	3

And while a clutch of these names have fundamental developments, I havent yet seen any notable fundamental reports about how strong would these stocks become fundamentally. Sure, they are under-owned and they are not expensive (mind you, I am not using the term çheap valuations' here), but that is not enough to have massive rallies on stocks. I can show you a clutch of stocks that are underowned, cheap and still not finding buyers. 

Will the broader markets correct then? Well, I have heard is that the P/E multiples of the Midcap and the Smallcap Indices are sky high, and that these levels are not sustainable. Been that way for a while now, but remember that the interest of almost all PMS schemes, AIFs and well as the plethora of Midcap and Smallcap funds from AMCs are looking to invest in value names in the Non-Nifty/Non-Sensex area. So the bottom-up story will likely continue. However, it might be healthier for the market to have a fundamentals-driven rally, as that kind of rally is sustainable. It would be very unfortunate to have people lose quick money by investing in non-fundamental driven rally names if the markets were to see the much-awaited healthy correction in what promises to be a volatile month. Did I forget to mention that India Vix typically rises in the month of January? 

The Impact (or the lack of it) of 'DeMon'

The impact (or lack of it) of 'DeMon'

The start of this quarter happened with almost EVERYONE saying that the usual suspects will present a torrid quarter. Slowdown in OND quarter, and if not, then weak commentary will surely be afoot.

What has happened is quite the opposite. Most 'suspect' corporates reported flat/marginal negative growth in 3QFY17.

Sample this - Summary of key corporate numbers for 3QFY17-Growth(%)(yoy)

1. Maruti domestic volume +4%
2. Asian Paint volume +2%
3. HDFC Bank retail disbursement +11%
4. Gruh Finance housing disbursement +20%
5. Axis bank retail disbursement +13%
6. Zee Ad revenue +3.4%
7. Kajaria Ceramics vol +1%
8. Ultra tech cement vol -2%
9. Bajaj Finance AUM +33%, 2.9mn new loans in the qtr.

Corporate commentary generally is 'cautiously optimistic', as it expects improvement in 4QFY17 and expects normalcy to come back in a quarter or two. Continuous improvement in liquidity will certainly go a long way in aiding performance. Remember, this regime will aid organised players, due to GST and the general consumer shift towards organised players and brands. Demonetisation only aids this phenomenon, and the mecca for the organised players is the stock market. So expect the listed cos to only gain due to demonetisation over CY17.

Choose what you ride wisely though - not all mules are horses

Bhutan Road Trip

The basic premise of visiting Bhutan is visiting a place which is perceptibly full of happy people, with scant regard to the digitally-dictated life seen elsewhere in the world. Our trip, though, happened quite by chance. We were wanting to do a Mahindra Adventure Road Trip - and the destination didnt matter. That Bhutan fit the time bank and the wallet is a serendipitous event in itself, and one that I will thank God for a long long time to come. Not only because it was Bhutan, but also because it happened with a set of people who seemed quite in sync with us. Eventually all experiences are about two things - memories that you create, and people that you befriend... and this trip was richly rewarding on both counts.

Ours were the last two slots available, and once the payments were done, we became adrenaline junkies. The thought of going through the mountains in a 4x4 SUV was exhilarating, and with the rich blue skies and zero-carbon air of Bhutan as an accompaniment, there was no doubt that the experience would be rewarding.

The unusual happened as well - creation of a Whatsapp group (yes - one more), people posting their pictures and the incessant chatter, and a pre-trip dinner of the Mumbai convoy members. Forebodings? Quite the opposite surprisingly.

We started off at Chalsa, a small hill-side tea plantation town in West Bengal, close to the Bhutan border. (Did I forget to write that enroute the flight to Chalsa, we made a couple of very interesting friends in two women who turned out to be chatter boxes themselves.. birds of a feather flock together I guess). Lovely bunch of people in the convoy, almost all more experienced than us, and a great team from XSO and Mahindra Adventure to guide us. The stage was set. To kickstart things, we had a beautiful game drive in a national park the first morning, seeing everything but the game, but rewarding nonetheless. Two evenings brought about the traditional flag off ceremony and an exhaustive do's and don't session by the expedition captains, and off we were the following morning, in expedition #20 and #21, both of them Scorpios.

The convoy reached Phuentsholing, the first town post the seemingly porous border. The border is just, ummm, a gate - and nothing else. Key learnings from the long vigil  as we waited for clearance - Bhutanese dont like the gentry which arrives by car (tip courtesy Raj Kapoor - our expedition leader), and thus, getting the visa and immigration clearances was painfully 4 hours long. However, once done, the convoy rolled on smoothly into the pristine beauty of Bhutan. Crackling two-way radios, intra-convoy movement to be in the order of the vehicle number assigned, soothing music and feel of the unadulterated air were going to be our main companions for the next 5 days. Might I add - bio breaks too.

The drive to Thimphu, the capital, was 6 hours long, and included one stop for licence verification. We revisited the old world charm of standing by a hot open fire while there is a nip in the air - and it felt wonderful. The dinner in the hotel, Tata Phendeyling, marked our first brush with Bhutanese cuisine - not a bad experience. Thimphu as the capital city boasts of some very good cafes, surreal vistas all over and a post office where you can get stamps printed with your own snap!!! Needless to say, the Indian contingent made sure there was a long queue and lots of noise at the post office ;). We also met locals who complained that the corruption levels in Bhutan were rising, and our beliefs of Bhutan being spotlessly clean were also shattered. However, these were small niggles in an otherwise well-constructed sentence.

The route from Thimphu to Punakha had one of the highlights of the trip - the Dochula Pass. Great views of the Himalayan range, a cafe with a great view and we ended up taking a group photo of the entire convoy. The remainder of the second unplanned night drive was full of divided opinions on bio breaks, bunching up to create photo-ops and some good music in between all this. We believed, when we reached the hotel, that the traditional day and the party would be the most exciting things of the evening. And they were exciting, as was listening to my buddy Jinesh playing the part of the Head DJ. However, little did we know that the evening would be hit with the news that Indian Govt would ban Rs 500 and Rs 1000 notes, a move that then dominated conversation. Fuel then became the most important commodity and gas stations the prized destinations. Added excitement, I say.

The trip to the Punakha Dzong, with Convoy #23 (one of the 2 girl gangs, a rebellious Pune duo) was fun. Few people came for the visit to a strikingly beautiful Dzong. There were no annoying guides, no serpentine queues and an ambience which was very very peaceful. During this outing, we also got to have tea at a Bhutanese lady's home - and the hospitality extended by this poor lady was just very very heartwarming. Convoy rolled on to the final destination with the knowledge of Donald Trump having won the US presidential elections. Grexit, Brexit and now this - the world was making contrarian choices. Nothing contrarian in the Le Meridien at Paro, easily the best hotel of the trip. Highly recommended if you want to stay in Paro (though Akar and Alpa will say Uma Paro is the spot of choice). We wrapped up the evening early because we had a mountain to climb next morning - literally and figuratively.

Tiger's Nest, the #1 picture postcard from Bhutan, lived up to its billing. The drive up to the parking itself is picturesque and sets you up for the trek ahead. Its not too easy but not too difficult a trek, the views are good, and the destination is akin to being a small wonder of the world. For me, the temple itself was just another temple, but the experience of this whole trek was unbelievable. Made a great new friend in Jayeeta and discovered a long-lost humane side in me thanks to an ex-colleague cum friend in Ankit. But those stories are for another day. The remainder of the day had one magical experience for me, and had some glorious times with my whole gang in the pretty cafes and pizzerias in the magical town of Paro.

That magical experience, my personal highlight of the trip happened quite by chance again. The two-way radios crackled with info that there was a side party of momos and beer by 'a' riverside. I was dead tired, people partying were not my immediate friends, and yet - those 15 minutes were the best of the trip for me. Watching planes as they approach the hillside and bank, being offered beers by people who hitherto are just other convoy members, and listening to the water gushing along was simply awesome. Something about friendly behaviour in the lap of nature does that I guess. For a few people, the riverside picnic and a stop in misty hills on the way back to India were the best moments. These could have happened anywhere in India too, as they were not Bhutan specific. And they were not paid attractions. Guessing the best things in life do come for free.

The trip ended with yet another party, which lasted and lasted, and ended up with a few happy people singing their throats away on the front porch of the hotel at 2 am. Just the finishing touches to a brilliant journey. You know you have struck a chord when someone 10-years younger tells you he wished you had been friends with him earlier. 

A fortnight later, a few moments stand out strikingly - Raj and Veissali drinking out of each other's hands, Jinesh and Akar DJing, the morning at the Meridien riverside with Vibhav, Shiana, Shoaib and Naseem and my sis Dipali, Masala tea with Alps at Dochula, Shiana's awesome back massage at the Delhi airport, the trek with Jayeeta up Tiger's Nest, Bijoy's quizzes, rueing the turning down of Venky's offer for a car, the dancing doctor and a few more, including lunch at a small army canteen enroute India. The realisation then dawns that most of these are again about the people. I have made a great set of new friends, and I hope that these friendships last. I really do.

Lastly, a revisit to Bhutan is in order - Blue skies and pure oxygen draw me to that place. The topography in North India is prettier, but Bhutan has 1/20th the crowd, and that makes it more serene. The country accords a preference to Indians over others (a pleasant change), is a great society which values time to oneself a lot more, and the proximity and ease of travel are great plus points. The array of Datses (typical Bhutanese dish of cheese and other ingredients) and Thukpas are a small treat too. And a laid back afternoon by a riverside, reading a great book is a pleasure unparalleled. Hopefully soon.

Randomly and consistently

Why does this happen so randomly and consistently;

Why does happen to all - but more to me

 

Why do I take for granted, things which are not my own;

Why do I hope for more, when the outcome is a conclusion forgone

 

Why do I trust you to respond in a manner that I expect to;

Why do I expect you to do things the way I do

 

Is it a mockery of my friendship or of my own;

That I believe in you the way I so do and then my belief is blown

 

While whatever exists between us may just a one-sided belief be;

Can it be true that it means a whole lot less to you than to me

 

Is it wrong to think beyond the periphery of the obvious between me and you;

A friendship so special-the kind which exists between very few

 

Guess my beliefs are out of place-maybe too inclusive

Will my beliefs ever allow me to get out of them - and let me in reality, believe!!!!!