Linkfest – 98

Friday, January 11th, 2019

Some articles from across the web in the last few weeks:

E-commerce: The battle for India’s giant retail market – Economic Times

New investments in India plunge – Livemint

Cronyism in financial policy – Debashis Basu

E-Commerce FDI Policy: Bored Game – Bloomberg Quint

10 Things Investors Can Expect in 2019 – A Wealth of Common Sense

A bond market update – Aswath Damodaran

Seven Big Ideas from Fooled by Randomness – Safal Niveshak

The Bull Case for commodities – Visual Capitalist


Aswath Damodaran – Laws of Valuation

Wednesday, January 9th, 2019

Great talk by Aswath Damodaran on the corporate life cycle and how companies evolve over time. Here is the video and some key takeaways:


Key Takeaways:

  • Companies don’t like to get old: fighting it can be one of the most dangerous things a business can do
  • Most value is destroyed by companies not acting their age
  • What makes for a great CEO of a company changes over the course of the life cycle
  • The progression of a company through this life-cycle:
  • The life cycle of a company is getting compressed: a 20-year old tech company is an old company
  • There are three main ways to make corporate finance decisions that maximise the value of a business:
    • The investment decision: Invest to earn a return greater than a hurdle rate
    • The financing decision: ensure the optimal mix of debt to minimise the hurdle rate
    • The dividend decision: if you cannot find investments that meet the minimum hurdle rate, then return cash back to shareholders
  • These decisions are heavily influenced by the life cycle: a start up would mainly be taking equity because it doesn’t have predictable cash flows, mature companies should think about financing mix as the cash balance start to build up and declining companies should be focusing on returning cash to shareholders
  • On Amazon as a disruption platform: it is unclear if Amazon will ever make money on any new business it enters but it is guaranteed that the existing players will lose money. 
  • Valuation is never just about the numbers; there is always a story that drives the numerical projections, especially for young companies. for mature companies, the numbers would drive the valuation more because you are at chapter 34 of a 35 chapter book and cash flows are predictable


a16z Annual Summit

Tuesday, January 8th, 2019

Andreessen Horowitz recently put up a number of talks from their a16z annual summit which cover many areas related to the ongoing disruption across various industries due to technology. Here are few of the videos that I found particularly interesting:

Moving Beyond Advertising only business models

The Evolution of Brands

How the US government used Crypto to catch fraud

The software disruption coming to real estate


Monthly Market Summary: December 2018

Monday, January 7th, 2019

We look at returns of various asset classes such as equity, debt, gold, crude oil and the Indian rupee in our latest monthly market summary.

We use data for these charts from Investing.com

Global Equities

The Sensex was flat for the month and has outperformed its peers in both emerging and developed markets. Broader markets fell sharply led by the fall in the S&P500 of around nine per cent. Barring the Sensex, most equity markets have given negative returns in the last year.

Fixed Income

Indian bond yields continued to correct in December, falling from 7.65 to 7.43. The collapse in crude oil prices and an easing of the liquidity situation has led to some relief in the bond markets.

Gold

Gold moved higher, but still was within range during the month. If the commodity moves strongly away from 1200-1400 dollars per barrel, it would give a better indication of the long term trend.

Oil

Oil continued to fall in December. From a value of 86 in early October, it closed at just above 54 dollars per barrel at the end of last month. This is a very sharp correction and is a positive development for the Indian economy because of our large dependance on oil imports. It is important to keep an eye on this figure as it can have a destabilising effect on our macros.

Indian Rupee

The Rupee was range bound in December, reflecting global currency movements.


Linkfest – 97

Monday, December 31st, 2018

Some articles from across the web in the last few weeks:

There’s No Such Thing As A Part-Time Watchdog – Bloomberg Quint

Smaller FMCG firms race ahead, put bigger rivals on notice – Livemint

India is missing the wake-up call from its shadow-bank bust – Bloomberg

Are consumption stocks invincible? – Business Line

Weaker growth ahead – Neelkanth Mishra

Urbanization – Our World in Data

What’s Not Going to Change in Financial Services? – A Wealth of Common Sense

Millennials Didn’t Kill the Economy – The Atlantic

Which matters more for building wealth – Get Rich Slowly

Rational vs. Reasonable – Morgan Housel

The shape of all things digital in 2019 – Founding Fuel

24 Cognitive Biases – Visual Capitalist

Changing the Indian state from bully to ally – Livemint

Overview Of Global Shale Oil Developments – Alpha Invesco

Capital infusion won’t fix PSBs – Debashis Basu

GST: The Many Course Corrections – Bloomberg Quint

10 learnings from 2018 – Bloomberg Quint

Zero-fee funds – Quartz

A macro update on bonds – IDFC MF

Factor investing and index funds – Bloomberg

99 Good News Stories You Probably Didn’t Hear About in 2018 – Medium

51 Ideas from 2018 – Safal Niveshak


Monthly Market Summary: November 2018

Monday, December 3rd, 2018

We look at returns of various asset classes such as equity, debt, gold, crude oil and the Indian rupee in our latest monthly market summary.

 

We use data for these charts from Investing.com

 

Global Equities

Monthly Market Summary

The Sensex and the S&P500 both outperformed their broader emerging and developed market peers respectively. The Indian market in particular bounced back strongly after a few months of correction. Meanwhile the broader emerging markets and developed markets have fallen sharply in the last year.

 

Fixed Income

Indian bond yields corrected in November from 7.88 to 7.65. The collapse in crude oil prices and an easing of the liquidity situation has led to some relief in the bond markets.

 

Gold

Gold stayed in range during the month. If the commodity moves strongly away from 1200-1400 dollars per barrel, it would give a better indication of the long term trend.

 

Oil

Oil continued to fall in November. From a value of 86 in early October, it fell to to just under 62 dollars per barrel at the end of last month. This is a positive development because of our large dependance on oil imports. It is important to keep an eye on this figure as it can have a destabilising effect on our macros.

 

Indian Rupee


The Rupee appreciated sharply against all major currencies in the last month, to the tune of roughly 5 per cent. This is probably linked to falling oil prices and a return to normalcy in the market from the earlier panic situation.

 

 


Linkfest – 96

Friday, November 23rd, 2018

Interesting commentary from across the web in the last few weeks:

 

Over dependence on cab aggregators is hurting auto profits – Scroll.in

No One is Crazy – Morgan Housel

Thriving With Systematic & Discretionary Investing – The Integrating Investor

How the contracting PE multiple stole 2018 – The Reformed Broker

Coffee Can Investing: Rajeev Thakkar – Money Control

Japan’s stockmarket is poised for a comeback – The Economist

Tiny Improvements, Big Results – A Wealth of Common Sense

The Surprising Power of The Long Game – Farnam Street

How Athleisure Conquered Modern Fashion – The Atlantic

The shopping revolution: Barbara Kahn – The Big Picture

The Wall Street Math Hustle – Institutional Investor

Trends & Time Lapses – A Wealth of Common Sense

Lending slowdown is affecting consumption – Bloomberg Quint

Zoom Out – Safal Niveshak

How the American Consumer Got Addicted to Choice – A Wealth of Common Sense

Life Insurance – Know What you are sold – Bala’s Blog

Fees continue to fall in US funds – Morningstar

Four Things Leonardo da Vinci Can Teach Us About Investing – Of Dollars And Data

 

The Myth of Private Equity – YouTube

 

 

How these penny pinchers retired in their 30s – YouTube

 

 

Aswath Damodaran: Making sense of market mayhem – YouTube

 


Monthly Market Summary: October 2018

Thursday, November 1st, 2018

We look at returns of various asset classes such as equity, debt, gold, crude oil and the Indian rupee in our latest monthly market summary.

 

We use data for these charts from Investing.com

 

Global Equities

Monthly Market Summary

Most major equity markets globally faced a steep correction in the month of October. While the S&P500 and the Sensex outperformed their developed and emerging market peers, they still recorded a correction of 5-7 per cent in the month.

 

Fixed Income

Indian bond yields spiked sharply in early October to roughly 8.20 but then fell over the course of the month to 7.82. The concerns over defaults on the systemically important IL&FS initially created an overhang on the market. This was amplified by concerns over oil prices spiking, the FED raising interest rates and the currency depreciating sharply. Post the MPC meet and post the government taking steps to change the board of IL&FS, there seems to be some calming of sentiment in the market.

 

Gold

Gold moved up in the month and closed above the 1200 dollars per ounce. If the commodity moves strongly away from the 1200-1400 range, it would give a better indication of the long term trend.

 

Oil

Oil corrected sharply in October. From a value of 86, it fell to to just over 74 dollars per barrel at the end of the month. Because of our large dependance on oil imports, it is important to keep an eye on this figure as it can have a destabilising effect on our macros.

 

Indian Rupee


The Rupee seemed to stabilise against most major currencies in October.

 

 


Linkfest – 95

Monday, October 29th, 2018

Interesting commentary from across the web in the last few weeks:

 

MIB: Howard Marks, Oaktree Capital – The Big Picture

Confessions of an equity analyst – Value Research

The impact of NBFCs on fund flow to the economy? – Bloomberg Quint

The $80 Trillion world economy in one chart – Visual Capitalist

The next recession – The Economist

The future of healthcare – The Economist

Beware of market timing rules of thumb – Insecurity Analysis

The land challenge underlying India’s farm crisis – Livemint

Amazon’s private label business – CNN

The NBFC scare isn’t over yet – Bloomberg Quint

Public sector enterprises are poor investments – Mihir Sharma and Aarati Krishnan

Warnings mount for leveraged-loan market – FT Alphaville

Decoding the NBFC bailout – Capitalmind

23 charts and maps that show the world is getting much, much better – Vox

A lost decade of dollar cost averaging – A Wealth of Common Sense

Oil’s rally isn’t over yet – Bloomberg Quint

Moral investments aren’t outperforming – FT Alphaville

Slowing US momentum- The Reformed Broker

What happens when interest rates rise? – Morgan Housel

Haste Makes Waste – Morgan Housel

The electric future will start on two wheels – Bloomberg

Credit Risk Funds pose a problem – INR Bonds

Investing is Hard – YouTube

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The global tightening of financial markets

Saturday, October 20th, 2018

2018 has seen tightening in financial markets across the globe. This is having divergent effects on growth for different economies. This trend is in sharp contrast to to the synchronised recovery and easy liquidity conditions we were seeing in 2016 and 2017.

The US economy continues to have strong momentum. The FED has gradually removed accommodation and has raised rates every year since 2015. As a result, the term spread has started to narrow and yield curve has started to flatten. The BIS has captured this in its latest quarterly review in the following chart:

 

The “flight to safety” effect has kept long term yields low in the US. It has also probably contributed, along with escalating trade tensions, to the rally of the US dollar. This has put further pressure on emerging market economies. India is not alone in that a number of such economies have been experiencing portfolio outflows with policy or political uncertainty compounding market stress and currency depreciation.

From the BIS:

 

And:

The long and unprecedented run of 16 consecutive months of net inflows to EME investment funds was cut short in May (Graph 4, centre panel). The slowdown had actually started in February for hard currency bond funds, and then extended to equity and local currency bonds as the US dollar appreciation accelerated in late April. This in turn reduced the returns on those assets for dollar-based investors. Unusually large EME carry trade returns fell precipitously as from April, dropping in August below the low levels of November 2016 (Graph 4, centre panel).

A number of these emerging economies benefitted from loose monetary policy of the developed economies over the last decade. Now that the liquidity is being withdrawn, the economies that have not addressed structural issues are feeling the most pain.

Even in more developed European economies, corporates started to see higher borrowing rates because of euro area sovereign financial stresses resurfacing.

The expectation is that global liquidity and credit conditions will continue to tighten, especially in the USA. A flat yield curve generally portends a recession. With other markets already showing signs of losing momentum, what does it mean if even US growth starts cooling off?


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