Credo Capital

Infosys came out with IPO in 1993 and it was a failure as no one knew much about IT companies then so hence did not invest.  By 2001 with three bonus and split 100 shares bought at 95 Rs in IPO became 1600 Shares ie around 23 Lacs in value. Today the same shares are worth around 5 Crs. In a span of 21 years the stock gave around 43% per annum returns.

I know several people who had bought infosys and sold it in 2-3 years, i happen to know even employees who sold off the stock, very few thought if the company is doing well and continues to grow, why should i bother about the stock price. To compare the house that i grew up in was owned and we never bothered about its price / growth in price, it was a home to live in. If Infy shareholders had the same long term holding capacity as they had for their house, gold and other tangible assets, they would today be dollar millionaires and the dividend would be enough to lead a good life !! Trick is to think of financial assets like we do our other intangible assets such as house, gold even silver articles and even brass utensils that we pass on from generation to generation without bothering to check the price.

Image and data source : Economic Times.

Oh, if the topic sounds like gobbledygook, dont worry. It simply means bonds that are issued privately among select investors as opposed to bonds that are issued publicly like the recent tax free.  Debentures are fancy word for bonds and non convertible means that they can not be converted to shares at a later date. Why call them non convertible? beats me but that’s how we call it and as we love jargon’s we keep inventing new ones.

A small note on the topic for which i contributed in Economic Time recently published.

http://articles.economictimes.indiatimes.com/2011-12-06/news/30481893_1_private-placement-ncds-public-issue

1.    Spain is not Greece – Elena Salgado,
Spanish Finance minister, Feb 2010

2.    Portugal is not Greece – the Economist,
22nd April 2010

3.    Greece is not Ireland – George
Papaconstantinou, Greek Finance minister, 8th November 2010
4.    Spain is neither Ireland nor Portugal –
Elena Salgado, Spanish Finance minister, 16 November 2010

5.    Neither Spain nor Portugal is Ireland – Angel Gurria, Secretary-general OECD,
18th Nov 2010

Thanks to Joseph Pulikken for the above ‘quotable quotes’

An article by me was published sometime back in “The Mint” newpspaper here is a link. http://mintmoney.livemint.com/featured/2010/07/curious-case-of-the-missing-mf-agent/

Gilt Funds invest solely in bonds issued by the Government, and hence are considered the most default risk free bonds. Strangely, Indian Government bonds are being bought by FII’s so much that they are about to hit the upper limit but domestic investors are not showing that much enthusiasm.

With the benchmark 10 year bond at 8%, it would be better to start investing in Gilt Funds now with a 1-2 year time frame.  If the interest do co ntinue to move up as expected one can average the purchase at 8.5% and then at 9% again. The returns at 8% is good (pre tax, pre expenses) if the interest rates fall by any chance due to some global / local events the returns could really be great.

A client of mine was featured in The Mint, a financial newspaper.

http://www.livemint.com/2010/03/18212346/Can8217t-wait-to-hang-up-hi.html

Mr Babu, a client of Credo Capital was featured on The Mint, an Financial Newspaper. I think what the client talked about applies to everyone.

http://www.livemint.com/2010/02/04190612/Mum8217s-money-lessons-be.html?atype=tp

The spinning top is a reflection of the economy, it is not supposed to spin that well and that stable but it surprisingly is stable. I think if one thinks about what can go wrong with an economy there are hundreds of things, and it does indeed wobble from time to time as if its going to stop. But just as we assume it will stop soon, as if an invisible hand whipped it again the top starts to spin.  This i guess is what Adam Smith called an invisible hand, the one that ensures that if there is a market for something, the supply follows.  It is not altruism that ensures you get medicine from the nearest chemist or buy that cold drink to refresh on a hot day from the general store but it is their own self interest, indeed if they were not interested in their own welfare there would be no shop and you would be left helpless.

Only Adam Smith would have thought about a statement such as this   “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

These words are the basis of capitalism and will forever remain so.

The link below shows a sculpture based on the spinning top, a tribute to Adam Smith,

http://www.spacestationx.com/projector/cp-Pages/Image38.html

Here is a link to my presentation in sify.com on myths about mutual funds.

http://sify.com/finance/Myths-about-mutual-funds-imagegallery-market-jl0sqWfdegf.html

If you have not already, read about the theories of Daniel Kahneman and Amos Tversky. They have together contributed more to how we think about economic choice. Of course they are  not economists but Psychologists.  One of the theories focusing illusion states , when people consider one specific factor that will make them happy – they tend to overweight that factor, while overlooking most factors that may have greater impact. This was the study of the paper ” Does living in California make people happy”? Students from Midwest USA and California reported same levels of satisfaction with their lives but the students in midwest thought that those in California would be happier because they were told that this question will be asked in California too.

The takeaway for investors is that in the markets we tend to focus on one thing say maximizing profits at the cost protecting from losses or vice-versa. The focus magnifies the issue and distorts our thinking.