Bringing Buffett's Wisdom to India

Rational investors get rich slowly..Here is a killer opportunity for NRIs

2009-04-19T12:50:00.001-07:00

Alright, thank for clicking.

I once read a book titled "Get rich fast", so I kept reading only to reaize that the author is getting rich on each of the titles that he is spewing out.

There is NO FREE LUNCH. You CAN'T GET RICH FAST.

But hold on..what does that mean? You can still get rich slowly right? Absolutely, that is my point.

If any of you have read about Buffett, the oracle of Omaha and the Sage of investing and the granddad of all the money managers, he compouned money at the rate of 24% every year since last 50 years. This year after the disastrous depressionistic era, he still ended up with 20% CAGR beating the S&P pants down.

I know you are waiting to hear where is the money?

If you know TATA MOTORS is on an agressive expansion with the orders flowing in for NANO, they are in depserate mode to raise capital. So they are reaching out to the public, giving 11% annual compounded quarterly which yields 12.83% and if you hold on for 3 years, you will simply get 45% return on your money. If Warren Buffett is in his 30s now, he would jump hand over fist for this kind of an opportunity.

So it is right there to grab. For NRIs you can transfer your money to an NRO a/c and then invest through that account.

http://www.tatamotors.com/ -- Visit this link. Oops I just have observed that the yield came down from 12.83% to 11.5%. That is how fast you lose opportunities.

Still, for all those small time players wanting to get big, here is your strategy.

Convert your forex to INR (get once in a lifetime exchange rate)
Invest that with ultrasafe for the 3 years.
Convert back that money into USD at low rate at that time (you bet, it would be 40rs in an year and then lower further)

Happy Investing,
If you like this blog, send me a note.
Will try to post more of them.

What is Investing?

2009-01-24T23:45:00.001-08:00

Can yo answer? Your clock starts now. You have 30 secs.
1 2 3 4 ..............STOP

Alright, I should give credit to the following statement to Benjamin Graham who practically invented the definition of investing on the Wallstreet. According to him "Investing is an activity that gives positive returns on the capital with out any loss of capital". Anything other that is called Speculation.

I'm sure now you must be thinking what the hell is that? So, if you are investing in an Idea say a Green technology, Alternative energy, New drug etc.. think before you invest. What is the chance of your success in that endeavor? Do you know the probability of success? There are 1000 ideas out there sucking cash out of investors and only 1 in 100 materializes. So if you go with 1 in 100 odds of making money then I don't think it is wise investing. You would rather visit LasVegas once.

Once we agree on the definition of investing then it becomes even more interesting. Now how do you actually invest. Isn't that Holy grail everybody is after.

Charlie Munger said"tell me where I'm going to die, and I will not go there". So true, If I know where to invest for a fixed 20% +ve return why wouldn't I go there and put my money! Beware of Madoffs of the world. That's exactly why when somebody says I will give you a fixed return upwards of 15% or for that matter any return more than 30 day TBill, they are basically Ponzi selling you something.

So, you would ask what then is Investing?

Investing with a business sense is what we call expecting a series of cash flows on any busienss you own. That is what is studied so meticulously under Value investing. It is all about figuring out what a business is worth and how much cash flow to expect from that business and what price to pay for that at what time.

Back to Basics: Calculating the growth rate of your portfolio

2009-01-24T23:18:00.000-08:00

Back to Basics: Arithmetic Mean and Geometric Mean for your portfolio:

When you look at a Mutual Fund or a Money manager's returns, did you ever wonder on how to come up with the actual return on that portfolio for a given time series? Ok, here is the answer for you. To Calculate the growth rate of your portfolio you just calculate the geometric mean of all the annual returns. For e.g.

If a Fund A has the following returns from 1996-2002

1996 25%
1997 42%
1998 -65%
1999 2%
2000 12%
2001 -30%
2002 10%

1/6√(1+.25)(1+.42)(1-.65)(1+.02)(1+.12)(1-.3)(1+.1) - 1 = -.08 = -8%

So, in this caase the fund lost 8% every year for the seven year period or it grew at the rate of negative 8 percent. I'm sure you would not be happy to invest in this fund!
Coming to Arithmetic Mean, usually you say the average return for a fixed period such as an year, a half year, a quarter etc. Typically we consider the returns for an year averaged for that whole period and we come up with an annual return.

Finally to conclude: You have to use Geometric Mean to calculate the growth rate. You refer to an average return as an Arithmetic Mean only for a specific interval to get a better approximation of returns for that interval.

That's all for now. We will talk about other statistical measurements next time.

Consensus a Science?

2008-11-20T21:00:00.000-08:00

Decide for yourself. If you are following the crowd--you are making a big mistake. This is what Michael Crichton had to say about consensus.

Crichton:
“I want to pause here and talk about this notion of consensus, and the rise of what has been called consensus science. I regard consensus science as an extremely pernicious development that ought to be stopped cold in its tracks. Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled. Whenever you hear the consensus of scientists agrees on something or other, reach for your wallet, because you’re being had.
Let’s be clear: The work of science has nothing whatever to do with consensus. Consensus is the business of politics. Science, on the contrary, requires only one investigator who happens to be right, which means that he or she has results that are verifiable by reference to the real world. In science consensus is irrelevant. What is relevant is reproducible results. The greatest scientists in history are great precisely because they broke with the consensus.
There is no such thing as consensus science. If it’s consensus, it isn’t science. If it’s science, it isn’t consensus. Period. . . .”

Successful Value and growth Investors

2008-10-11T19:22:00.000-07:00

Warren Buffett
Charles Munger
Joel Greenblatt--Special situations and Distressed investing

Computerization and Opinions on Financial press

2008-10-11T19:10:00.001-07:00

**This is an excerpt from the text 'Mastering Fundamental Analysis by Michael Thomsett'**
**I have just tried to use his comments here for wider audience. I have no copy rights on this paragraph**

" The computer has served to make the technician more efficient at producing opinion; it has not necessarily improved on the quality of that opinion. Graphic capability has made it easy to produce charts more quickly and for a wide and diverse number of stocks, industry groups, and indexes. This never improves the quality of information; it only makes quantifying easier. So even with more reliable scaling, faster output, and greatly improved turnaround time , questionable information remains questionable."

The above passage holds good every single moment in the stock market. CNBC pours opinions like a rainfall in Africa. How to weed out unimportant suff is the matter of awareness and knowledge which is hard to get. I hope there is a TV channel oneday which disseminates only knowledge rather than opinions. It may not occur because it will be left with no viewership.

My booklist

2008-10-01T10:28:00.001-07:00

Mart Twain "A man who does not read is no better than a man who can't read"
I say "A book worth reading once should be studied thrice". Once I understood the power of good book with a lofty goal and audacious hope, it is just 'Sky is the limit' kind feeling. When you read a good book it is like having a conversation with great thinkers of the world.

Completed and In Progress: (Some of them second round)

The little book on Value investing - Finished

Investment Management - Flash read once

Extraordinary Delusions and the Madness of Crowds
http://www.amazon.com/Extraordinary-Popular-Delusions-Madness-Crowds/dp/051788433X

The Intelligent Investor: The Definitive Book On Value Investing

Revised Edition (Paperback) by Benjamin Graham, Jason Csaieig
(The best investment book ever according to Buffett.)
http://www.amazon.com/exec/obidos/ASIN/0060555661/csai-20

The Interpretation of Financial Statements (Hardcover) (Second round)
by Benjamin O. Graham, Spencer B. Meredith
http://www.amazon.com/exec/obidos/ASIN/0887309135/csai-20

Security Analysis: The Classic 1940 Edition (2nd Ed. Hardcover)
by Benjamin Graham, David Dodd
(The textbook Buffett used at Columbia)
http://www.amazon.com/exec/obidos/ASIN/007141228X/csai-20

The Five Rules for Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market
by Pat Dorsey, Joe Mansueto
http://www.amazon.com/exec/obidos/ASIN/0471269654/csai-20

You Can Be a Stock Market Genius : Uncover the Secret Hiding Places of Stock Market Profits
by Joel Greenblatt
http://www.amazon.com/exec/obidos/ASIN/0684840073/csai-20

Buffett : The Making of an American Capitalist
by Roger Lowenstein
http://www.amazon.com/exec/obidos/ASIN/0385484917/csai-20

The Warren Buffett Way, Second Edition
by Robert G. Hagstrom
http://www.amazon.com/exec/obidos/ASIN/0471648116/csai-20

2008 SEC Guidelines; Rules and Regulations; As of December 2007 (Paperback)
by Gorham & Lamont Warren
http://www.amazon.com/exec/obidos/ASIN/B0015GVPN4/csai-20

Value Investing Made Easy: Benjamin Graham’s Classic Investment Strategy Explained
for Everyone (Paperback) by Janet Lowe
http://www.amazon.com/exec/obidos/ASIN/0070388644/csai-20

The New Buffettology, by Mary Buffett and David Clark
http://www.amazon.com/exec/obidos/ASIN/0684871742/csai-20

Value Investing : From Graham to Buffett and Beyond, by Bruce Greenwald
http://www.amazon.com/exec/obidos/ASIN/0471463396/csai-20

Wall Street On Sale (Hardcover) by Timothy Vick
http://www.amazon.com/exec/obidos/ASIN/0071342052/csai-20

Baruch: My Own Story
by Bernard M. Baruch (Benefactor of Bernard M. Baruch College, CUNY)
http://www.amazon.com/exec/obidos/ASIN/156849095X/csai-20

Benjamin Graham on Value Investing: Lessons from the Dean of Wall Street
by Janet Lowe
http://www.amazon.com/exec/obidos/ASIN/0140255346/csai-20

The tree of knowledge - Reading

Understanding computers and Cognition - Reading

Wish List in the next 60 days:

Keys to Reading an Annual Report (Barron’s Business Keys) (Paperback)
by G. Thomas Friedlob, Ralph E. Welton, George Thomas Friedlob
http://www.amazon.com/exec/obidos/ASIN/0764113062/csai-20

Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Second Edition
by Howard M. Schilit
http://www.amazon.com/exec/obidos/ASIN/0071386262/csai-20

How to Pick Stocks Like Warren Buffett: Profiting from the Bargain Hunting Strategies of the World’s Greatest Value Investor by Timothy Vick
http://www.amazon.com/exec/obidos/ASIN/0071357696/csai-20

Financial Accounting (Fourth Edition) with CD-Rom (Hardcover) by Libby
http://www.amazon.com/exec/obidos/ASIN/0072850531/csai-20

The Analysis and Use of Financial Statements by Whitehttp://www.amazon.com/exec/obidos/ASIN/0471375942/csai-20

Common Stocks and Uncommon Profits and Other Writings (Paperback)
by Philip A. Fisher, Kenneth L. Fisher
http://www.amazon.com/exec/obidos/ASIN/0471445509/csai-20

One Up On Wall Street : How To Use What You Already Know To Make Money In The Market
by Peter Lynch, John Rothchild
http://www.amazon.com/exec/obidos/ASIN/0743200403/csai-20

Beating the Street
by Peter Lynch, John Rothchild
http://www.amazon.com/exec/obidos/ASIN/0671891634/csai-20

How to Be Rich, by J. Paul Getty
http://www.amazon.com/exec/obidos/ASIN/0515087378/csai-20

Keys to Reading an Annual Report (Barron’s Business Keys) (Paperback)
by G. Thomas Friedlob, Ralph E. Welton, George Thomas Friedlob
http://www.amazon.com/exec/obidos/ASIN/0764113062/csai-20

One Up On Wall Street : How To Use What You Already Know To Make Money In The Market
by Peter Lynch, John Rothchild
http://www.amazon.com/exec/obidos/ASIN/0743200403/csai-20

Beating the Street
by Peter Lynch, John Rothchild
http://www.amazon.com/exec/obidos/ASIN/0671891634/csai-20

How to Be Rich, by J. Paul Getty
http://www.amazon.com/exec/obidos/ASIN/0515087378/csai-20

Brainstorm--Letter to my friend

2008-06-02T21:42:00.000-07:00

I'm writing this to share with you my ideas. I thought I should give you little more background before I bombard you with my ideas. Also read my other post 'Think BIG' which I wrote this afternoon. Again, don't be surprised by all these thoughts..they are not mine..I have been reading books and all of them are the wisdom I'm trying to attain from the existing market pundits.

Background: I don't want to work for someone for a paycheck anymore. I was infact so ignorant all these days that I wasted 10 years of my life starting from 1997. Ofcourse now that I'm motivated to get to the next level I'm able to process the information that comes my way faster and better. Two years ago I did not understand how the stock market works..actually it is not even 18 months since I started understaning stock market. And then on..my journey of knowledge acquisition and tough times in the economy and my company challenged me to think outside the box and here I'm trying to figure out when should I stop working and start living my life at my own terms.

I would really like to a master of money not a slave.

So, the more I think about it..it is all about the knowledge and power in the marketplace. There are plenty of opportunities all around us. Just that we should take a step forward. We are bound by this labor tradition of working for someone who pays us x$ to kill our creativity. We should put our subconcious brain to work for us.

Anyways..here are my various thoughts..they may seem little random and vague right now..but they give you the direction I'm thinking about if you agree with me.

First of all, we don't have to start anything big..we just have to start it and it becomes big if it has value for the customer.

There are so many businesse concepts coming up in India right now. For e.g. Waste Management. The other day I was reading about this guys who went back from US to India to start a waste management company, and I'm sure you understand the potential of such business and resources right infront of us.

Or

a Subway
a movie outlet(we have a movie rental kiosks here right across the street in the departmental stores, it is all automated and electronically paid..visit their website http://www.dvdplay.com/) imagine how many people would be willing to rent movies and enjoy DVD quality.
an online marketing promotions company (http://www.goimarketing.com/) which promotes awareness in local businesses about the power of online advertising. Read this blog http://www.sethgodin.com/ and check out his ideas on permission marketing. We can easily hire 10 young fresh college graduates to start any sort of technology venture.
Biofuel plants

Anyways..my point here is there is no dearth of ideas if we look around. We will get the money funding in various ways.

I'm a member of this website http://www.prosper.com/ which is peer to peer lending network. You can borrow 25000 $s with in days. I now lend money to people who are starting their businesses everyday. And I get returns like 12%-15% on my money which is even better than S&P 500 and index funds.

So, we can pair up and do lot of things. We can small start and then grow. We do all the homework while we are fully employed and when we have enough growth we quit our jobs.

Some more reasons:

Earned income is the highest taxed income all over the world. Do you know Warren Buffet pays less taxes than his secretary. He publicly stated that. You know why...all his money is in trust funds and it does not get taxed. Everybody knows that it is his wealth but no body can touch it. And he donated all of that to charity.

Passive income which is generated from your assets is the least interested.

You must be wondering..if we invest our money wisely then we should be fine. Nope, because you can't take leverage of others money(ie. Govt money) if you are working for someone else. And you keep paying higher taxes on your earned income(even if it is capital gains.Period)

So, the way we do that..is

acquire assets that pay you money and redirect those funds to acquire more assets and build your cash flow and assets at the same time.

Make use of Govt provided loans to the fullest and get all the tax credits they give for an entrepreneur. Get subsidized land, power, water everything you name it. Now you know..why rich get richer.

We end up getting caught in this labor tradition (this the term my new course uses to refer to 99% population..only 1% of the pouplation in the world owns 99% of the wealth. There are only 9 million Millionaries in this world whose net worth is more than 1 mil$ just in investable liguid assets and cash) with out realizing it's exploitation.

Ofcourse none of this comes to us easily. We have to fundamentally change our thinking process and the way our mind and boyd reacts to things and observes the world around us.

We need to fill an unmet need in the marketplace.
Provide true value.
Be ethical and trust worthy.
Smart and Agile and know how to take advantage of this information overload and process it and put it to best use.

We have to develop a network of people and professionals who can help us achieve our goals.

Ok..ra...I guess I'm writing too much..so let me change gears here.

So, Are you with me on this new found direction? Take your time..let me know what you think.

Here are the few things we can get started right away. These below items will be easier for you to find out than they are for me.

What kind of a company registration will give us all the tax benefits and if possible land and stuff from the government.
How long does it take now for us to register a company and the buerocracy involved?
Try to develop a network of tax,legal and other professionals who can work with us.
Consult a tax guy and find out how to start a company between both of us with my PAN Card details. And what sort of risks do we run into?
How do we protect ourselves legally when we set up a business?
What banks give us the loan with a solid business plan and at what interest rate?
How much net worth do we need to produce to obtain a loan?

I would like to stop here for now.

Transform and think BIG

2008-06-02T14:44:00.000-07:00

If you look at history and read the succesful minds and bodies they work differently. They don't think like normal people. Even scientists and philosophers do fall under that crazy category. They look crazy to anybody who is not like them..but when you delve deep into their mindset they are bizzarely different.

Rich people think..how to make the money work for them. Not the other way which is becoming a slave for the money. Intially I had trouble understading this concept but when I analyzed it further..it made lot of sense..think about this..you have only so much time in your life..for e.g. I have only 14600 days left in my lifetime assuming I work till 70 yrs old. And if you take out weekends and holiday I have less than 10000 days left on my clock. When you start quantifying this it is mindblowing.

Then you got to ask this question to yourself..how come some people achieve so much in those same time period while we work for the rest of the life and then die. The problem is..when I die..I don't want to be like a vaccum. I have to generate some critical mass which carries forward....

So, how do we do that? Well, history has always proven that proof of knowledge and power is Money. How much money do you have? Again, it is not currency..it is your VALUE in versus others in the marketplace. How much you have to offer to others and make them transact with you in various ways, which ultimately leads to accumulation of power for yourself.

We have to fill in a need in the marketplace which is not served yet..that creates wealth and opportunities for others.

You don't have to have money to make money. If you have a solid business plan there are millions of investors waiting to pour money into your wallets. The key concept is how much Do we know..so that we can generate an idea..it need not be like Google / Infosys. Even if you provide employement to 10 heads and you don't work for your life as a slave for the money that is good enough.

Currency does not hold any value..it is almost zero when it comes to value. After 1971 when USA $ is taken out of gold standard..Fed can freely print money whenver they want. The whole economic system is being manipulated by handful rich guys sitting on the top. Do you know that FEDERAL reserve is not a Government entity in US. Ofcourse..in India it is still Gov held organization.

Another truth in life is you can never do it alone. You have to have networks of help. And they don't form in a single day..fly by night relationships. You are talking about building trust and increasing personal value by mutual cooperation.

My Travel

2008-02-25T10:09:00.000-08:00

wow...Infact this is the reason I wanted to get into blogging..I wanted to share my experiences with all of you..the places I have seen (becoz it is already a long list) and foods I have tasted and people I met with and cultures I really enjoyed...

Ok..so Let us start with all the places I have visited till now...by the way..I should say We visited..coz I love my sweetie and she has been my travel companion since day one and only after she came into my life I traveled so extensively...:-) ok..let me stop boring you guys..but here you go..

Contients:

Asia
Europe
Americas

Countries:

India -- my birth country
England
Scottland
Wales
Canada
Singapore
Thailand
USA
Malaysia

New beginnings

2008-02-25T10:04:00.000-08:00

Hello webmates!

It's amazing..I never tried to pen anything here...I was exposed to the computers first time in 1997 and since then spent 50% of my time with this little machine but amazing I never posted a blog..so I thought this is high time and created one today...let us see how this goes!!