Investment strategies for today

More and more, investment strategies have to focus on the macro aspects like sector performance, asset class performance, etc.

The old mantra of "be invested in all asset classes and it will average out over time" may no longer apply.

When Benjamin Graham wrote "The Intelligent Investor", he emphasized on individual stock selection and margin of safety. With the democratisation of information,  AI analytics and the surfeit of analysts, it is not easy to find the proverbial  "cigarette butts".

Then Buffett came up with "find good companies at a reasonable price" formula.  Buffett, Peter Lynch with his Fidelity Magellan Fund, and the likes of Jhunjhunwala and Sadashiv Mankekar could do it. It is still possible to do this, but not everyone can be like these greats. It is also increasingly difficult to "discover"  hidden gems, for the same reasons as stated above.

The market is increasingly driven by instritutional and cross border money flows. They all tend to move in a herd, and there is always a lag between a trend becoming obvious and it catching on. Can you as a retail investor spot the trend, and move before the herd does?

For example, the place to be for the immediate foreseeable future is gold and silver, gold and silver mining stocks, commodities and within commodities copper and Uranium, and  commodity stocks.

I am in the process of shifting my investments to these. Whether I am right or wrong only time will tell, but there is no option but to have a view and act on it.

Ultra defensive plays like shifting predominantly to debt at 7 to 8 percent taxable is also likely to be disastrous with high inflation on the cards across the world.

We are living in very interesting times.

Import duties on gold and silver

So it has happened! Import duties on gold and silver have risen to 15 percent from 6 percent.

India does not have gold and silver mines, all our gold and silver is imported.

This is a move to save foreign exchange. It has been tried before, and rolled back too since it didn't succeed or had other unintended consequences.

Other consequences, like what? Well, when duties are so high, the arbitrage for smugglers becomes attractive. At 15 percent, the arbitrage is salivating.

Gold is especially easy to smuggle among all the items that are smuggled worldwide. It has very high value to weight / volume ratio. It can be cast and recast into any shape you want. And there is a thriving market in it across the world, after all it is the oldest form of wealth known to mankind.

Now watch all jewelers perk up, especially the kerala based ones. No doubt the newly elected government there is already setting up a gold smuggling coordination cell, not for curbing it silly, but for aiding the smugglers!  Kerala is especially famous for this. No doubt others will follow.

What could be the scale of this smuggling?  The world production of gold is about 3000 tons per annum. India traditionally consumes about one third of the world production. We are talking of the Indian retail market here. Which is about a thousand tons.

Let us assume twenty  percent of this is smuggled. That is 200 tons.  

Gold is currently at 4700 dollars an ounce, which is 150,000 dollars a ton, which is about 1500 crore rupees. The cost of 200 tons works out to 3 lakh crores, and the import duty margin at 15 percent is 45000 crores. This is not counting the gst arbitrage which at 3 percent is another 9000 crores. 

Now once that gold comes in, money has to be sent out through the hawala channels. Instead of money, often it is a reverse flow of goods. Like drugs. Originating from the golden triangle or golden crescent, flowing through india. Or it could be other goods.

There are second order and third order consequences to such a decision.

All governments hate gold. It is for the same reason that all religions hate sex. It is a force they cannot control.

We have highly interesting times ahead, increase in duties on gold was only the first salvo.

Meanwhile, the price of my gold and silver holdings would have risen by 9 percent. Let me go check. 

Travelling in a bubble

Am just concluding my second visit to Bhutan, as part of a motorbiking group. 

Imagine a country with a land area of 38000 square kilometres with a population of just 800000. My suburb in Bangalore has more people! 

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Bhutan shares borders with West Bengal and Assam in the south and Tibet in the north. Historically, they have never been colonised, and have always been isolated. Buddhism came in sometime in the eighth century and spread all over Bhutan. 

The entire country is mountains, part of the Himalayan range. There are monasteries all over, with the iconic Tigers Nest being the most famous. 

Sandwiched between two giants, India on one side and China on the other, here lies a quaint, isolated bubble of a country, somewhat like a real life museum. 

They never encouraged too much contact with the outside world. Even TV was "allowed" to enter the country sometime in the 1970s. 

Historically, for several centuries, power was divided between the king and the monks. It became a kingdom in 1907 with the Wangchuk dynasty installing themselves as hereditary kings. In the nineteen seventies it became a constitutional monarchy, with the King as head of state and a Prime Minister and elected Council of Ministers. 

The King has a semi divine status. The country is quite prosperous, with agriculture, tourism, and inward remittances - one in ten Bhutanese have settled abroad. 

Touring around the country is like visiting a well preserved National Park, largely untouched by outside influences, with people living in a time warp. The culture and practices are quaint and simple, as you would expect from centuries of isolation in such forbidding terrain. 

They are fiercely protective of their culture, including their dance forms and national dress. It is mandatory for all citizens to wear their national dress on most occasions, including government employees at work. 

It appears like the king runs a welfare state, with basic necessities being provided for. Education and medicine are totally free. During covid, citizens got a special monthly dole. 

The roads are excellent, and basic Indian food is available everywhere. In the last few years, tourism has been severely restricted - Indians pay 1200 per day of stay in the country, foreigners pay hundred dollars a day. A guide to accompany every group, including a group of one, is mandatory. Minimum grade of stay is three star hotels. Bringing in two wheelers or cars from India will cost more in daily fees than renting them here, and the rentals are not cheap.  

Which is an attempt to preserve the bubble in this mad mad world. Don't know how long it can last, but then it has lasted for centuries. 

It is very difficult to find places in the world today which are largely uncorrupted by outside influences. The people are gentle, simple and nice. 

Travelling around the country is like going on a highly curated conducted tour. 

It is a must visit, for all these reasons. Something you need to add to your bucket list, if you have not already been here.

Gold ETFs:The beginning of the end

HDFC AMC has sent a communication to all its Gold ETF holders.

It essentially states that the ETF will hold a minimum of fifty percent gold ( which number is ninety five percent now), and the balance can be "gold equivalents". 

It looks like SEBI may have relaxed some rules in the backend. 

Other fund houses may follow. 

In the US, most Gold ETFs are similar, they need not hold hundred percent physical gold. 

This is not a good developement and investors need to watch out. 

The whole idea of holding gold is that it is the ultimate insurance against total systemic collapse, apart from earning investment returns. 

This step introduces a lot of unwanted counterparty risk in what should be a straightforward product. 

The best way to hold gold is in physical form, in your possession. I would recommend this for several reasons, which I have gone into in earlier posts. 

The next best way is to hold Gold ETFs which have close to hundred percent physical holding. 

Investors should be careful before investing in any Gold ETF. If you are in the US, invest only in Sprott, they definitely hold hundred percent physical. 

If you are in India, definitely don't invest in HDFC, and keep a watch on the others, they may go down the same path. 

Some people may respond saying "big deal, why hold gold at all". That would be a big mistake. I just hope for all our sakes that the world does not end up in a situation where I will have to tell you "I told you so". 

REVIEW OF DHURANDHAR 2

Dharandhar 1 was pathbreaking. Dhurandhar 2 continues the good work. 

The Left Liberal appeasement nonsense is out of the window. 

The Aman Ki Asha nonsense is put to an end.

It is not at all subtle in its political messaging, and that is a good thing. The Indian public are not fools, they are politically very well aware, and they know that the incidents referred to in the film actually happened. 

Ok, so what are some of the messages? 

Terrorism has islamic roots. 

Pakistan's ISI is the biggest villain. 

Congress, SP, etc are hand in glove with the Pakis, anti national, and aiders and abetters of terrorism

The days of pussy footing are over. Ghar me Ghus Ke Maarenge is the new slogan.

Once the BJP came to power in India, for Pakistan it was the beginning of the end. 

The Balochis are suffering in Pakistan. They need to shake off the evil yoke of their Sindhi and Punjabi masters. 

And so on and so on. Every Indian watching this knows that this is reality, not the sugar coated candyfloss that Bollywood, under the control of D Company, has been dishing out to us.

Ranveer as the Indian spy, Madhavan as the Ajit Doval equivalent,  Arjun Rampal as ISI front, Rakesh Bedi, Sanjay Dutt, are all excellent in both the movies. Sara Arjun as the main ( and only) female does a good job too. 

The film is almost four hours long, but it doesn't feel too dragged out. The last scene is predictably a dishum dishum between the hero and the villain - nothing has changed since the Amitabh Bacchan versus Pran days, but that is excusable - it is cathartic to see your villains being bashed on screen. 

The songs are not as good as Part 1, and they are unlikely to become iconic like those did. The musical score is very good and tight though. 

So far the films, like Kerala Story and Kashmir Files,  that tried to buck the usual Bollywood narrative have been, how to put it, quasi documentary types, not really a threat to the Bollywood Badshahs. But this film beats the Bollywood variety in all areas, including technical excellence, taut storytelling, drama and direction. Aditya Dhar as Director has done a phenomenal job. 

Move over Bollywood,

Welcome to the New Bollywood!