The Tortoise Speaks...

A blog which periodically revisits evergreen investment principles!

Do companies get the shareholders they deserve?

Traditional Textbook Economics has the point of view of maximising utility. It means that each individual’s action in the economy is based on the expectation that they will make the maximum possible gain from a transaction. Whereas, behavioural economics has taught us, painfully, that we may not always be doing this well. We may set out with the best intentions of maximum gain but many times our actions fall short of the goal.

It is not the final action, but the motivation underlying the action, that decides what is or is not viewed as cooperative or fair behaviour.
– Games Indians Play by V Raghunathan

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Data Habits for the Digital Minimalist

What do we know so far…

  • Every single piece of information is a data point.
  • Very few data points are privileged to become an actionable data point, something that can be used to make a decision.
  • What happens to the remaining data points? They either get accumulated in a large heap of some trend or are ruthlessly forgotten by us for not being relevant.

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Fiction Therapy for Investors

There are many benefits of reading fiction.  Most of the productivity blogs / investing blogs I have read don’t offer much advice on how (or even why) to accommodate fiction in our lives. Apart from its entertainment value, fiction can be an effective tool to train our mind.

The future of a company, which we investors imagine today, is based on yesterday’s facts. It is in essence a matter of fiction. That’s what good fiction does. It provides us with a relationship between the facts. The narrative is just for us to absorb the trend a little better.

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Thinking with Books #1

It’s an understatement to say that books have been instrumental in helping me to learn. Non Fiction Books not only provide some structure about the topic for the uninitiated reader but also provide an approach towards the topic.

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Another Rate hike coming soon…

On 6th June 2018, the Monetary Policy Committee (MPC) of RBI increased the repo rate by 25 bps to 6.25% after nearly 4 years. Interestingly, the vote to hike as well as the magnitude of hike was unanimous. In the last MPC meeting, there was only one member of the MPC who had voted FOR the rate hike.

Another Rate hike coming soon…

Despite the RBI projecting a neutral outlook on future inflation, it remains a worrying prospect. Consequently, we have to grapple with the rather uncharacteristic dichotomy between the RBI’s words and its recent action. 

Increased crude (oil) basket prices…and the attendant negative impact on transportation costs are pointing to a rise in expected CPI inflation as suggested by the RBI Governor. 

RBI has already increased the inflation targets for H2 of FY19 from 4.4% to 4.7%. Core CPI inflation (ex-food and fuel prices) has crossed the RBI upper-bound of 6% after a long time, and shows signs of remaining elevated.

Impending US Fed. rate hikes may also put the Indian Rupee under pressure and further exacerbate the inflationary environment. 

Globally as well, growth has picked up – and impending trade wars notwithstanding – could eventually lead to  higher headline inflation and further test RBI’s resolve to maintain inflation within the much-publicised corridor of 4% +/- 2%. 

Lastly, don’t forget 2019 is an ‘Election year’ for India and history has shown that such years usually increase the pressure on the ‘fisc.’ and spur inflation.


So, what should you expect post the latest hike?
  • With 10 year G-sec yield crossing 8% , the cost of funds is set to rise
  • Home loans will become more costlier
  • You will earn more on your fixed deposits and liquid funds
  • With fixed deposit rates becoming more competitive, we could see mutual fund inflows slowing down a bit.
Given this backdrop, I would stick my neck out and predict that the RBI will announce one more rate hike in the next two MPC meetings this calendar year. 

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