Wealth-Generators often go Contrarian

You knew that too, right? 

Sure. 

Going contrarian is a buzz-phrase. 

We hear it again and again…

… till we begin to start thinking… 

… that we know what it means. 

Well, try going contrarian. 

Yeah, try actually doing it. 

You’ll see what I mean. 

It’s real hard. 

Going against the crowd takes all the strength you might have… 

… and then some. 

Most humans aren’t able to go contrarian. 

Most humans aren’t wealthy. 

When there’s blood on the streets, there’s no telling how much more there will be. 

Under such conditions, the contrarian investor lets go of his or her hard-earned money into an investment, knowing perfectly well that the Street might even value the investment tomorrow at a huge discount to today’s price.

That’s ok too, says he or she.

Why?

Because homework’s been done.

Underlying is strong.

Debt-free.

Management is stellar.

Balance-sheet is robust.

Projections are paramount.

That the world is pricing the investment wrongly is a problem with its vision.

Underlying is not going under. With above credentials, this alone matters.

Times change. Vision of the majority changes. Investor makes a killing. Cashes out some, principal and what have you. Leaves lots of free-standing shares… forever… or till parameters change.

Wealth-generators repeat this behaviour-pattern many times in their lives.

They’re not afraid of going against the grain.

They know otherwise.

Also, the money they use has been freed up.

Its being out of action for a long time is not going to change their lives even a bit.

They will have the last laugh.

Wealth is the reward of going contrarian. 

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Anyone up for a Quereinstieg?

Yeah, another German word.

And it’s loaded. 

I love the German language for it’s ability to combine words so that they can deliver a fistful!

So, what does it mean?

Quer means at an angle

Einstieg means entry

If you bang with something head-on, you’re likely to rebound. 

If you chisel into something at an angle with great force, you are likely to enter that something. 

That’s the logic. 

And it works. 

Albert Schweitzer, was it?

The multiply famous nobel-laureate who proposed and demonstrated Quereinstieg into fluency with a foreign language?

The formula was, for weeks in a row, to read texts, delve into media, the whole works, all in the foreign language, without really understanding what’s happening at first, and then getting a hold of the language’s structure through Sprachgefuehl, or feeling for language

Within a month or so, one would be speaking the language. One’s skills would be enough to get by on the streets. Works. 

Sprachgefuehl in action is a prime example of Quereinstieg

These are fast times. 

Almost the whole day, one is multitasking. 

And then, something new comes along. 

A new problem. 

One has to find a solution fast. 

There is no time to start from scratch. 

All other matters must be pulled along. Many people’s daily lives and routines hang upon you pulling your load. 

So, where does that leave you?

Cut to Quereinstieg.

You delve into the new matter, fast, at an angle, without bothering how you’ll fare.

You keep all your faculties open.

Your senses are on high alert.

You use your common-sense.

You learn from the play.

As you keep playing, on and on, you master technique.

The matter is not a problem anymore.

You incorporate the new asset into your repertoire as you attack your daily routine with renewed vigour and an arsenal boasting your latest Quereinstieg conquest. 

Action Oblique Inaction Upon Field-Proof

You.

Field.

In.

No theorizing.

Just get into the field.

Act upon field-proof.

Or, don’t act…

… upon field-proof.

That’s just about it.

There’s a time for theory.

It’s to tune your mind.

Learn the ropes.

Baby-steps.

Away from the field.

So you’re yet safe.

Fine.

That stage gets over.

The onus is on you.

Real world is different.

It’s not like theory.

If it were, everyone following theory would be a billionaire.

Today’s professors don’t even put their own money on the line.

If you don’t get a feel for the LINE, your paper-knowledge has no value whatsoever.

On the field, LINE is big. Very big. You have to handle the line well. Otherwise, your money’s gone.

So, gauge the field.

What proof are you observing?

Is it compelling you to act?

Yes?

Act. Forgot about everything else.

Is it compelling you to sit still?

Yes?

Don’t act. Sit still. Forget about everything else.

Carve your own dazzling destiny.

🙂

Pain is Pain

Pain is pain.

Can you see it?

I know you can see yours.

Thanks for reconfirming.

Can you see the pain of others, by the way?

Does it register?

Do you walk by?

Who are you… or… what are you?

Decide which question applies to you.

For example, do you see the pain of that earthworm writhing in the sun?

It rains. Coupla earthworms come out, only to be met by scorching sun. They writhe. Do you pick them up with a twig and install them in a wet muddy patch? Do you ignore them? Do you even notice them?

Finance is not too different.

It rains on your plans.

You writhe.

If your overall strategy has not been adequate, you can even perish due to your predicament.

Do you expect help?

Well, who doesn’t?

Only, you are that earthworm now. You are in pain.

Pain is pain.

The earthworm feels it, and so do you.

However, the earthworm is not able to do much. It will probably perish.

You, however, are human capital.

Stop writhing.

Prove you prowess as being superior in performance when compared to an earthworm, or perhaps to a donkey.

Stand up.

Clear your head.

Analyze the situation.

Pain dulls.

You’ve got to push through, and come out of it.

Once you’re up, and through, as in out of your predicament, well, don’t make the same mistake again. You’ll make other ones, sure, we all make other ones, but let’s not repeat the same one.

Safe investing.

🙂

So, … … , When’s Judgement Day?

The “fiscal cliff” thingie has come and gone…

Gone?

People, nothing’s gone.

If something is ailing, it needs to heal, right?

What is required for healing?

Remedial medicine, and time.

Let’s say we take the medicine out of the equation.

Now, what’s left is time.

Would the ailing entity heal, given lots of time, but no medicine?

If disease is not so widespread, and can be expunged over time, then yes, there would be healing, provided all disease-instigating factors are abstained from.

Hey, what exactly are we talking about?

It is no secret that most first-world economies are ailing.

Specifically, the US economy was supposed to be injected with healing measures, which were to take effect from the 1st of Jan., ’13. Financial healing would have meant austerity and a more subdued lifestyle. None of that seems to be happening now. The healing process has been deferred to another time in the future, or so it seems.

You see, people, no one wants austerity. The consumption story must go on…

So now, since the medicine’s been taken out of the equation, is there going to be any healing?

No. Disease-instigating lifestyles are still being followed. Savings are low. Debt with the objective of consumption is still high. How can there be any healing?

Under the circumstances, there can’t.

So, what’re we building up to?

We’re all clear about the fact that consumption makes the world go round. What is the hub of the world’s consumption story? The US. That part of the world which does save, and where there is real growth, well, that part rushes to be a part of the consumption story. It produces cheaply, to sell where there’s consumption, and it sells there expensively. Yeah, like this, healthy economies get dragged into an equation with ailing economies. Soon, the entanglement is so deep, that there’s no turning back for the healthy economy. It catches part of the ailment from the diseased economy. Slowly, non-performing assets of banks in such healthy economies start to grow. The disease is spreading.

Hold on, stay with me, we’re not there yet. Yeah, what are we building up to?

Healthy economies take time to get fully diseased. Here, savings are big, domestic manufacturing is on the rise, and there a healthy demographic dividend too. Buffers galore, the immune system of a healthy economy tries to fight the contagion for the longest time. As entanglement increases, though, buffers deplete, and health staggers. Non-performing assets of banks grow to disturbing levels.

That’s what we are looking out for, when we are invested in a healthy economy which has just started to ail. Needless to say, we pulled out our funds from all ailing economies long back. Our funds are definitely not going back to economies which refuse to take medicine, i.e. which don’t want to be healed. Now, the million dollar question is …

… what’s to be done with our funds in a healthy economy which has just started to become diseased due to unavoidable contagion?

Nothing for now. Watch your investments grow. Eventually, since no one is doing enough to stop the damage and the spread, big-time ailment signs will invariably appear in the currently “healthy” economy, signs that appeared a while back in currently ailing economies. Savings will be disappearing, manufacturing will start to go down, and bad-debt will increase. Define your own threshold level, and go into cash once this is crossed. You might not need to take such a step for many years in a row. Then again, you might need to take such a step sooner than you think, because the ailing mother-consumer economy is capable of pulling everyone down with it, if and when it collapses. And it just stopped taking its medicine…

Let’s get back to your funds. In the scenario that you’ve gone into cash because you weren’t confident about the economy you were invested in, well, what then?

Option 1 is to look for an emerging economy that gains your confidence, and to invest your funds there.

Not everyone is comfortable investing abroad. What if you want to remain in your own economy, which you have now classified as diseased. There’s good news for you. Even in a diseased economy, there are pockets of health. You need to become a part of such pockets, just after a bust. So, remain in cash after a high and till after a bust. Then, when there’s blood on the streets, put your money into companies with zero-debt, a healthy dividend-payout record and a sound, diligent and honest management. Yeah, at a time like that, Equity is an instrument of choice that, over time, will pull your funds out of the gloom and doom.

You’ve put your funds with honest and diligent human capital. The human capital element alone will fight the circumstances, and will rise above them. Then, you’ve entered at throwaway prices, when there was blood on the streets. Congrats, you’ve just set yourself up for huge profit-multiples in the future. And, the companies you’ve put your money with, well, every now and then, they shower a dividend upon you. This is your option 2. Just to share with you, this is my option of choice. I like being near my funds. This way, I can observe them more closely, and manage them properly. I suffer from a case of out of sight, out of mind, as far as funds are concerned. Besides, when funds are overseas, time-differences turn one’s life upside down. This is just a personal choice. You need to take your own decision.

At times like this, bonds are not an option, because many companies can cease to exist in the mayhem, taking your investment principal out with them.

Bullion will give a return as long as there is uncertainty and chaos. Let there be prolonged stability, and you’ll see bullion tanking. Yeah, bullion could be option 3 at such a time. You’ll need to pull out when you see signs of prolonged stability approaching, though.

One can use a bust to pick up cheap real-estate in prime localities. Option 4.

You see, you’ve got options as long as you’re sitting on cash. Thus, first, learn to sit on cash.

Before that, learn to come into cash when you see widespread signs of disease.

Best part is, widespread disease will be accompanied by a big boom before the bust, so you’ll have time to go into cash, and will be ready to pick up quality bargains.

You don’t really care when judgement day is, because your investment strategy has already prepared you for it. You know what to do, and are not afraid. If and when it does come, you are going to take full advantage of it.

Bring it on.

Finding the “Switch-Off” Button

Gadgets have a switch-off button, right?

Whatever for, have you ever wondered?

Do we have one too?

If we do, is it clearly marked, i.e. is it easy to find?

If we do, and if it isn’t clearly market, where and how can we find it?

Why is it essential to find it?

What if we don’t have a switch-off button?

First, let’s observe the Master. Sherlock Holmes. Master at the art of switching off.

Observe Holmes when the next obvious lead will take a day to obtain. Since the case is going nowhere, Holmes will take the day off. He will play his violin, trip on some coke to study its effects on mind and body (he’s Holmes), go to the art gallery, or what have you. The case at hand has gone into oblivion. Attenuated. What happens when it is time to pursue the case again? Holmes switches on. He is fresh. Alert. The switching-off really helped.

Remember the “attenuate” button on your car’s stereo?

Why do you think it is there?

So you can take that call without getting disturbed by the music. The music is still there, but upon pressing this button, it becomes really soft. So soft, that you don’t get affected by it. You conduct your business on the phone, and then press this button again, and the music comes back on in its full glory.

Same goes for the markets.

Once you are in a trade, market-forces are connected to you.

If you cannot attenuate them during off-market hours, you can ruin your evenings, nights, weekends, health and family life

Big, big price to pay.

Not worth it, so get busy and learn to attenuate the market’s connecting force once you switch your terminal off. Rest assured, it will come blaring back at you when you switch your terminal back on, but that time between terminal off and terminal on is oh so precious. That time belongs to you, and not to Mrs. Market. Don’t allow her that extra privilege. Use that time for things that you wish to do in life. Use it for your family. Mrs. M will be getting your undivided attention during the next market session anyways. Let her be content with that. Keep her in her place.

Just as any gadget needs rest, so do you.

Sometimes, the markets go nowhere, and / or are choppy. It doesn’t pay to trade. Switch off from the markets. Take a holiday. Do something else, till conditions become better for trading.

Yes, we do have a switch-off button. It is not clearly marked. It is located in the mind. One activates it indirectly. By switching on to some other relaxing activity that has the ability to grab the mind’s interest.

Switching off is a skill, and this skill needs to be developed. We don’t necessarily come with it. Most of us need to learn it. Otherwise, we’ll become tired, erratic, irritable etc. etc., scale up to commit big blunders, and then we will eventually burn out. That’s if the Street doesn’t throw us out as paupers before a looming burn-out. Also, our family lives will have gone for a toss. Our children will remember us as dreadful parents. Yes people, we need to find the switch-off button asap, and then we need to learn to activate this button at will. Essential.

And please don’t worry about not having such a button. After all, it was the human being who put such a button into all gadgets. Well, the idea must have come from somewhere. From inside our own mind, perhaps, where our own button exists?

Recognizing and Reacting to A-Grade Tomfoolery

Air India and Kingfisher Airlines (KFA) … can you name two things these two have in common?

They’re both loss-making airlines.

Furthermore, there’s lack of will-power to make them profit-making, from the very top.

The problem with a government job is that you can’t kick the government servant out. The government servant thus enjoys complete job-safety and total lack of accountability. That’s been India’s recipe for ineffectivity and loss-making government institutions for decades. In Air India’s case, add to this massive subsidization by the government. Whenever the Maharaja can’t pay his bills, which is like every month, the government of India chips in with tax-payer money. There’s no real policy being pushed through to effectively earn something. Government servants travel free, big-time. If there’s a shortage of seats, honest, real-money paying citizens are off-loaded and left stranded to accommodate the highly evolved souls that rule our country.

Seriously, why do you still travel Air India? Because it’s cheap? Don’t you see through the tomfoolery? Are you blind? They might wake up upon sensing a complete lack of interest amongst travellers. Until that happens, and until they start performing with no ad-hoc cancellations and off-loading, travellers need to give them that wake-up call by using other airlines and by not subscribing to any money-raising gimmicks or IPOs that the company might come out with.

Cut to KFA. What’s wrong with Mr. Mallya? Unpaid pilots, unpaid fuel bills, unpaid taxes, seriously!?!

Vijay Mallya’s story is not about lack of efficiency. It’s about flamboyance. At the cost of his shareholders? Perhaps.

His liquor business is performing well. A little hand-holding through initial turbulence would have seen KFA through. One pays one’s pilots. Period. You don’t just hire scores of great pilots and buy a huge fleet of aircraft, and then stop paying your pilots. Such flamboyance is going to result in a loss-making enterprise for a few years, isn’t that common-sense? In that period, the hand-holding comes into play from the promoter’s other profit-making enterprises, right? Does that seem to have happened here? Unlikely, looking at the current status of KFA’s balance-sheet. Quarterly losses of 100 million USD and growing coupled with a burgeoning debt, Jesus Christ…

The airline industry involves a very precarious vicious-cycle. If you can avoid falling into it from the start, you are through. Prime example is Indigo Airlines.

The first signs of letting up tighten the noose one more notch. Unpaid pilots result in strikes leading to delays and cancellations. A traveller who has been bitten once decides to travel with the competition. Numbers fall. Now, fuel bills can’t be met. More problems, more delays and cancellations. Finally, you can’t pay your taxes. That’s when the tax department steps in. Headlines go ballistic. Huge bad publicity. Twitter battles. What was that? You want the same mollycoddling as Air India? You want government subsidization? Which world do you live in? Not happening!

Money needs to flow into KFA, not loaned money, but clean money, out of the parent-group’s own coffers. Any usage of KFA revenues to fund the parent-group’s activities is a strict no-no. For example, if the Kingfisher Formula 1 team or the group’s IPL Cricket team were even partly funded by KFA revenues, that would be a huge, huge red flag, given the financial condition of KFA. As of now, shareholders need to see some will-power emanating from the top to control the bleeding. The Street can even short the KFA stock down to zero if the promoter’s attitude does not change. Perhaps such an image-beating would be a wake-up call for the promoter.