Corporate Office Success Mantra

As a Team Leader, my success mantra to the team, always:

1. Resolve the problem

2. Report the problem

3. Skip the problem (at time on priorities)

Let me explain:

1. RESOLVE :

First, attempt to resolve the problem yourself. This makes employees think on their own, problems get solved quickly, they develop courage to take decisions, and drain on the company working is reduced. It is important to make employees feel empowered and responsible. It is also important to allow mistakes made in good faith with the intention to learn from them and not repeat the same mistakes.

2. REPORT :

Next, if you cannot resolve a problem, then it is your duty to report it to your senior. If non-cooperation or non-completion by someone else, then email and cc the seniors. A problem may become problematic if you fail to report it. An escalation ensures things move towards the solution

3. SKIP THE PROBLEM :

Resolve and Report are for meaningful problems. Then, there is always going to be a long tail of problems in any organization. Learn to skip those, as the ROTI (Return on Time Invested) is not worth its while. Solving these problems will not move mountains. Hence priority is very critical.

Initially in my career I was very enthusiastic to solve every problem, but this realization dawned upon me; knowing which problem to skip for later is equally important to remain focused on the game. Hope this helps my colleagues and team mates in the industry, across the globe.

Disclaimer : This is purely a knowledge sharing article, not offering or influencing any deal or transaction or investments.

CA Yogesh Birla

Director
Birla WP Management Co.
read my blogs : www.YogeshBirlaCA.Blogspot.com

Why the FED should pause now ???

1. After Bank Runs, Bank Failures and Bank Bail Outs, which are a direct result of the uber loose policies post 2008, the Fed has a chance to course correct and take a stand. They probably will not do so. 

2. The fact that today the US Treasury has backstopped ALL Deposits in the Banking system, that the US President has announced to the nation that all Deposits are safe and the govt will do "whatever it takes" to keep them safe, represents a culmination of regulatory failure. 

3. It’s inconceivable that Banks holding assets up to just below USD 250 billion were consigned to " regulatory lite" and allowed to do as they wished with their balance sheets. If there was a deep investigation into the root causes of the bank failures, it must highlight this. 

4. It’s a huge privatisation of profits and socialisation of losses, when the govt says, banks can operate as they wish, we will keep your deposits safe, Too bad that bank shareholders and bond holders will be wiped out. That goes against financial integrity and stability. 

5. The Fed has a very difficult task to bring down inflation without causing a recession. That should be consigned to the background, at least for a month, to study the depth of the brewing banking crisis.

6. How bad is the hit to bank depositors’ confidence? How much of the small and regional banks deposits will flow out to larger banks and to money market funds?

7. That data is paramount now for financial stability and integrity. Last year when the UK Pension funds threatened to blow up, the Bank of England actually suspended their tightening and came to the rescue of the market to ensure market integrity and stability. It took six weeks but they paused and then continued.

8. In brushing SVB, Signature and Silvergate root causes under the carpet, and in allowing banks to be bailed out by offering them "at par" loans against bonds that are USD 620 bn lower than their "at par" levels, a huge dysfunction has been brought into market integrity. 

9. That should be observed, measured and tackled and over time this "universal guarantee to all depositors by the Treasury" should be removed. Till then, why would the Fed raise rates and increase systemic stress?

10. What has happened in the US banking system will be very deflationary, will hurt confidence all around and will take time to normalise. In that raging fire, would anyone rational pour more fuel by raising rates?

11. This is the key question. Rate hikes work their way through the economy with a lag. We have not seen such rate hikes in such a short time since the 1970s and early 1980s. A deep recession set in as a result. Ultimately inflation was tackled at deep suffering to all.

12. The Fed needs to move out of its reactive, data dependence stance and have the guts to say, we are flexible, we just had a 10-sigma event, bond markets went crazy, banks failed, customers confidence plummeted, the President needed to reassure all. We will pause and study. 

13. That would be my suggestion. Take a Pause, analyse what is happening and then project what will happen if you raise rates more. The safer way is to wait for a month or two and then take a call, with more on the ground feedback in hand.

14. We are at a delicate juncture and the Fed's job is unenviable and thankless. But the root is the bubble due to the uber loose policies of the last 14 years. The reckoning is here and the price has to be paid for that profligacy. Let’s see what we get on Mar 22nd.

Crazy Investment Facts n Learnings 2023

13 crazy investing facts and what we can learn from them

FACT 1

Since 1980, the Sensex has made new all-time highs less than 7% of all days, but during that time it is up 49,548% (Absolute) / 15.45% (CAGR).

Learning: The stock market is not a linear curve, and you are underwater 93% of the time. The less you look, the better off you will be.

FACT 2

The Sensex has compounded at 7 basis points a day since 1980, with total growth of more than 49,548% (Absolute) / 15.45% (CAGR).

Learning: Compounding really is a magic.

FACT 3

The Sensex has only been positive 53% of all days since 1980. The average daily return is 1.10% when it is UP and -1.07% when it is DOWN.

Learning: Stocks do not have to go up every day to deliver a healthy long-term return.

FACT 4

Since 1980, the Sensex has spent more time 30% or further below the highs than within 2% of the highs (16.77% of days vs 11.55% of days).

Learning: No pain no gain. You will spend more time in drawdowns than near highs.

FACT 5

Between June 1994 and April 2003, which is the initial 9 years of my investing career, the market was lower by nearly 25%.

Learning: Stocks deliver returns in the long-term, yet there can be long periods of famine and opportunity loss. Survival is underrated.

FACT 6

If you had invested in the Sensex on Feb 29, 2000, you would have had to endure a drop of over 50% by Sep-2001. Your return today (Feb 28, 2023) would have been 10.91% (CAGR).

Learning: What matters in the market is time. If you had remained invested even after that ill-timed investment, your return by February 2023 would have improved to a healthy number without accounting for dividends. There is magic in compounding and the most under-appreciated element of compounding is time.

FACT 7

The 10-year yield in India bottomed at 4.95% on Oct 16, 2003. As the RBI hiked rates, the 10-year yield climbed to 7.31% by Nov 8, 2004. So, what did the Sensex do in the face of this sharp hike in rates? It climbed 21%!

Learning: Investing may be simple but it is not easy. Market outcomes are driven by multiple variables and relying on a single variable and its presumed correlation can be injurious to your financial health.

FACT 8

On Jan 3, 2008, the 10-year yield was at 7.77% and the Sensex closed at 20,345. The yield plunged to 5.24% on Jan 1, 2009. The Sensex dropped from 51% to 9,903 during the same period when rates dropped.

Learning: How well do you know correlations and causation? Correlations can change, they can also invert. Causation is uncertain and multiple factors come into play including but not limited to valuations, earnings and the unknown unknowns.

FACT 9

If bought in 2008, Gold outperforms Sensex, but if bought in 2009, Gold underperforms Sensex.

On Jan 1, 2008, the Sensex was at 20,301 and Gold (10gm) was at ₹ 10,631. On Feb 28, 2023 the Sensex is at 58,962 and Gold (10gm) is at ₹ 55,320. Gold is up 5.2x and the Sensex is up 2.9x. Gold did better than the Sensex.

On Mar 9, 2009, the Sensex was at 8,160 and Gold (10gm) was at ₹ 15,501. On Feb 28, 2023 the Sensex is at 58,962 and Gold (10gm) is at ₹ 55,320. Gold is up 3.6x and the Sensex is up 7.2x. Sensex did better than Gold.

Learning: Asset prices fluctuate. You can support any argument by changing the start and end dates. Which is why point-to-point returns can be misleading. It is always better to evaluate rolling returns.

FACT 10

If you had invested from 2010-2020 and beaten the market by 5% each year, you would have made less money than if you had invested from 1980-1990 and underperformed the market by 5% a year. The table below illustrates the same:

Sensex Decade Returns Returns in % (CAGR)

1980-90 22%

1990-00 14%

2000-10 18%

2010-20 9%

Learning: When you were born &started investing > almost anything else.

Returns are not linear or discrete. Alpha is important but it is not everything. Although being in the right place at the right time may not be in your control, it can influence your outcome.

FACT 11

Sensex earnings went up 38% in FY1996; the Sensex was flat. Nifty earnings were flat in FY2015, but the Nifty was up 27%.

Learning: The Sensex & Nifty is not equivalent to the economy or even earnings in the short term. Markets are forward looking and reflect various sentiments and expectations.

FACT 12

If we discuss the US market, we have to mention how at the bottom in 2009, long-term US government bonds outperformed the stock market compared to the previous 36 years.

Learning: Stocks generally outperform bonds, but there are no guarantees. Also point-to- point returns can be misleading.

FACT 13

Berkshire Hathaway Inc., cofounded by Warren Buffett (who is also the chairman and CEO of the company) had lost nearly 50% of its value during a 13-month period leading up to the dotcom peak in the year 2000. The NASDAQ 100, however, gained 225% over the same time! From its low in 2000 the Berkshire Hathaway stock recouped all its losses and made a new high by November 2003. The NASDAQ 100 which lost over 80% from its peak in 2000 recovered its highs 16 years later in 2016.

Learning: In the short run, the market is a voting machine, but in the long run, it is a weighing machine – Benjamin Graham

Conclusion

When it comes to investing, think of probabilities and of rolling returns. Consider valuations and practise asset allocation. Implement diversification and systematic investment.

To reap the benefits of compounding think long-term. In the formula for compound interest: ‘n’ i.e., time is under-appreciated due the fascination with ‘r’ i.e., rate of return. Together they make magic.Survival is underrated.

Women Entrepreneurship Schemes in India

 

We keep on talking on Women Empowerment initiatives to create a hype in our thought process, but logically not making them avail existing easy funding mechanism to fulfil their dream of getting really empowered. In USA 41.8% of all businesses are owned by women, alongwith 46.8% female labour force participation. Irrespective of all these schemes by Indian government, women comprise only 14% of the total entrepreneurs in India, with only 9.32% female labour force participation. We are hereunder summarising few of Government and Banking schemes to provide venture funding for women. Bring this awareness to make Nari Shakti on entrepreneurial platforms:

(1). Women Entrepreneurship Platform (WEP):

Mentorship, network, funding, skill training, Incubation, and acceleration program offered by NITI Ayog for women to support in their entrepreneurship journey.

Upasana Taku(MobiKwik) received support from WEP, their current valuation is ~₹5700 Cr.

Kavita Shukla(FRESHGLOW Co) received support from WEP, now has customers in over 35 countries.

Shradha Sharma(YourStory) received support from WEP, is one of the leading media platforms for entrepreneurs.

Radhika Aggarwal(ShopClues) received support from WEP, their current valuation is ~₹1,000 Cr.

(2). Mahila Udyam Nidhi Yojana

MUNY Offers loans upto 10 lakh to be repaid in 10 years for supporting women entrepreneurs to set up a new MSME / SME scale venture. It is offered by Punjab National Bank and Small Industries Development Bank of India (SIDBI) and the rate of interest better than prevailing in the market.

(3). Bharathiya Mahila Bank Business Loan

This scheme offer loans up to ₹20 crores to female entrepreneurs looking to start a manufacturing business. Ease of collateral free loan upto certain amount is big attraction of this scheme. The Bharatiya Mahila Bank merged with the State Bank of India, the loan programme is still active.

(4). Dena Shakti Scheme

Offers loans upto ₹20 lakhs at an interest rate 0.25% below the base rate for building a business in sectors like Partnership firm, business, Retail stores, Manufacturing sector, Microcredit organisations, Housing, Education, etc.

(5). Stree Shakti Yojana

Offers loans upto 20 lakh for industrial sectors such as housing, retail, and education. Also allows women to avail of an interest concession of 0.05% on loans more than Rs. 2 lakh.

(6). Stand-Up India Scheme

This initiative offers composite loans between 10 lakh and upto 1 Crore to women in SC/ST categories.

Kanika Tekriwal started JetSetGo with this initiative, their current valuation is ~₹100 Cr.

Rashmi Daga started FreshMenu with this initiative, their current valuation is ~₹210 Cr.

(7). Mudra Yojana Scheme

MYS offers loans of ₹50,000 to ₹10 lakh and ideal for setting up beauty salons, starting a small shop, home-based business, or starting your dream company.

Shanti Mohan started LetsVenture with this initiative, their current valuation is ~₹270 Cr.

Ananya Jain started Chai Break with this initiative, their current valuation is ~₹50 Cr.

Dream of Indian government of USD 10 Trillion$ economy in the next 10 years can happen true only if women contribute desired portion of per capital income with men. Wish all these initiatives bring women on a new horizon, with ease of funding and strengthen your entrepreneurial dreams to come true, and wish good luck to all the incredible women, who are making this world a better place to live.

Disclaimer : This is purely a knowledge sharing article, not offering or influencing any deal or transaction or investments.

CA Yogesh Birla

Director
Birla WP Management Co.
read my blogs : www.YogeshBirlaCA.Blogspot.com

Financial Independence and Retire Early - F.I.R.E.

This isn’t another one about Buffett’s wisdom on investing or life. It is about the relationship between time, health and money using Buffett’s wealth and age as clickbait. The author begins with “Would you rather have $0 and be 20 years old, or have $100 billion and be 90? Most people respond to this hypothetical with a resounding “Of course not, there’s no amount of money I would take to fast-forward to being 90 years old.””

“There’s a popular movement called F.I.R.E. (Financial Independence, Retire Early), where followers are devoted to living as frugally as possible so that they can retire as early as possible. While I agree with a lot of the merits of F.I.R.E. (namely the F.I. part), I disagree with the R.E. part. Retiring 10 years early at the expense of a considerable portion of one of the most valuable periods of life (your 20s/30s) seems absurd. 

For one, what is 10 years in the grand scheme of your life? On the back end, the last 10 years are almost negligible (besides, you don’t know if you’re going to live to 90 or 100 anyways). But on the front end, they’re considerably more valuable.

Secondly, work can (and should) be a large part of what drives fulfillment. Progress with whatever we're pursuing (whether we call it work or not) is one of the key drivers of happiness, so we shouldn't discount the value of work and its impact on our overall well-being.

Would you give up 10 years on the tail end of your life if it meant that you would have a more fulfilling 20s/30s? I think most of us would take that rather than the opposite — optimizing solely for wealth early-on to get an extra 10 years of retirement at the end.”

Buffett and Munger are perhaps the best example of deriving fulfilment from their work well into their 90s.

He then ties health, time and money together:

“Certain experiences that require peak physical health might only be possible in the 20s and 30s phase. For example, say you want to run your fastest marathon, or you’re like these two friends, Phil and Carter, and you want to journey from Beijing to Barcelona by bike. Sure, no one needs to do these things, but they’re experiences that would be incredibly enriching and novel.

And sometimes, physical health isn’t the constraint. If you have children, they will only live with you for 18 years of their lives, and before you know it, they’re gone. Any experiences you want to have with your kids, you have a limited time window to do those things. So, it makes sense that at this phase (the roughly 20 year period where you have children at home), most people would find the greatest fulfillment by optimizing for time spent with their kids — earning those experience points while that window exists.

A bonus of having richer experiences earlier in life is that you not only get experience points, but these early experiences pay “memory dividends” in the value of the stories they create — stories that can be retold time and time again.

Experiences yield dividends because we humans have memory. We don’t start every day with a blank brain… We wake up every morning preloaded with a bunch of memories that we can access at any time.

When you add in this concept of a memory dividend to the net fulfillment equation, something becomes clear: it pays to invest in experiences early.

Compounding works not only with money, but also with experiences.”

The author concludes with some brilliant graphic illustrations on why ‘Net Fulfilment’ over ‘Net Worth’ is a better pursuit in life.

Disclaimer : This is purely a knowledge sharing article, not offering or influencing any deal or transaction or investments.

CA Yogesh Birla

Director
Birla WP Management Co.
read my blogs : www.YogeshBirlaCA.Blogspot.com

Long Term Investors & Stock Market - 8 Lessons

"If you are a long-term investor, you should own high- quality stocks and close your ears to the siren song of those who say a rate rise will cause you problems.*

If you are not a long-term investor, I wonder what you are doing in the stock market at all, and so will you one day."*

- Terry Smith.......The "Buffett of Great Britain"

Terry Smith, often known as the English Warren Buffett, has once again shared his annual letter encompassing ideas on investment strategies positioned to do well, views on specific stocks and thoughts on the current financial world. 

Well-known in the UK among retail investors, Smith’s Fundsmith Equity fund returned about 18.6% in 2021 and holds 28.9 billion pounds ($39.4 billion).

Here are 8 lessons that we must take from his vision :

*1) No investment strategy will outperform in every reporting period and every type of market condition. So, as much as we may not like it, we can expect some periods of underperformance.*

*2) In investment, as in life, you cannot have your cake and eat it, so it is difficult if not impossible to find companies which are resilient in a downturn but which also benefit fully from the subsequent recovery.*

*3) In our view, it would be a mistake to sell some of these good businesses in order to invest temporarily in companies which are much worse but which have greater recovery potential.*

*4) Someone once said that no one ever got poor by taking profits. This may be true but I doubt they got very rich by this approach.*

*5) We invest in companies, not indices or countries and in our view, the country where a company is listed is largely irrelevant.*

*6) We continue to apply a simple three step investment strategy: Buy good companies, don't overpay, do nothing (i.e., minimising portfolio turnover to minimise costs)*

*7) You may have heard a lot talked about the so-called 'rotation' from quality stocks of the sort we seek to own to so-called value stocks, which in many cases is simply taken as equating to lowly rated companies.*

 

*8) Inflation: It is a bit like trying to light a bonfire or a traditional BBQ on a damp day. If you put an accelerant like gasoline on it you can go from no fire to a loud ‘Whoosh!’ and find that you have also set fire to the garden fence.*

The good news is that we do not invest on the basis of our ability to forecast inflation or any other macroeconomic factor. We invest in companies not countries, indices or macroeconomic forecasts.*

Disclaimer : This is purely a knowledge sharing article, not offering or influencing any deal or transaction or investments.

CA Yogesh Birla

Director
Birla WP Management Co.
read my blogs : www.YogeshBirlaCA.Blogspot.com