It is a shame that the Prime Minister of this country is an economist and the Finance Minister a Harvard Grad. Both of them should be told that:

 

But basantjee..on second thought i dont think pm and fm has much degrees of freedom...if they dont do it,companies will bleed..if they go for price hike of petrol etc...comrades will flood the street with "Hamari maange....Aam aadmi pe atyachar ..bank strike...union strike...chaiwala going on strike " and wht not..

However...wht will solve this issue isnot economics but politics...if politicians muster the will to dismantle the APM in true sense and not introduce it thru backdoor....may be we have a way ahead..otherwise we will be consigned to hackenyed and ineffective policy measures of govt...

 

dnt we all know how active is our FM's family members in stock market ???

 

dnt we all remember the crash in May 06..come on guys throw some light on this ....

 

Very true Basant. PM/FM are not working as PHds or MBAs. They are leaders for country. What quality would you like in leaders? Somebody who does wrong things knowingly or stand up against force and do right things? If PM blasts commies and others and do right things, do you think left will withdraw? If they do that, PM would become hero.

 

I may sound strange, but IMO our PM gets more respect for his mastery of handling economy than he deserves. I am first one to admit that he is very honest person. He IS gentleman. But people always talk about PM as father of reforms and nobody talks about his blunders.

 

The reforms that he did was good job but it was out of compulsion and any govt had to do that. It was not rocket science. Even Pakistan had to import economist at the job.

 

Now let me talk about blunders.

I am not talking abt bank scam coz FM can may not be able to smell scams as there are individuals involved.

 

But when there was '91 bubble, Manmohanji actually believed the euphira. He never talked about bubble or did anything about that. And remember commodity stocks were trading at p/e of 60/70.

 

First we encouraged companies to put steel/sponge iron plants and then reduced import duties quickly before plants went into production creating huge bad loans and puting banking system trouble. The sequence of steps should have been upside down.

 

Then there was bubble again in '94 and Manmohanji didn't learn from previous experience. There were 30 IPO every single day and all kind of SATTAS were taking place with non-functional companies. Fly by night operators took flight at night - with people's money.

 

When they sold stocks of govt companies, they sold in bundles!! Have you ever heard of that, that if you want to buy pantaloon, you have to buy tisco and IPCL too? They said it was disinvestment, but most of those shares were given to UTI/Govt banks. So transferring assets from one pocket to another.

 

UTI fiasco. Less said batter.

 

After 5 years of Manmohanji as PM what was the state of economy? Int rates were at 18-20% and were were at one of the worst recession.

 

 

 

If Sonia would have been heading the Govt. we would have discounted the whole thing but this was not expected from SMS and PC.

 

The problem lies with we Indians.We blame the government for making these Oil Marketing companies bleed, but then are we behaving responsibly. Are we trying to reduce the oil we consume.... how many have decided yo forego cars for bocycles ot publictransporta. Unfortunately, India is not China, where the people will unite in no time and shun oil if they see their country in problem. I am not patronising the politicians and have been a vehement critic of them but I dont like we indians react to crisis. weare so symbolic in our responses.... we are vocal but then we dont really know how to fight as a collective unit.

 

coming to Oil Bonds, I beleive the governement was left with no other alternative.May be trying to fool everybody for some time.

 

 

Actually I can't agree with anything that you said. Govt IS to be blamed for mess. If we all start using bicycle, it will compound the problem. Govt is robbing peter to pay paul. They make money on patrol and subsidse other products heavily. If less patrol used, more loss to companies. Few questions: Is govt developing efficient public transportation? What will happen to car industry? Isn't free mkt better than all other systems?

In China people can't unite. Govt enforces lot of things. Even some horrible things.

 

It is not a question of "we Indians"  it is very easy to be an idealist and preach what others would do but it is so difficult to follow that. Do you know of anyone who has sold off his car and goes to office in a cycle. Now 100% of Indians cannot be wrong. Let us not make such sweeping statements that defy all reality.Are you in favour of some rationing system for oil? Basic demand supply economics would tell us that if oil prices are put at internationsl levels consumption will come down automatically.

 

If Manmohan Singh remembers a bit of Economics he learnt in ENgland and PC recalls a bit of the same he must have been taught before he left for Harvard I am sure they woulkd come up with better options.If someone tells me that this is the best they could have done I would add the following phrase to that line "to keep their seats and the vote bank".

 

 

 

 

Few points:

Why shouldn't we criticize wrong policies? If we do it may take long before it changes. If we dont it will never change.

 

Should we take solace from problems of US or others.

 

When we work every day, it helps economy. When we spend everyday it helps economy. When we put money into bank or invest in stocks it helps economy, so I guess we help economy everyday.

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So its very unfair that we as investors, wanting the industry and the economy to be "perfect" so that our stocks can zoom up, just go on critisizing the govt.

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Is it unfair for companies to sell something for more than waht they pay for? That is how business is done. Is business unfair? If these companies loose money how can they expand and how can the serve more people? They can't and that is why infosys had to wait for year and half to get connection.

 

 

I for one,has never beleived in the solidity of our growth story.By this issuances we are merely crowding out investments.This may not be visible now but will be visible when defcit finanacing will be resorted to pay for these bonds. I have always held the opinion that we are running on 1 major fuel:

Cheap Credit.

 

If credit no longer cheap as such issuances will prompt it not to...we will have some major issues to handle. We are merely delaying the inevitable, an end which would have been actually visible had the government allowed the oil prices to behave independently.Its really surprising to see people no longer taking it into their basket of risk.

 

Manish, seriously I am seeing some major risks emerging.... may be I am wrong and hopefully let me be wrong but there are questions which I am unable to answer. Thats why I am screening off those companies which have more than normal debt and that too denominated in domestic currency.I seek your views on this...

 

 

 

 

 

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As Mark Faber mentioned somewhere if we support growth artifically, then we are going on higher diving board. If situation doen't support higher growth, go for lower growth - consolidate. Artificial higher growth would be much more painful later on. Higher prices would take care of lot of things though. More people use public transportation, share transportation, they move closer to work, prefer bikes over cars etc. Japan has very high fuel cost but still economy is good so I dont think higher fuel price will stall economy. Now I am not for higher prices, but if cost is more then be it.

 

I am not too worried abt risk right now coz we have great momentum. There is no reason that investment will stop coming from inside/outside. I still see lot of people are getting good jobs and my frineds there say that productivity is improving. Deficit is concern but govt can burn furniture(PSUs) to stay warm in worst case.

 

Subsidies do more bad than good. For example due to subsidy on kerosene, people use that on autos and we had very bad pollution. Which effectively more costlier. Subsidies doesn't always go to needy people.

 

 

I sold out BPCL by the way. I think OIL may see higher price anytime now.

 

 

Coming to oil, I beleive people like Chavez and countries like Iran and North Korea will never allow crude to cool down(although N.Korea has a negligible impact, but nonetheless it heightens the tension). So, I agree that HPCL and BPCL are still not very attractive and stand in total agreement with your views.

 

Currently, I am adding my position in the following companies:

1.ONGC.

2.Great Eastern Shipping

3.BASF India.

4.Foseco India.

5.Chambal Fertilizers.

6.Some stray chemical stocks.

 

Will be delighted if you can throw your views on them. Also advise which Oil production company is alooking attractive. And also your views on Exploration and Off-shore sector.

 

In small companies Calvalley listed in Canada has good prospect but you wiil have to be patient as production is few Q away. At this price it may be available at p/e of 3. Reliance is partner in their project.

 

 

 

Just a thing I wanted to ask you. Dont you think governements world over subsidise stuff whose non-availability to the masses may be a cayse of concern. TheEU and the US devote a lot of funds for farm subsidies.I am not stansding against you but then the governments have to come up with some protective steps against the vulnerabilities.

 

Manish, my cousin is in Canda and she recommended Falconbridge and Inco. Any idea about both of them? From the look of your style, I dont think you have any aversion to commodity stocks. Do throw some light on other oil companies.

 

Regards,

 

Vivek

 

Falconbridge and Inco are biggie. When I invest in commodity, I dont go for biggie. Go for juniors and there is more money. They are very volatile though. To give you example if city is developing and you buy land in heart of city, it goes up 30%, but if you buy in far suburbs and wait for few years, you may make 500%.

 

Northern Dynasty(NAK) is trading at mkt cap of $550m. Value of recoverable metal in ground is mor than $150b. But it may take 5-7 years(minimum) before it goes into production and that might be one of the biggest mine then. With that scale they should have good cost advantage too. But one needs patients. I dont have NAK now but I trade in it. But some juniors are in potential p/e of 1.5-3 and prodcution is due in few months.

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Just a thing I wanted to ask you. Dont you think governements world over subsidise stuff whose non-availability to the masses may be a cayse of concern. TheEU and the US devote a lot of funds for farm subsidies.I am not stansding against you but then the governments have to come up with some protective steps against the vulnerabilities.

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Govts do what Govts do but that doesnt make it right. Govt  subside stuff to please voters. For non-availbilty concer, they can store stuff instead of subsidising. Subsidies do some weird things that we cant analyse. For example free power to farmers. Good cause but its not good for farmers themselves!! Know why?

When its free, they drain all the water(neccessory or not) from ground and water table goes lower and lower so they need more power. Free power would make utilities bkrupt so they send power with lower voltage and farmers motors burn. There are more frequent power cuts. They take forever to give new connections to farmers.

 

 

Point here is, if Brazil/Mexico subsidise oil it is not so bad as they have it. We subsidise something which we dont have. We should be working for long term alternate like Brazil did. NDA took initiative for ethanol but Manishankar killed program just because of it. We have enough thorium. What are we doing abt that?

 

 

Coming to one more cyclical industry, Shipping. I was looking at the Annual Report of Teekay Corporation and Alexander & Baldwin. These companies have such wonderful balance sheets and are doing all the things correctly.They are cutting their debts, accumulating big amounts in depreciation and all the positive things that a good corporate does.Dont you beleive they hold some wonderful potential when it comes to growth from here on..?????

 

I also agree now that subsidies do no good. Yourobservatio on free power was wonderful.There mustbe incentive for production and never for consumption.When you subsidise a consumption item you tend to artifically increase demand and until and unless you dont have the means to increase supply, such a step back-fires.Good take Manish.... Its all one and the same thing, the tax payers have to bear the oil deficit.... by directly paying more taxes or by seeing the value of assets erodr due to impending inflation.