Forget stocks, the real bull market is in veggie prices


This figure is not the return of any stock or investment.This figure is the increase in retail vegetable prices in October y-o-y

How can any ordinary investor inflation proof his savings with such high persistent and sticky inflation in food prices?

Maybe Jim Rogers was right after all:


Young people who have not decided on their futures should pursue agriculture degrees rather than MBAs, investor Jim Rogers told CNBC in a recent interview.


The reason? “Finance is in decline. In the future, the center of the world will not be finance β€” it’s going to be the producers of real goods.



Why I love Pride of Cows

A few months back I noticed a funny thing-whenever I made tea, there were a few specks of oil floating on the surface.

I couldn’t fathom where the oil came from.So I ignored it.

Then an incident happened.My wife had kept a vessel of boiled milk in the fridge.We went out of town and when we returned a few days later, we found that the milk had turned yellow with a thick layer of oil on top.

It was obvious that the milk we were consuming was adulterated.We changed our suppliers,our brands etc but to no avail.This article by Menaka Gandhi makes it clear of how common milk adulteration in India is.

We were at our wits end on what to do next.Fortunately, we found Pride of Cows, an initiative of Devendra Shah, owner of Parag Foods Pvt. Ltd.

The milk supplied is SUPERB comparable to the best overseas.It is pricey-more than double the cost of regular milk, but it’s worth it especially if you have children in the house.

This milk is so fresh and great that once you start having it you can’t go back to your normal brand.Would STRONGLY recommend my readers to try this.

Why FIR against NSEL was not registered under section 420?

Officials of one investigative agency is quite baffled with the Economic Offence Wing (EOW) of Mumbai Police on one issue. Questions are being asked why EOW skipped crucial IPC Section 420 while registering a FIR against the National Spot Exchange Ltd (NSEL).

But few investigative officers (who do not wish to disclose their agency name) are quite upset and concerned with EOW for not putting IPC Section 420 in its FIR. “Whether it is an ignorance, a mistake or an intentionally planned strategy – the consequences would be that our case would get weakened against NSEL and its schemes.”

Section 420 of the Indian Penal Code (IPC) covers offences relating to cheating and dishonestly inducing delivery of property. It also means that whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

“Why 420 was not invoked by EOW? It would have established the proceed of crime in NSEL case,” official said. He added, “It would have proven that total operation was manipulated and total transactions were misrepresented by NSEL and its management, for instance, disappearance of SGF amount. Now, not putting section 420 in FIR is like – saving skin of NSEL and its assets/schemes/products.”

Officer did not mince a word while saying, “its like proving Jignesh Shah not “Fit and Proper” to run the commodity exchanges, plan his exit route and than open the back doors for big giants to grab those controlling stakes in these exchanges.”from India Today

Board Proposes,Promoter Disposes

The company (Gitanjali Gems), however, is trying to hold on to whatever cash it has. Recently, its board agreed on a dividend but the promoters later opposed it, defeating the resolution by voting against it.

Exchange filings show at least some institutional shareholders were not in support of the move against the dividend but Gitanjali maintains it still has the backing of its institutional shareholders.

β€œIt is incorrect to say institutional shareholders opposed it. At the moment, in the current scenario, money in the company is more necessary than money moving out,” said promoter Mehul Choksi.-from BS

Indian long term equity return of 16% is a fairy tale

This number, 16 per cent, is liberally used by mutual funds, stockbrokers, financial planners and advisers to justify equity as a great long-term investment. I do view equity as the best option to beat inflation, but here is why the 16 per cent figure is wrong.

The Bombay Stock Exchange launched the Sensex in 1986. But it has calculated the Sensex data since April 1979 to provide a longer series, with a base index value of 100. It is on the basis of this that many analysts calculate historical returns for the Sensex. If the Sensex is quoted at 19,000, according to these data, the index has gone up 16 per cent, compounded, between 1979 and now. Only if the data are correct, that is.

For one, the Bombay Stock Exchange does not give year-wise Sensex data from 1979. The data for the Sensex that are freely available on the website of the Bombay Stock Exchange are from the year 1991 onwards. To get the data before 1991, you need to pay. According to what the Bombay Stock Exchange has generously shared with Moneylife, the Sensex rose from 124.15 as on April 3, 1979, to 991.26 as on January 2, 1991. The Sensex value as on April 3, 1979, was 124.15 and not 100, owing to the fact that the value of the index divisor has been arrived at by taking the average market capitalisation of all the 30 stocks for 1978-79. But are these numbers accurate?

From around 100 in 1979, the index moved up to around 500 in 1986 (according to data available with the Securities and Exchange Board of India), when the Sensex was actually launched. This would equate to an annual compounded growth rate of nearly 25 per cent in seven years! Is this credible? That would amount to a massive stock market bubble in the 30 top Indian stocks, almost equivalent to Nasdaq’s dot-com bubble. Does anybody remember 1979-86 as the period of a great Indian stock market bubble? If you assume that the index value of 500 in 1986 is correct, the data for the reconstituted Sensex of 1979 are suspect. Or the base data are correct and the index value of 500 is possibly wrong.

However, not only did the Sensex go up four times in seven years, it jumped to 1,193.61 on April 1, 1991, from 500 in 1986 – a rise of 139 per cent in five years. How credible is that? Remember that this was one of the worst periods for the Indian economy: the Bofors scandal, the disillusionment with Rajiv Gandhi’s government, V P Singh’s venomous raids on top Indian businessmen, his own short-lived coalition government, his regressive pro-reservation policies, and L K Advani’s Rath Yatra. It was an extremely difficult period for Indian businessmen, especially against the backdrop of galloping short-term foreign debt that culminated in near-bankruptcy for India in 1990. We had only two weeks of money for imports that year. To stave off the crisis, India had to pledge gold abroad. Now, should we believe that during this period, which was one of the most difficult periods in recent history, the Sensex was up 139 per cent, or 19 per cent, compounded?

Taking the entire period into account, the Bombay Stock Exchange would have us believe that the Sensex was up 19 per cent, compounded, annually from 124.15 as on April 3, 1979, to 1,194 in April 1991, a period of 12 years. If you believe the Bombay Stock Exchange, you will soon come across even more bizarre figures. According to the data, the Sensex moved up from around 124 in 1979 to a peak of 4,467 in April 1992, which translates into an annual compounded growth rate of 31 per cent.

One of the reasons why I strongly suspect that there are errors in these data is that the Bombay Stock Exchange does have a record of such blunders. The Bombay Stock Exchange reported that price-to-earnings (PE) figures for the Sensex were as high as 55-56 during the 1992 peak. On June 10, 1995, however, The Economic Times exposed this as wrong. In response, on June 14, 1995, the Bombay Stock Exchange dropped its PE to 42. This means an almost overnight drop in PE by as much as 25 per cent! Also, before September 1, 2003, the Sensex was calculated using the full market capitalisation of the constituents and dividing it by a number called the index divisor. And from that day onwards, the calculation method for the Sensex was changed to the “free-float market capitalisation” methodology. Under this, the level of the index at any point of time reflects the free-float market value of 30 component stocks relative to a base period. That leaves us with another thought. Is it fair to compare Sensex data before September 2003 with the data of the present index?

So next time someone tells you that equities are a great investment option because the Sensex has gone up 16 per cent, compounded, over the long term, take it with spoonfuls of salt.-wrote Debashis Basu in BS