I was unable to attend a cousin’s wedding during Covid times in early 2021. The missed opportunity was the catalyst for this letter. It has been edited for public reading without diluting the essence. I review & update it annually since then. Here is latest one updated on 6-Aug-2022.

Check this out – http://bit.ly/5moneychoices / Download PDF version

You are welcome to share feedback and queries in twitter @rajspace

Price of 1 share of ITC is Rs 257 (as of 14/10/2021)

The share represents part ownership in the business (not a piece of paper or line in the demat account)

In FY2019, the share generated Rs 7.60 in cash
In FY2020, the share generated Rs 9.90 in cash
In FY2021, the share generated Rs 8.70 in cash

All the cash generated belongs to the owner of the share. It is paid out as dividend or retained in the company. Difference is:

• Dividend is credited in the share owner’s personal bank account.
• Retained earnings is with ITC for new investments (capital allocation is the cool-sounding term)

In FY2019, the share generated Rs 7.60 cash. 5.75 was paid out as dividend & 1.85 was retained by ITC. (7.60 – 5.75 = 1.85)

In FY2020, the share generated Rs 9.90 cash. 10.15 was paid out as dividend & 0 was retained.

In FY2021, the share generated Rs 8.70 cash. 10.75 was paid out as dividend & 0 was retained.

(In FY20 & FY21, dividend is more than cash generated. Where did the excess come from? It came from past retained earnings.)

In the 1980 letter, Warren Buffet explains “the value of those retained earnings is determined by the use to which they are put and the subsequent level of earnings produced by that usage”. Later in the 1990 letter, he calls it “forgotten-but-not-gone” earnings.

Majority in the markets are not happy with ITC’s use of the retained earnings. The perception is forgotten-and-gone, up in the smoke of a cigarette! Hence the stock price has under performed in the past 5 years.

What about the minority in the markets? They have, in Tom Russo’s words, the capacity to suffer. A necessity to win in auction-driven markets.

Disclosure: Invested since pre-Covid times.

Ram: Markets are at an all time high… so many stocks doing superb! Wish my portfolio was better

Shyam: What do you exactly mean by “markets are all time high”?

R: Look at the Nifty & Sensex. Nifty is up 26% in the past 6 months, 31% YTD. Sensex is up 26% in the last 6 months, 28% YTD. Just yesterday, it was up 1%!

S: So by “markets”, you mean the indices – Nifty & Sensex. Isn’t that good? We are all benefiting 

R: Not really or at least I don’t feel that way. My portfolio is not.

S: ok, let’s draw an analogy. India is playing well and expected to win the world cup. Which of the 3 bets will you make?

1. Betting on West Indies
2. A dream team i.e best players picked from all teams
3. Betting on India

If you bet on A, then you are being a contrarian. You may lose the bet this world cup but could be the winner in the next. (this doesn’t make sense in cricket and most things in life but in investing it does. This is one reason investing is simple but not easy. It “doesn’t make sense” to a centuries-evolved human brain)

If you bet on B, it’s your portfolio versus the index. (large majority of investors including fund managers struggle to win over the index consistently)

If C, betting on India as a team means betting on the Nifty or Sensex. If “markets” go up, you benefit. If “markets: go down, you lose. There is no dichotomy of markets (aka indices) v/s my portfolio. index = portfolio.

R: So, which bet has historically worked the most in investing?

S: There are no right or wrong bets. One can bet on all 3 options, equally or varying weights. World cup ends and a winner emerges. Markets are perpetual. Hence the winner is different in 1 day, 3 months, 1 year, 5 years, 10 years, 20 years.

The question is what is your time frame? T20 or one-day or test?

Last week I had the opportunity to share my thoughts and experience with about 70 students from University of Mysore. The theme was life in the Indian IT Industry in 2021 & beyond – emerging trends in the industry & how to stay competitive as a professional.

I enjoyed the journey through the memory lane to distill the highlights. Here is a short summary:

1. Trend is your friend
2. Dream > Learn > Publish & Help (repeat)
   • Dream: possibilities are endless
   • Learn: on-the-job learning is different from college-learning
   •  Publish & Help: publish your works & build trust
3. Compete with yourself, not others
4. Avoid the zero multipliers in life

I am fascinated by the shipping industry. 90% of world logistics happens through maritime. 100s of seafarers are held hostage at any given time and hardly any of us care! The TED talk I have watched the most times is Inside the secret shipping industry by Rose George. In a connected world, only 10% of freight ships have internet available for its crew. I subscribed to the Shipping Podcast by Lena Gothberg a couple of years back & happened to listen the interview of Reshma Nilofer last week. She is a maritime pilot (India’s first woman) at Kolkata Port (Syama Prasad Mookerjee Port Trust) & recipient of the Nari Shakti Puraskar in 2018 from the Indian president.

1 insight:

1. Seafarers and maritime industry deserve recognition as much as healthcare workers in keeping the world’s supply chain running during the pandemic

2 experiences:

1. Accident while getting off a ship in bad weather in Aug 2020
2. Serendipitous entry into the shipping industry

3 ideas:

1. An aspiration for product labels to indicate the role of maritime industry in delivering the product to our hands.
2. The pilot is employed by the port, not the shipping company. He/she stays offshore at the port and uses a pilot boat to reach the ship. The pilot understands the waterways around the port and maneuvers the ship through the confined waters.
3. The highest grade of qualification for a seafarer is Master Mariner. A master mariner’s license is considered unlimited because there is no tonnage or geographic limitations for the holder to operate

Link: https://shippingpodcast.com/154-reshma-nilofer-maritime-pilot-kolkata-port-trust-india/

 

Micheal Saylor, CEO of Microstrategy, came up in my radar when I was developing deeper interest in bitcoin (reading this & listening to this). In Aug 2020, Saylor invested $250 million in bitcoins using Microstrategy’s cash in the balance sheet. An investor buying bitcoins is one but a business owner of a publicly listed company making a corporate treasury decision is serious.

1 insight:

1. Technology has “dematerialized” goods. Google dematerialized books & libraries. Apple did that to the camera, photo album, clock, atlas, music. These goods will never see inflation because the marginal cost for these goods is zero due to the demat.

3 ideas:

1. The headline inflation published by the government is irrelevant for most people. Inflation depends on the life we live and aspire for. Hyperinflation exists in scarce assets such as real estate in Tokyo, London, New York.
2. To drive adoption among masses- make it easy & give them a role model
3. On top of the core Bitcoin network which is the base settlement layer, blocks will get built such as Square & Paypal will solve the problem of buying coffee with bitcoin. Apple could provide the hardware wallet to store bitcoin. “Every time a new consistency joins the bitcoin network, they are going to plug a functionality gap”.

Link: https://www.theinvestorspodcast.com/bitcoin-fundamentals/btc005-bitcoin-michael-saylor-a-masterclass-in-economic-calculation/

I have not watched a single episode of Seinfield nor his standup comedy. I did not know how popular he and his shows are! Then why did I add the Tim Ferris interview of Jerry Seinfield to the listen queue?

• “he was offered $5 million per show to stay on another season – but quit because he knew the thing that made the show great was slipping away.” from Morgan Housel’s blog
• Systems, Routines, and Methods in the title of the podcast! (a case of catchy-headline bias!)

1 insight:

1. On writing – It is hard (arduous, painful, pushing against the wind in soft, muddy ground with a wheelbarrow full of bricks). No one can write all day. Two phases in writing: free-play creative phase followed by polish and construction phase. After you finish writing a piece, cherish the wonderful moment. Wait for a day before sharing with others. 95 percent rewrite.

2 experiences:

1. Verbal duel with the owner of The Comedy Store in LA (Jerry was 25 years old): I was angry. I was angry. I was frustrated. I was resentful. But I used that. It was just fuel for me. She wasn’t stopping me. Nobody was going to stop me. But when someone is that hostile to you, that can be a very good thing if you’re tough, if you’re tough enough to eat that shit and say, “She’s not stopping me.”. I went from three days a week to seven right there.
2. As a parent, Jerry did not have time for meals with friends and that is when “coffee happened”.

3 ideas:

1. Survival is the new success
2. Life in the 40s – “You get this free ride till you’re, let’s be generous, 43, and then God goes, “You know what? I’m going to move on to the people in their — 16 to 23 and I’m going to give them my best. If you want to hang around, you can hang around, but I’m not giving you anything anymore. It’s on you now. If you want to stick around, go ahead, but I got nothing for you. You figure it out.”
3. The mind & brain are different. Mind is the wisdom. Brian is primitive/stupid so systemization & repetitiveness is the key to master

Following books were referred to: Is This Anything? by Jerry Seinfield, The Last Laugh by Phil Berger, Body for Life by Bill Phillips, Seriously Funny by Gerald Nachman

Link: https://tim.blog/2020/12/08/jerry-seinfeld/

In the 2000s, Contest2Win was a significant Indian internet success story & Alok Kejriwal was the brains behind it. I looked up to Alok in those days. Hence was curious to hear to his thoughts & what is he up to recently.

1 insight:

1. Gaming/sports has strong sense of engagement. So much that people watch other people play even when they are not going to win [or have the pleasure of playing]

2 experiences:

1. Softbank was early investor in Contests2win. Softbank invited Alok to China & helped establish the Mobile2win business. (2001)
2. Alok’s company Mobile2win came up with idea to use SMS for the TV show Indian Idol voting (2002)

3 ideas:

1. Startups that change human behaviours become big
2. Difference between a mature & young entrepreneur: knowing what to punish yourself for & what not to.
3. Entrepreneurship requires deep insight. Such deep insights come from silence which in turns comes from being meditative.

Link: https://www.youtube.com/watch?v=UKK5YbDP48k

Founded in 1559 by Maharana Udai Singh II as a capital of Mewar kingdom. Surrounded by the Aravali ranges, the Jagdish Temple of Lord Vishnu, the City Palace, Lake Pichola are the places to begin your visit. Be at the city palace by 9am to beat the crowds.

Lake Pichola is man-made, built in 1362AD by a trader, not a king. It forms part of the sophisticated lake system of other artifical lakes such as Fateh Sagar.

If you like to include a cliché or two, use the public transport to reach Sajjan Garh/Monsoon Palace for sunset

Chittorgarh, 120km from Udaipur, was capital of Mewar kingdom until Akbar’s siege.

Will go again for:
– Hand-made art/crafts
– Lakes and forts
– Bhel puri

Will not go again for:
– The dust
– Expensive

When the plane touches down in Thailand, the mind is set on 2 things: Thai food & Thai massage! Yes, there is a long queue for the visa, the taxi will overcharge, and the traffic is congested. Yet good food & a hearty massage make for a great day in Bangkok.

In a recent short trip to the land of the free (Thai means free, hence land of the free is Thailand), besides the usual indulgence in the sour & spicy Thai flavours the new experience was the Suki, Thai-version of the Chinese hotpot.

The concept of Thai Suki is simple- Every table has a gas or electrically heated pot of broth & ingredients such as vegetables, meat, sea food, noodles can be ordered to choice. The ingredients are cooked in the broth & dipped in a spicy sauce to make for variety of tastes. The broth turns into a nice soup with flavours from the ingredients such as a tinge of sweetness from the corn, the earthy flavours of the mushroom, amazing aromas of celery… Spring onions, Bok Choy, Pumpkin, Carrots, Lotus Roots, Chrysanthemum were some of other vegetables on offer.

We made it to the MK restaurant around 6.30pm on a weekday & the occupancy was close to the capacity of 30-odd tables, primarily locals. As it turned out later, MK is a popular chain of over 300 Suki restaurants operating in multiple countries. The other option is Coca Suki, who are the original creators of the concept in the late-50s.

On other news from this trip: I was accompanied by a friend who was visiting Thailand for the first time. He violated the basic rule of ordering food in Thailand – “never ask for spicy food”. The chef did bloody well to more than meet the request!!!