Kanoon sabut mangata hai

This happened during under-graduate days of Analyst. There was one inter-college competition on “hospital waste management”, it was pretty good learning experience. Team went around hospitals speaking to hospital management & other related people to understand how waste is managed or disposed.

So student team along with college professor went to meet person in charge of waste disposal in one of leading government hospital. So students were getting tour of hospital & systems, and then team sat down for more discussion. During meeting, Analyst asked what hospital does with expired medicines. Reply was pretty simple, they throw it in dustbin. Analyst further queried, whether that was the right way to dispose? And reply was affirmative....its right way to do it. Still unsatisfied, analyst queried but don’t you think that can be bit dangerous? And reply was... “Hospital has never come across any such situation”.  By this time, team was miffed...why analyst was stuck on this and not moving on, so somebody dropped in with another question and conversation moved on.

Few days later on, while working on project one team member comes and announced loudly...you got listen to this case...... it was story about how street on kids live, they find food by looking in dumpster/waste basket and one such unfortunate kid happen to find strips of colourful medicine. Thinking it as chocolate he popped few and fell seriously ill & was admitted to hospital. Post recovering kid was questioned on source of those chocolates and he pointed to dumpster outside hospital.  Whole team was taken aback and thought to make this as key point.

Analyst was wondering why anybody didn’t see this coming when he was questioning about hospital throwing/disposing expired medicine in dustbin. Well sometime one has to lay things bare out; one has to actually say out loud things for people to understand. However, it’s not that easy, there is popular saying in legal parlance “kanoon sabut mangata hai”.

So if I tell you gold can actually fail to be good investment, most of the general people would discard that idea without second thought. But have a look at this (click on pick to enlarge or click on this link - Graph -1)



That is graph of gold price in US$ / ounce from 1983 till date, look how price that was ~US$400 (1983) was around that level till Oct-2003, full 20 years. Needless to say one would have made mistake. However argumentative Indian would say that is in US$, while I am India, I buy in INR. Then have a look at this (click on pick to enlarge or click on this link - table-1 RBI historic gold prices).



Notice price in 1993-94 ~Rs4500, while in 2001-02 it was near same. Time period is slightly less than decade (8-years to be precious) but still one didn’t make any money.

So now you know how to judge your Relationship Manager/ Investment Advisor/ Analyst (quality of their knowledge & advice). Next time if somebody comes and says gold is good investment as it has always risen, think like Jason Bourne and search for emergency exit for run away.

Read, Learn, Improve

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What motivates us?

It was Diwali time and wishes were being constantly exchanged by friends on cell, mail, facebook etc. Analyst had recently upgraded his cell and had installed whatsapp on it, so maximum conversation was beginning to shift there.

One evening, a message popped up with photo of goddess Laxmi that said “Pass this along lucky Laxmi pic to 10 people and wealth would follow you for rest of your life”. This is very simple and amazing message. To a rational mind this should sound absurd, how is it possible without doing anything just by passing this one can get money....that’s all....so simple ...huh?....this in fact is nothing new phenomena at all.  One who has lived during 1999-2000 (circa – 1999-2001...the rise of dot.com), followed by mobile boom and had been part of cycle when PC & net revolution swept through country one could easily related this. During those days one received numerous mails and sms on similar lines. And most of the time people without thinking too much followed instruction of forwarding it. Messages came in variety, right from blessing of goddess Laxmi (wealth) to all time happiness for family to all time peace or really scary one with some pic saying you have opened it and invited trouble forward it to avoid it thing. And message pretty much went on & on & on till the time it found it on new medium from email to sms to facebook to whatsapp to ....some place new.

So even though most people can easily make out this is just time pass activity, why do they still do it?.......................Well answer to it is “Greed and Fear”

Human beings are greedy and fearful. So when one receives a message that says “forward to receive good luck/wealth” our minds are motivated by either of 2 above mentioned factor: Greed and Fear. We think, 1) “hell who doesn’t want more money, also what does it cost me anyway to forward this msg” or here is 2^nd thought “ok this is stupid message, nobody can become rich by simply forwarding msg......but....what if my neighbour or my friend suddenly become rich and I didn’t...then what?....damn let me not take any chances and forward this”.

I am sure most of you would have spotted Greed and Fear in above decision; most of us have learned Maslow’s theory of Motivation (hierarchy of needs), there too security is first basic thing we seek and till date it works on us. There is difference in being greedy and ambitious; there is difference in being scared and panicked. Whenever our decision are based on extreme situation (irrational choices).....one tends to pick a wrong choice. Remember all those individual who invested in a scheme that offered to double their money fast, remember all those stock tips that stock broker or agent gave you.

Human beings are flawed creature. We are not perfect and so is nobody, our choices are only half chances (picked up from a song).......hence we try to maximise our chances for survival and winning. Before making any decision specially pertaining to investment/money, try being rational, think for a minute whether decision being taken is on its merit or driven by greed & fear.

Read, Learn, Improve - 10-Jan-15

Read, Learn, Improve - 10-Jan-15

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How one man’s wild geological treasure hunt could set off a new great oil boom – Link here

What’s up with Binny (514215)?

Backgrounder

I have been in market for almost over decade, I had never heard of Binny Ltd (BSE Code - 514215), however I had heard of Mohan Distilleries or Meakin Mohan owner of popular brand Old Monk and many other alcoholic and non- alcoholic brands – Full List.

So when newspaper reported that Binny Ltd would consider merging with Mohan Distilleries (Mohan Meakin), needless to say how much unbelievable news that sounds.



To verify above news I checked out stock exchange notices and was surprise to find notice did confirm the same. Company had put up notice on 14-Nov-14, full 14 days prior to it was carried in Hindu BusinesslIne (not sure about other major newspaper as I didn’t spot or I missed)



Interesting thing was stock was up 10% on 14-Nov-14 (Friday) on day of announcement, even thought announcement was posted on BSE at 3.56pm, post market hours (nudge nudge wink wink). And o yeah stock was down for next 4 trading session post that.



Then another announcement on 26-Nov-14 that says “board would consider development of land”. This was quickly followed by another announcement on 28-Nov-14 that reiterated land development and consider & evaluate merger with Mohan Distiller.





Stock prices had marginally recovered post going down for few sessions



Beginning of Upper circuit – 1-Dec-14

Then another announcement on 1-dec-14 that said “The Board has accorded its in-principle approval for the merger of M/s. Mohan Breweries and Distilleries Limited, a Company under the same management along with its Subsidiary, M/s. Arthos Breweries Limited with M/s. Binny Limited and directed the Company to submit the scheme of merger for final approval.”  Now it looks deal would be seal, if you had bought shares on first announcement (14-Nov) by now you would feel redeemed, things are moving, its matter of time before you recover your investment (by now stock was down by ~14% from 14-Nov).





Day of reckoning - 15-Dec-14

Company made announcement of upcoming board meeting on 18-Dec-14 to update on merger



It would here that you would feel like Bryan Adams singing “Cloud 9”, from 14-Nov-14 stock would have given return of 61% till 15-Dec-14. However if you had waited for more clarity post first announcement (14-Nov-14) and bought it on 1-Dec-14, return would be 87% till 15-dec-14.



Beginning of down circuit – 18-Dec-14

Then on 18-Dec-14 company announces “decision to drop merger plan”,





I am not sure what exactly is cooking up in Binny, but I am sure it raises question of corporate governance.

In markets, very often one discover cheap stock, there is reason why they are cheap.

Binny Ltd – Price (LHS) & Volume (RHS)