Indian value investor Chandrakant Sampat has joined the growing list of well-known economists who believe the efforts of the world’s central banks to save their respective economies will end up destroying them instead. Money Control’s Santosh Nair chatted with Chandrakant Sampat on Monday, revealing his concerns about economies around the globe.
“Today, capital markets are blindly chasing growth achieved through reckless consumption, greed and fiat money,” he told Money Control.
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He also said that economic growth doesn’t come through printed money. It comes from the earth’s resources, which are “fast being depleted. He said it’s time for the world to begin being “responsible.”
Chandrakant Sampat As India’s Warren Buffett
Some say Chandrakant Sampat is India’s Warren Buffett, and that certainly may be true. He lives quite frugally in spite of his vast wealth. His portfolio contains a number of MNC blue chip stocks, and he’s now one of the biggest individual shareholders in several companies including Hindustan Unilever Ltd. (BSE:HUL) and Nestle SA (VTX:NESN).
Like Buffett, Chandrakant Sampat receives numerous requests to share his investment philosophies, but most talks lately are focused on sustainable growth and the need for capital markets to refocus their efforts back on the “efficient allocation of capital.”
Chandrakant Sampat Is No Longer Investing
The value investor does say, however, that he stopped making investments a few years ago and that he believes investors in the stock market should prepare for difficult times. He says companies are more dependent on the global economy than ever before, so no longer can the financial health of companies be questioned solely on their own balance sheets.
“If the economy itself collapses, where is the question of individual companies doing well?” he asked.
In the U.S., worries about the end of the Federal Reserve’s bond buying program sent stocks into a downward spiral, especially after the positive jobs report last week. Gold prices went into a nosedive, causing some investors, like Chandrakant Sampat, to question whether the world has become too reliant on the easy money policies of the world’s central banks.
Are The Indian Markets Really Better?
Some have said the Indian market is doing better than others because of standards regarding corporate governance. He said many companies in India have a lot of debt on their books, and their top executives receive massive compensation packages. He also said promoters of these companies often live lavish lifestyles on the backs of shareholders and the general public.
“The misallocation of capital has created a new minority class of elites who have been the biggest beneficiaries of capitalism,” he said.
Greed And Consumption
Chandrakant Sampat also pointed to the chaos in U.S. markets and the ripples it will likely cause in India. He also senses a significant drop in value investing and an increase in greed and consumption.
“The trillions of dollars gushing across the globe are not seeking value; they are merely chasing yields,” he said. “An increase in US Treasury yields from 1.3 percent to 2.5 percent has triggered a collapse in many markets as funds move out to the US. Just imagine what would happen if the yields were to rise to 4 – 5 percent. There would be chaos in India. The RBI would just be helpless. It is not fundamentals, but behavioral forces at play, and no central bank can fight that.”
India’s situation may be much more daunting than some realize because of the deficit between what the Indian economy earns and what it spends. Chandrakant Sampat also said that the world’s increasing population isn’t the bigg problem. Instead, he said it’s the rising expectations of the next generation because consumption isn’t anywhere near where it was in the century before.