Indian Prime Minister Nahendra Modi has declared 500 and 1,000 rupee notes illegal for exchange. Since these are worth a mere $7.26 and $14.53, he has de facto ended paper currency for use in all major transactions.
Half the population do not have bank accounts, and consumer trade has come to a screeching halt. That is because the highest permitted denomination fetches only about one US dollar, and exchanging the larger notes requires long waits and government identification, which a quarter of Indians do not possess.
Beyond the self-inflicted economic crisis, Jayant Bhandari says India is becoming a police state. She is on a fast track to banana-republic status, before fragmentation into smaller political units.
The DG Value Funds were up 2.7% for the third quarter, with individual fund classes ranging from 2.54% to 2.84%. The HFRI Distressed/ Restructuring Index was up 0.21%, while the HFRI Event-Driven Index declined 0.21%. The Credit Suisse High-Yield Index returned 0.91%, and the Russell 2000 fell 4.36%, while the S&P 500 returned 0.58% for Read More
The gold market in India is in chaos, as people rid themselves of the domestic fiat currency: the price per ounce has skyrocketed to above $2,000, and tax authorities are blocking the retailers. This means the black market is set to boom, as smugglers adapt to the new opportunity, but import demand from India has dropped momentarily, since the formal markets are under the gun.
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Another dent in confidence of fiat currencies. What are YOUR thoughts. Lessons? I will pay $1 million dollars to ANYONE who can tell me how central planning helps people increase wealth over time vs. free exchange.
The balance between quantitative and qualitative research
“There’s so much you can tell in a 10-minute tour of a plant.
I can tell you right away whether we’re making money, if we have quality or delivery issues (so customer issues) and if there’s a morale problem. It’s easy to tell.
But you can’t tell until you go there.”
– Linda Hasenfratz, CEO Linamar Corporation, in conversation with The Women of Burgundy, September 21, 2016
One of the familiar tensions underlying the quality-value investment discipline is the balance between quantitative and qualitative research. Many investors intuitively understand the importance of assessing the quantitative aspects of a business. We analyze the numbers to understand what level of return the business is generating for its shareholders, what level of debt sits on the balance sheet, and whether the cash flows into the business are stable and recurring, for example.
While a quantitative assessment is vital to an investment decision, it is not complete without a qualitative framework to guide its meaning. For instance, it is not just the level of debt on the balance sheet that matters, but whether those debt levels are appropriate for the business. It’s not just a historical record of stable cash flows that gives us confidence, but rather an understanding of the economic moat that protects those cash flows from future competition.
It is with this background that I find Linda Hasenfratz’s quote truly compelling. As CEO of Linamar, she is responsible for running a global manufacturing business that spans 13 countries around the world. She may be able to look at the financial metrics to assess how her business is doing, but for Hasenfratz it is clear that a true, holistic understanding of the business comes from walking the halls of manufacturing plants and speaking face-to-face with her management teams around the world.
Her words were a welcome reminder about the importance of being there, on the ground, to gain a complete qualitative understanding of the operations. As I listened, I felt as if a member of our Investment Team had been dropped into her seat. Take, for instance, the excerpt below from the June 2016 issue of The View from Burgundy, “Boots on the Ground,” which brings us along on a site tour of a Chinese flavour and fragrance company’s R&D facility:
“Normally lab environments are tightly controlled, but in this case, rooms labelled ‘temperature controlled’ had open windows, letting in both the hot summer air and a fair share of local insects. What’s more, the facility was curiously devoid of employees, and the few research staff we did encounter were surly and unapproachable. It seemed odd to us that a company could have its main R&D facility in such a state of inactivity and disrepair, while reporting seemingly world-leading profitability in a highly competitive research-driven industry.
Our negative impression from the site tour provided useful information that would have been difficult, if not impossible, to acquire had we not done the on-the-ground work. It prevented us from making an investment in what had appeared on paper to be an attractive business, provided one didn’t scrutinize its operations – an example of why relying on company-produced financial statements alone is not sufficient when conducting due diligence.”
In other words, the science of investing is never complete without the art.