Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Robotics

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The first and several 10 Trillion dollar companies are likely to come as I have surmised and shared many times, is from a robotics industry.

At this moment medical robotics are very monopolistic in their own niches. I shared Intuitive Surgical two years ago. https://lifeandequities.wordpress.com/2018/01/20/drawdowns/ I also found Mazor X which is no longer standalone but acquired by Medtronics. Both have been 100 and 10 times 100 (thousand) baggers since the IPO.

The trained base of thousands of surgeons adds to the MOAT and high switching costs.

Short Video Demos of two medical robotics systems.

Written by amitdipsite

September 25, 2020 at 4:37 am

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Multiple issues with Kotak Bank IT

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You may have noticed today – on the 21st of September 2020 that Kotak Bank is not allowing login to customers for the past several hours. Probably over 10 hours now.

Like they say, problems are like cockroaches…. never one in isolation.

There seem to be 2 very major issues in Kotak Bank IT landscape which I inferred as a layman.

#1 They do not have a business continuity plan. Kotak does not have a Disaster Recovery secondary site to they could switch the traffic to. Big banks have secondary sites that they routinely switch traffic to almost on a monthly basis, so its not a paper pie in the sky exercise to be executed only when the disaster strikes.

#2 The internal details of the software and technologies they use is well leaked out to the world at large. Its a Security 101 violation.

In software, security architecture discipline is meant to protect the organisation, given that the code can be written like wild west by developers, who need not follow defense in depth guidelines, purpose made security testing and intrusive penetration testing is organised during a major release.

See below screenshot which is showing post login:

Kotak is broadcasting to the world that it uses opensource Java Spring Framework (https://spring.io/projects/spring-framework) as one of the technologies and the application code is having difficulty connecting to the Database via (SQL interface) – structured query language using JDBC driver.

This should never be known to the outside world, its one more dot that helps hackers know more about the internals of the software.

Written by amitdipsite

September 21, 2020 at 12:59 pm

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Quotes

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“The surest sign that intelligent life exists elsewhere in the universe is that it has never tried to contact us.”– Bill Watterso

“By the time a man realizes that his father was right, he has a son who thinks he’s wrong.”– Charles Wadsworth

“If you think you are too small to make a difference, try sleeping with a mosquito.”– Dalai Lama

“Everyone has a purpose in life. Perhaps yours is watching television.”– David Letterman

I asked my North Korean friend how he likes it there, he said he couldn’t complain.

“The duty of a patriot is to protect his country from its government.”– Edward Abbey

“A computer once beat me at chess, but it was no match for me at kick boxing.”– Emo Philips

If life gives you melons you may be having dyslexia.

You cannot be lonely if you like the person you’re alone with.

Written by amitdipsite

September 11, 2020 at 7:24 am

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Blackrock

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BlackRock, the world’s largest asset manager, with $7.4T AUM (as of Q4-2019) is backing up the truck on #silver. Was the 2nd largest buyer in Q2 2020 purchasing 5.4M shares of $SLV. Smart money going long silver!

Reference: First Majestic

Written by amitdipsite

August 19, 2020 at 7:39 pm

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Biggest event for Gold in 40 years

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Tiers of Bank Assets

Under the Basel Accord, a bank has to maintain a certain level of cash or liquid assets as a ratio of its risk-weighted assets. The Basel Accords are a series of three sets of banking regulations that help to ensure financial institutions have enough capital on hand to handle obligations. The Accords set the capital adequacy ratio (CAR) to define these holdings for banks. Under Basel III, a bank’s tier 1 and tier 2 assets must be at least 10.5% of its risk-weighted assets. Basel III increased the requirements from 8% under Basel II.

Tier 1 capital is the primary funding source of the bank.

Tier 1 capital consists of shareholders’ equity and retained earnings. 

Tier 2 capital includes revaluation reserves, hybrid capital instruments and subordinated term debt, general loan-loss reserves, and undisclosed reserves.

Tier 2 capital is considered less reliable than Tier 1 capital because it is more difficult to accurately calculate and more difficult to liquidate

Gold Upgraded

The Bank for International Settlements (BIS) is the Central Bank for all Central Banks.  http://www.bis.org  Their rules change behavior at the banks and the current Basel III rules will allow gold to be classified as a tier 1 asset (equal with a cash dollar). Gold was previously classified as a tier 3 asset. It will now be tier 1 (zero risk).  This change has been made since 2020.

Central banks are now understand that their can be run on their currencies. In the past 10 years currencies like Turkish Lira, Venezuala, Zimbabwe have failed or massively depreciated.

US Plan to defend Dollar

Since the US Dollar will eventually fail, the US Government is working on Digital Dollar (Google This!) It is now already tabled in Congress with exigency so as to prevent world from accepting other reserve currencies from taking off.

How this digital dollar will work will be similar to Gold Backed (could be 1/10th of real Gold) since USA has only 8,100 tonnes of Gold worth 60% of the market cap of Apple or 1 Trillion USD of Gold. Additionally to boost confidence, MIT is involved to provide distributed ledger as used by crypto currencies to prevent scam and cooking books to validate the actual gold reserves being backed. Of course, people would prefer some Gold to No Gold if there was a run on currency. But all central Banks will henceforth horde Gold as it’s been classified as Tier 1 Asset from Tier 3.

The race to buy Gold will be between doomsday Gold Bugs, Normal Investors, Jewellery and Bullion Hoarders, Banks , Hedge Funds, Speculators and Central Banks, yet the supply is limited.

Large Soverign Funds and University Endowments are also guaranteed to to lose 1% per year on US Treasuries. Yield 0.7% Inflation 2-3%, with the risk of inflation on upper side. Real interest rate this is negative. One US Dollar of 1913 is now worth 1 cent in Gold Terms in 2020, small inflation adds up. 20 USD bought an ounce of Gold, now you need 2000$.

There can be additional demand for Gold from Sovereign Funds. If Norwegian Sovereign Wealth Fund or Australian Superannuation wanted to diversify into Gold for 1% of their assets which are over 1 Trillion USD, it will cause 10s of billions of dollars pressure on Gold and Silver buying in an already hot market. Therefore 3000$ Gold should be an easy target by next year. Silver would swing more.

Let the games begin.

I understand that Gold is emotional but this emotion is in play for centuries and some recent events (like Crypto and Basel Gold reclassification, and COVID) make it low probability to change the course of events that have been set in motion that make Gold more attractive.

Reference: Investopedia.com

Written by amitdipsite

August 16, 2020 at 4:58 am

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Stock to Flow ratio

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For an equity investor this ratio is like number of trained plumbers for Astral Polytechnic PVC pipes or number of technicians for Toyota or Suzuki cars in the market. It’s almost like network effect.

While the entire amount of gold ever mined totals approximately 190,000 tonnes (the stock), annual production is about 2,900 tonnes (the flow). If you divide the stock by the flow you get a stock-to-flow ratio of 66 years. Silver meanwhile has a stock-to-flow ratio of ~22.

Platinum and palladium have a ratio of 1.1 and 0.4 respectively. Although typically lumped together with gold and silver as precious metals, annual production is a much more significant factor. If either of these metals start being hoarded prices will rise leading to higher supply and falling prices.

Gold isn’t as valuable because it is so rare, but quite the opposite: Gold is valued so highly because annual production relative to the existing stock is so small. Putting it differently: not only scarcity, but primarily the relative constancy of the available stock is what makes gold unique. This characteristic was attained over centuries and can no longer be altered. This stability and security is a crucial precondition for creating confidence.

Reference: https://materials-risk.com/the-gold-stock-to-flow-model/

Written by amitdipsite

August 15, 2020 at 5:38 am

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A case for silver

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Three days back I wrote about Gold and Silver being attractive investments. Today the news came out that the Gold basher, WB himself invested in a Gold company. Just FYI he invested in physical silver as well in 1998.

https://www.bloomberg.com/news/articles/2020-08-14/buffett-s-gold-averse-berkshire-jumps-into-a-big-bullion-miner

I don’t have the time to write in detail but will highlight key points as to why bullion is a good investment at this juncture.

Let me Bust the first major myth: Gold is expensive because it’s rare. That is a false statement. Gold is NOT expensive because it’s rare. That’s only PART of the reason. Platinum is as rare or more yet half the price. Gold is expensive because of its Stock of Gold above ground is 70 times the annual flow. Google STOCK TO FLOW ratio. This ratio provides Gold stability and lesser fluctuations as its being hoarded for thousands of years.

A case for Silver (or Gold)

  • You can walk to any city since the last 5000 years and sell 1 Kg of physical Silver or Gold, it’s liquid
  • Central banks are devaluing their paper currency
  • Zero percent interest rates (Biggest reason to invest in Bullion)
  • 15 trillion dollars at negative interest rates
  • Silver
  • Stock to Flow ratio of Silver is increasing since 2015
  • Silver is 17 times less rarer than Gold but current Gold to Silver price ratio is 80/1
  • For 400 years till the 18th century Silver to Gold ratio was 15/1 partly enforced by central banks.
  • In the 20th century average Silver to Gold ratio was 60/1 touching 30/1 on three occasions, most recent being 2011
  • Silver has more Industrial uses than any other metal
  • Silver is used in EV, Solar, Laptops, Mobile phones, Healthcare, Water purifiers and other upcoming industries
  • Silver substitutes have poor performance, wonder materials like Graphene will take more than 15/20 year for development
  • There is not enough Silver to supply solar panels with Silver as per current reserves till 2050, I know reserves get RE estimated and new ones are found all the time
  • 1.7 million tonnes of Silver mined to date vs 180,000 tonnes of Gold mined to date
  • 90% of Silver mined to date has been lost in landfills vs 98% of Gold mined to date is still I possession
  • 60% of silver is used for industrial purposes 40% for hoarding vs 93% of gold is used for hoarding versus 7% for industrial use
  • Central banks have exhausted Silver reserves
  • Above ground silver is only 40 billion ounces annual supply is 1 billion ounces this ratio is now improving to catch up with Gold
  • ETFs and bullion investment is increasing
  • If Silver were to become 5/10 times more expensive it will be worth more and hoarded more, it’s like Birkin Bags
  • 75% of silver comes as by product and not from primary silver mine

Why Silver is cheaper than 8/1 mining ratio or 17/1 availability in Earth’s crust ratio? Price of silver should be between 100$ to 250$ an ounce yet why isn’t it?

  • Silver is more volatile in price because of lower stock to flow ratio
  • Silver is not hoarded by central banks
  •  it takes hundred times more space to store silver
  • It’s inefficient to store silver in large quantity for central banks, however for retail investor 1 million dollars of silver bullion can be stacked in 4 shoe boxes.

That said:

All commodities are in 5000 year Bear Market and eventually they will go down to close to Zero. You can buy more of Zinc, Iron, Copper, Lead. Including Gold and Silver eventually. There is abundant Gold and Silver on earth. Total Gold mined till date fits in a 22 metres cube vs Silver in 55 metres wide cube. There is likely abundant Gold Silver even in earth so we don’t have to mine asteroids or inter stellar planets.

But there are squeezes on supply from time to time even on commodities not just precious metals. That time is worthy of investment even in the race to Zero price, eventually.

Total Gold in the world is worth 7.5 Trillion $, total Silver above ground is couple Hundred Billion $, Total Funds at Negative Interest Rates are 15 Trillion $ , Total Global Assets are 390 Trillion $. Why should anyone invest in Negative interest rate as opposed to Bullion or Bullion ETF?

So if Gold goes up 50% from these levels which it’s likely to in the next 18 months, then Silver will move 200% as it has historically has done.

Ironically Silver will be worth more if it’s more precious as it will take less space to store.

Written by amitdipsite

August 15, 2020 at 5:19 am

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Best of the Best & Next Big Idea

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I wrote about this company in 2017 and sold it at 30% gain. It has been 90 bagger this decade. I guess I never learn.

https://lifeandequities.wordpress.com/2017/04/04/best-of-the-best-lse/

I haven’t had much luck investing in small caps. Likely the allocations should be much lower than I have had.

What’s Next?

I did a PhD compressed in a few weeks in precious metals. My next big idea (of course it could go wrong) is Silver. Will write a post sometime. There are a few Silver ETFs, even Gold is quite attractive at Zero and Negative interest rates.

Silver is more volatile than Gold in swings. Gold will do very well in the next 2 years even from 2000$ an ounce and Silver from 29$ an ounce.

Gold is emotional and 90% used for hoarding and jewellery. Silver is industrial and used in Solar Panels, Electric Vehicles, Mobile Phones and only 20% used for Hoarding.

I am betting big on Silver. More educational post on silver later.

Written by amitdipsite

August 11, 2020 at 4:54 am

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GDP Growth != Equity Wealth Creation

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10 year returns

As you can see. Frontier market economies are growing rapidly. Yet the 10 year returns have been up to 70% down. Despite the high quality of companies and near monopolies the economic growth has not translated into equity returns.

India is 56th fastest growing economy as of 2019 but stock performance has beaten top 20 fastest growing economies over a 10 year period. USA is 101st fastest growing economy yet the stock performance of US Equities has been dazzling as you can see 197.7% returns In S&P 500.

Economic growth does not translate to wealth creation for investors. It could be a cycle but to be seen if African stocks can make a comeback.

I invested in about 10 very high quality African companies. Cadbury Nigeria, CIPLA Uganda, NSE Kenya Stock Exchange (monopoly), DSE Tanzania Stock Exchange (monopoly). Most of the the stocks are down 50-80% over a 5 year period. Being too early is same as being wrong.

The only exception to the rule in Africa have been two companies where we made money

1) BOSCH FREN SISTEMLERI TURKEY (BOSCH BRAKING)

https://finance.yahoo.com/quote/BFREN.IS?p=BFREN.IS&.tsrc=fin-srch

2) HIGHTECH PAYMENTS MOROCCO

https://www.marketwatch.com/investing/stock/hps?countrycode=ma

 

Written by amitdipsite

July 25, 2020 at 8:47 am

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Two extremeties

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There are stocks that are considered stalwarts, (jinki misaalein di jaati hain), books have been written about them heaping praise.

Yet they have not grown for 22 years. Example Cocal Cola 1998:- 42$ 2020:- 46$

Then, a second category of less known companies, not penny stocks and not junk but half to 1 billion dollar Market Cap companies that move on COVID news of an impending breakthrough of COVID vaccine or permission for COVID testing for sports leagues or viral medicine to reduce symptoms of COVID. There have been 100 plus such moves this year by dozens of companies this month.

Yesterday: 21st July 2020 there were about 10 such moves. Two are highlighted below. 250% and 420%.

So what is the right thing to do?

Written by amitdipsite

July 22, 2020 at 6:25 am

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