Views on Life & on Equity Investing

Wonder, Wealth & Abundance


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This one is about Trade War. The long term effect on society is clear, its a losing proposition. If some countries makes 1 Kg of Salt for 1$ and my country makes for 100$, then I should import. But what if I export Salt and import Toyota ? WTF, I don’t want to play this game.

Our miserable and hapless and ever CONFUSED INVESTOR does not know what to do ? First order effect is that the protectionist companies in USA and China will benefit, so Buy  Steel in the US and Pork makers in China. But then second order effects like expensive steel in US effects people’s purchasing power, makes machinery export expensive, renders US farmers redundant as there is no taker for Pork in China. A Tit for Tat war will make 3rd and 4th order effect harder to predict.

Society loses, but our CONFUSED INVESTOR, needs to raise a family and makes ends meet, he does not care for society  pretty much like the Presidents of the countries, as a miserable investor he can happily invest in a MONOPOLY Milk company even if infants die of hunger from MILK. Such is the spirit of Capitalism. But the THE CONFUSED INVESTOR does not know what to do?



Written by amitdipsite

March 24, 2018 at 10:17 pm

Posted in Uncategorized


with 4 comments

This is a cartoon about a tale of Two Modis.

One Giveth to the PSU Banks (PM Modi), the Other Taketh from the PSU Banks (Nirav Modi).

The sucker in this story is “The Confused Investor” who is always confused because of the unpredictable events that happen in the society.

Just like the Aam Aadmi of R K Laxman, Mr. Market of Graham and the Seeker of Peter Bevelin, “The Confused Investor” who has skin in the game is always on the rough end of the stick by the society ruled by those who do not have the heart and soul to feel the pain or understand the confusion of this hapless creature.

The life of this Confused Investor is hard enough as it is, working in an office, saving some money, raising family, finding companies to invest in, their analysis, predicting industries, their forces and interactions, forecasting future. As if this was not enough, challenging circumstances seem to surface every now and then out of the blue, mostly triggered by scoundrels of the society.

I hope you enjoy and relate to this ever confused investor who is always scratching his head.





Written by amitdipsite

March 24, 2018 at 5:20 am

Posted in Uncategorized

Needs and desires

with 2 comments

There was a person who was born in material poverty (or middle class) and tried hard to come out of those abject circumstances. By the middle of his lifespan he managed to accumulate sufficient wealth for his needs and entertainment, travel and had a wonderful family.


He noticed that some men in the society were either more famous or more materially prosperous than him. It was not something he needed but felt the desires pulling his heart strings.


Propelled by these urges, he threw himself headlong into unending work, sacrificing family time, and once again managed to make billions, by luck and hard work.  Closer to the end of his life, he was the most materially wealthy person on earth and accumulated 850 Billion USD at 2018 adjusted figures.


Just around this time, gravitation propulsion based inter stellar travel on earth became possible for the rich only, a ticket would cost 100 Million USD.


Our richest material person visited a nearby galaxy and noticed a civilisation, where each citizen had 7-10 stars  and planets as their holiday homes. He felt that his life was wasted on a mud puddle, stuck to a single planet and he lived a relative life of below poverty line compared to ordinary residents on this star system. He felt like a failure and that he could not:


  1. Spend much time with his family in the race of accumulation of fame and material riches
  2. Acquire meaningful wealth in the cosmic scale of things, in fact he felt more poor than ever close to the end of his life
  3. Realise is soul / spirit and inner freedom


This alien race felt the same destitution and poverty despite each resident having several planets because they encountered a race which had learnt to make universes at will by aligning themselves closer to the divine plan.


Moral: Find out the difference between what you need and what you desire. Life has more dimensions than we can imagine.



Written by amitdipsite

March 19, 2018 at 12:51 am

Posted in Uncategorized

QoE over RoE

with one comment

ROE is a derivative of the Balance Sheet and Profit and Loss statement, an important metric, which along with the Cash flow statement must be studied for long term investing decision, over the heavy emphasis on Profit and Loss statement.  QOE (Quality of Earnings) trumps other metrics but there isn’t a ready made formula.

“If the company were a person, Cash Flow statement would be the index of his habits, Balance Sheet the stock take of his character and Profit and Loss statement his day to day activities.” – Feeling poetic, quoteic here.

So, don’t be fooled from the day to day activities (P&L), a person may be visiting  liquor store daily before work for reasons not at all related to alcohol addiction.

When you analyse a company to hold for the long term you need to look at dozens of things or hundreds if you have an elaborate checklist. Whilst I do that, I don’t like to boil it down to formulas like Altman Z scores and the like.

Actually, in this post, I wrote that you should have FOUR Convincing Reasons, why you bought a stock, It can be hard indeed to find multiple reasons to invest in a company.

Analysing numbers can give you reasons. You need to stay with the questions longer to get the answers, not surprised that Einstein said he found more answers while doing menial chores than sitting on his table.

High level determinants for good QoE are:

  • Recurring vs non-recurring
  • Cash vs non-cash earnings, growing inventories, more than sales growth etc. are bad so are increasing DSO
  • Certainty and prospects of current earnings
  • Dividend payouts matter (free cash flows & intentions of management & requirements of business for expansion).
  • How the company treats one offs and non operating income
  • Shareholder’s earning vs GAAP earnings

In this paper Anup has concluded that the earnings quality has deteriorated over the previous 40 years.

The properties of earnings have changed dramatically over the past 40 years. Prior studies interpret this trend as a decline in earnings quality but disagree on whether it results from changes in the real economy or changes in accounting standards. I find that each new cohort of listed firms exhibits lower earnings quality than its predecessors, mainly because of higher intangible intensity

An intangible-intensive firm is likely to display high volatility in its revenues and cash flows because intangible investments carry higher uncertainty about future benefits than do tangible investments. By the outset of the twenty-first century, the United States had moved from being primarily an industrial economy to becoming mainly a knowledge-based economy. As a result, U.S. firms have increased their investments in intangible capital such as innovation, advertising, information technology, human capital, and customer relations.


  • Each new cohort of listed firms uses higher intangible investments.
  • Earnings quality is negatively associated with intangible intensity.
  • Thus, each new cohort of listed firms exhibits lower earnings quality.
  • The average earnings quality of listed firms declines over time.
  • This trend is mainly due to the inclusion of newly listed firms in the firm sample.In this paper Anup has concluded that the earnings quality has deteriorated over the previous 40 years.

Some other points to ponder from KPMG checklist:

  1. Cash earnings Recurring sales for which cash has been received.
  2. Based on fixed and certain amounts from completed transactions Recurring sales of tangible delivered products.
  3. Result from consistent application of accounting principles Consistent application of LIFO method of inventory valuation.
  4. Result from consistent application of estimation principles and methods Consistent application of pension expense calculation assumptions
  5. Result from estimates for which the range of possible balances
    is relatively small
  6. Changes in the accounts receivable reserve that has a range for the possible balance
  7. Based on transactions that are recurring Rental income
  8. Result from arm’s-length, commonly executed transactions with independent
  9. Sales to an independent customer
  10. Result from assets or liabilities recorded at cost Interest on investments
  11. Reflect proposed external/internal audit adjustments as presented in the
    financial statements
  12. Repairs and maintenance expense that reflects the recording of
    external auditor adjustments for expenses that were originally
  13. Noncash earnings Goods sold in exchange for stock of another company
  14. Based on amounts subject to change due to changes in estimates and future
    market conditions
  15. Mark-to-market derivative contracts
  16. Result from discretionary changes to existing accounting principles that result
    in earnings but no cash increase
  17. Switch to the FIFO method of inventory valuation

There is a reasonable book on this topic called by the same name called Quality of Earnings from Thornton O’Glove

In my long term investment I do care about cash flows, dividends, reported sales and reported profits in that order.

Written by amitdipsite

March 18, 2018 at 1:37 am

Posted in Uncategorized

Fix pot holes – message to municipalities in Ghana

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Young people in Ghana send this message back to road authorities and the government, plant banana trees in pot holes. 

Written by amitdipsite

March 16, 2018 at 6:38 pm

Posted in Uncategorized

Drawdown score

with 15 comments

I was taking stock today of my long-only portfolio. Long dated puts are on the wish list for a Level 4 portfolio that I mentioned here

India long-only portfolio is down 19% from the peak. Global including India long only portfolio is down 2.7% from the peak since the 1st Jan 2018, 0% ex-India proving my hypothesis, so far, of less correlation in equity markets across countries.

Once you are in into draw downs, you wish you had cash or term deposits, but most investors never have cash as they are 100% invested at all times, like I do.

Only few foresighted investors who may have actually planned for such an eventuality with a lot of patience, perhaps reliance on such funds for retirement, can have cash.

I feel 2018 could be good yet again for Indian NBFCs and Australian small caps may come back after two years of misery.

Written by amitdipsite

March 11, 2018 at 7:49 am

Posted in Uncategorized

Feel good after-effect

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When your knee hits the side of the table/bed/furniture followed by a throbbing or shooting pain, same as Walt Disney cartoon expression is experience. Yet, in most cases, after the initial 15 seconds, relief starts to dawn, almost sublime and definitely enjoyable. And in 300 seconds from the initial accident, the pain and the enjoyment after effect have vanished, that too has passed.

I am not sure about others, but I look forward to that relief.

Similarly, if the stocks that I own are actually growing the revenues / profits by 15-20% but the market price starts growing by 40%, its unsustainable, and I am forced to run like a rat to find more ideas. But if the market price also keeps pace with the underlying revenues / profit growth, then I can sit on my ass proverbially for 5-10 year without getting in and out of positions.

From this perspective I feel so good about the stocks in India that have corrected by 30% or so. Not looking forward to the pain, but feeling pleasant after effects.

Written by amitdipsite

March 10, 2018 at 10:44 pm

Posted in Uncategorized