Interesting interview of Mr Aditya Puri talking indirectly on competitive advantages of HDFC Bank
Thanks
Ashit
Developers not creating safe homes has a very very very long history. The Real Estate Regulatory Act takes its inspiration from the Hammurabi Code. Well at least at a more moderate level. Hammurabi became ruler of Babylon in 1792 BC. Thatās how old these codes are.
Hammurabiās Code is among the oldest translatable writings. It consists of 282 laws, most concerning punishment. Each law takes into account the perpetratorās status. The code also includes the earliest known construction laws, designed to align the incentives of builder and occupant to ensure that builders created safe homes
Codes 229 to 233 pertain to construction. Reproducing some of them.
If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death.
If it causes the death of the son of the owner of the house, they shall put to death a son of that builder.
If a builder builds a house for a man and does not make its construction meet the requirements and a wall falls in, that builder shall strengthen the wall at his own expense.
These codes are 4000 years old.
http://latticeworkinvesting.com/ - contains some very high quality interviews and the recent transcipt of the Daily Journal Meeting chaired by Munger.
Some Gems
Question 8: Your thoughts on the valuation of software companies like Apple, Facebook, Google, Amazon, Alibaba. Are they over-valued, potentially under-valued, too early to tell?
Charlie: Well my answer is I donāt know. (laughter) Next question. (laughter)
Charlie: All intelligent investors worry about banks because banks present temptations to their managers to do dumb things. Thereās so many things you can easily do in a bank that looks like a cinch way of reporting more earnings soon, where itās a mistake to do it, long-term considerations being properly considered. As Warren puts it, āThe trouble with banking is there are more banks than there are good bankers.ā And heās right about that. So I would say that if you invest in banks you have to go in at a time when you got a lot going for you. Because thereāll be a fair amount of stupidity that creeps into banking.
Question 49: Could you comment on why thereās so little health care in the Berkshire portfolio?
Charlie: I think we donāt understand it well enough and we donāt like a lot that we do understand. Those are two pretty good reasons for not investing.
Question 11: Two Questions. Could you give more detail around the Berkshire, J.P. Morgan, Amazon, healthcare partnership and why in the initial press release it said that the model would be spread beyond the employees of the three companies, but then the WSJ reported that the model would only be for the employees of the three companies? My second question is, can you give your view on āwhat is Li Luās talentā?
Charlie: Well those are two unrelated questions but thereās no rule against it. But three are too much just for the record. (laughter) On the healthcare system, the existing system runs out of control on the cost side and it causes a lot of behavior which is not only regrettable but itās evil. Thereās a lot of totally unnecessary crapola thatās crept into the medical system so that people can make more money. And the costs are just running completely out of control.
A week ago I wrote on Seeking Alpha about the ostensibly aggressive use of accounting standards on fair value, taking Fairfax India Holdings as an example.
I cannot say itās a great article (as the title of this thread expects) but it is certainly long and boring 
unless reading accounting analysis excites you! I thought it is useful to share because as we converge accounting standards to IFRS via IndAs, we can expect to see such even in India.
The article can be found here - https://seekingalpha.com/article/4258049-fairness-fair-value-analysis-fairfax-india-holdings
The conclusions are:
IFRS 13 Level 3 fair value relies heavily on management judgment. Though generally not a material consideration in many cases to assess intrinsic value, it does matter rather seriously in some cases. I examined one such case Fairfax India Holdings, an investment company, where Level 3 measured investment assets comprised 60%+ of total investment assets. Upon analysis, I find that Level 3 valuation can be said to be generous by management, who also seem to benefit from such generous valuations.
Investors should further examine for unusual changes, and when observed, make some adjustments and seek answers. Specifically for investors in FIH, I venture to offer the following suggestions:
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Look at some of the historical (2016 onwards) Level 3 valuations of early investments, see how the earnings have moved over time, and if some of the Level 3 assumptions made then have held up. Check how much, and in how many, of the organic growth in book equity of these investments (add dividends) have veered away (in either direction) from the after-tax discount rate assumptions used in calculating the Level 3 fair value. However one may argue that there is not enough history and that every new investment may be different from past investments.
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Seek more financial information of FIH investees on an ongoing basis. Like I mentioned earlier, FIH investors need more information to know if Level 3 fair value has indeed turned out to be fair. This is not with a view to second-guessing management, but to feel comfortable that managementās benefits do not color its assessment of Level 3 fair value. One instance is the BRK annual report which provides operating details of groups of its businesses. BRK, of course, does not carry out Level 3 fair value of its businesses.
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If I had one question to ask management it would be: āWhat metric should I look at in the annual report to gauge if the operating results of each investee match embedded expectations of the fair value you arrived at?ā
One should therefore take cognisance of the recent data prints, which indicates a global slowdown, if not necessarily a US recession. In the current market backdrop, the risk-reward for equities does not seem favourable. While both the Nifty and S&P 500 continue to be in denial mode and are within touching distance of their respective record highs, southward bound bond yields are telling us a much less upbeat story.
Though a recession may happen for the reasons mentioned above but we do need to check is the news widely discounted. If I am not wrong the inverted curve has been in the news from past few months. Also Trump came into power in 2017 and this is his third year in office. So the elections will be due in United States in a year or so. So in all probability he is not going to use his political capital now against the Chinese or rest of the world. He will be more market friendly and we can hope that the world markets do not encounter major speed bumps.
Regards
Divyansh
"In the case of issuers, incentives are clear. The higher the rating, the lower the cost at which they can raise funds and larger the investor pool they can tap. So, āratings shoppingā as it is often called, is a reality. In āratings shoppingā, issuers choose the agency that gives them the most favourable rating, short-changing investors in the process.
In the case of bank loan ratings, banks prefer to have loan parcels given higher ratings so that they need to set aside lesser capital. ā¦ "
A good read on credit rating agencies and what drives their behaviour
Sometimes doing nothing gets you great results.Nicely explained by storytelling featuring a wise crocodile! Moral of the story. Be Patient and grab the opportunity when it arrives.
Quite insightful article by Head of HDFC securitiesā¦
Interesting readā¦
Interesting perspective, although I am not too sure about the forecast but I agree with the point that if the expenditure goes out of our country to other countries, there would be a similar impact that of a brain drain but the consumption story does not stop with the top 1% as it did not start with them. Moreover you cannot put people who make foreign tours and who purchase two wheelers in the same basket. They are different.
Works as a cautionary tale, but not as a forecast.
Influencers Transcript: Charlie Munger, May 9, 2019
https://finance.yahoo.com/news/influencers-transcript-charlie-munger-105001910.html
This is a good transcript and many things in here that are food for thought.
The piece about how China copied Singapore to become hugely successful is quite revealing. The Chinese are going places for sure. How Singapore using the savings of the poor to build its country is all news for me.
The other piece is where Munger candidly admits that they made a mistake not investing in Google. They had all the info and couldnāt join the dots.
Predictability is the cornerstone of the Munger investing thought process - he mentions that in so many words
The exchange about peanut brittle is particularly hilarious. If you have seen the AGM video and come back with the conclusion that Munger goes there just so that he gets to eat free chikki as its called here, i wouldnt be surprised
Best
Bheeshma
Good report on implementation of the Uday Kotak Committeeās recommendations, effective Q1FY20
Good one.
Mohnish Pabrai articles gr8 source of wisdom ā¦