Jigneshbhai and Swami

Of Quotes and Learnings, From Investors and Hindi Movies: Jigneshbhai and Swami

by

“The problem with famous people and their quotes is that I don’t understand which one to apply when.” Swami remarked, as he walked in for our coffee meeting with a disappointed, confused face. He had a book of quotes with him.

“Is India a leaky boat?” he asked suddenly. Surprised, I looked up to my broker friend for a reply, as I did not understand the question.

But Swami continued. “I read in this book that Warren Buffett once said that if you perennially find yourself in a leaky boat constantly fixing patches, it is better if you devote energy to changing the boat rather than fixing the patches. So I was wondering with all our problems currently, is India a leaky boat?”

Jigneshbhai, my broker friend, maintained a studied silence.

On getting no response, Swami peeped into his book and read out. “He also said that when a management with a good reputation joins a bad business, it is the reputation of the business that stays. So is India a bad business?”

Again, Jigneshbhai maintained a studied silence, perhaps not quite sure what to say.

Meanwhile, Swami was in his own world of quotes and learnings.

He continued. “But he also says that we only attempt to be greedy when others are fearful, and fearful when others are greedy. So is it time for me to be greedy or fearful?”

Swami’s questions were relentless. Jigneshbhai’s silence was unending. Swami continued.

“And there is also a quote where he says that it is better to buy a wonderful company at a fair price, rather than a fair company at a wonderful price. So in the current situation, which one is India and its companies? I am getting confused.”

laugh2He was just not stopping and Jigneshbhai was just not speaking. His studious silence was not making things easy for Swami.

Just then, I noticed that the wealthy man in the palatial bungalow who lived next to me was also sitting in the coffee shop. He must have heard our conversation – actually Swami’s monologue – for a while. We had known from earlier interactions that he speaks little, and whenever he does it is cryptic.

He had probably finished his coffee, and while leaving, he walked up to Swami and smiled.

“अब इन्हें दवा की नहीं दुआ की ज़रूरत है. So wait for the miracle.”

As he walked away, I could see that the wealthy man and Jigneshbhai were looking at each other and sharing a smile.

Business or Profession, Customer or Client: The Faint Line of Trust: Jigneshbhai and Swami

by

The problem with making a business out of a profession is that a client becomes a customer. And when that happens, the professional becomes a businessman.

The other day my friend Swami was asking me this. “Am I a patient or am I a customer when I visit a hospital?” I did not have a clear answer, and neither did my broker friend. He was similarly puzzled. “I am not sure” he said. “I treat my investor clients as patients, not customers. That’s all I know.”

trust_me_im_a_financial_advisorI remembered my experience with the barber a few months back. That’s when I had realized that the simple barber next door had become a hair and beauty services provider. I guess the doctor has also become a health care service provider, and the financial adviser has become the financial service provider. May be the lawyer has become the legal service provider. And the accountant became the accounting service provider or something like that. A few days back, I saw a board outside a dentist’s clinic saying Smile Dental Hygiene Services. Schools should perhaps be called teaching and educational development services.

“Is it good to be a client or a customer?” My friend Swami asked.

I could see my wise broker friend warming up a bit. “Well, it depends. I don’t know whether it is good or bad. Good in part, bad in part” he remarked.

I don’t know why so many of Swami’s questions have ‘may be’ or ‘depends’ as answers.

“Again you are giving me your usual answers” Swami remarked, now quite used to Jigneshbhai’s answers.

“Hmm. Well, unless you become the customer, you won’t get the facilities and quality of treatment. So it is good for that. But what if you knew that the doctor treating you has revenue targets? So it is bad for that” my broker friend clarified.

trust-me-im-a-doctorPerhaps it is bad for the client as well as the professional. But perhaps, it is good for the business. And the professional needs the businessman.

It is not easy to run a profession as if the money does not matter. And it is not possible to run a business without the profits happening. And when the businessman meets the professional, it works for both. At least till they get into a tussle. Whether it works for the person availing the service is anybody’s guess.

While I was thinking about it, Swami’s next question came up. “So the surgeons have targets?”

My broker friend replied “May be not sacrosanct targets. But I am quite sure that a good surgeon not making much money is less preferable to the somewhat reasonable surgeon who brings in the money for the health care services business.”

Well, looks like that may be true. So what if one come across someone for whom a treatment is not strictly required, but taking it won’t hurt things anyway? And he can afford it? A procedure or diagnostic here or there, or a small addition of a stock that doesn’t impact the portfolio much, or a legal advice that isn’t going to change much. But provides the fees.

Well, that, perhaps, is the faint balancing line between a profession and a business. The balancing line between what’s good for the profession and what’s good for the business. Between being a client and being a customer. The faint line of trust. That line is fading fast.

Tragedy in Close-up, Comedy in Long-shot: A Matter of Perspective: Jigneshbhai and Swami

by

infycrash“Is Infosys closing down?” asked my friend Swami as we met for our weekend coffee today.

I had heard of nothing like that, and so obviously was all ears to him. Not sure why he asked, even my broker friend Jigneshbhai said, “What nonsense? Where did you hear that?”

“No – looking at the extreme reaction to its results yesterday, it looked like everyone was selling their stock as if the company was going to either go bankrupt or close down. So I thought I will check with you, as you guys are knowledgeable about such things. Does it have a lot of unpaid debt?” explained Swami.

Jigneshbhai was ready to answer this one as I wasn’t quite so sure. “No debt. They never had any. And I don’t think they ever will take any.”

“So are they making losses? Or do they have some liabilities from customers? Or they are not getting business from customers? What’s the problem?” asked Swami, not quite sure why people were selling the stock.

“No losses. Their profit margins are almost 30%. They grew by 22% last year” the well read Jigneshbhai explained.

“So then what’s the problem?”

“Well, they did not meet profit expectations that they had promised” said Jigneshbhai. “They had promised an earning of Rs.147 and they earned some Rs.145.5 per share. And they said next year may not be great. Every one expected them to grow by 12-14%, they said it would only be 10% max. So they did not meet expectations of investors.”

“Hmm..Got it now. So they are not performing? Should I also sell it now?” Swami questioned.

“Well, I don’t know. That depends on you and what your perspective is” said Jigneshbhai, in a cryptic manner.

“I don’t understand. Why do you have to talk in riddles all the time? Tell me clearly, yes or no” demanded Swami, clueless about what perspective means.

“I cannot tell you that. I wish I had simple answers. You decide for yourself. I told you it is a matter of perspective” continued Jigneshbhai, still not ready to solve Swami’s quandary.

There was a silence for a while. I thought Swami had given up on Jigneshbhai, and vice versa.

charliechaplinBut then, my broker friend suddenly got up and said, “Charlie Chaplin had said once that life is a tragedy when seen in close-up, but a comedy in long shot. I don’t know the answer to your question. But if you think about markets like that, perhaps, you may get an answer. Specially when such so-called tragedies occur. After all, what you see is a matter of perspective.”

Leaving us perplexed, Jigneshbhai finished his coffee and walked away.

Save me Superman: The Bailout Business: Jigneshbhai and Swami

by

[youtube=http://www.youtube.com/watch?v=MILArKLKUEk]”I am not normally a praying man, but if you are up there, please save me Superman” said Homer J Simpson. That was fine, but when my friend Swami sounded similar, it caught my attention.

“Jigneshbhai, I need a bailout” Swami pleaded as we were having our customary coffee over the weekend. “I have been investing in stocks of so many businesses for the past 4 years and still have losses. I also took some personal loans for a few purchases. These stocks are not recovering. I need a bailout now.”

I was a bit amused over his plea, but resisted a smile. Perhaps Swami was serious.

“I will buy your stocks at a small discount if you want, in case you need money” said my broker friend, maybe sensing an opportunity.

Not quite agreeing with it, Swami retorted “Arre no, I need more money from you to buy more stocks. Hopefully they will make money, and then I will pay you later. Maybe you can charge me interest, but then, what’s interest among friends? Isn’t that what a bailout means?”

“Good, you are learning fast my friend” my broker friend commented with a sly smile. “But I am not for these kind of bailouts. I am for the creative destruction kind of bailouts.”

Puzzled and not quite understanding it, Swami said, “But big businessmen nowadays get bailouts. Why can’t you bail me out then?”

As usual, I was watching both of them slug it out on another issue this time.

“That’s because you bought the stocks of the wrong businesses. I will buy the stocks of those businesses if I see value, but will not lend you more money to put into already failed businesses and then wait in hope. I can bail out businesses, not businessmen.” Jigneshbhai said with a tone of finality.

I realized that the discussion was taking an ugly turn now.

“But General Motors and so many US Banks also got bailed out. European banks are getting bailed out. And now they are talking of bailouts in India also. So what’s wrong with it?” questioned Swami, not quite convinced and now getting visibly angry.

Jigneshbhai was getting into one of his moods now. Getting ready for what I thought would be the next round of conversation, I was all ears.

profitloss“Hmm. You know the difference? In some of those cases, the ownership of those businesses changed. They did not find any lenders or buyers, and because their failure would have caused larger collapses that would not be in national interest – well that’s what they said at least – the government became the investor of last resort. Not the best thing to do, but it was still ok I thought, due to exceptional circumstances. And they made a killing on it, by the way later. But in your case, you are not giving me any ownership” Jigneshbhai informed Swami.

“How can I give up my ownership? That is sell my shares? What will I do then?” Swami asked, quite disturbed by now.

Jigneshbhai got up to leave and said angrily “Nothing, do something else. Businesses start and businesses fail. Your investments failed. So if you can’t see it through, give up ownership of your share, take whatever money you get and go home. Else close it down. But don’t ask for bailouts.”

Play for the Country: The Noble Intentions of our Cricketers: Jigneshbhai and Swami

by

My South Indian friend Swami had just returned from Australia, and joined us directly over the weekend coffee, straight from the airport. My broker friend and I were discussing what’s in store for the markets, specially after this mass downgrade done by S&P to European nations, when Swami barged in. After a long time, Jigneshbhai … Read more

The Annual Performance Appraisal: Jigneshbhai and Swami

by

“I must leave now”, said Swami, my South Indian friend just as we were sipping our coffee.

“Going out with family?” I asked, knowing that he was quite the family man.

“No! Don’t ask – I have this big form I have to fill after going home, and submit it tomorrow without fail”, he said.

“Hmm – something to do with your son’s school I guess. Then you better go”, I said.

“Arre – nothing like that boss! In fact, it is about the boss! I have to go home and fill my performance appraisal form, listing all that I did in the year and ensure my boss gets it by tomorrow, so that he can rate my performance! You know how this corporate thing works. You have to do this every year. I am sick of it – but kya kare? Will not get my increments and bonus if I don’t fill that form!”, an aggravated Swami said. I guess my repeated questions on why he was leaving our weekend coffee discussion early had clearly pressed the wrong button.

“Your annual appraisal system is part of the problem in our markets also”, interjected Jigneshbhai, my broker friend.

I was a bit surprised with that. I could not quite figure out how Jigneshbhai had an opinion on that too. I could see the same reaction on Swami’s face. But before we could ask anything, Jigneshbhai continued, “So your performance is also measured once every year?”

“Yes, they say they will do it twice every year, but happens only once. Increments are only given once a year”, confirmed Swami, with a sore face. Somehow the word ‘increment’ used in corporate circles seemed like a well devised tactic to set expectations on the size of salary raises, and that expectation seemed quite evident on Swami’s face.

Be that as it may, but Jigneshbhai went ahead making his point on how they were a problem.

“You see, as the time for filling your appraisal form comes near, I am sure people start frantically showing evidence of their performance? Like finishing up more projects, telling the bosses what they are doing and generally being more active?”

“Yes – that is right, more or less. But it is not fair to everyone, you know. Sometimes the good people get bad ratings, and bad ones get good ratings”, reaffirmed Swami, still having his issues with the appraisal process.

“Well life is not always fair. But this appraisal thing affects fund managers and institutions also. They know that the time for the measurement of their performance is near. So every fund wants to beat every one else.” Jigneshbhai had a good understanding of psychology.

“So what do they do?” asked Swami almost innocently.

“Well, I am not sure, but I guess it should be, more or less, what you are doing. Some researcher said that’s the reason markets fall in December. So that relative performance can be shown for the year. And then rise in January when they get fresh money”, explained Jigneshbhai in his nonchalant style. Sensing the surprise, he continued, “Of course, you cannot profit from it. When everyone wants his appraisal form to look good, this stops happening.”

This was not good to hear. And it also left Swami both alarmed and confused as usual. “Hmm, so they are playing games at the expense of my money”, he thought, but did not say it in those many words. Instead, always looking for simpler answers, he asked “So even they are working for increments. So, what are you saying? Stop investing in funds?”

“Of course not, you cannot change that”, resumed Jigneshbhai. “But you can become an appraiser once a year – of the fund manager of your mutual fund. And unlike corporates where every year performance is relative to others, in markets, you have an absolute against whom to measure his performance – the market index. Put him on a performance improvement plan if he cannot beat the market index. If it still does not improve after a year or two, sack him and move your money to a low-cost Index fund.”

Why Bulls, Bears, Pigs and The Big Fish don’t matter, and Cows and Goats do: Jigneshbhai and Swami

by

“The ocean in Mauritius is just wonderful, blue-green and pristine. Truly is a paradise island”, said my South Indian friend, Swami who had just been back from his vacation. One of the few times I had seen him happy, without much to complain about. Just when I thought he was in a good mood, he said, “But I got badly tanned. Got fully blackened, and for two days, I could not get out of my house.”

“So did you do any under water activities?” asked Jigneshbhai my broker friend.

“Yes, I think that and the sun is the reason for my tan. But it was worth it. The sea life – the fish and other sea animals were just wonderful to see up close under water.” Swami remarked. Clearly, his vacation had got more positives than negatives out of him. I was glad to note that he loved the sea, the fish and the sea animals more than he disliked the seafood. And if this is what Mauritius could do to Swami, I am sure it must be really be paradise for normal mortals. Jigneshbhai and I exchanged a smile on that thought.

But our thoughts were interrupted.

“I am not interested in the small fish. It is not useful to check even what the big fish are doing.”

We just looked around to check who had spoken. It was the wealthy man in the sprawling bungalow who had just joined us. I am sure he must be frequently going to Mauritius – I hear it is some sort of tax haven for wealthy people and foreigners. So not surprised that he had a view on the sea life there.

“No, sir. I could see only the small fish, we did not go deep enough to see the big fish. But the small fish were very beautiful and interesting, sir!”, Swami remarked, trying to disagree with the wealthy man.

“No point in following the small fish or the big fish. I am not interested in either the bulls or the bears also”, said the wealthy man.

He was known to speak rarely, and when he did, it was cryptic. But I was not sure he realized that we were talking of Mauritius. As far as we knew, bulls or bears were in the safari or at best in the markets. We just stayed silent, trying not to look awkward.

But Swami could not resist continuing. “Sir, we did not go to mainland Africa, only to the island of Mauritius. So did not see any bears, bulls or other animals in the safari.”

“Well, Africa is still the new frontier. You should be more worried about the Pigs in Europe – I hope someone takes care of them.” As he said this, we were almost getting on the edge now. Swami and I were desperately trying to make sense of this conversation.

I think Jigneshbhai got what the wealthy man was trying to say now. He quietly signaled to us to stay silent and asked, “Sir, got it. Those economies – Portugal, Italy, Greece and Spain are in trouble, and I understand that this is good time to ignore the bulls, bears and all the big and small fish or anyone who has a view on the markets.”

“Yes, indeed. You are right”, smiled the wealthy man, finally satisfied that someone understood what he was saying.

While both Swami and I were clueless, Jigneshbhai eagerly asked, “Sir, in that case, which animals do you prefer?” This left us further dumbstruck. Looked like he had picked up the animal language.

The wealthy man replied, “Honestly, I prefer goats and cows. They are easy to maintain, need just simple grass, and are sure to give you milk regularly. As they grow older, they almost always multiply easily. If they don’t, their meat is useful. So even if you pay a high price, goats and cows are useful, valuable animals.”

While Swami and I were wondering what happened to our conversation on Mauritius, Jigneshbhai was happy hearing what the wealthy man said, almost cheerful and thanked the wealthy man as he left back for his sprawling bungalow. And while leaving, the wealthy man turned back to us and said, “There’s a lot of animal instincts out there. So don’t go with the herd.”

Your Call is Important to Us: The Tragicomedy of Customer Service: Jigneshbhai and Swami

by

My simple-hearted friend Swami was in a restless mood the other day when we met over coffee. ““कृपया प्रतीक्षा करें, आप कतार में हैं” – isn’t that what they said, when you called customer service numbers in those days?” he asked us. “Some of them said ‘Please wait. You are in queue’,” my wise friend … Read more

A Cryptic Cocktail: Mixing Cricket Commentary with Stock Markets and Investing: Jigneshbhai and Swami

by

The wealthy man living in the sprawling bungalow near my house with his BMW and Mercedes speaks very sparingly. And whenever he speaks, it is quite cryptic. So one has to really concentrate when he is speaking, and think hard after he is done. So the other day when my South Indian friend Swami and I were just walking across from my house to get a coffee, we saw the wealthy man taking a walk with his dog. He knows Swami, who by now has had a number of ‘question-mark’ conversations with him in the past. So he wished me good evening, and this time before Swami could ask him anything, he just told him with a wry smile, “The situation is tense but under control.”

I first heard this term being used by the Mumbai police during the Mumbai riots in the early 1990’s. It was so conveniently cryptic and became so popular that the Home Ministry started using it. Now I think it has become the de-facto phrase used by government officials, specially Home Ministry ones, to describe, in an imprecise way, what is happening whenever there are riots, earthquakes, floods, strikes, accidents or anything remotely like those.

So I was a bit surprised when the wealthy man used it, not quite clear what he was referring to. So I took the liberty of asking him if he had some time for a quick coffee. The wealthy man does not easily say yes, but this time, he surprisingly did – so in a few minutes, we found ourselves chatting with him over a coffee.

After an awkward silence for a few minutes, my South Indian friend Swami had to ask something. He tends to lose his patience with Jigneshbhai, but with the wealthy man living in the sprawling bungalow, you cannot do that. So in polite language, he asked him for advice on the current state of the markets.

The wealthy man replied, “This match is very much in the balance now”. And added in his baritone voice, “It is not going to be easy for the batsman to get bat on to ball on this pitch.” Further, neglecting our confused looks, he continued, “It will provide assistance to the bowlers, but if the batsmen apply themselves, one can play a long innings.” I knew he spoke sparingly, and was cryptic most of the time, but this seemed out of context. So we thought he probably misunderstood the question – perhaps he heard matches instead of markets.

So Swami tried to explain – “Yes sir, but I was referring to the markets, not to the Champions league matches. I have already lost so much, would be great if you could throw some light on what to do next.”

This time, we thought we will hear some gems of wisdom. But the wealthy man continued. “Well, given the conditions, it should be good toss to lose”. This was getting a bit out of hand. Even I was starting to wonder what was happening here. But Swami was now getting a bit aggressive. He clarified, “Sir, I am losing money everyday in these volatile markets. You have been playing the markets for so many years. Should I sell and get out now?” Again with eager eyes, we were looking for some pearls of wisdom this time. And the wealthy man said, “We had a cracker of a game today, but at the end of it all, one will have to say that the team that kept its nerve better prevailed”.

This was getting too much to handle now, even for me. We were starting to fear if the wealthy man had lost it – maybe growing age and the stress of his wealth getting eroded at this stage in life was getting to him. Or perhaps he was watching too much of TV, and business and sports channels were getting mixed up in his head. Swami gave me a strong stare, almost warning me that he is going to stop having coffee with me. As if handling my broker friend Jigneshbhai was not enough, now he had this wealthy man from the sprawling bungalow to make sense out of.

So we started wrapping up with our coffee, and hoped that this was it. It did not seem to make sense to press the point now. Not wanting to take the discussion further, I asked for the bill, and while waiting for it, asked the wealthy man which team he was supporting in the Champions League. I casually added, “The Royal Challengers seem to be up to it this time, but you never know with them. The Mumbai Indians could spring up a surprise.”

I thought this conversation was now making sense. We were both talking about the same topic. At least we will leave on a sober note. No more mixing cryptic cocktails of cricket and markets, I thought. So as we left, we were stumped when the wealthy man threw another cryptic one. “Indeed, in these conditions, I am in support of investing in wonderful companies with good long term potential. For the true fan, this pitch is just what the doctor ordered.”

Ranjit’s Newsletter