Fwd: State of the Market - June 19
Deepak Singh
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Jairaj Chulani
Return to Daily Commentary from the Daily reckoning
"When you leave your hotel, the sights and sounds are
so overpowering you can barely stand it. And when you
get back, you're exhausted and don't want to go out
again. We saw people who never left the calm and
comfort of the lounge or the liquor bar."
We have never been to India. Nor have we ever ridden
in one of Tata's automobiles. Perhaps it is better
that way. Friends, recently returned from the
subcontinent, report that it is a wild and wooly
place.
Still, it is in wild and wooly places that businesses
boom and fortunes are made. And India is booming. All
the reports say so. The economy has been growing at
more than 6% per year for the last 15 years. And it
seems to be picking up speed. GDP growth over the last
three years has averaged more than 8% per annum.
How did this happen? We will not venture our own
opinion here. We merely note that many observers
credit the new boom to reforms that eliminated the
worst constraints of the "license raj" - as India's
painful system of government permits and regulations
was called.
We admit we know little of India's history. And what
little we do know comes to us almost as oral history
from Mohatma Gandhi's grandson, a dear reader of The
Daily Reckoning, who lives in retirement in
Massachusetts and corresponds with us from time to
time.
What we gather is that as with so many British
colonies that became independent, India was left to
start her new life with an enormous administrative
bureaucracy, to which the Indians themselves added
enthusiastically. Much of it soon outlived any use it
once possessed and began strangling the newborn
country. Unfortunately, the new Indian leaders were
also attracted to the progressive economic ideas of
the period - all of them: Fabianism, Marxism,
Socialism, Nationalism, and Keynesianism. Rather than
simply choosing one or the other, they took up a bit
of each, overlaying hornswoggle over boondoggle,
stirring it all up with a dash of ethnic flavoring and
a generous helping of linguistic chauvinism, and
finished off with a dollop of regional
power-brokering. Then, they allowed the whole spicy
curry to ferment in the hot climate. Is it any wonder
that the result was a rancid mess?
But India is a large, diverse country with a lot of
smart people. By the 1980s, , enough smart Indians
were tired of the mess that they decided to get out
the brooms and dustpans. Many of the worst regulations
were swept away, in a clean-up effort led by Manmohan
Singh. Then, he was finance minister. Now, he is prime
minister.
Since then, the country has been booming. The economy
is throwing up droves of new millionaires and
expanding the size of its middle class at a furious
pace. Huge office complexes spring up every day in the
big cities and the roads are crowded with more and
more new cars. Rich Indians are splashing out on
luxury items; wages are rising.
That is not to say that India is a country on a smooth
road to the future, mainly because in India, roads are
one of the biggest problems. According to the
Economist, it takes eight days for a truck to make the
trip from Kolkata (Calcutta) to Mumbai (Bombay) - a
trip that includes 32 hours of waiting at checkpoints
and tollbooths. But the problem is so obvious and
irritating that India is bound to build new highways.
And Indians are bound to buy more cars. And India's
low-cost car manufacturers are bound to get much of
the new business.
At our London office, we recently entertained two
Indian businessmen who had raised about $3 million to
start an auto business. In the Western world, the
effort would have been laughably amateurish. But in
India's freewheeling world, the two are already making
more money than General Motors!
Colleague Lila Rajiva fills us in on some details:
"Bill - on an Indian road, there is no room for
fence-sitting, you are either one of the quick or the
dead. The `road show´ in India is just that, a
spectacular show - overcrowded buses with dashboards
wreathed with jasmine garlands, compact Maruti cars,
lorries (what you call trucks) painted pink and green,
three-wheeled auto-rickshaws careening wildly from
side to side, legions of scooters and cycles with
saris or dhotis (the native dress most Indians wear)
streaming behind them in the dust, oblivious
pedestrians, bullock-carts, un-tethered donkeys,
beggars, urchins, even a few random monkeys crossing
the street. No observable lanes or rules. And all this
on worn pot-holed roads that wash away or flood with
every monsoon. The amazing thing is that people still
get where they are going.
"But all that is changing rapidly.
"First, we now have the Golden Quadrilateral - an
ambitious new highway project consisting of nearly
6000 kilometers of four to six lane expressways. It
connects Delhi, Mumbai, and Kolkata (in the north)
with Hyderabad, Bangalore, and Chennai (in the south)
and costs about $12 billion. It's due to be completed
this December, and it's going to be a major boon to
drivers, car manufacturers, and businesses in India
and abroad.
"Second, according to a BBC report in February 2006,
the Indian car market is set to grow 10% this year
"That's not only because of burgeoning middle-class
salaries. It's also the result of a change in habits:
Indians have always been big savers, but they are now
comfortable as big spenders as well. Last year, they
proved it by buying more than one million cars.
"Third, manufacturers - domestic and foreign - are
gearing up. The same report notes that Korean car
maker Hyundai is planning to double its production in
India and that Ford has become the fastest-growing car
maker there this year, ahead of General Motors as well
as the domestic giant, Maruti Udyog. Even Jim Cramer
is betting on the Indian road, listing Tata Motors as
one of his favorites in emerging markets. But I should
tell you, Bill, that Tata´s growth is likely to be
less about increased consumer demand than about
increased commercial activity. Tata´s main business
is making the lorries that carry things around.
"There is one more line of work that will boom, too.
Hindu temples are going to be getting a lot of
business going their way, too, because it's
traditional in Hindu culture to invoke the patron
deity of any undertaking, and the patron god of new
vehicles is Ganesh. You've probably seen him - the
cheerful, pot-bellied, elephant-headed god who
rides...a mouse.
"That makes him a good fit for the new rat-race on the
Indian road."
*** We remarked last week that among the many
departure points from which the "flight from risk" has
taken on passengers has been India. The Bombay stock
market has fallen around 25% from its peak, one of the
biggest losses among all markets. Tata Motors, one of
India's top automakers, has seen its stock fall by
almost as much.
As we pointed out, the flight from risk might be
heading in the wrong direction. Are investors really
wise to flee Mumbai and entrust their money to New
York and London?
We think not.
In the case of automakers, an investor might hope to
make money putting his money with General Motors. But
it seems more and more unlikely. The company labors
under such a burden of overhead, it is hard to see how
it will ever make money. And how could it grow? Who
doesn't already have a car in America...or two?
Compare GM's situation to that of Tata Motors. It is
operating in a market with low labor costs, much less
expensive management overhead, and virtually none of
the health and retirement legacy costs that GM must
wear around its neck. Nor does it have to go far to
find new customers; it only has to look out the
window. India is growing and so is its road system. So
are its licensed drivers. Even modest growth is bound
to bring millions of new drivers and millions of new
cars onto the highways in the decade ahead.
In short, the difference between Tata Motors and
General Motors is that with the latter you have to be
a genius to make it prosper. With the former, you have
to be an idiot not to.
A month ago, Tata stock looked like a bargain to us at
$21. Today, it looks like an even better bargain at
under $18. And if it goes lower with the summer, buy
some more.
India the Next Big Thing?
Return to Daily Commentary
"When you leave your hotel, the sights and sounds are
so overpowering you can barely stand it. And when you
get back, you're exhausted and don't want to go out
again. We saw people who never left the calm and
comfort of the lounge or the liquor bar."
We have never been to India. Nor have we ever ridden
in one of Tata's automobiles. Perhaps it is better
that way. Friends, recently returned from the
subcontinent, report that it is a wild and wooly
place.
Still, it is in wild and wooly places that businesses
boom and fortunes are made. And India is booming. All
the reports say so. The economy has been growing at
more than 6% per year for the last 15 years. And it
seems to be picking up speed. GDP growth over the last
three years has averaged more than 8% per annum.
How did this happen? We will not venture our own
opinion here. We merely note that many observers
credit the new boom to reforms that eliminated the
worst constraints of the "license raj" - as India's
painful system of government permits and regulations
was called.
We admit we know little of India's history. And what
little we do know comes to us almost as oral history
from Mohatma Gandhi's grandson, a dear reader of The
Daily Reckoning, who lives in retirement in
Massachusetts and corresponds with us from time to
time.
What we gather is that as with so many British
colonies that became independent, India was left to
start her new life with an enormous administrative
bureaucracy, to which the Indians themselves added
enthusiastically. Much of it soon outlived any use it
once possessed and began strangling the newborn
country. Unfortunately, the new Indian leaders were
also attracted to the progressive economic ideas of
the period - all of them: Fabianism, Marxism,
Socialism, Nationalism, and Keynesianism. Rather than
simply choosing one or the other, they took up a bit
of each, overlaying hornswoggle over boondoggle,
stirring it all up with a dash of ethnic flavoring and
a generous helping of linguistic chauvinism, and
finished off with a dollop of regional
power-brokering. Then, they allowed the whole spicy
curry to ferment in the hot climate. Is it any wonder
that the result was a rancid mess?
But India is a large, diverse country with a lot of
smart people. By the 1980s, , enough smart Indians
were tired of the mess that they decided to get out
the brooms and dustpans. Many of the worst regulations
were swept away, in a clean-up effort led by Manmohan
Singh. Then, he was finance minister. Now, he is prime
minister.
Since then, the country has been booming. The economy
is throwing up droves of new millionaires and
expanding the size of its middle class at a furious
pace. Huge office complexes spring up every day in the
big cities and the roads are crowded with more and
more new cars. Rich Indians are splashing out on
luxury items; wages are rising.
That is not to say that India is a country on a smooth
road to the future, mainly because in India, roads are
one of the biggest problems. According to the
Economist, it takes eight days for a truck to make the
trip from Kolkata (Calcutta) to Mumbai (Bombay) - a
trip that includes 32 hours of waiting at checkpoints
and tollbooths. But the problem is so obvious and
irritating that India is bound to build new highways.
And Indians are bound to buy more cars. And India's
low-cost car manufacturers are bound to get much of
the new business.
At our London office, we recently entertained two
Indian businessmen who had raised about $3 million to
start an auto business. In the Western world, the
effort would have been laughably amateurish. But in
India's freewheeling world, the two are already making
more money than General Motors!
Colleague Lila Rajiva fills us in on some details:
"Bill - on an Indian road, there is no room for
fence-sitting, you are either one of the quick or the
dead. The `road show´ in India is just that, a
spectacular show - overcrowded buses with dashboards
wreathed with jasmine garlands, compact Maruti cars,
lorries (what you call trucks) painted pink and green,
three-wheeled auto-rickshaws careening wildly from
side to side, legions of scooters and cycles with
saris or dhotis (the native dress most Indians wear)
streaming behind them in the dust, oblivious
pedestrians, bullock-carts, un-tethered donkeys,
beggars, urchins, even a few random monkeys crossing
the street. No observable lanes or rules. And all this
on worn pot-holed roads that wash away or flood with
every monsoon. The amazing thing is that people still
get where they are going.
"But all that is changing rapidly.
"First, we now have the Golden Quadrilateral - an
ambitious new highway project consisting of nearly
6000 kilometers of four to six lane expressways. It
connects Delhi, Mumbai, and Kolkata (in the north)
with Hyderabad, Bangalore, and Chennai (in the south)
and costs about $12 billion. It's due to be completed
this December, and it's going to be a major boon to
drivers, car manufacturers, and businesses in India
and abroad.
"Second, according to a BBC report in February 2006,
the Indian car market is set to grow 10% this year
"That's not only because of burgeoning middle-class
salaries. It's also the result of a change in habits:
Indians have always been big savers, but they are now
comfortable as big spenders as well. Last year, they
proved it by buying more than one million cars.
"Third, manufacturers - domestic and foreign - are
gearing up. The same report notes that Korean car
maker Hyundai is planning to double its production in
India and that Ford has become the fastest-growing car
maker there this year, ahead of General Motors as well
as the domestic giant, Maruti Udyog. Even Jim Cramer
is betting on the Indian road, listing Tata Motors as
one of his favorites in emerging markets. But I should
tell you, Bill, that Tata´s growth is likely to be
less about increased consumer demand than about
increased commercial activity. Tata´s main business
is making the lorries that carry things around.
"There is one more line of work that will boom, too.
Hindu temples are going to be getting a lot of
business going their way, too, because it's
traditional in Hindu culture to invoke the patron
deity of any undertaking, and the patron god of new
vehicles is Ganesh. You've probably seen him - the
cheerful, pot-bellied, elephant-headed god who
rides...a mouse.
"That makes him a good fit for the new rat-race on the
Indian road."
*** We remarked last week that among the many
departure points from which the "flight from risk" has
taken on passengers has been India. The Bombay stock
market has fallen around 25% from its peak, one of the
biggest losses among all markets. Tata Motors, one of
India's top automakers, has seen its stock fall by
almost as much.
As we pointed out, the flight from risk might be
heading in the wrong direction. Are investors really
wise to flee Mumbai and entrust their money to New
York and London?
We think not.
In the case of automakers, an investor might hope to
make money putting his money with General Motors. But
it seems more and more unlikely. The company labors
under such a burden of overhead, it is hard to see how
it will ever make money. And how could it grow? Who
doesn't already have a car in America...or two?
Compare GM's situation to that of Tata Motors. It is
operating in a market with low labor costs, much less
expensive management overhead, and virtually none of
the health and retirement legacy costs that GM must
wear around its neck. Nor does it have to go far to
find new customers; it only has to look out the
window. India is growing and so is its road system. So
are its licensed drivers. Even modest growth is bound
to bring millions of new drivers and millions of new
cars onto the highways in the decade ahead.
In short, the difference between Tata Motors and
General Motors is that with the latter you have to be
a genius to make it prosper. With the former, you have
to be an idiot not to.
A month ago, Tata stock looked like a bargain to us at
$21. Today, it looks like an even better bargain at
under $18. And if it goes lower with the summer, buy
some more.
Bill Bonner is the President of Agora Publishing. For
more on Bill Bonner, visit The Daily Reckoning.
__________________________________________________
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Jairaj Chulani
the state of our market is so dependent on the FIIs
and their whims and fancies that it makes me recollect
this speech by the president of India
PLEASE SPEND 10 MTS. TO READ THIS. IT'S WORTH
READING.
BE A PROUD INDIAN
President's Office - The President of India
DR A P J Abdul Kalaam's Speech in Hyderabad
==============================================================
"I have three visions for India. In 3000 Years of our
history, people from all over the world have come and
invaded us, captured our lands, conquered our minds.
From Alexander onwards. The Greeks, the Turks, the
Moguls, the Portuguese, the British, the French, the
Dutch, all of them came and Looted us, took over what
was ours. Yet we have not done this to any other
nation.
We have not conquered anyone. We have not grabbed
their land, their
culture, and their history and tried to enforce our
way of life on them.
Why? Because we respect the freedom of others. That is
why my first vision is that of FREEDOM.
I believe that India got its first vision of this in
1857, when we started the war of independence. It is
this freedom that we must protect and nurture and
build on. If we are not free, no one will respect us.
My second vision for India is DEVELOPMENT. For fifty
years we have been a developing nation. It is time we
see ourselves as a developed nation. We are among top
5 nations of the world in terms of GDP. We have 10
percent growth rate in most Vareas. Our poverty levels
are falling. Our achievements are being globally
recognized today. Yet we lack the self-confidence to
see ourselves as a developed nation, self- reliant
and self-assured. Isn't this incorrect?
I have a third vision. India must stand up to the
world. Because I believe that, unless India stands up
to the world, no one will respect us. Only STRENGTH
respects strength. We must be strong not only as a
military power but also as an economic power. Both
must go hand-in-hand. My good fortune was to have
worked with three great minds. Dr. Vikram Sarabhai of
the Dept of space, Professor Satish Dhawan who
succeeded him and Dr Brahm Prakash, father of nuclear
material. I was lucky to have worked with all three
of them closely and consider this the great
opportunity of my life.
I see four milestones in my career: Twenty years I
spent in ISRO. I was given the opportunity to be the
project director for India's first
Satellite launch vehicle, SLV3. The one that launched
Rohini. These years played a very important role in my
life of Scientist. After my ISRO years, I joined DRDO
and got a chance to be the part of India's guided
missile program. It was my second bliss when Agni met
its mission requirements in 1994. The Dept of Atomic
Energy and DRDO had this tremendous partnership in the
recent nuclear tests, on May 11 and 13. This was the
third bliss. The joy of participating with my team in
these nuclear tests and proving to the world that
India can make it, that we are no longer a developing
nation but one of them. It made me feel very proud as
an Indian.
The fact that we have now developed for Agni a
re-entry structure, for which we have developed this
new material. A very light material called
carbon-carbon.
One day an orthopedic surgeon from Nizam Institute of
Medical Sciences
visited my laboratory. He lifted the material and
found it so light that he took me to his hospital and
showed me his patients. There were these little girls
and boys with heavy metallic calipers weighing over
three Kg. each, dragging their feet around. He said to
me: Please remove the pain of my patients. In three
weeks, we made these Floor reaction Orthosis 300-gram
calipers and took them to the orthopedic center. The
children didn't believe their eyes. From dragging
around a three kg. load on their legs, they could now
move around. Their parents had tears in their eyes.
That was my fourth bliss!
Why is the media here so negative?
Why are we in India so embarrassed to recognize our
own strengths, our
achievements?
We are such a great nation. We have so many amazing
success stories but we refuse to acknowledge them.
Why?
We are the first in milk production.
We are number one in Remote sensing satellites.
We are the second largest producer of wheat.
We are the second largest producer of rice.
Look at Dr Sudarshan, he has transferred the tribal
village into a
self-sustaining, self-driving unit.
There are millions of such achievements but our media
is only obsessed in the bad news and failures and
disasters.
I was in Tel Aviv once and I was reading the Israeli
newspaper. It was the day after a lot of attacks and
bombardments and deaths had taken place. The Hamas
had struck. But the front page of the newspaper had
the picture of a Jewish gentleman who in five years
had transformed his desert into an orchid and a
granary. It was this inspiring picture that everyone
woke up to. The gory details of killings,
bombardments, deaths, were inside in the newspaper,
buried among other news.
In India we only read about death, sickness,
terrorism, crime.
Why are we so NEGATIVE?
Another question: Why are we, as a nation so obsessed
with foreign things?
We want foreign TVs, we want foreign shirts. We want
foreign technology.Why this obsession with everything
imported. Do we not realize that self-respect comes
with self-reliance?
I was in Hyderabad giving this lecture, when a 14
year old girl asked me for my autograph. I asked her
what her goal in life is. She replied: I want to live
in a developed India. For her, you and I will have to
build this developed India. You must proclaim. India
is not an under-developed nation; it is a highly
developed nation.
Do you have 10 minutes? Allow me to come back with a
vengeance. Got 10 minutes for your country? If yes,
then read; otherwise, choice is yours.
YOU say that our government is inefficient.
YOU say that our laws are too old.
YOU say that the municipality does not pick up the
garbage.
YOU say that the phones don't work, the railways are
a joke,
The airline is the worst in the world, mails never
reach their Destination.
YOU say that our country has been fed to the dogs and
is the absolute
pits.
YOU say, say and say. What do YOU do about it?
Take a person on his way to Singapore. Give him a
name-YOURS. Give him a face - YOURS. YOU walk out of
the airport and you are at your International best. In
Singapore you don't throw cigarette butts on the roads
or eat in the stores. YOU are as proud of their
Underground links as they are. YOU pay $5 (approx Rs
60) to drive through Orchard Road (equivalent of Mahim
Causeway or Pedder Road) between 5 PM and 8 PM. YOU
come back to the parking lot to punch your parking
ticket if you have over stayed in a restaurant or a
shopping mall irrespective of your status identity.
In Singapore you don't say anything, DO YOU?
YOU wouldn't dare to eat in public during Ramadan, in
Dubai.
YOU would not dare to go out without your head
covered in Jeddah.
YOU would not dare to buy an employee of the
telephone exchange in London at 10 pounds (Rs 650) a
month to, "see to it that my STD and ISD calls are
billed to someone else."
YOU would not dare to speed beyond 55 mph (88 km/h)
in Washington and then tell the traffic cop, "Jaanta
hai main kaun hoon (Do you know who I am?).
I am so and so's son. Take your two bucks and get
lost."
YOU wouldn't chuck an empty coconut shell anywhere
other than the garbage pail on the beaches in
Australia and New Zealand.
Why don't YOU spit Paan on the streets of Tokyo?
Why don't YOU use examination jockeys or buy fake
certificates in
Boston??? We are still talking of the same YOU.YOU who
can respect and conform to a foreign system in other
countries but cannot in your own. You who will throw
papers and cigarettes on the road the moment you touch
Indian ground. If you can be an involved and
appreciative citizen in an alien country, why cannot
you be the same here in India?
Once in an interview, the famous Ex-municipal
commissioner of Bombay, Mr Tinaikar, had a point to
make. "Rich people's dogs are walked on the streets
to leave their affluent droppings all over the place,"
he said. "And then the same people turn around to
criticize and blame the authorities for inefficiency
and dirty pavements. What do they expect the officers
to do?
Go down with a broom every time their dog feels the
pressure in his bowels?
In America every dog owner has to clean up after his
pet has done the job. Same in Japan. Will the Indian
citizen do that here?" He's right. We go to the polls
to choose a government and after that forfeit all
responsibility. We sit back wanting to be pampered and
expect the government to do everything for us whilst
our contribution is totally negative.
We expect the government to clean up but we are not
going to stop chucking garbage all over the place nor
are we going to stop to pick a up a stray piece of
paper and throw it in the bin. We expect the railways
to provide clean bathrooms but we are not going to
learn the proper use of bathrooms. We want Indian
Airlines and Air India to provide the best of food and
toiletries but we are not going to stop pilfering at
the least opportunity. This applies even to the staff
who is known not to pass on the service to the
public. When it comes to
burning social issues like those related to women,
dowry, girl child! and others, we make loud drawing
room protestations and continue to do the reverse at
home.
Our excuse? "It's the whole system which has to
change, how will it matter if I alone forego my sons'
rights to a dowry." So who's going to change the
system? What does a system consist of? Very
conveniently for us it consists of our neighbours,
other households, other cities, other communities and
the government. But definitely not me and YOU. When it
comes to us actually making a positive contribution to
the system we lock ourselves along with our families
into a safe cocoon and look into the distance at
countries far away and wait for a Mr Clean to come
along & work miracles for us with a majestic sweep of
his hand or we leave the country and run away. Like
lazy cowards hounded by our fears we run to America to
bask in their glory and praise their system.
When New York becomes insecure we run to England.
When England experiences unemployment, we take the
next flight out to the Gulf. When the Gulf is war
struck, we demand to be rescued and brought home by
the Indian government.
Everybody is out to abuse and rape the country.
Nobody thinks of feeding the system. Our conscience
is mortgaged to money.
Dear Indians, The article is highly thought inductive,
calls for a great deal of introspection and pricks
one's conscience too.... I am echoing J F Kennedy's
words to his fellow Americans to relate to Indians????
"ASK WHAT WE CAN DO FOR INDIA AND DO WHAT HAS TO BE
DONE TO MAKE
INDIA WHAT AMERICA AND OTHER WESTERN COUNTRIES ARE
TODAY"
Lets do what India needs from us.
Forward this mail to each Indian for a change instead
of sending Jokes or junk mails.
Thank you,
Dr Abdul Kalaam
(PRESIDENT OF INDIA)
--- Deepak Singh <deepakm...@yahoo.com> wrote:
> Hey,
>
> Please find newsletter for today.
>
>
> Keep sharing your feedback.
>
> Cheers,
> Deepak Singh
>
>
> Note: forwarded message attached.
>
> ---------------------------------
> Do you Yahoo!?
> Next-gen email? Have it all with the all-new
> Yahoo! Mail Beta. > Date: Sun, 18 Jun 2006 21:06:11
-0500 (CDT)
> Subject: State of the Market - June 19
> From: deepa...@hp.com
> To: deepakm...@yahoo.com