Summit Notebook
Exclusive outtakes from industry leaders
from Sakthi Prasad:
From coffee beans to brick buildings
M.R. Jaishankar, chairman and managing director of real estate firm Brigade Enterprises, the youngest of 12 siblings, started his career in the family business of growing coffee beans.
But after a nasty labor dispute, which resulted in the burning down of his factory in 1984, he saw an opportunity in the real estate business in the then sleepy Bangalore city -- and tasted big success.
Jaishankar said his first real estate loan of 10 million rupees in 1984 was considered so large that it had to be approved by the bank’s board of directors.
In contrast, he said in today’s IT-driven Bangalore, a loan of 10 million rupees could be approved at the level of a branch manager.
Perhaps even possible that people do sign such a deal these days over a cup of coffee?
from Sakthi Prasad:
Real Estate – To invest or not
Everyone of us has our own ideas about a dream home and usually wonder if it makes a good investment or not.
But for Abhijit Mukherjee, president of the pharma firm Dr. Reddy’s, the choice is very clear -- He is not a big fan of real estate investment.
While speaking to Reuters journalists at the India Investment Summit in Bangalore, Mukherjee cited the American example of a recent real estate crash and wondered whether India, too, is headed in the same direction. He said buying a house and holding it for value appreciation over a number of years is not a good idea.
Notwithstanding his skepticism, he said he is thinking of changing his apartment. But he was quick to add that it is not a very exciting investment.
Mukherjee would rather park his money in a high-risk, high-reward investment like equities.
from Sakthi Prasad:
The brave new world of Ideas
The world was built on ideas and in the absence of innovation, mankind would have continued to live in stone age.
Of course, Rostow Ravanan, chief financial officer of Mindtree, would subscribe to the view that new ideas are absolutely necessary to promote business growth. Well, who wouldn’t? While talking to journalists at Reuters India Investment Summit, he vigorously defended his company’s foray into designing smart phones saying it is a new idea, which may as well pay off.
Ravanan, in a philosophical manner, said the world is “spermicidal” and is designed to kill new ideas -- but that will not deter a company like Mindtree in pursuing business opportunities. Just because the smart phone market is perceived as crowded, it is not a good enough reason for Mindtree not entering the market.
When he was pushed by Reuters journalists to provide some color and details regarding the company’s smart phone project, he evaded the volley of questions in an innovative manner: He said he is paid not to reveal the details before the official launch.
from Sakthi Prasad:
New Contracts are like honeymoon
As the old adage goes, it is easy to build a new house as compared to remodeling an old one. If one would like to extend this adage to the new-age IT industry, then we could use what L. Ravichandran, president, IT Services of Tech Mahindra, told the Journalists at Reuters India Investment Summit in Bangalore: it is easy to negotiate new contracts with the clients rather than renegotiating old ones. He likened the new contracts to that of a honeymoon -- both the customer and the service provider are happy. But, of course, he did not extend his metaphor to old contracts by likening it to a marriage gone vinegary.
Ravichandran also pondered over the fate of fixed lines telephones. According to him, the fixed line phone will not be done away with altogether. Instead, it will be increasingly used to deliver other digital services like broadband internet, IPTV etc. So in a perverse way, landlines may continue to be used, but not much to make phone calls though.
from Sakthi Prasad:
Old business in New bottle
When the term “real estate” is mentioned, people immediately get images of bricks, cement, sand, gravel, dusty construction sites and so on. And the business is rightfully termed as “brick-and-mortar” or categorized as “old economy.”
Many youngsters nowadays would prefer to work in swanky offices of a software company or an investment bank instead of sweating it out in dust and heat at construction locations.
But for J.C. Sharma, managing director of Bangalore-based real estate firm Sobha Developers, it makes business sense to combine the selling power of “new economy” Internet and “old economy” real estate.
While speaking to Journalists at Reuters India Investment Summit in Bangalore, Sharma said the Non-Resident Indian (NRI) demand has gone up to 17 percent this year compared to less than 10 percent of demand last year -- thanks to the power of Internet.
Maybe, Internet would after all help a homesick Indian toiling in faraway foreign lands to find a home in India. And as J.C. Sharma would have it, one could always find a Sobha home on the cyber highway.
from Sakthi Prasad:
India Investment Summit comes to Bangalore
Executives of real estate, technology and pharmaceutical firms will be exclusively talking to Reuters journalists about their companies’ growth plans, challenges they face and business opportunities that are available within the wider context of India investment story.
Stay tuned.
Ritholtz: I zig when everybody zags
The U.S. economy is experiencing an ongoing but slow recovery, says Barry Ritholtz, director of equity research at Fusion IQ. But that’s not stopping him from enjoying discounted prices in a low-inflation environment, at least when it comes to his personal spending habits. The world is on sale if you’ve got the money to spend, he told the Reuters Investment Outlook summit in New York when asked, for example, if he might spend less while on a vacation or forego a purchase or two.
“I am an enormous counter-cyclical spender. At the top of the bull market I don’t want to buy anything. I am a seller into a bull market. We have been buying a ton of stuff over the past year. We got two new cars long before the May…. so we picked up two new cars. We’re doing work on the house. We’re adding a kitchen. I got my wife a very lovely birthday gift. She got me a very lovely birthday gift. We’ve been buying artwork. We’ve buying jewelry. I love to buy stuff when it is on sale. I hate to buy top dollar for it.
“So, we just were in the Cayman Islands on vacation some time ago. We were in Aruba back in December. I’m heading to Vancouver in July and probably take a week or two in the Hamptons. I’m thrilled to spend money in this environment.
“I got an e-mail from a client in the heart of ’08 saying the advise and commentaries have been great but you’re just so relentlessly negative in ’08, you’ve got to say something that makes me not want to commit suicide.
“I said stuff is on sale, go buy stuff. Go buy collectible automobiles, artwork, jewelry. If you want to buy real estate, you are probably early, but if you find a unique property, and as we have seen with some of these so-called trophy properties they’ve come down in price but they don’t plummet the way some condo in Miami is going to plummet. If you find something you really want to get, buy it now. Don’t be afraid to make low-ball bids on artwork. If it is $15 million up from $8 million, bid six and you might get surprised by what happens.
“In this environment I’m happy to tell people, if you can afford it, don’t go out and borrow against the house, don’t leverage yourself, but if you have the ability to go out and spend money and there are things you want and they are significantly discounted from where they were three, four, or five years ago, why the hell not? I would much rather spend when things are cheap than pay up when things are expensive.
Oh yeah, Barry sure zigs and zags a lot. This guys flips flops with the best of em:
Unfortunately, some people actually track your calls Barry and don’t fall for the BS. Those of us who are familiar with your little games know how you work. You are basically always hedged to win. We’re in a “secular bear” and a “cyclical bull” so you basically can’t be wrong. But within that you write hundreds of articles a month. Some bullish and some more bearish. When you need to you just cherry pick what suits your personal interests.
For instance, back on February 24th 2009 you said that we weren’t even close to bottoming: http://www.ritholtz.com/blog/2009/02/cap itulation-hardly-2/
But then miraculously just two weeks later everything had changed and you were very bullish. You often cite how you “called the bottom”. But then just one month later you were bearish again: http://www.ritholtz.com/blog/2009/04/bea r-market-rally-4/
But then just one month later we’re in a “cyclical bull” market: http://www.ritholtz.com/blog/2009/06/cyc lical-or-secular-bull/
But even throughout it all you’re constantly “hedged” and have protection and “tight stops” on all the time. I mean, even when you were wildly bullish and take credit for the rally you were really only about 60% invested with a HUGE 40% cash position: http://www.ritholtz.com/blog/2009/08/kas s-call-top/
60/40 isn’t exactly a conviction buy call, but in Barry’s “always hedged” world it can be painted however he wants it to be painted!!!!!! Yeay! You are always right. How incredible.
The smart people are on to your scam…..
from Funds Hub:
Here’s lookin’ at you KIID
The vexing question of how much to tell retail investors about what exactly they are buying has been exercising industry participants at the Reuters European Funds Summit. Although the sentiment is for more transparency and simplicity, as exemplified by the EU's new two page marketing document, some managers feel this won't fully reflect the risks and processes involved in a product.
The Key Investor Information Document (KIID), to be rolled out under UCITS IV, will replace the little loved "simplified" prospectus as the primary document via which fund promoters communicate with prospective clients - something that makes some managers very uneasy.
Noel Fessey, managing director of Schroder Investment Management in Luxembourg, admitted he had a bee in his bonnet about KIID, which requires managers to be very concise in their descriptions. "Under UCITS IV the fund prospectus becomes the subordinate document but that's the main document in which you can set out all the risks."
He agreed that the KIID would allow investors to compare products - something the simplified prospectus had failed to do, but added, "There's a significant degree of optimism by the regulator about what the KIID can do."
The problem for regulators and fund managers is trying to strike a balance. "If you are too technical you will scare people," said Andrea Favaloro, head of retail at BNP Paribas IP/Fortis Investments. "We need to explain what happens in simple words."
Maybe fund managers will have to experiment with some very small fonts.
Brazil on everyone’s lips (and in pockets too)
Forget China, at least for now. That “B” in BRICs is really gaining momentum. Many investment managers attending the “Reuters Investment Outlook Summit 2010″ in New York this week mentioned Brazil as a hot destination to park money next year.
There is a growing perception among decision makers that Brazil is on the right track for dynamic growth. Pimco’s founder Bill Gross, who helps oversee $940 billion in fixed-income securities, says both China and Brazil have big domestic markets with relatively low consumption levels, around 30 percent of GDP, and still room to grow.
The key difference among Brazil and the other BRICs is that it has vast natural resources and is relatively well managed, said investor and author Jim Rogers. On the other side, Russia is a “disaster” and India is “anticapitalist and “antiforeigner”, he added.
Diane Garnick, investment strategist at Invesco calls Russia “the world’s biggest black market.” Current market optimism is also big enough to overcome two historic bumps for Brazilian growth: low quality in education and lack of infrastructure. Garnick thinks both fronts are getting better, and Brazil’s economy is, well, ready to take off.
