Investment Management

Investing during a crisis

It is now clear that a macro risk (Russia/Ukraine) has become a known event.  Not surprisingly the markets are selling off as new information is factored into prices. 

No one knows how this will end or its short term implications.  If anyone tells you they do, it tells you more about them than their forecasting abilities.

Signal vs noise – what game are we playing?

“In life, the challenge is not so much to figure out how best to play the game; the challenge is to figure out what game you’re playing.” (Kwame Anthony Appiah http://appiah.net/)

CLSA is a reputed broking house.  It published a report 2 days ago recommending investors book profit in India.

We agree with CLSAs that valuations in India, on aggregate, are stretched.  In our last letter we mentioned, we were “cautious, but not bearish” and that because we have borrowed returns from the future, we could be in for a period of muted returns.

Playing the game vs being clear on what game you are playing

In trying to optimize short term performance and also long term performance simultaneously is a very hard game to play.  We can choose to be smart in the short term or in the long term – but can’t choose both.  It’s a rare genius that can trade short term and invest long simultaneously.  Most people who claim they can do this lie about their returns.

Why did Franklin Templeton wind up Six credit funds?

Franklin Templeton Mutual Fund, on Thursday announced it would wind up six credit funds with a large exposure to higher-yielding, lower-rated credit securities. 

Why did they do so?  The Corporate Bond markets in India are fairly illiquid.   FT schemes have got impacted because they invested in papers with low credit rating (they actively took on credit risk).