Suppose you bought a share for Rs. 300 (eps 30, pe of 10), and after one year you find that the share price is at Rs. 600 (eps of 30, pe of 20) and after another year you find that the share is at 900 (eps of 30, pe of 30) – what would you conclude?

Well this is what a bubble looks like. People’s expectation from the share is that it will now grow at 30% year on year. Sure, it could happen, but the warning signal is that the EPS is not rising. Ditto in the Indian market, Maruti Suzuki which is now sub Rs. 6000, is still at a pe of 22, this is not really mouth watering, is it? Where are the ‘inexpensive’ or cheap shares that you feel like buying? Well surely, not in the Index. If you believe that this govt will do some magic and change the PE and the EPS of the PSU shares, then there are some amazing buys, but I stopped believing in the Navratnas long ago.

So is there value in the mid cap and small cap shares? Is there value in the successful NBFC? Are big Nbfc able to leverage and buy assets from the small and struggling Nbfc? Are banks able to lend? Why are youngsters not committing to homes? why are they not buying ENOUGH cars? what happened to the 96% of the population which must be ‘dying’ to own a car? I do not like the big Nbfc at all – I will surely not add more. I will sell and keep buying back. So I will sell Chola at say 300 and buy it back at 270. Or sell at 290 and buy it at 275. Which means my cash will lie in arbitrage funds, liquid, savings account, but not in equity. However, as the fresh dividends have come in, and I have a monthly surplus..I will have to invest soon. I have no clue where to invest.

Honestly I have no answers. In corporate India I see companies negotiating salaries downwards, and many people have re-negotiated rents downwards with their landlords. Well now let us take the same example and apply to real estate. Suppose you bought a house 3 years ago for Rs. 2 crores. You gave it on rent for a paltry sum of Rs. 15k a month. This meant you got 12k a month (after society charges) 1.44L on a Rs. 2 crore investment. Well that was less than 1%. Terrible deal, but you lived with that. Now the broker says that the price has gone upto Rs. 4 crores. Wow, you rejoice. However the rent is making you cringe. You are still getting only Rs. 20,000 rent, and the society charges is Rs. 5000 per month. So 1.8L on Rs. 4 crores. Yuck, if this is NOT A BUBBLE, what is a bubble?

Many experts in the US are saying that there is a bubble because of Index investing. I am not sure, and the jury is out on this. I do feel that bubbles are caused by Active investors, and not so much by passive investors.

In the 1950s, 60s, 70s, 80s….most investors were PASSIVE investors without even using those words. It was sheer luck that some parent/ grandparent invested in shares and the family did not even bother till the old man was dead or dying. This happened to be Bajaj auto, LnT, Tata steel, Tamo…..etc. and it was worth a fortune They did not cause a ‘bull’ or a ‘bear run’. It was in the 1990s that people started trading – and lost money heavily. Then came FnO, FII, ….and now we seriously do not know what to buy.

If I do not know what to buy…what should I do?

a) I could hand it over to a fund manager who may also be wondering what to do OR

b) put it in Nifty, Nifty next, ….or one of the indices.

If everybody found value in this, who will do research? who will watch the channels?

Such simple theories like indexing will not work in places where everybody wants action….tch tch…

What to do? keep searching I presume?