A lot of people do get confused by their very young son. He’s not young anymore but he’s young he’s asked me Daddy budget without Gelder Gatlinburg. But the article did it though so I do remember some markets some places where the two kinds of people there are people with the or experience and there are people with money in the marketplace and what happens in the bull market gets over it that the people with money and they’re getting told you about and the people at the bar and they’re getting the money. So.
I’m hoping to speak to you today in the voice of the Djerba. I have lots of to do right lots of hair gone so I have a lot of that to offer you. So let me speak to you with some sense of first what some of the lessons I learned in the financial markets to understand where we are in the context we need to know where we’ve been. Let me show you some of the great bull markets in history. And. From the laws to the highs how much they’ve gone up.
How many years it took to go up and how many times it has gone up. So we look at say the Dow is after a post-World War 2. It went up from hundred sixty two to nine ninety five. So about six 6 in the beautiful almost 15 20 years. This is my most favorite bull market after that is the Nikkei where Japan hosted the Olympics in 1960. It used to be a third world country. People didn’t know the products it made. And to the very skeptical about even hosting the Olympics the Nikkei index went from 39 57 to almost 39000.
A 30 x move in the index itself or upward of 25 years. By the time the bull market ended Japan as a member of the G5 US Sony had become household names and the whole country had become from a third world country to probably the third largest economy in the world. So Japanese bull market is always the gold standard of bull markets in equity. And remember that the Japanese yen also went up from 360 to almost hundred to the dollar. So if you look in yen terms it went up not 30 export almost undertakes the index went up on index are on Sensex 18 1992 went from seven hundred forty five hundred six and a half time move on the index in a period of about four five years.
Oil went from 32 to 140. There’s always a bull market going on somewhere in the world. The Nasdaq itself in 2000. In the 92 to 2000 TMT bull market went from 350 to 5000 or 40 next move. Today the Nasdaq is even all that limit is only 8000 are on Sensex and 2000 went from almost 5000 to 20000 or forex moves. So this bull market which I did to August 2013 began at 17000 right. So it’s not even it’s barely doubled from that level. So if you go by historical precedent Liz this is still a young bull market.
All right. So what it seems to me is a major correction in a bull market. Not necessarily the top of a bull market. If you start saving in your 20s all right or your 30 phase order 40 but you say double the amount every year. Look at the difference that happens when you approach retirement age. Look at the amount of difference you know been a crucial market not actually systems in real life. All right. So let’s say Karishma is the hardworking one she likes to save and invest money early so she starts saving when she’s 18 years old.
Green is the fun one she wants to have a good time. Go out party buy clothes travel. So she starts saving which is 25 years old Karishma stop saving when she is 25 years old. So she says a repeat of eight years. Karina says the rest of her life till 62. She says every year how much of the save 50000 rupees a year puts us in European household. Got that. But what a difference it makes because Christmas are early. And then when she’s 40 years old she has 55 legs fifty two point two five crores when 60 she is twelve point eight crores.
Whereas Karina who saved for 40 years ends up with only half the amount to Jodie sugar Nagar it no digit compounding is so great an advantage when you start early.
So the one lesson I like this young people here to take away from you is start investing early even small amounts invested early make a huge difference 10 20 30 years down the road. Let me put it in words that you will understand most of us will have a career of about 30 years 30 years in the financial markets 30 years as an architect or as a doctor or professional go to 30 to 40 years come to let’s say 30 years of that let’s say you start of life when you’re 25. And you get you save your first 10 legs up that does like save career gets me man I’m going to get those like but are the.
Now you’re able to double your money every three years. All right every three is able to double your money the index itself goes up 16 percent right. So double your money means Rule 21 22 percent a year is not that hard. If you double your money every three years in a 30 year career you’ll have 10 doubles in your life. Ten times your money. Europe ten doubles in your life. So suppose you start with ten lakh rupees right then agro agribusiness twenty five when you’re fifty five. Can a young person tell me if you double your money every three years.
What will that amount become.
Yeah yeah yeah. Someone in all that stuff is right. I’ll get the bigger one hundred. See ya. How does it becomes undersea Elizabeth the math was always fun I know you know this but it’s still fun.
Okay then Lex after three years becomes your w money. Twenty right. Twenty becomes. Forty becomes. It becomes. Now let’s run it off here becomes three three. That’s out of five years of fifteen years becomes three right. Now see what happens the next 15 years. Six twelve. Fifteen hundred hundred. Think about it.
If you have a hundred crores that even in today’s depreciated rupee there’s about 10 15 million dollars that puts you in the richest 1 percent in the world. Forget in India it’ll make you the richest 1 percent in the world. All right. What have you done. You bought businesses that have doubled every three years. Right. Are these opportunities there. I think model put up a chart. I mean there must be 100 stocks that have done better than that over the last few years. Right. Is it simple.
Nor is it easy. No. But. You. Making money is not easy. I mean all of you work eight hours 10 hours 15 hours a day for a living. Right. So making money is not easy. But if you find a great business that can double for you every three years. So people ask me that. Maybe I was lucky when I and modules you invested in our career. We had long term capital gains exemption right. So you could build a capital tax rate. But the truth of the matter is even you can because unless you sell.
Your stocks there’s no capital gains. So try and find businesses that last not three years or six years or 18 years or 24 years. Because as the money grows as the value of the share grows the business remains tax free for all of you. I’ll tell you a story which really. Drove the point home. When my son who was 12 or 13 we had one of those named ceremonies for him correct. So we are in very 200 people as proud parents and his grandparents gave him cash. Someone bought sweets someone bought toys someone bought you know clothes for the young person.
I think as parents he was also given him some clothes. One of my friends gave them some shares rather than this thing. All right. You give him at that time to load twenty five thousand rupees five hundred shares of something you gave him almost like it was an afterthought as a present. He played with the toys while the clothes enjoyed the sweets. The shares put him in the locker 25000 rupees. The shares are not to be HDFC Bank. All right. So the final shares have begun two thousand finer shares to the final shares times two thousand rupees.
You do the math what it’s worth today. This kid is barely 30 and he already has such amount of wealth because one of our friends was wise enough to give him an appreciating asset and not a depreciating asset. And the trick about buying as modules you said when you buy a stock is thinking that carries it out. Don’t think of buying a price fluctuation. Say you bought a thousand shares of DFC bank. Think you’re a part owner of the bank then you will think differently as opposed to say Bismillah get partisan BS the eminent because then you are fluctuating on the price you want to be a trader.
That’s fine. You want to build wealth but budget says then you go to buy invest in a business. I explain to the power of compounding compounding of burning if there’s one lesson that the younger people should take away from here is there’s magic in compounding. If you understand what compounding is it can change your life. Trust me when I say that 10 lexical 100 crores sounds silly to most young people. How does that happen. My father works all his life. You know he’s not got anything that amount like that but.
That is the mathematics of it. You go on a spreadsheet on it take 10 lacs component about twenty two point three percent and see what that money becomes in 30 years. Math doesn’t lie. It becomes hundred crores. The trick is finding the businesses that can compound it such a great rate for you. India Grows at Night. You know all these people who get very bearish on India. Okay. You have gotten a unique rupee depreciate. You know we are blessed with 125 crore people in that economy. OK.
I keep on legal and other chatting I good GDP growth annually. There’s nothing no one can stop that that’s going to happen. If you have a good government will grow at 10 percent. If your bad government would grow at 7 percent right. So India Grows at Night It doesn’t matter not overcome to terror they understand it. So India will keep growing and a growing economy means growing profits growing profits mean growing stock market valuation as companies find and. Aspire to newer markets new niches in retail and cement in pharmaceuticals.
Enormous amount of wealth is going to be created. Look what happened in India in the last 25 years of my career. From this is gonna be assassinated to the end BFC trouble though. Suppose I came to India in 1989 and you told me that you are coming to rupees about 20 to the dollar it will go to 80 to the dollar. They’ll be Kargil war that plagues and Sudha. There’ll be a nuclear bomb blast. There’ll be a Y2K the big tech meltdown there’ll be a salami. And I’m going back I’d only invest in this Indian market.
And yet all these things have happened. All right. Governments have come and gone. The rupee is depreciated calamities of the Indian market. People have boycotted parliaments governments have come and gone and still the index was suddenly eight hundred ran out. My career started. Is today closer to 30 thousand plus. Right. So that’s what I mean by India Grows at Night. Could you be all that things happen bad but because you are blessed with having a market of hundred and twenty five crore people all right opportunities are greater today than they’ve ever been.
Bull markets equal big money the greatest money is made when a bear market is getting over in a bull market starts with all bull markets go up. Three X five x x x to be zero index one hundred thousand without the index. Okay so the big money is made in the big swing in the market. So you got to get into the bear market be ready that values will emerge that buy it and don’t make 10 20 rupees and sell it because the shorts using herself as model pointed out but just fancy go 400 X HDFC Bank and go up thousand X Infosys goes up 2000 X alright.
These opportunities are in finding those great companies. So you need to spend time understanding whether it’s a bull market and if it’s a beginning of a bull market you understand that great opportunities lie ahead of you. Someone asked me up that job index are some as you look at of they are all about good wages. Jarrod so I asked the wisest friend I know in the stock market who happens to be also the founder of demand. I just happened to be on the board of demand the founder of the award. And we was asked the same question by another group of youngsters.
And. Someone asked him what is the best investment time in his career. He’s seen a 50 year investment career he’s seen as someone said the model to this a dividend scrapping act. He’s seen the liberalisation Manmohan Singh. He’s seen the tech boom in India. This is what are the best investment decade in your investing career and without blinking he said the next 25 years. The opportunities in the next 25 years are greater because you have a market. We are a democratic country. We have skill sets. We understand the value of economic reform so the opportunities ahead of us are far greater than the opportunities behind us.
As great as the opportunities were behind us all right. So please I don’t know don’t take my word for it. Who might consider one of the best investors in India. One of the best entrepreneurs in India says that the opportunities of the next 25 years are greater than the last 25 years. So having spoken over the last 25 years we share with you the next 25 years how to invest for the next 25 years member may. You are not bullish How did it leave new the Bombay or the US in Bombay.
Which school did you get to. That’s very important. Which admission is schools are not what I know he’s just going to 3000 request. She gives you admission which club you’re a member of and. We have a parking spot.
Parking spot he abhorred marijuana in this society. Right. So in my building for example raised in south Bombay parking spot may go from anywhere from 50 lacs for an open spot like this to certify likes for a garage set. It’s more than the cost of the car. So whatever you figure that out. So the question I have to you is what do you think this parking spot will be worth in 25 years I think you gave you a clue.
Yeah. You think Zero. Because he’s my mama. So he knows what I think. I think it was when he was 0. Now there’s a pretty radical thing for me to say. Well let’s see. Let’s let’s make the case for it.
We’re at the point being that technology is changing the way you think it is very important for investors to keep adapting to technology as it’s changing. Take a look. This is New York City Fifth Avenue.
Nineteen hundred at the turn of the century. If you look closely this picture is not a very high resolution picture because you didn’t have high resolution cameras subordinate here. There’s no card. The only goal I got is out there. OK. Nineteen Hundred only got I got it. What happened 13 years later.
All cars same street same city.
No I.D. only cars in 13 years. LaGuardia I.D. gave way to the internal combustion engine. All right. So all those people who say that the electric car won’t happen it’s too fanciful. Should look at this picture and think in 13 years we move completely from horse to a horseless carriage.
Let’s take to market. Does anyone know any young person. No. Which was the most dominant name in photography in 2000. It’s Kodak. It was the most company. I’m not going to call Polaroid with me an instant camera. They’re the most long government in. What’s the price of Kodak today was the stock price of Kodak does anyone know is bankrupt. Zero has gone bankrupt. Kodak the most dominant company in the world in photography 15 years back is bankrupt today. Polaroid bankruptcy. All right. The two most run companies.
Now let me ask you why did it go bankrupt. We don’t take photographs. I see people who are clicking photographs all the time. We click more photographs per capita today than we did in 2000. But why they didn’t keep up with the times. I didn’t understand that people want to click photographs on a mobile phone and not to see printed out. At the heart Kodak and Polaroid what chemistry companies they believed in the magic of processing photographs and getting it done an album and keeping it that didn’t believe in the social media revolution that took place believe me Kodak and Polaroid had patents done on photographs to be kept on phone and a hard place.
But they didn’t believe in that because it’s run by companies chemists who taught themselves in small photography market not honestly in the social expressions market. And because of that they went bankrupt. So you’ve seen two industries before right. All right. Horse carriage and photography go bust. So yes something that no opaque minister said and this is funny when I’m saying this now because the biggest worry in the Indian market is the price of oil. And I have self among the. People who say that if oil were to drop ten dollars an ounce a barrel index we’re back to eleven thousand seven hundred.
Right. But he said the Stone Age didn’t end because they ran out of stones. Think about very profound words the Stone Age didn’t end because ran the stone technology progressed beyond stones. All right. So the oil age as a corollary will not end because they’re no longer oil. So even though oil is now troubling the Modi government troubling your wallet. Troubling the country troubling the rupee.
You can sense that the end of oil is near us. Why is there no oil coming here. Because it would be undone by smartphone apps long life batteries simple during internal combustion engine which used to power all the oil will now give way to the integrated circuit. And what’s at stake is 10 trillion dollars worth of economic output. That’s what the global auto industry is worth ten trillion dollars. And with it the future of so many sectors auto auto injury infrastructure auto industry is at stake. Let me explain to you what I mean when I explain to you once you go to electrically because you do need oil to run them they’ll be running on battery power.
Right. So what is the cost differential between the current auto and electrically equal. If we just go to the numbers are pretty staggering.
You replace the ignition in your car 400 dollars goes zero in because you don’t have ignition electric vehicle cars. How many parts do you have in a current auto. Twenty thousand. How many electric train. 20. What is the cost of a driver in India. 400 dollars. No parties there will occur in Bombay at least a driverless car. Zero car drives itself. Right. Cost of parking I put 25 x very charitably is small like 50 to 75 0. What’s going to happen with the electric car.
So will all of you come here for the seminar. You’ll all take out a smartphone apps punch in a few numbers are there. A camera can pick you up take you where you want and go pick up the next person. You won’t actually own a car. You don’t own a car. Why would you want a parking spot. This useless. About it we use a car maybe 10 15 percent of the time. Most of the time you go to the office go to the grocery store it’s parked later right.
You don’t use the car. Once the electric cars comes in there’ll be no accidents. People will just order it like a fleet. But in the back Arriaga auto the. It won’t matter. It’s not like we generate own electricity. You know we just use the legacy of the grid so we use fleet cars. So if you want to write a car if you like the experience of writing a car just like you want to ride a horse you go to the horse track. And on a horse that you don’t go out on the street and ride a horse.
The same will happen with electric car. You want to drive a car. You want to get your own feel a young man again driving a car. Go to a racetrack drive a car your driver on the road. It’ll be driverless. It will be electric and it will be cheap. Right. So everyone will live it or they want commute wherever they want. They will be very few accidents because they’re all software driven. So they will tell keep six inches distance between the car don’t have accidents so the accidents ram it down.
No auto insurance is there. If all cars follow one other you don’t need 16 highways was have tooling highways and do it. The profound investment implications. I found the study. That out of. In the 90 years of the US stock market twenty five thousand companies are traded. All right. And in that year the Dow has gone from 166 to 25000. And yet only 4 percent of the thousand companies have accounted for all that gain. So in a market as mature as the US only 4 percent. So people say stock market picking is not important.
Could we lay low. Bodega. It happens sometimes but all long periods of time is very important to pick the right stocks. So the question for you here is during this period from 1926 to 2015 which was the best performing stock in America and how much you go up.
General Electric OK. Few more guesses Amazon Amazon listed 926 if what it probably would be would. Opposed. Now there are a lot of Apple fans. Again it’s not listed that long. It’s been a great stock bonanza. Microsoft again not listed nineteen eighty five got listed. Coca-Cola Berkshire who’s at Berkshire. Good good good good. Getting closer but not quite there. For.
Exxon Mobil. These are all good guesses. I mean you all are coming very close. But the best stock has been Philip Morris cigarette maker.
The two best stocks in the world in any market. Iphone. No Google got listed only in 2000 sometime. The two best stocks in the world almost every market or group are the sin stocks liquor and tobacco. All right. What is the best stock in Japan. Japan American Tobacco. What are the best stock in Britain. The Asian bad. What is the best stock in India over the last 30 years idc. Right. So for whatever reason is a habit forming events. So these stocks have done the best.
How much is Philip Morris up in the. 90 years. How many times is it up. To you without a vagrant stocks all go no go so go No. Jocelyn I wonder how much is Philip Morris up. To the old times also very good to him. How much is Philip this in dollar terms I buy that is not in rupee terms in dollar terms how much is Philip Morris up 2 million times.
Two million times this including dividends. All right.
But the point is that and cigarette consumption has fallen in America. Okay. People do want to smoke cigarettes. But said. The. Characteristics of a powerful business are such that even in a shrinking market they keep raising the prices tax whether or prices rather than you know gamers can ban them because they get too much revenue from it. So these inelastic demand smokers will want to smoke. I’m sure about this at how crabby people still smoking so you know it has created a huge amount of value for investors. All right.
I’m not in the business of telling you what stocks to buy. I mean I’m okay to buy liquor stocks tobacco stocks. Some people don’t like to buy them. I respect them. But the hard fact is Philip Morris has been the best stock in India and of course Berkshire Hathaway. When I went as a student of America 1977 I checked that later on the stock was worth seventy five dollars a share. Today it’s something like 300000 dollars. So I wish I had gone to the beach and bought some shares of Berkshire but.
I wasn’t that smart. So here’s a rule of.
The top 20 stocks over the 90 years I put Alger. That’s the name of Philip Morris. Now it has changed its name to Altria so that’s Altria but these are some of the names you all mentioned you knew at General Motors Exxon Mobil Apple Merck Wal-Mart these are some of the great stocks that have been present over the last 90 years in the financial markets. Your job is your means to find these stocks can you find them the double for you every three years. You’re rich. This is some of the things I put down as a potential This is my list.
Again as Mother always said there’s no guarantee anything about this. This is our own thought process we do that some potential loser the very simple to say auto industry. If you go to electric vehicles auto industry is not going do well. And again I say over the next 25 years I’m not saying the next two years Maruti will 10000 rupees right now. So I’m saying over the next 25 years. All right. Auto ancillary auto insurance if you will need oil you probably will need refining that much. They probably won’t do well.
Textiles is become very commodity business which robots using it heavy labor industry because artificial intelligence is going to take over the component of labor. So the dramatic change in those industry sort of things they’ll do well liquor and tobacco as I mentioned to you. These are some of the last 90 years with the greatest stocks human habits don’t change. People will always. Have some base in life. That’s why these stocks will do well gaming again. People like to gamble for whatever reason gaming stocks will do well. I say quick service restaurants because I think is a young country people still cook at home.
People who start going out to eat. Women really working outside the house airlines very controversial one hasn’t done well for me. Oil prices have kill them but ultimately you’ll have electrically legal. Cars but you still need to go to Bombay for a wedding you know for a convention Jaipur for a holiday and only way to do it is to fly there. Right. So the airlines will probably do well over time upgrade for 2018. I want to leave you with some sort of semblance of what I think. Is that.
This is more like a vicious correction than a bull market top. I think that’s the question everyone. I think I disagree with my audience today everyone in the audience thinks is that we made a top model. You know I think it’s a correction. I hope I am right and you’re wrong. I think I hope the market goes back. I think if oil drops 10 20 dollars we’ll probably be back to eleven thousand seven hundred. The key variable for the market is corporate governance. Companies with bad corporate governance what do I mean poor results auditors changing unnecessary losses market slamming those stocks down so good corporate governance is a key determinant now on what to buy in the market.
Leadership still rests with. Consumer and consumption oriented stocks. I believe that despite the market now falling in New Highs which it is you know I think over the next three months individual stocks will start making new highs again. We’ll go back again next may not do for six months nine months but I think individual stocks will start making new highs. So that is a sign that the bull market is intact. If indeed the stocks can meet new highs then clearly we are entering a bearish market. The festival season is off to a great start.
So does the valley. From what I understand with its Titan or whether it’s two wheelers or with its textiles they’re all doing well. So that’s a good sign. Consumption purchasing power is good. And market fears are what you know tariff was Fed hike if I say laying down selling whatever these all markets will always climb a wall of worry there will never be a market with no nothing to worry about.