Thursday, October 30, 2008

Rise and the fall of the Sensex

What a swing of the Sensex from its peak of around 21000 on 08-Jan-2008 to low of 7600 today (27-Oct-2008)!. There are questions and answers flowing everywhere whether we have reached a bottom. Many people forget the tops and bottoms were only recognized hindsight. You will only be able to confirm whether this is a peak or not only after an year or later. Never the less both tops and bottoms are associated with some characteristics which somewhat give an idea if we are nearing that. However these could well mislead many a times, so you never know if this is a real bottom.


Characteristics of Tops (Sensex or Nifty peak):

  • P/E is high. On 08-Jan-2008 the Nifty P/E is about 28. Which is very high but not dangerously high. If two more quarters of good results flown-in, then the PE would have become somewhat lesser may be about 22 or 24.
  • P/B is high. On 08-Jan-2008 the Nifty P/B is about 6. Which is dangerously high.
  • Dividend Yield. It was less than 1% meaning we are in for a fall some time in future if not today.
  • Market cap/GDP ratio. Another bubble indicator was excessively high at 1.8 (anything above 1.3 is a bubble region)
  • All the analysts started talking about 1-year silly forwards PEs or even 2-year fully forward PEs. They go to any extent in justifying the price and target of a stock (in fact they are always paid for this).
  • Market hype: Very high market hype. Every Tom, Dick and Harry started buying into IPOs, Secondary stocks, Mutual funds and ULIPs. People started looking at Reliance Power as something produces Gold out of nothing starting from tomorrow instead of thinking it produces electricity from fuel in 2012-2020. The valuations were equal to what were commanded by Infosys in their bubble days (2000).

So the crash had to happen. If not in Jan-2008 some few months later or an year later. The credit crisis has actually made it come faster.

Let us look at Bottoms (Sensex or Nifty Bottoms):

  • P/E is very low (trailing 4 Qtr PE of 10-12). Nifty PE was 10.38 On 27-Oct-2008.
  • P/B of around 2. Nifty P/B is 2.12 o 27-Oct-2008.
  • Dividend Yield of > 2%. It is 2.24% on 27-Oct-2008.
  • 4. Market Cap/GDP ratio of 0.6 saying we are very reasonable. This can become high only if India is heading into GDP contraction (recession) which is very low probable event. The worst you can assume is 5-6% GDP growth for next 2-3 years.
  • Analysts only talk of trailing 4 Qtr PE. No one has guts to say are going to be this year’s earnings for any company, forget about silly-forward-PEs.
  • Absolute fear in the market. All the Tom, Dick and Harry are just waiting to dump their stocks into market at the slightest increase in prices.

Probably the last one i still incomplete it takes some time before every Tom, Dick and Harry realizes it easier to earn money in selling peanuts, or growing Vegetables or running a auto-rickshaw rather than by inverting into stock markets. Over the next 2 years these people are going to leave. That process is not going to be smooth, but painful with dips at every rise. That reminds of a some quotes: Stock markets are going to be irrational longer than you can stay solvent. Or They are going test the patience of the even the most patient investor. Key is to stay solvent, keep investing only excess money that you probably not need in next 3 or 5 or 7 years, after keeping an emergency funds of 6-12 months of expenses.

I am loving it. This is right time to start executing the plans. We may still go down a bit from here and stay there for quite a while, but great over all opportunity to collect value.

Sunday, October 5, 2008

Trip to Ooty: The Good, Bad and Ugly

October 1 (Wednesday) and October 2 (Thursday) being holidays it gave us an opportunity to plan some thing for the five days after taking Friday off. I started searching for places as far as Singapore and Andamans to not so far (but still far) as Goa and Karwar. While we had no time for Visas for Singapore and thought of postponing Andamans trip to some time December (since it may need a full week) while Goa is discarded since we visited it already. I could not get accommodation in Karwar Devbhag Island resort, so started looking at much nearer places. We have zoomed in on Ooty particularly since my wife never visited the place so far. I had visited it way back in 1994, but it is quite a long time (must have passed so much of polluted air over the hills of Ooty since then), since it is also easily accessible for own driving, we decided to give a try. I started searching for hotels in Ooty and Coonoor. Finally decided and booked one of the suites for 3-nights/4-days in Kluney Manor by phone. Double checked the weather forecast on Google, Accuweather and weather.com. Google predicted rain on Day1 (Oct1), but not the other websites. So I decided to ignore Google. Overall the forecast was "Beautiful day with Sun shine and Clouds".

The Onward Journey:
We planned to start at 6 a.m. Our 2 1/2 year old son got up in the morning and ready for the trip, to our delight he was in good mood despite waking up early in the morning. Thanks to so many small things we postponed for the morning we could only start at 6.45 a.m. When we headed out of Koramangala in Bangalore we soon realized we were late by looking at the activity on the roads. We quickly crossed Madiwala, BTM, JP Nagar, Kanakapura Road and then NICE Road to join Mysore road at Kengeri in just 25 minutes. Not so bad given that there is already some traffic on the road. We drove past Ramanagara and stopped at Kamat Lokaruchi hotel which was already packed with tourists going towards Mysore. We hurriedly had breakfast and got some Dosa's and idly packed for rest of the onward journey and started towards Mysore.
While our son entertaining us with the Rhymes (see video),



we crossed Mysore Ring road (probably 2 1/2 hours time from start) and I quickly realized we have to take ring road and avoid going through the City. We reached Nanjungud road after driving around Mysore city (pretty long route, I got a feel whether it is wise to drive through the City instead). We crossed Nanjungud and then Gundulpet. This route is not unfamiliar; I had visited and stayed in Bandipur way back in Dec 2003, so it is just about five years I am back on these roads again. I still remember the roads were not good at that point of time, so five years has really made a difference to the people commuting these roads. Well, the story of good roads ends there; the stretch between Gundulpet and Bandipur was really bad which took considerable time. We stopped at Bandipur forest office (or tourist office) for a quick break before heading towards Madumalai forest to enter into Tamilnadu. I was looking for wild life, but could not find any except monkeys which my son enjoyed them watching.
I probably there at a wrong time of the day (around 12 noon) and wrong time of the year. While coming back I could spot some wild squirrel kind of animal on one of trees but my camera's zoom was not sufficient to capture it properly. We reached Madumalai and then Teppakadu junction in no time. At the junction, we took left turn to take the shorter but steeper road through Masingudi instead of longer and flat road (right turn) that carries all bus and truck traffic through Gudulur. The shorter routes takes little more than 1 hour to reach Ooty (36 km) while the longer route takes double that time and double the distance. When we crossed the forest and just about to enter Ooty we were welcomed by the famous steep 36 hair pin bends. I was mentally prepared to take on the steep hair pin bends so did not get surprised ( I had visited other ghat roads as well so not much of a problem). However I realized that my Maruti Suzuki Swift was not able to climb up the hair pin bends comfortably in 2nd gear so I needed to often use 1st gear (this is a known problem with Swift - Petrol, hopefully Diesel one is better). On the way (around 15/36 hair pin bend) I noticed Kluney's Mystic Ville, one of the resorts I short listed, to see what the hotel has to offer. Good location in the middle of Tea gardens and at the edge of the hill with a valley view and of the Kalahatti falls (though there is not so much water). The manager showed me one of the rooms facing the falls which is quite good, but since it is around 13 kms from Ooty town and takes about 1/2 hour to reach we gave it a pass. We soon entered into Ooty town and quickly crossed the Bus stand and got directions and reached Kluney Manor (see link) rather comfortably. It was about 1.45 p.m. so it took exactly 7 hours including the breaks (about 4o-50 minutes) to reach there. As expected the hotel was on top of a hill (somewhere between Fern Hill and Elk hill) with good view of the other parts of Ooty town and thankfully is isolated from all hustle and bustle of Ooty town, really quite quietness.










The historic bungalow was beautiful, the lawn was neatly maintained. I quickly checked the views around the hotel before heading towards the reception where I got keys to one of the suites facing front (Elk hill) but I requested one facing other side (Ooty lake) which they promptly agreed to offer. The room was spacious (believe me close to 20x30 feet and the toilet is not smaller than 10x10 feet, and a separate lobby in the suite entrance) with old Victorian style of decor and lighting as promised. Pretty clean and nice ambiance. My son immediately liked the hotel, the lawn and the suite; he started jumping on the bed.

Day 1 (Ooty Lake and Boat house):
After taking a bit of rest and refreshing ourselves we first thought of covering one of the usual Ooty sightseeing places - the Ooty Lake and Boat house. The town is pretty small, every thing is around the Bus stand and Charring Cross which are around 1-2 kms apart. As soon as you are at lake and stand in the queue for tickets you realize that some old style rules still ruling - Entry fee: Adults 20/-, Camera 30/-, Video Camera 75/-. I think the tourism department in India should wake up! Who does not carry a camera these days, of which how many camera's do not have video option (all still digital cameras come with video shooting ability, isn't it?) and what about Camera phones? I realized many of the younger generation (who are considerable number of Ooty tourists) actually use camera phones, but not cameras. Seriously there is a need to review these entry fees for Cameras, more because there is no enforcement for Camera entry fees; it is up to the individuals to declare. It is better to have higher entry fee since it is enforced already and leave cameras without any fee which is what the practice I noticed in US and I guess in other parts of the world.

I can start feeling the usual complaint of Ooty town - the crowd, the noise, the dirt and the pollution. Ooty is rather unfortunate to have good connectivity and some good roads. It's easy accessibility from Coimbatore, Mysore and some parts of Kerala (note this is close to Karnataka, Kerala and Tamilnadu border) has taken a toll on the overall characteristic of a hill station. You can notice that many people do not even stay overnight in Ooty, they arrive in the morning and depart by night (we did exactly that when we visited Ooty way back in 1994; stayed in Mysore and visited Ooty as an excursion) and also the amount of money one needs to make a day-trip to Ooty is much more affordable which means the stress on the city is higher.



Leaving my complaints aside, my son had truly enjoyed the trip to Ooty lake, we took what he calls it as "row row row your boat" trip (we got a boat with rower), clicked some photographs and then dashing cars, then a mini train ride and finally a horse ride, all at one place and in overall 2 hours time. At around 6 p.m. we soon started feeling the chillness of Ooty weather. It reminded us of our trips to Manali, Darjeeling and Gangtok, but no where close to that chillness. We headed back to our suite and finished dinner by 8 p.m. and pretty much tired, just wanting to call it a day. Though the hotel charges 100/- to lit up the fire in the fire place we got it done to get some relief from the cold and also get a feel of that style of living.

Day 2 (Botanical Gardens, Doddabetta, Coonoor):
Our day started perhaps as early as 4 a.m. and we were all ready by 7.30 a.m. waiting for the buffet breakfast to start at 8. We (even hotel staff) realized we are the odd ones to come for the breakfast so early (though the hotel has another 16 rooms we could not find any one coming so early). Finally at around 9 a.m. we were out towards Botanical garden. The crowd was in good numbers, perhaps October 2 being a National holiday. We some how found parking for our car and went inside the Botanical gardens. Ooty lake and Botanical gardens are bit crowded, but these can not be omitted since you get very good photographs at these two places. Whether you like it or not at that time, trust me you are going to like after looking at the photographs. So we soon became busy clicking some photographs, walking around and my son running around. The weather was good with sun shine and intermittent clouds. Direct sun shine was bit warm, but with clouds it was very pleasant.



After lunch (we did not like it much) we headed back to next destination - the Doddabetta - the "big hill" - the highest point in Tamilnadu at about 2600 mts. The place looked bit crowded due bad parking arrangement also because the sides of the path way were very badly occupied by hawkers (why allow selling all such things as cheep plastic makes at the highest point in Tamilnadu) and lots of waste generated because of these hawkers. Such places need attention to maintain good ambiance. Though the views of the valleys and hilltops were good, we were still disappointed at that place, I should have done some homework finding about right time to visit that place (perhaps the early morning may be a good time).

Then decided to see what Coonoor has to offer. Not much. The traffic was heavy and it takes more than 40 minutes to go from Ooty to Coonoor. On the way we had to wait to give way for the the famous mini train that takes visitors from Mettupalem to Ooty and back, through a picturesque landscape. That is one thing we had not really planned for but promised ourselves "next time". Soon we found Sim's park in Coonoor, looks good, but can not much appreciate this place after visiting Botanical gardens. My son enjoyed some slides, swing at the children play area within the park, trying to spot some big trees, small trees and monster trees before heading back to hotel. I felt Coonoor is not so cooler compared to Ooty, perhaps some what lower in altitude. However when I reached Ooty and hotel, I realized even Ooty was not that cold that day (which continued for next 2 days too). As usual we finished dinner, got lit up fire and then went to sleep.

Day 3 (Avalanche trip in search of Canada dam):
We finished breakfast by around 9 a.m. and decided to venture out of Ooty. But we have noticed a Deer park while having the boat trip in Ooty lake so we decided to make visit. It was a very small place with around half dozen deers kept in a small enclosure. There is absolutely no one out there except our selves. Here even our son took photographs with his toy camera:






We headed towards Avalanche (around 25 kms) which has some Dams (Canada dam), some view points (Hawk's eye) and fishing place where once can hire the equipment from locals (hoping it will not be a Feviquik version) and catch some fish. Our hotel guys did not know lot about the place but they indicated it may take lot of time 2 hours or so (the road is not good etc.). Since we do not have any thing else to do and have a strong desire to go out of Ooty town and particularly places no one normally visits, we continued by following our gut feel of the route and by confirming the route with locals in between. When we travelled around 5-6 kms and went out of Ooty town, we soon noticed the English version of the directions/boards etc. have disappeared leaving only Tamil scripted boards, the landscape became beautiful with tea gardens, some villages surrounded by hill tops and valleys, the traffic being bare minimum, the road in reasonably good condition. We enjoyed the drive.



We drove past the Emerald town (or village) and started checking of directions from people cutting and clearing road side trees. We found that we almost entering into Mukurthi Wildlife Sanctuary nearing Kerala border, we had to take a U-turn. My blackberry and always useful google maps not help me much. Google maps lacked the fine details of the roads there. We had to solely depend on the directions given by the locals in Tamil and digest them (like go 3 kms - Lawrence - take left turn - go 7 kms). We lost all other details the locals have given. After driving little more than 4 kms we found a left turn, a tempo driver showed "left" when we asked "Avalanche Dam". We driven around 4 or 5 kms before the road became very bad. We probably ignored the boards in Tamil which said you are in a restricted forest area. We saw a lake on right side and soon we saw a forest guest house and crossed a little bridge on a small stream. Then come across a forest guard who said this is a restricted area and need to take permission, not here but in Ooty. I learned there is no Avalanche dam there. We saw a tempo (probably with tourists) going further which learned on a way to a fishing farm. With 2 local kids guiding us we spent some time there at a supposedly Orchid farm (but Orchids were missing) and went into the water stream, played a bit and we returned when my son collected some rounded stones from the stream. We even went to the fish farm where the trout fish eggs were hatched. While returning we stopped at the lake, it was good.
We again took directions for the Avalanche dam and the Emerald dam (they are off the Emerald town junction, need to take right turn while coming from Ooty). Since there is no way we could touch water we quickly finished our visit to the Emerald dam by walking to the middle of the dam to the gate opening and back. We skipped Avalanche dam and search for Hawk's eye point. We said "next time" in our usual manner. We had to buy some bottled water (to my surprise we could get Bisleri brand there), some biscuits and bananas in one of the small shops at the Emerald junction. The food was necessary since it was about 4 p.m. and we had not taken any thing after our heavy breakfast. We headed back to hotel after a nice and joyful outing in the nature and countryside. It was a good experience overall.
Day 4: The return journey:
Day was full of mixed experiences. Some good and some not so good, particularly the lengthy and painful return journey. We packed our stuff and planned to be out by 9 a.m. but we could only be out by 10.45 a.m. (in the last minute just before I started my car we noticed both of our camera's running out of charge so needed to spend around 20 minutes to just charging them). We filled full tank of petrol and started pondering on whether to take the longer route (through Gudulur) or shorter route (through Masingudi). I wanted to go through Gudulur which I heard is much more scenic than the shorter route. However my wife wanted to go fast (we thought of covering Mysore Zoo mainly because it has Giraffes). When I saw "Pykara falls ahead" board, I realized I missed the turn to the shorter route some where (probably got misled when I saw "No entry" in big letters and "for trucks and buses" in smaller letters. ). I had no regrets; I wanted to see this route any way. We saw couple of places with people, perhaps famous film shooting places. We decided not to stop since we were becoming late and my son was sleeping as well (we said "next time"). We also saw people near Pykara falls, we could not see actual falls from the road, we could only see people seeing the falls. We said "next time" here as well. What followed was a beautiful journey from Ooty to Gudulur. Spectacular views, valleys, hill tops, greenery, mist and all of them together. It was drizzling intermittently, what a nice time to drive on the road. The road was good except for couple of small patches; we enjoyed the drive since there was not much of traffic the other way. Otherwise it would have been difficult since the on going road works had occupied half of the lane at many places. We stopped at couple of places and took quick photographs.




It was a long journey, but ultimately reached Gudulur, then Madumalai forests. Some bad stretches of roads finally lead to Teppakadu junction where the shorter and longer routes merge. In between I got a little doubt whether I lost the way after seeing many Kerala registered vehicles on the road before realizing the Geography of this place that it is pretty near to Kerala border as well (Mysore - Calicut highway demerges from Ooty road at Gudulur). We did not have much wildlife luck other than spotting monkeys. We stopped again at Bandipur, our familiar place. This was my fourth visit to Bandipur out of which I stayed overnight at two occasions. We want to do it again some time. I enquired about Reservations in the forest guest houses/rooms which the lady said "All reservations in Mysore, not even in Bangalore". I decided to take help from some one in Bangalore to get one day booking for coming months preferably in the summer where animals come out of forest for search of water. I remember the experience of seeing hundreds of deers which come to the open ground near the Bandipur forest office cum guest houses every night and leave back to forests in the early morning. You must stay there in the night to experience that.
After a painful drive from Bandipur to Bangalore, with two unsuccessful hotel stops which we did not like but ended up wasting around 50 minutes of time and with dinner at Kamat at Ramanagara, we reached home about 8.50 p.m. after clocking 770 k.m. for the whole trip spending around 17500/- (4000/- on petrol and 12000/- at the hotel) on a 3-nights/4-days nice and memorable trip to Ooty. However we realized there is nothing like coming back home and sleeping in our own bed. We truly felt it even after such a wonderful trip. This reminded me of:

"No one realizes how beautiful it is to travel until he comes home and rests his head on his old, familiar pillow. ~Lin Yutang"

Good, Bad and Ugly of my "Ooty trip":

Good:
  • Kluney Manor hotel, views from it, the quietness of the place (quite good, but not absolute like living in a forest).
  • Ooty Weather.
  • Places outside the Ooty town (e.g. Avalanche),
  • "Ooty - Mysore route" via Gudulur.
  • Photographs taken at Ooty Lake and Botanical Gardens.
Bad:
  • Water in Ooty lake,
  • Crowds at Ooty lake and Botanical garden.
Ugly:
  • Ooty town - the noise of the crowds, vehicles, pollution.
  • The doddabetta (views are good, but place is cramped, too many hawkers, dirty, polluted at rush hours).