Month: December 2015 | Page 6

7 December, 2015

Corporate performance shows a clear trend of demand destruction

Last week the Reserve Bank of India (RBI) released the data on the performance of non-financial private corporate business sector during the second quarter of 2015-16 (July- September 2015). This data makes for a very interesting reading.

The data aggregates the financial results of 2,711 listed nongovernment non-financial companies during the period July to September 2015. Take a look at the following table which summarises the performance of the companies. Also, please keep in mind that “to compute the growth rates in any quarter, a common set of companies for the current and previous period is considered.” This has had to be done because the number of companies across quarters does not match. So while 2863 companies have been taken into account for July to September 2014 results. Only 2,711 companies have been considered for the period July to September 2015.

Indicator	July to September 2014		April to June 2015		July to September 2015
Indicator	Amount in Rs billion	Year on year growth in Per cent	Amount in Rs billion	Year on year growth in Per cent	Amount in Rs billion	Year on year growth in Per cent
No. of Companies	2,863		2,723		2,711
Sales	8,107	4.2	7,639	-2.4	7,517	-4.6
Value of Production	8,148	4.2	7,694	-2.4	7,479	-5.6
Expenditure, of which	7,076	3.6	6,534	-3.5	6,330	-7.8
Raw Material	3,760	3.4	3,199	-11.8	2,994	-18.7
Staff Cost	649	7.7	681	10.2	689	9.0
Power & fuel	297	3.7	284	-3.0	276	-4.2
Operating Profits (EBITDA)	1,073	8.3	1,160	3.7	1,149	8.9
Other Income	275	26.1	215	1.8	250	-5.8
Depreciation	297	3.5	304	3.6	301	4.0
Gross Profits (EBIT)	1,051	14.1	1,070	3.4	1,099	6.5
Interest	326	-0.6	342	9.5	333	8.4
EBT (before NOP)	725	22.1	729	0.7	766	5.6
Tax Provision	204	29.0	211	6.0	219	9.6
Net Profits	537	25.6	514	-9.5	577	9.9

The table clearly shows that the sales of the companies during the period July to September 2015 fell by 4.6%, in comparison to the same period last year. Despite falling sales the net profits went up by 9.9%. There are a couple of important points that need to be made here.

Falling sales show that businesses lack pricing power. This is because the consumer as well as industrial demand for products hasn’t been going up at the same pace as it was in the past. Nevertheless, despite falling sales, the net profit went up by close to 10%. What is happening here? The raw material costs of businesses fell by 18.7% during the three month period in comparison to a year earlier.

As CARE Ratings pointed out in a recent research note: “The negative growth in net sales is largely attributed to weakness in demand and pricing power. Despite negative producer’s inflation as measured by the wholesale price index signalling also lower raw material costs, growth in profits do not appear to be satisfactory.”

The raw material cost during the period stood at a total of Rs 2,99,400 crore. This was Rs 76,600 crore lower. Profit on the other hand jumped by around Rs 3,900 crore during the quarter. Hence, the entire jump in profits has come from lower raw material costs.

Raw material costs have fallen largely due to falling global commodity prices. Power and fuel costs have also eased by Rs 2,100 crore. This has helped businesses bring down total expenditure by Rs 74,500 crore during the quarter and in turn, help report greater profits.

Now let’s dig a little deeper and look at how manufacturing and services companies have done.

Indicator	Manufacturing
	July to September 2014		April to June 2015		July to September 2015
	Amount in Rs billion	Year on year growth in Per cent	Amount in Rs billion	Year on year growth in Per cent	Amount in Rs billion	Year on year growth in Per cent
No. of companies	1,910		1,828		1,828
Sales	5,896	3.9	5,414	-4.8	5,275	-7.8
Expenditure, of which	5,270	3.5	4,732	-6.2	4,534	-11.3
Raw Material	3,374	3.0	2,882	-13.0	2,697	-19.1
Staff Cost	293	11.3	311	10.8	309	9.4
Power & fuel	168	10.5	164	2.8	158	-2.5
Operating Profits (EBITDA)	649	7.9	717	4.0	699	11.0
Other Income	127	20.1	119	-3.9	140	12.5
Depreciation	184	3.0	187	4.1	181	2.4
Gross Profits (EBIT)	592	12.0	649	2.4	658	13.9
Interest	188	3.2	196	9.4	182	4.2
EBT (before NOP)	404	16.7	453	-0.4	476	18.1
Tax Provision	131	30.1	135	6.9	137	6.2
Net Profits	281	21.6	310	-14.3	333	19.8

The manufacturing sector includes companies operating in Iron & Steel, Cement & Cement products, Machinery & Machine Tools, Motor Vehicles, Rubber, Paper, Food products etc. The sales of these companies have fallen by 7.8% during the three month period between July and September 2015. This shows a slowdown in industrial as well as consumer demand.

The profits on the other hand, tell a completely different story jumping by 19.8%. This was primarily on account of raw material costs falling by 19.1%, during the period. It needs to be mentioned here that for profits to continue to grow raw material costs will have to continue to fall, so that expenditure can be controlled or brought down.

For raw material prices to continue to fall, commodity prices need to continue to fall. Commodity prices have already fallen quite a lot. Hence, for profits to grow in the next financial year sales of companies need to start growing as well.

Let’s take a look at the performance of services sector which includes companies operating in Real Estate, Wholesale & Retail Trade, Hotel & Restaurants, Transport, Storage and Communication industries.

Indicator	Services
	July to September 2014		April to June 2015		July to September 2015
	Amount in Rs billion	Year on year growth in Per cent	Amount in Rs billion	Year on year growth in Per cent	Amount in Rs billion	Year on year growth in Per cent
No. of companies	465		454		450
Sales	701	8.8	816	6.8	799	7.2
Expenditure, of which	583	6.4	655	4.8	646	3.3
Raw Material	49	12.9	47	6.8	44	-13.6
Staff Cost	50	11.9	55	8.0	56	8.4
Power & fuel	40	3.4	31	-21.7	30	-25.9
Operating Profits (EBITDA)	129	28.3	164	16.4	157	19.4
Other Income	64	61.7	24	2.9	43	-33.3
Depreciation	60	6.4	68	6.6	69	11.2
Gross Profits (EBIT)	133	59.0	120	19.5	131	-2.2
Interest	45	-8.0	50	6.0	56	20.8
EBT (before NOP)	88	@*	70	31.5	75	-14.3
Tax Provision	17	-9.3	23	16.7	23	35.4
Net Profits	71	@*	48	6.6	47	-33.9

* The ratio / growth rate for which denominator is negative or negligible
is not calculated, and is indicated as ‘$’ and ‘@’ respectively.

The sales of companies operating in the services sector have risen by around 7.2% but net profit has fallen by 33.9%. This despite the fact that raw material cost as well as cost of power and fuel has crashed. Nevertheless, this did not prevent overall expenditure from going up. This again shows that companies operating in this sector are going through tough times and lack pricing power. The consumption has still not picked up despite the RBI cutting the repo rate by close to 125 basis points since the beginning of this year.

The column originally appeared on The Daily Reckoning on December 7, 2015

7 December, 2015

Swacch Bharat Cess Is Not Like Education Cess, It’s A Proper Tax

The government of India (like other governments all over the world) has effectively outsourced a major part of tax collection. The corporates deduct income tax from the salary of their employees regularly and hand it over to the government. The government’s dealing with the employees is limited to the income tax return that needs to be filed at the end of the financial year.

The government has also outsourced the collection of service tax to people like me, who are self-employed professionals. We collect service tax on behalf of the government from our clients and hand it over to the government at regular intervals. We are also expected to file service tax returns, regularly.

Recently, during the course of billing a client for service tax as well as Swacch Bharat Cess I had a very interesting experience, which I will share in this column.

On November 6, 2015, the Narendra Modi government decided to implement a Swacch Bharat Cess. The cess amounts to 0.5% on all services, and has pushed up the effective rate of service tax to 14.5%, from the earlier 14%. As the press release announcing the cess pointed out: “the Government has decided to impose, with effect from 15th November 2015, a Swachh Brarat Cess at the rate of 0.5% on all services, which are presently liable to service tax. This will translate into a tax of 50 paisa only on every one hundred rupees worth of taxable services.”

This meant that when I was sending out bills for the month of November 2015, I had to take Swacch Bharat Cess into account as well. One particular client’s bill had amounted to around Rs 30,000. On this I added a service tax of Rs 4200 (14% of Rs 30,000) and a Swacch Bharat Cess of Rs 150 (0.5% of Rs 30,000).

I sent across this bill on December 1. The next day, the accountant called. He tried to explain to me that I had miscalculated the Swacch Bharat Cess. The Swacch Bharat Cess should be Rs 21 and not Rs 150, he said. It took me a while to realise what he was trying to say.

He had essentially considered the cess to be a tax on a tax, like is the case with the education cess that is levied on the income tax that we pay. Education cess is levied at the rate of 2%. There is a secondary and higher education cess of 1% as well. Hence, the total education cess essentially amounts to 3%.

This cess is a tax on a tax. If you happen to come in the 30% tax bracket, then the education cess effectively works out to a tax of 0.9% (3% of 30% income tax rate). If you happen to come in the 20% tax bracket, then the education cess effectively works out to a tax of 0.6% (3% of 20% income tax rate). If you happen to be in the 10% tax bracket, then the education cess effectively works out to a tax of 0.3% (3% of 10% income tax rate).

The accountant was effectively telling me that the Swacch Bharat Cess worked in a similar way, like the education cess. What he was saying is that Swacch Bharat Cess was effectively a 0.5% tax on 14% service tax. This amounts to an effective rate of 0.07% (0.5% multiplied by 14%). In my case the actual Swacch Bharat Cess worked out to Rs 21(0.07% of Rs 30,000, the amount I had billed or 0.5% of Rs 4,200, the service tax that needed to be paid).

Over the next 45 minutes I tried explaining to him that what he was saying was wrong. The Swacch Bharat Cess did not work like the education cess and was not a tax on a tax. He wouldn’t budge. Finally, I gave up and promised to send him a new invoice. The difference between Rs 21 and Rs 150 was Rs 129 per month, and that really wasn’t a very large amount. I could pay it out of my own pocket.

The Swacch Bharat Cess is effectively an additional tax of 0.5%, unlike the education cess which is a tax on a tax. So why has the government called it a cess? Tax collected by the central government needs to be shared with the state governments, a cess does not. That is why the Swacch Bharat Tax has been basically been called Swacch Bharat Cess.

Any additional tax essentially complicates the tax-filing and the tax-collection mechanism, as my dealing with the accountant brings out in a very simple way. While, the amount involved in my case is very small of around Rs 129 per month (or around Rs 1548 per year, if I continue to bill the client Rs 30,000 per month), this may clearly not be the case with others. Further, time and energy are wasted in trying to explain things to others, which clearly isn’t my job. Long story short—any additional tax, essentially ends up complicating the tax system further.

News-reports suggest that the government is now considering a 2% skill cess. This, as per news-reports, will function like the education cess and will be levied on corporate and income tax. Nevertheless, it raises multiple questions. If to develop something as basic as skills, the government needs to implement a cess, what is it doing with all the ‘real’ taxes that it is collecting? Further, the government has set up a committee to suggest simplification of the income tax laws. As explained earlier, every cess/extra tax introduced complicates the law. Hence, if the idea is to simplify the income tax laws, why introduce one more cess? How does the government explain this basic dichotomy?

(Vivek Kaul is the author of the Easy Money trilogy. He can be reached at [email protected])

The column originally appeared on Huffington Post India on Dec 7, 2015

4 December, 2015

Rajan won’t cut interest rates before the budget

This is a column I should have written earlier this week. But given that I got busy explaining the 7.4% economic growth number, this took a backseat.

The Reserve Bank of India (RBI) presented the Fifth Monetary Policy Statement for this financial year, earlier this week on December 1, 2015. It maintained the repo rate at 6.75%. Repo rate is the rate at which RBI lends to banks and acts as a sort of a benchmark to the interest rates that banks pay for their deposits and in turn charge on their loans.

In the press conference that followed the declaration of the Monetary Policy Statement, Raghuram Rajan, the governor of the RBI, said: “We are still accommodative.” What this means in simple English is that the RBI is still looking to cut the repo rate rather than raise it, if the conditions are right.

Nevertheless, it is unlikely that Rajan and the RBI will cut the repo rate any further before Arun Jaitley presents the next budget in February 2016. Why do I say that? Almost towards the end of the Monetary Policy Statement Rajan says: “The implementation of the Pay Commission proposals, and its effect on wages and rents, will also be a factor in the Reserve Bank’s future deliberations, though its direct effect on aggregate demand is likely to be offset by appropriate budgetary tightening as the Government stays on the fiscal consolidation path.”

The Seventh Pay Commission has recommended a 23.6% overall increase in the salaries of central government employees as well as the pensions of the retired central government employees. The RBI will keep a lookout for the impact this jump in salary and pension will have on inflation in the days to come.

Over and above this, the RBI feels that the impact of the Seventh Pay Commission recommendations on inflation (or what it calls direct effect on aggregate demand) will be offset by the government cutting down on its expenditure in other areas. The fear is that the increased salaries and pensions will lead to higher spending and that will lead to higher inflation.

There are multiple reasons why this is unlikely to happen. The first being that factories are currently running around 30% below capacity. Typically as demand for products and services goes up, the supply side can’t keep pace if it is operating full throttle. That is clearly not the case here. If consumer demand picks up, the supply side can easily accommodate by ramping up production.

Further, the RBI feels that the government will carry out “appropriate budgetary tightening”
to stay on “the fiscal consolidation path”. The Seventh Pay Commission recommendations as and when they are accepted, will lead to a higher expenditure for the government, everything else remaining the same.

The RBI expects that the government will not let this happen by ensuring that it cuts its expenditure on other fronts and ensures that it keeps moving towards the fiscal deficit target of 3% of the gross domestic product for 2017-2018 that it has set for itself (or what the RBI calls the fiscal consolidation path in the monetary policy statement).

While expectation is one thing, the RBI needs to make sure that the government continues moving towards the fiscal consolidation path. And that will only be possible to figure out once the budget for the next financial year 2016-2017 is presented in February 2016.

Given this, the RBI is unlikely to do anything on the interest rate front before it gets a dekko at the next financial year’s budget document.

Another important point that the RBI made in the monetary policy statement was regarding the efficacy of monetary policy. As it pointed out: “Since the rate reduction cycle that commenced in January, less than half of the cumulative policy repo rate reduction of 125 basis points has been transmitted by banks. The median base lending rate has declined only by 60 basis points.” One basis point is one hundredth of a percentage.

What this means is that while the RBI has cut the repo rate by 125 basis points since the beginning of 2015. The banks in turn have managed to cut less than half at 60 basis points. Why is that? A major reason for this is that bad loans have been piling up at banks. The overall bad loans of banks as of September 2015 stood at Rs 3,36,685 crore. As a recent research note by CARE Ratings points out: “Gross NPAs [i.e. bad loans] stood at Rs 3,36,685 crore in Q2-FY16[as on September 30, 2015] increasing by Rs 71,129 crore over Q2-FY15[as on September 30, 2014]. This indicates growth of 26.8% in gross NPAs across 37 banks.”

The public sector banks are facing more bad loan problems than their private sector counterparts. Bad loans eat into profit. Hence, in order to maintain their profit at a certain level, the public sector banks need to maintain their interest rates at high levels. And they have not been able to cut interest rates by as much as the RBI has cut the repo rate.

Further, given that the public sector banks haven’t cut interest rates by as much as the RBI wants them to, the private sector banks haven’t needed to cut interest rates either at a rapid rate.

Given this, unless the bad loans problem of public sector banks is solved, interest rates are unlikely to keep coming down at the rate the RBI wants them to. As the RBI acknowledged: “The on-going clean-up of bank balance sheets will help create room for fresh lending.”

The other issue here is that of small savings schemes which tend to offer slightly higher interest rates than bank fixed deposits. Given this, unless the interest rates on small savings schemes come down to the level of fixed deposits, banks can’t rapidly cut the interest rates on their fixed deposits. If they do this, they are likely to see money deposited with them moving to small savings schemes.

If banks can’t cut their fixed deposit rates, they won’t be able to cut their lending rates. The RBI was hopeful that “The Government is examining linking small savings interest rates to market interest rates. These moves should further help transmission of policy rates into lending rates.”

The column originally appeared on The Daily Reckoning on December 4, 2015

4 December, 2015

Does The RBI Really Think Banks Are Cleaning Up Their Balance Sheets?

The fifth monetary policy statement for the current financial year (2015-2016) was released by the Reserve Bank of India (RBI) earlier this week. In this statement the RBI points out that since the beginning of this year, the repo rate has been cut by 125 basis points (one basis point is one hundredth of a percentage). Repo rate is the rate at which RBI lends to banks and acts as a sort of a benchmark to the interest rates that banks pay for their deposits and in turn charge on their loans.

When the RBI cuts the repo rate it is expected that the banks will follow suit. As banks cut interest rates, the expectation is people will borrow more. But that doesn’t seem to have happened. Bank lending growth has continued to be in single digits. While the RBI has cut the repo rate by 125 basis points, the bank have cut their interest rates by only 60 basis points, which is less than half of RBI’s cut.

One of the reasons for this is that the bad loans have been piling up at banks, especially public sector banks. This hasn’t allowed banks to cut interest rates at the same pace as the RBI has cut the repo rate. Higher interest rates are being used to generate income which can compensate for losses on account of bad loans.

The RBI in the monetary policy statement is hopeful that “the on-going clean-up of bank balance sheets will help create room for fresh lending.” What this means is that once banks are able to clean up their balance sheets i.e. bring down their bad loans, they will be able to lower their interest rates and in the process greater lending will happen.

But how likely is this? The RBI declares the sectoral deployment of credit data every month. In this it gives out details of how much money was lent by banks to different sectors of the economy. Between October 2014 and October 2015, the banks have lent around Rs 1,15,800 crore to industry. This is an increase of 4.6%. Between October 2013 and October 2014, the lending to industry has gone up by 7.8%.

So far so good. Within industry, banks have lent Rs 73,500 crore to the infrastructure sector. Within the infrastructure sector, banks have lent Rs 55,600 crore to the power sector. Lending to iron and steel increased by Rs 22,200 crore between October 2014 and October 2015.

Hence, lending to the power sector and iron and steel sector was at Rs 77,800 crore. Given this, nearly two-thirds of all industrial lending by banks during the last one year has been to power and iron and steel companies. If we consider the entire infrastructure sector along with the lending to the iron and steel companies, then banks have carried out 82.6% of their industrial lending over last one year to companies operating in these sectors.

And why is that a problem? The RBI Financial Stability Report, which is released twice a year, with the last edition being released in June earlier this year, points out: “Five sub-sectors, namely, mining, iron & steel, textiles, infrastructure and aviation, which together constituted 24.8 per cent of the total advances of scheduled commercial banks, had a much larger share of 51.1 per cent in the total stressed advances. Among these five sectors, infrastructure and iron & steel had a significant contribution in total stressed advances accounting for nearly 40 per cent of the total.”

The power sector is a part of the infrastructure sector and a big defaulter of bank loans. Power sector loans form a little over 8% of total banks loans. Nevertheless they form 16.1% of the stressed advances.

Stressed advances are essentially gross non-performing assets (or bad loans) of banks plus restructured loans divided by the total assets held by the Indian banking system. The borrower has either stopped to repay this loan or the loan has been restructured, where the borrower has been allowed easier terms to repay the loan by increasing the tenure of the loan or lowering the interest rate.

What does this tell us? Basically 40% of the stressed advances of banks come from companies operating in the infrastructure and the iron and steel sectors. Ironically, banks have carried out more than 80% of their industrial lending to companies operating in these sectors, in the last one year.

Hence, banks are lending money precisely in those sectors where they have been losing money. Why are they doing that? A possible explanation is that new loans are being given so that the older loans that are falling due can be repaid. The companies operating in these sectors do not have the money to repay the loans they had taken on. In the process, the problem of recognising bad loans can be controlled, and the banks can kick the can down the road.

As the Financial Stability Report points out: “The debt servicing ability of power generation companies [which are a part of the infrastructure sector] in the near-term may continue to remain weak given the high leverage and weak cash flows. Banks, therefore, need to exercise adequate caution while dealing with the sector and need to continue monitoring the developments very closely.” What explains banks giving out more loans precisely to these companies?

With regard to the iron and steel sector the report had said that “the sector holds very good long term prospects, though it is currently under stress, necessitating a close watch by lenders.”

In fact, despite giving out fresh loans to the troubled sectors, the bad loans of banks have been on their way up. A recent newsreport in the Mint pointed out that bad loans of banks had risen to Rs 2,85,000 crore as on September 30, 2015. This was 22.9% higher than the total bad loans of banks as on September 30, 2014.
A report in The Indian Express puts the bad loans of banks at Rs 3,36,685 crore as of September 30, 2015. This is a rise of 27% from last year.

The RBI governor Raghuram Rajan recently said: “I want to put something like March 2017 on the table as when we hope that a full clean-up will have been done.” Is he being a little too optimistic here? That only time will tell.

(Vivek Kaul is the author of the Easy Money trilogy. He can be reached at [email protected])

The column originally appeared on HuffPost India on Dec 3, 2015

3 December, 2015

When it comes to investing in real estate, the greater fool is you

I am in Delhi as I write this listening to FM radio. I rarely listen to FM and am surprised at the number of real estate advertisements still being broadcast on radio. What makes it even more surprising is that the real estate market in much of Delhi and the surrounding National Capital Region (NCR) continues to remain in a mess. A possible explanation for this may lie in the fact that radio advertising is cheap in comparison to other forms of advertising.

The business lobby Assocham, recently conducted “random survey of nearly 125 real estate developers in Delhi-NCR”. The survey found out that the “demand for buying property have decreased by over 30% over the last year.”

In fact, sales have fallen despite the home prices having crashed. As the Assocham press release points out: “The prices have almost crashed but they are still un-affordable. Be it Rohini, Dwarka, South Delhi, Noida, Gurgaon, the prices of property are down by 25-30% as compared to the last two years… The ticket price 3-bedroom, 2 BHK and single room flats has seen correction by 30 per cent in Noida, 25 per cent in Gurgaon and 15 per cent in some key areas of Delhi but still, the demand stays subdued.”

The total number of unsold homes in NCR stands at 1.7 lakh. Of this around 62% homes are uninhabitable. As Assocham points out: “The problem has been confounded by delays in regulatory clearances and litigations, points out the survey.”

The radio ads are trying lure people in, by harping on the fact that they don’t need to put the entire money upfront. Further, the ads talk about lower down-payments and lower EMIs. Given that 62% of 1.7 lakh unsold homes in Delhi are under-construction, it makes no sense to buy an under-construction home, which the radio ads advertise.

What these ads also tell you is that the builders (especially the smaller ones) are desperate for money, given that the conventional source of lending through banks has more or less dried down during this financial year. In this scenario they will be happy to raise any money that they can. Chances are that they will use this money to complete their earlier projects. Hence, the new projects that they raise money for will continue to remain uncompleted. Given this, it makes no sense to buy a new under-construction home in Delhi NCR as of now.

I decided to test this hypothesis at a wedding I attended in Delhi. Of course, the sample was small and hence, readers need to keep that in mind. But it does not change the points that I am trying to make here. The general feel that I got from the people I spoke to in Delhi was that they would still buy an under-construction property if they were able to afford it.

Most of these people I spoke to are Delhi residents and they have had a special relationship with real estate. They have seen the price of their DDA flats multiply many times, over the years and still believe in the power of real estate. And most of them hoped that they could sell an under-construction property to someone else in the years to come.

The Greater Fool Theory was at work. As Jason Zweig writes in The Devil’s Financial Dictionary: “The belief that no matter how foolish a price you pay for a stock or other asset, you can always find a greater fool who will pay more to buy it from you. Why bother figuring out what a stock [or a home] is worth, when you can simply gamble that somebody else will think it’s worth more?”

This, despite the fact that most of the people I spoke to knew someone who had bought an under-construction property and was still stuck with it, neither having been able to live in it or sell it on forward.

Further, the trouble in the Indian case is how does one figure out the right price of a home? Only the brokers operating in a particular area tend to have that information. And they do not always have the best interest of the prospective buyers in mind.

As Sanjoy Chakravorty writes in The Price of Land—Acquisition, Conflict, Consequence: “The price of a given piece of land [or a home], like the price of everything else, is based on information on the price of other pieces of land: prices paid in the recent past and prices paid elsewhere, especially in nearby locations.”

Such information is not easily available in the Indian context. As Chakravorty writes: “If information on prices is not available and the rights to negotiate and refuse do not exist, a real market does not exist.”

And this is precisely how things stand in India. Given that there is no clear cut way of knowing the right price of real estate in a particular area, there is a great belief that home prices and land prices do not fall.

The trouble is that home prices have been falling in Delhi NCR. It’s just that it takes special surveys like the one by Assocham to bring this fact out. This information is not available on a regular basis, like is the case with the stock market, where you can see the price of a stock going up or down, almost 250 days a year.

And this lack of a real market has its costs. As Zweig writes: “It might seem surprising that there could ever be a shortage of fools in this world, but if you count on always finding one just when you most need to, you will make up one day to find that everyone else has suddenly smartened up and the greater fool is you.”

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The column originally appeared on valueresearchonline.com on Dec 3, 2015