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Canção de mim mesmo.
Por Walt Whitman.
E o que eu suponho, você deve assumir
Pois todo átomo que pertence a mim pertence a você.
Eu me inclino e seguro à minha vontade, observando uma lança de grama de verão.
Nascido aqui de pais nascidos aqui de pais o mesmo e o deles / delas.
pais o mesmo,
Eu, agora com trinta e sete anos em perfeita saúde,
Esperando não cessar até a morte.
Retirando-se um pouco, bastou o que eles são, mas nunca esquecidos,
Eu porto para o bem ou para o mal, eu permito falar em todos os perigos,
Natureza sem cheque com energia original.
Eu respiro a fragrância eu mesmo, conheço e gosto disso,
A destilação me intoxicava também, mas não deixarei.
destilação, é inodoro,
É para a minha boca para sempre, eu estou apaixonada por isso,
Eu irei ao banco perto da floresta e ficarei sem disfarces e nu
Eu sou louco por isso estar em contato comigo.
Ecos, ondulações, murmúrios, raiz amorosa, fio de seda, virilha e videira,
Minha respiração e inspiração, o bater do meu coração, a passagem.
de sangue e ar através dos meus pulmões,
O cheiro de folhas verdes e folhas secas, e da costa e.
rochas do mar de cores escuras e de feno no celeiro,
Alguns beijos leves, alguns abraços, um abraço de braços,
O jogo de brilho e sombra nas árvores como os ramos flexíveis abanam,
O prazer sozinho ou na pressa das ruas, ou ao longo dos campos.
A sensação de saúde, o trinado no meio-dia, a música de mim se elevando.
da cama e encontrando o sol.
Você tem praticado tanto tempo para aprender a ler?
Você se sentiu tão orgulhoso de entender o significado dos poemas?
Você deve possuir o bem da terra e do sol (há milhões.
Você não deve mais levar as coisas em segunda ou terceira mão, nem olhar através delas.
os olhos dos mortos, nem se alimentam dos espectros em livros,
Você não deve olhar através dos meus olhos, nem tirar as coisas de mim,
Você deve ouvir todos os lados e filtrá-los de si mesmo.
começo e fim,
Mas eu não falo do começo nem do fim.
Nem mais juventude ou idade do que existe agora,
E nunca haverá mais perfeição do que existe agora
Nem mais céu ou inferno do que existe agora.
Sempre o desejo procriador do mundo.
aumentar, sempre sexo,
Sempre uma ligação de identidade, sempre distinção, sempre uma espécie de vida.
Para elaborar não adiantou, aprendeu e desaprendeu sentir que é assim.
entretido, apoiado nas vigas,
Stout como um cavalo, carinhoso, altivo, elétrico,
Eu e este mistério estamos aqui.
Até que isso se torne invisível e receba a prova por sua vez.
Conhecendo a perfeita adequação e equanimidade das coisas, enquanto eles.
discuto que estou em silêncio e vou me banhar e me admirar.
Nem uma polegada nem uma partícula de uma polegada é vil, e nenhuma deve ser.
menos familiar do que o resto.
Como o abraço e amoroso companheiro de cama dorme ao meu lado durante a noite,
e se retira no peep do dia com passos furtivos,
Deixando-me cestas cobertas com toalhas brancas inchando a casa.
Devo adiar minha aceitação e realização e gritar aos meus olhos,
Que eles deixam de olhar para depois e para baixo na estrada,
E imediatamente cifra e mostre-me um centavo
Exatamente o valor de um e exatamente o valor de dois e que está à frente?
Pessoas que eu conheço, o efeito sobre mim da minha vida precoce ou da ala e.
cidade em que eu moro, ou a nação,
As últimas datas, descobertas, invenções, sociedades, autores antigos e novos,
Meu jantar, vestido, associados, olhares, elogios, dívidas,
A indiferença real ou imaginada de algum homem ou mulher que eu amo,
A doença de um dos meus pais ou de mim mesmo, ou doentio ou perda.
ou falta de dinheiro, ou depressões ou exaltações,
Batalhas, os horrores da guerra fratricida, a febre das notícias duvidosas,
os eventos intermitentes;
Estes vêm para mim dias e noites e vão de mim novamente,
Mas eles não são eu mesmo.
Está divertido, complacente, compassivo, ocioso, unitário,
Olha para baixo, está ereto, ou dobra um braço em um certo descanso impalpável,
Olhando com a cabeça curvada para o lado, curioso o que virá a seguir,
Tanto dentro quanto fora do jogo e observando e imaginando isso.
linguistas e contendores,
Não tenho escárnios ou argumentos, testemunho e espero.
E você não deve ser humilhado ao outro.
Não palavras, não música ou rima eu quero, não costume ou palestra, não.
Apenas a calma que eu gosto, o zumbido da sua voz valvulada.
Como você colocou sua cabeça em meus quadris e gentilmente se virou para mim,
E separei a camisa do meu peito e mergulhei sua língua.
para o meu coração nu,
E alcancei até que você sentiu minha barba e alcancei até que você segurasse meus pés.
todo o argumento da terra,
E eu sei que a mão de Deus é a promessa da minha própria
E eu sei que o espírito de Deus é meu irmão,
E que todos os homens nascidos são também meus irmãos e as mulheres.
minhas irmãs e amantes
E que um kelson da criação é amor,
E ilimitadas são folhas duras ou caídas nos campos,
E formigas marrons nos pequenos poços abaixo deles,
E migalhas musgosas da cerca do verme, pedras empilhadas, ancinho, verbasco e.
Como eu poderia responder a criança? Eu não sei o que é mais do que ele.
Um presente perfumado e um lembrete projetado
Portando o nome do dono de alguma forma nos cantos, para que possamos ver.
e observe, e diga De quem?
E isso significa, brotando tanto em zonas amplas e zonas estreitas,
Crescendo entre negros como entre brancos,
Kanuck, Tuckahoe, congressista, Cuff, eu dou a eles o mesmo, eu
recebê-los o mesmo.
Pode ser que você transpire dos seios de homens jovens,
Pode ser que se eu os conhecesse eu os amaria,
Pode ser que você seja de pessoas idosas ou de filhos levados em breve.
dos colos de suas mães,
E aqui estão as voltas das mães.
Mais escuras do que as barbas incolores dos velhos,
Escuro para sair de baixo dos telhados vermelhos das bocas.
E percebo que eles não vêm dos tetos das bocas por nada.
E as dicas sobre homens e mães idosos, e a prole tomada.
logo fora de suas voltas.
E o que você acha que se tornou das mulheres e crianças?
O menor broto mostra que realmente não há morte
E se alguma vez houve levou vida, e não espera no.
fim de prendê-lo,
E ceas'd o momento em que a vida apareceria.
E morrer é diferente do que qualquer um supõe e tem mais sorte.
Eu apresso-me a informá-lo que tem a mesma sorte de morrer, e eu sei disso.
não estou contido entre o meu chapéu e botas,
E folhear objetos múltiplos, não dois iguais e todos bons,
A terra é boa e as estrelas são boas, e seus adjuntos são todos bons.
Eu sou o companheiro e companheiro de pessoas, tudo tão imortal e.
insondável como eu mesmo
(Eles não sabem como é imortal, mas eu sei.)
Para mim aqueles que foram meninos e que amam mulheres,
Para mim, o homem que se orgulha e sente como se magoa,
Para mim o doce coração e a velha empregada, para mim mães e os.
mães de mães,
Para mim lábios que sorriam, olhos que derramaram lágrimas,
Para mim, filhos e geradores de filhos.
Eu vejo através do pano largo e do guingão se ou não,
E estou por perto, tenaz, aquisitivo, incansável e não posso ser abalado.
Eu levanto a gaze e olho por um longo tempo, e silenciosamente afastei as moscas.
Eu peeringly os vejo do topo.
Eu testemunho o cadáver com seu cabelo enrolado, noto onde a pistola.
O pesado ônibus, o motorista com seu polegar interrogatório, o.
o barulho dos cavalos no chão de granito
Os trenós de neve, tinidos, gritos, peles de bolas de neve,
Os hurrahs de favoritos populares, a fúria de mobs
A aba da maca da cortina, um homem doente carregado para o hospital,
O encontro de inimigos, o juramento repentino, os golpes e a queda,
A multidão excitada, o policial com sua estrela rapidamente trabalhando a dele.
passagem para o centro da multidão,
As pedras impassíveis que recebem e devolvem tantos ecos,
Que gemidos de over-fed ou half-starv'd que caem sunstruck ou em ataques,
Que exclamações de mulheres levadas de repente que se apressam para casa e.
dê à luz bebês,
Que fala viva e enterrada está sempre vibrando aqui, o que uiva.
contido pelo decoro,
Detenção de criminosos, ofensas, ofertas adúlteras feitas, aceitações,
rejeições com lábios convexos,
Eu me importo com eles ou com o show ou a ressonância deles - eu venho e parti.
A grama seca do tempo de colheita carrega o vagão lento,
A luz clara toca no cinza marrom e verde intertidos,
As braçadas estão cheias do corte da queda.
Eu senti seus choques moles, uma perna reclinada na outra
Eu pulo das vigas e agarro o trevo e o timothy,
E role de ponta-cabeça e enrole meu cabelo cheio de mechas.
Vagando espantado com a minha própria leveza e alegria,
No final da tarde, escolhendo um local seguro para passar a noite,
Acendendo uma fogueira e assando o jogo recém-matado,
Adormecer nas folhas recolhidas com meu cachorro e arma ao meu lado.
Meus olhos assentam a terra, eu me inclino na proa ou grito alegremente do convés.
Eu coloquei minhas sandálias nas minhas botas e fui e me diverti;
Você deveria ter estado conosco naquele dia em volta da caldeira de chowder.
a noiva era uma menina vermelha
Seu pai e seus amigos sentaram-se perto de fumar de pernas cruzadas e
eles tinham mocassins em pé e grandes cobertores grossos.
pendurado em seus ombros,
Em um banco, o caçador, ele estava drogado, principalmente em peles, sua luxuriante.
barba e cachos protegiam o pescoço, ele segurava a noiva pela mão,
Ela tinha longos cílios, a cabeça estava nua, as mechas grossas e retas.
desceu sobre seus membros voluptuosos e alcançou a seus pés.
Eu ouvi seus movimentos quebrando os galhos da pilha de lenha,
Através da meia porta da cozinha, eu o vi nervoso e fraco,
E foi onde ele se sentou em um tronco e o guiou e lhe assegurou,
E trouxe água e encheu uma banheira para seu corpo suado e pés machucados,
E deu-lhe um quarto que entrou no meu e deu-lhe um pouco.
roupa limpa grosseira,
E lembre-se perfeitamente bem de seus olhos revolvidos e sua falta de jeito
E lembre-se de colocar piasters nas pernas do pescoço e dos tornozelos;
Ele ficou comigo uma semana antes de se recuperar e passar para o norte,
Eu o fiz sentar ao meu lado na mesa, minha maçaneta de incêndio encostada no canto.
Vinte e oito jovens e todos tão amigáveis;
Vinte e oito anos de vida feminina e tudo tão solitário.
Ela se esconde bonita e ricamente abafada pelas persianas da janela.
Ah, o mais caseiro deles é lindo para ela.
Você borrifa na água lá, ainda fica estoque ainda em seu quarto.
O resto não a viu, mas ela os viu e os amou.
Pequenos riachos passavam por todo o corpo deles.
Ele desceu tremulamente de seus templos e costelas.
sol, eles não perguntam quem se agarra rápido a eles,
Eles não sabem quem puffs e declina com pingente e arco de flexão,
Eles não pensam quem eles usam com spray.
na barraca no mercado,
Eu perambulo aproveitando sua réplica e seu embaralhamento e desmembramento.
Cada um tem seu trenó principal, eles estão todos fora, há um grande calor dentro
O ágil de suas cinturas joga mesmo com seus braços maciços,
Overhand os martelos balançar, overhand tão lento, overhand tão certo,
Eles não se apressam, cada homem bate em seu lugar.
embaixo de sua corrente amarrada,
O negro que dirige a longa roda do pátio de pedra, firme e firme.
alto ele está parado em uma perna na corda,
Sua camisa azul expõe seu amplo pescoço e peito e solta mais.
Seu olhar é calmo e imponente, ele joga a aba do chapéu.
longe de sua testa,
O sol cai em seu cabelo crespo e bigode, cai no preto de.
seus membros polidos e perfeitos.
Eu também vou com a equipe.
Para nichos à parte e junior bending, não uma pessoa ou objeto em falta,
Absorvendo tudo para mim e para esta música.
é que você expressa em seus olhos?
Parece-me mais que toda a impressão que li em minha vida.
Eles se levantam juntos, eles lentamente circulam ao redor.
E reconhecer vermelho, amarelo, branco, jogando dentro de mim,
E considere verde e violeta e a coroa tufada intencional,
E não chame a tartaruga indigna porque ela não é outra coisa,
E o bosque nunca estudou a gama, ainda que trate muito bem para mim,
E o olhar da égua da baía envergonha minha tolice.
Ya-honk ele diz, e soa para mim como um convite,
O atrevido pode supor que não tem sentido, mas eu escuto perto,
Encontre seu propósito e coloque lá em cima em direção ao céu invernal.
chickadee, o cão da pradaria,
A ninhada da porca grunhida enquanto puxam suas tetas,
A ninhada da galinha de peru e ela com suas asas meio espalhadas,
Eu vejo nelas e em mim a mesma velha lei.
Eles desprezam o melhor que posso para relacioná-los.
Dos homens que vivem entre o gado ou o gosto do oceano ou da floresta,
Dos construtores e diretores de navios e os manejadores de machados e.
mauls e os condutores de cavalos,
Eu posso comer e dormir com eles semana após semana.
Eu indo em minhas chances, gastando por vastos retornos,
Adornando-me para me dar o primeiro que me levará,
Não pedindo ao céu para descer para a minha boa vontade,
Dispersando livremente para sempre.
O carpinteiro veste sua prancha, a língua do seu anteparo.
assobia sua língua ascendente selvagem,
Os filhos casados ​​e solteiros voltam para casa para o jantar de Ação de Graças,
O piloto pega o pino-rei, ele abaixa com um braço forte,
O companheiro está de pé no baleia, lança e arpão estão prontos,
O atirador de pato caminha por trechos silenciosos e cautelosos,
Os diáconos são ordenados com as mãos cruzadas no altar,
A fiação recua e avança para o zumbido da roda grande,
O fazendeiro para nas barras enquanto caminha no primeiro dia e no chão.
olha para a aveia e centeio,
O lunático é levado por fim ao asilo como um caso confirmado,
(Ele nunca mais vai dormir como no berço da mãe dele).
A impressora do jornal com cabeça cinzenta e mandíbulas magras trabalha no seu caso,
Ele se livra de tabaco enquanto seus olhos brilham com o manuscrito;
Os membros malformados estão amarrados à mesa do cirurgião,
O que é removido cai horrivelmente em um balde;
A garota quadrada é vendida no leilão, o bêbado concorda.
o fogão da sala de bar,
O maquinista arregaça as mangas, o policial viaja a sua batida,
as marcas do porteiro que passam,
O jovem dirige o vagão expresso (eu o amo, embora eu o faça).
As correias do mestiço nas botas leves para competir na corrida,
O tiroteio ocidental dos perus atrai velhos e jovens, alguns se inclinam sobre eles.
rifles, alguns sentam em toras,
Saindo da multidão, caminha o atirador, toma sua posição, nivela sua peça;
Os grupos de imigrantes recém-chegados cobrem o cais ou dique,
Como as patas de lã enxameavam no campo de açúcar, o superintendente as vê.
da sela dele
A corneta chama no salão de baile, os cavalheiros correm para o seu.
parceiros, os dançarinos se curvam,
A juventude jaz acordada no sótão do telhado de cedro e toca no.
O Wolverine põe armadilhas no riacho que ajuda a encher o Huron,
O squaw envolto em seu pano amarelo está oferecendo mocassins e.
sacos de pérolas para venda,
O apreciador olha ao longo da galeria de exposições com metade fechada.
olhos curvados para os lados
Quando as mãos do convés aceleram o barco a vapor, a prancha é atirada.
os passageiros em terra,
A jovem irmã segura a meada enquanto a irmã mais velha a enrola.
fora em uma bola, e pára de vez em quando para os nós,
A esposa de um ano está se recuperando e feliz tendo uma semana passada.
seu primeiro filho
A garota ianque de cabelos limpos trabalha com sua máquina de costura ou no.
fábrica ou moinho,
O homem da calçada se apoia em seu compactador de duas mãos, o líder do repórter.
voa rapidamente sobre o livro de notas, o pintor de sinais está a rotular.
com azul e dourado
O menino do canal trota no caminho de reboque, o guarda-livros conta com o seu.
escrivaninha, o sapateiro enrola seu fio,
O maestro bate o tempo para a banda e todos os artistas o seguem,
A criança é batizada, o convertido está fazendo suas primeiras profissões,
A regata é espalhada na baía, a corrida é iniciada, (como o branco.
O tropeiro assistindo seu dirigido canta para eles que se desviariam,
O pedler sua com sua mochila nas costas, (o comprador desordenado.
sobre o centavo estranho;)
A noiva não enrola o vestido branco, o ponteiro dos minutos do relógio.
O comedor de ópio se reclina com a cabeça rígida e os lábios abertos,
A prostituta arrasta seu xale, seu gorro balança sobre ela embriagado e.
A multidão ri de seus juramentos de guarda, os homens zombam e piscam para.
(Miserável! Eu não rio de seus juramentos nem zombar de você;)
O presidente que ocupa um conselho de gabinete é cercado pelos grandes.
Na praça, três matronas imponentes e amistosas com braços entrelaçados.
A tripulação do bando de peixe repetiu camadas de alabote no porão,
O Missourian cruza as planícies carregando suas mercadorias e seu gado,
Quando o colecionador de passagens passa pelo trem, ele avisa pelo.
tilintar de mudanças frouxas,
Os homens do chão estão colocando o chão, os estanhados estão estanhando o chão.
telhado, os pedreiros estão pedindo argamassa,
Em arquivo único, cada um deles levava sua mão aos operários;
Estações perseguindo umas às outras a multidão indescritível é reunida.
é o quarto do sétimo mês, (que saudações de canhão e armas pequenas!)
Estações perseguindo umas às outras os arados mais resistentes, a segadeira corta,
e o grão de inverno cai no chão;
Nos lagos, o pescador vigia e espera no buraco.
a superfície congelada,
Os cotos ficam grossos ao redor da clareira, o invasor ataca profundamente.
Flatboatmen fazem rápido em direção ao anoitecer perto do algodão-madeira ou pecan-trees,
Os caçadores de coon atravessam as regiões do rio Vermelho ou atravessam.
aqueles drenados pelo Tennessee, ou pelos do Arkansas,
Tochas brilham no escuro que paira sobre o Chattahooche ou Altamahaw,
Patriarcas sentam-se no jantar com filhos, netos e bisnetos.
Em paredes de adobe, em tendas de lona, ​​caçadores de descanso e caçadores depois.
o esporte do dia deles
A cidade dorme e o país dorme
O sono vivo pelo tempo deles, os mortos dormem pelo tempo deles,
O velho marido dorme por sua esposa e o jovem marido dorme junto a sua esposa;
E estes tendem para dentro de mim, e eu tendem para fora para eles,
E como é ser desses mais ou menos eu sou,
E destes todos e todos eu tecer a canção de mim mesmo.
Independentemente dos outros, sempre respeitoso com os outros,
Materna e paterna, criança e homem
Coisas com o material que é grosso e coisas com as coisas.
Um dos Nação de muitas nações, o menor o mesmo e o.
maior o mesmo,
Um sulista logo como um nortista, um plantador indiferente e.
hospitaleiro pelo Oconee eu vivo,
Um ianque ligava o meu próprio caminho pronto para o comércio, minhas articulações eram as mais simples.
articulações na terra e as articulações mais severas na terra,
Um Kentuckian andando pelo vale dos Elkhorn na minha pele de cervo.
leggings, um Louisianian ou georgiano,
Um barqueiro sobre lagos ou baías ou ao longo das costas, um Hoosier, Badger, Buckeye;
Em casa, com sapatos de neve Kanadian ou no mato, ou com os pescadores.
Em casa, na frota de barcos de gelo, velejando com o resto e atacando,
Em casa nas colinas de Vermont ou nos bosques do Maine, ou no.
Camarada dos Californianos, camarada dos ocidentais livres do Norte, (amando.
suas grandes proporções)
Camarada de jangadas e carvoeiros, camarada de todos que apertam as mãos.
e bem-vindo a beber e carne,
Um aprendiz com o mais simples, um professor do mais pensativo,
Um principiante que está começando a experienciar miríades de estações,
De cada matiz e casta sou eu, de todo posto e religião,
Um agricultor, mecânico, artista, cavalheiro, marinheiro, quaker,
Prisioneiro, homem de fantasia, barulhento, advogado, médico, padre.
Respire o ar mas deixe a abundância atrás de mim
E não estou preso e estou no meu lugar.
Os sóis brilhantes que vejo e os sóis escuros que não posso ver estão em seu lugar,
O palpável está em seu lugar e o impalpável está em seu lugar.)
não são originais comigo
Se eles não são seus tanto quanto meus eles não são nada, ou quase nada,
Se eles não são o enigma e a desvinculação do enigma, eles não são nada,
Se eles não estão tão próximos quanto estão distantes, não são nada.
Este é o ar comum que banha o globo.
Eu não jogo marchas apenas para vencedores aceitos, eu faço passeatas.
conquistou e matou pessoas.
Eu também digo que é bom cair, batalhas são perdidas no mesmo espírito.
em que eles são ganhos.
Eu sopro através dos meus encaixes meu mais alto e mais alegre para eles.
E para aqueles cujos navios de guerra afundaram no mar!
E para aqueles que afundaram no mar!
E para todos os generais que perderam compromissos e todos superaram heróis!
E os incontáveis ​​heróis desconhecidos são iguais aos maiores heróis conhecidos!
É para os ímpios exatamente como os justos, eu faço compromissos.
Eu não vou ter uma única pessoa desprezada ou deixada de lado,
A mulher, esponja e ladrão é convidada,
O escravo pesado é convidado, a venerealee é convidada;
Não haverá diferença entre eles e o resto.
Esse é o toque dos meus lábios nos seus, esse o murmúrio de saudade,
Essa profundidade e altura distantes refletem meu próprio rosto,
Essa é a mescla pensativa de mim mesmo e a saída novamente.
Bem, eu tenho, para os chuveiros de quatro meses, e a mica no.
lado de uma rocha tem.
A luz do dia surpreende? faz o twitter inicial do redstart.
através da floresta?
Eu surpreendo mais do que eles?
Eu posso não contar a todos, mas vou te contar.
Como é que extraio a força da carne que como?
Mais tempo foi perdido me ouvindo.
Esses meses são vácuos e o chão, mas chafurda e sujeira.
vai para o quarto-removido,
Eu uso meu chapéu como quiser dentro ou fora.
médicos e calculado perto,
Não encontro gordura mais doce do que paus nos meus próprios ossos.
E o bem ou o mal eu digo de mim mesmo eu digo deles.
Para mim, os objetos convergentes do universo fluem perpetuamente,
Todos estão escritos para mim e eu preciso entender o que a escrita significa.
Eu sei que esta minha órbita não pode ser varrida pela bússola de um carpinteiro,
Eu sei que não passarei como um carlacue de criança cortado com um queimado.
Eu não incomodo o meu espírito para se justificar ou ser entendido,
Eu vejo que as leis elementares nunca pedem desculpas,
(Eu acho que não me comporto mais do que o nível em que planto minha casa,
Se nenhum outro no mundo estiver ciente eu sento o conteúdo,
E se todos e cada um estiverem conscientes, sento-me contente.
E se eu chego ao meu dia de hoje ou em dez mil ou dez.
Eu posso alegremente aceitar isso agora, ou com a mesma alegria que posso esperar.
Eu rio do que você chama de dissolução,
E eu conheço a amplitude do tempo.
Os prazeres do céu estão comigo e as dores do inferno estão comigo,
O primeiro eu enxerto e aumento em mim, o último eu traduzo.
em nova língua.
E eu digo que é tão bom ser mulher quanto ser homem
E eu digo que não há nada maior que a mãe dos homens.
Nós nos esquivamos e depreciamos o suficiente
Eu mostro que tamanho é apenas desenvolvimento.
É uma ninharia, eles vão mais do que chegar lá cada um, e.
Eu chamo a terra e o mar pela metade à noite.
Noite dos ventos do sul - noite das grandes poucas estrelas!
Ainda acenando noite - noite de verão nua e louca.
Terra das árvores adormecidas e líquidas!
Terra do por do sol partido - terra das montanhas enevoadas-topt!
Terra do vítreo derramar da lua cheia apenas tingida de azul!
Terra de brilho e manchas escuras na maré do rio!
Terra do cinza límpido das nuvens mais brilhante e claro por minha causa!
Terra com cotoveladas remotas - terra rica de flores de maçã!
Sorria, para o seu amor vem.
O amor apaixonado indescritível.
Eu vejo da praia seus dedos tortos,
Eu acredito que você se recusa a voltar sem me sentir,
Devemos ter uma volta juntos, eu me despir, me apressar fora da vista da terra,
Almofada me suave, me balançar em sonolento billowy,
Me arremesse com amorosa molhada, eu posso te pagar.
O mar respira respirações amplas e convulsivas
Mar da salmoura da vida e de sepulturas ainda não preparadas,
Uivador e scooper de tempestades, mar caprichoso e delicado,
Eu sou integral com você, eu também sou de uma fase e de todas as fases.
Extendedor de amies e aqueles que dormem nos braços um do outro.
(Devo fazer minha lista de coisas na casa e pular a casa que.
da maldade também.
O mal me impulsiona e a reforma do mal me impulsiona, fico indiferente,
A minha marcha não é a marcha do descobridor de defeitos ou do rejetor,
Eu umedecer as raízes de tudo que cresceu.
Você adivinhou que as leis celestes ainda precisam ser trabalhadas e corrigidas?
Doutrina suave como ajuda constante como doutrina estável,
Pensamentos e ações do presente nosso despertar e começar cedo.
Não há melhor do que isso e agora.
A maravilha é sempre e sempre como pode haver um homem mau ou um infiel.
E o meu uma palavra do moderno, a palavra En-Masse.
Aqui ou daqui para frente é tudo a mesma coisa para mim, eu aceito o tempo absolutamente.
Só essa maravilha desconcertante mística completa tudo.
Materialismo primeiro e último imbuindo.
Buscar stonecrop mixt com cedro e ramos de lilás,
Este é o lexicógrafo, este químico, isso fez uma gramática de.
os velhos cartuchos
Esses marinheiros colocam o navio em perigosos mares desconhecidos.
Este é o geólogo, isso funciona com o scalper, e isso é um.
Seus fatos são úteis, e eles não são minha morada,
Eu, mas entrei por eles em uma área da minha morada.
E mais os lembretes da vida incontável, e da liberdade e extração,
E faça contas curtas de neutras e castrados, e favorece os homens e.
as mulheres se equipam totalmente,
E bater o gongo da revolta e parar com fugitivos e eles que.
conspirar e conspirar.
Turbulento, carnudo, sensual, comendo, bebendo e criando,
Nenhum sentimentalista, nenhum stander acima de homens e mulheres ou à parte deles,
Não mais modesto que imodesto.
Desaperte as portas dos batentes!
E tudo o que é feito ou dito retorna finalmente para mim.
Por Deus! Não aceitarei nada que nem todos possam ter.
em contrapartida nos mesmos termos.
Vozes das gerações intermináveis ​​de prisioneiros e escravos,
Vozes das doenças e desespero e dos ladrões e anões,
Vozes de ciclos de preparação e acréscimo,
E dos fios que conectam as estrelas, e dos úteros e dos.
E dos direitos deles os outros estão em baixo,
Do deformado, trivial, chato, tolo, desprezado,
Nevoeiro no ar, besouros rolando bolas de estrume.
Vozes de sexos e luxúrias, vozes veladas e eu removo o véu,
Vozes indecentes por mim esclarecidas e transfiguradas.
Mantenho-me tão delicado ao redor das entranhas quanto na cabeça e no coração
A cópula não é mais importante para mim do que a morte é.
Vendo, ouvindo, sentindo, são milagres e cada parte e etiqueta de mim.
O aroma desses axilas é mais fino que a oração,
Esta cabeça mais que igrejas, bíblias e todos os credos.
meu próprio corpo, ou qualquer parte dele,
Mofo translúcido de mim será você!
Bordas sombreadas e descansa, será você!
Colter masculino firme será você!
O que quer que seja para o tilth de mim, será você!
Você meu rico sangue! seu fluxo leitoso, strippings pálidos da minha vida!
Mama que pressiona contra outros seios, será você!
Meu cérebro será suas circunvizinhas ocultas!
Raiz da bandeira doce lavada! lagoa-snipe timorosa! ninho de guardada.
ovos duplicados! será você!
Mix'd feno de cabeça, barba, músculos, será você!
Engordando seiva de bordo, fibra de trigo viril, será você!
Sol tão generoso será você!
Vapores iluminando e protegendo meu rosto, será você!
Você suado riachos e orvalhos ele será você!
Ventos cujos genitais suaves se esfregam contra mim, serão vocês!
Campos musculares largos, ramos de carvalho vivo, espreguiçadeira carinhosa na minha.
caminhos sinuosos, será você!
Mãos que eu tomei, cara que eu beijei, mortal que eu já toquei,
será você.
Cada momento e tudo o que acontece me emociona com alegria,
Eu não posso dizer como meus tornozelos se dobram, nem de onde a causa do meu menor desejo,
Nem a causa da amizade que eu emito, nem a causa do.
amizade eu levo de novo.
Uma glória da manhã na minha janela me satisfaz mais do que a metafísica.
A pouca luz desvanece as sombras imensas e diáfanas,
O ar é bom para o meu paladar.
Scooting obliquamente alta e baixa.
Mares de suco brilhante sufocam o céu.
O pesado desafio do leste naquele momento sobre minha cabeça
A provocação zombeteira, Veja então se você deve ser o mestre!
Se eu não pudesse agora e sempre mandar o nascer do sol para fora de mim.
Encontramos a nossa própria alma na calma e fresca do amanhecer.
Com o rodopio da minha língua, eu abarca mundos e volumes de mundos.
Isso me provoca para sempre, diz sarcasticamente,
Walt você contém o suficiente, por que você não deixa transparecer?
Você não conhece o discurso de como os botões abaixo de você estão dobrados?
Esperando na escuridão, protegido pelo gelo,
A sujeira recuando diante dos meus gritos proféticos
I causas subjacentes para equilibrá-los, finalmente,
Meu conhecimento minhas partes vivas, mantendo em concordância com o significado de todas as coisas,
Felicidade, (quem quer que me ouça deixe-o sair em busca.
Englobam mundos, mas nunca tentem me envolver,
Eu me amontoo mais rápido e melhor simplesmente olhando em sua direção.
Eu carrego o plenum da prova e tudo mais na minha cara,
Com o silêncio dos meus lábios eu confundo completamente o cético.
Para obter o que eu ouço nesta música, deixar os sons contribuírem para ela.
cacho de palitos cozinhando minhas refeições,
Eu ouço o som que eu amo, o som da voz humana
Eu ouço todos os sons correndo juntos, combinados, fundidos ou seguindo,
Sons da cidade e sons da cidade, sons do dia e da noite,
Jovens falantes para aqueles que gostam deles, o riso alto de.
pessoas que trabalham em suas refeições,
A base de raiva da amizade desarticulada, os tons fracos dos doentes,
O juiz com as mãos apertadas na mesa, seus lábios pálidos pronunciando.
O heave'e'yo de stevedores que descarregam navios pelo cais, o.
abster-se dos âncoras levantadores,
O anel de alarmes, o grito de fogo, o zumbido de estrias rápidas.
Motores e carros de mangueira com timbre premonitório e luzes coloridas,
O apito a vapor, o rolo sólido do trem de carros se aproximando,
A marcha lenta jogou na cabeça da associação marchando dois e dois,
(Eles vão guardar algum cadáver, os topos das bandeiras são cobertos com musselina preta.)
Eu ouço a corneta com chave, ela desliza rapidamente pelos meus ouvidos,
Ele sacode as dores loucas e doces através da minha barriga e peito.
Ah, isso realmente é música - isso combina comigo.
O orbic flex de sua boca está derramando e me enchendo cheio.
A orquestra me gira mais do que Urano voa,
Arranca tais ardores de mim que eu não sabia que possuía,
Ele me navega, eu limpo com os pés descalços, eles são lambidos pelas ondas indolentes,
Eu sou cortado por granizo amargo e bravo, eu perco meu fôlego,
Íngreme em meio a morfina mel, minha traqueia estrangulada em falsas da morte,
Finalmente deixo de novo sentir o quebra-cabeça dos quebra-cabeças,
E isso nós chamamos de ser.
(Volta e volta nós vamos, todos nós, e sempre voltamos para lá)
Se nada mais se desenvolvesse, o quahaug em sua casca era suficiente.
Eu tenho condutores instantâneos em cima de mim, quer eu passe ou pare,
Eles apreendem cada objeto e conduzem-no inofensivamente através de mim.
Tocar minha pessoa na de outra pessoa é o máximo que posso suportar.
Chamas e éter fazendo uma corrida para minhas veias,
Ponto traiçoeiro de mim chegando e lotando para ajudá-los,
Minha carne e sangue jogando raios para atacar o que é dificilmente.
diferente de mim mesmo
Por todos os lados, provocadores provadores enrijecendo meus membros,
Esforçando o úbere do meu coração pelo gotejamento retido,
Se comportando licenciosamente para mim, não tendo nenhuma negação,
Me privando do meu melhor como para um propósito,
Desabotoando minhas roupas, segurando-me pela cintura nua,
Iludindo minha confusão com a calma da luz do sol e campos de pasto,
Imodestamente deslizando os outros sentidos,
Eles subornaram para trocar com o toque e ir pastar nas bordas de mim,
Nenhuma consideração, nenhuma consideração pela minha força drenante ou pela minha raiva,
Buscando o resto do rebanho para apreciá-los um pouco,
Então, tudo se unindo para ficar em um promontório e me preocupar.
Eles me deixaram impotente para um marauder vermelho,
Todos eles vêm ao promontório para testemunhar e ajudar contra mim.
Eu falo descontroladamente, eu perdi a minha inteligência, eu e mais ninguém sou o.
Eu fui primeiro ao promontório, minhas próprias mãos me carregaram até lá.
Desprenda suas comportas, você é demais para mim.
Isso fez você sofrer assim, me deixando?
Rich showering rain, and recompense richer afterward.
Landscapes projected masculine, full-sized and golden.
They neither hasten their own delivery nor resist it,
They do not need the obstetric forceps of the surgeon,
The insignificant is as big to me as any,
(What is less or more than a touch?)
The damp of the night drives deeper into my soul.
Only what nobody denies is so.)
I believe the soggy clods shall become lovers and lamps,
And a compend of compends is the meat of a man or woman,
And a summit and flower there is the feeling they have for each other,
And they are to branch boundlessly out of that lesson until it.
And until one and all shall delight us, and we them.
And the pismire is equally perfect, and a grain of sand, and the egg.
And the tree-toad is a chef-d'oeuvre for the highest,
And the running blackberry would adorn the parlors of heaven,
And the narrowest hinge in my hand puts to scorn all machinery,
And the cow crunching with depress'd head surpasses any statue,
And a mouse is miracle enough to stagger sextillions of infidels.
grains, esculent roots,
And am stucco'd with quadrupeds and birds all over,
And have distanced what is behind me for good reasons,
But call any thing back again when I desire it.
In vain the plutonic rocks send their old heat against my approach,
In vain the mastodon retreats beneath its own powder'd bones,
In vain objects stand leagues off and assume manifold shapes,
In vain the ocean settling in hollows and the great monsters lying low,
In vain the buzzard houses herself with the sky,
In vain the snake slides through the creepers and logs,
In vain the elk takes to the inner passes of the woods,
In vain the razor-bill'd auk sails far north to Labrador,
I follow quickly, I ascend to the nest in the fissure of the cliff.
I stand and look at them long and long.
They do not lie awake in the dark and weep for their sins,
They do not make me sick discussing their duty to God,
Not one is dissatisfied, not one is demented with the mania of.
Not one kneels to another, nor to his kind that lived thousands of.
Not one is respectable or unhappy over the whole earth.
They bring me tokens of myself, they evince them plainly in their.
Did I pass that way huge times ago and negligently drop them?
Gathering and showing more always and with velocity,
Infinite and omnigenous, and the like of these among them,
Not too exclusive toward the reachers of my remembrancers,
Picking out here one that I love, and now go with him on brotherly terms.
Head high in the forehead, wide between the ears,
Limbs glossy and supple, tail dusting the ground,
Eyes full of sparkling wickedness, ears finely cut, flexibly moving.
His well-built limbs tremble with pleasure as we race around and return.
Why do I need your paces when I myself out-gallop them?
Even as I stand or sit passing faster than you.
What I guess'd when I loaf'd on the grass,
What I guess'd while I lay alone in my bed,
And again as I walk'd the beach under the paling stars of the morning.
I skirt sierras, my palms cover continents,
I am afoot with my vision.
Along the ruts of the turnpike, along the dry gulch and rivulet bed,
Weeding my onion-patch or hosing rows of carrots and parsnips,
crossing savannas, trailing in forests,
Prospecting, gold-digging, girdling the trees of a new purchase,
Scorch'd ankle-deep by the hot sand, hauling my boat down the.
Where the panther walks to and fro on a limb overhead, where the.
buck turns furiously at the hunter,
Where the rattlesnake suns his flabby length on a rock, where the.
otter is feeding on fish,
Where the alligator in his tough pimples sleeps by the bayou,
Where the black bear is searching for roots or honey, where the.
beaver pats the mud with his paddle-shaped tall;
Over the growing sugar, over the yellow-flower'd cotton plant, over.
the rice in its low moist field,
Over the sharp-peak'd farm house, with its scallop'd scum and.
slender shoots from the gutters,
Over the western persimmon, over the long-leav'd corn, over the.
delicate blue-flower flax,
Over the white and brown buckwheat, a hummer and buzzer there with.
Over the dusky green of the rye as it ripples and shades in the breeze;
Scaling mountains, pulling myself cautiously up, holding on by low.
Walking the path worn in the grass and beat through the leaves of the brush,
Where the quail is whistling betwixt the woods and the wheat-lot,
Where the bat flies in the Seventh-month eve, where the great.
goldbug drops through the dark,
Where the brook puts out of the roots of the old tree and flows to.
Where cattle stand and shake away flies with the tremulous.
shuddering of their hides,
Where the cheese-cloth hangs in the kitchen, where andirons straddle.
the hearth-slab, where cobwebs fall in festoons from the rafters;
Where trip-hammers crash, where the press is whirling its cylinders,
Wherever the human heart beats with terrible throes under its ribs,
Where the pear-shaped balloon is floating aloft, (floating in it.
myself and looking composedly down,)
Where the life-car is drawn on the slip-noose, where the heat.
hatches pale-green eggs in the dented sand,
Where the she-whale swims with her calf and never forsakes it,
Where the steam-ship trails hind-ways its long pennant of smoke,
Where the fin of the shark cuts like a black chip out of the water,
Where the half-burn'd brig is riding on unknown currents,
Where shells grow to her slimy deck, where the dead are corrupting below;
Where the dense-starr'd flag is borne at the head of the regiments,
Approaching Manhattan up by the long-stretching island,
Under Niagara, the cataract falling like a veil over my countenance,
Upon a door-step, upon the horse-block of hard wood outside,
Upon the race-course, or enjoying picnics or jigs or a good game of.
At he-festivals, with blackguard gibes, ironical license,
bull-dances, drinking, laughter,
At the cider-mill tasting the sweets of the brown mash, sucking the.
juice through a straw,
At apple-peelings wanting kisses for all the red fruit I find,
At musters, beach-parties, friendly bees, huskings, house-raisings;
Where the mocking-bird sounds his delicious gurgles, cackles,
Where the hay-rick stands in the barn-yard, where the dry-stalks are.
scatter'd, where the brood-cow waits in the hovel,
Where the bull advances to do his masculine work, where the stud to.
the mare, where the cock is treading the hen,
Where the heifers browse, where geese nip their food with short jerks,
Where sun-down shadows lengthen over the limitless and lonesome prairie,
Where herds of buffalo make a crawling spread of the square miles.
Where the humming-bird shimmers, where the neck of the long-lived.
swan is curving and winding,
Where the laughing-gull scoots by the shore, where she laughs her.
Where bee-hives range on a gray bench in the garden half hid by the.
Where band-neck'd partridges roost in a ring on the ground with.
their heads out,
Where burial coaches enter the arch'd gates of a cemetery,
Where winter wolves bark amid wastes of snow and icicled trees,
Where the yellow-crown'd heron comes to the edge of the marsh at.
night and feeds upon small crabs,
Where the splash of swimmers and divers cools the warm noon,
Where the katy-did works her chromatic reed on the walnut-tree over.
Through patches of citrons and cucumbers with silver-wired leaves,
Through the salt-lick or orange glade, or under conical firs,
Through the gymnasium, through the curtain'd saloon, through the.
office or public hall;
Pleas'd with the native and pleas'd with the foreign, pleas'd with.
the new and old,
Pleas'd with the homely woman as well as the handsome,
Pleas'd with the quakeress as she puts off her bonnet and talks melodiously,
Pleas'd with the tune of the choir of the whitewash'd church,
Pleas'd with the earnest words of the sweating Methodist preacher,
impress'd seriously at the camp-meeting;
Looking in at the shop-windows of Broadway the whole forenoon,
flatting the flesh of my nose on the thick plate glass,
Wandering the same afternoon with my face turn'd up to the clouds,
or down a lane or along the beach,
My right and left arms round the sides of two friends, and I in the middle;
Coming home with the silent and dark-cheek'd bush-boy, (behind me.
he rides at the drape of the day,)
Far from the settlements studying the print of animals' feet, or the.
By the cot in the hospital reaching lemonade to a feverish patient,
Nigh the coffin'd corpse when all is still, examining with a candle;
Voyaging to every port to dicker and adventure,
Hurrying with the modern crowd as eager and fickle as any,
Hot toward one I hate, ready in my madness to knife him,
Solitary at midnight in my back yard, my thoughts gone from me a long while,
Walking the old hills of Judaea with the beautiful gentle God by my side,
Speeding through space, speeding through heaven and the stars,
Speeding amid the seven satellites and the broad ring, and the.
diameter of eighty thousand miles,
Speeding with tail'd meteors, throwing fire-balls like the rest,
Carrying the crescent child that carries its own full mother in its belly,
Storming, enjoying, planning, loving, cautioning,
Backing and filling, appearing and disappearing,
I tread day and night such roads.
And look at quintillions ripen'd and look at quintillions green.
My course runs below the soundings of plummets.
No guard can shut me off, no law prevent me.
My messengers continually cruise away or bring their returns to me.
pike-pointed staff, clinging to topples of brittle and blue.
I take my place late at night in the crow's-nest,
We sail the arctic sea, it is plenty light enough,
Through the clear atmosphere I stretch around on the wonderful beauty,
The enormous masses of ice pass me and I pass them, the scenery is.
plain in all directions,
The white-topt mountains show in the distance, I fling out my.
fancies toward them,
We are approaching some great battle-field in which we are soon to.
We pass the colossal outposts of the encampment, we pass with still.
feet and caution,
Or we are entering by the suburbs some vast and ruin'd city,
The blocks and fallen architecture more than all the living cities.
I turn the bridgroom out of bed and stay with the bride myself,
I tighten her all night to my thighs and lips.
They fetch my man's body up dripping and drown'd.
The courage of present times and all times,
How the skipper saw the crowded and rudderless wreck of the.
steamship, and Death chasing it up and down the storm,
How he knuckled tight and gave not back an inch, and was faithful of.
days and faithful of nights,
And chalk'd in large letters on a board, Be of good cheer, we will.
How he follow'd with them and tack'd with them three days and.
would not give it up,
How he saved the drifting company at last,
How the lank loose-gown'd women look'd when boated from the.
side of their prepared graves,
How the silent old-faced infants and the lifted sick, and the.
sharp-lipp'd unshaved men;
All this I swallow, it tastes good, I like it well, it becomes mine,
I am the man, I suffer'd, I was there.
The mother of old, condemn'd for a witch, burnt with dry wood, her.
children gazing on,
The hounded slave that flags in the race, leans by the fence,
blowing, cover'd with sweat,
The twinges that sting like needles his legs and neck, the murderous.
buckshot and the bullets,
All these I feel or am.
Hell and despair are upon me, crack and again crack the marksmen,
I clutch the rails of the fence, my gore dribs, thinn'd with the.
ooze of my skin,
I fall on the weeds and stones,
The riders spur their unwilling horses, haul close,
Taunt my dizzy ears and beat me violently over the head with whip-stocks.
I do not ask the wounded person how he feels, I myself become the.
My hurts turn livid upon me as I lean on a cane and observe.
Tumbling walls buried me in their debris,
Heat and smoke I inspired, I heard the yelling shouts of my comrades,
I heard the distant click of their picks and shovels,
They have clear'd the beams away, they tenderly lift me forth.
Painless after all I lie exhausted but not so unhappy,
White and beautiful are the faces around me, the heads are bared.
of their fire-caps,
The kneeling crowd fades with the light of the torches.
They show as the dial or move as the hands of me, I am the clock myself.
I am there again.
Again the attacking cannon, mortars,
Again to my listening ears the cannon responsive.
The cries, curses, roar, the plaudits for well-aim'd shots,
The ambulanza slowly passing trailing its red drip,
Workmen searching after damages, making indispensable repairs,
The fall of grenades through the rent roof, the fan-shaped explosion,
The whizz of limbs, heads, stone, wood, iron, high in the air.
He gasps through the clot Mind not me--mind--the entrenchments.
(I tell not the fall of Alamo,
Not one escaped to tell the fall of Alamo,
The hundred and fifty are dumb yet at Alamo,)
'Tis the tale of the murder in cold blood of four hundred and twelve.
Nine hundred lives out of the surrounding enemies, nine times their.
number, was the price they took in advance,
Their colonel was wounded and their ammunition gone,
They treated for an honorable capitulation, receiv'd writing and.
seal, gave up their arms and march'd back prisoners of war.
Matchless with horse, rifle, song, supper, courtship,
Large, turbulent, generous, handsome, proud, and affectionate,
Bearded, sunburnt, drest in the free costume of hunters,
Not a single one over thirty years of age.
massacred, it was beautiful early summer,
The work commenced about five o'clock and was over by eight.
Some made a mad and helpless rush, some stood stark and straight,
A few fell at once, shot in the temple or heart, the living and dead.
The maim'd and mangled dug in the dirt, the new-comers saw them there,
Some half-kill'd attempted to crawl away,
These were despatch'd with bayonets or batter'd with the blunts of muskets,
A youth not seventeen years old seiz'd his assassin till two more.
came to release him,
The three were all torn and cover'd with the boy's blood.
That is the tale of the murder of the four hundred and twelve young men.
Would you learn who won by the light of the moon and stars?
List to the yarn, as my grandmother's father the sailor told it to me.
His was the surly English pluck, and there is no tougher or truer,
and never was, and never will be;
Along the lower'd eve he came horribly raking us.
My captain lash'd fast with his own hands.
On our lower-gun-deck two large pieces had burst at the first fire,
killing all around and blowing up overhead.
Ten o'clock at night, the full moon well up, our leaks on the gain,
and five feet of water reported,
The master-at-arms loosing the prisoners confined in the after-hold.
to give them a chance for themselves.
They see so many strange faces they do not know whom to trust.
The other asks if we demand quarter?
If our colors are struck and the fighting done?
We have not struck, he composedly cries, we have just begun our part.
of the fighting.
One is directed by the captain himself against the enemy's main-mast,
Two well serv'd with grape and canister silence his musketry and.
clear his decks.
They hold out bravely during the whole of the action.
The leaks gain fast on the pumps, the fire eats toward the powder-magazine.
He is not hurried, his voice is neither high nor low,
His eyes give more light to us than our battle-lanterns.
Two great hulls motionless on the breast of the darkness,
Our vessel riddled and slowly sinking, preparations to pass to the.
one we have conquer'd,
The captain on the quarter-deck coldly giving his orders through a.
countenance white as a sheet,
Near by the corpse of the child that serv'd in the cabin,
The dead face of an old salt with long white hair and carefully.
The flames spite of all that can be done flickering aloft and below,
The husky voices of the two or three officers yet fit for duty,
Formless stacks of bodies and bodies by themselves, dabs of flesh.
upon the masts and spars,
Cut of cordage, dangle of rigging, slight shock of the soothe of waves,
Black and impassive guns, litter of powder-parcels, strong scent,
A few large stars overhead, silent and mournful shining,
Delicate sniffs of sea-breeze, smells of sedgy grass and fields by.
the shore, death-messages given in charge to survivors,
The hiss of the surgeon's knife, the gnawing teeth of his saw,
Wheeze, cluck, swash of falling blood, short wild scream, and long,
dull, tapering groan,
These so, these irretrievable.
In at the conquer'd doors they crowd! I am possess'd!
Embody all presences outlaw'd or suffering,
See myself in prison shaped like another man,
And feel the dull unintermitted pain.
It is I let out in the morning and barr'd at night.
and walk by his side,
(I am less the jolly one there, and more the silent one with sweat.
on my twitching lips.)
My face is ash-color'd, my sinews gnarl, away from me people retreat.
I project my hat, sit shame-faced, and beg.
Somehow I have been stunn'd. Stand back!
Give me a little time beyond my cuff'd head, slumbers, dreams, gaping,
I discover myself on the verge of a usual mistake.
That I could forget the trickling tears and the blows of the.
bludgeons and hammers!
That I could look with a separate look on my own crucifixion and.
I resume the overstaid fraction,
The grave of rock multiplies what has been confided to it, or to any graves,
Corpses rise, gashes heal, fastenings roll from me.
Inland and sea-coast we go, and pass all boundary lines,
Our swift ordinances on their way over the whole earth,
The blossoms we wear in our hats the growth of thousands of years.
Continue your annotations, continue your questionings.
Is he waiting for civilization, or past it and mastering it?
Is he from the Mississippi country? Iowa, Oregon, California?
The mountains? prairie-life, bush-life? or sailor from the sea?
They desire he should like them, touch them, speak to them, stay with them.
head, laughter, and naivete,
Slow-stepping feet, common features, common modes and emanations,
They descend in new forms from the tips of his fingers,
They are wafted with the odor of his body or breath, they fly out of.
the glance of his eyes.
You light surfaces only, I force surfaces and depths also.
Say, old top-knot, what do you want?
And might tell what it is in me and what it is in you, but cannot,
And might tell that pining I have, that pulse of my nights and days.
When I give I give myself.
Open your scarf'd chops till I blow grit within you,
Spread your palms and lift the flaps of your pockets,
I am not to be denied, I compel, I have stores plenty and to spare,
And any thing I have I bestow.
You can do nothing and be nothing but what I will infold you.
On his right cheek I put the family kiss,
And in my soul I swear I never will deny him.
(This day I am jetting the stuff of far more arrogant republics.)
Turn the bed-clothes toward the foot of the bed,
Let the physician and the priest go home.
O despairer, here is my neck,
By God, you shall not go down! hang your whole weight upon me.
Every room of the house do I fill with an arm'd force,
Lovers of me, bafflers of graves.
Not doubt, not decease shall dare to lay finger upon you,
I have embraced you, and henceforth possess you to myself,
And when you rise in the morning you will find what I tell you is so.
And for strong upright men I bring yet more needed help.
Heard it and heard it of several thousand years;
It is middling well as far as it goes--but is that all?
Outbidding at the start the old cautious hucksters,
Taking myself the exact dimensions of Jehovah,
Lithographing Kronos, Zeus his son, and Hercules his grandson,
Buying drafts of Osiris, Isis, Belus, Brahma, Buddha,
In my portfolio placing Manito loose, Allah on a leaf, the crucifix.
With Odin and the hideous-faced Mexitli and every idol and image,
Taking them all for what they are worth and not a cent more,
Admitting they were alive and did the work of their days,
(They bore mites as for unfledg'd birds who have now to rise and fly.
and sing for themselves,)
Accepting the rough deific sketches to fill out better in myself,
bestowing them freely on each man and woman I see,
Discovering as much or more in a framer framing a house,
Putting higher claims for him there with his roll'd-up sleeves.
driving the mallet and chisel,
Not objecting to special revelations, considering a curl of smoke or.
a hair on the back of my hand just as curious as any revelation,
Lads ahold of fire-engines and hook-and-ladder ropes no less to me.
than the gods of the antique wars,
Minding their voices peal through the crash of destruction,
Their brawny limbs passing safe over charr'd laths, their white.
foreheads whole and unhurt out of the flames;
By the mechanic's wife with her babe at her nipple interceding for.
every person born,
Three scythes at harvest whizzing in a row from three lusty angels.
with shirts bagg'd out at their waists,
The snag-tooth'd hostler with red hair redeeming sins past and to come,
Selling all he possesses, traveling on foot to fee lawyers for his.
brother and sit by him while he is tried for forgery;
What was strewn in the amplest strewing the square rod about me, and.
not filling the square rod then,
The bull and the bug never worshipp'd half enough,
Dung and dirt more admirable than was dream'd,
The supernatural of no account, myself waiting my time to be one of.
The day getting ready for me when I shall do as much good as the.
best, and be as prodigious;
By my life-lumps! becoming already a creator,
Putting myself here and now to the ambush'd womb of the shadows.
My own voice, orotund sweeping and final.
Come my boys and girls, my women, household and intimates,
Now the performer launches his nerve, he has pass'd his prelude on.
the reeds within.
climax and close.
Music rolls, but not from the organ,
Folks are around me, but they are no household of mine.
Ever the eaters and drinkers, ever the upward and downward sun, ever.
the air and the ceaseless tides,
Ever myself and my neighbors, refreshing, wicked, real,
Ever the old inexplicable query, ever that thorn'd thumb, that.
breath of itches and thirsts,
Ever the vexer's hoot! hoot! till we find where the sly one hides.
and bring him forth,
Ever love, ever the sobbing liquid of life,
Ever the bandage under the chin, ever the trestles of death.
To feed the greed of the belly the brains liberally spooning,
Tickets buying, taking, selling, but in to the feast never once going,
Many sweating, ploughing, thrashing, and then the chaff for payment.
A few idly owning, and they the wheat continually claiming.
Whatever interests the rest interests me, politics, wars, markets,
The mayor and councils, banks, tariffs, steamships, factories,
stocks, stores, real estate and personal estate.
I am aware who they are, (they are positively not worms or fleas,)
I acknowledge the duplicates of myself, the weakest and shallowest.
is deathless with me,
What I do and say the same waits for them,
Every thought that flounders in me the same flounders in them.
Know my omnivorous lines and must not write any less,
And would fetch you whoever you are flush with myself.
But abruptly to question, to leap beyond yet nearer bring;
This printed and bound book--but the printer and the.
The well-taken photographs--but your wife or friend close and solid.
The black ship mail'd with iron, her mighty guns in her turrets--but.
the pluck of the captain and engineers?
In the houses the dishes and fare and furniture--but the host and.
hostess, and the look out of their eyes?
The sky up there--yet here or next door, or across the way?
The saints and sages in history--but you yourself?
Sermons, creeds, theology--but the fathomless human brain,
And what is reason? and what is love? and what is life?
My faith is the greatest of faiths and the least of faiths,
Enclosing worship ancient and modern and all between ancient and modern,
Believing I shall come again upon the earth after five thousand years,
Waiting responses from oracles, honoring the gods, saluting the sun,
Making a fetich of the first rock or stump, powowing with sticks in.
the circle of obis,
Helping the llama or brahmin as he trims the lamps of the idols,
Dancing yet through the streets in a phallic procession, rapt and.
austere in the woods a gymnosophist,
Drinking mead from the skull-cap, to Shastas and Vedas admirant,
minding the Koran,
Walking the teokallis, spotted with gore from the stone and knife,
beating the serpent-skin drum,
Accepting the Gospels, accepting him that was crucified, knowing.
assuredly that he is divine,
To the mass kneeling or the puritan's prayer rising, or sitting.
patiently in a pew,
Ranting and frothing in my insane crisis, or waiting dead-like till.
my spirit arouses me,
Looking forth on pavement and land, or outside of pavement and land,
Belonging to the winders of the circuit of circuits.
man leaving charges before a journey.
Frivolous, sullen, moping, angry, affected, dishearten'd, atheistical,
I know every one of you, I know the sea of torment, doubt, despair.
How they contort rapid as lightning, with spasms and spouts of blood!
I take my place among you as much as among any,
The past is the push of you, me, all, precisely the same,
And what is yet untried and afterward is for you, me, all, precisely.
But I know it will in its turn prove sufficient, and cannot fail.
single one can it fall.
Nor the young woman who died and was put by his side,
Nor the little child that peep'd in at the door, and then drew back.
and was never seen again,
Nor the old man who has lived without purpose, and feels it with.
bitterness worse than gall,
Nor him in the poor house tubercled by rum and the bad disorder,
Nor the numberless slaughter'd and wreck'd, nor the brutish koboo.
call'd the ordure of humanity,
Nor the sacs merely floating with open mouths for food to slip in,
Nor any thing in the earth, or down in the oldest graves of the earth,
Nor any thing in the myriads of spheres, nor the myriads of myriads.
that inhabit them,
Nor the present, nor the least wisp that is known.
I launch all men and women forward with me into the Unknown.
There are trillions ahead, and trillions ahead of them.
And other births will bring us richness and variety.
That which fills its period and place is equal to any.
I am sorry for you, they are not murderous or jealous upon me,
All has been gentle with me, I keep no account with lamentation,
(What have I to do with lamentation?)
On every step bunches of ages, and larger bunches between the steps,
All below duly travel'd, and still I mount and mount.
Afar down I see the huge first Nothing, I know I was even there,
I waited unseen and always, and slept through the lethargic mist,
And took my time, and took no hurt from the fetid carbon.
Faithful and friendly the arms that have help'd me.
For room to me stars kept aside in their own rings,
They sent influences to look after what was to hold me.
My embryo has never been torpid, nothing could overlay it.
The long slow strata piled to rest it on,
Vast vegetables gave it sustenance,
Monstrous sauroids transported it in their mouths and deposited it.
Now on this spot I stand with my robust soul.
O manhood, balanced, florid and full.
Crowding my lips, thick in the pores of my skin,
Jostling me through streets and public halls, coming naked to me at night,
Crying by day, Ahoy! from the rocks of the river, swinging and.
chirping over my head,
Calling my name from flower-beds, vines, tangled underbrush,
Lighting on every moment of my life,
Bussing my body with soft balsamic busses,
Noiselessly passing handfuls out of their hearts and giving them to be mine.
after and out of itself,
And the dark hush promulges as much as any.
And all I see multiplied as high as I can cipher edge but the rim of.
the farther systems.
Outward and outward and forever outward.
He joins with his partners a group of superior circuit,
And greater sets follow, making specks of the greatest inside them.
If I, you, and the worlds, and all beneath or upon their surfaces,
were this moment reduced back to a pallid float, it would.
not avail the long run,
We should surely bring up again where we now stand,
And surely go as much farther, and then farther and farther.
not hazard the span or make it impatient,
They are but parts, any thing is but a part.
Count ever so much, there is limitless time around that.
The Lord will be there and wait till I come on perfect terms,
The great Camerado, the lover true for whom I pine will be there.
never will be measured.
My signs are a rain-proof coat, good shoes, and a staff cut from the woods,
No friend of mine takes his ease in my chair,
I have no chair, no church, no philosophy,
I lead no man to a dinner-table, library, exchange,
But each man and each woman of you I lead upon a knoll,
My left hand hooking you round the waist,
My right hand pointing to landscapes of continents and the public road.
You must travel it for yourself.
Perhaps you have been on it since you were born and did not know,
Perhaps it is everywhere on water and on land.
Wonderful cities and free nations we shall fetch as we go.
And in due time you shall repay the same service to me,
For after we start we never lie by again.
And I said to my spirit When we become the enfolders of those orbs,
and the pleasure and knowledge of every thing in them, shall we.
be fill'd and satisfied then?
And my spirit said No, we but level that lift to pass and continue beyond.
I answer that I cannot answer, you must find out for yourself.
Here are biscuits to eat and here is milk to drink,
But as soon as you sleep and renew yourself in sweet clothes, I kiss you.
with a good-by kiss and open the gate for your egress hence.
Now I wash the gum from your eyes,
You must habit yourself to the dazzle of the light and of every.
moment of your life.
Now I will you to be a bold swimmer,
To jump off in the midst of the sea, rise again, nod to me, shout,
and laughingly dash with your hair.
He that by me spreads a wider breast than my own proves the width of my own,
He most honors my style who learns under it to destroy the teacher.
but in his own right,
Wicked rather than virtuous out of conformity or fear,
Fond of his sweetheart, relishing well his steak,
Unrequited love or a slight cutting him worse than sharp steel cuts,
First-rate to ride, to fight, to hit the bull's eye, to sail a.
skiff, to sing a song or play on the banjo,
Preferring scars and the beard and faces pitted with small-pox over.
And those well-tann'd to those that keep out of the sun.
I follow you whoever you are from the present hour,
My words itch at your ears till you understand them.
I wait for a boat,
(It is you talking just as much as myself, I act as the tongue of you,
Tied in your mouth, in mine it begins to be loosen'd.)
And I swear I will never translate myself at all, only to him or her.
who privately stays with me in the open air.
The nearest gnat is an explanation, and a drop or motion of waves key,
The maul, the oar, the hand-saw, second my words.
But roughs and little children better than they.
The woodman that takes his axe and jug with him shall take me with.
The farm-boy ploughing in the field feels good at the sound of my voice,
In vessels that sail my words sail, I go with fishermen and seamen.
On the night ere the pending battle many seek me, and I do not fail them,
On that solemn night (it may be their last) those that know me seek me.
My face rubs to the hunter's face when he lies down alone in his blanket,
The driver thinking of me does not mind the jolt of his wagon,
The young mother and old mother comprehend me,
The girl and the wife rest the needle a moment and forget where they are,
They and all would resume what I have told them.
And I have said that the body is not more than the soul,
And nothing, not God, is greater to one than one's self is,
And whoever walks a furlong without sympathy walks to his own.
funeral drest in his shroud,
And I or you pocketless of a dime may purchase the pick of the earth,
And to glance with an eye or show a bean in its pod confounds the.
learning of all times,
And there is no trade or employment but the young man following it.
may become a hero,
And there is no object so soft but it makes a hub for the wheel'd universe,
And I say to any man or woman, Let your soul stand cool and composed.
before a million universes.
For I who am curious about each am not curious about God,
(No array of terms can say how much I am at peace about God and.
Nor do I understand who there can be more wonderful than myself.
I see something of God each hour of the twenty-four, and each moment then,
In the faces of men and women I see God, and in my own face in the glass,
I find letters from God dropt in the street, and every one is sign'd.
And I leave them where they are, for I know that wheresoe'er I go,
Others will punctually come for ever and ever.
try to alarm me.
I see the elder-hand pressing receiving supporting,
I recline by the sills of the exquisite flexible doors,
And mark the outlet, and mark the relief and escape.
I smell the white roses sweet-scented and growing,
I reach to the leafy lips, I reach to the polish'd breasts of melons.
(No doubt I have died myself ten thousand times before.)
O suns--O grass of graves--O perpetual transfers and promotions,
If you do not say any thing how can I say any thing?
Of the moon that descends the steeps of the soughing twilight,
Toss, sparkles of day and dusk--toss on the black stems that decay.
Toss to the moaning gibberish of the dry limbs.
I perceive that the ghastly glimmer is noonday sunbeams reflected,
And debouch to the steady and central from the offspring great or small.
I sleep--I sleep long.
It is not in any dictionary, utterance, symbol.
To it the creation is the friend whose embracing awakes me.
It is not chaos or death--it is form, union, plan--it is eternal.
life--it is Happiness.
And proceed to fill my next fold of the future.
Look in my face while I snuff the sidle of evening,
(Talk honestly, no one else hears you, and I stay only a minute longer.)
Very well then I contradict myself,
(I am large, I contain multitudes.)
Who wishes to walk with me?
and my loitering.
I sound my barbaric yawp over the roofs of the world.
It flings my likeness after the rest and true as any on the shadow'd wilds,
It coaxes me to the vapor and the dusk.
I effuse my flesh in eddies, and drift it in lacy jags.
If you want me again look for me under your boot-soles.
But I shall be good health to you nevertheless,
And filter and fibre your blood.
Missing me one place search another,
I stop somewhere waiting for you.
DayPoems Poem No. 1900.
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TIM Report: Market Sentiment Still Bullish in US, Down Globally, with TJX, BAX, and DKS as longs, DRYS, GS, and POT as shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of November 13-19, 2009, the TIM Sentiment Index (TSI) increased 0.85 points to 55.29, staying within bullish territory (see last week's post and the youDevise website for additional information on the TIM report, a reading above 50 is bullish). On the other hand, the TSI Worldwide Index dropped 4.61 points to 47.13, falling in bearish territory. Only two sectors were bullish, with seven bearish, and one neutral. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM fell to 62.89% from 73.61%.
TIM Report: Market Sentiment Down, But Still Bullish, with STT, AAPL, and AMZN as longs, FDO, TOL, and ESV as shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of November 6-12, 2009, the TIM Sentiment Index (TSI) fell 1.05 points to 54.44, staying within bullish territory (see last week's post and the youDevise website for additional information on the TIM report, a reading above 50 is bullish). The drop in the TSI Worldwide Index was much larger, falling 5.60 points to 51.74, but still staying in bullish territory. Eight of the ten sectors were in bullish territory with the remaining two bearish. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM increased 0.41 points to 73.61%.
TIM Report: Market Sentiment Moved Bullish, with RIMM, X, and BAC as longs, WFC and AMR as shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of October 30-November 5, 2009, the TIM Sentiment Index (TSI) rose 5.65 points to 55.49, moving into bullish territory (see last week's post and the youDevise website for additional information on the TIM report, a reading above 50 is bullish). The TSI Worldwide Index also increased 7.55 points to a bullish 57.34 reading. Nine of the ten sectors were in bullish territory with only one bearish. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM increased 5.64 points to 73.20%.
TIM Report: Market Sentiment Slightly Bearish, with VFC, ORLY, and FSLR as longs, LVS, MU, and NVDA as shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of October 23-29, 2009, the TIM Sentiment Index (TSI) is borderline bearish at 49.83, after the North American index fell 1.17 points (see last week's post and the youDevise website for additional information on the TIM report, a reading above 50 is bullish). The TSI Worldwide Index actually increased 1.76 points, but was also still just below the break-even point at 49.79 points. Four sectors were in bearish territory, four were neutral, and two were bullish. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM increased 2.15 points to 67.56%.
TIM Report: Profit Taking Results In Less Bullish Market Sentiment, with IR, TEX, and FCX as longs, RIMM, WYE, and STJ as shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of October 16-22, 2009, increased profit taking resulted in drops in market sentiment in the U. S., with the TIM Sentiment Index ( TSI ) was down 8.32 points in North America to a significantly lower, but still bullish 51.01 (see last week's post and the youDevise website for additional information on the TIM report, a reading above 50 is bullish). The TSI Worldwide Index was down 5.57 points, falling into bearish territory at 48.03. Eight sectors were in bearish territory, with two bullish. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM decreased 5.81 points to 65.41%.
TIM Report: Brokers More Bullish, with GWW, ORLY and PFE as longs, CHK and SWY as shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of October 9-15, 2009, market sentiment in the U. S. became even more bullish. The TIM Sentiment Index (TSI) was up 3.87 points in North America to 59.32 (see the youDevise website for additional information on the TIM report). The TSI Worldwide Index was down 0.96, but remained bullish at 53.60 (a reading above 50 is bullish). Six sectors were bullish, while three were bearish and one was neutral. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM increased 2.69 points to 71.22%.
TIM Report: Brokers More Bullish, with PAG, BYI, and CHKP as longs, MGM and CTXS as shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of September 25 - October 1, 2009, market sentiment became more bullish. The TIM Sentiment Index (TSI) was up 2.11 points in North America to 53.16 (see previous post and the youDevise website for additional information on the TIM report). The TSI Worldwide Index was also up, increasing 3.83 points to 51.42. Six sectors were bullish, while three were bearish and one was neutral. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM increased 3.50 points to 65.55%.
TIM Report: Bullish Brokers Sentiment Falling, with KG, AIG, and ETFC as longs, YUM, PCS, and AKS as shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of September 18-24, 2009, bullish broker sentiment continued to decrease. The TIM Sentiment Index (TSI) was down 1.74 points in North America to 51.05, slightly bullish (see previous post and the youDevise website for additional information on the TIM report). The TSI Worldwide Index was down 5.14 points to 47.58. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM decreased 6.31 points to 62.05%.
First Coverage: Market Sentiment Still Bullish.
First Coverage's weekly market sentiment report is still pointing to a bullish market (First Coverage). This week has seven sectors rated bullish, with three, including basic materials, consumer goods, and energy (oil and gas) rated neutral. The weekly sentiment change has basic materials moving more bearish from last week with a 10.9% decline in sentiment (although still neutral), while health care has become more bullish. The financial sector has also failed to roll over, indicating that the sell-side has still not yet gone bearish, even with the big run-up in this sector over the last six months. Stocks generating the greatest bullish sentiment shifts include Thoratec (THOR), ConAgra Foods (CAG), Potash (POT), Dell (DELL), and Netflix (NFLX). Those stocks generating the greatest bearish sentiment shift include Vulcan Materials (VMC), Bio Ref Labs (BRLI), Iteration Energy (ITX), Bill Barrett (BBG), and PNC Financial Services (PNC).
Six New China Sector-Specific ETFs Being Planned.
Global X Funds has filed a prospectus with the SEC to offer six new ETFs that will be designed to follow six different sectors within the Chinese economy (IndexUniverse). The six sectors/categories include consumer, energy, financial, industrial, material, and technology. The plan is for the funds to be 80% invested in ADRs and Global Depository Receipts, with the remaining 20% invested in swaps and various options contracts. The fund hopes to replicate the underlying FTSE sector-specific indexes with a 95% accuracy after fees and expenses. While there are many funds that follow the broader Chinese economy, the new ETFs will be some of the first to allow investors to focus on a specific sector within this region. The fact that such sector-specific ETFs are being offered for the Chinese economy also tells you something about demand and interest for investing more directly within this growing and increasing influential market.
Could Quant Fund Underperformance Signal That A Correction Is Near?
Quant funds who bet on high-quality stocks, while at the same time shorting those stocks that are over-priced, have been under-performing the stock market ( WSJ ). This under-performance has come in part as a result of poor balance sheet stocks being pulled along by the momentum train of the last few months. The performance gap has even widening recently as short squeezes have pushed weak stocks higher, just as those with brighter prospects have done worse. Some feel that the under-performance of higher quality stocks may be an indication that the recent move is running out of steam, and that the market may be due for a correction. Breadth and other overbought/oversold indicators continue to flirt at times with high levels and cause concern among the bulls - but then again, they did so one month ago as well. Nonetheless, a correction, even if mild and short-term, could be in the cards as it seems an increasing number of participants have started watching and waiting for their overbought biases to be confirmed, including some of those who continue to be long in the market. Time will tell, but the next month could be interesting, and telling, as we move into October.
Moody's Believes Basel II Changes Are Positive for Creditworthiness.
Moody's issued a special comment paper focusing on Basel II amendments already introduced, as well as statements from the Basel Committee on Banking Supervision (Risk). T he paper highlights enhancements relating to a bank's trading book, securitization, and counterparty credit risk. In particular, the recommendations involve strengthening Tier I capital, introducing tougher liquidity standards, including counter-cyclical provisioning, discussing systemic risk provisions (which is becoming popular in the United States), and including leverage ratios as a supplementary measure. Moody's also believes that proposed Capital Requirement Directive changes to the quality of capital and securitization were also a positive step. In addition, the paper mentions that “One important amendment calls for stricter operational requirements for credit analysis for banks holding securitisation exposures. We believe that the increased requirement for credit analysis for banks holding securitised exposures is going to be an important element of improved risk management, and should ensure that only banks with the necessary information and analytical tools hold securitised products.” Of course, it could also mean that less securitization takes place. While this may be the intended result, the unintended consequence of reducing the efficient flow of capital, or not allowing those who want to off-load or bear risk access to the vehicles they need, will also need to be considered further - either now or later.
State Street Offers New Preferred Share ETF.
State Street Global Advisors launched a new ETF with investments in non-convertible preferred stocks (ticker PSK, IndexUniverse). Similar ETFs already on the market, PGX and PFF, are up 20% and 33% YTD, respectively. The preferred shares in the fund are rated investment grade and have minimum trading volume requirements. The ETF has an expense ratio of 0.45%. The PSK exchanged traded fund would be attractive to investors that are looking for income, potential capital gains growth, and safety given that preferred shares pay a fixed dividend, can appreciate like normal common stock, and are higher on the food chain compared to common stock in the event of bankruptcy.
TIM Report: Bullishness Moderating, with DRYS, KR, and X as Longs, S, AIG, and GS as Shorts.
According to the recent TIM (Trade Ideas Monitor) report for the week of September 11-17, 2009, market sentiment moderated after being bullish last week. The TIM Sentiment Index (TSI) was down 1.86 points in North America to 52.78 (see previous post and the youDevise website for additional information on the TIM report). The TSI Worldwide Index was down 3.89 points to 52.72. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM decreased 0.86 points to 68.36%.
Hedge Funds Increased Their Stakes In Financials During Q2.
Hedge funds increased their stakes in financial stocks during the second quarter according to the Goldman Sachs Hedge Fund Trend Monitor (WSJ). Specifically, ownership in financials increased 55% from Q1 to Q2, growing to $70 billion - representing 3.7% of the sector's market capitalization. Bank of America (BAC) and JPMorgan (JPM) were some of the more popular financial holdings within hedge funds, with Regions Financial (RF) and Citigroup (C) also becoming new long positions for some funds. While the net short position of financials also rose slightly, 8% to $63 billion, the large increase in long exposure has resulted in hedge funds being net long the financials by the end of Q2 (WSJ). Although hedge fund redemption request have decreased, reducing the need for forced selling, it is unclear if hedge funds on average will maintain their net long positions in financials after the nice run these stocks have made since the March market lows.
TIM Report: Brokers Still Cautious, with MDSO, BJ, and AA as Longs, FSLR, BRCD, and LVS as Shorts.
According to the recent TIM (Trade Ideas Monitor) report for August 20th, the TIM Sentiment Index (TSI) in North America was 50.37, down 1.76 points, right near the critical 50 mark (see last post, and previous post and the youDevise website for additional information on the TIM report). The TSI Worldwide Index was down marginally. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM decreased 3.15 points to 62.53%.
Transparency Will Need To Go Global.
The tremendous growth of the Chinese economy and stock market has many wondering how long it will take before China once again regains it spot as the top economy (The Business Insider). When looking at purchasing power parity, some analysts are expecting that China will regain the crown as the top economy by 2015, after 125 years of the U. S. holding the number one spot. Yet for China and any other global market or economy to be a long-term destination for investment, further transparency and disclosure will no doubt be necessary. Just yesterday I discussed some recent academic research that found investors tend to trade foreign equities more often than their domestic counterparts (Bull Bear Trader). In short, the authors of the study found that the level of trading is higher for stocks in markets for which there are weaker investor protections, or for markets that have lower disclosure standards. The portfolio turnover or churn rate was higher as the quality of information and level of familiarity decreased.
Investors Trade Foreign Equities More Often Than Their Domestic Counterparts.
There has been significant research in the past looking at the phenomenon of " home bias ," or investing a larger portion of your wealth in a domestic market, despite the benefits of increasing international diversification. Less research has been done on how these home bias investors rebalance between domestic and foreign exposure. Previous research has also produced somewhat conflicting data regarding foreign equity turnover rates, ranking them from having only slightly faster levels of turnover, to foreign equity turnover rates 10 times greater domestic equity turnover rates - although in many cases the data samples were limited to just a handful of countries.
" . be consistent with the hypothesis that the investors rebalance more often the holdings of stocks about which they know less and are less familiar with ." As might also be expected, the churn rate was higher in a foreign market if the market had performed well, with the rate increasing as the level of familiarity decreases. Similar to other markets, it seems that investors are likely to take profits after a market has run-up, and are much more likely to do so if the market is foreign, less transparent, and has a lower level of familiarity.
Does Enterprise Risk Management Add Value To Firms?
In their research paper "The Value of Enterprise Risk Management," Robert Hoyt and Andre Liebenberg attempt to uncover whether there is firm value in implementing Enterprise Risk Management (ERM). As the authors discuss, ERM has generated considerable interest from the media in recent years as organizations begin implemented enterprise-level risk management programs, and consulting firms and universities look for ways to offer support, guidance, courses, and services related to ERM. Rating agencies have also begun to consider ERM in the rating process, and regulators are taking notice. The ideas of enterprise and system-wide "systemic" risk are also now being given serious consideration at the economic system level.
"ERM usage to be positively related to factors such as firm size and institutional ownership, and negatively related to reinsurance use, leverage, and asset opacity. By focusing on publicly-traded insurers we are able to estimate the effect of ERM on Tobin’s Q, a standard proxy for firm value. We find a positive relation between firm value and the use of ERM ." In fact, beyond just adding value, the ERM premium was 16.5%, and found to be both statistically and economically significant, as well as being robust to a range of alternative specifications of both the ERM and value equations. In summary, it appears that added risk management disclosures inherent in ERM add value to the firm. As a bonus, by adding additional risk management transparency, firms are likely to reduce the expected cost of regulatory review, along with the amount risk capital that is allocated for less productive/profitable uses, each of which no doubts helps to increase firm value. Certainly something the proponents of ERM believed, but now there is some initial evidence to back up the claims - at least for insurance companies.
TIM Report: Brokers Cautiously Bullish, with CBEY, TWTC, and WSM As Longs, ALGT, TLAB, and ACI As Shorts.
According to the recent TIM (Trade Ideas Monitor) report for August 13th, the TIM Sentiment Index (TSI) in North America was 52.13, down 2.42 points, but still over the critical 50 mark (see last post, and previous post and the youDevise website for additional information on the TIM report). The TSI Worldwide Index averaged 53.40. Total new long ideas as a percentage of all new ideas sent to investment managers by way of the TIM remained high at 65.68%, but down slightly.

Ant Investor.
Special situation investing involves participating in variety of corporate actions like buyback, rights issue, demerger, etc. These are low-risk arbitrage opportunities which can act as kicker to investor’s core portfolio. In this blogpost, I am going to concentrate on demerger/spin-offs.
Demerger/Spin-offs happens for two broad reasons:
Due to conglomerate nature or historical diversification steps, company could be operating in two completely different areas of businesses. Demerger/Spin-offs can help to get better valuation (no more holding company or conglomerate discount) and unlock parent company’s value. It also gives focused management bandwidth to each business to grow and scale up. Recent examples: Crompton greaves, Max India, and Transport corporation of India Sometimes, parent company might be struggling with debt, which holds back the core operating performance of the company. Hence, the management sandbag one of its divisions with debt and spin them off. This will liberate the other operating company from the debt and help them to achieve better valuation. Recent examples: Future enterprises became holding company with loads of debt and some investments in group companies whereas Future retail was spun-off with minimal debt. Same is the case with Sintex Industries where textile division had loads of debt and poor operating metrics when compared to Sintex plastics.
First category: It is a plain vanilla demerger but for some reason, Mr. Market mis-prices them even after the management’s demerger announcement. It usually takes 10-12 months from board approval to record date announcement. I believe Mr. Market underestimates what a focussed management bandwidth can do to the fortunes of the company. Market will offer an opportunity to enter these demerger stories at some point in time during this 10-12 months period.
Peter Lynch on Spin-offs:
“Spinoffs often result in astoundingly lucrative investments. Parent companies do not want to spin off divisions that will go on to fail as this would reflect poorly on the parent. Once these companies are granted their independence, the new management, free to run its own show, can cut costs and take creative measures that improve the near-term and long-term earnings. Spinoffs get little attention from Wall Street and they are usually misunderstood by investors. This all bodes well for future returns. Spinoffs are a fertile area for amateur shareholders. Lynch recommends looking for spin-offs with insider buying as it will confirm management believes in the spin-off’s long term potential”.
Second category: Sometimes, Mr. Market favor one business division much more than the other one. It could be due to high debt, small market capitalization, lack of complete information regarding the assets it holds. This will result in forced selling by the market participant. For example, a large mutual fund/FII’s mandate doesn’t allow them to hold companies more than 500 crores market cap. The discarded business division could be worth lot more than the current depressed price offered by market.
Howard Marks on Forced Selling:
“The absolute best buying opportunities come when asset holders are forced to sell, and in those crises they were present in large numbers. Believe me, there is nothing better than buying from someone who has to sell regardless of price. From time to time, holders become forced sellers for reasons like these:
The funds they manage experience withdrawals Their portfolio holdings violate investment guidelines They receive margin calls because the value of their assets fails to satisfy requirements agreed to in contracts with their lenders”
Joel Greenblatt on Spin-off:
“Believe it or not, far from being a one-time insight, tremendous leverage is an attribute found in many spinoff situations. Remember, one of the primary reasons a corporation may choose to spin off a particular business is its desire to receive value for a business it deems undesirable and troublesome to sell. What better way to extract value from a spin-off than to palm off some of the parent company’s debt onto the spin-off’s balance sheet? Every dollar of debt transferred to the new spinoff company adds a dollar of value to the parent.
The result of this process is the creation of a large number of inordinately leverage spinoffs. Though the market may value the equity in one of these spinoffs at $1 per every $5, $6 or even $10 of corporate debt in the newly created spin-off, $1 is also the amount of your maximum loss. Individual investors are not responsible for the debts of a corporation. Say what you will about the risks of investing in such companies, the rewards of sound reasoning and good research are vastly multiplied when applied in these leveraged circumstances. Tremendous leverage would magnify our returns if spinoff turned out, for some reason, to be more attractive than its initial appearances indicated”
Seth Klarman on Spin-off:
“The behavior of institutional investors, dictated by constraints on their behavior, can sometimes cause stock prices to depart from underlying value. Institutional selling of a low-priced small-capitalization spinoff is one such example. Many parent-company shareholders receiving shares in a spinoff choose to sell quickly, often for the same reasons that the parent company divested itself of the subsidiary in the first place. Shareholders receiving the spin-off shares will find still other reasons to sell: they may know little or nothing about the business that was spun off and find it easier to sell than to learn; large institutional investors may deem the newly created entity too small to bother with; and index funds will sell regardless of price if the spinoff is not a member of their assigned index. There is typically a two to three month lag period during which the spin-off company’s financials have not been entered into financial databases and there will be very few analysts covering it. Thus, the stock could be the cheapest stock in the world during this time”
Historical data both in India and around the world points to better performance of spin-offs when compared to broader markets.
Empirical data on Spin-offs globally:
Empirical data on Spin-offs across market cycles in India:
I have very limited experience in the demergers space. I started to focus on this segment for the past 3 years with reasonable success. Following are some of my experience:
Crompton Greaves: Demerger of Consumer electrical division from parent CG power. Crompton was a very powerful brand in consumer electricals but management couldn’t focus, invest and grow the brand due to the distraction of poor operating performance of CG power overseas division. Management announced demerger and at the same time sold their stake to PE funds (Advent International and Temasek holdings). I believed new management can realize better value than the current management. Meanwhile, they appointed Shantanu Khosla as new MD who is veteran in P&G India signalling change in management focus. Hence i bought them between Jan and Feb 2016, with a simple assumption that new management focus can help to create better value for the Crompton brand. Investment worked out lot better than i initially thought. Transport Corporation of India: Demerger of TCI express division which caters to e-commerce verticals. Here both the parent and the demerged entity were equally good. Most Indian promoters has many children. In order to avoid conflict and give them better autonomy, promoters will demerge business division so that each children can steer an individual company better and scale them up. TCI and TCI express is a straightforward demerger. I bought 2-3 months before the record date for demerger and both equally performed well over the past one year. Future Enterprises: This was not my original idea. One of my friend shared his short thesis on the company: “Future enterprises is Complex spin off. Top 3 shareholders are ‘Consumer funds’ who are now forcefully selling the ‘Rental & Investment spinoff’ as it’s not in their mandate to hold non consumer stocks. Value of Investments (in Future lifestyle, Future Consumer, Logistics division, Insurance division) exceeds total debt. Management has promised to monetise assets and pare debt quickly which is key. Process has already begun. While the rental business is available free. Expecting huge cash flow from this business in coming quarters. I think the stock is worth more than CMP. Pure holding companies trade at discount but here management is planning to monetize the assets and pay off the debt. Hence value will migrate from debt side to equity side”. After reading his note, I looked at the shareholding pattern of the company. The amount of forced selling by FPI consumer funds was staggering. They wanted to get rid of their positions in the holding company before December year-end closing for investor’s reporting. Check out the following table:
Arisaig India Fund.
Based on the above info and company’s presentation’s, I bought Future Enterprises in Dec’16 and the investment turned out very good.
Timeline of demerger process in India:
[From a company’s presentation: Timeline is little optimistic (usually it takes 10-12 months instead of 8 months mentioned above). Just added to give an idea on steps involved in the process].
Demerger opportunities currently open:
My thoughts on Tube Investments of India demerger:
As we can see from the above table, Tube Investments of India board announced demerger of manufacturing vertical from financial services on Nov 3, 2016 and currently it is close to getting NCLT approval. Record date would be around Sept 2017 and further listing of the demerged entity would be around Nov 2017. It is part of Murugappa’s group. Management is known for competence and integrity.
Recent company’s presentation is very informative. Dar uma olhada.
I did valuation analysis on July 1, 2017. Market cap = 12,500 crores.
Financial vertical = approximately 10,000 – 11,000 crores.
Holds 46% stake in Chola finance. At CMP, it comes to 8000 crores. Let’s apply a holding company discount of 25% = comes to 6000 crores. TII holds 60% stake in Chola MS general insurance business. It is one of the better managed and consistently profit making general insurance business in India. Got captive customers in Chola finance for selling general insurance policies. In addition, in recent times, government opened up agri insurance business which gives more business opportunity for general insurance companies. None of the general insurance companies are listed. Hence we have to rely on secondary market valuation. In March 2016, TII sold 15% stake to Japanese JV partner Mitsui at a valuation of around 6500 crores. TII’s 60% stake comes to 3800-4000 crores. Demerger will happen sometime around August, 2017. Hence 18 month forward, one can assign 5000 crores. FY’17 TII’s 60% share of profits = 125 crores (growth of 60% over FY’16). For FY’18, i expect this division to post 155-160 crores (25% growth). 5000 crores valuation assigns around 30-32 PE which is reasonable considering general insurance business potential and scores of planned IPO listing in this space in FY’18.
Manufacturing vertical = approximately 4000 crores :
FY’16 Revenues = 4000 crores; EBIT = 260 crores (margin 6.3%). FY’17 revenues of 4200 crores & EBIT of 310 crores (7.3%). Most of the capex is done. FY’17 volumes of cycle division suffered little bit. Economic revival & better capacity utilization can push up the EBIT margins to 9-10%. Even if we value at 1X revenues/12X EBIT, its valuation approximately comes to 4000 crores. Got a debt of 650 crores – which is manageable given the cash flows.
Above calculation shows that roughly there is 25% valuation gap. I can see 2 trades here. First opportunity: Buy close to the NCLT verdict and hold for 12-18 months for decent returns. Another opportunity could be: After listing, market for some reason could favour finance division much more than manufacturing division and that can result in temporary mispricing which can be good entry point for decent returns.
Recent development: Murugappa group has a policy of rotation of CEO among various business divisions so that they don’t get attached to the business and mistreat it as their fiefdom rather than being a team player in the overall group activity. Group appointed Vellayan Subbiah as MD for Tube investments of India. He successfully turned around the Chola finance business over the past 5-6 years from their slumps. I believe this can booster dose for the better profitability of manufacturing vertical of Tube investments (Just a guess). Have a look at his profile.
There is no single scientific reason/valuation metric behind better returns in demerger/spin-offs. It could be due to multitude of factors like better market perception, better management focus, better valuation due to forced selling etc. One additional indicator I track is insider’s behaviour. Sometimes, promoter will buy from open market or allot warrants indicating their intention to raise stake in these companies. I know that in the current red-hot market where small caps are flying thick & fast, average returns of 20-25% wont appeal to lot of people. But i still believe that investing around the special situations like demerger carries minimal risk and it is a useful tool to have in the portfolio.
However, everything is not rosy in the world of demerger. In recent times, IDFC bank demerger is one example where some of my friends made zero returns. Sometimes, management cancels the whole demerger process (Eg: Jasch Industries). Hence, it is important to pick and choose the company we want to associate with.
You can be a stock market genius – Joel Greenblatt [Chapter 2: Page # 53-128] Margin of Safety – Seth Klarman [Chapter 10: Page # 187-191] One up on wall street – Peter Lynch [Chapter 8: 133-136]. SBI Capital Securities on demergers in India – Link Axis Capital research report on Tube investments of India – Ligação.
Disclaimer: Please note that this is my investment journal. The main aim is to expose my investment thoughts to the scrutiny of fellow investors and improve the process thereby. It shall not be construed as an advise to buy/sell the stock.
RBL bank and ESOPs.
Unlike manufacturing companies, capital is the raw material for financial institutions. Banks periodically raise capital by issuing new shares via rights issue, QIP etc. to support their future growth. Hence, for existing shareholders, equity dilution is one of the important factor that impacts his/her future returns. In addition, Equity stock option (ESOPs) to the top management is another important factor that dilutes investor returns. Check out the difference in CAGR returns between net profit growth and Earnings per share for some of the best-performing private sector banks. On average, 3-5% impact on the returns can be seen.
RBL Bank was kind of outlier – I convinced myself that this could be due to the huge capital raised by the new management to support their high-growth phase (Before IPO, they raised capital from marquee investors via multiple private placement of shares). However, following figure from Motilal Oswal research report intrigued me:
Around the world, the behaviour of the management teams usually responds to financial incentives. It is one of the most powerful concept in behavioral economics. Charlie Munger stressed that one should always think about the power of incentives. He famously quipped, “Show me the incentive and I will show you the outcome”. In recent times, ESOPs issuance by Indian private sector banks emerged as an most important component of management compensation and retention tool. It was pioneered by HDFC bank and over the time, most private banks followed the suit.
Check out the following two passages on incentives:
Opaque accounting practices in financial sector:
Complex accounting practices of financial sector places enormous power in the hands of the senior management in terms of what kind of information to disclose in financial statements. There are many instances in India where opaque accounting and senior management’s aggressive loan growth strategy leading to near-term bank profits that could boost the stock price today but damage the business few years down the line.
Read Livemint story on the aggressive lending of Indian Overseas Bank Read Outlook business story on wholesale banking business troubles of Standard Chartered bank in India.
In the year 2013, ambit capital came out with a thematic report on aggressive accounting policies followed by Indian companies. It flagged following two accounting practices regarding private sector banks:
I. Cost of ESOPs [basically management compensation cost] is not expensed in the bank’s P&L statement using a proper valuation method and hence boosting bank’s profitability. It further noted that if ESOPs are properly expensed, it would shave off 10bps from ROAs of these banks.
II. Fee income accounting: Fee income constitutes significant portion of private bank’s operating revenues. While the interest paid by borrower accrues over the duration of the asset, the fee income is often booked upfront by some of the banks, thus bloating the earnings. Check out the following example from the report:
Annual reports does not provide much info regarding fee income accounting. However, there is fair amount of disclosure on ESOPs and its impact of bank’s profitability.
[Source: Annual report FY’16]
I looked up info on ESOPs impact on profitability from previous annual reports and compared with the IndusInd bank [Where MNC executives took over the bank’s top management in 2008].
Bottomline impact is consistently on the higher side. I also looked at the outstanding options at the end of FY’16 and compared it to total equity base. It shows the prospect of significant equity dilution going forward when compared to other private banks.
I have high regards for the senior management of RBL bank for turning sleepy co-operative bank into new-age private sector bank. Its IPO was well-marketed. But i feel, the compensation structure is bit unfair to the equity shareholders of the bank. I agree that ESOPs across the management structure could instill a sense of ownership and motivates them to strive for better organization. However, this high-powered incentives has the potential to act as a distraction for the management to build a robust financial firm.
P. S. I have a friendly bet against RBL bank with a friend initiated on October 1st, 2016. I wagered that DCB Bank will outperform on a 3-year term basis when compared to RBL bank. My bet was purely based on the valuation when compared to its CASA deposits, return ratios, loan book basis etc. I still believe that if management executes quality growth, it can outperform most private banks on a 7/10 year horizon. However, I would like to keep a close eye on the behavior of the management.
P. P.S. Why does the bank schedule so many analyst meet? Almost like an daily affair 🙂
Disclaimer: Please note that this is my investment journal. The main aim is to expose my investment thoughts to the scrutiny of fellow investors and improve the process thereby. It shall not be construed as an advise to buy/sell the stock.
Kiri Industries – Heads I win; Tails I don’t lose much.
Mohnish Pabrai in his highly acclaimed book ‘Dhandho Investor’ popularized the following concept:
Investors should constantly look for mis-priced situations where loss on downside is capped while potential upside is multi-fold ( Heads I win, Tails I don’t lose much ). One must bet big when the odds are overwhelmingly in his favor.
While screening for bargains in Chemicals industry (If you want to make the industry sexy, then add “Specialty” before it :-)), I accidentally stumbled upon Kiri Industries.
Kiri Industries is one of India’s largest and integrated manufacturer of dyes intermediates and reactive dyes which are used in dyeing cotton fabrics, synthetic fabrics, bed-sheets, carpets etc.
Value chain: Basic Chemicals [Oleum/Sulphuric Acid/Chloro Sulphonic Acid] —> Dyes Intermediates (Vinyl Sulphone/H-Acid) —> Reactive Dyes (Colorants for Textiles). The company is vertically integrated across the value chain from basic chemicals to reactive dyes.
Manish Kiri (2nd gen promoter with MBA from USA) took over the company. This period was marked by rapid expansion of manufacturing facilities, overseas acquisition, equity fund raising via IPO & QIP and debt binging.
In March 2008, company came out with the IPO to raise about 56 crores. The funds was principally meant for capacity expansion of basic chemicals and dyes intermediates. In March 2010, Kiri industries (37.57% stake) formed a JV with China-based Longsheng group (62.43% stake) and acquired German-based DyStar from bankruptcy proceedings. The JV was based out of Singapore and raised about 100 million euro (Debt to equity of 65:35) to fund the acquisition. DyStar (Formed through the merger of dyes operations of BASF, Hoechst, and Bayer) is a leading player in dyes solutions with a 21% global market share and with sales of 800 million euro. It acquired the net assets of 291 million euro in addition to fully depreciated fixed assets of 140 million euro at replacement value. It avoided taking over all liabilities, including employees and bank liabilities in Germany. In November 2010, Kiri industries raised about 240 crores at the price of 590/- to fund DyStar acquisition and also expand manufacturing facilities of standalone business.
During this period, revenues of standalone operations jumped 4X to 572 crores. However, debt also jumped from 60 crores to 410 crores.
Delay in turnaround of DyStar: Initial turnaround plan was to replace high cost german manufacturing base with lost cost manufacturing in India & China and be cash positive from 2011. Management also guided DyStar IPO by Q1 CY 2013 at an international market. Even the best laid plans goes awry due to multiple factors. Euro zone crisis and resultant slowdown hit DyStar hard. Hence, Kiri Industries had to fund the company through term loans & working capital loans (around 100 crores) raised in foreign currency in FY’12. Derivative loss: During the Rupee crisis in 2013, Kiri Industries encountered derivative losses (82 cr) and loss on conversion of foreign currency loans to Indian currency (30 cr) following restructuring of loans by banks [Similar to many Indian firms at that time who didn’t hedge foreign currency]. All of them piled into giant debt of 750 crores!! Volatility in crude oil prices (principle raw material) and dumping from Chinese competitors [Unlike Indian counterparts, Chinese manufacturers do not have effluent treatment plant – hence they could produce at low cost] resulted in losses even at operating levels [Closest competitor Bodal Chemicals also faced similar problems – suffered both operational & forex loss]. Corporate Debt Restructuring: Shares pledged with the lenders were dumped in the market resulting in drastic drop in promoter shareholding from 58% to 30%. Also, JV partner blocked the IPO of DyStar and thereby preventing value unlocking. Local banks also closed funding tap following the debt ballooning & operational losses. Hence, the company ran out of options and admitted into CDR.
III Slow Recovery (2015-Present):
When the company is headed south, we investors have an option to abandon the ship and move to better investment opportunity. However, promoters does not have that luxury. His fortunes are intimately tied with the company. He has to wither the storm and do the hard grind to reach his desired destination.
Promoter fund infusion: In FY 2015-16, promoter infused around 50 crores in 2 tranches by subscribing to 37.5 lakh warrants at 135/- per share. Consequently shareholding increased from 25 to 37%. In October 2016, board approved 35 lakh warrant to promoters at the price of 363/- which can be converted at any time during the next 18 months. At the time of allotment, promoter has to pay 25% upfront i. e. 32 crores. Promoter shareholding may jump to 44.64% at the end of the process. Warrants at both instance were priced at slight premium to the prevailing market price. As of date, they infused 80 crores along with commitment of 90 crores over the next 18 months. Debt restructuring by lenders: In exchange of promoter’s fund infusion, lenders agreed to restructure the debts. April 2016 announcement: “Kiri Industries Limited has executed agreements for settlement of all its debt by the end of financial year March 31 , 2016. This has resulted in significant reduction of the borrowing. The total borrowings of the company have been reduced from Rs. 853.13 crores to Rs. 410.62 crores, which is about 51.87% reduction compared to the previous financial year. The initial installments under the agreements are also paid before the end of the financial year 2015-16. Further, as per Settlement Agreements executed, the Company is committed to settle and repay majority of the balance debt during the current Financial Year 2016-17. Hence, the company has now achieved a major landmark for its shareholders by fully addressing its debt burden, which had been weighing down the Company’s performance over the past several years. On one hand the realization of its products have significantly improved, on the other hand there would be huge savings in the finance charges from the current financial year i. e. 2016-17. The debt has been addressed majorly with the asset reconstruction companies, private lenders, as well as NCD holders.” Tailwind for Indian dye intermediates manufacturers: Closure of chinese plant (Hubei Chuyuan – Largest player of Dyestuff in China) resulted in 2-3X increase in prices of dyes intermediates (Vinyl Sulphone/H-Acid) resulting in windfall gains. In addition, Indian dyes industry faces structural tailwind due to china’s pollution problem (See below).
Heads I win – Value unlocking in Dystar subsidiary:
Beginning FY’14, DyStar subsidiary started to show turnaround in performance and is now generating profits consistently for the past 3 years. This associate profit from the JV gives an EPS of 70-80. Principal reason for the low PE in the screening table above is that Mr. Market ignores DyStar associate profit completely. With no access to the DyStar profit pool, Mr. Market believes that Kiri’s investment became kind of dead-end.
In June 2015, Kiri Industries initiated legal proceedings in the High Court of Republic of Singapore against JV partner Longsheng to enforce its rights as a significant minority shareholder and unlock value of the company’s share (37.37% stake) in DyStar.
Company is hopeful of completing litigation by end of Sept’17. Based on the timeline of recent Daichi-Ranbaxy arbitration at Singapore court, I would say it is very much possible. Also remember, JV (DyStar global holdings) entity was registered in Singapore.
Daichi – Ranbaxy arbitration timeline.
Best-case scenario: If Kiri Industries win in litigation, then JV partner has to purchase its 37.37% stake on the basis of court mandated independent valuation or else to liquidate DyStar and distribute assets as per investment ratio of both shareholders. Even if we assign a PE of 10-12, its 37.37% stake will yield around 2000 crores.
Worst-case scenario: Company’s investment will remain blocked till it liquidate to a 3rd party.
[Source: Bodal Chemicals Investor’s presentation]
[Source: Bodal Chemicals Investor’s presentation]
On a steady-state basis, company should yield around 70-80 crores of net profit [Note: Quarterly interest cost fell from 20 cr to 2.5 cr]. At a PE of 10-12, standalone operations of Kiri Industries should support the current valuation of 900 crores.
Ultimately we are partnering with promoters in a belief that they will share the proceeds with minority shareholders. Hence listed factors for & against promoters:
Concentrated bet can go wrong:
I strongly believe that few outsized bets are necessary to build a sizable corpus before switching to diversified portfolio to protect the corpus. Once a favorable odd was identified, we have to gather courage to bet big. If everything goes well, investment should conservatively yield 3X in 2-3 years time frame. If not, will incur huge opportunity costs due to the outsized nature of the bet.
Worked: Buffet invested of 40% of his fund in American express during salad oil scandal.
Went against: Bill Miller investment in Financials during 2008 crisis and Bill Ackman’s investment in Valeant pharmaceuticals.
Disclaimer: Please note that this is my investment journal. The main aim is to expose my investment thesis to the scrutiny of fellow investors and improve the process thereby. It shall not be construed as an advise to buy/sell the stock.
Indian Financial Landscape through the eyes of Rashesh Shah (Edelweiss)
This blog is mostly about recording and sharing ‘aha’ moments which i come across while studying various businesses in Indian stock market. This post is about things that i learned about Indian financial space accidentally while analyzing Edelweiss financial services.
Barring few exceptions, most consistent wealth creators in India are generally limited to 4 sectors: Information technology, Pharmaceuticals, Financials, and Consumer facing branded companies (2&3-wheelers, FMCG, housing-related etc.). However, IT and Pharma are going through their fair share of churn in their business models.
IT – I may be the 100th person 🙂 to tell you about the coming disruption of Social, Mobile, Analytics, Cloud (SMAC) to the business model of IT companies. Besides, top 3 sectors serviced by Indian IT companies are undergoing tremendous change and managements are struggling to adapt to them. For eg: Banks & Insurance companies are struggling due to negative interest rates & regulatory changes; Hardware IT companies like Dell, HP, Intel, Cisco are finding tough to match cloud services; retail companies like Macys, JCP, Belk, Target due to the E-Commerce onslaught from Amazon.
Pharma – It is not the FDA issues that am worried about. I strongly believe in, “what doesn’t kill you, will make you stronger”. FDA concerns will stregthen well-managed companies. But am worried about something else. Neelkanth Mishra of Credit Suisse pointed out in an interview: “Earlier, Pharma companies are valued for base business + one-off cashflows discounted back. However, now one-off bounties are included as regular cashflows and valued accordingly”. Besides there is no visibility for blockbuster drugs going off-patent beyond FY’18-19.
Hence, understanding financials is very important and you cant ignore the biggest wealth-creating segment. This blogpost is an on-going effort to learn the business model of financial institutions in India.
According to me, there are 4 broad themes playing out in financial services:
PSU banks which control 70% of the credit are sitting ducks and one of the greatest value migration happening right in front of us. Technology and competition from new licensed players will disrupt both the payments space and retail savings part . We already saw record mobilization of funds by Bandhan Bank at higher interest rates. But risk pricing can’t be disintermediated by technology in my opinion. It is not the technology part that is harder. Human short-term greed is the problem. You need an fanatic manager who eschews short-term greed and pressure from PE players & truly focus on the long term vision of the business. Until that happens, you will hear stories like Lending Club, P2P scams in China etc. and people will develop mistrust about the platform. Over the long-term, net interest margins for Indian financial players could come down due to the technology and competition. Hence, am very vary to pay high price to book multiples.
As I analyzed in earlier blogposts (Part-I & Part-II), most PSU banks, and old-age private banks are in deep troubles due to NPA. As a next step, I wanted to study about NBFCs. It can be largely divided into 5 groups:
Retail loans like Auto, Gold, & Consumer loans – Bajaj, Shriram City, Shriram Transport, M&M financials, Sundaram, Chola finance, Muthoot finance, Manappuram, Capital first, Magma Fincorp. Housing finance companies – HDFC, GRUH, Repco, Canfin, Indiabulls, Dewan, LIC, GIC housing. Microfinance/Small finance banks – Ujjivan, Equitas, Satin, SKS, Arman Financial. Broking companies diversifying – Edelweiss, Motilal Oswal, IIFL holdings, JM financials. Industrial conglomerates building NBFCs – Religare, Reliance Capital, L&T financial, Piramal Enterprises, Aditya Birla financials.
As usual, I followed the process of exclusion to focus down the players i wanted to study. I believe there is some kind of frothiness in terms of future business expectation and valuation going on in housing finance & microfinance space. As management is the top filter to invest in leveraged business like financials, I avoided both broking companies (due to their involvement with NSEL scam) and Industrial conglomerates (for their poor corporate governance & capital allocation abilities except in the case of Piramal Enterprises). However, following passage from Forbes India intrigued me about the Edelweiss financial services.
Prudent risk management kept Edelweiss away from NSEL fiasco when other leading brokers like IIFL, Motilal etc. burnt their fingers & reputação. Hence, i wanted to dig deeper about the company.
Edelweiss Financial Services:
According to me, basic smell test for any company is ROE and growth >15%. It passed on both counts.
Their quarterly presentation gives very good idea about their various business lines. It is present in both credit side (NBFC) and non-credit side (like Insurance, asset management, wealth management, Investment banking etc.).
It has got fairly good presence in wholesale credit segment, Asset reconstruction credit, Investment banking, Agri warehousing . However, their retail NBFC, Insurance, Wealth management segments are still in the investment phase and long way to go before contributing meaningfully. On the consolidated basis, only in Q1 FY’17 they crossed ROE of 15%. We have to look for the cosistency of ROE, ROA, and how various platforms are scaling up.
However, this post is not about the analysis of Edelweiss financial services. It is more about things i learned about the Indian financial space from its Investor day transcript. It was an excellent talk from the CEO Rashesh Shah. I made few edits for my understanding and grouped interesting parts of the talk into 3 segments and various sub-segments (I strongly recommend interested people to read the 32-page original transcript which is full of insights about the Indian financial space).
I. Overview of Indian credit market.
II. About business model of financial institutions.
III About Edelweiss business lines.
I. Overview of Indian credit market:
Three broad trends happening in the Indian credit market:
Credit markets are getting segmented and new avenues opening up New avenues for capital/liabilities opening up From the risk management point of view, more data or information is available with info from credit bureaus and analytics.
Bird’s eye view of Indian credit market:
Even today the total credit outstanding in the entire banking sector is about Rs. 75 lakh crore out of which about 52 is with the PSU banks and 22-23 is with the private sector banks. The total credit of all the non-banks put together is only Rs. 8 lakh crore only. So it is a smaller base and even within that there are the larger NBFCs who are mono lines focused on a particular segment. Out of Rs. eight lakh crore at least Rs. 4.5 to 5 lakh crore is housing finance. So the non-housing finance is only Rs. 3-4 lakh crore in the non-bank markets. So if you keep on slicing like that you can estimate that there is at least a fair amount of opportunities are still available.
Credit markets getting segmented & newer segments opening up:
Pre 2000 there was hardly any retail credit market in India. We had few housing loan products, and a few auto loan products but the retail credit as we all know now, it did not exist. For the first 8–10 years when ICICI Bank, HDFC Bank all of them started ramping up the retail credit part of the opportunity, it was still largely in the urban areas, largely in the metros and also largely to salaried employees of the companies. However, over the last 7-8 years, the credit market became very heterogeneous and there are smaller and smaller segments of credit which are starting to open up. Recent times, many NBFCs have seen good growth in segments like auto loans (2-wheeler, 3-wheeler, tractor, commercial vehicles – LCV/HCV) to rural markets, micro finance companies, SME Sectors, Self-employed where earnings are erratic and where there is no clear salary certificate etc. Also the credit bureau getting setup, and now with analytics you can have a fairly good estimate of cash flow. This is a completely new market, which has opened up.
Market is getting segmented which happens with every new entrant. So if you see consumer goods in India, there was one detergent out there. Then suddenly Nirma, Rin and Wheel and a lot of others came about. As the market is growing the segment doesn’t remain static. So like the SME segment itself has at least 8-9 categories from equipment finance to what is called UBL – unsecured business loans, to SME secured, to trade finance, to various other categories. And SME itself has got micro SME’S where the average loan size is about Rs. 8-10 lakhs, to SME’s where your average loan size is about Rs. 30-40 lakhs, to mid SME’s where your average loan size is a crore, to large SME’s where it can be up to Rs. 5 crore. And these are very very different categories – their needs, their banking experience, their track record, and the information available about them are very very different. So if you saw in housing also, companies like Repco, Gruh and all grew because they went after the self-employed segment, which was not there earlier. Until 8-9 years ago people were not actually going after that because of lack of enough underwriting data or the analytics or the credit bureau information. So now what is happening in credit is newer segments are opening up. For the newer players, a thousand, two thousand or five thousand crore rupees market segment is also exciting, while for an existing large player it may not be. And third is when you become large and if you have been doing a particular asset class it is very hard for organizations to change, especially for mono lines becoming multi line is very hard. If you see Bajaj Finance is not a monoline, they are now multiline. Their real growth started the day they removed auto finance from their name. It used to be called Bajaj Auto Finance, and then the day Auto was dropped is when the growth started happening. Going after the new emerging opportunities you should be able to go after multiple, smaller opportunities where you can learn the game. You have to be agile, have to be slightly more adaptable, which may be the new age firms are.
The pros about a bank is that you can choose your scalability because if there is a glass ceiling on NBFC at Rs. 100,000 crore and if you really want to think about the next 10– 15–20 years and at some point you want to be Rs. 2 lac–3 lac crore, then you need to think. It is currently hard to see an NBFC scaling up more than Rs. 100,000 crore but as I said it keeps on changing. 10 years ago I would have said Rs. 20,000 crore; 3–4 years ago I would have said Rs. 40,000 crore, now I am saying Rs. 100,000 crore is the glass ceiling for NBFCs. The other thing that the banking structure will allow you is some more stable regulatory environment because a non bank is always exposed to RBI changing its view on NBFCs and we have seen that happening over the years. The last 3 years RBI has been very positive about NBFCs but it can easily change if there is some chaos in the industry. So you are always suspect to scalability issues and the change in the regulatory environment if you are a non bank. On the other side what has happened is the profitability of the non-bank has improved as compared to banks. As I keep on saying, how many banks you can name who have RoE above 18% and how many non banks you can name who have RoE under 18%?
Liability side is getting broad based:
The biggest problem to be in the credit business is you need capital and it is not the asset side problem, it is the resource side. The liability side problem is bigger. It is very hard for a non-business group to build the resource side of the equation. The asset side work will always be there. What has changed in the last 3 years is the resources side has become lot more easier for NBFCs. Lot of the older firms was able to grow because they had access to bank relationships and other funding options. The bank credit as a percentage of their borrowing is starting to fall as the bond market is starting to develop. There are a lot of new players in that, for example insurance companies are becoming a big supplier of credit to the NBFCs. It was always earlier banks, and then mutual funds started after 2008-09 when they started getting some scale. But in the last three years insurance companies are emerging and I can guarantee you that in the next five years insurance companies are going to be big provider of capital, long-term capital to the NBFCs. An insurance company on a traditional policies will allocate 85-95% of the money in bonds and only 5-15% in the equities. So all that is starting to change and so I am saying that liability side change is very exciting. A lot of more NBFCs, which are not constrained by resources, are now starting to take advantage of.
II. About business model of financial institutions:
What can kill you in credit business?
But as with everything in credit, you have to be very careful, you have to focus on cost, at underwriting cost. Your underwriting costs are the most important cost in this business. What can kill you in a credit business is your credit cost, it is not going to be your cost income ratio, and it is not going to be your cost of funds. If you are reasonably smart, it is okay. But if you can get your credit cost down and keep them under control then there is a huge opportunity.
Most NBFCs are fairly mono lines (either in housing finance or commercial vehicle or gold loan) and what we have found is if you look at the NBFC’s history in India, monolines grow very fast but also struggle across cycles because if you are a housing finance company and you think there is a lot of irrational stuff going on the financial industry and people are under pricing, will you be able to scale back the business? It is very hard to do because how do you give up growth? No credit company will be ok with the shrinking book. So you will continue to grow hoping that I will be smarter than the others, but you will not be able to escape the irrationality of the industry. However, if you are a broad base firm, which what the banks are, you can keep on reallocating your portfolio. Aditya Puri once remarked to me that when the auto finance industry got very irrational, there was a lot of undercutting going on and HDFC Bank scaled back, actually exited the auto finance business completely for 4 years and then they came back after that. Now if you are at HDFC Bank you have that option, but if you are only an auto finance company do you have that option? You have the sales force, you have all the relationships with the dealers and you can’t escape that. You can slow it down but you can’t escape that.
Lack of size is an advantage:
Finding a new niche is a lot harder for larger banks. For example, microfinance companies like Equitas or Ujjivan is happy to build a Rs. 4000–5000 crore book over 8 year and be happy over that. But it is hard for a bank to say that I am going to spend 8 years figuring out the micro finance market and build an 8–10,000 crore book though it can be very profitable . The scale is actually starting to work against them in new emerging opportunities. So while we are seeing these untapped segments in the credit market, each of them is at a size of where it is exciting for building a 3-4-5-7 or 8000 crore book. But you can’t build a Rs. 30 – 40,000 crore book in any one segment. Lack of size is an advantage because we can go after smaller and niche opportunities and you have seen a lot of other NBFCs and the credit firms have also gone after that. The only bank who has done this very well is the HDFC Bank. It is the only bank which will a see Rs. three thousand crore opportunity and go after it. So whether it is gold loan or a micro finance loan they are not leaving that behind. So amongst all the banks it is the only bank I have seen which can go after this sub scale opportunities and build expertise in that and that been the magic they have. Twenty years ago when the broker accounts was a small part, the first one to maintain and build that line was HDFC Bank and their ability has been to go after the smaller segments.
Lessons from 2008 retail loan crisis:
Even in 2008 when there was a retail banking crisis, 80% of that was in small ticket personal loan, what is called STPL, that time and everybody from GE Capital to Fullerton to ICICI to HSBC everybody had a large part of STPL book and there was craziness because the same guy was actually borrowing from 8 people. You didn’t have the credit bureau then and in fact people like Bajaj benefited out of that unsecured market collapse as everybody emptied out of that space except the HDFC Bank. So if I go back to 2011, the only players left in unsecured consumer loans were HDFC and Bajaj. Idea in credit is to pick up early warning signal like we ourselves have gone and analyzed the 2008 STPL market and there were 2 – 3 firms which really got stressed. But you know large part of stress happened when everybody else slowed down and scaled back, they continued for 3 more quarters and the 3 more quarters was what actually killed them. So the idea is to see the early stress and scale back which is what I keep on emphasising and lot of our risk focuses on analytics and we work with CIBIL and everybody else to see that stress.
Scaling back is very important in credit business:
One good thing about credit markets in India is that there have been pockets like STPL in 2008, Project finance now and project finance in 89–90–91, 2000–2001, 2002-2003 was also project finance. It was auto finance is 96–97–98. There are always pockets and that is what we worry about the most that can it happen in SME and at that time our idea is that a) it should not be a large part of our book and b) can you scale back? Actually even in structured credit in 2008 we had a Rs. 1,100 crore book. By end of 2008 it became Rs. 400 crore. We shrank back that book in that time because of the market volatility post Lehman. So the ability to manage your risk and shrink it back is equally important. I remember I was talking to Uday Kotak and he said in 1999–2000 when all NBFCs failed, Kotak survived and one of the reasons is that they scaled back their business.
Wholesale credit book and NPAs:
If you analyze the NPA issue going on in the banks right now, which is mostly on the wholesale side, but 80% of the NPA issue is around project finance and frauds. So if you take the frauds like what is happening in REI Agro what happened in Deccan Chronicle and all of that, and if you take the project finance whether it is power, whether it is coal, whether it is mining, whether it is roads because approvals didn’t come, projects were over invoiced or whatever else were the reasons, 80% of the problem is project finance. Quite a few of our senior management started our career in project finance and even 25 years ago project finance was always risky. Project finance is never without risk in India and one of the reason all of us have avoided it is because at 13–14% interest rate you are not getting compensated enough for that ; there is no risk reward in project finance but you can get scale in project finance easily, you can put Rs. 1,000 or 2,000 or 5,000 crore to work in the project finance opportunity quickly to gain scale. But if you avoid project finance, then wholesale credit books or corporate credit books even in IndusInd Bank, Kotak, Deutsche Bank etc. are not doing badly. So anybody who avoided project finance and frauds has been ok.
One of the other significant changes that has happened is, banks are becoming more conscious of risk based pricing. This entire NPA mess is forcing banks; banks are also saying I am not going to give money at 12-13%. So anywhere, normally these real estate guys would borrow from a non-bank at 100–200 basis points higher than they can get in the bank because bank has all these other issues. The banks are now starting to push this out of the banking part and your largest risk in real estate developer financing is execution risk. When you do a real-estate residential project, and we do only post approvals so usually there is no approval risk. If you take approval risk you can get a higher yield but if you do post approval, your only real risk is execution risk. It is not price risk at that level. You are 2x collateralized and unless there is a real estate collapse like an Asian crisis happens in India and suddenly the real-estate fall by 50–60 % which is not something that we think can happen in India given the way the economy is. In fact it has been improving. In the last one year even housing market has started to crawl back. Commercial real estate improved one year ago and this quarter housing also did really well and again, over the years I have seen one thing, the way night follows day, real-estate market follows stock market. So, if the stock market is going to be robust for the next couple of years, because real-estate market has not gone anywhere for 7–8 years, this is the biggest de-risking that has happened. Commercial yields are starting to inch-up but again idea is not to be too optimistic. Select your counter parties very carefully. If you get good counter parties and your collateral is good, you are ok. Some projects will be slower so your project execution risk may be there. The whole market of real - estate residential developers’ credit is about Rs. 100–120,000 crore market per year. HDFC is about Rs. 40–45,000 crore, Indiabulls is another Rs. 17-18,000 crore, Ajay Piramal’s group is about Rs. 14–15,000 crore and we are a Rs. 5,000 crore in that and that’s a fairly good market. Not a lot of people have lost money in that. The project have got stuck but on the credit side very few cases of default.
Profitability in urban home loan& LAP segment eroded:
We all NBFCs talk to each other and you know people who are handling products they are friends all over. Currently there is no stress building up. Their profitability has eroded from the home loan market. So home loan, especially urban salaried home loans, there is no profitability. We are not seeing increase in NPAs in that. In fact metros have becomes fairly competitive on both LAP and home loans but the tier 2 tier 3 cities we are not seeing stress getting to build up beyond what is the normal range and it is partly analytics and partly also the craziness that we saw even in the home loan market in 2008 with 100% LTV and all are anyway not allowed any more. We are not seeing that kind of behavior. In fact underwriting discipline has still been fairly good and partly aided by the fact that people are able to grow without making compromises. It is not like 2008–09 where you had to make compromises in terms of your underwriting standard to grow. It is not just our experience, when we talk to everybody and you all will also know that people are saying that we are not getting the push to scale back the standards. In fact if you saw our LTV, it has only come down. So we are not seeing it but it is a worry that should always be there and you should constantly look out for that.
Economic incentive for banks to sell NPA’s to ARC business:
ARC will continue to grow for the next couple of years because the banks usually sell the assets after the second year because the provision impact is the most after the second year because they provide 15% in first year, 30% in second year and goes upto 100% soon. The irony is that very often, the NPAs are not beyond recovery. If I gave to you home loan and it became NPA, it won’t become zero and eventually one should be able to recover 30, 40, 50 percent. For the bank it makes a lot of sense to sell to an ARC even at 40 cents to a dollar and avoid the last 40-50% NPA provision because once they sell it to ARC, then they don’t have to provide anymore.
[My Note: This explains the excitement around the ARC business with slew of partnerships between indian entities like SBI, ICICI, Kotak, Piramal and foreign capital providers. If you are interested in understanding the business model of ARC – better read pages 29-31 in the transcript].
III About Edelweiss business lines:
There is something that we are trying to implement in a different way. We believe having a good mix of credit and non – credit is the way to build truly a very scalable kind of a model. Most of the NBFCs are very credit oriented and credit is obviously the big part of the opportunity. Obviously currently credit is very hot but over a long term we have seen India growing the way other economies have grown and having the non-credit side of equation also gives you a balance and gives you a lot more sustained profitability.
Game plan for building the retail book:
We see lot of opportunity in Retail mortgage, agri & rural financing, SME business. Most of the verticals were started about 3–4 years ago and we are still understanding. Our strategy has been to take 4-5 years to understand the segment and then you start scaling up. As I said, at our size we can afford these things. So our whole idea is thinking like a bank having about 5–6-7 sectors where we can keep on reallocating capital.
Going through the grind while building business:
We started hiring people for our retail finance business, in 2011–2012. We were very clear that retail would take 8–10 years to build. So I do think that even now retail business in Edelweiss is under stated in the profit because we are still in the investment phase. We started our retail credit business in 2011 and only this year we have hit 10–11% RoE. We think it is a 20-22% RoE opportunity. Scale matters a lot because we have studied all the retail finance service companies and your cost income ratio and your scale are inversely proportional. What we say in all retail businesses you have the front book and the back book and the acquisition cost of the front book is what impacts your current P&L and the back book is what really adds to P&L. All retail finance companies invest a lot in building the back book and it takes you 8–10 years to build the back book and you have to go through the grind. We started this in 2012 and from 2012 onwards it has been good growth and we are still continuing to invest in retail. We do feel confident that as the retail is getting scaled up, there is still a lot more opportunity in front of us.
Game plan for non-credit side:
On the non-credit side we still have a high cost to income ratio of 74% and on long term basis we think we should be 50–60% because as you get scale it improves. But currently we are investing in building scale so we are growing fairly fast. We want to grow this business at a Net Revenue level at 35– 40%. It still makes only 22% RoE, usually non-credit should be between 30– 40% RoE. We think it will be another couple of years away before we get that scale to start generating or eking out or harvesting the profitably out of this.
On a long-term basis, to build an insurance company, you need to have agency model. If you look at most large good insurance companies around the world over the last 40-50 years, you will find very few companies, which have been built around the banca model. But the problem with agency is that it is expensive and it is a drag on your profitability, capital and cash flow. However, on a long-term basis, the profitability of selling traditional products through agents is the highest. So in a way, you are buying a new more fuel-efficient car which is very expensive. So you are spending a large amount upfront, but you get the returns over the long term.
We also focus a lot on liquidity cushion because as you know we are not a part of a large industrial house or a large business group. In that sense we operate like a standalone bank with a large part of assets in treasury. Our ALCO focuses a lot on liquidity management and in fact the liquidity guidelines that we internally follow are the Basel 3 guidelines. We have almost 9% of our assets in unencumbered cash assets available to us on an overnight basis. We are able to do this because we have a treasury approach to this which most of the NBFCs do not have, though they are starting to build now.
Warehousing and Agri commodity financing business:
The reason we are in agri services (Warehouse & collateral managment) is because we want to build agri credit business and we have realized that without an agri service as an arm you can’t build an agri credit business, as your risk will not be easy to manage. Agri financing is usually short-term, it is usually between 3 months to maximum 1 year, because a lot of this are self liquadating assets. So our whole strategy is we become warehouse managers & collateral managers, and after that we fund goods which are in our warehouses. We believe it is an very innovative robust model for financial intermediation in commodities.
Warehousing industry is getting organized and we have WDRA (Warehousing Development and Regulatory Authority). Eventually warehouses should be like NSDL – CDSL. If there are goods lying in the warehouse then you can be certain that the goods are there and they are clean and that is where India needs to go. The good news is that the warehousing industry especially for agri is starting to get organized. Lot of the PE money is starting to go into this segment, which is the first indicator that this is getting organized and all are high quality companies that are getting built. This is a 5–10 year trend.
Fairfax paid Rs. 1,100 crore for NCML with 1.3–1.4 million tons capacity and they make about Rs. 28–30 crore PAT and they paid almost 40X of that because they see opportunity there.
All banks are keen to do this (agri credit). Our estimate currently is that this is a Rs. 100,000 crore credit opportunity for the organized market and currently banks do anything between Rs. 20–40,000 crore and this keeps on fluctuating because ultimately a warehouse receipt business is a risky business and in the past ICICI had issues, all banks have had issues, NSEL is another one, because we are still not at a stage where a warehouse receipt is something you know that the goods are behind it as we all have found out after NSEL. An organized warehouse manager is something that banks want and banks are appointing others and us as collateral managers. There is a feeling that the WDRA is going to impose capital adequacy norms on the warehouses managers, which will be good. It is in the proposal.
We are not into warehousing and logistic business. We started doing a little bit of agri credit, built our first Rs. 100 crore book then realized that there is a lot of risk management required when the goods are lying in the third party warehouse. Hence we stopped that and went back to drawing board, which took a lot of time to convince our board. On a long-term basis we don’t see ourselves as a warehouse manager; we just had to do it. Coincidently we may have ended up building a standalone good business but our long term idea was that if there is a warehousing logistics management opportunity we will go on that part and we will be sponsors of that but we wanted to use that base for building an agri-credit business as our attempt has always been to find credit opportunities where you are not competing head-on with banks because banks have a cost of capital advantage. The idea is to find things where you don’t compete with banks but you collaborate with them. A lot of the Agri credit we are doing we expect that about a third of that will be priority sector. So now a lot of banks come to us saying can you help us expand our agri portfolio? We don’t want to do farmer loans but here biggest thing is the collateral is in your control because if it is not in your control then risk multiplies manifold. Unlike a car which has its identification or a house which has an identification, a bag of wheat has no identification which is the biggest risk at the end of the day in this particular sector. If that risk is conquered, this is a Rs. 100000 crore market and think about it, for 4% spread on Rs. 100000 crore market is Rs. 4000 crore. Opportunity is out there and it is a fairly big one. All banks, a lot of global financial institutions want to come and partner with us.
Looking forward to your thoughts and comments 🙂. My twitter handle (@eeswardev).
Things I Learned about Chit funds and Rural Savings.
Don’t worry, I am not going to bore you about ‘Ponzi schemes’ like Sharada chits masquerading as ‘Chit funds’ :-). Instead, I want to talk about the real chit funds where group of like-minded people from the same community join their hands together for savings and borrowings. Investments in chit funds are very popular in southern states like TamilNadu, Andhra pradesh, and Karnataka. It is one of the important financial instrument in rural India (where people still hate to deal with arrogant bankers) and yet very few people understand it. Given the way chit funds are structured (See the Image below), it cannot declare about the returns an individual is likely to make in advance. Final returns varies depending upon the financial needs of all the participants. In contrast, most ponzi schemes (like Sharada scam, 1996 TN chit fund scam etc.) are deposit schemes that offer eye-popping interest rates, cash prizes, and gifts for deposits with the chit funds.
During my recent trip to India, I caught up with my friends and as usual talks veered towards savings and investment. Most of them invested in local chit funds and yet nobody have any clue about the returns it generates. Hence, out of curiosity i got data from couple of friend’s chit fund investment and attempted to put a number on it.
[ Note: I have fascination for chit funds from very early age. My father would say that he met all his life obligations like his sister’s marriage, his marriage expenses, my grandpa’s medical emergencies, our education expenses were met solely through this type of monthly chit fund investment. He might have invested in some 40-50 chit funds in his lifetime. He used to take us to the community auction spot where group of 20 to 30 people used to gather, pool their money, and bid for it. In our small town, most people might have invested in atleast 2 chit funds at any one point of time].
R Thiyagarajan of Shriram group built a formidable chit fund business. Shriram chits was started in the year 1974 and currently it has an AUM of 13,500 crores serving around 22 lakhs customers in 4 states (TN, AP, KN, and MH). In the newly released book, he noted the uniqueness of the chits and its role in the financial inclusion of rural household.
“Indian psyche is attuned to the concept of saving money. Every household and every individual want to save money and at the same time is also nervous if his savings will be adequate to meet his needs. Where will he go if he is unable to have his needs met? The chit somehow gives him an impression that as he saves, he also has protection.
The advantage in the chit business for a person who has been a member is that he has the right to take the money. The only concern is whether he is able to offer enough discount, so he doesn’t have to depend on anybody’s willingness to help him. It is his right and it preserves his self-respect to a large extent. So the peculiarity of this instrument, of its being able to be a saving instrument and double as a lending instrument means he doesn’t have to go about requesting the chit fund company to lend him the money. In fact, he can go demand it. That makes him feel very comfortable.
These things should be understood and appreciated and the government should make some modifications in the regulation of the chit fund business. Chit funds as an instrument could play a very useful role in achieving the government and the community’s objective of enhancing financial inclusion”.
This chit fund was run by local finance professional. It is very similar to the chits run by Shriram, Margadarasi chits etc.
Number of people: 20; Auction: Monthly; Number of months: 20; Investment: 25,000; Pot money: 5 lakhs (20*25,000); 5% commission: 25,000 (5% commission is like fund management fees which goes to the person who runs the chit. He shoulders all the responsibility for the chit money and its monthly collection). Auction starts at 4,75,000 (after 5% commission) and the person who bids the lowest get to take the money home. For example, in the 1st auction, Person A places lowest bid at 3,58,000. Hence the divisible money for the group members will be 4,75,000-3,58,000 = 1,17,000. It is shared among all the 20 members as interest/dividend (1,17,000/20 = 5,850). And the same process repeated for 20 months.
[Note: I filled-in best possible guess for the future auction in August and September 2016. In October, there will not be auction as last person standing will get to take 4.75 lakhs].
From savings perspective: If a person’s whole motive of investing in chit fund is savings, he will not bid in any of the auction and likely to take the final pot money of 4,75,000. To get this final corpus, he invested around 4,43,000 over the period of 20 months i. e. 22,150 per month on average. I didn’t want to complicate by feeding these monthly numbers into excel sheet and calculate IRR. Instead, i flipped and asked what else he could have done if he had not invested in chit funds. Recurring deposit is the only other option for the monthly investment. SBI and post office offers interest of around 7.5% quarterly compounded. 22,150 monthly investment for 20 months will fetch 4,73,250. Here, chit fund did slightly better. Returns worked out to be 8% compounded quarterly. [A little anecdote from my friend’s mom: She can’t do math and doesn’t have much needs apart from education expenses. Hence she never called any auction in her 25 years of chit fund investments and will always take the final pot money].
From lending perspective: Most people invest in chit funds in anticipation of future funding needs. It can be education fees, business funding needs, or unanticipated medical emergencies. Recurring deposits will allow to withdraw only 90% of the corpus you invested so far. On the other hand, in chit funds you can borrow against your future payments which were agreed at the start. If a person calls money in any of the first 3-4 auctions, the interest rate works out to be around 24-25% which is roughly the same most credit cards charges i. e. he gets around 3.6-3.75 lakhs and pays back 4.43 lakhs (22,150 per month over 20 months as EMI). Most people avoid them unless they are in emergency situations. From 5th to 8th auctions, interest rate will work out to be 15-18% and so on.
Amazing feature of the chit funds is its flexibility nature. It can be both lending and savings instrument at the same time. Also you can tweak the rules in the way you want. In the above example, chit fund was run by a finance professional whose whole job is gathering people, taking risk, and running chit funds. In the local community, sometime people will run the chit fund for the lower commission structure (say 2%, 2.5% or 3%) or sometime without any commission at all (see the example below). Also, there can be weekly, bi-weekly, monthly, once in 3 months kind of chit funds. Sometimes, people run chit fund in the name of god and spend all the money collected as commission (5%) for the community festival.
This is local community chit fund in which another friend invested. Here the rules are little different and hence returns are better.
Number of people: 21; Auction: Once in 3 months ; Number of months: 60 i. e. over 5 years; Investment: 10,000; Pot money: 2.1 lakhs (21*10,000).
It has 2 important tweaks:
Commission is Nil . However, as the chit fund runs for 5 years, there is a real chance that someone might die/fall into a situation where they cannot continue further. Hence in the first meeting, everyone will pool 10,000 and save that pot of money (2.1 lakhs) for future unanticipated emergencies. Real auction starts from the 2nd installment [I was really amazed at this risk mitigation step!!]. If a person calls an auction, he is no longer eligible for the dividend/interest from the divisible money (i. e. pooled money – Auction value). Hence with each auction, number of participants decreases for divisible money. This ensures steady dividend/interest throughout the chit lifecycle and hence the returns are higher as seen below. [In the earlier example, people who called auction, are barred only from future auctions but eligible for the dividends/interest from divisible money].
As the chit fund runs without commission, returns are better. Also borrowings also works out 3-4% less than the example#1. In the example#1, the risk is borne by finance guy whereas in the example#2, the risk is borne by the community.
People in tier-2/tier-3 towns are already sensitized to variable returns. Hence it is a myth that people don’t invest in equity mutual funds due to the uncertainty in the future returns. Rather the problem lies in the sales team who push the MF product at wrong time with unrealistic return expectation. Most people in rural India intuitively understands that lower the commission, better the deal. However, due to the muddled thinking of our regulators, MF players fleece investors with high expense ratio of 2.5-3%. Instead of looking down this financial product, people need to recognize chit fund flexibility as savings & lending instrument and the role it plays rural savings culture.
To be clear, am not advocating that people should go out and invest in chit funds. In fact, chit fund culture it is not present in many states. Also there is problem with unscrupulous players who may flee with the corpus. In fact, it is better not to invest in chit funds unless you have strong bond with the community and you are familiar with the counter-party you are dealing with.
Following is the suggestion i gave to my friends during the trip: I did not want to confuse them with asset allocation and re-balancing stuff. Typically, Debt allocation were met by mandatory employee provident fund/contributory provident fund. Short-term funding needs will be met by the local community chit funds which gives debt mutual fund like returns. Gold allocation will be met by the gold that comes with marriage. Hence i insist them on mutual funds (specially ELSS with 80C benefits) only for the retirement corpus and ask them not to touch for next 20-25 years.
Please let me know if i had made any mistake in the excel calculations. Looking forward to your thoughts 🙂
How short-termism wrecks a company – An imaginary tale.
As i noted in my first blog post, I was always curious to know how some of the high-growth market darlings goes belly up in few years time. I am more interested in business failures. I strongly believe that avoiding stupidity in investment process will yield long-term above-average results. As Charlie Munger famously quipped, “Just tell me where I’m going to die, so that I won’t go there”. Recently I was intrigued by the spectacular collapse of PE-backed fast-growing education company (lets call it as Company “T”) which operated in pre-schools and K-12 education segment. Also it was one of the rare cases which did not involve debt (as mostly would be the case for spectacular collapse). Hence i wanted to delve deeply.
Background: Company “T” started its first pre-school in 2003 and was founded by first-generation entrepreneur. In 2008, its business model caught the attention of a high-flying US-based Private equity “M” which recently started its operation in India. Over the next 4 years, it pumped 63 crores [35 crores (2008) + 15 crores (2010) + 9 crores (2011) + 4.2 crores (2012)] and the company “T” expanded furiously to 240 self-operated + 62 franchise pre-school centers and 24 K-12 schools. Company followed capex heavy self-operated model as against market leader’s franchise based model. Each pre-school center on average costs about 40 lakhs and it charged fees between 20,000 to 60,000/- per kid.
In August 2011, Company “T” came out with IPO and raised around 112 crores from the public. In FY 11, its total income was 41.15 crores and posted a net profit of 9.2 crores. As expected, Investment bankers, PE investor, and management priced the IPO issue at astronomical price (50x its diluted FY 11 earnings. ). IPO had a poor stock market debut and ended 14% below issue price on Day 1.
Everything went fine until FY 13. Following was its financials at FY 13:
The average life span for most PE funds are around 7 years. Most of them will focus on exits starting 4th/5th year of investment. Due to this institutional imperative, I believe PE “M” shifted its focus from building the company to exiting its investment sometime towards the end of FY 13. It held around 25% of the company “T” and naturally started to worry about ways to exit. Being a 750-crore small-cap company with low liquidity in stock exchanges, selling the stake to other deep-pocketed institutions such as mutual funds, Insurance companies, other PE investors etc. was the only option left. At the same time, company “T” was still in investment mode and needed huge cash due to capex heavy self-operated model. Following is the imaginary conversation between CEO the company “T” and PE “M”:
Company “T” CEO: We had good FY’13 – almost 50% growth on revenues and net profit. To maintain growth momentum, we may need more money some time next year for further expansion.
PE investor “M”: Sorry, we are already in the 5th year of our fund cycle. We can’t pump any more funds into the company. We have to start exiting our investments over the next 2 years. While we are scouting for potential investors, please execute high growth at any cost.
Company “T” CEO: Due to poor economic conditions and high inflation, our growth moderated in FY’14. Being an consumer discretionary item, our pre-school revenues grew only 20% and due to higher expenses, our net profit was almost flat when compared to last year.
PE investor “M”: We already have hard time in finding potential suitors due to the rupee crisis. It is only since the Jan 2014, things started to look better. In addition, company need additional funds for future expansion. We can’t publish this horror results at this time. Lets “window-dress” company accounts to make it look better. Lets book additional 20 crores of revenue under ‘revenue from K-12 schools’ which are anyway going to accrue over the next 3 years. As costs are already incurred, this additional revenue will flow directly into the bottomline. Still we get cash from those schools, they will be hiding as receivables in the balance sheet. Most investors including smart money is more focussed on P&L statement, rather than on balance sheet and cash flow statement. This will be win-win for both of us: It will help company to raise additional funds and at the same time helps us to exit investment.
Company “T” Trade receivables from its FY2014 Annual Report.
Company “T” CEO: Is it ethical? Will it not cause trouble?
PE investor “M”: It is well within accounting standards and besides everyone does “window-dressing” of accounts . Also before fund raising event like QIP, it is important to weave a story that the company is a big proxy for the multi-billion dollar education services sector and pull some regular PR stunts to make it a ‘hot fancied stock’ no mercado. Give regular interviews with peppy numbers bandied around, also give ads to business channels (although it doesn’t make sense to advertise in business channels – it creates necessary visibility about the company among investors) etc.
Status of cash flow by FY’14: Company”T” showed 18% increase in pre-tax Cash flow from operations (CFO). Most of the times looking at standalone pre-tax CFO figures will mask underlying truth as changes in one or more heads will distort the picture. Hence i always try to look at pre-tax CFO/EBITDA which showed detoriation in FY’14 (Ideal ratio would be around 80-100%). [Note: Each year company “T” was paying variable fixed deposit amount to K-12 schools for securing exclusive rights. It masked original picture of CFO from operations. Hence i presented adjusted figures by including those fixed deposits].
On cue, the stock was pumped from 220/- to 500/- just before QIP. In Dec 2014, it fixed its QIP price at 440/- and raised around 200 crores from marque investors.
At the same time, PE “M” sold sizeable stake to a insurance company for 50 crores in Feb-March 2015 and some more in open market for another 50 crores in June 2015. It was left with 12% stake.
But the luck didn’t last long for the company. In Sept 2015, proxy advisory firm raised concerns on company’s high receivables. It opined that receipt of fees in arrears is ‘rare and an exception’ in the education business the company operates in. It also raised questions on company’s fee collection mechanism and accounting system. Although the company’s management replied to the satisfaction of the proxy advisory firm, people lost faith on the management and stock price tanked relentlessly.
During the mayhem, PE “M” also dumped its residual 12% stake in open market 2 nd and 3 rd week of Feb, 2016 and bailed out. However, First-gen promoter who left holding the bag was clueless and didn’t know what hit his company. Company “T” released its tepid FY’16 numbers marked by provisions and write-offs. Its net profit nose-dived to 6 crores from 60 crores in FY’15 and its debtor days climbed to 100 from 20’s in FY’13.
According to me, following are the key learnings from this episode:
P&L statement is one of the least useful tool to analyze company’s strengths. It can be easily manipulated. Focus more on the balance sheet and cash flow statements to assess true strength of the company. Sudden raise in receivables should warrant further investigation. PE investors comes with institutional constraints and sometimes their short-termism nature can cause havoc in the company. Institutional investors often labelled as smart money is mostly ‘dumb money’. They too fall for fancied stock and behaves pretty similar to normal retail investors. Always be aware of any vertical movement in stock price before fund raising. More often it is management hand-in-glove with manipulators at work (If you got still doubt, would recommend reading Moneylife magazine for more case studies).
Note: This is my reading based on the sequence of events unfolded. Pode ou não ser verdade. So take it with pinch of salt. Looking forward to your comments and suggestions.
Indian Banks – Parte II.
In Part-I, I shared my preliminary analysis of PSU banks loan book. Even if the PSU banks overcome the bad assets and recapitalization woes, its future growth potential appears less than optimistic due to the recent advances in the technological innovation around banking industry.
Broadly there are 3 vital pillars in managing financial services and each of them undergoing profound changes:
Facilitating Transactions – Fintech companies will make this vertical more and more commoditized. Most manpower in PSU banks are dedicated to this vertical whose relevance will wane in future. Pricing ‘risk’ & # 8211; Fintech companies are trying to break open this vertical with models, artificial intelligence, data analytics etc. However, we all know what happened last time when financial world used models to price the risk [Hello 2008 :-)]. They have to undergo atleast one financial cycle to prove its worth. Local knowledge and real world judgement on pricing the risk will still be crucial. Workforce skill-set – Managing human resource, providing training in evolving technologies to improve customer service and to manage risk are very important. This is an area where large private sector banks has an definitive edge over PSU banks and even some of the smaller old-age private sector banks.
Lets first look at the loan books of private sector banks and weed out poorly-managed banks to arrive at the shortlist for further analysis. As i said in part-I, I considered Net NPA’s and restructured standard assets net of provision as bad assets.
We can clearly see why HDFC bank always trades at premium. It has got ultra-clean loan book with paltry bad assets. Bad assets of ICICI and Axis bank constitutes approximately 25% of its Net Worth. Quality difference in the loan book between HDFC bank and ICICI & Axis is clearly visible.
[Note: For example, in the case of Federal Bank, bad assets constitutes 42% of its entire Net Worth].
Debacle of Dhanlaxmi bank is well-known and hence lets exclude it. Except, City Union bank and DCB bank most of them are afflicted with bad loans problem. Barring these exceptions, bad assets constitutes 6-8% of the bank’s loan advances. It will hobble them for a while and higher than usual equity dilution can’t be ruled out.
Key points from long-term investing perspective:
Better not to look at the PSU banks further, except SBI. In addition, probably SBI is the only PSU bank that has strong presence in asset management, insurance and investment banking vertical. Added it to watchlist. Among larger private sector banks, HDFC, Kotak, IndusInd, Yes bank needs to be delved deeply. Although Axis and ICICI bank are hobbled by bad assets, they have excellent retail banking franchise. Added both of them to watchlist – will closely monitor developments on asset quality front. Given the huge potential of financial sector in India, couple of smaller private banks may break out from the pack. DCB and City union bank needs to be analyzed further.
I attached private sector bank’s data excel sheet. Feel free to download and play with the numbers. Let me know if you come across any mistakes or interesting observations [ Note : All the numbers are collected from individual bank’s FY 2015 annual report. I used only standalone numbers for comparable purpose. For Kotak-ING combined, i took FY’15 Kotak bank standalone + FY’15 Kotak Mahindra Prime subsidiary (which does car financing) + FY’14 ING Vysa (FY’15 annual report is not available due to merger)].
Looking forward to your thoughts. Felicidades 🙂
Indian Banks – Parte I.
Traditionally, i avoided financial institutions due to the inherent leverage in its business model. Considering its immense potential for wealth creation, recently i started taking baby steps towards analyzing indian banking sector, its growth drivers, and future potential. In this two-part series, i will document some of the interesting things i learned (Don’t worry, i am not going to bore you with all the financial jargons in analyzing financial stocks 🙂 Rather i would like to pen down some of the ‘aha’ moments during the learning process).
There are 27 public sector (PSU) banks and 20 private sector banks in India. However, majority of the assets and loan advances are controlled by PSU banks.
[Source: FY 2015 Bank Annual reports. Data excludes unlisted banks such as State bank of Hyderabad & State Bank of Patiala (PSUs) and Catholic Syrian bank & RBL (Private banks)]
Understanding bank’s balance sheet is very crucial. Following is the snapshot of Federal bank’s balance sheet.
Liabilities side is dominated by bank’s Net Worth (Share capital + Reserves & Surplus), bank deposits, and market borrowings.
Assets side is dominated by Investments (Treasury operations) and Advances a. k.a loan advances (both corporate and retail loans). Loan advances are further classified into standard assets and non-performing assets (NPA). NPAs are loan accounts that are not paid for 90 days.
Generally bank’s Net Worth is levered (varies with each bank – approximately 8-12 times) with borrowings (bank deposits & market borrowings) to provide loan advances. In the above example, loan advances of Federal Bank is around 6.6 times its Net Worth. In other words, its entire Net Worth will be wiped out if 15% (1/6.6) of its loan advances turn bad assets and becomes not recoverable. Banks are generally valued at multiples of its book value (i. e. Net worth) depending on the bank’s return ratios and management’s capabilities. Before attaching multiples to Net Worth, we need to ascertain ‘true’ Net Worth by quantifying standard assets and bad assets.
Instead of shortlisting good-performing banks, i inverted the process. First, i wanted to eliminate poorly-managed banks that contains lot of bad assets. Because more the bad assets, lesser will the ‘true’ Patrimônio líquido. I considered Net NPA’s and restructured standard assets net of provision as bad assets. I collated each bank’s Net Worth, Gross NPA’s, provisions for NPA’s, Net NPA’s, restructured standard assets (according to me, they are nothing but glorified NPA’s that are ever-greened due to lax attitude of regulator & bankers), provisions for restructured standard assets from its FY 2015 annual report. Lets look at numbers of 24 PSU banks loan advances in two separate sets.
[ Note: I removed SBI from above the chart as its assets are huge and skews the graph. Hard data: Standalone SBI’s Net Worth – 1284 bn and bad assets – 676 bn (Net NPA – 276 bn + Restructured std asset net of provision – 400 bn). But incidentally it has one of the better-managed loan book among PSUs as seen in the charts below. Its bad assets forms 5% of the loan advances only and its Net Worth is approximately twice that of bad assets].
[Note: For example, in the case of SBI, bad assets constitutes 53% of its entire Net Worth].
[ Note 1: For example , UBI’s bad assets is 2x its Net Worth. If it takes a 50% hair cut out of its bad assets (highly unlikely), its entire Net Worth will be wiped off].
[ Note 2 : In my twitter page, i shared my preliminary analysis. Here i inverted the ratio to provide better picture. Also, Numbers here are slightly different due to inadvertant minor error. Restructured loan book contains assets from both standard asset and NPA accounts (Thanks to @deepakshenoy for pointing out). I corrected it and included only restructured assets of standard loan book & Net NPA’s for the calculation of bad assets. I also netted of any provisions against those restructured standard assets. Still the numbers are scary 😮 and doesn’t change broader picture much].
As you can see from the above pictures, loan book of SBI and its associates are relatively (Only relatively . ) better than other PSU banks. Some of the smaller PSU’s like Allahabad bank, Oriental bank of commerce, Punjab & Sind bank, Central bank of India, and Union of India are in dire straits with bad assets/loan advances >15% and its bad assets constitutes 1.75-2x Net Worth.
Equity dilution is principal enemy for the long-term investors in banks. PSU bank stocks are beaten down so much. There could be short-term 30-50% jump depending on developments such as marginal improvement in stressed sectors, extension of leniency by RBI or government package etc. But i am more interested in the long-term wealth creation and being novice in the market, i don’t have the ability to predict on the possible short-term movement. For me, putting finger on the bank’s ‘true’ Net Worth is crucial.
Lets be clear on one thing: None of the bank’s Net Worth is going to ZERO. Either government will re-capitalize or it will merge with relatively better PSU banks. Principal question: What will the hair-cut to the bank’s Net Worth due to the bad assets? According to CRISIL ratings, historically, about 35-40% of the restructured accounts have eventually defaulted. Lets be charitable and factor in 25% haircut.
In addition, bank needs additional capital of 25% to meet Basel-III recommendation and also to meet additional provisioning requirement due to RBI’s change in rules. In total, there is a real probability of approximately 40-50% equity dilution for long term investors.
Based on the above analysis, i eliminated all the PSU banks except SBI. I would re-examine them when all the things like recapitalization settle down. In recent times, i became very skeptical of turn-around stories. Being contrarian is very different from being contrarian & right. Success stories of turn-around stories are filled with survivorship bias. Generally investors who became contrarian early in a turn-around story are not alive to tell their story. My thumb rule for turn-around stories: Have a starter position – Let the management execution & business profitability determine your position size and not your wishful thinking. I would like to stick to this rule even if it means leaving some profits on the table.
In the part-2, i will document some of the interesting things i learned about the private sector banks and technological innovation in banking industry.
I attached data excel sheet. Feel free to download and play with the numbers. Let me know if you come across any mistakes or interesting observations [Note: All the numbers are collected from individual bank’s FY 2015 annual report. I generally don’t attach much to quarterly reports and analyst presentation – lot of things are swept under the mat. 2 Quarters were passed – some of the banks might have raised equity capital, sold bad assets to ARC, or recognized more bad assets – Please keep that caveat in mind].
Looking forward to your thoughts. Felicidades 🙂
Conundrum of Steady-growth Vs Turnaround themes.
Earnings growth is one of the important determinant of wealth creation. Broadly there can be 4 situations that favor occurrence of high earnings growth.
Value migration – Value migrates from outdated business model to new ones. For eg: Value migration in IT and Pharma sectors from western world to low-cost countries; value migration from public sector to private sector banks Sustained industry tailwind – Sectors catering to the growing, aspiring population in India – like FMCG, consumer durables, quick-service restaurants, autos, housing finance, construction related materials like sanitary ware, tiles, electrical goods etc. Here wealth is created by companies that are dominant/market leader (top 3) in the segment or by niche companies with unique business model that created the market segment. Turnaround due to operating leverage – Disproportionate increase in earnings due to one/combination of the following conditions: new large investment getting commissioned, change in business mix, improvement in under-performing business vertical, change in management. Turnaround due to financial leverage – Disproportionate increase in earnings due to one/combination of the following conditions: Sale of non-core assets, Sale of loss-making subsidiary, raising fresh equity to reduce interest cost.
Over the years, Motilal Oswal wealth creation studies have shown that there is higher probability of wealth creation in secular growth themes such as value migration and sustained industry tailwind in Indian context. But most of the time, we investors are more enamored with the turnaround themes than the secular growth stories. Warren Buffett famously quipped in 1979 letter that “Both our operating and investment experience cause us to conclude that turnarounds seldom turn”. Following is edited excerpts from the annual report of Crompton Greaves (one of the company i followed closely in recent years), which is undergoing business re-structuring.
Excerpts from FY 2013 annual report:
“The restructuring exercise started in FY 2012 continues and is part of an on-going process of globalization of CG. Full fledged restructuring for creating a greater and more efficient global footprint takes time. There is no reason why your company’s global management team cannot effect the turnaround in FY 2015, and deliver better results for the shareholders”. “Results include Includes Exceptional items of one time Belgium operations restructuring costs of Rs. 229 crores “.
Excerpts from FY 2014 annual report:
“I am happy to state that your company’s restructuring has started delivering better results. Sales grown by 11.5% and PAT have more than trebled to Rs. 258 crores”. “CG has done better than last year. But it is the beginning of the climb back to the top. We will get there – perhaps faster than we think”.
Excerpts from FY 2015 annual report:
“In my last year’s letter to you, I wrote “that your Company has started delivering better results” and expected “better days ahead”. Regrettably, this has not happened in FY2015. On consolidated basis, Net sales grew by 2.8% and PAT was 20.2% lower”.
“Unfortunately, the overseas business has affected your Company. Revenue from overseas operations decreased by 0.6% to US$ 1,023 million in FY2015. Operating EBIDTA posted a loss of US$ 6 million. And because of some significant one-time charges (170 crores) and additional provisions , losses at the PAT level deteriorated from US$ 40 million last year to US$ 83 million in FY2015″.
Even the management tend to underestimate the time taken to restructure and turnaround business operations. Note the one-time exceptional charges which are recurring :). Over the years i realized that for the turnaround theme to work, lot of moving parts have to align perfectly (except in the case of new large investment getting commissioned) making it a low-medium probability event.
Recently, I came across 13 top picks of analysts for the CY 2016 in Outlook Business magazine. 10 out of 13 analysts (77%) picked turnaround themes. Only 3 out of 13 (23%) chose franchise business which can compound steadily. I classified their investment thesis based on the earnings growth category mentioned above. (Note: Average 3 year ROE > 15% is classified as well-run business and Average 3 year ROE < 15% is classified as poor business. In an ideal scenario, i would have preferred ROCE when compared to ROE to eliminate the impact of debt. Data Source: Moneyworks4me).
3 Year average ROE: 1.4%; FY 15 ROE: -1.12%; Debt to Equity: 2.74.
Investment case: Turnaround due to operating leverage (better realization due to consolidation of competition, volume growth, cost efficiency).
3 Year average ROE: 2.25%; FY 15 ROE: -2.75%; Debt to Equity: 0.44.
Investment case: Turnaround due to operating leverage (New large investment getting commissioned at Daman) and financial leverage (non-core asset sale expected).
3 Year average ROE: 4.7%; FY 15 ROE: 4.94%; Debt to Equity: 1.98.
Investment case: Turnaround due to Operating (better business performance expected in recently diversified business verticals) & Financial leverage (raised equity and better working capital management is targeted).
3 Year average ROE: Negative (loss making in FY 13 and FY 14); FY 15 ROE: 6.78%; Debt to Equity: 40.67.
Investment case: Turnaround due to Operating leverage (higher contribution from enterprise telecom vertical) and financial leverage (debt reduction due to sale of SA subsidiary).
3 Year average ROE: 5.22%; FY 15 ROE: 7.25%; Debt to Equity: 0.02.
Investment case: Turnaround due to change in business mix going forward (Higher contribution of component business expected).
3 Year average ROE: 0.58% (loss making in FY 13 and FY 14); FY 15 ROE: 8.6%; Debt to Equity: 0.08.
Investment case: Turnaround due to operating leverage (better performance expected from women’s clothing brands like westside and JV with Zara, closure of struggling Landmark and stabilization of JV with TESCO in hypermarkets).
3 Year average ROE: 8.54%; FY 15 ROE: 11.88%; Debt to Equity: 0.73.
Investment case: Turnaround due to operating leverage (Change in management – takeover by Godrej group).
FY 15 ROE: 12.49% (Believe no point in looking at 3 year average ROE due to US-FDA ban on plants); Debt to Equity: 0.55.
Investment case: Turnaround due to operating leverage (Better performance from high-margin US export business vertical due to the expected removal of US-FDA ban)
3 Year average ROE: 14.02%; FY 15 ROE: 12.69%; Debt to Equity: 0.06.
Investment case: Turnaround due to operating leverage (Higher order off-take expected from domestic water treatment vertical and turnaround of low-margin International business vertical which faced significant headwinds)
3 Year average ROE: 14.23%; FY 15 ROE: 17.37%; Debt to Equity:0.00.
Investment case: Turnaround due to operating leverage (Higher demand for ACs expected due to impending 7th pay commission and OROP and turnaround in electro-mechanical vertical performance)
FY 15 ROE: 24.36% (listed recently); Debt to Equity: 1.76.
Investment case: Sustained industry tailwind (in inner ware and lounge ware + Valentine brand)
3 Year average ROE: 25.18%; FY 15 ROE: 22.57%; Debt to Equity: 0.00.
Investment case: Sustained industry tailwind (in footwear market + Good brands)
3 Year average ROE: 26%; ROE: 18.57%; Debt to Equity: 0.00.
Investment case: Sustained industry tailwind (in QSR segment + Dominos & Dunkin Donuts brand tie-ups)
Following are the reasons i believe investors tend to choose turnaround themes over steady compounding machine. Consider following scenarios mentioned in most investment thesis in the magazine:
Scenario 1: This turnaround candidate will double in 3 years.
Scenario 2: This franchise business will compound steadily over time.
Framing effect: Scenario 1 is far more exciting than the scenario 2 Illusory of control: People tend to choose ‘certainty’ in the CAGR returns of turnaround candidates (mostly people say that it will double in a specific time frame) over ‘uncertainty’ in the returns of steady compounders (mostly people will refrain from giving number) Most investors including experts fail to see steady compounders as small incremental changes tend to go unnoticed (Charlie Munger called this phenomenon as “boiling frog syndrome“).
I am not advocating that we should abandon turnaround stories and load up on steady-growth themes. Both of them has a place in the investor’s portfolio. Well-judged turnaround story even in a commodity business will work wonders.
My learning: We need to be aware of the base rate of success in the category and tilt our portfolio towards higher probability events. Because hope is not a strategy 🙂
Looking forward to your comments.
Vicarious Learning.
Warm welcome to all. Following tweet from Rahul Bhangadia set my thoughts in motion:
Charlie Munger famously quipped, “Just tell me where I’m going to die, so that I won’t go there.” What he’s really saying is, tell me how and why an investment approach fails, and I will learn how to improve upon it. I strongly believe that avoiding stupidity in investment process will yield long-term above-average results. I was really intrigued how 25% ROCE biz went belly up in few years time. Along with Hunang toys, I wanted to study some of the yesteryear market darlings that fell dramatically. Following is the list I could come up with: Arshiya Intl, Hunang toys and textiles, OnMobile global, Deccan Chronicle, Praj Industries, Blue Star, Opto circuits, Suzlon energy, Educomp. Broadly they fell into 3 different baskets: Outright poor business, Qualify as contrarian bets but quite opposite in hindsight and Apparently sound business but duds in hindsight. I wanted to learn some common themes which runs through these business so that i can try to avoid in my investment journey.
General financial parameters long-term investors look for soundness of the business are:
Net sales growth (12-15%) Net profit growth (12-15%) Decent net profit margin (7-10%) Net Operating cash flow Consistent ROIC that exceeds cost of capital (12-15%) Debt to equity (< 0.5)
Arshiya International – Very poor ROIC, Negative operating cash flow and rising debt.
Hanung toys & textiles – Erratic operating cash flow and very high debt.
OnMobile Global – Very erratic and declining ROIC.
Above companies are quite easy to skip as they don’t muster even the basic smell test for a sound business.
II. Qualify as contrarian bets but quite opposite in hindsight:
Companies in this basket are quite tricky. Value investors often take pride in telling the whole world how wrong they are by making contrarian investments in companies met with temporary setbacks. But making contrarian bets just for the sake of being contrarian would be quite counterproductive. In order to avoid pitfalls, value investors need to trend cautiously.
10 Year Snapshot.
Company has great brand in consumer facing air conditioner market and all the financial parameters are picture perfect till FY’09. Stagnant sales and net profit in FY’10 can be dismissed as temporary blip. Quick search in internet would have yielded this blog post (written in 2006) from famed value investor Rohit chauhan. But the investment would have ended disastrous with price plunging from 450 to 150.
Blue Star – Price chart.
Only parameter that might have saved us in the 10-year financial snapshot is deteriorating working capital days (keep this parameter in mind) starting FY’10. Rohit chauhan rightly pointed out deteriorating account receivables and inventory position.
Deccan Chronicle and Holdings:
10 Year Snapshot.
Until FY’08, Deccan chronicle had higher debt and erratic operating cash flows. With rapid reduction in debt and stabilizing operating cash flows, FY’09 annual report might have painted that the company is turning around the corner and better days are ahead. But the results would be equally disastrous.
Only parameter that might have saved us is consistently high working capital days of the company. I remember equity master got burned on its recommendation of Deccan chronicle.
Praj Industries – 10 Year Snapshot.
It was an emerging player in ethanol space and Rakesh Jhunjhunwala had substantial stake in it. Till FY’09 it was sound in almost all the financial parameters. Drop in net sales and profit in FY’10 can be dismissed as minor blip. But the following 3 years turned out to be like this:
Actually market hold up until Jan 2012, but deteriorating working capital days combined with falling ROIC and net profits should have served as better indicator to dump the stock.
Therefore, before donning contrarian cap, we should check working capital days (with cutoff <175-200) of the company to ascertain soundness of the business. Simply put, Working capital days is the number of days that a company will take to convert its working capital into revenue. Working capital is a common measure of a company’s liquidity, efficiency and overall health. Please check out this video:
III Apparently sound business but duds in hindsight:
Sure deteriorating working capital day’s parameter can save us from making dud contrarian bets. But what about companies with good all-round financial parameters in sunrise sectors? Will this parameter be helpful to distinguish wheat from chaff? It seems “ yes” when we look at following images.
10 Year Snapshot – Great on all 6 parameters until FY’08.
10 Year snapshot – Great on all 6 parameters until FY’11.
10 Year Snapshot – Great on all 6 parameters until FY’11.
I am pretty sure that all of us know how investors fared by investing in above companies. All the three companies continued to excel in most of the financial parameters until the disastrous financial year that showed massive drop in profits. Check out the consistently high working capital days in all of them, which can serve as big and only red flag against investment in these companies.
As Charlie Munger advises, lets invert the problem. Will dramatic improvement in working capital days along with other financial parameter point to better investment candidate? Lets look at Avanti feeds – see the dramatic improvement in working capital days in the past 3 years along with other financial parameters.
Avanti feeds – 10 Year Snapshot – Note the working capital days turnaround in Fy’10 and its further improvement over the years.
It is same story in Atul Auto, Astral Poly, Symphony etc.
Before using this indicator indiscriminately, we also have to look at exception. I observed pharmaceutical industry as a whole has long working capital days. It might be due to the inherent nature of business, which has long gestation period between the investment of manufacturing plant and cash generation. Hence we should always compare the company with industry leaders. Following is the snapshot of leaders in pharmaceutical industry:
Sun pharma – 10 Year Snapshot – Working capital days hovers >200.
Dr. Reddy’s – 10 Year Snapshot – Note the consistent high working capital days.
In conclusion, I believe working capital days parameter is one of the important indicator to judge the soundness of the company and hence it should be added to the investor’s checklist. Specially it would be very useful in small caps and midcaps space where we would overlook company’s fundamental in our zeal to find next multi bagger. Along the way I am sure we may commit some mistakes of omission but not mistakes of commission which is a bigger danger any investor need to avoid.

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Design of regional and sustainable bio-based networks for electricity generation using a multi-objective MILP approach.
Biomass energy systems can be employed to meet the requirements of distributed energy systems in rural as well as urban contexts, whether this is an electrification or a microgeneration project. This work is focused on a mathematical programming approach applied to bio-based supply chains that use locally available biomass at or near the point of use in order to produce electricity or other bioproduct. The problem of designing and planning a regional biomass supply chain is formulated as a MO-MILP (multi-objective mixed integer linear program), which takes into account three main objectives: economic, environmental and social criteria. The model supports decision-making about location and capacity of technologies, connectivity between the supply entities, biomass storage periods, matter transportation and biomass utilisation. The advantages of this approach are highlighted by solving a case study of a specific district in Ghana. The aim is to determine the most suitable biomass and electricity network among the different communities. The technology considered to transform the biomass into electricity is gasification combined with a gas engine.
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