India: Farewell

 

Ryan Hessenthaler at the Taj Mahal

As I wrap up my time in India, I leave this fascinating country with a sense of awe.  You can’t travel the streets of Delhi or Agra without feeling the overwhelming pulse of humanity.  If I were to describe my experience in India in just one word, that word would be “relentless.”

In my experience, Delhi is a city that never really takes a breath and pauses – the pace and constant activity is relentless.  The poverty and desperation of so many in India is heartbreaking and relentless.  The heat and stifling humidity is relentless.  The sheer magnitude of humans crowding every square foot of space is relentless.  The challenges with insufficient or non-existent infrastructure is relentless.  The traffic and horns are relentless.  The entrepreneurial spirit and desire to make a deal is relentless.  The enthusiasm and hope for the future is wide-spread and truly amazing… and it’s relentless.  Those people who I spoke with in India truly believe that despite their many, many challenges, they are on the path to a better life.  The optimism I witnessed was relentless.

I had occasion to use several taxis to travel around Delhi.  With taxis “sharing” (generous description) the roads with tuk-tuks, rickshaws, horse-drawn carts, motor-scooters, and every other type of wheeled conveyance imaginable, simply traveling around Delhi is an absolutely fascinating (albeit harrowing) experience.  I’m always eager to hear a diversity of view-points… and cab drivers are often more than willing to share them.

After a particularly close call when pushing through what some might describe as an intersection, the driver smiled and said, “You need three things to survive Delhi roads: 1) good brakes, 2) a good horn, and 3) good luck.”  I found this advice compelling and thought about how such advice applies to the investment environment.

A summary of the investment analogy that comes to mind includes: 1) “Good brakes” represent an effective risk management strategy.  2) A “good horn” (and the turns and course corrections they always announce) represent an adaptive, tactical approach.  3) “Good luck”… we’re all eager for good fortune to smile on us, but it’s unpredictable.  In addition to luck, we use a repeatable, objective, rules-based approach with the goal of long-term investment success.

Fundamental to our investment DNA at Lunt Capital is a constant awareness of risk.  We try to build strategies that are “risk-aware.”  Described another way, our strategies are designed to have the ability to “brake” (or reduce risk) when appropriate.  Of course, our variety of strategies range from conservative to aggressive, but many of the strategies can rotate to cash or cash-like instruments when market volatility increases.  This action of rotating from higher risk positions to lower risk positions is analogous to “portfolio brakes.”

Swaminarayan Akshardham

Another critical feature we try to design into Lunt Capital’s strategies is the ability to adapt to ever-changing market environments.  Drivers in Delhi are constantly hitting their horns to navigate an ever-changing flow of traffic.  Motor-scooters and tuk-tuks fill in every conceivable gap in traffic and are constantly shuffling into that next tiny bit of space.  Cars are coming and going in every direction… and the only way drivers can effectively communicate how they’re adapting is through their horns.

From a portfolio management perspective, Lunt Capital is constantly adapting to the ever-changing market environment.  We aren’t great at predicting where certain markets, sectors, or asset classes will go just as drivers may find it challenging to predict where any given car on the road may be going.  Instead, our “horn” is the responsibility we take to constantly monitor the markets and adapt our portfolios as necessary.  That doesn’t mean that our strategies are devoid of risk or that the investment ride will always be glassy smooth.  Rather, we have a long-term perspective on where we want to go and we use our adaptive strategies to navigate the path along the way.

And finally, the idea of good luck.  Who doesn’t love it when good fortune shines on them for fleeting moments?  We’ve all heard about “the guy” who decided to quit his 9 to 5 job, mortgaged his house, opened an online account, and had an unbelievable stretch of good luck.  He made 20x or 50x or 100x on his investments (the magnitude of the luck depends on who’s telling the story and/or how many times it’s been passed along to the next recipient).

These stories of outstanding investing good luck come up at every summer barbeque with the neighbors or dinner with the extended family.  I’ve heard dozens of such stories in the last decade.  And while I want to believe them, I’m a little skeptical of everyone around me somehow hitting the jackpot by trading stock tips.

Ryan Hessenthaler at the India Gate

Since luck is unpredictable and fleeting, it’s difficult to find long-term investment success by relying on luck.  Instead, Lunt Capital uses objective, rules-based, repeatable processes to navigate the markets.  It’s not nearly as sexy as the amazing “good luck” story that my neighbor is quick to share about his overnight success in the markets, but “luck” is not an investment strategy.

Beyond the wisdom gained from taxi drivers, I had conversations with shop keepers, guides, students, and police.  I learned something a little different from every conversation… but the consistent theme underlying everything we discussed was the hope and belief that India is making a fundamental shift in the way they function as a country and as a culture.  Prime Minister Modi’s reforms are lofty visions and goals that, if realized, will help transform India’s position in the global economy.  To read a recap of a recent address to the nation from Modi, click here:

http://blink.htcsense.com/web/articleweb.aspx?regionid=4&articleid=46462542

The challenges in India are daunting and the opportunities are overwhelming.  I suspect (and it’s my sincere hope) that the relentless drive and desire to live a better life will propel India forward to new heights.