What did we say last year? We remember our visit to India. And we remember commenting on the Indian stock market – when the Sensex Index was under 15,000. We hope we said it was going up…because that’s what it did. The Sensex Index touched 20,000 last week – a new record high.
We met with a group of a dozen analysts. All but two or three thought next year would be another growth year for Indian stocks .
Looking in the paper or out the window, we find the growth story everywhere:
New apartment buildings are going up all over the place. Automobiles fill up the roads. Salaries are rising. And GDP growth is over 9% per year; only China is growing faster.
“India is a great story ,” said a colleague yesterday. “The economy is growing very rapidly. Of course, if you spend a few more days here you will begin to wonder how it grows at all. Nothing works quite as it is supposed to, so we spend a lot of time trying to cope with everyday inconveniences. But the basic story is very solid. The economy is growing in spite of the government. And it’s growing fast. And now we have the ingredients for growth – we have money, skills, people…this growth story should continue, unless the government finds a way to stop it.
“You know, those terrorists who were responsible for 9/11 did their basic training here. They broke into our congress many years ago. They were going to kill as many of our politicians as they could. Instead, they botched the job. But the funny thing was the most ordinary people were disappointed that they didn’t succeed!
“But since they abandoned the worst of the Stalin-era regulations…and the Soviet-style central planning…Indians have been allowed to make money again. And that’s what they are doing…”
We visited the analysts on Saturday morning. In the United States or Europe, it would have been hard to get together a group of financial professionals on Saturday. But the Indians are still hungry…
On TV, a man was breaking up watermelons with his head. The show was in a local language, but he seemed to be aiming at a record. He head- butted one big watermelon after another, taking barely two seconds on each one. Then, when he had smashed a couple of dozen of them, he ran out of steam. His head went down…and bounced back up. He tried a second time…and a third time…and finally gave up; he was out of steam.
The streets of Mumbai are crowded – unbelievably crowded. Crowded with locals…and crowded with Chinese and Japanese businessmen, doing deals.
“When I was growing up – in the ’70s – Bombay was a paradise. Or, at least it seemed like it to me. There were only 2 million people. Now, there are 11 million – in exactly the same space. Bombay is a narrow peninsula…so there’s no room to expand. They’ve built up the open areas…giving away the land to people with political connections. And now, the price of space in Bombay is as high as Manhattan. It takes a little while for the builders to catch up…but they’re building millions of square feet of new living space, so prices are sure to collapse. They do every 10 years or so.
“If there is one thing you can count on it is that developers, bankers and farmers will over-do it. They all go bust every 10 years or so.”
What is hurting the banking industry now is subprime lending – that is, passing out money to subprime mortgage borrowers, subprime corporate borrowers and subprime speculators.
But don’t worry. We live in an age of Zoo Capitalism…and the keepers are supposed to make sure the animals don’t get hurt.
The Daily Reckoning Australia