Ace value investor Sampat sees coming of economic storm

Ace value investor Sampat sees coming of economic storm [July 2013]

• Sampat belongs to the camp of economists and market participants who believe that easy money policies of central banks and unbridled consumerism has set the stage for increased social and financial turmoil in the days ahead.
• "But the printed money is not really the source of growth; it is the earth with its resources that makes economic growth possible. And those limited resources are fast being depleted. It is time to be responsible," cautioned Sampat.
• "The trillions of dollars gushing across the globe are not seeking value; they are merely chasing yields," says Sampat. "An increase in US Treasury (government bonds) yields from 1.3% to 2.5% has triggered a collapse in many markets as funds moved out to the US. Just imagine what would happen if the yields were to rise to 4-5%. There would be chaos in India. The RBI would just be helpess. It is not fundamentals, but behavioural forces at play, and no central bank can fight that," he says.
• "Rising population in itself is not the main problem; it is the elevated expectations of the new population that is worrying. The consumption is nowhere near what it was in the previous century. Today the expectation of an average US citizen is one home and two cars. And that trend has penetrated other parts of the world as well, including India. Simply put, to fulfill the expectations of this 7.5 billion people, we would need the resources equal to five earths," he says.
• "In theory, growing at a compounded rate of 8 or 9 percent year after year sounds like a great thing. But what nobody asks is whether the earth has enough resources to support such a growth rate on a sustained basis, and what that will do to currency and inflation" he says.
• "If you look at the trajectory of inflation over the last 50 years, prices have gone up 100 times. This rate of inflation, brought out by endless printing of money, is clearly unsustainable. If this is not controlled, high inflation will eventually lead to the demise of capitalism," he says.