September 26, 2023

Episode #499: Kevin Carter, EMQQ International – India is Occurring NOW

Visitor: Kevin Carter is the Founder & Chief Funding Officer of EMQQ International. Whereas he principally considers himself an energetic “worth” investor, he has collaborated with Princeton economist and indexing legend, Dr. Burton G. Malkiel, for greater than 20 years.

Date Recorded: 8/30/2023     |     Run-Time: 55:41

Abstract: In right now’s episode, Kevin kilos the desk for India’s tech sector. He covers the demographic tendencies, The India Stack, the distinction from China 15 years in the past and the present valuations. He additionally explains why environmental dangers are one thing to keep watch over in India.

Take heed to Kevin’s Kevin’s first look on the podcast.

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Hyperlinks from the Episode:

  • 1:13 – Welcome again Kevin to the present; Episode #187: Kevin Carter,
  • 1:35 – Classes discovered from playing
  • 4:18 – Rising markets and points with the MSCI index
  • 13:52 – The demographic shifts fueling India’s booming digital financial system INQQ ETF
  • 18:01 – India’s tech stack
  • 22:17 – API-driven digital infrastructure for a paperless, cashless, and presence-less society; India Stack; UPI; GEO; ONDC;
  • 33:00 – India’s digital platform sparks each optimism & privateness considerations
  • 37:32 – Rising markets funding alternatives and challenges
  • 44:15 – Global CAPE ratios from Barclays
  • 45:03 – Reflecting on experiences in South Asia
  • 49:16 – Shantaram by Gregory David Roberts; The White Tiger by Aravind Adiga;
  • 49:39 – India’s potential dangers
  • Be taught extra about Kevin: EMQQ Global; LinkedIn



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Meb Faber is the Co-Founder and Chief Funding Officer at Cambria Funding Administration. As a consequence of trade laws, he is not going to focus on any of Cambria’s funds on this podcast. All opinions expressed by podcast contributors are solely their very own opinions and don’t mirror the opinion of Cambria Funding Administration or its associates. For extra info, go to


What’s up, everyone? We bought an excellent enjoyable present right now. We’re crossing some borders with our returning visitor, Kevin Carter, Founder and CIO of EMQQ International. In right now’s episode, Kevin kilos the desk for India’s tech sector. He covers the demographic tendencies, the India tech stack, comparisons to China 15 years in the past within the present Indian inventory valuations. He additionally explains why environmental dangers are one thing to keep watch over in India. Take a look at the hyperlink within the present notes for Kevin’s first look on the present, which is a good pay attention earlier than this episode. Please take pleasure in this episode with Kevin Carter.

Kevin, my good friend. Welcome again to the present.


Thanks, Meb. Good to be again.


The place do we discover you right now?


I’m in Lafayette, California, 15 miles east of San Francisco.


Certainly one of our mutual favourite locations on the planet, Lake Tahoe. When’s your subsequent journey up there, man?


I’ll be going up this weekend.


Final time we talked to you and, listeners, I’d truly extremely advocate to take heed to the primary episode with Kevin as a result of we go into his background, which is fairly fascinating. We speak lots about China and it’s a fairly good half one to this episode. So we’ll put it within the present word hyperlinks, possibly we’ll publish it within the feed once more simply to have each there. We’re going to hit on a distinct subject right now, however within the meantime, we had one in all your companions and mentors over the 12 months on the podcast, Burton Malkiel, who listeners will definitely know that title. We had been joking as a result of we stated, “Burton, give us a bit of one thing to ask Kevin on the present,” and he says, “Do you know once we had been touring across the rising markets, Kevin’s a little bit of a card participant.” So I all the time say, what does that imply? Is that Bridge, Blackjack? Are you a craps gambler? What’s the story? You simply doing your personal due diligence in Macau?


That’s humorous. I’ve been to Macau. It’s onerous to discover a Blackjack desk at Macau and Blackjack’s the sport I prefer to play, however Burton and I, Burton likes Blackjack and he performs by the principles. He’s bought his guidelines. I don’t know when you requested him for his guidelines, however he’ll give him to you. I can’t keep in mind what they’re precisely. I don’t play by these guidelines. I play a bit of bit extra by intestine with some math as properly, however sure, we’re in Australia collectively for some displays about China and we performed on the Star On line casino in Sydney is the place Burton taught me his guidelines of Blackjack. I feel we each walked out with the identical sum of money, however mine was a bit of bit extra risky.


I feel each younger individual goes via a second in time the place there’s this attraction to this idea of the Martin Gale, and really shortly you study lots about guess sizing as a gambler, whereby, listeners, when you don’t know the Martin Gale, it’s primarily you double down each time you lose. Theoretically, in case you have an infinite bankroll, you’ll by no means lose as a result of finally you’ll win. The issue comes, you study a really fast lesson and the facility of exponentials as a result of in a short time when you lose 5 10 in a row, the guess measurement will get greater than any bankroll anybody will ever have, however assume that’s a enjoyable lesson. Playing, so long as you don’t go broke and even then it may be an excellent lesson. There’s so many good classes in fascinated about place sizing and learn how to play and odds.


That’s proper. Much like brief promoting, the place you may have 100% upside and limitless draw back and your guess will get greater because it goes, not like a protracted place which will get smaller, it will get greater.


Certainly one of my all-time early favourite podcast visitors was the godfather of Blackjack card counting, Ed Thorpe. Additionally probably the greatest performing hedge fund managers of all time, who the unique beat the vendor and beat the market books. Listeners, you’ll be able to go discover an outdated copy. They’re definitely classics. Nicely, let’s discuss rising markets. Like many cycles, this cycle feels, like within the inventory markets, they’re persevering with to emerge. I feel as a proportion of world market cap, we’re within the low teenagers, however once I talked to advisors over the previous variety of years, and Goldman has give you some stats on this, I feel the common allocation sits down round 2% or 3% as a proportion of their inventory portfolio. So massive underweight. Speak to me a bit of bit about the way you see them broadly after which we’ll begin to dial in additional particularly to at least one nation specifically.


I inform folks there’s actually two issues to find out about investing within the rising markets. The primary is that the factor that’s rising are the folks. You’ve bought six and a half billion folks they usually’re shifting up. They’re rising they usually need stuff. They need extra and higher meals, extra and higher clothes. They need home equipment. They need to go to films and take holidays they usually need a automobile, they usually need their youngsters to go to Harvard, and that’s a very powerful factor, and that’s a really lengthy one-directional secular pattern that has been very well-documented. So when you’re investing in rising markets, it’s my perception that that’s what you ought to be making an attempt to seize.

The second factor about rising markets is that there’s an enormous downside, and the issue is the index itself. The MSCI index, which we use to trace the efficiency of rising markets, has loads of issues. The primary and largest downside, which I encountered my first 5 minutes into being a part of rising markets 18 years in the past, is that the rising markets have loads of these government-owned banks and oil firm, these state-owned enterprises which are inefficient, they’ve conflicts of curiosity with you as an investor, and the governance isn’t superb, and the corruption is in all places.

So what you discover, and I bought pulled into China 18 years in the past, due to Burton, the very first thing I did was I requested for an inventory of all the businesses within the China ETF as a result of we had these buyers that had been interested by investing in China after listening to Burton discuss China. I assumed we might use the ETF that iShares had. There was just one China ETF again then. It was the FXI, however since I’m an Omaha individual, I wished to see what had been the businesses. I don’t care concerning the title of the ETF, I need to know what are the companies we’re going to personal.

So I requested for that checklist and that’s when Burton pulled me apart and defined to me that 80% of the index was government-owned banks and oil firms and the way the government-owned banks would make loans to firms that had been already bankrupt, mainly, to maintain the workers paid. In order that’s an enormous downside and I don’t have an answer for it. Loads of buyers have given up on rising markets they usually have very small allocations as a result of they’ve had loads of promise for a very long time, however nobody’s actually bought any actual return from investing there.

In truth, I feel the 12 or 13 12 months return is about 25%. I do know that for the ten years ended with 2022, the earnings progress was unfavorable. So in Omaha, investing is de facto easy. The explanation companies have worth is as a result of they make income for the house owners. The one strategy to make the worth go up is to make the income go up, and that hasn’t occurred within the conventional indexes, that are, once more, filled with banks and oil firms and mineral firms which are state-owned and probably not for-profit in a conventional sense.


We spend loads of time in all probability manner an excessive amount of for this to be wholesome and useful to our obtain statistics, however we spend loads of time speaking about market cap investing and the way it’s an fascinating and good first step, and it enabled some issues within the ’70s, however so far as an investing methodology can grow to be fairly suboptimal given some situations, notably instances when issues go completely bananas.

The fascinating half that I really feel like is among the greatest dislocations for me when speaking about rising markets as a result of I really like my polls on Twitter, and we’ll ask folks what proportion of world GDP is rising markets, and virtually everybody says zero to twenty%, 20% to 40%. We each know that that’s completely unsuitable. Rising markets find yourself being most of world GDP, which surprises so many individuals. Then trying on all the varied statistics, like once we had been speaking about Macau earlier and also you Google Macau On line casino annual income and Vegas annual income, in a short time folks could be shocked that Macau is multiples of Las Vegas already. So simply the size of rising markets is de facto staggering, notably for most individuals who’ve by no means completed any touring, which is, after all, many, if not most.

So that you and I sat all the way down to dinner and looking back, we in all probability ought to have gone to an Indian restaurant. There’s some good ones round right here versus the one we went to, which was good, however you had been very excited and animated, which is your pure state, however give me the lead in. What was the preliminary attractant to what you see as a reasonably large alternative right here?


Nicely, 9 years in the past, first recognized was the truth that all of these billions of shoppers in rising markets we’re going to get their first ever laptop in type of an Android-based smartphone, and that when that they had these pocket-sized supercomputers, they had been going to get on the web, and that as a result of they didn’t have financial institution accounts they usually didn’t have cars and there was no goal shops, that they’d leapfrog and grow to be digital shoppers, and since we’ve had such an evolutionary expertise with info and with know-how, we don’t understand that not everyone else on this planet has traveled that path as now we have.

So swiftly, what I used to be seeing was that each one of those billions of shoppers had been going surfing and getting their first checking account, nevertheless it wasn’t a conventional checking account. It was a smartphone-based place to maintain your cash and make funds. Once more, I first noticed that in China. That began occurring in China. As it’s possible you’ll know, I launched numerous China ETFs with Guggenheim, however we launched a China know-how ETF, CQQQ, in all probability 13 years in the past to seize that story, the net shopper.

Then I noticed that it was evolving and it wasn’t simply China, it was Mercado Libre, which went public out of South America. That was the of Brazil and Mexico. Now, what we see is that since this story began in China, China’s e-commerce market, it’s the most important on this planet by far. So China is an rising market in a conventional sense, however when it comes to the digitization story and e-commerce, China’s essentially the most developed nation on this planet by far.

So what we began to see was that whereas there’s the opposite 45 rising markets, they’re mainly the place China was 15 years in the past. So if you concentrate on shoppers and the web and private computer systems, that mainly began in the US within the 12 months 2000. When may you actually have a pc at your home, get on the web and do some enterprise on the web? That mainly began within the 12 months 2000, and we noticed this 15-year S-curve because the FANG shares took over our lives and our inventory market.

The China wave, the second wave was mainly proper behind us, 2005 to 2020, Alibaba and Tencent main the way in which, and now what’s coming is the third wave, and that is the opposite 5 and a half billion folks that aren’t in China, and India is the most important a part of the story and South Asia, when you embody Pakistan and Bangladesh to the west and east, that is virtually two billion folks and about 850 million Gen Z. So that is essentially the most fertile floor for this story going ahead.

India stands alone in my thoughts proper no longer solely as the most important alternative in rising markets, however possibly the perfect alternative in rising markets when it comes to a single nation that we’ve seen, and it’s due to numerous causes which have simply lined up they usually’re lined up at a time when now you can get a $12 smartphone model new in India. After I noticed you for dinner just a few months in the past, I’d inform you you can get a $50 smartphone model new in India. That is an Android-based smartphone, however simply seven weeks in the past, Reliance Jio launched a $12 smartphone, a $12 supercomputer. So whereas China after they bought on-line, they had been on PCs they usually, like us, migrated onto the smartphone, properly, these persons are skipping the PC altogether and the India story is simply extremely compelling.


Let’s dig in. So you may have the plain demographic. I really feel like most buyers can recognize that. You simply talked about there’s multiples extra Gen Z than there are Individuals in whole, simply the size of the quantity of individuals, the density. I’ve by no means been to India. I actually need to go, so you’ll be able to assist be my tour information, however inform me a bit of bit about what the macro image. Stroll down what took you from, “Okay. That is curious and fascinating,” to, “Okay. That is truly actually fascinating.”


Meb, three years in the past, we solely had one half of 1% of EMQQ inside India, and we solely had three publicly traded firms, however what I noticed was that there was dozens of unicorns that had been lined as much as IPO. So I’d initially deliberate to go to India within the spring of 2020, however then the COVID got here and I used to be unable to go, however the IPOs occurred. There have been 23 Indian web IPOs within the first 18 months of the COVID, however all of them went public in India, in order that they didn’t get a lot protection right here. What was given me unimaginable quantity of conviction is the final 9 months. I’ve mainly devoted the entire final 9 months to a deep, deep dive into all issues India, together with the web alternative there, the digital alternative that now we have tapped into. As , we launched INQQ, the India-only product final 12 months as quickly as there was sufficient firms. So as soon as there was over 20 firms sufficient to make a diversified portfolio is once we registered and launched.

So the story for India, which, by the way in which, this isn’t a secret. Nearly each main funding agency has some report outlining the bullish a part of the India story, however there’s mainly eight bullet factors. First, it’s now the most important nation on this planet. It handed China in April in keeping with World Financial institution, so 1.4 billion folks in India. In case you take a look at the chart because it goes out, it’s going to get greater and greater than China as a result of it’s younger. It has the youngest financial system, a significant financial system. They’re about 11 and a half years youthful on common than China. So that you’ve bought 600 million folks which are simply moving into their early a part of their prime. You may have the quickest rising main financial system. Most of that progress is coming in a swelling center class that can the truth is move China and have extra consumption inside a decade by most estimates, and also you’ve bought the quickest rising e-commerce market. India’s rising just a bit quicker than Brazil, about 28% a 12 months.

Lastly, and that is the half that I didn’t recognize fully till lately, India has a authorities that’s a democracy, which lots of people favor, and it’s a democracy that’s led by a authorities that has mainly gone all in on digitization. Modi, who’s been the chief for the final decade, his complete platform is Digital India. So I knew that that they had completed numerous initiatives to assist the digitization of the nation, however I had no thought how well-developed these programs and this digital public infrastructure had grow to be, which is an summary factor, which I hope we go into intimately. So you may have all these basic items, massive, younger, simply the guidelines, and it’s onerous to, with phrases or footage or numbers, to elucidate the size of this chance, the sheer variety of people, the density.


Nicely, you may have an precise fairly good chart and among the stats we’ve talked about earlier I feel hit residence, however you may have an excellent chart that we’ll put within the present notes on Bangladesh, however you stated the scale of Bangladesh after which if half of the US moved to Illinois is the inhabitants of Bangladesh, which simply places it in perspective, the density.


No, it’s staggering. There’s 170 million folks and it’s the scale of Illinois. Additionally, a 3rd of its all the time flooded. So it’s mainly two-thirds the scale of Illinois. You’d should take the third via ninth largest nations and mix them to get to the scale of India. It’s very, very younger, it’s very dense, and it’s fairly chaotic. In contrast to China, which is homogenous, 95% Han Chinese language, India has bought 1600 completely different languages and 24 of them the federal government publishes each doc in. So there’s 1,580 languages that aren’t even acknowledged formally. So it’s extremely various and it’s very dense.

The opposite factor that India has going ahead now is also infrastructure. After I bought concerned with China 18 years in the past, it was mainly tied with India. It was a bit of bit forward of India when it comes to its GDP per capita, however not very far, however what you can see was China had begun this huge infrastructure funding to construct the world’s finest infrastructure, high-speed rail, airports, highways, high-speed trains, and seaports to load up the manufactured merchandise and get them on a ship.

Whereas they had been doing this, India was mired in forms and mainly sat on its palms and didn’t actually spend money on its infrastructure, and China blasted forward and mainly quadrupled the scale of their financial system. Plus in that interval, properly, India didn’t actually get shifting and the forms that the British left India or I feel largely responsible.

Nicely, proper now, Modi is the chief of India, and he’s been the chief for the final 10 years. So he’s ending up his second five-year time period. He’ll virtually definitely get one other five-year time period after they vote subsequent 12 months and a fourth time period if he needs it. There’s no time period limits. He’s liked. He’s bought an 80% approval ranking. Not everybody likes him, however the overwhelming majority do, and he has bought the federal government organized and environment friendly and really business-like, and that features the infrastructure investments. So the entire infrastructure numbers have exploded below Modi within the final 10 years. They’re presently in the midst of a trillion and a half greenback complete infrastructure plan that includes modernizing the gorgeous in depth rail community they’ve, electrifying it, including tons of of latest stations, modernizing the stations. They’re constructing their very own high-speed trains now. They’ll ship 400 of these trains within the subsequent a number of years connecting the cities, clearly, with the excessive pace rail.

The Indian air journey market’s going to blow up. That’s one of many early luxurious spends of individuals as they transfer up the buyer ladder, they need to go see the websites of their very own nation. So the home air journey market will explode in India. It’s already exploding. The airports are going to triple by the top of 2025. So all components of the infrastructure now are catching up. Again 17, 18 years in the past, that they had issues with the facility grid to the factories they usually had brownouts and so forth. They fastened most of that they usually’re making massive investments.

Now, loads of this has to do with this China plus one technique, looking for different provide chains and different suppliers so everybody’s not completely depending on China, and that’s in all probability a sensible factor to need to do anyhow, however the actuality is China’s bought the perfect infrastructure they usually’re capable of make the perfect merchandise, get them on a ship higher than anyone, and it’s the port capability that’s going to be a bottleneck as a result of China’s port capability is 10 instances India’s, and it apparently takes a very long time to construct a port.

So that you’ll see manufacturing jobs go to India. Apple’s going to make 1 / 4 of their iPhones, the newest iPhones, by the top of 2025 by estimates. So the infrastructure is lastly there they usually’re actually taking it significantly and it exhibits, and it does feel and look like Shanghai and China did once I first went there 17 years in the past.

Now, right here’s the third a part of this setup that India has, and that is the half that I alluded to earlier that’s it’s distinctive on this planet, no different nation developed or rising has this, and it’s what they name the digital public infrastructure or the India Stack. Many of the parts of this digital public infrastructure whereas summary to me, I knew what they had been, however I didn’t fairly recognize how that they had advanced and developed. It began in 2009 when the Indian authorities had determined it was lastly time to create a nationwide identification card so that everyone within the nation would have a novel 12-digit quantity on a card given formally from the federal government as a result of one of many issues they had been having with growing was that no person had identification. Only a few folks had driver’s licenses or passports or any type of official authorities identification. As you’ll be able to think about, it’s onerous to develop your financial system the place no person can show who they’re.

They requested the chairman of Infosys, Nandan Nilekani, if he could be in cost. Mr. Nilekani stated, “Look, I’ll be accountable for this, but when we’re going to do that, I’m going to make use of loads of know-how as a result of,” as he stated, “I didn’t see as a lot know-how as I’d’ve anticipated once I helped the folks in Bangalore, and now if I’m going to do that, we’re not solely going to make use of the perfect know-how of right now, however we’re going to look to the longer term, and never solely will we give everyone a card, everyone may even have their 12-digit quantity linked to their eyeball scan and fingerprints.” So each quantity has a human being tied to it, biometric knowledge.

Now, after they launched it in 2010, it was completely voluntary. You didn’t have to enroll. So I knew about this program. I had the emblem in my presentation. It’s the nationwide identification quantity. That’s going to be good for the financial system, however I didn’t fairly comply with its growth. Then about three years later, they put one other layer onto the stack. So the Basis Aadhaar, then they put a KYC, know your buyer, layer on prime. With this program, they began initiatives in order that you can go into any financial institution. In case you had been within the Aadhaar system, you can stroll right into a financial institution and open a checking account in three minutes with no paperwork simply by placing your fingers on a pad and looking out into the digicam.

In 2016, they launched this different initiative, the Unified Funds Interface or UPI. Once more, this bought loads of protection. It was a part of Digital India. I put the emblem in my presentation about India, however I didn’t actually comply with the event, however the headline of the UPI was that it could permit instantaneous, fully free switch of cash from any individual to every other individual or enterprise, no delay, no friction. I may ship you $10, you can ship it again to me. We may do it 20,000 instances, it could nonetheless be $10.

So I stated, “Okay.” Nicely, however to be completely sincere, the primary factor I felt about that program was a priority as a result of one in all our firms that we talked about, it hadn’t gone public but, nevertheless it was the Indian Funds Chief, Paytm, which I began that includes in my presentation after Berkshire Hathaway invested within the firm about eight years in the past and it was nonetheless personal.

The following a part of this isn’t a part of the digital public infrastructure, nevertheless it successfully acts prefer it, and this was form of the Massive bang second. This can be a personal enterprise referred to as Jio or the Jio Community. That is the most important cellphone service, the cell phone subscriptions. Jio is a part of Reliance Industries. What occurred, the identical 12 months that the UPI was launched, Mukesh Ambani, who runs Reliance Industries, had made a really decisive choice that Jio wanted to go all digital and that Reliance wanted to go massive on the digitization of India’s story, and their first and really daring transfer was to purchase the one 4G license, the one 4G spectrum within the nation, and make investments $25 billion to construct a national state-of-the-art 4G community that was additionally contemplated 5G and 6G coming down the road.

Now, on the time, there was a couple of dozen different carriers and all of them had been on 2G, they usually had been all locked in a worth warfare, and their stability sheets had been horrible they usually couldn’t even make investments to maintain their 2G working very properly. So Jio is available in after which they launched within the November of 2006, identical 12 months because the UPI, and their pitch is fairly easy, “We’ve the one 4G community. In case you join with us, we’re going to provide you free voice calls ceaselessly, limitless, and we’ll provide you with six months of free knowledge, after which after your six months is over of free knowledge, we’ll nonetheless be the one 4G community and we’ll even have the bottom costs.” In order that was their supply.

Then the purpose that Mukesh put ahead was that they’d join 100 million folks by the top of the subsequent 12 months, so by the top of 2017, and that was a fairly daring purpose. It was particularly daring as a result of again then when you wished to get a brand new cell phone, it took about three hours on common if you went to the cellphone retailer since you would, once more, should show who you had been they usually must confirm you manually.

When Reliance Jio launched, they used the Aadhaar system as a result of it’s open for folks to make use of, and of their shops, that they had mainly the eyeball reader and the fingerprint reader, they usually opened 100 million accounts in 4 months, a median flip time of 5 minutes down from three hours. So this was the primary time the industrial energy of this India Stack actually made itself seen.

So now when you quick ahead to right now and what’s occurred within the final three and a half years as a result of COVID accelerated as greater than anyone, every other nation, that cellular funds have exploded, that UPI platform now accounts for 40% of the world’s real-time immediate cash transfers, and the slope of the curve continues to be at 45%, 50% progress. What has occurred along with that’s the authorities additionally took out the excessive denomination payments they usually simplified the tax code.

So seven years in the past, the Indian financial system was 95% cash-based, paper-based money. Now, it’s 75% digital. So it went from 4.5% digital to 75% digital. Once more, the funds numbers have exploded. The tax revenues to the federal government have exploded as a result of everybody’s now within the correct monetary system not dodging taxes and dealing off of money. So that you’ve taken what would’ve taken 60 years within the outdated world to modernize their monetary system, they usually’ve completed it in seven years.

So this India Stack, no person else on the planet has this, and apparently now, Nandan Nilekani, the chief of all of this, he’s now providing it as much as different nations. In truth, a number of nations have signed as much as take a duplicate of the UPI, together with France. Aadhaar will in all probability be a bit of tougher to promote folks due to the privateness, however anyhow, this digital stack is a secret weapon and folks I don’t assume recognize it and perceive it as a result of I didn’t perceive it or recognize it till lately and it’s not completed.

The opposite vital aspect to India is you say, “Okay. Nicely, when you’re going to have e-commerce, what’s the present commerce? The place are folks getting their stuff right now?” In South Asia, in India particularly, they get their stuff from 13 million mother and pop shops. So 90% of all shopper spending occurs in these little like a bodega in New York Metropolis. It’s a small store that has 200 gadgets of what you want every single day. Once more, there’s 13 million of those shops they usually’re extra formal retail. Massive field shops have been launched, however they’ve not been capable of take very a lot market share.

So what I feel India goes to finish up with is a hybrid, the place the kirana shops are going to grow to be digitized. It’s already occurring. In truth, Paytm, who I referenced earlier, it actually has a stronghold in these service provider markets. Paytm’s discovered a strategy to earn cash. They make mortgage now, they grow to be the banker for the kirana retailer house owners and make loans. So, I feel what you’re going to finish up with is a extremely digital mother and pop, hyperlocal e-commerce, and there’s a brand new layer to the stack to drive this. It’s referred to as the ONDC, and that is the newest, once more, led by Nandan Nilekani.

The ONDC is the Open Community for Digital Commerce. It’s designed to assist additional combine these mother and pops into the nation’s e-commerce. I can’t clarify it properly, and I don’t assume when you … There’s a fantastic Morgan Stanley interview with this man, Nandan Nilekani. It’s a 12-minute interview the place he talks about all of these items from the start after which appears ahead to what’s coming down the pipe, however he says that this explicit new program is perhaps essentially the most highly effective factor that they’ve launched. It’s onerous for me to consider something will be extra highly effective than that basis, but-


Nicely, it’s fascinating. Whenever you discuss this, listening to it, it’s extremely optimistic and apparent and thrilling, and you then do it via the American lens of Massive Brother and, don’t know, if it’s even libertarianism. It simply needs the federal government out of their life. The prospect of doing one thing like this in a rustic like US, I put it at close to zero.


That appears proper. That looks like the correct quantity.


Rounds to zero is the phrase from Oppenheimer. It’s humorous as a result of I ponder what a part of the story once we arrive at analyzing these alternatives and investments, we include our preconditioned bias of considering of the world in American phrases or Western phrases or no matter, after which it’s a completely completely different perspective in India that really, whereas we might imagine it’s a possible, everybody sees the China Massive Brother, you’re strolling via the intersection, they’re going to zap your face after which ceaselessly you’re shamed and in a database, however I feel on the flip facet of that, there’s a ton of positives and alternative that appear like an Indian instance is fairly fascinating.


I feel it’s simply getting began. I feel there are …. Once more, if you hear this man, an, discuss it, he stated, “Loads of the stuff that they had no thought of the way it was going to work out. They only knew it could be highly effective.” Like I stated, I feel it’s a secret weapon and for a lot of causes, together with what you simply talked about, like loads of nations, the inhabitants goes to have a look at that as a Massive Brother sort of factor and never conform to it, at the least not anytime quickly, and possibly that was a part of the success with Aadhaar was voluntary. No person needed to do it, however I feel folks noticed that there was a profit. You possibly can show who you had been simply by simply taking a look at a digicam, and simply as utilizing your QR code to pay for one thing is healthier than utilizing money. There’s lots apart from commerce causes that that is perhaps a beneficial factor or at the least a liquefier of issues. You consider going via safety strains in airports or what have you ever that may be accelerated with that platform that, once more, I feel is sort of distinctive.

The opposite factor that I feel is fascinating about this, and Nandan Nilekani talks about this as properly, however India doesn’t have a really well-developed shopper credit score market. I’m not an economist, however what I’ve seen from some economists after they take a look at India’s shopper credit score market and if it begins to develop and look extra like a developed world’s shopper credit score market the place extra folks have credit score and use it, that might add two or three proportion factors to their GDP progress on an annual foundation, and that’s one of many issues now that Nandan is speaking about is, properly, now that you’ve this what he calls informational collateral, that it’ll set the inspiration for a doubtlessly very giant progress in shopper credit score, which then accelerates the GDP progress, which the estimates are 6%-6.5%.

By the way in which, that’s one of many different issues. I’ve made through the years numerous buddies which are Indian buyers, they usually’re extra skilled than me, definitely in India, however they’re extra skilled than me additionally simply in years. Lots of them have been very profitable in enterprise capital or hedge funds, personal fairness. I’ve tried to determine, “Okay. What am I lacking right here? What can go unsuitable? What are the issues that I’m not understanding?” Certainly one of these people who has in all probability in some ways an unimaginable pedigree, Wharton, early enterprise investor in India, he’s the true deal and he stated, “The factor persons are lacking is we are able to in all probability develop quicker, and why not? China grew. It died 10%, 11% for some time. Why can’t India do this?”

I feel, once more, I’m not an economist, however I really feel like the facility of this digital platform that they had in and of itself may very well be price some incremental GDP progress charge. Simply if you concentrate on the working capital cycles for folks after they’re immediately shifting cash, so it’s going to be the thrilling 20 years in India and it appears actually good.


So let’s speak a bit of bit concerning the funding alternative set. I feel there’s a normal apathy in terms of rising markets. A part of that as we all know is simply buyers’ sentiment is all the time drawn to what’s going up essentially the most, however one of many causes I do angel investing is with the hope that making an attempt to remain present and hopefully see across the nook a bit of bit, and I feel we talked about at dinner, however I stated a really giant variety of my startup investments over the previous 5 years specifically however actually during the last 10 have been XUS and among the finest performers have been XUS, Latin America, Africa, which we did a complete collection on the podcast, however then India, Pakistan, and Bangladesh.

These three specifically, you see these exponential traction alternatives such as you talked about, the place you’re going from yellow pen and paper to swiftly a digital adoption and the numbers simply in a short time grow to be staggering. So it’s positively been fascinating and curious to look at. As you discuss this message, and also you’ve completed it earlier than, speaking about these markets, what are the most important pushbacks from buyers on why they is probably not or why they’d be not fairly but or turned off by this chance?


Loads of our narrative of our India analysis is, is India like China 15 years in the past? As I discussed that the GDPs had been about the identical, there wasn’t smartphones again then so we are able to’t take a look at smartphone penetration, nevertheless it does look statistically like China. Then there’s anecdotal issues. My second journey to Beijing was 15 years in the past, and I visited the model new Apple retailer, the primary Apple retailer that was opened in China, and two weeks after I left India, the primary two Apple shops opened there. Now as I’ll have talked about earlier, the issue is when you had invested in China 15 years in the past, regarded and stated, “All proper, I feel China’s going to develop lots. I’m going to purchase the China ETF,” properly, you had been proper, the Chinese language financial system grew 409%, however the FXI went down 51, so that you misplaced half your cash.

So now the query is, okay, properly you need to spend money on India, the PE multiples for the broad indexes are fairly excessive, the best on this planet in keeping with Shiller CAPE ratios that Burton likes to make use of. In order we are saying in Omaha, you pay a excessive worth for a cheery consensus. The truth that India has all these optimistic issues, that it’s not concerned with Russia, that it’s not concerned with China and Taiwan, it’s like a protected haven in a manner amongst rising markets the place you’ve bought wars occurring and folks assume China’s going to do one thing with Taiwan. There’s all that stuff. India stands alone.

Frankly, we’re discovering fairly good reception for it. We didn’t speak concerning the product for actually the primary 12 months till I went and noticed what I noticed and got here again and processed all of it, however we’ve had some, once more, coming off of a really, very small base, we’ve had some flows and persons are , however one of many challenges that we face as a enterprise is that our current major product, EMQQ, it’s accessible at locations like Morgan Stanley and UBS with advisors that we all know, and the India product continues to be small and it’s not accessible in these locations. So the primary pushback we get is I can’t purchase it as a result of it’s not accepted on my dealer’s platform.


Say, “Good, simply go open up a private PA account and you should buy it in your personal-”


We’re doing what we are able to to seek out folks that may purchase it, however the efficiency this 12 months is fairly good. It’s up about 20%. As , there was a fairly vital correction in our primary product, EMQQ, and that was lots due to the China tensions and the delisting threat and the federal government crackdown, each of that are completed and probably not … I don’t consider them the way in which most individuals do. I feel they had been simply noise, however they’re additionally each behind us. The China shares weren’t the one ones that go down. All of the Indian web firms additionally went down about 75% from their prime. Now once we launched, they had been already down lots. So our observe report’s unfavorable, however it could’ve been a massacre if we had launched 9 months earlier.

I’ll say that the valuations proper now for the INQQ portfolio I feel are very compelling. After I take a look at the PE for the Indian inventory market, so when you purchased the iShares India product, both the Nifty 50 or the MSCI, they’re mainly the identical, INDA and INDY. These merchandise proper now, the PEG ratios are very excessive. I like to make use of the PEG ratio. That’s the one ratio I care about. I like to have a look at it two methods. I like to have a look at the PE over the income progress charge as a result of the highest line to me is essentially the most pure type of progress. You possibly can have a enterprise that’s even shrinking and purchase again inventory and in any other case develop your earnings, however that may’t go on ceaselessly. So I take a look at the PE to income progress first.

After I take a look at the PE to income progress for the INDA, the INDY, it’s 3.5. You’ve bought a 21 PE and a progress charge of 6%. Now, the INQQ has bought the identical PE and it’s bought a progress charge that’s 3 times that. So the PEG ratio is 1.28 or name it 1.3. So whereas the India market broadly, the Nifty 50 and the MSCI, they mirror a really rosy outlook with these 3.5 PEGs. These firms, which they’re not included within the indexes, most of them, have a PEG on a income foundation that’s 1.3. On an earnings progress foundation, the PEG ratio for INDA and INDY isn’t as unhealthy. It’s like one seven-ish, however the PEG ratio for the INQQ portfolio is 0.98. So a long-term investor, and if you should buy the digitization of India at a PEG ratio of 1 right now and also you’ve bought 10 or 15 years, I feel you’ll do fairly properly.


There’s a few issues that you just delivered to thoughts. One is, listeners, we’ll put lots … Kevin’s talked about loads of assets, PDFs, movies. We bought the worldwide CAPE ratios from Barclays. All these items we’ll put within the present word hyperlinks at Right here’s a enjoyable experiment, listeners, to verify your biases is you’ll be able to pull out a bit of paper and write down, see what number of you’ll be able to guess and see what number of you’ll be able to guess so as the world’s 10 largest inventory markets. There’ll be a pair in there that’ll in all probability shock you, and there’ll be a pair in there that you just’ll in all probability get manner out of order. I feel it’s a enjoyable experiment and likewise to verify the magnitude of a few of these which are possibly already there that you could be not assume that might be, and even just a few that don’t commerce a complete lot. So test it out.

Whenever you’re speaking about China and the efficiency, I don’t know that there’s been a rustic over this previous cycle. There’s definitely been international and rising nations during the last 40, 50 years that has seen a wider spectrum of agony and ecstasy than China. The previous isn’t all the time prologue to the longer term, however taking a look at your fund, I used to be smiling as a result of I’m drawn to stuff that’s in drawdowns. That’s my factor, however taking a look at your fund specifically, which is extra concentrated seemingly than the broad mark cap index, however the percentile rank, which is waffled between, primary, and it goes to 96, one, 100, two, two, sorry, one 12 months one, then 190, 90. So you may have this era the place simply the flip flop of individuals being binary, so excited and optimistic, after which so despondent, and simply the emotional swings on this nation would make a random walker blush, I feel, to rope Burton into this.

I really like the issues which are unloved, and the rising story, my goodness, throughout the board appears like that. As you look again at touring via India, Bangladesh, Pakistan, China even, any explicit reminiscences or tales that actually stand out? It may very well be from assembly firms, from chatting with buyers to authorities officers, something that you just’re like, “Wow, it is a nice story,” or, “This left an enormous impression”?


Nicely, let me communicate to the South Asia a part of that. To start with, we began in Dhaka in Bangladesh, which is perhaps essentially the most intense metropolis on the planet. The density of Bangladesh we talked about, however the density of Dhaka itself, it simply will get onerous, you’ll be able to’t put it into phrases. The opposite factor about South Asia is it’s fairly chaotic. The streets themselves are form of emblematic of the entire thing. You’ve bought donkeys pulling carts, you’ve bought folks pulling carts, folks pushing carts, cement vehicles, bicycles, rickshaws, bike rickshaw, every little thing, and it’s simply chaos, and due to the density of Dhaka, it’s intense, and there have been a number of instances once we had been strolling and we actually couldn’t transfer anymore. We may cease, and it only a … It was a site visitors jam, however there have been extra than simply automobiles concerned and also you’d should step backwards three steps and take two steps to the correct simply to go ahead.

So I’d say my first day in Dhaka was fairly intense. I feel the issues we selected to go see had been notably its heads, the wholesale market and so forth. The Dharavi slum in India can be fascinating. That is the place the Slum Canine Millionaire got here from. It is among the densest locations on the planet. There’s virtually one million folks. It’s like a 3rd of a sq. mile. It’s very small and dense.

What I didn’t recognize is it’s mainly a enterprise as properly. Principally, one facet of the slum, they convey in waste merchandise and plastic remnants and so forth, they usually undergo the alleys and there’s all these little artisan or craftsman, I don’t know what the suitable phrase is, however they’re breaking apart issues product of plastic and separating them, after which the subsequent station, they’re melting. Principally, by the top of the road, they’re model new completed backpacks with tags on them which have been all made between the junk pile and the opposite facet of the slum. It was very fascinating.

Additionally, that is very well timed as a result of Tata is on the brink of redevelop the Dharavi slum, which shall be fascinating as a result of just like the hutongs and the lilongs in China, they’re historic neighborhoods, and that’s in all probability an excellent cause to modernize it. By the way in which, the true property costs within the slum are off the charts. So when you personal a home, you already are a slum canine millionaire, mainly. In order that was fascinating.


I used to be going to say, as I attempt to consider the chance to any funding on the macro, on the micro, on every little thing … By the way in which, listeners, two actually excellent books, Shantaram, after all, is known, White Tiger, additionally a wonderful e book. It’s been made right into a present, however the e book, like many, might be significantly better. Are there any issues that you just assume are usually one thing that individuals ascribe to being a threat for India? Is the caste system? Is there any political? You talked about it’s democracy and it appears to be fairly a bit extra secure. Is there something that’s on the checklist, whether or not it’s for you or for different folks which are speaking about … China, there’s so many entrance of thoughts ones with Taiwan and their interactions, however India, at the least, I don’t see the headlines as a lot.


I’m looking for the chance. Those which are apparent are, to start with, Modi. Modi, it is a threat … In the end, one of many issues I feel we’ve discovered within the final 10 years is it doesn’t actually matter what type of authorities you may have. If the man in cost goes loopy or in any other case does stuff you don’t like, then all bets are off, and it doesn’t matter if it’s a monarchy or a communist get together or a democracy. The individual in cost could be a downside.

Now, the excellent news is I feel Modi, he’s an asset, however he’s not in his 30s, so there’s positively the political threat, the Modi threat. The nation has had different leaders which have left workplace prematurely for unplanned causes. So there’s positively racial tensions. Up within the very, very far east of the nation, there’s been a complete lot of racial violence. Truly, one of many issues that India does after they have issues is that they shut off the web. So there’s a area, a small area in India the place they’ve had loads of sectarian violence they usually haven’t had the web for 3 months both.

One of many different fascinating issues I did once I was in India is I went and crossed into Pakistan on the Wahga border, the land border, and it’s the place the Indian guards and the Pakistani rangers do their ceremonial march and making an attempt to out excessive step one another. We flew to Amritsar, which is the primary metropolis there, and it’s the place the Golden Temple is, which is the middle of the key faith, which is a tremendous place, equally as spectacular and wonderful, I feel, because the Taj Mahal.

Whereas we had been there that afternoon, the web went out, and what we discovered was there’s a Sikh separatist that had sprung one in all his followers from a jail someplace, they usually shut off the web so he couldn’t talk along with his different separatists. My colleagues had been unable to e book flights to get out of city that afternoon.


You bought to hold round Elon’s Starlink, man.


No, I’ve one someplace, however I didn’t deliver it with me, however I crossed the border in time to get protection on the Pakistan facet. The opposite threat that appears fairly clear to me is the environmental threat. The nation is … So most of the folks stay alongside the Ganges River they usually’re having very massive warmth. Actually, it might grow to be uninhabitable, they usually’ve seen loads of issues in the previous few years with excessive, excessive warmth in and round Delhi. Air pollution is a big downside throughout South Asia as properly. Once more, loads of the water comes down from the Himalayas, and there’s in all probability extra environmental threat in India than different locations.

I feel that, as with loads of different dangers, you don’t actually realize it’s a threat till it exhibits up and also you say, “Oh, sure, that was a threat,” however I’d say the political stability, which is nice now, however issues can change in a single day for any variety of causes, and the environmental threat appears actual. Aside from these two primary ones, it looks like … As a result of loads of the India tales, that inner story, whereas the China story was an export pushed story, I feel what India goes to finish up with is much more inner progress versus pure export progress, which is what China led with.


Nicely, it’s thrilling. After we talked final time, you stated you had been going to assist me once we had been beginning the Kevin Carter Journey Capitalist Journey Company to return give some excursions. So I’m going to tag alongside and be part of you on one in all these subsequent time, however first, we’ll begin with a bit of boat tour of Tahoe. How’s that sound?


That sounds nice.


Superior, my good friend. Finest locations for folks to take a look at your funds, web sites? I don’t assume you do this a lot on Twitter. The place do they go?

Kevin: is our web site, after which you will discover me on LinkedIn, Kevin T. Carter, and yeah, you’ll discover us if you wish to.


Superior. Thanks a lot for becoming a member of us once more right now.


All proper. Thanks, Meb.


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