Tuesday, August 31, 2010

Is this guy for real?

Apropos the earlier post, here is an interesting statistic I picked up today. While I do think the guy is making wildly exaggerated statements to get some headlines, I do think the guy has a point (which is why trade #1 in the earlier post).

Judge for yourself!

Oil Should Be Around $10 a Barrel: Analyst

On Monday August 30, 2010, 12:57 pm EDT

The price of a barrel of oil would be closer to $10 if the commodity wasn't traded as an investment instrument, given the record-high levels of U.S. oil inventories, Peter Beutel, president of Cameron Hanover, told CNBC Monday.

"I honestly think that if there were no investors using oil as an asset that the price of oil right now would be $10 or $15 or $18, but it wouldn't be anywhere near where it is," Beutel said.

"We have so much oil right now, more than we've had in 27 years. Why is it 27 years? Because that's how far our records go back. It's probably the most in 50 or 100 years," he added.

Part of the reason the price of oil is currently above $74 (BIS: US@CL.1) a barrel is because of a belief in the economic recovery, Beutel said.

Comments by Federal Reserve Chairman Ben Bernanke over the weekend gave the commodity a boost as he signalled a willingness to support the fragile economic recovery with additional policy measures.

From a historical perspective, Beutel pointed out that the current level of inventories is even higher than when the price of oil was below $20 a barrel.

"We've got 50 million barrels of crude more than we had two years ago. We have 176 million of distillate," Beutel said. "When I started in the business back in 1980 we used to think to ourselves: "Gee, we would love it if we had 140 million barrels of distillates to start the winter."

Not all market watchers agree that the price of oil should or will go lower. Jonathan Barratt, managing director at Commodity Broking Services, told CNBC that he thinks oil will rise to between $82 and $85 a barrel.

Friday, August 27, 2010

Investment thoughts

Whiling away time late Friday night, thinking of what trades to put on in the market next. A few thoughts (disclaimer: these are just ideas, and I may change my opinion on them anytime!!)

  1. Oil marketing companies - in the next 1 week, all the 3 oil marketing companies (IOC, HPCL, BPCL) will pay out 2-3.3% of their current market value as dividends. This will be tax free in the hands of the shareholder. If one has spare money lying around in the bank, one can earn the equivalent of interest for the whole year in 1 week. And the best part is that it is going to be tax free! Of course the stock price will get adjusted downwards for the payout, but here the bet is on a continuing weak global economy and consequent weak oil prices. If crude oil prices remain below $73 per barrel, I think the oil marketing companies will rise in value at least 5-10% from here. It is a big IF, but I am comfortable with the risk / reward here.
  2. Tata Motors - sales of the Jaguar and Land Rover are picking up. The domestic business is going great guns - commercial vehicles are on a roll, the Nano is ramping up volumes, and demand for the Indica / Indigo are robust. If Jaguar and Land Rover sales sustain at the current trajectory, it will a) magnify earnings per share because of the highly leveraged capital structure of the company b) allow quick de-levering (high leverage has been a major overhang on the stock) and c) lead to a re-rating in the p/e or ev / ebitda multiples. The multiplicative effect of these 3 drivers could lead to $$$ returns! The rewards should more than compensate for the risk of downside.
  3. Tata Steel - a sentimental favourite for me. Currently trading at lower than 5 year average valuations due to fears about Corus performance. The brain likes it because a) the India operations are superb (lowest cost producer in the world), b) most of Corus' losses stemmed from the fixed costs at a particular plant, which has since been shuttered and put on the block and c) the Tata group have managed to turn around all of their global acquisitions - Tetley a decade ago to Jaguar Land Rover a couple of years ago. The heart likes it for reasons unknown! Overall risk / reward seems quite favourable.
  4. Sell or short Suzlon. Loads of debt (approx 10x EBITDA), negative EBITDA (high fixed costs), no new orders internationally in the last 3-4 quarters and general poor perception of quality (broken blades being a big issue with its windmills). The company does not have enough cash to even service its debt, let alone pay the principal back. As of now, seems like a candidate for bankruptcy. Again, I dislike this stock sentimentally for reasons unknown.
  5. Reliance Industries - because this is the big daddy of Indian stocks and has underperformed the Index by 30% this year. This cannot continue - either RIL should rise or the Nifty must fall. Long RIL - Short Nifty is one trade that suggests itself
Other ideas welcome!

Pyaar ke side effects

This post is actually about shaadi ke side effects - one very strange effect in particular. I had heard about this phenomenon, but seeing it in action is very mystifying!

The longer you are married, the more you become like your spouse. A slow and gradual process, no doubt, but utterly unhalting. Before our marriage, the wife loved milk, I did not. I loved watching movies, she did not. I was a late sleeper and late riser, she was the opposite. I liked eating out, she was a home-made healthy food freak. She was a big yoga fan, I was not. I had 10-12 cups of tea a day, she was a 2-cups-a-day girl. I was the more foolhardy risk taker while she was the quicker tempered one.

And now, I am a milk maniac, she has a lot of tea, I wake up at 6:30am without an alarm, while she sleeps for a bit longer, I have become a yoga fan, the last movie I saw was 7-8 months ago, I prefer the plain and simple ghar ka khana; she is a successful entrepreneur while I hold on to a steady job. She has become patient and I fly into rages more often. We have even begun to have similar choices on colors, cars, homes, books, people and music!! This was unthinkable as recently as a couple of years ago. Its almost as if we are converging into the same person!

Fascinating development!

Thursday, August 19, 2010


Heard this one recently -

Suresh Kalmadi: Sir U Made Lakhs


Yesterday, as I spent more than an hour in my car navigating the many traffic jams that had proliferated in the rain, I saw a disquieting event. At a jammed-for-miles traffic intersection, there suddenly appeared a cavalcade of old Ambassadors with flashing red and blue lights, which then proceeded to take the wrong side of the road, speeding away to their destinations. Traffic from the other side was disrupted, the people who had been waiting in line for more than 20 minutes kept sitting there in their vehicles like idiots, and the policemen manning the intersection did nothing except wave the cavalcade forward.

This led me fuming - why is it that my time is always considered less precious than some likely corrupt, illiterate, venal, small time thug? Why are rules only for me, and not for this same person? I remember an ad on radio during election time talking about the "garibon ka massiah" Kanwar Singh Tanwar, the BSP candidate from South Delhi. This very same thug's son recently crushed 2 people to death in his speeding BMW, which he was driving in an inebriated state.

The thought led to many other (I had lots of time to kill in the jam), and I realized that everywhere, in every sphere, the Indian state has failed. I look at the Commonwealth Games fiasco, and feel ashamed. I look at the big dug-up holes that pass for in-process-of-beautification roads in Connaught Place, and dont know how to explain it to myself. The latest on these holes is that the contractors have given up on getting them repaired in time, so they will be filled back with mud, and 'beautified' AFTER the Games are over. Meanwhile, Kalmadi and his ilk line up their pockets with Rs 11,000 crores, delivering leaking stadia, substandard roads, and shoddy pavements. The RWA in my colony spends its precious time getting petitions for cutting trees so that they can create yet another cemented parking lot for their third cars. Meanwhile, every rain, the lane outside gets flooded and breeds slush and dengue carrying mosquitoes.

The Indian state is failing. No - this is beyond the state. Indian society is failing. There is little I can do about it. I am not sure if the reason is poor governance and systems or Indians themselves. The 'real' India of the villages still believes in male chauvanism, caste based 'khap' panchayats, feudalism and illiteracy. The 'elite' Indians living in cities like Delhi are rapists, totally selfish, corrupt, narrow minded and a threat to social living.

I can ignore all this and keep going through my daily grind (as I have been for ages). I do not know what else I can do?

Wednesday, August 11, 2010

Did you know?

Doing some research on media in India, I came across this gem...

The longest movie in the world according to Guinness World Records is The Cure for Insomnia, directed by John Henry Timmis IV. Released in 1987, the running time is 5220 minutes (87 hours) and has no plot. Instead, it consists of poet L. D. Groban reciting his 4,080-page poem “A Cure for Insomnia” over the course of three and a half days. The movie is inter-spliced with clips from porno and heavy metal music videos.


Sunday, August 01, 2010

Completing the troika

$20 million is a big amount, in any country in the world. Very few of us earn this kind of wealth over entire lifetimes. So, when one hears about a guy who made $20 million EVERY WORKING DAY OF A YEAR, one is compelled to wonder - what did this guy do? What makes him special? What makes him tick?

Answering these questions is "The Greatest Trade Ever" by The Wall Street Journal's reporter Greg Zuckerman. The book traces the history, demeanor and turning points in John Paulson's life, as well as the thoughts behind the trade that led to a $4 billion payout in 2008.

The book is a definite page-turner, focusing on the human interest stories and very light on the technical aspects. This is definitely a good thing, since a lot more people will be able to enjoy the colourful stories told here - whether of Andrew Lahde, who dropped out, hustled big time to raise peanuts, and then had the best investment run of all time, only to drop out again (the letter he wrote thumbing his nose to the Establishment is a classic), or of Jeff Greene, who stole Paulson's trade and (almost) suffered big time, or of Paolo Pellegrini, the 46 year old starting from the lowest rung in Paulson's fund, working with 20 year olds.

Comparisons are odious, but since this is the 3rd (and last) book I've read on the subprime trade (others reviewed here and here), it makes sense to rank the 3. I would rate the Greatest Trade Ever up at #1 place, very very marginally ahead of The Big Short, with Roger Lowenstein bringing up a mediocre third. While a lot of the characters in the 1st 2 books are the same, its just that The Greatest Trade Ever has a lot more, covered in lesser detail. This makes it less involved, but also lighter reading (not that Michael Lewis is any slouch in that department).

Overall, a good investment of time and money!