The Business Standard carried this op-ed piece yesterday. It brought to the fore what one already feels in one's bones - we are a nation of insidious insiders. We operate on the philosophy of you-scratch-my-back-i'll-scratch-yours; justice, national interest and fair play be damned. Sample this
- we have 55 billionaires for every trillion $ of gdp (more than the US, approx. 3 times Germany and approximately 3.5 times Brazil). The only country that exceeds us is Russia, and we all know that that country is run by crooks.
- the fact that most (27, to be exact) of our elected 'youth' politicians are the sons / daughters / nephews or brothers-in-law of other politicos.
The article in question raises some probing questions into the national soap opera being played out right now - the ugly saga of the 2 brothers - and its repercussions on national energy security. Had it not been for the younger brother being peeved (and rightfully so, in my opinion!) with not getting what was promised to him, no one would have raised some pertinent questions on the way the gas - a national resource - is being priced.
The way the contract works is quite simple - the gas belongs to India, and the contractor (RIL in this case) is compensated for the capital expenditure incurred and operating expenses in extracting the gas via a revenue share on the gas sold. Obviously, the contractor has an incentive to pad capital costs, since this enables recovery of more revenues from the government. This conflict is supposed to be contained via a review mechanism where a 4 member committee approves the capex. Now, the fact is that the capex per cc of gas DOUBLED in 2 years (from 2004 to 2006) . The 4 wise men who stamped this were found to be related (indirectly, of course) to RIL and sister concerns. The government's independent verifying arm, the CAG, has publicly said that it has not been given access to the contractor's data for the last 18 months, despite asking for it repeatedly!
If this is not bad enough, the oil ministry is siding quite openly in the legal process with one side of the litigants. While there is nothing wrong in this, the rub comes here - it is also openly hurting the interests of NTPC, another national company and our largest power producer. The country’s top law officials, the Attorney General and the Solicitor General have openly criticised Deora’s ministry for having hobbled the public NTPC from pursuing its legal battle against RIL.
It is not my case to take sides in the gas dispute - legality aside, it seems to me that the national interest would be served better by NOT honouring the contract between RIL and RNRL. However, I do think that we need a lot more scrutiny and a lot more transparency to prevent India from turning into another oligarchic banana republic.
Sunday, August 16, 2009
Tuesday, August 11, 2009
Ferozeshah Kotla
Early one morning, a few of us landed up at the ruins of the citadel of Ferozeshah in New Delhi. Some pics (courtesy Anjaani Manzil):
Thursday, July 30, 2009
Excerpts from Poe
`Prophet!' said I, `thing of evil! - prophet still, if bird or devil! -
Whether tempter sent, or whether tempest tossed thee here ashore,
Desolate yet all undaunted, on this desert land enchanted -
On this home by horror haunted - tell me truly, I implore -
Is there - is there balm in Gilead? - tell me - tell me, I implore!'
Quoth the raven, `Nevermore.'
`Prophet!' said I, `thing of evil! - prophet still, if bird or devil!
By that Heaven that bends above us - by that God we both adore -
Tell this soul with sorrow laden if, within the distant Aidenn,
It shall clasp a sainted maiden whom the angels named Lenore -
Clasp a rare and radiant maiden, whom the angels named Lenore?'
Quoth the raven, `Nevermore.'
Whether tempter sent, or whether tempest tossed thee here ashore,
Desolate yet all undaunted, on this desert land enchanted -
On this home by horror haunted - tell me truly, I implore -
Is there - is there balm in Gilead? - tell me - tell me, I implore!'
Quoth the raven, `Nevermore.'
`Prophet!' said I, `thing of evil! - prophet still, if bird or devil!
By that Heaven that bends above us - by that God we both adore -
Tell this soul with sorrow laden if, within the distant Aidenn,
It shall clasp a sainted maiden whom the angels named Lenore -
Clasp a rare and radiant maiden, whom the angels named Lenore?'
Quoth the raven, `Nevermore.'
Probably true! This is as good as it gets.
Tuesday, July 28, 2009
Bashing Goldman Sachs Is Simply a Game for Fools: Michael Lewis
From the moment I left Yale and started working for Goldman Sachs, I’ve felt uneasy interacting with those who don’t.
It’s not that I think less of Goldman outsiders than I did while I remained among you. It’s just that I feel your envy, and know that nothing I can do or say will ever persuade you that I am no more than human.
Thus, like many of my colleagues, I have adopted a strategy of never leaving Goldman Sachs, apart from a few brief, spasmodic attempts to make what you outsiders call “love” or “the beast with two backs.” Goldman recognizes how important it is for its people to replicate themselves. We bill no performance fees for the service.
Today, the sheer volume of irresponsible media commentary has forced us to reconsider our public-relations strategy. With every uptick in our share price it’s grown clearer that we who are inside Goldman Sachs must open a dialogue with you who are not. Not for our benefit, but for yours.
America stands at a crossroads, and Goldman Sachs now owns both of them. In choosing which road to take, ordinary Americans must not be distracted by unproductive resentment toward the toll-takers. To that end we at Goldman Sachs would like to dispel several false and insidious rumors.
Rumor No. 1: “Goldman Sachs controls the U.S. government.”
Every time we hear the phrase “the United States of Goldman Sachs” we shake our heads in wonder. Every ninth-grader knows that the U.S. government consists of three branches. Goldman owns just one of these outright; the second we simply rent, and the third we have no interest in at all. (Note there isn’t a single former Goldman employee on the Supreme Court.)
What small interest we maintain in the U.S. government is, we feel, in the public interest. Our current financial crisis has its roots in a single easily identifiable source: the envy others felt toward Goldman Sachs.
The bozos at Merrill Lynch, the dimwits at Citigroup, the nimrods at Lehman Brothers, the louts at Bear Stearns, even that momentarily useful lunatic Joe Cassano at AIG -- all of these people took risks that no non-Goldman person should ever take, in a pathetic attempt to replicate Goldman’s financial returns.
For too long we have allowed others to emulate us. Now we are working productively with Treasury Secretary Tim Geithner and the Congress to ensure that we alone are allowed to take the sort of risks that might destroy the financial system.
Rumor No. 2: “When the U.S. government bailed out AIG, and paid off its gambling debts, it saved not AIG but Goldman Sachs.”
The charge isn’t merely insulting but ignorant. Less responsible journalists continue to bring up the $12.9 billion we received from AIG, as if that was some kind of big deal to us. But as our CFO David Viniar explained back in March, we were hedged. Our profits from AIG “rounded to zero.”
People who don’t work at Goldman Sachs, of course, find this implausible: How could $12.9 billion round to zero? Easy, but you just need to understand the mathematics.
Let’s assume AIG transferred $12,880,560,250.34 of taxpayer money to Goldman Sachs. A Goldman outsider, asked to round this number, might call it $12,880,560,250.00. That’s not how we look at it; at Goldman we always round to the nearest $50 billion, so anything less than $50 billion rounds to zero.
Think of it that way and you can see that $12,880,560,250.34 isn’t even close to not rounding to zero.
Rumor No. 3: “As the U.S. government will eat the losses if Goldman Sachs goes bust, Goldman Sachs shouldn’t be allowed to keep making these massive financial bets. At the very least the $11.4 billion Goldman Sachs already has set aside for employees in 2009 -- $386,429 a head, just for the first six months -- is unfair, as the U.S. taxpayer has borne so much of the risk of the wagers that generated the profits.”
Really, we don’t know where to begin with this one. It is wrong-headed in so many different ways!
Let’s begin with the idea that the taxpayer is running a bigger risk than we are. The billions he stands to lose are trivial; after all, they round to zero.
The real risk, when you think about it even for a minute, is the risk we take ourselves: that Goldman will cease to exist and we will cease to be Goldman employees. To flirt with such tragedy we obviously need to be paid.
Rumor No. 4: “Goldman employees all look alike.”
Several recent newspaper photos have revealed that a surprising number of Goldman Sachs workers are white, male and bald. That non-Goldman people glance at such photos and think “Holy crap, they even look alike!” just shows how deeply anti- Goldman bigotry runs in American life.
We at Goldman represent unique clusters of DNA; if we bear some faint surface resemblance to one another, and to creatures from the 24th century, it is only because our superior powers of reasoning lead us to hold in our minds exactly the same thoughts, at exactly the same time.
A shared disinterest in growing hair, for instance, isn’t a coincidence of nature but an expression of healthy like- mindedness.
“The world is a pool table,” our naked-headed CEO likes to tell us. “And all the people in it are either stripes or solids. You alone are the cue balls.”
Rumor No. 5: Goldman Sachs is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Those words are of course taken from a recent issue of Rolling Stone magazine and they are transparently false.
For starters, the vampire squid doesn’t feed on human flesh. Ergo, no vampire squid would ever wrap itself around the face of humanity, except by accident. And nothing that happens at Goldman Sachs -- nothing that Goldman Sachs thinks, nothing that Goldman Sachs feels, nothing that Goldman Sachs does --ever happens by accident.
(Michael Lewis is a columnist for Bloomberg News and the author of “Liar’s Poker,” “Moneyball” and “The Blind Side,” soon to be a major motion picture. The opinions expressed are his own.)
It’s not that I think less of Goldman outsiders than I did while I remained among you. It’s just that I feel your envy, and know that nothing I can do or say will ever persuade you that I am no more than human.
Thus, like many of my colleagues, I have adopted a strategy of never leaving Goldman Sachs, apart from a few brief, spasmodic attempts to make what you outsiders call “love” or “the beast with two backs.” Goldman recognizes how important it is for its people to replicate themselves. We bill no performance fees for the service.
Today, the sheer volume of irresponsible media commentary has forced us to reconsider our public-relations strategy. With every uptick in our share price it’s grown clearer that we who are inside Goldman Sachs must open a dialogue with you who are not. Not for our benefit, but for yours.
America stands at a crossroads, and Goldman Sachs now owns both of them. In choosing which road to take, ordinary Americans must not be distracted by unproductive resentment toward the toll-takers. To that end we at Goldman Sachs would like to dispel several false and insidious rumors.
Rumor No. 1: “Goldman Sachs controls the U.S. government.”
Every time we hear the phrase “the United States of Goldman Sachs” we shake our heads in wonder. Every ninth-grader knows that the U.S. government consists of three branches. Goldman owns just one of these outright; the second we simply rent, and the third we have no interest in at all. (Note there isn’t a single former Goldman employee on the Supreme Court.)
What small interest we maintain in the U.S. government is, we feel, in the public interest. Our current financial crisis has its roots in a single easily identifiable source: the envy others felt toward Goldman Sachs.
The bozos at Merrill Lynch, the dimwits at Citigroup, the nimrods at Lehman Brothers, the louts at Bear Stearns, even that momentarily useful lunatic Joe Cassano at AIG -- all of these people took risks that no non-Goldman person should ever take, in a pathetic attempt to replicate Goldman’s financial returns.
For too long we have allowed others to emulate us. Now we are working productively with Treasury Secretary Tim Geithner and the Congress to ensure that we alone are allowed to take the sort of risks that might destroy the financial system.
Rumor No. 2: “When the U.S. government bailed out AIG, and paid off its gambling debts, it saved not AIG but Goldman Sachs.”
The charge isn’t merely insulting but ignorant. Less responsible journalists continue to bring up the $12.9 billion we received from AIG, as if that was some kind of big deal to us. But as our CFO David Viniar explained back in March, we were hedged. Our profits from AIG “rounded to zero.”
People who don’t work at Goldman Sachs, of course, find this implausible: How could $12.9 billion round to zero? Easy, but you just need to understand the mathematics.
Let’s assume AIG transferred $12,880,560,250.34 of taxpayer money to Goldman Sachs. A Goldman outsider, asked to round this number, might call it $12,880,560,250.00. That’s not how we look at it; at Goldman we always round to the nearest $50 billion, so anything less than $50 billion rounds to zero.
Think of it that way and you can see that $12,880,560,250.34 isn’t even close to not rounding to zero.
Rumor No. 3: “As the U.S. government will eat the losses if Goldman Sachs goes bust, Goldman Sachs shouldn’t be allowed to keep making these massive financial bets. At the very least the $11.4 billion Goldman Sachs already has set aside for employees in 2009 -- $386,429 a head, just for the first six months -- is unfair, as the U.S. taxpayer has borne so much of the risk of the wagers that generated the profits.”
Really, we don’t know where to begin with this one. It is wrong-headed in so many different ways!
Let’s begin with the idea that the taxpayer is running a bigger risk than we are. The billions he stands to lose are trivial; after all, they round to zero.
The real risk, when you think about it even for a minute, is the risk we take ourselves: that Goldman will cease to exist and we will cease to be Goldman employees. To flirt with such tragedy we obviously need to be paid.
Rumor No. 4: “Goldman employees all look alike.”
Several recent newspaper photos have revealed that a surprising number of Goldman Sachs workers are white, male and bald. That non-Goldman people glance at such photos and think “Holy crap, they even look alike!” just shows how deeply anti- Goldman bigotry runs in American life.
We at Goldman represent unique clusters of DNA; if we bear some faint surface resemblance to one another, and to creatures from the 24th century, it is only because our superior powers of reasoning lead us to hold in our minds exactly the same thoughts, at exactly the same time.
A shared disinterest in growing hair, for instance, isn’t a coincidence of nature but an expression of healthy like- mindedness.
“The world is a pool table,” our naked-headed CEO likes to tell us. “And all the people in it are either stripes or solids. You alone are the cue balls.”
Rumor No. 5: Goldman Sachs is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Those words are of course taken from a recent issue of Rolling Stone magazine and they are transparently false.
For starters, the vampire squid doesn’t feed on human flesh. Ergo, no vampire squid would ever wrap itself around the face of humanity, except by accident. And nothing that happens at Goldman Sachs -- nothing that Goldman Sachs thinks, nothing that Goldman Sachs feels, nothing that Goldman Sachs does --ever happens by accident.
(Michael Lewis is a columnist for Bloomberg News and the author of “Liar’s Poker,” “Moneyball” and “The Blind Side,” soon to be a major motion picture. The opinions expressed are his own.)
Sona
Was randomly surfing youtube, when I chanced upon an old favourite. One thing led to another, and I figured that this is a very talented and cute chick:
Tuesday, July 07, 2009
80% pass
Everyone and their uncle in the media are running around hoops on how the budget is a 'missed opportunity', not so good etc. etc. I do not agree with this.
For one, the budget is what it was meant to be - a bald recital of the Government's accounts over the next year. It is not the place to make grandiose policy announcements, or to give punters a chance to pump up some stocks and dump others.
Secondly, it prescribes the right dose for India's ailing economy - fiscal stimulus (albeit directly in the hands of the consumer). I felt the removal of the tax surcharge was a really good thing (since the section affected by this is never part of any traditional vote-bank and thus easy pickings for all grasping politicos). It also removed another regressive tax - the FBT. And it committed to introduction of the most efficient goods and sales tax (the GST) from next year.
Third, the budget does not sugar coat any of the hard messages - fiscal deficit is going to be high at 6.8% of GDP (much higher if one accounts for the deficit properly), tax revenues are going to be down, and disinvestment is going to be a slow and tortuous affair, large doses of government spending is going to be required to shore up the rural economy. Were the manic punters bidding up our markets hoping any different? If so, they deserve what they got from the market.
For one, the budget is what it was meant to be - a bald recital of the Government's accounts over the next year. It is not the place to make grandiose policy announcements, or to give punters a chance to pump up some stocks and dump others.
Secondly, it prescribes the right dose for India's ailing economy - fiscal stimulus (albeit directly in the hands of the consumer). I felt the removal of the tax surcharge was a really good thing (since the section affected by this is never part of any traditional vote-bank and thus easy pickings for all grasping politicos). It also removed another regressive tax - the FBT. And it committed to introduction of the most efficient goods and sales tax (the GST) from next year.
Third, the budget does not sugar coat any of the hard messages - fiscal deficit is going to be high at 6.8% of GDP (much higher if one accounts for the deficit properly), tax revenues are going to be down, and disinvestment is going to be a slow and tortuous affair, large doses of government spending is going to be required to shore up the rural economy. Were the manic punters bidding up our markets hoping any different? If so, they deserve what they got from the market.
A study in contrasts
Last week, I saw 2 movies - The Hangover and (I am ashamed to admit) Kambakht Ishq.
The Hangover is a really good movie - oddball, corny and really good for guffaws. The perfect weekend fare, intelligently written, well acted and perfectly paced. Kambakht Ishq, on the other hand, made me cringe in disbelief and embarassment.
How could anyone have
The Hangover is a really good movie - oddball, corny and really good for guffaws. The perfect weekend fare, intelligently written, well acted and perfectly paced. Kambakht Ishq, on the other hand, made me cringe in disbelief and embarassment.
How could anyone have
- written this unadulteratedly regressive, stupid and intelligence-insulting script (if one can call it a script)
- acted in such a vehicle and
- spent millions producing it
These are true mysteries. There are no songs to speak of, the 'special appearances' are especially dumb, and this movie is a walking talking advertisement for how not to waste time. The movie is full of caveman cliches (the hero shuts up the heroine by smooching her, he can sleep with all and sundry but she has to be pristine, the 'friend' runs her life and marriage on the whims of her friend, the heroine's mother is at fault for her stuck up and tight arsed behaviour, the heroine realizes the folly of her wicked ways in the end - I could just go on and on!) that I just hated.
In fact, by writing about it, I feel I am somehow denigrating this blog. Rather extreme!!
Monday, July 06, 2009
Neemrana
Neemrana is a nice weekend getaway from Delhi - just a hundred kilometers away and good for a break in routine. It is essentially an old fort, which has now been restored and enhanced into a heritage resort. Some pictures from a mobile phone camera:
Friday, June 26, 2009
Ambiguity as sin
I read John Le Carre's most recent novel, A Most Wanted Man, entirely in a book store. As often before, I was enraptured by its tight plot, totally believeable characters and most of all by its sense of innate morality. It also had the old Le Carre characteristic - the good guys never win (unless it is Smiley - but then Smiley was such a loser in life that he could be forgiven his wins).
As with his other truly memorable books, the story also disturbed me. Because it was so real, and because it probably happens so many times in this world we live in. I looked, perhaps for the first time, upon this world of ours from the point of view of a devout follower of Islam. And did not find it to be a safe or even reassuring world. Innocence is a sin, might is right and morality is a liability. The cruel logic of Guantanamo Bay overrides the human virtues of compassion and justice. We live in a world of justice by strength, justice of the winner, justice as fiat.
Usually I find Le Carre books morally ambiguous - everyone has a point of view which can be understood, Smiley or Karla. But not in A Most Wanted Man. Sometimes ambiguity has to be recognized as what it is - a sin. Something is right, and another thing is wrong. And one has to do the right thing. The right thing is humanity and compassion.
As a character in the book says - five percent of him was bad. But if I look at myself, can I say the same? For me, its probably closer to fifteen. Or even twenty. This is as true for me or you as it is for the character. Recognizing this, and making allowance for it - this is what will make life better for all of us.
As with his other truly memorable books, the story also disturbed me. Because it was so real, and because it probably happens so many times in this world we live in. I looked, perhaps for the first time, upon this world of ours from the point of view of a devout follower of Islam. And did not find it to be a safe or even reassuring world. Innocence is a sin, might is right and morality is a liability. The cruel logic of Guantanamo Bay overrides the human virtues of compassion and justice. We live in a world of justice by strength, justice of the winner, justice as fiat.
Usually I find Le Carre books morally ambiguous - everyone has a point of view which can be understood, Smiley or Karla. But not in A Most Wanted Man. Sometimes ambiguity has to be recognized as what it is - a sin. Something is right, and another thing is wrong. And one has to do the right thing. The right thing is humanity and compassion.
As a character in the book says - five percent of him was bad. But if I look at myself, can I say the same? For me, its probably closer to fifteen. Or even twenty. This is as true for me or you as it is for the character. Recognizing this, and making allowance for it - this is what will make life better for all of us.
Thursday, June 18, 2009
Interesting analysis
This post comes from material posted on Yahoo! finance
Professors Barry Eichengreen (Berkeley) and Kevin O'Rourke (Trinity) have produced a great series of charts that compare the progress of this worldwide recession with the Great Depression of 1929.
Effects on world industrial output and world trade volumes are worse than the Great Depression of 1929!
The good news, however, is that equity markets the world over have been quick to price all this in, perhaps protecting us from the slow painful slide seen last time around (fast and painful, or slow and painful? i prefer the former!)
And add to that the massive (I mean MASSIVE) monetary and fiscal stimulus laid on by governments and central banks. Raises the hope that today's green shoots are really the oaks of tomorrow!!
The good news, however, is that equity markets the world over have been quick to price all this in, perhaps protecting us from the slow painful slide seen last time around (fast and painful, or slow and painful? i prefer the former!)And add to that the massive (I mean MASSIVE) monetary and fiscal stimulus laid on by governments and central banks. Raises the hope that today's green shoots are really the oaks of tomorrow!!Service economy? Ha ha
There are no two ways about it - our service economy sucks! Getting a broadband connection at home (this is the most premium plan, and with the 'best' operator) is proving to be a headache. This is after my earlier broadband connection would provide such terrible connectivity that I would find it quicker to use a data card on my computer!
This is not just about broadband, or even telecom. I don't understand why we do not have a good, professional service economy. Where if I am told that xyz will happen on a certain day, it does happen on that day (or even that week)! This is true even of the largest retailer in India, who commits delivery on a certain day but actually delivers on some other day.
Earlier, this was a given - because everything was Govt. (or should I say bureaucracy) owned, and the Govt. certainly does not care about service. It is much more difficult to understand now - we have private companies with a profit motive, we have differential pricing, we have pretty much all elements in place for great service. But do we get it? Unfortunately, the answer is no!
My hypothesis is that this stems from 2 key factors - a) the chaos and unpredictability of daily life in our cities. I cannot predict to within 30 minutes the time it will take me to get from place A to place B, or whether I will find parking there, or whether the guy I'm supposed to meet or the item I'm supposed to collect will be there at all! In such an environment, even a small variable can effect output tremendously. Therefore service providers are unable to predict things themselves b) we are horrible at communication and are very short term thinkers. We think saying something conveniently now (Yes surely I will deliver today / Guaranteed madam, kaam aaj ho jayega) is enough to satisfy the customer, rather than say something not so pleasing, but then keep the promise. Ergo, we are short term optimizers rather than long term strategics.
Whatever the reason, our service economy sucks!
Thursday, May 21, 2009
99
I recently came across the following (true) facts:
- Statistically speaking, all girls in Delhi are called either a) Pooja or b) Neha
- All taxi drivers in Delhi are thieves
- Bhojpuri movies' 'dashing young heroes' are usually middle aged, balding and paunchy men
- There is a thriving satta bazaar in Delhi
- Mumbai goons have no chance against a) Delhi police and b) the Delhi chill
- Cyrus Broacha is funnier in real life than in a funny role
All these were gleaned from a watching of the latest (and only in a long long time!) Bollywood noveau middle house cinema offering - to wit - 99.
The movie is a good timepass watch, entertaining in parts, and with good, believeable characters (except Soha Ali Khan as the eponymous Pooja, in a role so wooden that environmental enthusiasts will embrace her as worth preservation!). Mahesh Manjarekar, Vinod Khanna, Boman Irani and a really good guy called 'Kuber' provide solid performances. The scripting is good, and the situations (while over the top) are believeable.
Definitely worth a dekko.
Saturday, May 09, 2009
Gaga over Yaga
Yaga Venugopal Reddy, the Governor of the Reserve Bank of India from 2003-2008 is being credited as being the 'saviour of the Indian financial system' from the impact of the global meltdown (a newspaper articles' words, not mine!). The dude sure seems pretty prescient in hindsight, since he moved swiftly (and with little regard to the netas in the government, it must be noted) to quell what seems now to be an obvious bubble in real estate prices and unsecured credit by raising interest rates. No wonder the guy is in great demand as a speaker at various international fora on financial system stability and the role of central banks.
What Reddy did during his tenure seems all the more amazing now since at that time, it seemed quite a contrarian and rather obstinate thing to do. Indeed, if Greenspan had done what Reddy did, perhaps we would not have this catastrophe of a credit crunch on our hands and perhaps many millions of jobs would not be lost. It is therefore instructive to see what Reddy thinks now.
Interestingly enough, in an interview with Mint, he says: "that the underlying inflationary pressure in India is very high" and that "one should take into account the Consumer Price Index (CPI) and not the Wholesale Price Index (WPI) while taking monetary and fiscal measures. In contrast to WPI, the country’s most widely tracked weekly inflation index, CPI reflects the price of goods at the retail level. For the week ended 25 April, WPI inflation was 0.70%, but CPI for industrial workers continued to be high at 9.63%, for February 2009 (the latest available number)." Bang on!! I always laugh when I hear strange numbers each week on CNBC: Inflation is now 0.2%, now 0.5%!! Huh?? Nothing seems to be becoming cheaper (except petrol, the price of which was reduced in February), so how can this be?
He goes on to say "the challenge before the authorities is unwinding the packages in due course. Otherwise, vested interests (will) develop in some stimulus packages and that will add to the inflationary pressures." Further: "You cannot do recovery at any cost. Your recovery has to be at an appropriate price.” The guy is still being farsighted and rightly indentifies that the focus on blind copying of 'stimulus' by our government (for populist reasons perhaps? or for bailing out property 'developers' who really deserve to be bankrupt) could be sowing the seeds of future pain and degrowth in India.
I wish we had more courageous (and sensible!) people like Yaga at the helm of economic policymaking!
What Reddy did during his tenure seems all the more amazing now since at that time, it seemed quite a contrarian and rather obstinate thing to do. Indeed, if Greenspan had done what Reddy did, perhaps we would not have this catastrophe of a credit crunch on our hands and perhaps many millions of jobs would not be lost. It is therefore instructive to see what Reddy thinks now.
Interestingly enough, in an interview with Mint, he says: "that the underlying inflationary pressure in India is very high" and that "one should take into account the Consumer Price Index (CPI) and not the Wholesale Price Index (WPI) while taking monetary and fiscal measures. In contrast to WPI, the country’s most widely tracked weekly inflation index, CPI reflects the price of goods at the retail level. For the week ended 25 April, WPI inflation was 0.70%, but CPI for industrial workers continued to be high at 9.63%, for February 2009 (the latest available number)." Bang on!! I always laugh when I hear strange numbers each week on CNBC: Inflation is now 0.2%, now 0.5%!! Huh?? Nothing seems to be becoming cheaper (except petrol, the price of which was reduced in February), so how can this be?
He goes on to say "the challenge before the authorities is unwinding the packages in due course. Otherwise, vested interests (will) develop in some stimulus packages and that will add to the inflationary pressures." Further: "You cannot do recovery at any cost. Your recovery has to be at an appropriate price.” The guy is still being farsighted and rightly indentifies that the focus on blind copying of 'stimulus' by our government (for populist reasons perhaps? or for bailing out property 'developers' who really deserve to be bankrupt) could be sowing the seeds of future pain and degrowth in India.
I wish we had more courageous (and sensible!) people like Yaga at the helm of economic policymaking!
Friday, May 01, 2009
Celebration!! and a new beginning...
This is the 200th post on nothing-spectacular! When I started, I had no idea that this blog would become such a natural and integral part of my life. I hope this journey continues...
This post is special for another reason. The beta version of the Five X Capital website is launched! Please visit http://www.fivexcapital.in and send in your comments / suggestions / brickbats. The site is till date the only thing I have to show for 7 years of education and 3 degrees (BTech, MTech in Computer Science and MBA)!!!! A humbling experience...
This post is special for another reason. The beta version of the Five X Capital website is launched! Please visit http://www.fivexcapital.in and send in your comments / suggestions / brickbats. The site is till date the only thing I have to show for 7 years of education and 3 degrees (BTech, MTech in Computer Science and MBA)!!!! A humbling experience...
Green shoots notwithstanding...
Not wanting to be a party pooper, I can't help but feel uneasy while publishing the following pictures (obtained from The Business Insider). While this may of course not happen, it would hurt no one to be cautious! 
Next, a really long term chart of the S&P Composite - note that all bottoms are formed when the index moves substantially below the long term trend line. Will it defy history and stop at the line, or will it go below, as it always has?
Points to ponder! Is cash going to be king?
First up, a chart showing that a 30% rise does not mean that the tide has turned: such rallies were common in other long term downtrending markets (Nasdaq 2000, Nikkei 1990s, Dow Great Depression, and current credit crisis). Of course, this argument falls flat if one argues that the current credit crisis is not as severe as the others - but it seems to me that it should definitely be more severe than the tech bust of 2000-01?
Next, a really long term chart of the S&P Composite - note that all bottoms are formed when the index moves substantially below the long term trend line. Will it defy history and stop at the line, or will it go below, as it always has?Points to ponder! Is cash going to be king?Reverie of a hazy afternoon
Its really hot outside - the hottest April in Delhi in 50 years, the media would have me believe. It is torture to do anything in such heat - anything but sip a cool drink, that is. The telly bleebs on while I listlessly check the time and trawl web pages on enabling the login/password feature on the wife's company's website.
On comes a corny song from the rustically named 'Singh is Kingg'. Neha Dhupia lights up the screen. I flip channels to IPL II (private thought: what a disaster!). The mind lingers still on 'Singh is Kingg'. I think - hey! I rather like Neha Dhupia. I wonder why this is so. I dont really like Katrina Kaif. Nor Aishwarya Rai Bachchan. I positively detest Shilpa Shetty. Sonam Kapoor is ok. Vidya Balan is embarrassing. Why do I like Neha Dhupia?? I think its for the same reason I like Gul Panag.
I think I like her because of her roles - Mithya. 12:30 ki last local. Some shady Kareena Kapoor movie where she is the elder sister. I like her (as I do Gul Panag) because she seems to be able to hold her own in a tough world. Able to give back as good as she gets. Able to stand out, and not blend in with the crowd. A strong lady. Trying to be different (in weird ways though - by undressing and making provocative statements). But hey, still different. Still unique.
The mind slowly focuses back on reality. The login/password feature beckons. I trawl more pages. The heat gets worse.
On comes a corny song from the rustically named 'Singh is Kingg'. Neha Dhupia lights up the screen. I flip channels to IPL II (private thought: what a disaster!). The mind lingers still on 'Singh is Kingg'. I think - hey! I rather like Neha Dhupia. I wonder why this is so. I dont really like Katrina Kaif. Nor Aishwarya Rai Bachchan. I positively detest Shilpa Shetty. Sonam Kapoor is ok. Vidya Balan is embarrassing. Why do I like Neha Dhupia?? I think its for the same reason I like Gul Panag.
I think I like her because of her roles - Mithya. 12:30 ki last local. Some shady Kareena Kapoor movie where she is the elder sister. I like her (as I do Gul Panag) because she seems to be able to hold her own in a tough world. Able to give back as good as she gets. Able to stand out, and not blend in with the crowd. A strong lady. Trying to be different (in weird ways though - by undressing and making provocative statements). But hey, still different. Still unique.
The mind slowly focuses back on reality. The login/password feature beckons. I trawl more pages. The heat gets worse.
Wednesday, April 29, 2009
Traders, Guns and Money
Although I read this delighful book a few months ago, I was reminded of it today as the author (Satyajit Das) wrote a long article on the whole 'green shoots' business in the Mint today.
The book is a side splitting and very very accurate take on life in the daring world of derivatives. The author, thanks to his massively varied experiences (true or apocryphal, I know not!) paints a rollicking picture of banks vs. clients (sophisticated companies, ignorant companies, MNCs, small noodle makers - the only thing they have in common is that they get shafted :-). Replete with incidents like the 'big swinging dick' trader farting (and more... its so gross its quite funny) loudly to make his point on the trading floor, or an English lawyer turning the tables on the big bad bankers from Goldman or the hookers used by the sales guys for their Indonesian clients, the book keeps one laughing most of the time. Add to that the fact that our dude author talks very intelligently about derivatives, and you have a winner on your hands.
Some excerpts (from this interview of the author):
Story 1
A trader I know thought that it might be useful to have his business cards translated into Japanese. His official title was “Trader- Fixed Income”. The Japanese translation was “Trader on Fixed Salary”. The card brought strange looks from the bemused Japanese clients. It seemed more than a little was lost in translation.
Story 2
Around 1999, I met an ERM (Enterprise Risk Management) advocate,. Dudley , the head of risk for an investment bank. He wanted to meet me. I had no idea why. I soon discovered that Dudley had reached ERM. It was the “new”, best-est thing. It was revolutionary. Dudley was at the forefront. He would give me an example of the problems he was trying to model.
“Let’s say our head trader has a complex trading strategy only he understands, yes”. I nodded. I didn’t think any strategy could be that complex, at least if a trader had put it on. But it was quite likely that no one knew about it. The trader may have not told anyone. “Let’s say the trader bicycles to work”. I did not think this likely. Traders prefer Porsches. Not wishing to prolong the discussion, I did not disagree.
“On the way to work, he is hit by a bus. His mobile phone is knocked away from him and damaged. He is unconscious. Assume that simultaneously market prices move due to surprise news. This news is vital to the trader’s position. He does not know. Nobody knows what to do with his position”. I nodded. “That’s not all. Assume simultaneously, there is fraud in another bank”. I nodded in real agreement. That was very likely. “This bank goes into bankruptcy. It creates a financial crisis. This of course affects the trader’s position. He doesn’t know of course. He’s unconscious”. I was hoping he would get to the point soon.
“At the same time, assume there is an accident at a power plant. There is a blackout. The bank’s back-up generator fails. The mechanic forgot to check the fuel tank. The bank’s computer system goes down. The trader can’t get prices or model the risk on his position”. I reminded Dudley that the trader was unconscious, maybe deceased. “Exactly”, he replied cheerily. It went on.
Eventually after a tragedy of biblical proportions had been outlined, Dudley reached the end. “I am modeling the probability that such an event could occur”. For me, it was one step too far in the search for “holistic risk”. Risk management seemed to have completed its transformation into pure entertainment. Dudley seemed the epitome of a risk manager who would drown crossing a river that was 12 inches in depth on average.
Story 3
Nero and I marketed together a fair bit. I provided the technical bits. He smoozed the clients. Nero and I were making a pitch for a new structured product with a portfolio manager from an overseas fund over dinner. Dinner was a 3 martini, 2 bottles of French red wine and cigar and brandy affair. I kept looking for a moment to interject and explain the structure and benefits of the trade. I didn’t get a chance.
Towards the end of the evening, the fund manager turned to Nero and said: “The girls are coming up to my room, right?” I looked at Nero surprised. “You didn’t forget the stuff, it drives the girls wild?” Nero muttered something and carefully steered the conversation in a different direction. After dinner, Nero and I left the hotel. Nero stopped and drew his hand in a cutting motion across his throat. “Remember IBGYBG,” he said. “I be gone, you be gone. Got it kid.” A week later the portfolio manager was on the phone. “Been thinking about your deal. Like it a lot. Send me a term sheet. I think we can do something there.” We closed a juicy trade for $200 million booking profits of over $2 million.
Years later, one of Nero’s boys was pitching a deal to a client. Coincidentally, I happened to be a consultant to the customer. During the presentation, I asked some questions. Nothing personal, I was doing my job. The presentation wasn’t going to plan. Eventually, the salesman stood up and said: “The product is unsuitable for you. It is intended for someone less sophisticated.” I rang and told Nero. He killed himself laughing. True lies, all of them.
I think I'll read it again this weekend!
The book is a side splitting and very very accurate take on life in the daring world of derivatives. The author, thanks to his massively varied experiences (true or apocryphal, I know not!) paints a rollicking picture of banks vs. clients (sophisticated companies, ignorant companies, MNCs, small noodle makers - the only thing they have in common is that they get shafted :-). Replete with incidents like the 'big swinging dick' trader farting (and more... its so gross its quite funny) loudly to make his point on the trading floor, or an English lawyer turning the tables on the big bad bankers from Goldman or the hookers used by the sales guys for their Indonesian clients, the book keeps one laughing most of the time. Add to that the fact that our dude author talks very intelligently about derivatives, and you have a winner on your hands.
Some excerpts (from this interview of the author):
Story 1
A trader I know thought that it might be useful to have his business cards translated into Japanese. His official title was “Trader- Fixed Income”. The Japanese translation was “Trader on Fixed Salary”. The card brought strange looks from the bemused Japanese clients. It seemed more than a little was lost in translation.
Story 2
Around 1999, I met an ERM (Enterprise Risk Management) advocate,. Dudley , the head of risk for an investment bank. He wanted to meet me. I had no idea why. I soon discovered that Dudley had reached ERM. It was the “new”, best-est thing. It was revolutionary. Dudley was at the forefront. He would give me an example of the problems he was trying to model.
“Let’s say our head trader has a complex trading strategy only he understands, yes”. I nodded. I didn’t think any strategy could be that complex, at least if a trader had put it on. But it was quite likely that no one knew about it. The trader may have not told anyone. “Let’s say the trader bicycles to work”. I did not think this likely. Traders prefer Porsches. Not wishing to prolong the discussion, I did not disagree.
“On the way to work, he is hit by a bus. His mobile phone is knocked away from him and damaged. He is unconscious. Assume that simultaneously market prices move due to surprise news. This news is vital to the trader’s position. He does not know. Nobody knows what to do with his position”. I nodded. “That’s not all. Assume simultaneously, there is fraud in another bank”. I nodded in real agreement. That was very likely. “This bank goes into bankruptcy. It creates a financial crisis. This of course affects the trader’s position. He doesn’t know of course. He’s unconscious”. I was hoping he would get to the point soon.
“At the same time, assume there is an accident at a power plant. There is a blackout. The bank’s back-up generator fails. The mechanic forgot to check the fuel tank. The bank’s computer system goes down. The trader can’t get prices or model the risk on his position”. I reminded Dudley that the trader was unconscious, maybe deceased. “Exactly”, he replied cheerily. It went on.
Eventually after a tragedy of biblical proportions had been outlined, Dudley reached the end. “I am modeling the probability that such an event could occur”. For me, it was one step too far in the search for “holistic risk”. Risk management seemed to have completed its transformation into pure entertainment. Dudley seemed the epitome of a risk manager who would drown crossing a river that was 12 inches in depth on average.
Story 3
Nero and I marketed together a fair bit. I provided the technical bits. He smoozed the clients. Nero and I were making a pitch for a new structured product with a portfolio manager from an overseas fund over dinner. Dinner was a 3 martini, 2 bottles of French red wine and cigar and brandy affair. I kept looking for a moment to interject and explain the structure and benefits of the trade. I didn’t get a chance.
Towards the end of the evening, the fund manager turned to Nero and said: “The girls are coming up to my room, right?” I looked at Nero surprised. “You didn’t forget the stuff, it drives the girls wild?” Nero muttered something and carefully steered the conversation in a different direction. After dinner, Nero and I left the hotel. Nero stopped and drew his hand in a cutting motion across his throat. “Remember IBGYBG,” he said. “I be gone, you be gone. Got it kid.” A week later the portfolio manager was on the phone. “Been thinking about your deal. Like it a lot. Send me a term sheet. I think we can do something there.” We closed a juicy trade for $200 million booking profits of over $2 million.
Years later, one of Nero’s boys was pitching a deal to a client. Coincidentally, I happened to be a consultant to the customer. During the presentation, I asked some questions. Nothing personal, I was doing my job. The presentation wasn’t going to plan. Eventually, the salesman stood up and said: “The product is unsuitable for you. It is intended for someone less sophisticated.” I rang and told Nero. He killed himself laughing. True lies, all of them.
I think I'll read it again this weekend!
Monday, April 27, 2009
Eaten alive
Last week the wife and I decided to try something off the beaten track. We tried an experiment where we were fodder from some creatures called 'doctor fish' (garra rufa for the scientifically inclined) flown all the way from Turkey. The concept is quite simple - the fish are supposed to eat up dead skin, giving the person a natural derm-abrasion, and leaving behind only healthy skin. While one can get a full body treatment, we were only adventurous enough for a feet therapy session. Some pictures (not very clear since taken from a phone camera): 
The biggest problem in the entire 20 minute experiment was keeping ourselves from laughing uncontrollably from all the tickling. The verdict - only good for experimenting, definitely nothing that dramatically improves the feet or your skin. Will I go again? No, unless I'm in a blue funk and need a lot of giggling to get me out of it!
Wednesday, April 08, 2009
'Black Swan' author talks sense
in this article from FT...
Ten principles for a Black Swan-proof world
By Nassim Nicholas Taleb
Published: April 7 2009 20:02 Last updated: April 7 2009 20:02
1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.
2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.
4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.
5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.
6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.
7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.
8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.
9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).
10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.
Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.
In other words, a place more resistant to black swans.
The writer is a veteran trader, a distinguished professor at New York University’s Polytechnic Institute and the author of The Black Swan: The Impact of the Highly Improbable
Ten principles for a Black Swan-proof world
By Nassim Nicholas Taleb
Published: April 7 2009 20:02 Last updated: April 7 2009 20:02
1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.
2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.
4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.
5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.
6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.
7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.
8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.
9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).
10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.
Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.
In other words, a place more resistant to black swans.
The writer is a veteran trader, a distinguished professor at New York University’s Polytechnic Institute and the author of The Black Swan: The Impact of the Highly Improbable
Wednesday, April 01, 2009
Intriguing
These creative advertising types certainly can be innovative.
Courtesy (of all places!!): marketbhavishya.com
Courtesy (of all places!!): marketbhavishya.com
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