Friday, April 20, 2018

Interesting Readings 20 April 2018

India
India needs to fundamentally alter its export strategy
Ajit Ranade spells out the answer briefly. The article however highlights important gaps in Indian exports.

World
What 1985 tells us about a US China trade war
Mint searches for lesson in Regan's Japan strategy for Trump's China strategy. Interesting.

Worth reading.

Sort of explains my feeling. Long ago we shorted a group of Australian media stocks. We took positions when they were trading in $38-42 range (yeah all of them) and then they went up over next 3 months. I being a junior was a bit scared though we had doubled down of these bets. Ultimately Lehman struck and these stocks went down right to $4 approx. Yet, I still remember feeling a bit jittery during those times.

One of the most important podcast you will listen. Annie is a poker player and her views on decisions in uncertainty will definitely be helpful. I want to read her book "Thinking in bets". Poker is much like financial markets - decision making under uncertainty. You can also read For Richer, For Poorer: Confessions of a Player by Victoria Coren Mitchell for general view of Poker.

Many people seem to throw blockchain and Distributed Ledger technologies as useful in many domains. For example, in the above one, shipping is considering. While blockchain can solve their problem, that is not the most apt solution. What they need seems to be a centralised processing system with view access to all channel partners.

This is an old one but it gives sort of the evolution of Chinese leaders. 

World War Watch

F-35 the myths. This four part series answers some of the questions related to F-35. Part 1; Part 2; Part 3; Part 4. I am beginning to believe it will be better for India to rely on 5 aircraft configuration for Indian Airforce. Gripen, F-35, Tejas, Su-30, Rafale. If US can offer a manufacturing line for F-35 we should take it. But a manufacturing line for F-16 block 70 does not seem to make sense. Particularly I find F-16 short on avionics and a fuel guzzler of sorts. The main part will be to ensure all aircrafts talk to each other. That will be the biggest problem. Further, the deployment should be multi-aircraft types rather than single types. It means more collaborative training between all pilots.


Tuesday, April 17, 2018

Jobs/Employment and Growth

Why are incomes not picking up even when the unemployment rate is at its lowest and profits are rising?

The first phase of automation focussed on improving productivity. So skill requirement of workers goes up and hence their pay goes up.

In present phase of automation, the skill requirement of worker operating the equipment is going down and hence their pay is going down.

Thus, if you replace the spade with earth moving equipment, you need to pay the worker more for the higher skill requirement. But when you replace an expert barista with a coffee-maker machine then you need to pay less to the operator of that machine. 


Wednesday, April 11, 2018

Interesting Readings 11-Apr-2018


Ila Patnaik believes bank fraud at PNB and ICICI Bank (possibly) are result of lack of proper supervision. I agree that supervision is inadequate. However putting the blame on RBI alone is not proper. Rightly, Ila points at all supervisors. In addition, I think one perspective is missing - that PNB and ICICI Bank (alleged) fraud are two different animals. PNB is systemic loopholes being exposed something regulator, management should have caught and has far reaching implication wrt Business process design within banks. ICICI Bank (alleged) is pure corruption. Even if it is conclusively proved that there was no fraud, the optics on this are bad. It is more responsibility of shareholders than the other. 

Shikha Sharma followed K V Kamath's model of growth without regard to Asset quality. Even Rana Kapoor belongs to this group. On the liability side their strategy is to get corporate deposits. Aggressive lending - generally large corporate (longer tenure) and consumer lending (higher risks) on asset side and corporate deposits (more fickle, higher costs) on liability side accentuates Asset Liability mismatch for these banks. Chanda Kochhar managed to set ICICI house in order after Kamath's high-paced up-scaling. But the problem persists in many new private banks. As corporate lending portfolio looks more risky the banks become more shaky.

International
Grantham is one astute market observer. Earlier this year he mentioned the likelihood of a melt-up (markets going up). The Trump histrionics have dented the probabilities but it still is at 40%. Cool!

Interesting ideas from Fred Wilson. Short video, short podcast, IPO intro-letter. 

Frauds are eating up the moral character these days.

Interesting

Ken Rogoff thinks it is not easy.


On a different note
The story of the spy. Looks like a must watch movie from Meghana Gulzar. Talvar was well made movie. I liked it.

I like Dwayne Johnson.

Monday, April 09, 2018

Interesting Readings 09 April 2018


BANK SCAM WATCH

PNB scam: ED unearths Rs5,000 crore money trail
This will test the skill-set of ED team. Lets hope they get it done properly.

INTERNATIONAL
Also subscribe to Bronte Capital blog. The article is thanks to Barry Ritholtz.

This post was courtsey Barry Ritholtz. The author is worried about US stock markets and believes that central banks will back the markets again. I find that difficult to believe but the past decade has been unbelievable to say the least. But the post triggered some thoughts. Refer to this comment:

This massive growth has had tremendous implications for the global financial system. As the Chinese government sold more Yuan and bought U.S. dollars, they reinvested the USD back into US Treasuries and other relatively safe fixed-income vehicles. This had the effect of pushing interest rates lower, which when combined with the falling rate of inflation from the cheap Chinese goods that were entering America, sent bond prices rocketing higher. As interest rates fell, many consumers were able to refinance their mortgages (or take out equity home lines of credit), which allowed them to buy even more Chinese goods. This, in turn, caused the Chinese government to have to sell even more Yuan and again buy USD, thus creating a self-reinforcing feed back loop. To some extent, the credit excesses that led to the 2008 Great Financial Crisis were the direct result of the Chinese economic reform. China’s transformation had the effect of creating lower inflation and lower interest rates in the rest of the developed world.
Most commentators praise China for "allowing" US to consume more. I think that is wrong way to think about it. It is because of this cheap credit that we had the bubbles and problems of the past decade. Had China been gradual in its development, it would have given about 400 million developed world workers to make the adjustment. The world went along with China in that game to its own detriment. Further, it would have been worthwhile if Chinese workers would be irrevocably moved out of poverty. But that is not so. The upcoming trade wars and squeezing of Chinese supply will put many out of work and push them into poverty. China will have to make a decision to chose who to let go into poverty. To prevent this, China wants to invest in the world through BRI which they will use Chinese capacity and Chinese employment to create assets overseas. It is all fantastic.

Edward Harrison explains this in his post titled China cannot use its Treasury holdings as leverage. Here’s why.  Edward links to work by Micheal Pettis and explains some of the nuances of the present Chinese predicament. Similarly Marshall Auerback highlights some risks to China here.

But here is a cartoon from Tom Toles



OTHERS





Puffin beaks are fluorescent and we had no idea
Thanks to Tyler Cowen. Puffins are birds with colorful beaks. The beak apparently lights up under UV light. What I learnt is that birds perceive colors differently. Humans see colors that are a mix of red, blue and green light, while birds have a fourth color in the mix — a property called tetrachromatic vision. Tetrachromacy is quite common among birds reptiles etc. It provides larger visual spectrum (different types of light) though spectral resolution (clarity) is similar to humans.

Not Enough Women at Wikipedia?
There are not enough women editing the stuff on wikipedia. I don't know how to think about this. Wikipedia is a free resource, created by free contribution by everyone. I hope Wikipedia is not stopping women from contributing. That would be stupid. Is it that men contribute overwhelmingly more than women? Why so? Does it say something about pay-gap and gender equality? I wonder.

Friday, April 06, 2018

Interesting Readings 06-Apr-2018


India
I would like to watch how NCLT decisions filter through Supreme Court.

This is another area where drastic simplification is required. If Form16 has the data why can't Income Tax pick it up directly from employers. This makes filing taxes difficult for the citizens. Then government complains why tax compliance is very low.

This is the problem when there is no coordination between producers. That is why I have proposed Smart Agriculture Management System.

Educomp was once a darling of the market. As one of the early investors (not in personal capacity), I visited their Bangalore school. When they went Asset heavy for a business model that was asset light (software platform for education), Educomp missed the game. It could have become one of the Indian unicorns. But self-interest triumphed over smarts. And now the company is playing another questionable game. Sad!

A 1.6 km rail track was stolen alongside a busy railway line in Madhya Pradesh. 60% of the rails were recovered and masterminds fled to Pakistan apparently. 


International
I wait for the day when Indian politicians go to jail for these offences. Would love it. Actually most of them will have to go. Chagan, Sharad, Ajit, Rane, Mulayam, Lalu, Sonia, Rahul, Kanimozhi, Raja, Karuna, Chidu, etc. etc. list goes on and on.

Trump is targeting $100bn over the $60 billion. China had slapped $66 billion tariffs as a response. 
I think US talks up its opponents and China talks up itself. Once we get over that, we realise this is not going to go well for China.

Greg Ip summarizes how this game will play out. Two important points:
By contrast, the U.S.’s political pain threshold is low, which other countries regularly exploit: in 2002, the European Union retaliated against U.S. steel tariffs by targeting motorcycles from Wisconsin and orange juice from Florida, both swing states in elections. The U.S. repealed the tariffs.

China has singled out products made in states represented by influential Republicans, such as whiskey, distilled in Kentucky, home of Senate Majority Leader Mitch McConnell.
India must wait and watch for this opportunity. If there is a possibility to supply US with a manufacturing base in India, it will give India some advantage. However, India must not make the mistake of overbuilding uneconomical capacities. Nelson Cunningham says just that - How Donald Trump’s trade policy will affect India.


Others
I always suspected people do not use food grade ice.

There are a lot of bots spewing out content on social media. It is important to know if you are listening to a bot. Article provides some interesting links for bot-watchers. Some intelligent perspective too. 

Elon Musk recommends this one. So must watch.


World War Watch
Indian Govt firms up plans for made-in-India Kalashnikov rifles
Interesting development. I would love to see F35 along similar lines.