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Wednesday, April 04, 2018

Interesting Readings 02-April-2018


John Mauldin picks Lacy Hunt's chart on velocity of money. Here it is.
This is what has been the problem all along. I explained this 2013 article on this blog titled About Money Supply and Inflation. This is the reason why unprecedented stimulus did not result in inflation. But velocity is weird variable. If it turns up then we will quickly go into high inflation.

Jared Dillian has a great newsletter. He believes we are entering a trading zone. Volatility is good for trading not for investing. Investors need to keep cash on hand for opportunities that may arise. They may have to move quickly. Interesting times. 

Here is a bit of advice from Jared Dillian's boss. Worth keeping in mind. 
There is a relationship between volatility and liquidity. When the Fed adds liquidity to the system, it suppresses volatility. When it withdraws liquidity, volatility rises.
FT ponders which company will beat 1 Trillion Dollar valuation. It points to how Scott Galoway jinxed Amazon, Morgan Stanley jinxed Microsoft. In the article FT jinxed Apple. Interesting read.

World War Watch
Various South Korean artists are in North Korea on a diplomatic mission. The tour, titled “Spring is Coming,” is billed as a gesture of goodwill and includes k-Pop artists. Red Velvet a famous K-Pop band also sang their song called "bad Boy". It went well with Kim but the Economist was worried about exactly that and its implication for diplomacy:
Red Velvet’s “Bad Boy” could be an unorthodox injunction to nuclear diplomacy: “Oh your edgy style is a bonus/ I love the boring way you talk/ let’s push and pull.”

Interesting analysis. Raja Mohan believes Kim went to China to “inform” Xi of his decision, “promise” to keep China in the loop and “seek” the Chinese leader’s blessings. This is a position of strength for Kim. Raja Mohan states that the two polar opposite outcomes of Kim-Trump accord are bad for China. If it succeeds there will be more US presence in North Korea - closer to Chinese border. If it fails drastically again there will be a war near China border. But any outcome that increases US cooperation with North Korea seems problematic for China. That means only acceptable option for China is North Korea determined to be anti-US but pro-peace and pro-denuclearisation. Hmm.....

IS with small resources is thinking up newer tricks to battle with trained armies. These new strategies are being watched carefully. Armies need to be prepared to counter-act such tactics or develop them for self-defense. Imagine what can China do. India needs to keep an eye on Arunachal and Kashmir. The future looks dangerous.

Very important read. US needs to do more to be assertive in the region. There is another aspect. US has always appeared to be lot closer to being beaten that it really is. Japan came close but fell back. The US resilience is rooted in democracy-capitalism complex. That is at its weakest. But it can be strengthened. Once done, it will unleash another wave of creativity and growth leaving many behind.

Others
Caroline Weaver explains the history of Pencil in a short 4min TED video.
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Monday, March 26, 2018

Interesting Readings 26 March 2018



International
The problem of the crisis is the story of blind men and the elephant.

Micheal Batnik links to GMO 7 year forecast and it does not make a pretty picture.

Look at this -from visual capitalist courtsey Barry Ritholtz.

Another thanks to Barry Ritholtz.

Thanks to Gulzar Natranjan. The quote goes thus:
John C. Coffee Jr., a professor at Columbia Law School who teaches classes on white-collar crime, said, “Typically you get more sympathy from the criminal justice system if you’re an attractive young woman than a brash, arrogant young male”... In comparison to Mr. Shkreli’s fraud, the Holmes allegations “are really a different order of magnitude,” Ms. Apps said.

Some reads from V Ananthanageswaran on China
Specially the Kevin Rudd speech

India Bank Fraud
Three articles from Anjan Basu on the fraud. Thanks to Gulzar Natrajan again.
Are India’s Public Sector Banks at Their Nadir?
Three Reforms That Also Set India's Public Banks on a Bad Loans Path
As the Industry Changed, India’s Public Banks Lost the Most and Won the Least

Any deterioration in a sector is result of many small mis-steps. These three articles give the details of how small interventions possibly led to present predicament.







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Friday, March 23, 2018

Interesting Readings 23 March 2018

India
Take this as a case study - all elements that reduce farmer's risks help. That is why I developed the Smart Agriculture Management System. It not only reduces risks but makes the process transparent allowing private parties to invest in agriculture support services that lower risks further. It should create a positive spiral. 

Key quote: 
We would assign a 25% probability to an early general election, clubbed together with state elections scheduled in Q42018 and H12019 (first half), including the key BJP states of Chhattisgarh, Rajasthan and Madhya Pradesh.
This is to ride on better economic data that may turn by March 2019 unless structural reforms are undertaken. It should help campaigning for BJP.

International
The science is right. The carbon conversion from plant to human is more efficient than from plant-to-animal-to-human. However, the solution is not to cut the meat consumption in half. The solution is to capture the carbon. After all if one extends that logic, ultimately you will reach a point when humans are better off not living. [That is what Terminator and other movies suggest].

Roseneft is close to Putin and CEFC the company that was taking the stake has fallen out of favour of Chinese elite. They have backtracked on projects in other countries including Czech Republic. 

World War Watch
Two sets of parties are nicely moving together setting the stage for a big war. China-Pakistan-Iran-Russia and North Korea are tagged on one side (note - only by the media). On the other side are Quad+ 2 (Britain & France).  Some player equations are yet to evolve.  Saudi has an alliance with Russia. Russia with Iran. Russia is strategic partner of India too. Europe will abstain if Russia abstains otherwise they will side with US.

Brahmos is Russia India collaboration.
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Wednesday, March 21, 2018

Interesting Readings 21 March 2019


India
The article highlights the same old problems. The solution however is better - open markets. Farmers bear too much risk in Agriculture and are not compensated adequately. For example see this. But de-risking agriculture is not easy.  Here is my paper explaining the problem and the solution.

Do We Need Banks?
Menaka Doshi pointed to this post yesterday by JR Varma. The article is important for the links in them. Amol Agarwal points to some other post by JR Varma first being Are banks too opaque? and next being Can radical blockchain technology decrease banking frauds? I am not sure I agree but both are worth reading. May need a longer post.

International
Martin Wolf examines the problems with Macroeconomics. Unfortunately, theoretical economists often ignore the empirical findings that contradict their views and thus delay the progress of economics.

DAvid Warsh talks about Benn Steil book Marshall Plan. From the article it seems it is worth a read. The Marshall Plan (economic assistance to Europe) was part of the Marshall Plan. The other part of the plan was to keep Soviets at bay. In fact, it seems the Marshall Plan was a tool to accomplish Soviet containment. India and its neighbors need this kind of Marshall Plan against China.

There is something really wrong with US healthcare costs.


World War Watch
China's stealth wars in the Himalayas
Bramha Chellaney highlights the extent of China's designs. That does not bode well for India. Even Arunachal Pradesh is at risk. India better act fast. Also, with Belt-Road through Pakistan-Occupied-Kashmir, India could face two front war - both fronts with China!

China tests driverless tanks that could be powered by artificial intelligence
That is something to watch out for on Arunachal borders.

US Pacific Command supported selling F-35 fighter jets to India.
Lockheed is pitching for production line for F16. I would take it if it comes with production line for F35 too. That would be super. F35 is quite a capable aircraft. As one pilot described it, US aircraft are like racing cars - you have to take real good care of them. Russian aircraft are more like monster trucks - they stand up to abuse fairly well. In that context India's Russian aircraft dependence suits us. But eventually we have to move to these US-style fighters. Saab's Gripen will also be similar. Also Saab is going to assist with Tejas. India will be one country with both Russian and Amercian weapons in its armory.
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Interesting Readings 20 March 2018


Lemon Tree is ranked 4th Best Company to Work for but attrition rate is 43%. Readers know that I have my gripes about the practice of HR management. I think most of it is glorified payroll processing. Real talent management has not developed at all. HR can be quite strategic asset if used properly.

Actually some of the ideas Jio is using came for Reliance Communications. RCom, before the split, was going along the exact same way only they were going to use fibre-to-home rather than mobile. Also the choice of CDMA was because it was data efficient. This is back in 2002 when iPhone had not changed the world. Mukesh Ambani is a tech geek and understand new tech very well.

Andy Mukherjee is at it! Well written. Kumar Mangalam Birla just treated India’s new bankruptcy law with utter disdain. But before you dismiss the behaviour, think of the huge favour he’s doing the legal system.

This crisis is entirely Modi's making. Modi, when he was campaigning, seemed like Narsimha Rao 2.0 - take political risks but fix the economy. Vajpayee's NDA was not ready to take political risks because of their marginal majority. However, Modi's policies are more in line with Gandhi's (Rajiv and Indira) and Manmohan Singh than either Vajpayee or Narsimha Rao. The sooner he aligns himself with the correct economic model the better.
International
Barry Ritholtz finds we haven't learnt much.


Look at the LBO-based financialization of the firm. This shows the difference between investors such as Warren Buffet and these vulture funds. In one of the meeting with investee, I happened to join with analyst from a co-investor firm. First thing this guys says to the entrepreneur "we own you guys".
They blame her but she is getting off the hook. Apparently after being charged with defrauding investors out of more than $700 million, Theranos founder and CEO agreed to a $500,000 fine, gave up her voting control of the company, reduced her equity stake significantly, and will not be able to serve as an officer or director of a public company for 10 years. 

The main culprit here is the silicon valley culture. One fellow suggested to me that entrepreneur should get financed by VCs because "they will open the doors" for him. So if his idea was important and he did not need funding no one will open the door? The once you get first round, you have to get second round at 10X the valuation and third round at 10X till you go for IPO exit where everyone gets off and common investors are left holding the bag. Read some issues raised by this episode at Worden Report.

Excellent pointer thanks to Barry Ritholtz. Look at this chart, India should focus on improving patenting of innovations already being used. Indians are quite lax about patenting.

Trade war with China was always on the cards. In fact tariffs and trade blockade is the way to keep China from damaging US interests. China was becoming increasingly aggressive with US and its allies. A US trade blockade will put the wages and employment of large population at risk. So will China suffer? I think not. Chinese leaders have shown great strategic depth. I believe they are already working on shifting their economy towards a consumption-oriented economy. However, as I said before, I think consumption driven economy is fundamentally incompatible with restrictive political system.


Indian Bank Scams
Debasis Basu asks the right questions whether RBI is powerless or not. And rightly highlights that there is finger of responsibility points to babus from Finance Ministry too. Must read.

Ajay Shah weighs in on how to manage the bank reform. I agree with him in some aspects. Here is the quote:
A comparison with the experiences of 2008 and 2013 is instructive. India was one of the worst-hit emerging markets immediately after the Lehman failure. Each crisis is different, and this one had a combination of stress in mutual funds, real estate companies, Indian borrowers in the overseas money market, ICICI Bank, etc. The key factor that led to good outcomes was the capabilities and teamwork between the Ministry of Finance, RBI and SEBI. The day to day actions mattered, but even more, the market was reassured that there was genuine capability and teamwork.

Objectively speaking, the difficulties faced in India in 2013 were smaller than the storm of 2008. The difference lay in the capabilities and teamwork. In 2013, we came across there as a jittery government coming out with one new action every day, and lacking an understanding of what we are up against. This converted a small shock into an outsized problem.
This evokes mixed feelings for me. First, Government is coordinating the various banks and their ensuring that at least there is some coordination between smaller-bank-group vs large-banks-group. It is good for efficiency. But retail credit need not be good credit. It has to be good credit first and retail credit is secondary.  

Others
 Tyler Cowen highlights an interesting paper. This applies to "sons" not daughters. It is triggering many thoughts as to why it should be so. Read the comments too. Not much discussion can be carried out without sounding racist so be careful.

Former Additional Solicitor General of India Biswajit Bhattacharya has written a good piece. But like a good lawyer fails to explain the other side. Supreme Court, despite being cognizant of this, has granted custody for many politicians. Mind you this is mostly in case of politicians accused of scams. Others like Salman Khan tended to get off easily. The CBI, government officers and corrupt politicians have extremely tight nexus. It is being sought to be broken and it is not going away without a fight.


World War Watch
Mint believes in pragmatism. But two-front war is something we need to prepare for. General Bipin Rawat is right. The points made by Mint are right too.

Excellent article by C Raja Mohan. I think, India must consider the possibility that China is playing the same game US played with Soviets and the game is economic and not related to armed intervention. Luckily, India has US on its side in this game. The Quad is necessary reality. Shinzo Abe was right and timely (probably late). India must accept this reality.

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Monday, March 19, 2018

Interesting Readings 19 March 2018


V Ananthanageswaran points to interview of former election commissioner. It highlights how the proposal for electoral bonds (a salutary proposal at the time) has morphed into something of a joke against corruption. The mechanism for political party finance remains elusive.

India is considering creating a regulatory Sandbox for fintech. I think Singapore provides a good model, proactive and with feedback loops.

David Henderson writes about his experience of Uber Driver cancelling and ponders over the economic motivations.


World War Watch

Interesting development. Was the need of the hour.

Lockheed Martin is trying to sell F16s to India. Offering is unique. But F16 still has higher operational cost than Gripen and likes. I would rather have a Gripen aircraft with same deal as F16. Modern air warfare will most likely involve big-team strategies beyond visual range. Gripen can also be modified to carry Indian missile systems.


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Friday, March 16, 2018

Interesting Readings 16 March 2018



BJP is becoming arrogant. The problem is people realise what reforms are critical. Unfortunately Modi has gone silent on reform and development. He needs to communicate and guide the national sentiment. Further, 80% of BJP is like all other political parties - goons, thugs and fringe elements. They need to be disciplined. 
BJP is also suffering from prolonged and relentless campaign by the media. Media is wearing BJP down. In the time when prime minister (the main icon of BJP) is not speaking on reform and process government is using, it has become one sided. 
The institutions too are waging a war against reforms - banks and telcos are relentless in their Aadhar marketing. To make it worse they are threatening with dire consequences causing pain - locking of bank accounts, mobile phones etc. Can the BJP not reign them in?


Suresh Prabhu's efforts are paying dividends. This is the beginning of improvement in Railways. 


A day after Patel’s plaint, finmin points to power regulator enjoys
I don't understand why they have to fight in public. Why can't the RBI and Finmin sit and do a dialogue. I mean even Kim and Trump are talking. This public spats are unwarranted. I was not sure about Jaitley as Finance Minister.

Also Mohammad Shami and his wife should shut up and the press should just ignore them. 

Trade Wars
There I have come to first use of Wakanda as an example in Economics.

World War Watch
HAL production capacity is 6 aircraft per year. The aim is to get 16 aircraft per year production rate. If this is what is priority then I believe we need super duper priority. The aim should be to create about 30 aircraft per year. For next 3 years. 
As a comparison Lockheed Martin F35 production rate is 17 aircraft per month. It is not totally comparable as there are orders of 3500 F35 pending with Lockheed. But once the Indian capacity is used up for Tejas there will be upgrading and new aircraft etc. HAL's IPO should help proceedings.



Others
Mark GB presents a case that Putin is being wrongly demonized. Russian version of Syrian conflict was more accurate than US/Western version. I am also not a fan of US interfering in elections, parties, coups and political assassinations in guise of bringing democracy. 

US has done a great service to the world in second world war. I think the post-war freedom movement was partly result of negotiation by Franklin Roosevelt with the Europeans. That was good. After the World war US entered into a cold-war era which had its issues. Part of US interference in other countries was in light of cold war Soviet financing of the political establishment in other countries. [One can see the parallels with China in this case]. But after the fall of Soviet Russia, US has interfered without reason and merely to further interest of those who lobbied for it. The first war on Iraq was justified but not the second. The mess in Afghanistan was more created by US. 
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Thursday, March 15, 2018

Interesting Readings 15 March 2018


No Banking Regulator Can Prevent All Frauds, Says RBI Governor
Urjit Patel, full speech is here. Before reading you might be tempted to count this as a cop out by RBI. However, Urjit Patel raises important issues which merit consideration in overall scheme of Banking Regulation. It is not to blame present government but to highlight the important issues. Most of the points he highlights need careful deliberations which frankly I think are beyond Arun Jaitley. (He may be a good man but mostly misled by his bureaucrats and same goes for Hasmukh Adhia).
All commercial banks in India are regulated by the RBI under the Banking Regulation (BR) Act of 1949. Additionally, all public sector banks are regulated by the Government of India (GoI) under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970; the Bank Nationalisation Act, 1980; and the State Bank of India Act, 1955. Section 51 of the amended BR Act explicitly states which portions of the BR Act apply to the PSBs, most common thread across the omissions being complete removal or emaciation of RBI powers on corporate governance at PSBs:
  • RBI cannot remove directors and management at PSBs as Section 36AA(1) of the BR Act is not applicable to the PSBs.
  • Section 36ACA(1) of the BR Act that provides for supersession of a Bank Board is also not applicable in the case of PSBs (and regional rural banks or RRBs) as they are not banking companies registered under the Companies Act.
  • Section 10B(6) of the BR Act that provides for removal of the Chairman and Managing Director (MD) of a banking company is also not applicable in the case of PSBs.2
  • RBI cannot force a merger in the case of PSBs as per Section 45 of the BR Act.
  • PSB’s banking activity does not require license from RBI under Section 21 of the BR Act; hence, RBI cannot revoke a license under Section 22(4) of the BR Act as it can in the case of private sector banks.
  • RBI cannot trigger liquidation of PSBs as per Section 39 of the BR Act.
  • Furthermore, in a remarkable exception of sorts, in some cases there is duality of Managing Director and the Chairman – they are the same – implying the MD is primarily answerable only to himself or herself.
This legislative reality has in effect led to a deep fissure in the landscape of banking regulatory terrain: a system of dual regulation, by the Finance Ministry in addition to RBI.3 I will now take a few minutes to explain why this fissure or the fault line is bound to lead to tremors such as the most recent fraud.
(...)
In contrast, the market discipline mechanism for public sector banks is appreciably weakercompared to that at private banks. There is implicitly a stronger perceived sovereign guarantee for all creditors of PSBs, and the principal shareholder – the government – has not so far been interested in fundamentally modifying the ownership structure. From an economic standpoint, this weakened market discipline should imply that the government would prefer strongerregulatory discipline of these banks, not weaker. However, as I explained above at length, and perhaps since the original idea behind bank nationalisation was complete government control over credit allocation to the economy, the situation in India is exactly the reverse: RBI’s regulatory powers over PSBs are weakerthan those over the private sector banks.
The owner of our public sector banks – the government –which has provided the IBC, the related ordinances and the bank recapitalisation package to get the churn going, might consider making further, equally important contributions by:
  • Making banking regulatory powers neutral to bank ownership and leveling the playing field between public sector and private sector banks; and,
  • Informing itself about what do with the public sector banking system going forward as part of optimising over the best use of scarce national fiscal resources.
It is an open issue whether centralised government control alone can be effective enough at designing and implementing governance of banking franchise comprising over 2/3rds of the sector’s deposits and assets. It would be better instead to restore regulatory and market discipline.
Read this in context of article below which suggests some ways how to operate publicly owned companies.

Scott Sumner talks about past article How capitalist is Singapore? (we linked to this in previous post). Read the article with an eye to Air India and Indian Government owned companies. The first line is : 
Singapore Airlines is majority owned by the Singapore government. Alitalia is privately owned. So which country's airline industry is better described as "capitalist", Singapore or Italy?
India's Clouseau Bankers Deserve a Bigger Stick
Andy Mukherjee says it well suggesting Arun Jaitley should accept Urjit Patel's suggestions. Though I do not agree with the privatisation part. They could well set out a road map saying Banks will be privatised in 8 years or so and then working them towards profitability.

Haim Bodek is a whistle-blower who exposed Direct Edge a stock exchange help High Frequency Traders. He is back with another expose of NYSE now. Both have resulted in fines of $14m. Also worth reading are articled linked in this one.

Chinese credit risks are quite severe. It is good that India is reforming its banking system. This will allow for next decade or two of growth. 

A counter-view about China. He points out that China's overall debt is not too high. He makes certain other points in favour of China too.

But the debt is not too high when using normal methods. The Chinese use outside-mechanism to create debt. It's institutions carry too much debt burden backed by the government. This debt has financed investment in factories capacity equal to global demand for many products. When trade policy turns adverse and every country protects its own manufacturing, this capacity will be a huge liability. US is rightly changing the policy and in fact is playing the conflict strategically in the economic theater. US did the same with Soviet Russia - played them economically with Star Wars program.

What should be the international reaction to Chinese debt problem?
Global central bankers should increase the risk weightage for firms dealing with Chinese financial institutions. This is the time to increase capital backing these transactions.  That is what I suggested in Subverting Capitalism & Democracy:
In  an  economic  growth  cycle,  it  seems  advisable  to  have  increasing  deposit  reserves.  As  the  pace  of  the  economy  grows, banking system should become taunt and solid. This  moves the banking system from a fractional reserve system  towards  100%  reserve  system.  Of  course,  it  would  never  reach  100%  reserve.  At  the  extreme,  reserves  may  reach  say  40%.

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Wednesday, March 14, 2018

Interesting Reading 14 March 2018


Bank Scam
RBI bans letters of undertaking for seeking overseas loans
Too little too late?

China’s Own Goal: An Unnecessary and Counterproductive (on-budget) Fiscal Consolidation
Brad Setser talks about how Chinese demand and savings affect global demand and savings. Interesting read as usual. He has clarified this issue many times before but read this article as it gives details on Chinese central government debt and savings.

B.R. Ambedkar in the time of farmer protests

China’s US Treasury holdings in focus amid trade tensions
This seems like a fallacy. China would rather use the forex reserves to buy assets globally or in US than just dump them. With countries restricting acquisitions by China [Recently US government vetoed Singapore based Broadcom's bid for Qualcom] things could get nasty but dumping treasuries may not be part of the deal. In case situation worsens however China may use it as an offensive tool. From China's point of view those dollars should be written off already.

Other Interesting
The Economist has a story on how taxi data was mined around Fed meetings to study what is the potential impact of the policy being announced. The Economist raises some questions about information leakage between policy announcement and release of minutes of meeting where there is no blackout.

My suggestion is that every politician or bureaucrat when he meets with outsiders the meeting should be live streamed with audio on their website. And no meetings should be allowed on outside. Thus when an official meets outsider in a coffee shop or so, a presumption of law may be attributed to that being "illegal" meeting.



Blockchain Revolution Without the Blockchain 
A sensible article about what the block-chain is  and what to expect. This comes from Bank of Canada courtsey Amol Agarwal.

Addressing the Dark Side of the Crypto World
Christine Lagard weighs in on risk of Crypto World. Gives you flavour of what international policy is heading for.

Something Mysterious Is Killing Captive Gorillas
Gut bacteria is very important. Some principles of Ayurveda are coming back to mainstream.

World War Watch
A challenging time for the Indo-Pacific
Brahma Chellaney does a superb post. Must read.
Remember Indian ocean is strategic - it has access to two choke points on trade routes - The gulf of Aden (towards suez canal) and Strait of Malacca (Singapore strait towards pacific). China is trying to get its feet into areas where it feels it can be choked -oil transport routes.

Forget Trade Wars. Trump's ‘Taiwan Card’ Is China's Real Worry

Game Theory Scowls at Trump-North Korea Talks
Tyler Cowen explains the North Korea-US talk in game theory perspective. North Korea is in position of significant advantage. The question is there are some options that are not known to us lay people but known to US security experts.  That is the hope.

Most of China experts believe that North Korea is headache for China. However, I don't think so. There is/must be some tacit understanding between China and North Korea. I feel China is playing US through North Korea. This game is not being played by Kim alone. The behaviour of China & North Korea just don't add up.

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Tuesday, March 13, 2018

Interesting Readings 13 March 2018


V Anathanageswaran says "The machinery of complex financial engineering that conjured up some derivative products remains intact. The ethical issues that dogged the Wall Street then remain alive."

India Bank Scam watch
Amol Agarwal shares his view on making RBI accountable in bank case. I liked this line:
There is generally a lot of fire and fury around Indian central bank’s independence and its actions on interest rates. But very few of such pieces mention that independence should be backed by accountability as well.
While I am for privatization in general, I am against privatising banks right now. Government must show some risk-taking ability.

Interesting to see what China is doing with respect to banking and financial regulator. Remember Chinese banking problem is X times Indian problem and there could be other scams too. But China is action oriented and they move quickly. Interesting to see the comparison.


World War Watch
Gideon Rachman says:
For the past 40 years, the world’s two largest economies have both embraced globalisation, based on understandings about how the other would behave. The Chinese assumed that the US would continue to support free trade. The Americans believed that economic liberalisation in China would eventually lead to political liberalisation.

Both of these assumptions are now shattered. On Sunday, China’s National People’s Congress rubber-stamped a constitutional change that would allow President Xi Jinping to rule for life. Three days earlier, President Donald Trump announced tariffs on steel and aluminium and tweeted that “trade wars are good and easy to win”.
Raja Mandala: A Korean miracle?
C Raja Mohan gives his take on Kim-Trump talks and implications for various parties. I think Kim's sister may have more influence than understood. Along with her, South Korean President Moon may be the most important voices of reason. Lets us see.

Another piece by Raja Mohan. He talks about relations between France and India and the a bit of history.


Others
Dalai Lama's sister and mentor to many children.

This is second movie involving Aamir Khan to feature in China. Indian Movie industry should look to China for expansion. Some marathi films may do well too. India needs to realise that Bollywood is more powerful soft-power than any. The movie business people are unaware of the opportunity.

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Monday, March 12, 2018

Interesting Readings 12 March 2018


Asia's Big Developers ‘More Vulnerable’ to Shocks, BIS Warns
Higher interest rates, sinking property prices or falling currencies are shocks that could worsen developers’ financial health, with the potential for significant economic repercussions, according to the organization known as the central banks’ central bank. Even without external jolts, falling returns on assets and declining interest coverage ratios “could pose problems” for the firms, it said.
The BIS Quarterly review is a must read itself.

How Blackstone Turned India Into Its Most Profitable Market
Interesting points
“Limited partners always used to complain that it’s easy to invest in India and hard to get the money out,” Dixit said in an interview at Blackstone’s office in Mumbai. “That has changed now -- since 2014, there has been a good exit environment.”

How to Construct a New Invisible Hand: A Conversation with Peter Barnes
This conversation needs to be read and re-read. A lot of what he talks about needs to be discussed in detail. It is interesting that Peter talks about lot of benefit arising from common property. I just came across this article about Singapore.

Indian banking purgatory – 2/3 (the Dharma of blocking the defaulter)
There are many links within it. Be sure to read them all.

The Real Engine of the Business Cycle
Credit-driven household demand channel rests on three main conceptual pillars. First, credit-supply expansions, rather than technology or permanent income shocks, are the key drivers of economic activity. Second, credit-supply expansions affect the real economy by boosting household demand, rather than the productive capacity of firms. Third, the main problem is that the economy has a hard time “adjusting” to the precipitous drop in spending by indebted households when credit dries up, usually during banking crises.
Returning the UK’s privatised services to the public
Article illustrates my gripe with unabashed Thatcherism / Reganism. There is a distinct role for the state in the modern economy and no more. Anything too "free market" and too "state-linked" is a problem. Maintaining that sweet-spot is difficult. Read it in conjunction with article about Singapore.  How would you compare the ideas in these two?

Time to tweak the bankruptcy code, again
Indian Bankruptcy Code needs modification again. I do not see why this should be a problem. These codes need to be iterative. My problem is most of the codes do not provide the principles behind the legislation in clear terms. This makes it difficult to interpret the legislation for the judiciary. Indian Judiciary is quite slow in any case. This adds delays and makes process cumbersome.

MIB: Ryan Holiday
Ryan describes how the media works on the eve of his book launch Conspiracy the battle between Hulk Hogan and Gawker! Must read for those who want to reinvent journalism.

 Multinationals pay lower taxes than a decade ago
This ties in with what I have written in Subverting Capitalism and Democracy in 2009. Rana Foroohar's Makers v Takes explains the a very similar issue. The evidence is compelling. What we need is a global tax deal that prevents such manipulation.

The Blockchain Pipe Dream
Nouriel Roubini aims to dismiss the Blockchain promise. Some fundamental points there.


Dictatorial China  
 
Will China Out-Innovate the West?
Edmund Phelps asks this question more for what West needs to do rather than will China succeed in this. For that answer refer to articles below.

China Is Not a Garden-Variety Dictatorship
This is thanks to V Ananthanageswaran. Very impressive

Start of the end of China's rise: Xi is reversing elements of Deng formula 
A must piece discusses another author's book and interpretation of events.

World War Watch





Others

Big Sugar Versus Your Body
Sugar is now getting hit as cause of disease. Gary Taubes' case against sugar started this line of research. Now others are getting to speed. We will know soon. Meanwhile carbohydrates - particularly staples - wheat and rice are getting bad rep too.

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Friday, March 09, 2018

Interesting Readings 09 March 2018

Today's list is going to be short.

V Ananthanageswaran has started another series on banking problems. It is a must read as always. He lets the board off with some valid points. Though I won't do so. I think boards' approved ever-greening led to this lax control. If boards had called out ever-greening managements would not have let their guards down easily. Further, as with Nirav Modi case, it was difficult for boards to find out the specific scam. But generally scams are initiated by those with questionable financials. I believe if boards caught those, (a) the scam would not have been this big i.e. possibly these borrowers would be outed early AND (b) overall banking crisis may have been avoided.
[Note: Bank managements - not just junior officers, Finance Secretariat, RBI audit dept, all have to take the blame.]


This one is courtesy of Amol Agarwal who put up the link to this one. It sort of explains my position on the central bank cryptocurrency debate. I think we will have a e-currency soon. It may also be tokenized but it wont be crypto. I also think money (currently what is cash), claims (currently what is bank account money or electronic money) and their interchange will undergo dramatic change. Will write about it some day.
[Note: I am fan of blockchain technology but not of the current lot of cryptocurrencies. Also, as an aside, far too many application are going to use blockchain that do not need them. ]


This video below explains in detail a bit of history from 1G till 5G. Gives a perspective. Must watch for telecom analysts.



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Thursday, March 08, 2018

Interesting readings 08 March 2018



Finomics

Tepper highlights reasons as follows: (Please read the detailed explanation it has interesting charts)
  • Companies are keeping more of the economic pie
  • Workers are productive but are not getting paid for it
  • Companies have more market power
  • Many workers are dealing with a monopsonist
  • Many workers live in a rural area with less choice of jobs
  • CEOs are getting paid a lot more than workers
  • There is no countervailing force to high CEO and low worker pay
This is quite comprehensive and well laid out. Check out the charts. They are more impressive. Must read.

 Patrick Watson too weighs in on this. His comments are spot on. Take this quote:
As of December 2017, two the states the CAC named (Alabama and Arkansas) had lower unemployment rates than the national average, yet one of three jobs in those states were in the “low-wage” category. But if all you saw was is the unemployment rate, you might think they were doing fine.
 Now, if you need 2 jobs just to sustain yourself then you need twice the number of jobs as we have. In such a scenario understanding what 4% unemployment means is really difficult.

Interesting perspective on the dollar in short last para.

Investors ready to disrupt far-sighted strategies for short-term gain have ruined trust - says Michael Skapinker. Well written. Companies should focus on the long term. 

Dan Ariely speaks about his personal experience. He highlights an important point. What motivates medical professionals is very important. Their motivations in recommending a treatment do not always stem from patient interest. I am not talking about the usual Pharma marketing gimmicks. In Ariely's case the doctor wanted to write a scientific paper and he needed at least 3 sample surgeries. This topic needs to be studied and informed decision matrix needs to be developed for cases where courts examine medical propriety.

Hat-tip Tyler Cowen. Must read article. In Understanding Firms I discussed the mechanics of firm advantage. This fits in well with it.

India
Kenneth Andrade believes rural stocks are poised for growth. Good perspective. Kenneth Andrade is a good stock picker.

Arun Maira wrote this article is former BCG consultant. So I was a bit surprised. Heartening to note that the main focus of the article seems to be in the nature of "anti-dumping" rather than true protectionism. Indian businesses should aim to compete globally on merit. Any other form of competition will be (a) short lived  and (b) bigger disaster for future.

Raghav Behl asks this question. He objects to the mass sale of companies to Chinese, Amercian and Japanese investors. I am not that concerned. It is important to develop many more companies - some will go to foreign investors some will remain with locals. It is all part of the game.

Raghuram Rajan is not coming out of this mess in a pristine condition. Possibly was coerced by Chidambaram but we will never know.

Interesting Quote from the article
According to the Pakistan Bureau of Statistics, the country’s exports to Afghanistan fell to $1.271 billion in FY17 from $1.437 billion in the previous year. Exports in the first quarter of 2017-18 stood at $319 million.










China Is Making a Bold Military Power Play
David Tweed & Adrian Leung write on Bloomberg. I love the maps they have put up.
 
And this one about China's island chain that restrict its naval ambition.
 There are a certain missing links in the first map. First, India and US has signed naval treaties allowing each other to use the bases. Thus, the US influence should be measured in terms of Quad+two (US-Japan-Australia-India-Britain-France). That adds a few more bases. India has access to Chabbar in Iran (contentious though but accessible for friends), Australia has one more base in Indo-Pacific (others are purely pacific or southern facing). So my map goes like this.




Others
Raoji reviews the book. Seems to be must read about Indian entrepreneurship. Kindle version is at INR 60/- thats cheap. I just bought it. Will read and review it soon.

Interesting analysis of sonic distortions noticed in US Embassy.
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