GDPR Notice

GDPR Notice:
Please note that Google, Blogger, Adsense and other Google services may be using cookies and doing whatever they do. Please take notice that by using this blog you give your consent to those activities.

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.


at No comments:
Labels:

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. 
at No comments:
Labels:

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%.

at No comments:
Labels:

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.

at No comments:
Labels:

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.

at No comments:
Labels:

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.

at No comments:
Labels:

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.



at No comments:
Labels:

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.
at No comments:
Labels:

Wednesday, March 07, 2018

Interesting Readings 07 March 2018

What do you guys think could be a good name for these posts - they have links to articles I read and some bits of commentary. Please write with your suggestions.
Here are some interesting readings for today:

Global readings
If you have read the old 1998 paper it is quite a refreshing reading. Read both if you have been following Japan.

Another paper this time by Federal Reserve Board papers

Yves Smith from naked Capitalism writes about Elizabeth Warren fighting the deregulation of big banks. It highlights the lobbyist-driven establishment that governments have become, globally. Try getting a meeting with local representative, Senator, Member of Parliament, anyone and you will be hounded by gatekeepers. For democracy to work better, this has to change. This is part of the issues I have highlighted in Subverting Capitalism and Democracy.

Part 2 of the Gaius Publius article. First was linked here. Part 1 looked at the Why question — Why should all student loans be canceled? — and answered it in economic terms, since ending student loan debt would benefit not just the students affected, but the economy as a whole. It also answered the Why question in moral terms: Ending the practice of parasitism, humans preying on humans, is a good thing in itself. This piece looks at the How question — How should ending student loans be implemented? A future installment, the last, will address the What Next and What If We Don’t questions. (Hint: Extreme parasitism is not a stable system, and the social consequences of extreme human suffering aren’t limited to the ballot box.) I agree with students being saddled with debt that cannot be reneged was wrong. But the solution is too crude and not imaginative. I would like the solution to put some cost on the borrowers, since they were minor party to this, also helps in moral hazard problem. Second, the lenders have to bear the costs too. Only tax payer cannot be left holding the bag at all times. If we burden the tax payer then we should not wonder why she does not pay her fair share of tax.

Tyler Cowen explains why as incomes and wealth grows birthrate tends to drop. Quite interesting set of explanations he has put. Short but must read.

Austerity by Design. Yanis Varoufakis's lessons for reasserting European social democracy.
J. W. Mason writes about new book by Yanis Varoufakis called "Adults In The Room: My Battle With Europe’s Deep Establishment". V Ananthnageswaran has a few comments on this article and some additional links for related readings. I read Yanis Varoufakis' book "And the weak must suffer what they must". Interesting books. But Yanis is a great speaker. In fact, if you want to know the deconstructed leftist thought on current affairs it is better to read Yanis' views and better still watch him presenting. Note the parallel between student loans and greek loans as conveyed by Yanis.

The person is Albert Wenger, partner, Union Square Ventures. He suggests that we need to relook at intellectual property rights in the current era. It is a topic close to my heart. We need to reinvent intellectual property rights. I was in the process of writing a short book on it, had done all the research for that and stopped it. Need to revive that project.

Bank fraud India

Mint talks about RBI actions in wake of Nirav Modi fraud. I like the third suggestion:
Third, PSBs need urgent governance reforms. The Punjab National Bank fraud is the consequence of a complete collapse of governance. Governance in PSBs needs an overhaul and government interference in appointments should be minimized. In this context, the P.J. Nayak committee (2014) rightly noted: “Government officers and regulators may not possess the skills to appoint the top management of commercial banks. Banking is a very specialised activity, and top management needs to combine strategic foresight with a good commercial knowledge of sectors to lend to, prudent risk management and human resource skills.” The outcome of establishing the Banks Board Bureau has also not been as desired. Therefore, the government needs to revisit the way appointments are made in PSBs, starting with the board. Only a professional board will be in a position to take the right decisions. It is important for banks to continuously improve operational efficiency by making the right investments in technology and human resources. This is a good time to initiate reforms as the government is in the process of recapitalizing PSBs.


World War Watch

They are saying something but not saying everything. I hope some mobile phone experts explain the possibilities in greater detail.
Article explores variety of developments in the Indo-Pacific region.

Others
Supreme Court of India has made available the roster i.e. assignment of judicial benches to subject of petitions. This comes in the wake of the crisis earlier this year/late last year. I am surprised that this was not the case earlier. It is a prudent practice and should be encouraged across courts.

One smart guy’s frank take on working in some of the major tech companies
Tyler Cowen shares an email from one smart guy who has worked in tech. Read it for organisational issues and some industry view.

The sad story of Maplin Electronics
Frances Coppola analyses the bankruptcy of Maplin Electronics a retailer. Very interesting to read. Must read for investors who read financial statements. Note how the analysis goes right back to history 1987 to know where the mess started.

CONFLICT OF BENCHES: The SC’s February 8 Judgment in Indore Development Authority Is Not Supported By Text Or Intent Of The Act, Says Namita Wahi, Expert On Land Acquisition...
Namita Wahi interprets two controversial judgements of Indian Supreme Court in teeth of the Five-bench

Damodaran Online: There is an App for that!
Aswath Damodaran links to App for mobile access to website. Also uValue App that explains valuation concepts and other data which users can use.
at No comments:
Labels:

Friday, March 02, 2018

Interesting Readings 02-March-2018



The rot at the board level is applicable not just for Public sector units but also to many companies. Most boards are co-opted cabals hand-in-glove with the promoters. There is no effective governance. Board level reforms are necessary for protection of shareholder interests.

Two Governments, Parliament And An Expert Body - How ICAI Is More Powerful Than All Of Them Menaka Doshi highlights how National Financial Reporting Authority is required to curb lax monitoring by ICAI. Yesterday another news item informs  Government has notified NFRA. It was essential to undertake proper regulations. Most of the scams today have the Chartered Accountant at the centre of it.

The article describes the research into musical instruments by Dr. C. V. Raman, Indian Nobel laureate. Quite interesting view on ektara.

Quote from the article
A more fundamental problem is how this deeply held desire that China – like Japan, South Korea, and Taiwan—will one day become more like America clouds views about what is actually happening in China. James Mann, the author of 2008’s The China Fantasy:  Why Capitalism Will Not Bring Democracy to China, cited the long history of Pollyannish statements about China. “Trade freely with China, and time is on our side,” George W. Bush said, while Bill Clinton called the opening of China’s political system, “inevitable, just as inevitably the Berlin Wall fell.” Just like Gordon Chang’s notorious 2001 book The Coming Collapse of China, Bush and Clinton might be right but early: It’s certainly possible China liberalizes and democratizes – it’s just very unlikely.
 Sudheendra Kulkarni, who has lost the plot politically, remains a mature expert on many other matters. He counters the article above with caution. Naturally, Asia and India should keep an eye on both. A Quote
A final thought. It’s high time Indian commentators stopped viewing China through the tinted glasses of a West fearful of the coming end of its global domination. Let us bring innate Indian wisdom to bear on reforming our own flawed system of governance and also offer it to China to democratise itself, while simultaneously learning from the latter’s innate strengths. And there is much to learn from Xi Jinping’s Thought.
 Indo-pacific cooperation and the Quad are becoming increasingly important. Chinese aggression is threatening Japan, the ASEAN and international trade routes where China wants to control with multi-function ports and watch points.


Interesting perspective on Sen. Though I still believe capitalism is the best among broken systems.

Even Berkshire is invested in it. At 900billion, Apple is close. Amazon is at 730billion. However, Apple is losing its edge. There is a space at the very top with those "mis-fits" and that place no longer belongs to Apple. Someone must rise up to claim it. Question is who?

Something new after the hem line index and Men's underwear index this is a new addition. All three are in different class when it comes to prediction though.

Interesting perspective - one art market - collectible rugs seems to be on decline.

at No comments:
Labels:

Interesting Readings 01March2018


First on the list is George Friedman's super wise comment
 I have written in several places about a paradox. On the one hand, if you take a snapshot of the world every 20 years or so, the reality of how the world works and what matters will have shifted dramatically compared with the previous snapshot. On the other hand, at any point in time there is a general belief that the world as it is at this moment will remain in place for a long time. It is not just the public but also experts and those who govern who tend to fail to see how transitory the present reality is. As a result – and this is what makes it important – as the geopolitical system shifts, there is a tendency to see the shifts as transitory, a temporary disruption caused by unfortunate events, until they are well entrenched, and so we tend to align ourselves with the shift far too late.

In 1900, Europe was peaceful and prosperous, and it dominated the world. It was assumed that this was a permanent reality. By 1920, Europe had torn itself apart, impoverished itself, in a bloody war. It was assumed that Germany, having been defeated, was finished. By 1940, Germany had re-emerged and was astride Europe. It was assumed that the German tide could not be resisted. By 1960, Germany was an occupied and divided country. It was assumed that war between the strongest of the occupiers, the United States and the Soviet Union, was inevitable. By 1980, there had been a war, but in Vietnam rather than Europe, and the United States had been defeated. The U.S. was now aligned with China against the Soviet Union. It was assumed that the Soviets were a permanent and dangerous enemy to both countries. By 2000, the Soviet Union no longer existed. It was assumed that the key interest of all countries was economic growth, and that traditional conflict among nations had become a marginal matter.

Twenty years is an arbitrary time period, but historically it’s about the length of a human generation. The world changes radically in each generation, but the dates can vary. The last era began in 1991 and ended in 2008. Yet even now there are many who are waiting for the world of 1991 to return. More important, only now is the full power of what started in 2008 being felt.
Scam reports
CBI arrests Karti Chidambaram in INX Media bribery case. There is no question the Chidambaram family is steeped in corruption. The question is how to get them properly. CBI has not shown dramatic or even proper application in such cases. The 2G Telecom scam findings are case in point. The accused A Raja and Kanimozhi were released for lack of any proper investigated reliable charge.


Other issues
Can good guys with guns stop bad guys with guns? Must read
Battlefields are places where one is expected to shoot down the enemy. But 1947 book Men Against Fire by Brigadier General S.L.A. Marshall, changed the existing beliefs about battlefield behaviour. The study found that in World War II only 15-20% of soldiers fired their weapons at enemy soldiers in view, even if their own lives were endangered. This was the first significant study that showed that it is not easy for a normal human being to kill another human, even in war.o

Ignored For the Nobel Prize, This Unsung Scientist Is The Father Of Fibre Optics! This is the story of Dr. Narinder Singh Kapany who first demonstrated fibre optic transmission of light in 1950s. Remarkable story.
 

Reinventing Journalism
Journalism has suffered from broken business model and there seem to be no solutions, at least as of now.Today I bumped into a story about billionaires messing with Journalism.

Billionaires gone wild is the story by Alex Pareene who is ex-Gawker a online media site shut down by Peter Thiel for its anti-Trump views by allegedly financing the legal lawsuit by Hulk Hogan. Gawker was notorious too.

World War Watch
Xi Jinping is unmaking Deng Xiaoping’s China
Mint has a great piece on Chinese constitution amendment allowing Xi Jinping to continue as President.
The effects of Xi’s longer term in office will be felt across the world. But those effects are also a function of what transpires in China in the first place. In terms of leadership style and choice of policies, Xi is more Mao Zedong than Deng Xiaoping. While Mao believed in helping revolutionary movements around the world, Deng’s approach was informed by his mantra of “hide your strength, bide your time”. Xi’s China is moving back, closer to Mao, by interfering in the domestic politics of other countries. Deng introduced political reforms so as to prevent the kind of concentration of power possible under Mao. The two-term limit on presidency was part of those reforms. Xi is now reversing Deng’s legacy on this front too.
at No comments:
Labels:

Wednesday, February 28, 2018

Interesting Readings 28 Feb 2018


Bank Crisis Watch
  • The roots of the current banking crisis  Manas Chakravarty says "The roots of the current crisis in our banks lie in the great boom of 2003-08, which was then prolonged in India by a fiscal and monetary stimulus".  And that is true. When we are in phase of high growth all credit expansion seems good. It is only tested during downturns. Even now if India starts growing broadly  at 10% the bad debts will soon go away. [Rather their materiality to the balance-sheet will diminish]
  • But Manas Chakravarty refuses to blame anyone further. The boards of banks - PSU and private sector, also companies too, are not functional. There a substantial level of checks and balances just dont work. Unless you have functioning boards which uphold the shareholders interest banks will continue to pander to political will. There is also substantial corruption - both at RBI and Finance Ministry- that has corrupted the banking top management of all PSU banks.
  • Fault lines in the Indian banking industry - Rajrishi Singhal asks the right questions. This seems to be the first part of his analysis. Must read. One quote
One trend is unmistakeable: money is diverted out of the banking system with the active connivance of either the bank’s senior management or a couple of rogue officers. This is what makes both the PNB and BoB cases incredulous: with Reserve Bank of India (RBI) putting so much emphasis on anti-money laundering mechanisms, and with an increasing number of prosecutions against either money laundering or diversion of bank funds, it is indeed curious how both the banks persisted with lax risk mitigation and supervision frameworks.
  • SBI chief Rajnish Kumar hits back at critics seeking PSB privatisation. The SBI chief is not wrong. If you look at the accounting books of most of Indian companies - Public sector units have cleaner books than many private-sector listed companies. Sometimes I really don't know what these companies are hiding in those books. PSU is more wyswyg-types.

Reforms
  • T. V. Mohandas Pai and S. Krishnan complain about unfairness of taxation - View: Every year the same old story — Punish the honest, let the dishonest make merry. They are not wrong. The incentive system in India is stacked against the honest. I had earlier written about this somewhere. In India, the cost of complying with the law is quite high and punishment on breaking the law is not great and certainty of getting caught is almost zero. It is exact opposite of what it should be -  cost of complying with law should be low, punishment should be substantial and certainty of getting caught should be almost 100%.
  • Two Governments, Parliament And An Expert Body - How ICAI Is More Powerful Than All Of Them, Menaka Doshi highlights how ICAI is trying to scuttle creation of "National Financial Regulatory Authority". It is a must read. Government should get cracking on this. 
    • In the article Menaka Doshi highlights MCA's reply with statistics
Of the 1,972 cases taken up by the Disciplinary Committee/Board of Discipline of the ICAI, only in the matter relating to Satyam Computers have the members been permanently removed. 
Penalties of one year or more have been imposed on members in only 14 of these cases. In a majority of the cases, the members have been found as not guilty. 
Further, in majority of the cases where members have been found guilty, they have been merely reprimanded or cautioned. 
Astonishingly, the MCA noted that the ICAI has not moved even on complaints made by the Ministry. 
    • Most of the financial scams in this country including tax evasion and money laundering are product of the Chartered Accountants. They are hand-in-glove with tax authorities and Finance Secretariat in leaving huge loopholes in the law. NFRA will be a significant development. Staff it with clean officers and you will start cleaning the system.
  • Airlines Are Backing a Startup That Could Fix the Overbooking Problem
    • They are trying to solve the problem of overbooking. In the process the article states they want to collect more data.
    • This has been another pet peeve of mine. The airline booking systems, to my mind, are unnecessarily complex. The variety of factors are being unnecessarily tampered with to create opaque complexity. And whenever there is opaque policy there is fleecing of customers. I recently read an article about the different fare categories and it is complex. CNN Travel asked the question why airlines do not go flat-fee? They also have another article explaining airline pricing secrets.  
    • My suggestion to get lower prices on your tickets is search for tickets in "private mode". Using cookies airlines know you are searching for specific flight and hike up the prices for the same. It is my suspicion and based on my experience.
  • The confusion over rural electrification in India Dipti Jain explains the problems in rural electrification. 
    • A village is considered electrified if at least 10% of its households are electrified, among other conditions. Intensive electrification, on the other hand, refers to deepening the electricity infrastructure to provide access to the remaining un-electrified houses.
    • While progress is being made on the rural electrification front, proper accountability and monitoring is critical if the government is to set a date for achieving universal electrification.
Others
  • Fred Wilson has an excellent post called VC Funnel where he links to another article from CB Insights.  Read the CB Insights article and Fred Wilson's comment too. The chart is quite interesting though so here it is.
    • This chart is easily explained by the "bargaining power" logic I used in Subverting Capitalism and Democracy. Whenever there is an opportunity to grant loan so that the loan is difficult to be waived (student loan does not get waived by bankruptcy) and the bargaining power is favorable then you can increase the exposure. The rate of growth is increasing because lenders are keen to lend any amount (higher the better) and colleges keep hiking fees (because students have no bargaining power). The logic worked for the top courses like say Harvard MBA where pay-off from salary was quite substantial. But it hurt the lesser courses where the pay-offs were not as high. 
    • Dont forget to read Yves' comment right at the start of the article.
  • Next year, we may have a market crash, says eminent economist Andy Xie. I agree with some of his points and disagree with others. But worth a read.
World war watch
  •  HAL carried out hot-refuleing trial on Tejas. Tejas is quite important aircraft for India. Lower cost of purchase, low operating costs and supersonic fighter will be a baseline for large capacity deployment for India. Hope it functions well.
  • View: Why India should not delay its fighter jet procurement. This article argues that India will need a 5th generation fighter aircraft. India has invested in design of Su-57 but India is not happy with the engine and stealth characteristics of the aircraft. The choice is going all in for either Su-57 (we have good equation with Russia) or with F-35 one of the costliest aircraft as on date though they have now achieved lower prices with scale F35 cost is about 80million. With Su-57 having improved the engine to Saturn 2, I think Su-57 makes a better bet than F-35. It will need a super deal to tilt scales in favour of F35. (The order book for F35 is quite full). My sense is India will have to maintain both F-35 and Su-57 fleet. My vote for workhorse aircraft still goes to Gripen E and Tejas. In air, there is superiority in numbers.
  • Germany's armed forces are not quite ready says Judy Dempsey in Germany: From Machine Guns to Broomsticks. The article highlights how German army is ill-equipped. Two quotes are relevant
    • Back in 2014, a year after Ursula von der Leyen became defense minister, the armed forces were lacking such essential equipment that the aircraft that was supposed to take 150 German soldiers home from Afghanistan broke down. There wasn’t a back-up one available. That same year, at one stage during a NATO exercise, because they lacked machine guns, tank commanders instead used broomsticks. They had them painted black. This was not a joke.
    • As for the Eurofighter and Tornado fighter jets and the CH-53 transport helicopters, they can only be used on average four months a year. They are in constant need of repair. And by the way, there’s a shortage of spare parts for maintenance. Just to add to the miserable state of the armed forces, the troops lack night-vision equipment and automatic grenade launchers.

at No comments:
Labels:
Subscribe to: Posts (Atom)