Readings

Krugman blames global warming for "popular rage" from lack of food. Sadly, this is really shallow. We've had food crises for ages, and we only had a relatively nice period in the last 10 or so years. That we're warming is a fact, but it's not that humans are influencing it, regardless of the so-called consensus. Rage against food prices is usually the straw that breaks a camel's back - people are usually pissed off about other things, like corruption (and Egypt *is* a prime example).Blaming a "vast leftist conspiracy" is just a strawman.

12 steps to get things done. (The Kirk Report)

A great post on Bonds: Bond Trading 101 (Pragmatic Capitalism)

Food has 50% weight in the New CPI, and housing, 10%. Releasing 18th Feb (CPI)

James Altucher on writing books with details. (The Altucher Confidential) Incredible - just 14,000 of his "Trade like a hedge fund" sold. Books don't seem to make much money.

Readings after a hiatus:

Dhirendra Kumar takes a jab at the labour ministry for asking for a “guarantee” of equity returns. The labour min seemingly asks for a guarantee and a minimum return – yeah, what’s different between that and buying government bonds, one would think. The EPFO looks screwed, with the corpus of 5 trillion (lakh cr.) that needs to pay out either 8.5% or 9.5%; if they fall short, they will need the government to put in money.

About 100 years ago: The New York Stock Exchange decreed that commissions of 1/8% is sacred, it will be charged for all transactions, even outside the exchange. From then to now, what a difference. (That’s about 15 basis points, still lesser than what delivery transactions in India tend to cost)

The National Housing Bank (NHB) has increased the risk weights and provisioning for housing finance companies (HDFC, LIC Housing Finance etc.). Loan to value above 90% isn’t allowed, and for loans of 20 lakhs or more, the limit is 80%. Additionally, risk weights of loans above 75 lakhs are at 125% – that is just following what RBI did for banks in November. Provisioning for teaser loans goes to 2%. Obviously this is a non-issue – the stocks didn’t even flinch.

I didn’t know this – NHB has banned prepayment penalties for pre-closure of housing loans if the money is paid through the buyer’s own sources.

Manish Chauhan at Jago Investor has an excellent review of term insurance plans. The data’s outdated, a little bit – let me see if I can expand on this a bit.

Sucheta Dalal on the Mutant Superbug, the increasing neta-babu nexus that we will just not stop. While she makes many allegations without presenting any evidence*, the main point she makes is valid – we seem to have an even higher neta-babu control over our economy.

* Like “stock tips in lieu of cash”, etc. I believe that might be true, but in the absence of evidence, it’s just a random allegation. Did she hear someone say it? But like Niira Radia said Kalal Nath “can make his 15 percent”, that doesn’t make it true. It has to be not just believable but true; especially when there is more research possible. Note: even I make this mistake a lot.

Japan, after the bubble. An old piece but amazingly informative about how real estate screwed that country. In the same context, WSJ on the London Real Estate Bubble.

Moneylife finds that expert advise is often wrong, with a recent example. Forecasting is such a joke.

Chastity, Poverty and Obedience in store for Ireland.

Oh, and they’re blaming the Sensex 1.3% fall on Korea’s tensions. Forget that – the stock went up 1.5% on Monday, I suppose because then the Koreans weren’t tense. And it was down Friday because the Koreans got a foot massage. This reason attribution is so silly.

Hilarious: The TSA in a US airport confiscates a pair of nail clippers from a soldier travelling with a rifle. It can’t get better than this:

Soldier: Why?

TSA Guy: They can be used as a weapon.

Soldier: [touches butt stock of the rifle] But this actually is a weapon. And I’m allowed to take it on.

TSA Guy: Yeah but you can’t use it to take over the plane. You don’t have bullets.

Soldier: And I can take over the plane with nail clippers?

TSA Guy: [awkward silence]

Me: Dude, just give him your damn nail clippers so we can get the f**k out of here. I’ll buy you a new set.

Soldier: [hands nail clippers to TSA guy, makes it through security]

China takes rates up 25 basis points. Inflation, it seems. Lending rates are now 5.56%.

Coal India’s 15,000 crore IPO is 1.7 times oversubscribed.

For the record: I looked at the IPO document, realized I don’t understand a darn thing about coal, and know just two things:

• The P/E is 15 or so. This is a commodity. Big and all, but they won’t get a single paisa from this IPO (it all goes to the govt).
• The issue is already oversubscribed, but retail will perhaps get full only by 21st (when the issue ends)

I’m not subscribing – there are better opportunities out there. (Biocon – yes, even now. Sugar looks like a better cyclical, Auto-ancilliaries, etc. )

India’s 10-year bond yields are at 8.07% while 91-day T-bills are at 6.6%. This is one narrow band.

NYT: Canceling Dubai Property Deals Is Nearly Impossible Watch out, there’s an Emaar IPO coming up in India soon.

Ritholtz: Do You Wanna Be Right, or Do You Wanna Make Money?

If you are constantly fighting the tape, if you missed the run up and are now whining about it, let me steer you to esteemed technician Ned Davis of NDR. In his 1991 book Being Right or Making Money, Davis tells the story of missing trades, investments and rallies because they did not fit some expectations of his regarding the economy or valuations or other factors. The title of his book and of this post comes from a  more senior trader, who simply asked him: “Do You Wanna Be Right, or Do You Wanna Make Money?”

Sounds like India, man.

Career Point Infosystems listed today – at nearly 2x, which is a ridiculously good return. CPIL listed at 658 today, up from IPO issue price of 310. Of course the issue was 31x oversubscribed at retail, 101x at non-institutional, and 47x at QIB levels, so people would have got piddly allocations. The valuation, for a company in the education-to-clear-tests business, is phenomenal and will likely drive the rest of the field in too. And now there are hundreds of online players as well; this space will stay hot for a while.

Moneylife is pissed with SEBI. I’m not in favour of their arguments; though some of them are forced through for no reason (such as KYC or KYD being made compulsory). Removal of entry load is awesome, as was the trail commission removal at the request of the investor. The point is: If we don’t do these things suddenly, people will not wake up and decide to pay the advisor separately. Imagine if doctors were getting paid by the medicine companies, and offered their services to you for free – would you go? Really? Yes, pharma companies pay docs even today; but that amount isn’t much compared to what they charge patients – and because they charge you, you don’t find them recommending Rs. 500 worth drugs every time you visit them with a fever.

SKS Microfinance fired its CEO Suresh Gurumani yesterday, leading to rumours that it was either a personality clash between founder and Chairman Vikram Akula, or some financial irregularities. But no, says SKS:

“There was no personality clash between Akula and Gurumani. The move is in the best interest of the company. There was no financial irregularity involved," SKS Microfinance spokesperson told PTI.

So why would they fire a CEO, after a stellar last quarter? Hmm. There is something black among the lentils. The stock tanked 6% on the news, and a further 1.5% today.

The Economist’s latest cover is on India. This is not good. A substantial number of great stories end when they land on the cover of a famous magazine. The logic is perhaps that by the time the magazines get to the story, it’s so hot that the story has peaked. What has scared me recently has been the number of stories on Gold – though not yet big time cover, the fact that mainstream media considers something so trendy it’s cover-page material is perhaps an indication of overheating. It’s even called the “Cover Story Syndrome” , says Jeff Matthews.

And one of the things that Wall Street types pay attention to when they look for patterns is something called “Cover Story Syndrome,” which is a shorthand way of saying that when investment themes get so popular they appear on the cover of a major news magazine—a dying breed, but the basic idea is still there—then that investment theme is, by definition, too popular to succeed, and maybe popular enough to start betting against.

It is a pattern that occurs more often than you might think.
The Cover Story of all Cover Stories, as any investor with grey hair will tell you, is the fabled “Death of Equities” BusinessWeek cover story from August 13, 1979 (“How inflation is destroying the stock market”), which hit newsstands smack-dab at a market bottom—and indeed helped create that bottom by giving readers the intellectual stimulus to finally bail out.

Fast-forward to June 2005, the peak of those balmy home-buying days of Housing Bubble: Time Magazine publishes a front-cover story on the joys—at least, investment-wise—of owning your own home.

And the magazine cover that triggered the article?

Rethinking Homeownership: Why owning a home may no longer make economic sense.

That’s all for now, folks. Stay safe, while I shift residence because my current landlord was getting a mindblowing deal on this house. The bubble India story is intact.