Readings

Reads: IT Scrutiny, Loan Dis-Waiver, Retail in F&O, VC Changes

No Comments » Written on July 29th, 2014 by
Categories: Links, Readings

Income Tax Department to run a city specific tax scrutiny: Co-op bank deposits in Bangalore, Cars in Lucknow, Films in Kolkata (Times of India). Nothing wrong with this drive, black money doesn’t sit in Swiss banks anymore, it is largely in India. But I just wish they explored real estate - it’s a far bigger black money source.

Andhra farm loan waiver turns into recast, but RBI says there’s no justification (Business Standard) Oh, those pesky election promises.

Modi’s “New” India is off to a Bad Start (Bloomberg). We won’t give up our food subsidies, no matter what. But then, neither will the US or Europe.

On that note, V. Anantha Nageswaran argues that India’s stand is right. (Livemint) There is really no need to benchmark to 1986 prices, for max-support metrics.

Reliance Power will acquire JP Power’s 1800 MW Hydel Plants (Livemint). Stock gains big but closes up only 3%. (Blah.)

A good piece by Ajay Shah on why Retail Investors are NOT the problem in Indian derivatives markets. (Ajay Shah). I believe Indian retail is an important part of the solution, and this concept of “sophisticated investors only” is just bullshit.

A Great Discussion with @skupor @davemcclure @msuster on Changes in the VC Industry (BothSidesOfTheTable) If you’re a startup or a VC, this is a great read. 

Reads: Companies Act, Dartboard Picks, Vadra’s Real Estate Portfolio

Comments Off Written on April 21st, 2014 by
Categories: Readings

Monday AM Reads:

Mauritius Court Freezes Shiv-Vani Oil’s Offshore Assets after it Defaults on $84 million (Economic Times)

Companies Act Likely To Hurt Realty Firms (Business Standard)

What the 1% Don’t Want You To Know (Bill Moyers, Truth-Out)

Throwing Spaghetti Against a Wall (Prashanth)

Japan Shows Deficit of $14 trillion, Yen Falls (Bloomberg)

The Business Interests of Karti Chidambaram (LiveMint)

Robert Vadra’s Real Estate Empire (WSJ)

Just returned from another weekend trip out of town, lots more to come.

Reads: Infy Warns, Sun Pharma Alerts, New Zealand Raises, Bull Market EndGame

1 Comment » Written on March 13th, 2014 by
Categories: Readings

In News:

Infy says it might not make as much money as it thought. Revenues at lower end of guidance, clients aren’t spending. Stock down 8%. (SmartInvestor)

Sun Pharma sees the FDA put an import alert on the Karkhadi plant and the stock’s down 3.5%. (Economic Times) Wonder why it’s singled out in this fall - mentioned in the FDA report are: Ranbaxy (all plants), Aurobindo Pharma (1 plant, stock is up!), Wockhardt (2 plants).

New Zealand is the first developed country to raise rates (Bloomberg)

Mutual funds find it difficult to oppose the Maruti Suzuki Gujarat plant but still ask Maruti to park excess cash in its debt schemes (Investors are idiots)

How to tell when the bull market is turning bear (LiveMint)

Reads: Synchronized Tightening, Buffett Letter, Marketing Amortization and more

Comments Off Written on March 3rd, 2014 by
Categories: Readings

Think before you buy with a credit card: The taxman will track individual spends. (SmartInvestor)

Buffett’s annual letter to investors. A lot of stuff there I don’t agree with, in the sense that it’s not the only way to invest. But it’s made him a substantial amount of money, and good for him! As usual though, great investing letter. Remember, read what Buffett says, but don’t bullshit yourself that it applies to anything beyond just that; unnecessarily broad usage of statements like “don’t lose money” have lost people more money than dear old Noida Toll Bridge. Do what works for you.

Professor Bakshi talks about the relative unattractiveness of Relaxo footwear after it went up nearly 65% in about six months when he first pitched that it’s a cool company. The Bakshi Effect? Can’t underestimate the power on a low volume stock!

(Note: I went through the analysis and wasn’t very confident about amortizing ad spends over three years. That’s very dangerous territory for me - amortising marketing spends is what gets EVERYONE in trouble because there is hardly any evidence that marketing in year x has an impact in year x+3 if there is no spend in years x+1 and x+2! If you ignore that and do the same calculations, you get a roughly 3x return, a 12.5% potential return for the 10 year risk of making incorrect assumptions. But nice momentum on that stock!)

Maruti Suzuki shares have been falling after it tried to convince investors that getting cars made in a factory owned entirely by one promoter, Suzuki, was a good thing. My view: It is a good thing if there is no evil in this world, but there is.

The emerging world is making a huge mistake by contracting monetary policy at the same time, says Ambrose Evans-Pritchard. (HT @goyal_ash) Synchronised Tightening (sounds like an Olympic sport) is okay for a country in isolation, but a hugely negative thing when done in coordination, he says. I still think it’s a better thing for emerging markets than runaway inflation, which is the fire to Synchonised Tightening’s frying pan, if you will please excuse the idiom abuse.

Reads: Hawala Premiums, Chinese Taper, Airtel Loses, Don’t Go To Jail

Comments Off Written on February 20th, 2014 by
Categories: Readings

Hawala premiums for gold smuggling are up to 4%, says Business Standard.

Bad Housing Starts data in the US? No, says Calculated Risk; it’s the cold weather and higher prices.

Why I didn’t go to jail, writes Ben Horowitz, on doing the right thing instead of doing what other people are doing.

China’s flash PMI for Feb falls to 48.3, a seven month low and takes European stocks with it.

Bharti Airtel loses appeal in case to Econet Wireless in Nigeria, has to pay $3 billion to Econet which was wrongfully denied its shareholding in the company acquired by Airtel from Zain. Airtel has to pay to acquire Econet’s minority shareholding, and this is the third setback in the case (which has seen unfavourable judgements from an international tribunal and then two lower courts in Nigeria). Share’s fallen to Rs. 298.

Whatsapp founder was once on food stamps. (Business Insider)

China wants to fund 30% of India’s $1 trillion infra investment. That’s probably their diversification strategy as they have just cut their US Treasury holdings exposure by $47 billion. (The “Chinese Taper”) Oh, we should let them. If they invest money in our roads, they’re hardly likely to bomb them.

Reads: Killing BitCoin, More Taper, Bad Debts in India

Comments Off Written on February 12th, 2014 by
Categories: Readings
Check out Capital Mind Premium! Take a 30-day Free Trial.

The Glitch that will kill Bitcoin (Bloomberg).

Bad jobs report won’t change the Taper (CNBC)

Government Jugaad: Asking RBI to pay interim dividend to meet fiscal targets (Livemint)

What Indian regulators are getting wrong (Business Standard)

Tata Housing Screws Low Cost Housing Flat Buyers (Alphaideas) Or, why you should not buy under-construction properties, Tata Housing Edition.

The Bad Debt Problem exacerbates in many Indian banks (Livemint)

No more 26% cap on lending rates for Microfinance companies (ET)

SEBI: Brokers must use multiple trading software in case one vendor goes bust (ET) Seems to target FT which has been in trouble lately and owns more than 50% of the broking technology space.

Reads: Dropping EM Currencies, Of Mad US Housing, Apple Drops 8%, Aam Aadmi Airline Regulation

6 comments Written on January 28th, 2014 by
Categories: Readings

Via @palmerandrew: Chart of EM Currencies:

Embedded image permalink

51 million iPhones, 26 million iPads, in one darn quarter. But Apple’s $13 billion earnings was a tad lower than the previous year, and lower than street estimates (which nowadays are a bigger thing than reality, it seems). The stock is down 8% in after-market trade as a consequence.

 

Parag Parikh on why closed ended funds are becoming seriously popular:

For simplicity's sake, let's ignore the regulatory slabs for expense ratios and assume a fund can charge 2.5% as expenses per year. Say for instance a fund is closed end for 5 years, it can have 12.5% as expenses. The AMC of such a fund would offer anywhere between 7 to 8% to the distributors. Their job is to get an investor who would be locked in for 5 years. And for getting that money for five years the distributor is rewarded with an upfront commission. This has got the distributors active. Imagine getting paid for 5 years work today itself. They will sell anything to anybody.

 

The Government will sell wheat in the open market, says Hindu Business Line.

The State-run Food Corporation of India (FCI) had recently entered into an agreement with NCDEX Spot Exchange (NSPOT) to sell wheat in the open market.

“The first of the e-auction of wheat was successfully carried out on January 25, 2014 in Delhi and Hyderabad,” NSPOT said in a statement.

 

Chinese data is suspect again, says Bloomberg. Ooh.

Hong Kong’s December imports from China fell 1.9 percent from a year earlier to HK$176 billion ($22.7 billion), the city’s statistics department said yesterday. That compares with $38.5 billion in exports to Hong Kong reported earlier this month by China’s customs administration, up 2.3 percent, based on data compiled by Bloomberg.

 

Bloomberg reports that they’re stalling Air Asia using a 1937 law that allows the regulator to call for, in Aam Aadmi Party style, public opinion on whether we need another airline:

India’s aviation regulator invoked a a provision under its Aircraft Rules 1937, for the first time, asking for public feedback on an application by an airline to start services in the country. That delayed plans for AirAsia, which had aimed to start operations by the end of December and offer free tickets for some seats.

 

New York Times on the insanity that happened in the US housing market. Come a few years, and we’ll write this about India.

The story of 12204 Backus Drive is in many ways the story of the American housing market: first anodyne, then ruinous, then resilient. It is peopled with losers and villains, lucky winners and a young couple hoping for, but not counting on, good fortune. This house’s value peaked at $540,000, plunged to $215,000, and rapidly convalesced until, last year, it sold for an amount that might be considered auspicious.

 

No faith in India, actions of Indian retail investors show (WSJ). Confusing the DII numbers for MF? Or is this reality?

From the start of September through Friday, Indian mutual funds, a proxy for the behavior of individual investors, unloaded $1.6 billion of shares, representing an acceleration of selling from earlier in the year, according to data from the Securities and Exchange Board of India.

 

Finally, someone listens. Mish reports that Europe is dumbing its silly Global Warming and Climate Protection Goals. I believe that humans are not responsible for more than a very tiny amount of the warming out there and we’re not really warmer than the past, and that some scientists are motivated more by hatred of big-oil and the funding they get from creating the fear. This drives into very bad conclusions, and I’m glad Europe’s getting the picture.

At the request of Commission President José Manuel Barroso, EU member states are no longer to receive specific guidelines for the development of renewable energy. The stated aim of increasing the share of green energy across the EU to up to 27 percent will hold. But how seriously countries tackle this project will no longer be regulated within the plan.

Real Estate: Builders Not Delivering, High Unsold Inventory and Then, Defaults

12 comments Written on September 23rd, 2013 by
Categories: Defaults, Readings, RealEstate

In real estate, for you on a Monday, is not good news. They aren’t finishing their projects, says Mansi Taneja at Business Standard.

Till July this year, of the committed supply of 406,539 housing units, only 143,838 had been completed, according to data from real estate research firm PropEquity. That comes to 35.38 per cent — just a tad more than a third.

In Gurgaon, the committed supply was 22,571. But till July, only 7,645 units, or 33.9 per cent had been delivered by developers. In Noida, of the 36,847 units promised, only 7,672, or 20.8 per cent, were delivered. Mumbai fared a little better, delivering 7,990 of the 18,725 promised units — 42.7 per cent. Pune also scored much better than the National Capital Region (NCR)by delivering 26,376 of the 59,766 units committed (44.1 per cent).

This means they took money and haven’t delivered their projects yet. While they blame many factors for the slowdown in finishing it, they seem to simply have run out of money. And since the only way to get money without doing any work is to announce a project and have greedy real estate investors rush for “pre-launch” payments, they just announce new projects while not delivering on the old ones.

And meanwhile, the amount of “unsold inventory” - that is, stuff they’ve built and not sold - are at new highs of Rs. 58,000 cr.

Of the Rs 58,000-crore pile-up, DLF, India’s largest real estate developer, accounted for almost a third. As of March-end, the Delhi-based company reported an inventory worth Rs 17,600 crore, 18 per cent more than that two years earlier. The company’s consolidated net sales declined from Rs 9,561 crore to Rs 7,773 crore during this period. Following DLF is HDIL, which reported an inventory of Rs 12,043 crore at the end of March this year, more than six times its net sales last financial year.

Third on the list is Indiabulls Real Estate, with an unsold inventory worth Rs 5,111 crore, nearly four times its 2012-13 net sales.

This is not going to be good. Defaults have started. Orbit Corp defaulted on Rs. 96 cr. of loans from LIC Housing Finance:

The housing Finance company has classified the account as a non-performing asset and served a recovery notice to the developer known for its premium south and central Mumbai developments. Through a public notice on Monday,LIC Housing Finance also restrained the developer from creating any third-party rights on over 2.40 lakh sq ft across three of its projects that were mortgaged for securing the loan along with hypothecated receivables from seven of its luxury projects.

As has Hiranandani on a 76 cr. Tata Capital Loan in July:

According to the petition reviewed by ET, the developer defaulted on loan obligations from December 2012 and is now liable to pay 82.6 crore, including an annual interest of 18.5%. It adds that Hiranandani Palace Gardens had applied for a 100-crore term loan that was sanctioned in July 2011. Of this, Tata Capital had disbursed 76 crore

The defaults are starting. The inventory is going up. Prices are starting to come down. We’re seeing the beginning of India’s largest real estate train wreck, in 0.25x speed.

Readings: Greece Broke, Slumdogs Into Millionaires

Comments Off Written on June 7th, 2012 by
Categories: Readings

The Prospectus For Silicon Valley’s Next Hot Tech IPO (which sounds like most Indian IPOs)

Greece Warns of Going Broke as Tax Proceeds Dry Up (NYT)

Nearly 6.5 Million Linked Account Passwords Posted Online (PCW)

And in that vein, Jeff Atwood Makes Your Gmail Hacker Proof (Read Now) 

Turning Slumdogs Into Millionaires: Of Pabrai’s Focussed Charity in India (Forbes)

How To Keep Your Financial Advisor Honest (CBS). I wonder if this will work in India.

When the Fake @jhunjhunwala met the real one (Sruthijith at ET)

Readings: Buying India Abroad, Spain, Fed and Jelly Donuts

Comments Off Written on June 1st, 2012 by
Categories: Readings

Ajah Shah on the moving of trading of Indian instruments outside Indian shores.

The CEO of SGX wakes up in the morning and thinks about competing with NSE. The CEO of NSE wakes up in the morning and thinks of an array of weird things.

I’m not all in agreement – Nifty futures have more OI in Singapore for other reasons also: they
trade longer, they can be traded in the night, and they are US dollar These factors are quite important now as suddenly RBI will do a policy change in non-market hours, or some company will release results
post-market etc. Secondly, you have the SGX Nifty + NSE Nifty + Rupee arb. But the post does apply – it appears that trading Indian instruments is better done outside India.

David Einhorn on Fed’s Jelly Donut Policy.

The promise to keep rates low invites procrastination. Why should anyone make a marginal decision to borrow and spend or build today, knowing that low-cost financing will still be available through the end of 2014?

‘Mish’ Shedlock : Hyperbolic selloff coming on Spain?

Oh, see at Zerohedge, a GS research note on Spain seeing over Euro 15 bn of deposits moving out of the country in April.

Ritholtz on Perenially Wrong Bottom Callers, listing mainstream news editors calling the bottom of the housing slump since, well, 2006. Incredible post. And then, he’s heading directly against Bill McBride of Calculated Risk who has said in February that the Housing Bottom is Here. While yes, data is seriously lagged, it’s kinda difficult to call a bottom on anything while the European mega-crisis is close to exploding. I’m with Ritholtz in that prices need to from too high to too low before they careen back to normal.

Readings: TMC Madness, Goldman Sucks, Reliance GRMs

Comments Off Written on March 14th, 2012 by
Categories: Readings
  • Railways Minister Dinesh Trivedi announces a hike in raild prices, and immediately Mamata Bannerjee, head of the Trinamool Congress (TMC) opposes it. The funny part: Dinesh Trivedi is a member of the TMC.
  • Why I am leaving Goldman Sachs: Greg Smith says the culture of helping customers is gone. If you read Traders, Guns and Money by Satyajit Das, it went a long time ago. No one now expects your bank to think in your favour.
  • Jet Airways NOT in financial distress, says Naresh Goyal, Chairman. Don’t believe any news till it has been officially denied.
  • Wipro’s founders were selling 3.5 crore shares (1.4% of the company) at a floor price of Rs. 418, which seems to have got only 71% subscribed. This auction thing will soon be replaced with promoters selling in the open market and then saying, oh, we sold it off.
  • Reliance has some GRM worries, says Deepak Singh
  • Chinese stocks fall 2.5% as Wen Jiabao says that home prices are still too high and curbs on them will continue.
  • And a phenomenal own-goal in Israel:

Readings: DLF Overpriced, Greek Default, RE Losses

3 comments Written on March 4th, 2012 by
Categories: Readings

Subramoney on Losses in Real Estate Deals. (But success stories are equally incredulous. I have seen money doubled between a pre-construction purchase, waiting for three years until it’s evident builder isn’t anywhere close to finishing, and then selling off the flat; and the flat is still a LONGGGG way from completion)

Monika Halan on why banks should not be allowed to be insurance agents. (or must be liable for their mis-selling)

A Veritas Report (I don’t have a copy) says DLF is overpriced and it should be worth Rs. 100. They claim “aggressive accounting” overstated profits. They used to sell what they built to DAL at inflated prices to show profits, eventually having to buy the promoter owned DAL back at an extremely high valuation. They’ve given up on projects (Bidadi, Dankuni, NCR convention center etc). A stretched balance sheet, no free cash flow, and a slowing real estate market are quoted as reasons to downgrade. These are not unknown – both DLF and Unitech have been momentum stocks, and the DAL Dud Deal was known from the IPO. It was just assumed that the owners would carry DLF through; but the stock has fallen from the 1,200 levels in 2008, to 200.

The telegraph claims that Greece may actually default, by invoking Collective Action Clauses (CACs) if 90% of the lenders do not agree to the voluntary losses of 70% of the “face value” of privately owned Greek debt. The CACs allow Greece to force the haircut on to everyone, and that would make it involuntary which will definitely trigger bond insurance. This insurance has been sold by overleveraged banks who it is surmised will have another crisis if the insurance is “triggered”.

Back From Holiday, With Notes…

2 comments Written on January 16th, 2012 by
Categories: Readings

Bangalore was fantastically refreshing, with mentionably better weather. Much  has happened in the last few days, so I’ll use this post to link-comment.

Europe was downgraded (WSJ) by S&P – France is no longer AAA, and Italy is BBB-, just above junk. Portugal is junk. Step back and think about this a bit: The US is no longer AAA, and their stock market, their bonds and their currency have only gone up. Nobody cares about what rating agencies think. The point they should have been downgraded was two years ago. Right now, the rating fellows are just saying “oh, ok, we also agree that there is a problem”.

The rating change in itself is not such a big deal. It would be if – and I say if – funds and banks were forced to buy only the top AAA rated assets, or if the assets became AA then they were forced to put up more collateral. The ECB is happy to accept anything as collateral if it has ink on it, so Portugal being junk means nothing – the ECB will still lend against Portuguese bonds. Funds that are forced to buy only AAA (like pension funds) will simply modify their mandate if so required, like they did when the US lost AAA. For the markets, this should not be a trigger.

The issue with Greece is more worrying (WSJ). Greece has a lot of bonds out there, and much of them are owned by the “private sector”. They were talking to the pvt. sector bondholders to voluntarily take a hit on the bonds so that Greece can pay back less than the face value, or restructure the debt with a longer maturity and a lower coupon interest rate. (They have a 14.6 billion euro payment on March 20) While the initial hit was supposed to be 50% – a verbal yes had been given by everyone then – it’s turned out that Greece is substantially deeper doo-doo than anyone thought, so they are looking for a near-70% hit for the bondholders. This is not acceptable “voluntarily” to the private sector. Big deal, you think, so it will be involuntary – they have to take that much because that’s all Greece has.

Not so fast. If the hit is involuntary, it triggers credit default swaps, which have been sold as credit insurance (bond holders who buy CDS get paid out 100 cents on the euro, instead of a “voluntary” haircut). CDS sellers are institutions that will be hurt REALLY badly if the CDS is triggers, and are levered entities like banks. Interestingly, as hedge funds buy up the outstanding bonds and then CDS, they are lesser likely to agree to a voluntary hit; the negotiations get even more complicated. To sort this out by March 20, there will need to be significant arm twisting.

In India, the Air India rescue effort required banks to convert 11,000 cr. of working cap to long term loans, and make 7,000 cr. into CRPS (Cumulative Redeemable Preference Shares), and provision around 10,000 cr. While RBI has blessed the SBI-Caps created restructuring proposal, this has scared off banks who feel that a) SBI (the bank) gets a better deal and b) The provisioning will kill their rating abroad. At nearly 2% of total bank capital, and the other big restructuring issues still to come – Kingfisher, GTL and so on – the AI deal will shine some light into how comfortable the banking system is with losses.

RBI has issued guidelines on compensation at banks; they’ve asked for “variable” pay limited to 70% fixed pay, clawback and malus in case bank performance deteriorates and so on.

Google, what were you thinking?  In a blog, Stefan Magdalinski, the CEO of Mocality, a business database in Kenya, unravels attempts by Google Kenya in association with Google India to steal business addresses off their database, including a sting operation that redirected requests from Google owned IPs to their own call center. (Google has apologized, but WTF)

I’m quoted in an article with Mahesh Murthy in a Business Standard piece on “Is Online Retail the next bubble waiting to pop?” This needs a detailed follow up, because it lost my entire chirpy twist that “bubbles are good, why are we complaining?”.

You want a long term gold chart? Zerohedge provides Goldman charts for gold from 1265 in Great Britain Pounds, properly adjusted.

Suze Orman recommends a “debit” card that charges $3 per month, and falsely claims it helps your credit score in the US. I don’t know enough of US products, but honestly, Indian cards are saintly in comparison!

John Mauldin: The End Of Europe?

Mark Cuban’s 12 Rules For Startups.

Schlep blindness by Paul Graham. This deserves a post with context. And I’m guilty.

What are you reading?

Readings: Bank Risk, Carbon Credits, Kingfisher

1 Comment » Written on December 19th, 2011 by
Categories: Readings

Nine Lakh Cr. stuck in risky sectors, says Firstpost. Even a 10% loss on that will hugely hurt bank capital, but the figure is exaggerated.

There is an enormous difference between a market opinion and a market position”, says Peter Brandt. A great post by an experienced trader. Lose your opinion before you lose your money; it’s silly to tell traders how they were wrong a month back, perhaps.

EU Carbon Credits have fallen off a cliff (From barchart.com)

image 

Stocks like SRF and Suzlon get income from selling CERs, and if the prices have more than halved, the stocks will see a decline in income. But the stocks have been beaten up so badly it might not even matter!

Kingfisher grounds 15 more aircraft. Can’t afford maintenance expenses now. That stock is at 21 rupees, which sounds like 21 rupees too many…

We Need More Equity Investors: McKinsey

3 comments Written on December 13th, 2011 by
Categories: Readings

The coming shortage of equity investors by the Economist, quoting a report by McKinsey. 80% of the world’s financial assets of $157 trillion are held in developed economies, where people are ageing. Pension funds are maturing and they withdraw from equities. Emerging market investors hold most of their assets in debt, very little in equity. The crash in recent years – 10 years of nothingness in the US, 4 years in Asia, 20 years in Japan etc. – have prompted an exodus from equity markets. Finally, financial investors like banks will have to sell equities to create capital for regulatory norms such as Basel III.

This means by 2020, there is an “equity funding gap” of $12.3 trillion, unless things change dramatically. (But things will change dramatically. IMHO: There is no equity funding gap – valuations will come down to levels where they attract investors. )

US households have 42% of non-retirement financial assets in shares. The number for Western Europe is 29%; and Japan is just 10%, down from the 30% number before the crash in 1990 (since which the index is down 75% today). Most emerging markets are at about 10%.

Companies will have to fund themselves with equity but the lack of demand will propel them towards debt, says the report. About India:

Households are the largest investor class in India, holding 42 percent of financial assets—$835 billion out of $2 trillion. This money is invested almost exclusively in bank deposits, and equities accounted for only 8 percent of household financial assets in 2010. Overall, Indian household investors prefer gold and real estate to financial assets. The Indian government plays a large role in the financial system, holding more than a quarter of all financial assets. This $560 billion portfolio is largely invested in bonds and the listed equity of corporations. Banks are also investors, with $280 billion in securities. While the wealth of Indian households is expected to grow rapidly in the coming decade, the prospects for India to develop a significant equity investing culture are unclear. In 2009 the Securities and Exchange Board eliminated upfront sales charges, or “loads,” on mutual funds, which has caused distributors to pull back. Such regulations, perversely, may temper Indian investor demand for equities.

image

Also, according to them, India has an equity gap of $1.8 trillion (that’s about the current GDP of India, and greater than the entire market cap of the NSE, to give you a size comparison)

The entire McKinsey report is worth a read.

Random Reads: The Big Fight, Social Media, UID Kaput?

2 comments Written on December 9th, 2011 by
Categories: Readings

The Big Fight between Ma-Mu and John K about the demise of Taggle, the kamikaze (or not) act of Air Deccan, and how we should not do things. I think it’s good that we do proper post-mortems of companies without looking at the ego lifting parts of the pieces involved (“I said Air Deccan wouldn’t work”, “Not till after it was dead”, etc.)

The story is of a much-chased space (“deals”) spoilt by the small fact that no one thinks getting a haircut for 80% discount at Rs. 200, implying a regular price of Rs. 1000, is a good deal. And then the “pivot” to sell electronics, of all things. And investor panic buttons were on, as they usually are. Of a smart team chasing a formula chased successfully before, and the local dynamics hurting before helping. The point to learn is: when you fail, fail big, boss.

John K and the Taggle team are not worse off; and regardless of what anyone says, they tried, they made a brand, and they individually come out winners even if the company lost. That is sadly the Indian story – of very few big exits – but at least it’s not a story that the founder was a Tata/Birla/BigName.

***

A parliamentary committee has rejected the Nandan Nilekani run Unique ID (UID) Project, for four reasons: Inclusion of residents rather than citizens, private data collection could lead to misuse, duplication of work done by the National Population Register and the big costs of the project.

So much fun. First they reject FDI in multi-brand retail. Now UID. I don’t think this government is capable of any reform. I know that UID has flaws but it can’t be summarily rejected like this. If this is how large projects are run – sometimes yes, sometimes [NOO! ROLL BACK!] then this country is really not worth investing in.

***

How social media is changing the stock market. Mentions Stocktwits, the US stock conversation site that builds on top of twitter. There is no such site for India, but the number of online conversations about Indian stocks on twitter is next to nothing; even then, I find that discovery of news, rumours and head fakes are better on twitter – the junta is definitely more informed than much of the media out there.

***

A bank manager at HSBC tries to swindle customers out of 1.3 crore, by promising high returns on their unused savings account balances. The first rule of being a bank customer is: DO NOT TRUST YOUR BANK MANAGER.

***

Greece likely to default in Jan? Interesting post, but I don’t think so.

***

OT: Read Sidin Vadukut’s piece on Ashwin Ravichandran .

Readings: Farms, Prepayment Penalties, VC Movies

Comments Off Written on September 7th, 2011 by
Categories: Readings

Readings: Edible Oils, Real Indian Story, Italian Mints

1 Comment » Written on August 30th, 2011 by
Categories: Readings

A few interesting things to read over the 2-day trading holiday:

Italian town printing its own currency to escape austerity (Reuters)

Nidhi Nath Srinivas on the edible oil industry (ET).

Read @moneybloke about KS Oils, which has fallen a magnificent 80% in the last year, from highs of Rs. 80 down to Rs. 10 today. (Disclosure: I went long at 32. I ignored my stop losses on the way down and exited at an average price of 21 or so. But it  was a small position, so I console myself.)

image

(Promoters pledged shares and financiers sold them as the stock collapsed). Directors have resigned. Rumours abound of the promoter losing his shirt on Palm oil futures. Risks to the Indonesian plantations persist, with some government bans that might happen. Tough stock to buy on fundamentals, except with a hope of a turnaround.

Ajay Shah: Only 20% of India has a household income of less than 60K per year. This is a result of a survey of 143,000 households, which I haven’t tested for integrity (i.e. is it diversified enough, how much urban/rural bias is there, is there cherry picking). But if true, this is revolutionary. That means the real story is that 80% of India is making more than Rs. 5,000 a month. This is going to rapidly increase consumer spends – FMCG, appliances, gas and all that. Oh, and stuff is cheaper now than Jan of this year.

Andrew Ross Sorkin on The Mystery of Steve Jobs’ Public Giving (NYT) There’s always a different standard for Jobs, versus any of the other really rich people, and Sorkin’s almost apologetic. Though it must be said that Jobs is suffering terribly these days and I hope he gets better and Sorkin, in that context, is all right to go easy on him. 

Readings: Warming, Bonds, Book Writing

8 comments Written on February 8th, 2011 by
Categories: 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: Guarantees, Neta-Babu, Term Plans

5 comments Written on December 30th, 2010 by
Categories: Readings

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.

Readings: Bank Elite, MFI, MoneyLife, 99ers

2 comments Written on December 12th, 2010 by
Categories: Readings, SKSMICRO

A Secretive Banking Elite Rules Trading in Derivatives by NYT. How the big bankers won’t let in the small guys into the market they control and keep opaque.

At Forbes, In India, Size Does Matter. On how the MFI industry has screwed itself by going national, rather than local. Yeah, that’s true of countries too – when they’ve borrowed from foreigners, it’s that much more palatable to say “let’s default”. And bankers, who only originated credit and packaged the loans they gave to other people. When you don’t know the person who lent you money it’s much more morally acceptable to default in a crisis.

From JagoInvestor, MoneyLife helps a real estate customer get his money back. Indiabulls had encashed cheques (blank cheques!) of a borrower without even lending him money. Gagan Banga, big shot at IB, was mailed – Sucheta at Moneylife has serious contacts – and he ensured recovery. She writes in a comment that  “Moneylife Magazine (www.moneylife.in) routinely does grievance redressal and that our success rate is over 80%.”. Impressive!

Calculated Risk: No help for 99ers. The supposedly cool extension of tax benefits (which will help some 2 million in the US that have been unemployed for 99 weeks now) is not so cool. 99 weeks is still 99 weeks, but you can start qualifying for it even right now. To the guys whose benefits end now, they don’t have much to celebrate. But after 99 weeks without a job, is it right for them to expect US govt. support? Oh well, the govt. still supports bankrupt banks and institutions. We are all socialists now.

And 800 more Radia tapes. That is a lot of transcribing left to be done.

Readings: Japan, Expert Advise, Sec Theater

Comments Off Written on November 23rd, 2010 by
Categories: Readings

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]

Readings: China Raises Rates, Coal India, Bond Yields

3 comments Written on October 19th, 2010 by
Categories: Readings

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.

Coal India IPO statistics

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.

Readings: Dubai, Making Money, A Big Listing

1 Comment » Written on October 6th, 2010 by
Categories: Readings

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.

Links: SKS CEO, SEBI Outrage, Cover Stories

2 comments Written on October 5th, 2010 by
Categories: Readings

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.

SKS Microfinance crashes after Gurumani is fired

image

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 EquitiesBusinessWeek 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.