Team USA Made in America Act

If ever there was a nonsensical piece of legislation addressing a farcically trivial issue it is the introduction of the "Team USA Made in America Act". If ever there was proof that US senators and congressmen do nothing useful, here it is.

A hullabaloo started when it was discovered that the US Olympic Team's uniforms for the London Olympics were actually made in China. Senators clambered over each other in expressing righteous indignation at this outrage. They are now passing a law that seeks to mandate that future olympic team uniforms have to be made in the US of A.

This triggered some admittedly nostalgic memories of my first ever post when I took up blogging three plus years ago. My very first post addressed precisely this issue; so much so that I couldn't resist dredging it up. 

Has much changed in three years ?

Ramamritham acquires a new fan

My good friend Sriram, appears to have become a fan of Ramamritham, just like me. Sriram is an excellent blogger of incredible energy ; who else can keep the scorching pace of 2 or 3 quality posts a day.

His post of a few days ago, On the life sucking bureaucracy in India,  makes a very good read. Heartily endorse the post for readers of this blog.

Its a telling comment on our respective energy levels that by the time I have summoned up the effort to cross post, he has already made 3 newer posts despite the fact that he is traveling ! Ah, the advantages of being a younger man !!

Farewell, old girl

As you grow older, you start to yearn for the familiar. In an ever changing world, that's a real challenge.  Wouldn't it be nice if some things never changed. A fixed beacon in the cauldron that is the world ? Alas that can only be a pipe dream as there is nothing that is impervious to the passage of time. And so, when something that is long standing , finally succumbs to Father Time, it is time to shed a tear. Especially something that has stood for 71 years.

When I first went to London, there were two places I HAD to see immediately. The second of them was a trek to Tunbridge Wells in Kent to stand on the hallowed pitch where in 1983, one of the greatest cricket innings of all time happened - Kapil Dev's 175 that launched India on the path to World Cup victory. But the first, even above that sainted place, was for me, Bush House, the home of the BBC in the Strand. You can't enter the building, unless you are an employee, so I contented myself with gazing at its majestic facade in awe. And a visit to the BBC World Service shop, which you can enter, of course.

Bush House, for 71 years stood for something special. As the home of the BBC, it was virtually the centre of the world. Right through the decades , until about 15 years ago, BBC Radio was the window to the world for most of its population. I grew up before the internet era ; actually even before the TV era had really established itself. I became a global citizen thanks to the BBC. My education was 50% at school and 50% thanks to BBC World Service. Fiddling a small short wave transistor radio, and trying to listen through the static and crackle, and there would come the magic words - This is London.

The BBC is shifting homes and abandoning Bush House to move to fancier (and presumably cheaper) quarters in London. The logic is impeccable. Bush House was never made for the digital age. Its old world rooms and corridors are a positive nuisance for a modern office. And yet, and yet .......

The BBC itself has changed of course. World Service Radio (at least on the short wave) is more or less dead.  TV has taken over. Budget constraints are taking their toll. But then the BBC is not going away - its only Bush House that's retiring. So why the nostalgia ? Especially for a building that I haven't even been inside. I can't explain it, except that, at my age,  it seems to be the passing of an era.

In four days time, at precisely mid day in London, the last World Service news will be broadcast from Bush House.  From the next hour onwards, the News will still come bang on time, but from the new quarters. Its the same BBC. Its the same news. Its the same anchors. But, surely, it will not be the same. The world may perhaps not notice. But I will heave a big sigh.

One more familiar sight in the world will go down.  Farewell old girl. Here's a big hug. You will always be one of a kind.

CEO for 20 minutes

How would you like to be CEO for 20 minutes ? No this is not one of those employee motivation exercises, nor is it a joke. This is all too real.  That's precisely what happened to Bill Johnson the CEO designate of Duke Energy.

All this arose from a merger between Duke and Progress, two giant utility companies in the US. It is now the largest electric utility in the US. As is typical in such merger of giants, the CEO of Duke was to become the Chairman of the combined entity and the CEO of Progress, Bill Johnson, was to become the CEO of the combined entity. Regulatory and shareholder permissions were sought , and received. All very good. On 27th June, Bill Johnson signed his new employment contract and  that was that.

The merger was consummated at 4.00 PM on Monday 2nd July. Immediately thereafter the new Board met and sacked Bill Johnson. At 4.20 PM Johnson resigned - he resigned rather than refusing to do so, as he was getting a $10m settlement that way. CEO for 20 minutes.

This is not a tin pot company, nor is the Board a bunch of jokers (although you have to rethink that now). Both the companies are giants in their own right and the combined entity is a behemoth. And yet, did they seriously believe that they would get away with this sort of behaviour? Did they expect the regulators and the shareholders to keep quiet. Even a moron can see that this is probably the worst move that you can make.

Mergers and acquisitions are notoriously difficult to implement. More go wrong than right. But if you start off like this, what chance do you have of any success ?

The future is all too predictable. The Board will defend for 3 days that all was right. Public and regulatory outcry will build up. Then the Chairman will resign. As will a few more Board members, if not all. A new CEO will be appointed. More turmoil. And the acquisition will steadily go downhill. Two years from now, Progress will be divested at one tenth the acquisition value.

It boggles the mind how corporations can monkey around like this. They seem to be their own worst enemies.

PS. Since all this drama is happening in Gils's current hometown,  perhaps, the esteemed blogger might pen a first hand account in the comments section :)

When "information" equals garbage

It is a fundamental tenet of capitalism that an investor should be fully informed of all matters relating to his investment. Over the years, regulatory authorities have been increasing disclosure requirements so that there is as much transparency as possible. But has this gone too far ? And has the overreaching legal recourses, especially in the US, led to the purpose being defeated ? No this is not a boring, dry post. Read on.

Take the case of Manchester United's IPO filing (if you ask what Manchester United is, I'll clobber you). IPO filers are required to disclose the risks associated with their business. Fair enough. But look at Man U's risks disclosed. They have listed 51 risks. Amongst them are such gems as
  • There could be a decline in the popularity of football (beggars belief)
  •  To service our indebtedness, we require cash, and our ability to generate cash is subject to many factors beyond our control. ( Ha Ha)
  • We are dependent upon the performance and popularity of our first team. (Really ?? - this is like a company saying that we are dependent on the popularity of our products)
  • If we fail to properly manage our anticipated growth, our business could suffer. (this is supposed to be an earth shattering revelation)
  • Our international expansion and operations in foreign markets expose us to risks associated with international sales and operations (brilliant insight which we otherwise did not have).
There are 51 such gems and monuments to inanity. Obviously lawyers have written this piece of garbage, including everything they can possibly think of. I am surprised that they did not add the following, which I will freely offer for inclusion in the filing
  •  Wayne Rooney (Man U's star striker) might develop a pimple on his ass that might prevent him from scoring goals
  •  An asteroid might hit the earth tomorrow
  • All other teams in the league might gang up and refuse to play Man U saying that they are fed up of getting thumped.
  • The queen might die and Prince Charles might succeed her (Prince Charles is a known Burnley supporter)
  • China may pass a law banning the Chinese from wearing Man U T shirts on the grounds that the Dalai Lama visited Old Trafford for a game.
This disclosure business has gone too much. To cover their asses, lawyers disclose a mountain of irrelevant stuff. Any sane follower is buried under a ton of garbage. Take Annual Reports of companies. They have become so bulky and big, that nobody reads them anymore. They are also written in such complex legalese that they are largely unintelligible to anybody. The only thing that anybody even sees , if they ever open one of them, is the constipated faces of the pompous Board. So much for the riveting reading annual reports make.

The purpose of full disclosure has been completely thwarted. Only three classes of people read these things these days. Lawyers who wrote the gibberish in the first place (I am not entirely convinced that they read it, but we shall give them the benefit of doubt). Lawyers looking for ways to sue. And finally a few unemployed  bloggers like yours truly.

There's something very rotten in Finance

Can a whole industry be rotten ? Definitely not. As in any field, you should expect the good, the bad and the ugly. But increasingly it is difficult to spot anything good with the financial services industry. Consider the latest scandal to hit the headlines - the manipulation of LIBOR by Barclays and 20 other banks.

LIBOR (which stands for London inter bank offer rate) is one of the prime interest rate benchmarks in the world. Many interest rates are fixed at LIBOR plus a premium. LIBOR should therefore be an impartial market rate based on which a whole lot of other transactions revolve. But it now comes out that Barclays has been manipulating this rate for a while. A fine of $450m has been imposed on Barclays and a probe is on with 20 other banks.

I know greed is a universal vice and an industry that directly deals with money is especially vulnerable to an overdose of greed. Yet it would be difficult to find an industry that has so allowed its core to rot . One after another, examples of insane risk taking, outright fraud, manipulation and criminal behaviour is coming to light. Action by governments has been patchy at best.

There is almost no  financial player that has remained untouched. Mention banks and every bank of renown has been in trouble. Mention insurance and the likes of AIG and Marsh & McLennan come to mind. I don't even need to comment on the likes of hedge funds and other less savoury players. Even the most reputable names in the business (Barclays is one of them) have been caught in wrongdoing. How can this be - a whole industry cannot be bad ?

The best brains in the world go into finance. And this is the field that seems to have the deepest rot.  Says something about the value systems of bright people. The state of the industry has gone beyond outrageous levels and has to be stopped.

Draconian action has to be launched by governments against the industry. It has to be made the most boring business in the world - so much so that the best minds recoil from going there.  All the scare mongering that capital for business would dry up should be discarded - there is enough capital in the world and like water, it will find its way to the best businesses. If some forms of risk management become impossible - it doesn't matter; the plethora of so called hedging products have created more risk than provided insulation against them.

The Reserve Bank of India stands out , amongst global central banks, by being bulldogish and refusing to allow any form of sex appeal in Indian banking. They have tried their best to keep Indian banking a boring business. By and large Indian financial institutions have escaped from major disasters - we have the RBI to thank for this. 

I hate to say this, but even Ramamritham has his uses !

Down with corruption; Oh really ?

End corruption; a favourite slogan in India, especially in the recent past. Really ?? Beware , what you wish for.  If that really happened, it would profoundly alter life in India, as we know it. Are we actually ready for it ?

  • If we don't pay the bribe to get our driving license, we really have to learn driving to get one.  It is an absolute certainty that if the driving test were to be strictly administered, 90% of Indian drivers will fail
  • We have to really declare the right price of your house when registering the property. Is anybody ready for that ?
  • We probably have to vacate the house you live in - chances are that few of them meet statutory safety requirements. Fire safety - what's that ?
  • If we are "rich" we can't slip those crisp ones to witness/cop/judge and stay out of jail , every time we get up to mischief
  • If we are "poor" we can't accept the Rs 500 and one bottle of liquor at election time
  • We are  most likely evading tax. Even the salaried lot, who think that  taxes are deducted at source - are we really declaring the interest income on our savings bank account in our tax return ? That is , if we file a tax return.
  • We have to spoil our hairdo by wearing the helmet while riding the two wheeler. Slipping twenty bucks to the traffic "mama" won't do 
  • I know the concept of municipal/metro water is a joke, but the tankers of water our building society is buying is probably mostly illegal and much of the price that we pay actually is to grease some palms. 
  • Slum life is real tough and unfair, but we still cannot throw a piece of wire to the line and tap electricity. You see the Rs 150 being slipped each month to the linesman can't go on.
I can go on and on. Corruption, in India, is a story where its considered "smart" if you do it, but its a scam if anybody else does it.

So, do we REALLY want to  abolish corruption ??

The Art of Giving

Life is not fair. That's an obvious lesson life itself teaches you, although  interpretations of "fairness" tends to vary widely across the spectrum. 

For some, life tends to deal a particularly bad hand. In a poor country like India, you see them all the time, although most of us have developed the ability to "not see" in order to preserve our sanity and not be overwhelmed. But we can't escape the reality of the misery around us. This post is a plea to lend a helping hand to one such group of the unfortunate - the aged.

We talk a lot about Corporate Social Responsibility and the philanthropy demands on the rich.  But we rarely talk about Personal Social Responsibility and the philanthropy demands on the common man. This post is also meant to ask the reader to reflect on what each individual can do, however small.

In developing countries like India and China, the lot of the aged is particularly tough. There is no social security net - the net is the family. The family system was designed for the times when people did not live long. Families could cope with taking care of the aged for a while. Now while lifespans extend and families become smaller, this social system is straining at the seams. It is a particularly big problem in China because of the one child policy - four aged adults are dependent on one couple. In both these countries, it is all too common to see the aged on the street, begging. They have nowhere to go and in the sunset of their lives, when they ought to have some peace, they find none.

So the next time you see an aged person on the pavement, please don't turn away. Give him a dollar, or five rupees or one yuan. Whatever be your views on begging, please suspend them for an old lady who is on the streets. She is not begging there because that is an easy way out. She is there because she has no choice.

Doing good need not take on the contours of a gigantic project. Those who do it that way are indeed saints. But not all of us can do that. That's fine. It is equally noble just to reach out and give a little to a needy soul every day. The logical and rational questions as to whether that is the best way to help are academic. For that hungry lady in the blazing sun, its a manna from heaven. Lets leave it at that.

Perhaps this touches a chord in all of us. That's why the pictures and story of Jason, a young American outside a McDonalds in China chatting and sharing a burger and fries with a granny begging on the streets has gone viral and created such a storm.

We are privileged. God willing, we will never be on the streets. But we will join the ranks of the aged for sure, as Father Time is of course relentless. So here's a plea to help wipe a tear from our fellow brethren. Keep loose change in your pocket. And everytime you see an old person on the street, give her a coin. Its not a big deal for us. Its a huge deal for that unfortunate soul.

Pardon this blogger for a sanctimonious post. For you see, pontificating and pestering are attributes of the aged.

Big is Bad

This blogger doesn't mind telling a story against himself. A couple of decades ago, he made his first trip to the US of A. Two experiences stand out in the trip. The first was his  seatmate on the flight. The gentleman was, to put it mildly, a mountain of lard. Having encountered many Rajalakshmis - she of the ample proportions -  this blogger thought he had seen it all. But "he ain't seen nothing yet". The specimen he was now witnessing would put all Rajalakshmis combined into the svelte and petite category . The worthy had boarded the flight first as "a passenger requiring assistance" and occupied the two seater we were to share. When I boarded, I discovered that both the seats had been "taken" (this was before the era which now requires man mountains to buy two tickets). I managed the two hour flight by standing next to the seat !

The second stand out experience was when I ordered a cup of tea at some cafe. Small size please. I got a plastic monstrosity which held some 2 litres of boiling water. And one sad looking tea bag . I have never ever asked for hot tea  in the US ever since. This is, after all the country where the smallest size in Starbucks is called Tall

This was 20 years ago. The connection between the two has only now been grasped in the US. Or at least in New York. Mayor Bloomberg now wants to ban soda fountains serving portions bigger than 16 oz (half a litre) in his crusade against obesity.

This blog has carried consecutive posts on economics and politics. That is rather heavy. Readers are now invited to wash that down with this rather "easy" post.

New Yorkers are up in arms protesting against the encroachment of the fundamental right to consume 3.4 litres of Coke in one go. I have some fundamental questions regarding how anatomically possible this propensity of New Yorkers is. I am fairly convinced that human body systems for dealing with liquids, do not have a combined capacity of  3.4 litres. Therefore if there is ingress of the stated quantity, there must also be a steady egress ! And what happens to the enormous quantity of CO2 inherent in the soda. Is this the reason for the generation of the vast quantities of hot air that The Tea Party and Michael Moore followers do each day. Or is it that all that gas adds a certain amount of buoyancy to people who are gravitationally challenged enabling them to transition from the horizontal to the vertical ?

Bloomberg is arguing that he is not banning New Yorkers from drinking 3.4 litres of Coke in one go. He is only banning them from drinking that from one glass. They can buy 7 glasses of 16 ozs each and slurp to their heart's content. Apparently his theory is that they cannot carry seven glasses at one time; so they will consume less !!

I am applying to the good Mayor for a clarification. Are the 14 kgs of ice cubes that are shovelled into each drink to be counted in his 16 oz limit or not ??  For , you see, no self respecting New Yorker will drink a soda, unless the entire Arctic ice cap is in his glass.

I am also unclear how the good state of Texas views all this. You see, all Texans believe that New Yorkers are wimps because they serve such tiny portions of food and drink. You want to see a Big Mac, come to Texas, where about two cows have to lay down their lives in the cause of doing justice to one burger. The Texan concession to the war on obesity is that he has reluctantly agreed to settle in for an order of "1 Big Mac and a Diet Coke please" !

A political addenda to the economic blueprint

Politicians will do anything to win elections; even good things ! You can't blame them , for after all that is the objective in politics. As I observed in the previous post, an economic blueprint is of no use unless a political way can be shown as well. So the task is to show that an economic plan will win an election. Or at least not lose one.

I believe the time is ripe for that in India. The Congress government is almost certain to lose in the next general elections due in 2014. They have no plan to win it. No amount of cash doled out to the voter is going to help them win. Therefore they have nothing to lose. Ideal conditions to try something drastic.

Make a fresh beginning. Manmohan Singh should retire and a grateful nation should say thanks for a lifetime of public service. Pranab Mukherjee can be kicked upstairs. Chidambaram, Anthony , Pawar etc are to exit with a 21st century Kamaraj Plan. For the lack of any other leader, Rahul Gandhi should take over as Prime Minister. He should form a new cabinet - 50% from the political class and 50% from technocrats and experts who are complete strangers to politics (imagine Sreedharan as Railway Minister). Form a government of national unity, giving a couple of Ministerships to the BJP and the Left as well - this may not happen, but no harm trying. This government has a two year mandate to do things .

Bribe the states to fall in line. No state is opposing any of the measures on grounds of ideology or conviction - every opposition is simply politics. The best way to overcome them is to bribe the states. Every state that wholeheartedly supports the entire agenda of the government will get say Rs 2000 crores as a dole. Fund this by running a one time deficit. States that still do not want to toe the line are welcome to stand alone, but the rest of the nation will go ahead.  If and when they join, they won't get the Rs 2000 crores.

Form a "conclave of experts". From all walks of life - social workers, businessmen, government officials, environmentalists, politicians, etc etc. Say about 50-100 eminent Indians. Appointed; not elected. The government should "sell" the plan to them. Debate and incorporate the sensible changes they recommend. Make them inclusive in the plan. Appeal to their nationalism that single point agendas (like say an environmentalist opposing any dam whatsoever and not  taking any responsibility for economic development) cannot work. There are no easy solutions. Some tradeoffs must be made. The governing principle is 75% agreement (since all cannot agree), but 100% commitment once the plan is finalised. The plan then goes through Parliament for adoption.

For two years banish any strike or agitation against any aspect of the plan. The conclave of experts have to commit that they will not agitate outside the conclave (that's what 100% commitment means). Opposition or ruling coalition parties who wish to strike are welcome to do so; the government simply ignores them and goes on ahead, daring anybody to bring down such a young, new, active government. It is unlikely that Mamata Banerjee or Mayawati or any of the usual trouble makers will increase their seats in a new election; so what's the joy in bringing down the government. The one likely gainer can be Jayalalithaa who will probably have to be "bought" by more dole to the Tamil Nadu government.

The government fully backs the bureaucracy and the judiciary to take quick decisions and implement like crazy( a bit of Sarkozy style hyperactivity would help). No bureaucrat would be punished for taking risks or taking a wrong decision - he would only be in trouble if he was corrupt. Sack the current grandstanding Comptroller and Auditor General who sees a scam in going to the loo and replace him with an eminent person from industry. Equally judiciary is "bribed" with doles to take a fast track for economic issues. The principle would be that its OK to get it 20% wrong , but quick, rather than hoping for the mythical 100% right and getting nothing done. Create a frenzy of activity - it tends to be self fulfilling and gathers a momentum of its own.

What about corruption ? It will never go away anywhere in the world. In India, contrary to public opinion, personal enrichment is a small part of corruption. Much of corruption is to create the war chest to fight elections. And the bulk of the spend is not in campaigning like in the Western world. Most of the spend is doling out cash and liquor to voters. But that has never won anybody an election. Everybody does this; so you can only lose by not doing this, but will never win only because of this. This can be lessened by moving towards proportional representation, instead of the first part the post system. Something to do immediately after winning the next election. This is an idea I wholly borrowed from Dr  Jayaprakash Narayan, an extremely impressive politician from Andhra Pradesh, where he is a MLA. For those interested, you can watch to him eloquently arguing the case here - incidentally it will also be an eye opener that such politicians also exist.

Meanwhile the current government just says no to building a war chest for elections. The Congress breaks ranks and refuses to bribe the voter with cash and liquor (remember it cannot win by doing this). Instead it tries to stand on the planks of freshness, action and two years of solid work.
Will this win Rahul Gandhi the next election. Maybe, maybe not. But he's not going to win it currently and he has nothing to lose. And maybe, just maybe, it might win him the election . The Indian voter is not an idiot. In the absence of any other compelling reason, he votes on caste lines, or whoever bribed him or sheer anger at the incumbent or fractures his vote. But give him a compelling reason and he votes in a wave irrespective of any other considerations. Remember 1977 after the emergency. Remember 1984 and the Rajiv Gandhi wave. Even the last elections in West Bengal is an evidence of the wave.

A fresh competent government may create a wave. Somebody trying this may lose, but will still go in a blaze of glory. Really worth a try.

An economic blueprint for India

It isn't enough to just criticise. A critic must also state what is the alternative.There have been lots of criticism of India's economic performance in recent times and the government's seeming inability to do anything right, economically. The blogger has been one such critic too. But precious few have really laid down a comprehensive argument of what needs to be done , and equally how this can be done; for we cannot, and should not,  wish away political realities.

Government action should be for sustained long term economic development - not short term fixes. Improving "sentiments" , like trying to bolster the stock market, is a waste of time and should not be anywhere in government's priorities. Issues like FDI in retail, fiddling with tax laws, which are getting a disproportionate amount of airtime, are all side shows - they won't make or break India.

This blogger is no expert on anything. He is just a concerned citizen. So here's one citizen's blueprint of what can be done and how it can be done. This blog is not a research paper, so there are a few ideas but no space to present data and research to back this

Stimulate agricultural growth:  Right through the last two decades, agricultural growth has lagged way behind GDP growth. This is unsustainable in a country where the majority depends on agriculture and therefore do not see the country's growth as inclusive. Some thoughts
  • Significant investment in agricultural research and wholehearted acceptance of genetically modified crops . In doing so, insist on clear labelling of genetically modified crops and let the consumer choose - take on the environmental lobby and stand firm.
  • Large investment in the power and water sectors of infrastructure referred to in manufacturing is also important for agriculture. Remove the freebies like free power (what use is free power when rural India has 14 hour power cuts).
  • Revamp the APMC rules that distort trade and let the agricultural sector freely export - there is a massive opportunity to feed China.
  • `Drive cooperatisation of agriculture ( a al Amul model) and even allow corporotisation without allowing any of these entities to acquire land.

Arrest the fall in manufacturing :   India's growth story is stalling primarily due to the decline in manufacturing. In Jan-Mar 2012, Manufacturing actually declined by 0.2 %. Manufacturing growth is the only route to creating jobs for the large population of India. Here's what can be done to drive the manufacturing sector
  • Setting a land acquisition policy that is sensible (the current one is not). This is an incredibly difficult thing to do; no country, including China, has managed this and there is unfortunately  no easy way. The current attempt in India is a step backwards. We must learn from states like Gujarat which have managed this well.
  • Decide on mega projects that require high level government approval quickly. Today every large project is in complete paralysis as the government is terrified of doing anything for getting dragged into controversy and accusations of scams. You can't be accused of a scam if you do nothing !
  • Significantly step up investment in infrastructure. The government has actually done a great job in two sectors - roads and telecom (although the misguided courts are trying their best to reverse the gains in telecom). It has performed abysmally in Railways, Power, Water and Urban Development. These are the four sectors for concentration
  • Implement the Goods & Services Tax, Direct Taxes Code and the new Companies Bill.
  • Do nothing else and let both private and public sectors drive the growth 

Fiscal Responsibility : Both central and state governments have to adopt fiscal responsibility. Do the following
  •  Statutorily fix a ceiling (low) on deficits as a % of GDP . Neither the Centre nor the states can breach this under any circumstance.
  • Phase out subsidies slowly - it is impossible to phase them out in one shot, but over 5-10 years they can be phased out. In order of priority, they should be petroleum , fertilizer and then finally food. Some component of food subsidy can never be phased out and should always remain as an anti poverty safety net.
  • Reduce significantly doles such as the Rural Employment Guarantee Scheme
  • Increase tax revenue by broadbasing tax - remove the exemption for capital gains and agricultural income and go after taxing property transactions
Fight Inflation : Fighting inflation must assume almost religious proportions (a la Germany).
  • Make RBI truly an independent Central Bank and task it with monetary policy. The government must abdicate its right to tinker with monetary policy. In the current environment, RBI is completely right to keep interest rates high
  • Fiscal responsibility referred to above, will automatically reduce inflation
  • Fight inflation supply side; boosting GDP growth is a good way to fight inflation.
Inclusive Growth : Mere GDP growth, without benefiting most (all is impossible) is not sustainable in any society. Growth must touch a large proportion of the population.
  • That is why, agricultural growth is at the top of my list
  • Invest massively in education. Inequity must be tackled at the level of opportunity. It is NOT an objective to achieve equity of outcome.
  • We should establish a social security net. No Indian shall starve and nobody will go naked. No child will be unable to go to school. Everybody will get basic medical care (note the word basic). Anything more than this is an agenda item after 10 years.
That's it. Do nothing else. Results come from doing a few things very well rather than lots of things poorly. 

None of this is new, and I am not vain enough to believe that this is an earth shattering blueprint. Wiser minds exist in government who know all this and more. The problem is the political will for implementation. Politics and economics cannot be divorced. So how do we make all these things happen politically ?? That's for tomorrow's post.

A sporting classic from the past

The telly in this blogger's household leads a cushy life. It is in a state of perpetual rest. It is only occasionally called to perform and then immediately sent back to the state of rest with an apology for disturbing the slumber. All that changed a week or so ago.

You see, ESPN has bagged the rights to telecast the London Olympics which begin in a couple of months. As a lead up to this event, ESPN has been airing some memorable documentaries of past Olympics. If ESPN marketed those videos they are airing, I will stand in line for 72 hours in Chicago in freezing winter to buy them ! There are some absolutely riveting stories there. This post is about one such memorable sporting event.

Atlanta 1996. The rather unglamorous sport of weightlifting. What happened that Monday will go down in sporting legend as one of the great days of sport. It was the 64 kg category - not the man mountain variety. Naim Süleymanoğlu from Turkey was already a legend. Nicknamed the Pocket Hercules for his short stature, he was, pound for pound, the greatest weightlifter of all time. He was an absolute hero in his country. He was already a double gold medalist - from Seoul and Barcelona, but was now coming out of retirement to compete in Atlanta. His main competitor was the world record holder Valerios Leonidis of Greece. Adding spice to the contest was the fact the Greece and Turkey share a relationship somewhat akin to India & Pakistan.

The atmosphere in the hall was electric. On the left were legions of red Turkish supporters. On the right were the blue Greeks. Flags were waving everywhere. The noise was deafening. The event has two types of lifts - snatch and clean & jerk. Each lifter has three lifts in each category and the sum total decides the gold medal. When the snatch was over Naim had a 2.5 kg lead over Valerios. The drama reached a crescendo in clean & jerk. Naim went for a world record at 185 kg with his second lift and succeeded. Valerios asked for 187.5 kg for his second lift and succeeded, beating the world record  Naim had just set. Remember these guys were 64kg in body weight  - they were lifting three times their body weight. For his final lift Naim went for 187.5 kg and succeeded, equaling the world record just set, but would win the gold medal  since he was carrying a lead from the snatch. For the final lift of the competition, Valerios asked for an unbelievable 190 kg (10 kgs more than he had ever lifted before). He lifted it to his shoulders but couldn't complete the lift. The Pocket Hercules had won his third gold medal.   The men embraced. The public-address in a rare departure from the cript, actually said, "Ladies and gentlemen, that concludes today's competition, and you have probably witnessed one of the greatest weightlifting contests in the history of the world."

Later on as they lined up for the medals ceremony, Leonidis sportingly patted Süleymanoğlu and said "Naim, you are the best". To which Naim was reported to have replied , "No Valerios, WE are the best"

You can catch a little of the drama here. Of such stuff are sporting legends made.

The curious public reaction to Facebook IPO

You couldn't have missed the public fury over the Facebook IPO, over the last week, even if you not economically inclined !  Facebook was a darling before the IPO - great company, stratospheric valuations, etc etc, which this blogger has been heartily against. But now after the IPO , Facebook is a pariah, it botched up the IPO, lawsuits threatened, etc etc. This time this blogger is completely on the side of Facebook and totally flummoxed by the public reaction.

What is the main charge ?  Facebook's price did not shoot up 10 times after the IPO. Instead it has declined by some 16% or so, over the IPO price, in the first week. The company has committed sacrilege. Really ??

Who are the moaners and bleaters. The punters who bought in the IPO wanting to sell on the first day after listing and make a 5000% profit. Please tell me why the company has any obligations to these greedy leeches ? What economic activity have these speculators done (never mind that in this lot might be Oregon widows who didn't know what they were doing !)? Why should they make any profit at all ? Why should Facebook "ensure" that the stock rises manifold on the date of listing ? It can be argued that Facebook should actually be doing precisely the opposite. After all if the price shoots up after the IPO, the company is shortchanging the original investors who first invested in the company to the benefit of the sharks who want to make a whopping profit in one day. By that yardstick, Facebook has done precisely the right thing.

The second charge is that the IPO price was overvalued. Now do you need a MBA to tell you this ? Of course the company is overvalued like crazy. Everybody knows that. People chose to close their eyes and believe that in a stampede they would make a killing. They've now been trampled. Tough luck. 

The third charge, and a more serious one, is that Facebook let some analysts know that its latest quarter's numbers would be lower than expectations, but didn't inform everybody. This is what is triggering the threats of massive lawsuits.I don't know the facts behind this allegation, but I suspect this is a fig leaf behind which the punters are wanting to hide. As if their stampeding to buy Facebook shares had anything to do with numbers or logic or any sensible model of valuation based on earnings. Would they have behaved any differently if Facebook had said they would earn half of what they did ??

I have zero sympathy for those moaning today, I am actually delighted that they have lost their shirts and would be even more delighted if they lost their underwears too. The right course of action for them is to wait a year or two, and see if Facebook's performance doesn't lift the share price. Fat chance of that happening - this lot has the patience of an ectoplasm !

I am totally with Facebook on this one, even though I am not with them on anything else. That's why I am not updating my timeline !

Never mind Greece, there's a bigger basket case

Its the world's ninth largest economy. Its six times the size of Greece. Its actually bigger than India. And its hopelessly bust . Yet; we aren't hearing much about it. Only because ,  its not a country. Its a state. The State of California. The world's biggest basket case ! This has been a favourite topic of mine having blogged before here and here.

California has a state budget of some $90 bn. And it just projected a deficit of $15 bn. What sort of an economy runs a deficit of 18% of the budget ?? This has been going on for years . And what does that state do - simply borrow . And borrow. And borrow.  And with no hope of ever bridging that gap. If California had its own currency, I would be merrily shorting it. It would be a prime candidate for begging at IMF's door. 

For once you can't blame the political leaders for the mess, although they are the ones being vilified and quartered. The blame must squarely rest on the citizens of California. For they are the ones who have brought this mess upon themselves by indulging in direct democracy.

California is a perfect example of democracy run wild. For decades they have been passing laws through referendums without the level of serious evaluation and trade offs that are necessary for good governance. The infamous Proposition 13 of 1978 drastically limited property tax and imposed a requirement for a two third majority to raise any taxes , making it virtually impossible to do so. Then they passed scores of spending laws like Proposition 98 of 1988 which mandate 40-50% of the general revenue to be spent on education. And Propositions like 117 of 1990 that mandated a minimum spend of $30m on wildlife habitat. Proposition 49 of 2002 increased spending on before and after school programs by some $450m. There are tons of such mandated spending with barely a thought on how they would be funded. They also pass whimsical Propositions that mandate that a chicken must be able to spread its wings and turn a full circle without touching another chicken as I outlined in this post !

The problem is simple. California depends for more than 50% of its income on personal income taxes. These unfortunately fluctuate. Recessions drastically reduce tax revenues. In boom times the revenue increases are spent away and nothing is saved. In hard times, there's a massive hole in the budget. There is zero political will ( read citizen appetite) to do anything about it. Budgets are never passed on time. Fiscal irresponsibility has a new meaning in California that would make Greece blush. California is the perfect example of how not to run an economy.

The puzzling thing is that California is also home to the smartest people in the world.  It is arguably the most intelligent place on earth. And yet ..... 

Maybe intelligence is no insurance against stupidity !

A matter of grave import to the nation

The Hon'ble Supreme Court of India is a very esteemed body and is concerned with matters of grave constitutional importance, on which hinges the future of this nation of 1.2 billion people.  Therefore when this august body makes a ruling, we should take it very seriously and comply. It also goes without saying that the Supreme Court only rules on extremely weighty matters and does not lend itself to trivialisation. It is therefore very clear that the removal of sun films from car windows is one of the most important and pressing of issues that confronts India today.

The Supreme Court has ruled, after intense deliberation, and careful consideration of legal issues that pasting a sun film on your car window is illegal. That it has devoted its valuable time to this, while it is suffering from a massive backlog of cases is enough evidence that this is an extremely grave matter. A very concerned citizen of India, Mr  Avishek Goenka (it is completely untrue,  that the aforesaid gentleman is an old f@*$, of the qualities I alluded to in this post) filed a Public Interest Litigation that sun films on car windows was an important reason for rape, dacoity, murder and a host of heinous crimes . The Hon'ble Supreme Court agreed. From now on , thou shall ride a car with sun films on the windows at your peril.The implication of this judgement is obviously that as soon as sun films are removed, the incidence of dacoity, rape, etc etc shall drastically fall. Please monitor the statistics in the next few months to see this dramatic fall.

The police in each state is getting ready to diligently implement this critical matter of public policy. They shall now treat sun film violations on par with catching those driving without a license, driving on the wrong side of the road, driving without any lights at all, five people riding a two wheeler, parking in the middle of the road etc etc. These matters already receive the highest attention from the police, so much so that these problems are largely licked ; they will now have the time to tackle sun film.

The Hon'ble Supreme Court did not mention this, but we can speculate that the corollary effect on public health also influenced its opinion on the matter. We are somewhat concerned that Vitamin D deficiency is at an unacceptably high level in India. Exposure to sunlight, especially the intense summer sun that we are blessed with, is really a significant aid to the health of the nation. With no sun films on car windows, my vitamin balance will be strengthened by the absorption of more sunlight.

A byproduct of this move shall also be to enhance public morality. Activities of an amorous nature, carried out in the confines of a car will now be visible to the, umm,  naked eye and therefore act as an effective deterrent.

I shall also compliment Mr Avishek Goenka on services to the nation and exhort him to continue to strive for further reducing dacoity , rape, etc,. Considering that a significant proportion of such crimes are done indoors, its time to turn the attention to buildings. It is deplorable that building windows are tinted and the view blocked by curtains. I am exhorting Mr Avishek Goenka to move the Hon'ble Supreme Court to also deliberate upon the legality or otherwise of curtains. (Reflections, please note).  After winning this, Mr Goenka is also exhorted to move the Hon'ble Supreme Court to ban the wearing of sunglasses so that potential rapists who are ogling at women with the intention of committing rape can be more easily found out.

I am extremely happy to be living in a land where the institutions are so concerned about my welfare and safety. I shall now feel much safer on Indian roads knowing that policemen are on the look out for sun film offenders. I commend and applaud all those who have diligently framed this public policy. Jai Hind.

Oh no; Not again

This blogger is rather vain about his English. And yet he was completely flummoxed when he spotted the headline "JP Morgan loses $2bn in egregious error" . He has to sheepishly admit that he did not know the meaning of the word "egregious" and had to look it up in a dictionary :( Trust a banker to come up with an unintelligible world - at least unintelligible to one "master" of English :). It sums up the problem neatly. The financial world has gone so bonkers in dreaming up structures of incredible and ununderstandable complexity that we cannot sit by and watch this go on anymore.

JP Morgan is a well respected bank. Its governance is top class. It should be one of the models of all that is good about the financial sector. In  Jamie Dimon, it has one of the finest Chief Executives in the world. It has superb risk management systems, strengthened even more in the wake of the financial crisis of 3 years ago. And what happens - it manages to lose $2bn in  one quarter on credit derivatives trading. An "egregious error".

This casino has gone gone berserk and has to stop. Enough is enough. Here is this blogger's remedy which is an extreme extension of the Volcker Rule.

  • Commercial banking must be made a boring business. No proprietary trading. List of what they can do is made boringly small and strictly regulated by a super Ramamritham. All bankers have to come to work wearing only a panchakacham (man) or madisar (woman) - the logic being that anybody dressed like this can't be a punter.
  • Commercial banks continue to enjoy the implicit sovereign guarantee. They are not allowed to become too big. After a certain size, they have to break up into two; somewhat like an amoeba.
  • This is a free world. So the downright crazy casino is allowed; but at only two places in the world - Las Vegas and Macau. If Europe makes too much noise, Monaco can also be let in.
  • Any idiot who enters any of these three places is required to sign a pledge that he clearly understands that he is committing suicide. Before he starts punting, he has to get a license, which will only be granted after he spends one night in the ward meant for the dangerously criminally insane.
  • No bail outs for the punters in these three cities. If they lose their shirt , or something worse, it is their funeral. The state may helpfully construct a 100 floor tower with a fast lift to the top so that those who want jump off are easily facilitated.
Period. No more discussions or engagement with the financial community.

PS : If you are still wondering what "egregious" means, defines it as " extraordinary in some bad way; glaring; flagrant"

Pranabda ko gussa kyon aata hai

Statutory Warning - This post has language which may be offensive to some. Reader discretion is advised !

Why is the  Finance Minister  an angry old man  - approximate translation of the title of this post for non Indians. He is one of the most mature and level headed politicians in India. And yet, these days, he is behaving like an "old f&*% with that perpetual scowl on his face" - you can see zillions of this category in any apartment owners' association in India. Either he has gone a bit batty or has let Ramamritham loose - both of which are awful developments for India

I am referring to their collective antics relating to the tax laws in India. The Vodafone story is now well known and is the subject of an earlier post of mine. Pranabda is simply being extremely churlish and petty in pursuing this. I continue to be amazed that they are going after Vodafone (which was the buyer in this transaction and made no capital gain) rather than the seller, Hutchison Telecom, which is really the company they should go after. If Ramamritham has any b*&@$, he should take on China.

But they haven't stopped there. They are loudly defending the retrospective changes they have brought into the Income Tax law . In this process, they are also overriding bilateral tax treaties with many countries. Nonsense regarding sovereignty and the right of Parliament to enact any law it pleases is being spewed. They are seeking to impose GAAR (General Anti Avoidance Rules). In layman's language, GAAR  simply means that you as a tax payer have to prove your innocence (the taxman is simply going to assume that you are guilty). Fantastic. Grrrr.

I can understand the pressing need to raise revenue - given that they are spending money like water on doles and giveaways and simply borrowing their way to nirvana. Even grant for a minute that curtailing expenditure is a non option (wow).  But is this the way to raise money ?

Only 35m Indians pay Income Tax. That's 3% of the population. Is really 97% of India poor ? How about getting some more people to pay instead of screwing those who do ?? Just look at the fantastic (and mostly ill gotten) wealth in property most of which is in suitcases. How about tightening the noose on those. Even today you can earn Rs 10000000000 crores as "agricultural income" and not pay any income tax at all. Why not tax that ?

The relationship between the taxman and taxpayer is one of extreme confrontation in India - anybody who has been at the receiving end of attention from Ramamritham knows this. Laws are draconian and the concept of guilty until proven innocent is well engrained. Dispute resolution in a sensible way is non existent - everything is confrontation. With the latest scowl on Pranabda's face, its only going to get worse.

When will we ever learn that making laws simple and fair , keeping tax rates reasonable and letting economic activity boom is the surest way for governments to increase revenues. Pranabda knows all this - he is a wise and extremely experienced minister. And yet, look at what he has become.

Will the Pranabda of old resurface please ?

For a more level headed and saner piece on this issue, read here.

A cross post

Should we worry about India's economy ? Yes says Sriram, a friend and a most prolific and versatile blogger. He makes two or three posts a day  and has wide and original views on a number of issues.  On India's economy, he says

"Less than a fortnight into the hundred days in India, the more I observed, the more I wondered whether India's economic "success" story was more hype than real.  That line of thinking morphed into to this column in which I wrote that "the economic health of India is not looking good."

Every day, evidence seemed to pile on to further reinforce the impression that India could run into some serious economic troubles really soon.  I was particularly concerned that the country was not paying enough attention to the long-term requirements of
resources, energy, and infrastructure."

You can read his full post here.

Yes there's much to worry and despair about. We have made some progress, but make disproportionate noise about it. The real tragedy is that India is capable of so much more - Oh what a huge unfulfilled potential there is. With this much poverty around, its a crime to let potential go unfulfilled.

Excuse me, which way is it to Omaha ?

Where on earth is Omaha ?? I must confess I had to look it up on a map. God - its in the middle of nowhere. Who on earth wants to go to Nebraska anyway. Well, this weekend, all roads lead to Omaha, if you are a certain type who likes to make money. For its the annual jamboree of Berkshire Hathway, and one old man named Warren Buffett.

I really don't understand why anybody wants to go to that blessed event. I mean, can there be any excuse for wanting to go to Nebraska ?? For God's sake ! To listen to words of wisdom from the "Oracle of Omaha" ?? Please, spare me the thought. Warren Buffett is no sage. In any case, if the multitude that go there even care to listen to him, they wouldn't be going there in the first place. For after all, he has been saying for donkeys years , don't listen to self proclaimed sages. Don't go on tips and hunches. Do research. Invest for the long term , etc etc. Everybody goes there to get tips on investing. They haven't understood what he has been trying to tell them - don't listen to tips. Whoever said that there was a surfeit of brains in the investing community.

But I want to go to Omaha !! I wish I was there this weekend. But not to listen to the old man. Or even have the free ice cream they dish out. I want to be there for a far more important reason. I want to have a chance to challenge Ariel Hsing to a game of table tennis.

You see, Warren Buffett is an amateur table tennis (ping pong, if you prefer) player. Typical of him, he spotted a talent in Ariel Hsing, when she was 9 years old. He brought her to his annual jamboree and then challenged anybody to beat her - the winner gets a box of candy. In the six or seven years, nobody has beaten her. She is now 16 and has made the London bound US Olympic Table Tennis team. In one of those years, she thrashed Bill Gates, who is an amateur player himself - one of the few occasions when Bill Gates has been thrashed in anything. Buffett even joked that Bill Gates' manhood has taken a severe beating losing to a pre teen !!

So, attendees to the Berkshire Hathway AGM can challenge Ariel to a game. Well, I have some claims to playing a decent standard of table tennis. I rather fancy my chances. Of course, I would chivalrously lose in the end, but after giving the lovely lady a bit of a running !!

Unfortunately Bangalore to Omaha is a fair way, although the opportunity to play with a lovely lady must move a man to trek to the moon. In my younger days, sure.  Alas, with the advent of years ....... I shall therefore pass the opportunity to Gils, who is not far away - he having recently shifted to an equally obscure and godforsaken place, rather close to Omaha !

As for Ariel, good luck in London, young lady. The US team, as indeed many other teams, is entirely made of ethnic Chinese. They will soldier bravely, but really have little chance against the real thing -  China. Which other country can afford to drop the current World No 1 man and woman from their team ?? That's exactly what China has done. Perhaps not that surprising, when they also have the No2, No3, No4 and No5 !!

Cry for me, Argentina

Its time to change Andrew Lloyd Webber's famous song in Evita. There's no option, but to cry for Argentina. How else can you react to the awful move by Cristina Fernandez, Argentina's President, to nationalise YPF, two weeks ago ?

YPF, Argentina's largest oil and gas company is 57% owned by Repsol, the Spanish oil giant. Ms Fernandez's grouse against Repsol is that it is not investing in increasing production in YPF. This is partly true, but the real reason why YPF is not expanding production is that her government has artificially kept petroleum product prices low . No company is going to invest for very little profit. So the good lady has decided to nationalise the company. No doubt, a pittance would be paid to Repsol, well below the market value of its shares in YPF. This is daylight robbery, of the kind Ramamritham (of Vodafone fame) would feel proud.

Is this any way to treat your largest foreign investor ? Spain and the EU are up in arms and threatening a fight. Spanish companies have significant investments in Argentina, united by a common language, of course. Argentina can kiss good bye to any foreign investor from now on. Already it is an international economic pariah having defaulted on its sovereign debt in 2001. However much you hate international finance, you need investors for any economic activity.

Does any serious country nationalise anything these days ? Is there any more proof needed that nationalisation and state control of industry does not work ?

An interesting by line is the parallel with Indian politics. Cristina Fernandez is a Rabri Devi. Her husband Nestor Kirchner was the strongman of Argentina. When the constitution limited him for a consecutive presidential term in 2007, he installed his wife as President and , well ...... The plan was that he would return back in 2011 as President. Unfortunately, God willed otherwise and he died. So, the lady continues.

The worrying thing is that what this lady is doing might be read, and emulated, by another lady who's running another Eastern state in India. Thankfully, the latter lady apparently does not read any newspapers other than those that only write about her greatness. She certainly doesn't read this blog and there is little risk that the Argentinian precedent will be known to her. But still ,.........

The real worry is that Ramamritham has learnt about this move in the opposite corner of the world. You see, the problem with Ramamritham is that he reads widely, maybe even this blog !! The real worry is that he will take a leaf out of Ms Fernandez's book.

Andrew Lloyd Webber will have to produce another musical then. "Sonia" the musical, will feature the hit song, Cry for me, India !

Are women thick headed ?!

The Delhi government apparently feels that women are rather thick in the head. Considering that it is headed by a lady, we must now take this as a conclusive fact. I am reacting to the continued insistence of the government in making helmets for two wheeler riders compulsory for men , but optional for women. 

This piece of news was too good to resist. Regular readers are familiar with this blogger's tendency to rib the fairer sex once in a while. Realisation has dawned that there has been some tardiness in this matter over the past many months. Time to rectify the situation. Sunday posts are an excuse for unbridled frivolity rather unbecoming of a "serious" business blog. So here goes.

Why else must the government make the differentiation ? There is no evidence to suggest that Romeos are more likely to fall from two wheelers than Juliets. Yes, Romeo's concentration on the bike can easily, and often, be distracted by a passing Juliet, but that's equally true of Juliet too - its just that the human emotions that are triggered by such a sight varies from admiration to envy  ! It certainly cannot be anything to do with display of the hairdo to please the eye . Indian ladies have a mighty preference for long hair, but considering that Rajalakshmi is far too lazy to tend to it properly, it can be argued that it is best hidden under the helmet.

It can perhaps be on the grounds of women empowerment, but then India is not pro choice country (American far right, please note)! Perhaps it is a consequence of the tendency of the ladies in this country to ride side saddle -  Research indicates that a fall might more likely result in a landing on a rather more substantial part of the anatomy.

We have too look for clues elsewhere. There is yet another group in this worthy city which is exempted from wearing a helmet. Members of a certain religious group who sport rather substantial and cushioning headgear are not required to wear a helmet either. But considering the popular perception that under that elaborate adornment, there is a certain sparseness of matter, especially as we  approach midday, we cannot draw a parallel to the feminine of the species ! For the record, the said insinuation is an abominable untruth.

Certain masculine members of my audience might respond as to what was new in the question posed in the title. Any category of the population which is fixated with the saas-bahu serials (soaps for ye non Indians)  must obviously have to be somewhat thick in the head. Evidence mounts in this direction considering the obvious feminine dispensation towards a pedicure (see here for a learned exposition on this subject.

The Transport Minister in the Delhi Government who is leading the fight against women equality is the fantastically named Arvinder Singh Lovely ! But then being a member of the group which is exempt from wearing helmets for reasons outlined  a couple of paragraphs above, we cannot take his  arguments too highly !!

Motion is hereby moved that the fair sex is indeed rather well defended in the highest part of the anatomy. Spirited defence against the motion is invited. Those in support of the motion might consider tactical restraint as a means of saving their lives.

How the stock market works

"Company X crushes estimates; Shares Soar" screams the headlines in Forbes,  a respected business magazine. "Company X profits slip 35% as spending continues"  proclaims the equally loud headlines of The Wall Street Journal, a respectable business newspaper. Both refer to the same company - Amazon - and the same piece of news, the first quarter results of the company. Flummoxed ?? Read on.

Can both headlines be right ?? Surely they can't.  Only in the rarified world of finance , especially the even more ionospheric world of stock markets can both statements be true. Yes.

You see, company performance and movement of share prices is based on "expectations" and not on reality. Expectations of whom, you may ask ?  Of a unique sub species of the human race called homo sapiens analystensis (hereinafter referred to as HSA).

Cut to business school. Some of the best brains in the land want to "go into finance" after they graduate. Their ambition is to mutate into this unique sub species I referred to earlier. There are distinct variants even in the subspecies that you can aspire to become - HS Brokerensis, HS Sellsideanalystensis, HS Buysideanalystensis, HS Fundmanagerensis, etc etc.

All of them have only one aim in life. They aspire to make predictions of the future. These predictions are called "expectations" or "estimates" in the lingo. Never mind that humanity has not yet discovered how to foretell the future. All through history, many quacks have attempted to do this - astrologers, palmists and charlatans of various kinds. To this tribe has now been added the aforementioned HSA. Their tool is not a parrot or a horoscope, but an abomination called the Excel spreadsheet. For their quackery, HSAs earn only in seven figures.

Based on their wise gazings, they come up with an Estimate (with a capital E). Then they all flock together , total up all their Estimates, divide it by the number present and come up with a "Consensus Estimate". This is the magic target for the company to beat. This is what Amazon beat by 4X prompting the Forbes headline.

Companies are of course wise to all this. They cuddle up to this species. They ply them with booze in events called Analysts Meet. They provide them with "guidance" so that the fertile minds of the great members of HSA can be fertilised. Sharp readers may note that along with other humans, company honchos are equally clueless about the future. But that doesn't stop them from pontificating. They  whisper, allude, provide crystal balls etc etc so that the sainted HSA can come up with the "right" Estimate. Then they spend all their life trying to beat the millstone around their neck.

The stock market formula is simple. Beat the Estimate and your share price will soar. Miss the Estimate and the share price will tank. Never mind if you made a profit or a loss. Never mind that you sold more or less. Never even mind if you made cornflakes or condoms.

Now you see why both Forbes and Wall Street Journal were right. Amazon's profits actually dropped by 35% from last year's first quarter. Signor Bezos continues to thumb his nose at any naysayer and spends money like water (made respectable by calling it investment). But he beat the consensus estimate of the HSA. Not just beat it, but licked it.  

Amazon's share price rose 14% yesterday.


Alas, George Orwell's prophecy has come true. Its 30 years late, but its now a reality. His book, 1984, I mean. For those unfamiliar with the aforesaid gentleman and book [having been born subsequently :) ], here's a helpful link as to what it is all about.

The sudden realisation dawned on me through the innocuous act of installing the Ghostery plugin to my Firefox browser. I had innocently thought that something that would enhance my internet privacy would not be a bad thing. Little did I realise what a disaster it would lead to.

You see, I had not realised how much the powers that be were interested in my colourless life. Within one second of installing the damn thing it showed me that Facebook and Twitter were monitoring my every click on the Net. Never mind that I don't use either of those.  I expected to see the usual culprits like Google Analytics and Double Click. But, pray, what on earth are Chitika, Open X, Crazy Egg, Tealium doing spying on me ..... . Now every 5 minutes, Ghostery is throwing up a new character that wants to monitor me. As soon as I block one, another one pops up. I have become completely paranoid. What on earth is happening.

Why is anybody even remotely interested in what I do ?? After all, the wonderfully exciting things I do on the Net are blogging, checking email, etc etc.  I am not a terrorist. I am not in  China trying to stir up trouble over Bo Xilai. I am not  circulating cartoons of a certain Chief Minister of India, which will land you in jail. No, I am not even browsing girlie sites !

So who is interested. The official explanation is that they are collecting non identifiable data so that they can target ads better . Really ? Who the hell cares two hoots about an ad on the Net these days ? I haven't ever bought a single thing on the Net because I saw an ad for it. I never will.

I think Big Brother has come into being. With all this analysing going on, I can picture my dossier in Big Brother's hands. My dad's name is Ramamritham and Rajalakshmi is my secret girl friend.  I have connections with the Greek protestors since I am friendly with , one, Zeno. I have a taste for seafood since I seem to be fascinated with Gils. I have one eighth Maori blood in me since I know a kiwibloke.  ?  And I am surely narcissistic since I seem to be gazing at Reflections (yes, she is eminently gazeable at:)) . But who in the world is the mysterious "J" ?

I am now quaking with dread. No doubt there are video and audio trackers in action. Since I rarely switch off my computer, they can presumably see what I do and listen to what I say. They can find out some amazing things. Yes, I woke up at 7.48 in the morning today. No, I do not sing in the shower. Yes, my sartorial talents are not well developed. No, I do not watch TV .... Riveting stuff.

This is simply awful. Even the good old Soviet Union of yore, or  present day North Korea are better. Get an internet connection at your peril. Big Brother is bound to find out that you sleep on your tummy.

What you can get with a billion dollars

In the last post, I asked a rhetorical question - What would you do with a billion dollars ?

Well, I read in the Economic Times today, that it was all too real a question to two people. They were faced with precisely this problem.

Read here , what they actually did. I found this a moving piece and would strongly commend reading it.

What can you get for a billion dollars

You have a billion dollars burning a hole in your pocket (Gils, Zeno, and a few others have that problem !). Take your pick. What would you buy ? 800 patents, dating back to the early days of the Internet. Or a red hot new internet rage that everybody is talking about but which has no revenues. Or boring old Yellow Pages. What would you take ?

These are three transactions that actually happened in the last couple of weeks for about $1 bn. 

Microsoft bought the 800 patents from AOL for $1.1 bn. The patent world has become completely crazy for tech companies in the last few years. Everybody is suing everybody else for patent infringement. Some 800 plus patents are given simply for what goes into a mobile phone. Its impossible these days to launch anything without infringing on somebody's patent.The US patent office has gone crazy as I wrote about here - Patents have now become innovation stifling rather than innovation building. Anyway Microsoft believes its better to pay $1.1 bn to acquire them rather than defend later in court.

The crazy deal is Facebook buying Instagram for a $1bn. If you don't know what Instagram is, its  a photo sharing program which allows you to apply filters to your photo (for example to make your photo look like it was taken in 1960) and share it. For a humourous look at it, watch Jon Stewart's show here. This transaction confirms my view that Facebook is a nut case. Instagram has 13 employees and has no way to make any revenues at all, let alone a profit. And here comes Facebook which believes its worth $1bn. Anybody remember dot com mania. Its alive and kicking. Yeah Yeah - I am an old duffer who "doesn't get" the Internet Age.

The third is a boring transaction. Cerebrus , a private equity firm is buying The Yellow Pages from AT&T for a billion. Who even opens the Yellow Pages these days. Doesn't everybody Google everything ? Its a dying product (if not already dead), right ?  Dead wrong. Sure the business is unglamorous. But it has revenues of $3.3 bn and is churning out cash even while in a slow decline. Private Equity folks aren't fools - they can smell money better than any drug sniffing dog. This seems to be the bargain of the lot for the buyer.

All this just confirms my theory on valuations. There is no science to it despite what business schools like you to believe. It just depends on the degree of desperation of either the seller or the buyer.. Sometimes both !

Readers are invited to present their own creative proposals on what they might do with a billion. Gils and Zeno are excused on the grounds that they may have to give away what they might actually do !

Wealth and Morality are not mutually exclusive

Not for nothing is Archbishop Desmond Tutu widely known as "South Africa's moral conscience". The Nobel Peace Prize Winner in 1984, Archbishop Tutu was one of the leaders of the anti apartheid struggle in South Africa. He headed the Truth and Reconciliation Commission after the fall of apartheid which so enabled South Africa to move on from the past and not start a war of vengeance. He speaks often in defence of moral positions. 

So when he wrote a piece in the Financial Times, I sat up and read. He argues in his piece that you don't have to lead a life of austerity to be moral or spiritual. Being wealthy is not a crime (its often made out to be by those who claim to speak for the poor). "It is fine to make a living; we are meant to enjoy abundant lives. The conflict comes when we separate ethics and economic progress and when we equate the latter with happiness", he says.

There's a beautiful statement in his piece.  "Shareholder responsibility is not only to make profits. How they are made also matters." Beautifully put.

I'll leave you to read the article yourself. Its not earth shattering or a blindingly  novel idea. But I believe he has stated very well, with all his moral authority, that yes, you should strive to be wealthy, but be careful of how you become wealthy.

In early stages of a career wealth seems to be everything. That's the goal to aspire for. As you grow older, you may realise that wealth is a necessary, but not sufficient, condition for happiness. You may or may not be religious, or even spiritual. But you have to be "moral" to attain a degree of happiness. Those who age, without this realisation, have grown older, but no wiser. It may appear that they have the trappings of happiness, but in reality, they do not.

The opposite is equally true. To condemn wealth and say that it is a barrier to morality, or even spirituality, is sheer bunkum. Glorification of poverty is one of the greatest sins that people can make. Unfortunately many activists do so stridently. They should listen to Archbishop Tutu.

I've often felt that the world needs moral leaders. In the ancient world, the Pope performed that function (alas often appallingly). Leaders, tainted by religion, are now too narrow to be moral world leaders. In the modern world, there are no moral leaders. The closest to having that aura would be Nelson Mandela, but he is an old man now. Archbishop Tutu is somewhat in that mould, even though much of America vehemently criticises him for his strident opposition to Israel's policies on the Palestinians. The world needs more men (and women) like them.

Frankly, my dear, I don't give a damn

Immortal words from an immortal movie. If you don't know where this quotation is from, click here (excusable because this was before you were born)

I am however writing about more prosaic things. Like the American nomination of Jim Yong Kim for the Presidency of the World Bank. Readers of this blog may recall that I had railed about the practice of nominating an American for the head of the World Bank and an European for the Head of the IMF here. The IMF vacancy came rather suddenly after the antics of Dominique Strauss Kahn. After some pious sermonising about how it wasn't an European stitch up, the post went to Christine Lagarde, another French person !

Now there is a vacancy coming at the top of the World Bank as Robert Zoellick is completing his term. The Americans are now wanting to stitch this up. But its the American they have nominated which is raising eyebrows. Kim who ??

Jim Yong Kim is an eminent American, no doubt. But he is an anthropologist and physician by profession. He is currently the President of Dartmouth College and was the former director of the HIV/AIDS section of the World Health Organisation. He is a highly respected figure in his circles. But he is not a banker. So what's an anthropologist going to do as head of the World Bank.

Convoluted justifications are being given. Apparently it would be good to have a "development expert" as head of the World Bank. Balderdash. Its simply America trying to make it more palatable to have their nominee as the boss. Kim is Korean by descent and is not a white man. They can even pass him as an "Asian". Its just an effective fudge to continue the tradition of stitching up. Or else a more interesting logic might have been in the mind - Bankers are too dangerous to be allowed to run the World Bank (I can begin to have sympathy for such a thought !)

There is some muted opposition to this. A Nigerian and a Colombian are standing against him, but are unlikely to have much of a chance. But the more interesting development is that nobody seems to care. Deafening silence from the chief lender to the world - China. I don't know how to say it in Chinese, but I can almost hear Hu Jintao saying "Frankly, my dear, I don't give a damn" !

Sack Ramamritham

Ramamritham must be sacked - plain and simple. He is usually just a nuisance and a pain in the posterior, but otherwise a good man. But recently he has crossed the barrier and is now a genuine danger. He must be read the riot act and told to go.

I am referring to his contortions and nonsensical behaviour in the Vodafone case. For those not familiar with this saga - here's a short summary.

Some years ago Vodafone bought a 67% stake in Hutchison Essar. Vodafone's Dutch company bought the shares from Hutchison Telecom which is a Hong Kong company. Neither the buyer, nor the seller was an  Indian company although the shares they bought were of a company whose operations are in India. Under ordinary tax laws in most countries in the world, including India, the place where the selling company is and the buying company is dictates where tax would be paid on the gains from the sale of shares (in this case neither was in India). This should have been a straightforward matter.

But Ramamritham decided to put his grubby fingers in. He levied a demand on Vodafone that capital gains tax was to be paid in India as the underlying asset was in India. Specious argument, but then Ramamritham is not exactly renowned for cold logic. The judicial process being what it is, Vodafone had to cough up a substantial amount (Rs 2500 crores of the total demand of Rs 12,000 crores ), before it could go on appeal.

The case duly went to the Supreme Court which told Ramamritham to *$%& off. That should have been it.

But Ramamritham decided that he would not return the money he had expropriated from Vodafone (you see he had spent it on giving free colour TVs to all and sundry). So he amends the law with retrospective effect in the latest budget to say that Vodafone has to pay. He has excelled himself - he has amended the law with retrospective effect dating back to 1962 !!!!! He can now open every sale or purchase of shares from 1962 and go after everybody. His justification - government will lose a lot of money if it has to refund Vodafone. The mind boggles - next he can simply rob you and me of all our money and then refuse to return it on the grounds that government will lose revenue.

It does not matter to him that the Supreme Court has ruled time and again that the law cannot be amended retrospectively. Ramamritham is trying to get away in this case by claiming that he is not amending the law but the notes to the law !

Have you noted that the blighter is going after Vodafone, which was the buyer and made no capital gain - it was Hutchison Telecom as the seller which made the gain. The simple reason is the Vodafone is in India and unfortunately in Ramamritham's grasp. Ramamritham can always find logic for his tantrums ( in this case the grounds are that Vodafone did not deduct tax at source). Hutchison Telecom does not exist in India; so he cannot go after them. They exist in China which of course has told Ramamritham where he can go and stuff it.

No sensible businessman can do business in India if Ramamritham continues to get away scot free. He must be sacked,  banished to Dhanushkodi and told never to return.

PS - For newbies to my blog, here's an introduction to this frustrating character called Ramamritham.

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