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" !
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