This is what Warren Buffet had to say in his annual letter to shareholders.
******
Our decrease in net worth during 2008 was $11.5 billion, which reduced the per-share book value of both our Class A and Class B stock by 9.6%. Over the last 44 years (that is, since present management took over) book value has grown from $19 to $70,530, a rate of 20.3% compounded annually.
The table on the preceding page, recording both the 44-year performance of Berkshire’s book value and the S&P 500 index, shows that 2008 was the worst year for each. The period was devastating as well for corporate and municipal bonds, real estate and commodities. By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game.
As the year progressed, a series of life-threatening problems within many of the world’s great financial institutions was unveiled. This led to a dysfunctional credit market that in important respects soon turned non-functional. The watchword throughout the country became the creed I saw on restaurant walls when I was young: “In God we trust; all others pay cash.”
By the fourth quarter, the credit crisis, coupled with tumbling home and stock prices, had produced a paralyzing fear that engulfed the country. A freefall in business activity ensued, accelerating at a pace that I have never before witnessed. The U.S. – and much of the world – became trapped in a vicious negative-feedback cycle. Fear led to business contraction, and that in turn led to even greater fear.
This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone “all in.” Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel. These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyone’s guess, though one likely consequence is an onslaught of inflation.
Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They won’t leave willingly.
Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.
Amid this bad news, however, never forget that our country has faced far worse travails in the past. In the 20th Century alone, we dealt with two great wars (one of which we initially appeared to be losing); a dozen or so panics and recessions; virulent inflation that led to a 211/2% prime rate in 1980; and the Great Depression of the 1930s, when unemployment ranged between 15% and 25% for many years. America has had no shortage of challenges.
Without fail, however, we’ve overcome them. In the face of those obstacles – and many others – the real standard of living for Americans improved nearly seven-fold during the 1900s, while the Dow Jones Industrials rose from 66 to 11,497. Compare the record of this period with the dozens of centuries during which humans secured only tiny gains, if any, in how they lived. Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America’s best days lie ahead.
Take a look again at the 44-year table on page 2. In 75% of those years, the S&P stocks recorded a gain. I would guess that a roughly similar percentage of years will be positive in the next 44. But neither Charlie Munger, my partner in running Berkshire, nor I can predict the winning and losing years in advance. (In our usual opinionated view, we don’t think anyone else can either.) We’re certain, for example, that the economy will be in shambles throughout 2009 – and, for that matter, probably well beyond – but that conclusion does not tell us whether the stock market will rise or fall.
In good years and bad, Charlie and I simply focus on four goals:
(1) maintaining Berkshire’s Gibraltar-like financial position, which features huge amounts of excess liquidity, near-term obligations that are modest, and dozens of sources of earnings and cash;
(2) widening the “moats” around our operating businesses that give them durable competitive advantages;
(3) acquiring and developing new and varied streams of earnings;
(4) expanding and nurturing the cadre of outstanding operating managers who, over the years, have delivered Berkshire exceptional results.
Monday, March 02, 2009
Tuesday, December 30, 2008
Book on Prabakaran
Most people approach Prabakaran and his widely known LTTE on emotional ground. Either they blindly support or they blindly oppose. Both there approaches fail to paint complete picture about him. His organization was started with a rusted revolver, but now Prabakaran is running a government. He possesses police force, judicial system, army, navy and air force ... everything that a nation ought to has.
Before arriving into any judgment about Prabakaran and his outfit, it becomes imperative to understand the history of Sri Lanka's ethnic conflict. What was the beginning point the endless war between Sinhalese and Tamils? What started it and why? How long this fire is going to be on? Can the self determination question of Tamils could be resolved only at war front? What are the innocent civilians caught in the the crossfire going to see a dawn? Is Tamil Eelam the only solution? Can Prabakaran win that for his men? Or is everything is going to end at his demise?
LTTE is a banned organization in India. Prabakaran is a main accused in Rajiv Gandhi's murder. Many countries in the world have banned the tigers. Sri Lankan government does not show any signs of putting an end to the war as it believes tigers can be completely destroyed. What is in store for the rebels? What is going to be its future?
The book on Prabakaran tries to examine these questions.
Before arriving into any judgment about Prabakaran and his outfit, it becomes imperative to understand the history of Sri Lanka's ethnic conflict. What was the beginning point the endless war between Sinhalese and Tamils? What started it and why? How long this fire is going to be on? Can the self determination question of Tamils could be resolved only at war front? What are the innocent civilians caught in the the crossfire going to see a dawn? Is Tamil Eelam the only solution? Can Prabakaran win that for his men? Or is everything is going to end at his demise?
LTTE is a banned organization in India. Prabakaran is a main accused in Rajiv Gandhi's murder. Many countries in the world have banned the tigers. Sri Lankan government does not show any signs of putting an end to the war as it believes tigers can be completely destroyed. What is in store for the rebels? What is going to be its future?
The book on Prabakaran tries to examine these questions.
Friday, December 19, 2008
Free stock market tips india
Just came across this paragraph from fortnightly investment magazine 'Capital market' .. It is not only impressive but thought provoking as well.
"Many research analysts do not invest in equities, but preach to investors on what to buy, hold or sell. As per the present regulation, a research analyst needs to disclose his holding in the company that he is commenting. It would be far better to make it mandatory for the analyst to invest a certain pre-defined sum in the recommended stocks for the period mentioned in the research report. This would definitely improve the sense of responsibility and accountability in the research community. It would also provide on-the-job training to analysts and make them aware of the risks involved in equity investment. Remember those who actually invest are shrewder than those who simply preach"
When someone shows up in response to the question Who is the
"Many research analysts do not invest in equities, but preach to investors on what to buy, hold or sell. As per the present regulation, a research analyst needs to disclose his holding in the company that he is commenting. It would be far better to make it mandatory for the analyst to invest a certain pre-defined sum in the recommended stocks for the period mentioned in the research report. This would definitely improve the sense of responsibility and accountability in the research community. It would also provide on-the-job training to analysts and make them aware of the risks involved in equity investment. Remember those who actually invest are shrewder than those who simply preach"
When someone shows up in response to the question Who is the
best stock market analyst in India
, better beware !!Monday, November 03, 2008
Indo-US nuclear deal.. - A look back
- Chellamuthu Kuppusamy
That was something unprecedented in the history of Indian democracy. We had never seen such a sensational 'display of money' on the parliamentary floor. Trust me those were some of the tragic cum hilarious scenes we witnessed during the recent 'no confidence motion' and it could match any nail biting one day cricket game. You know what I am coming to. Yes, it is about the widely debated Indo-US 'civil' nuclear deal.
The Unites States Congress which is the House of Representatives (akin to Lok Sabha) and the Senate which is the upper house have given their blessing to this historic deal on September 28th and October 1st respectively. There was a sense of vindication, according to the Indian ambassador to the US Ronen Sen.
What makes this deal so special and time critical? Does India really surrender its national interest and sovereignty with this deal? A little recap from the history would help answer these questions.
The United States has the reputation of being the only nation in the history of mankind to deploy nuclear weapon and massacre more than 200 thousand people in August 1945. That eventually brought the World War II to an end.
Postwar era saw the world dividing into two camps, needless to mention American camp & Soviet camp. Mutual suspicion, secret nuclear programs and arm race was inevitable. Need for checking the proliferation of nuclear arms was felt and Nuclear Non-Proliferation Treaty (NPT or NNPT) was born thanks to the efforts from Ireland and Finland. That was in 1968.
NPT recognized the United States, the United Kingdom, France, Russia, and China as nuclear weapon states (NWS) while the others were identified as non nuclear weapon states (NNWS). All the nations recognized by the UN signed NPT except India, Pakistan and Israel. For India, NPT did not prevent proliferation but actually classified the counties as ‘nuclear haves’ and ‘nuclear not haves’ as it only prevents ‘not have’ nations developing atomic armory after 1968.
Being a non-signatory of NPT, there was no restriction on India for conducting nuclear test. It perhaps carried out a test in 1974 to be coded as ‘Smiling Buddha’ which provoked serious reactions around the globe. Nuclear fuel supplying countries formed Nuclear Suppliers Group (NSG) that subsequently decided not to assist India in the civil nuclear energy space.
There were 34 long years before this ban could relax. Indo-US deal enables India to access outside civil nuclear technologies and fuel, while still being a non-signatory of NPT. This is the best things that could happen to India.
World’s largest democracy only has to assure that it would not mix its civil and military nuclear establishments, and let IAEA supervise its civilian atomic power station. An estimated 14 out of the existing 22 reactors are to be used for civil and the rest for military purpose.
Following the foot prints of the U.S, France has inked an agreement to sell nuclear technology and reactors to India. What France plans to sell to India is the large 1,600 MW reactor, indeed, the largest of kind in commercial operations in the world, says the Hindu Business Line.
We have an installed capacity of 145,587.97 MW, primarily sourced from coal fired thermal power. France, on the other hand, generates 78.8 % of its electricity from nuclear power. We are at 2.9%. A long way to go indeed! We are far from uninterrupted power supply.
That was something unprecedented in the history of Indian democracy. We had never seen such a sensational 'display of money' on the parliamentary floor. Trust me those were some of the tragic cum hilarious scenes we witnessed during the recent 'no confidence motion' and it could match any nail biting one day cricket game. You know what I am coming to. Yes, it is about the widely debated Indo-US 'civil' nuclear deal.
The Unites States Congress which is the House of Representatives (akin to Lok Sabha) and the Senate which is the upper house have given their blessing to this historic deal on September 28th and October 1st respectively. There was a sense of vindication, according to the Indian ambassador to the US Ronen Sen.
What makes this deal so special and time critical? Does India really surrender its national interest and sovereignty with this deal? A little recap from the history would help answer these questions.
The United States has the reputation of being the only nation in the history of mankind to deploy nuclear weapon and massacre more than 200 thousand people in August 1945. That eventually brought the World War II to an end.
Postwar era saw the world dividing into two camps, needless to mention American camp & Soviet camp. Mutual suspicion, secret nuclear programs and arm race was inevitable. Need for checking the proliferation of nuclear arms was felt and Nuclear Non-Proliferation Treaty (NPT or NNPT) was born thanks to the efforts from Ireland and Finland. That was in 1968.
NPT recognized the United States, the United Kingdom, France, Russia, and China as nuclear weapon states (NWS) while the others were identified as non nuclear weapon states (NNWS). All the nations recognized by the UN signed NPT except India, Pakistan and Israel. For India, NPT did not prevent proliferation but actually classified the counties as ‘nuclear haves’ and ‘nuclear not haves’ as it only prevents ‘not have’ nations developing atomic armory after 1968.
Being a non-signatory of NPT, there was no restriction on India for conducting nuclear test. It perhaps carried out a test in 1974 to be coded as ‘Smiling Buddha’ which provoked serious reactions around the globe. Nuclear fuel supplying countries formed Nuclear Suppliers Group (NSG) that subsequently decided not to assist India in the civil nuclear energy space.
There were 34 long years before this ban could relax. Indo-US deal enables India to access outside civil nuclear technologies and fuel, while still being a non-signatory of NPT. This is the best things that could happen to India.
World’s largest democracy only has to assure that it would not mix its civil and military nuclear establishments, and let IAEA supervise its civilian atomic power station. An estimated 14 out of the existing 22 reactors are to be used for civil and the rest for military purpose.
Following the foot prints of the U.S, France has inked an agreement to sell nuclear technology and reactors to India. What France plans to sell to India is the large 1,600 MW reactor, indeed, the largest of kind in commercial operations in the world, says the Hindu Business Line.
We have an installed capacity of 145,587.97 MW, primarily sourced from coal fired thermal power. France, on the other hand, generates 78.8 % of its electricity from nuclear power. We are at 2.9%. A long way to go indeed! We are far from uninterrupted power supply.
Wednesday, September 17, 2008
1930 around the corner?
- Chellamuthu Kuppusamy
When Christopher Columbus landed in North America he would not have foreseen a financial institution to be established by his future fellow immigrants from western Europe, let alone that institution sending tremor to the financial market across the globe. Yes, I am talking about Lehman Brothers.
Henry Lehman was just 23-year-old when immigrated to the United States from Germany in 1844. He choose to settle down in the southern state of Alabama. Two of his brothers Emanuel & Mayer too took separate ships to the American shore and three of them formed Lehman Brothers in 1850. They took cotton trade as their primary business in which they excelled. In the next few years the center of cotton trade shifted from the south to New York City, which of course was - as it is today - the center of trading & commission business.
Civil war erupted 1982 and Lehman brothers financed Alabama state's reconstruction program. That was the beginning and the end came a couple of days ago. In the meantime they have grew, grew continually. They underwrote securities - initial public offers in particular - and did almost everything in the financial market. It did merger with American express and then de-merged again in 1994.
Subprime crisis that surfaced late last year forced Lehman Brothers to close down subprime division 'BNC Mortgage' and sending around 1,200 people home. On September 13 it decided to take bankruptcy protection. Its valuation based on September 15 stock price stood at $130 million. It's reported revenue for 2007 was 454 times more than this.
****
Sixth months ago Bear Stearns, the fifth largest bank, was on the prink of bankruptcy. JP Morgan Chase bought it out for dirt cheap $2 per share. That was not alone. Just recently Fannie Mae and Freddie Mac were bailed out by the US government. Now even before this 'broke' news from America's fourth largest investment bank Lehman could sink in, even more troubling stories come out. American International Group (AIG), the largest insurance firm in the US, would become next Lehman unless it gets around $70 - $80 billion. Luckily FED has come forward to perform rescue act. Likewise Merrill Lynch & Co was luck enough to find a buyer in Bank of America.
The US economy has been the driving force of the global economy, whether we like it or not. Any trouble in the US is not a standalone subject in the current world where everything is interconnected and eventually nothing is insulted in the great financial eco-system.
Already some analysts are talking about 'another' great repression of 1930 that we have only studied in history books. But we are unlikely to see 'another' great depression, but a greater or lesser depression, because the world economy now is interconnected while it was insulated back in 1930.
When Christopher Columbus landed in North America he would not have foreseen a financial institution to be established by his future fellow immigrants from western Europe, let alone that institution sending tremor to the financial market across the globe. Yes, I am talking about Lehman Brothers.
Henry Lehman was just 23-year-old when immigrated to the United States from Germany in 1844. He choose to settle down in the southern state of Alabama. Two of his brothers Emanuel & Mayer too took separate ships to the American shore and three of them formed Lehman Brothers in 1850. They took cotton trade as their primary business in which they excelled. In the next few years the center of cotton trade shifted from the south to New York City, which of course was - as it is today - the center of trading & commission business.
Civil war erupted 1982 and Lehman brothers financed Alabama state's reconstruction program. That was the beginning and the end came a couple of days ago. In the meantime they have grew, grew continually. They underwrote securities - initial public offers in particular - and did almost everything in the financial market. It did merger with American express and then de-merged again in 1994.
Subprime crisis that surfaced late last year forced Lehman Brothers to close down subprime division 'BNC Mortgage' and sending around 1,200 people home. On September 13 it decided to take bankruptcy protection. Its valuation based on September 15 stock price stood at $130 million. It's reported revenue for 2007 was 454 times more than this.
****
Sixth months ago Bear Stearns, the fifth largest bank, was on the prink of bankruptcy. JP Morgan Chase bought it out for dirt cheap $2 per share. That was not alone. Just recently Fannie Mae and Freddie Mac were bailed out by the US government. Now even before this 'broke' news from America's fourth largest investment bank Lehman could sink in, even more troubling stories come out. American International Group (AIG), the largest insurance firm in the US, would become next Lehman unless it gets around $70 - $80 billion. Luckily FED has come forward to perform rescue act. Likewise Merrill Lynch & Co was luck enough to find a buyer in Bank of America.
The US economy has been the driving force of the global economy, whether we like it or not. Any trouble in the US is not a standalone subject in the current world where everything is interconnected and eventually nothing is insulted in the great financial eco-system.
Already some analysts are talking about 'another' great repression of 1930 that we have only studied in history books. But we are unlikely to see 'another' great depression, but a greater or lesser depression, because the world economy now is interconnected while it was insulated back in 1930.
Friday, August 01, 2008
Troubled waters - Indian economy
- Chellamuthu Kuppusamy
I was watching the US market opening report on UTVI last night and the female reporter from NYSE was elaborating the jobless claims in that country reaching 44 thousands plus level, which apparently is the highest since 2003. (We all know that 2003 is the year when the market bottomed out, at least in India with SENSEX around 3,000 mark) The united states is a strong economy where people spend a lot and they spend most of their incomes and borrowings. Therefore unemployment figures do not board well for the largest economy in the world, which not only determine the destiny of investments in that country but elsewhere around the globe.
When we talk about unemployment problem, what went unnoticed is the textile industry in India. In the last one year 3.5 lakh jobs have been lost in this space. There are already reports about negative inflation-adjusted salary hike in the much discussed IT sector where smaller players might loose their skin over the time. You should not have missed the news that Hexaware is trimming down their work force.
Automobile industry in India, which is already struggling to swallow the increased input costs, might face slowdown in demand thanks to RBI's move of hiking interest rate to combat inflation. Governor Y.V.Reddy in his last monitory policy announcement asserted that the idea is bring the inflation down to 7 % by 2009 March from the current level around 12%. Inflation is at 13 year high now. The interest rate was around 17% in 1995, which is exactly that period before 13 years. So, more rate hikes on the cards?
One areas that bestowed unprecedented return, namely real estates, is already facing softening demand and prices. Real estate and construction companies' decline was double that the average decline produced by the market on the bourses. In 2008, around 80 million sq ft (45 million sq ft in 2007) of commercial space supply is expected; indicating that supply is running ahead of demand. With the lending rate going up and the era of easy money is a thing of the past, one does not need to be rocket scientist to predict further decline in property prices across the country. Dalal street investment journal quotes on the current issue: "As for the NAV, a study states that 30 per cent decline in property prices leads to 50 per cent erosion of NAV and hence with property prices softening, NAV of companies with high land bank needs to be revisited.
Needless to say, banking was understandably the worst hit by inflation. Softening credit growth, upward trend in NPA etc can be expected. The, "Sir, would you be interested in any personal loans?" calls you normally get private banks on your mobile might change as, "Sir, we have an attractive fixed deposit scheme offering...". Most of the bank now trade 40-50 down from their 52 week high. They are also affected by treasury losses due to interest rate increment. This was evident in ICICI bank's recently announced quarterly results. The bank's net was dragged down by the treasury loss.
On top of all these we should not forget that our economy is still not detached from the agriculture whose fortune heavily depends on monsoon. With around 60 % of our population still in rural area basing their lives on the oldest vocation on this earth, severe draught for a couple of years can put some brakes on the growth.
Beware, cost of living, cost of health care, cost of politics (price tag for MPs), cost of housing, cost of education and of course the cost of girlfriends are on the rise and they are unlikely to come down.
What lies ahead? Have we shifted from a 'sustained bull run' to a 'sustained bear run' with periodic correction on the upper side? Has the India growth story faded? Are global slowdown and global commodity prices press the India Inc? What lies ahead?
Yes, it is troubled waters. FISH, IF YOU CAN & IF YOU HAVE HAVE THE WILL...
I was watching the US market opening report on UTVI last night and the female reporter from NYSE was elaborating the jobless claims in that country reaching 44 thousands plus level, which apparently is the highest since 2003. (We all know that 2003 is the year when the market bottomed out, at least in India with SENSEX around 3,000 mark) The united states is a strong economy where people spend a lot and they spend most of their incomes and borrowings. Therefore unemployment figures do not board well for the largest economy in the world, which not only determine the destiny of investments in that country but elsewhere around the globe.
When we talk about unemployment problem, what went unnoticed is the textile industry in India. In the last one year 3.5 lakh jobs have been lost in this space. There are already reports about negative inflation-adjusted salary hike in the much discussed IT sector where smaller players might loose their skin over the time. You should not have missed the news that Hexaware is trimming down their work force.
Automobile industry in India, which is already struggling to swallow the increased input costs, might face slowdown in demand thanks to RBI's move of hiking interest rate to combat inflation. Governor Y.V.Reddy in his last monitory policy announcement asserted that the idea is bring the inflation down to 7 % by 2009 March from the current level around 12%. Inflation is at 13 year high now. The interest rate was around 17% in 1995, which is exactly that period before 13 years. So, more rate hikes on the cards?
One areas that bestowed unprecedented return, namely real estates, is already facing softening demand and prices. Real estate and construction companies' decline was double that the average decline produced by the market on the bourses. In 2008, around 80 million sq ft (45 million sq ft in 2007) of commercial space supply is expected; indicating that supply is running ahead of demand. With the lending rate going up and the era of easy money is a thing of the past, one does not need to be rocket scientist to predict further decline in property prices across the country. Dalal street investment journal quotes on the current issue: "As for the NAV, a study states that 30 per cent decline in property prices leads to 50 per cent erosion of NAV and hence with property prices softening, NAV of companies with high land bank needs to be revisited.
Needless to say, banking was understandably the worst hit by inflation. Softening credit growth, upward trend in NPA etc can be expected. The, "Sir, would you be interested in any personal loans?" calls you normally get private banks on your mobile might change as, "Sir, we have an attractive fixed deposit scheme offering...". Most of the bank now trade 40-50 down from their 52 week high. They are also affected by treasury losses due to interest rate increment. This was evident in ICICI bank's recently announced quarterly results. The bank's net was dragged down by the treasury loss.
On top of all these we should not forget that our economy is still not detached from the agriculture whose fortune heavily depends on monsoon. With around 60 % of our population still in rural area basing their lives on the oldest vocation on this earth, severe draught for a couple of years can put some brakes on the growth.
Beware, cost of living, cost of health care, cost of politics (price tag for MPs), cost of housing, cost of education and of course the cost of girlfriends are on the rise and they are unlikely to come down.
What lies ahead? Have we shifted from a 'sustained bull run' to a 'sustained bear run' with periodic correction on the upper side? Has the India growth story faded? Are global slowdown and global commodity prices press the India Inc? What lies ahead?
Yes, it is troubled waters. FISH, IF YOU CAN & IF YOU HAVE HAVE THE WILL...
Wednesday, June 25, 2008
Real estate FDI inflow up nearly five-fold
- Chellamuthu Kuppusamy
Quite understandably there are reports on surging inflation, increasing interest rates and the potential impact on housing sector etc flowing across. This, along with FIIs pulling out from Indian equity market, is not surprising indeed. But here is an interesting piece of information that goes against this theory. FDI investment in real estate sector has increased nearly five-fold this year.
Courtesy: Hindu business line.
New Delhi, June 24"
The Indian real estate and housing space emerged as the darling of foreign investors in 2007-08, clinching FDI equity inflows of about Rs 8,749 crore, a near five-fold increase over FY07.
“The investors have seen that the real estate potential in India is huge. The returns are quite attractive. In fact, we see the trend picking up even further this year as the prices are getting more attractive for investors,” Mr Ramesh Sanka, Chief Financial Officer at DLF said.
Late last year, DLF Ltd had sold 49 per cent stake in eight residential project SPVs to private equity investors for a total consideration of Rs 1,675 crore.
A Merrill Lynch & Co entity had bought 49 per cent equity in seven residential projects in Chennai, Bangalore, Kochi and Indore for Rs 1,481 crore. The company — headed by Mr K.P. Singh — has also diluted 49 per cent stake, in another middle-income housing project in Panchkula, Haryana, to Brahma Investments for Rs 194 crore.
According to data released by the Government on Tuesday, the real estate sector, thrown open in 2004-05, saw the FDI picking up significantly between FY05 and FY08; it was Rs 171 crore in 2005-06 surging to Rs 2,121 crore in 2006-07.
“Over the last three years, there has been a build-up in investor interest. We saw the impact of that interest and euphoria for FY07 and FY08 as new townships and projects were announced. Depending on the asset class within real estate sector, the average rate of return stood at 25-35 per cent for India, against a global average of single digit return,” Mr Sanjay Verma, Executive Managing Director, South Asia, of Cushman & Wakefield said.
“However, at the beginning of the current year we have seen some asset bubble deflation. With prices moving southwards, choppiness in the stock markets, pressure on interest rates and global issues, while deals will still happen, pricing will be the question,” Mr Verma added.
Wednesday, July 11, 2007
Warren Buffett Biography in Tamil
- Chellamuthu Kuppusamy
My second book has been released in Tamil.
It was a great pleasure and opportunity to write the biography of Warren Buffett, one of my lifetime heroes, in Tamil. I don't want to waste more words here.
A detailed post about this book in available at this link
Warren Buffett - an Investograhy is my English biography on Warren Buffett
My second book has been released in Tamil.
It was a great pleasure and opportunity to write the biography of Warren Buffett, one of my lifetime heroes, in Tamil. I don't want to waste more words here.
A detailed post about this book in available at this link
Warren Buffett - an Investograhy is my English biography on Warren Buffett
Thursday, May 10, 2007
Tuesday, May 08, 2007
Indian, Lanka, Sethu & Ram Bridge
- Chellamuthu Kuppusamy
Hot debates are floating around in the national capital New Delhi as well as in Chennai, and Colombo is keenly watching with plenty of curiosity. If you assume it is about LTTE and the eternal domestic conflict in that beautiful island, you are mistaken. What I am talking about is the Ram bridge issue.
Parts of India and Sri lanka were originally not part of Asian continent. Lemuria, as geologists call it, was a continent east of Africa or an extended part of that. It gradually moved and collided with Asian plate. The pressure created by that impact erupted the Himalayan mountains. Srilanka was part of the Indian subcontinent and over the years sea swallowed some of the low lying areas and thus separating Ceylon and India.
Even today that particular section of Bay of Bengal is not deep. (Great national poet Subramanya Bharathi sang, ‘lets us level sethu and build it to a street in order to reach Singala island’) It is very close to Rameshwaram and refugees often venture to swim across to reach rehabilitation camps, albeit being bad in condition, on our shores. This section of the see is known as palk straight, through which only boats can sail. Thinking of any ship is absolutely out of question.
Nagapatnam port, which is way in to the sea now, was focal point for sea trade of the powerful Cholas empire. After British established their presence in Madras (Chennai), it turned out to be their political and trade center of South India. Tuticorin is a harbor on eastern coast of south India and has been the port of Pandiya dynasties for centuries. Even now considerable direct trade takes place at Tuticorin port, which is a natural port unlike that of Chennai.
Well, how do all these matter to us, you might ask. If we look for three largest port in the word in terms of trade and activity, we find one of them in china. That is agreed as China is a massive country with huge population and plenty of international trade. However the surprise comes with the other two harbors.
One is Rotterdam in Netherlands, a country which flourished by trade even when the mighty British were conquering the entire world a couple of centuries ago. Holland is a tiny nation with around 15 million population. Their sea traffic is primarily dedicated to other European courtiers than Holland itself. Same can apply to the Amsterdam airport in that country, which is below see level.
Another port among the largest three is in Singapore, a city and a country, which raised itself among high per-capital income spot in the world. Much of its success came from its trade and service activities, as against any manufacturing and agricultural business. Their port creates lot of employment and plenty of income.
Singapore port is an important transit point. Most of the ships stopover for few hours and resume. Many Indian ships from/to the western coast are invariably among them. Ships operating between Europe and south east Asia are huge in number too.
Why do our ships halt at Singapore? Can’t we use one of the ports at our coat for this purpose? Yes, we can. Tuticorin is an obvious choice. But, if the ships stop over there, they have to go around Srilanka and then sail again. That makes it expensive and absurd. On the other hand, if pak straight is canalled deep enough to allow ships, life would be made simple.
It would potentially shift sizable port business from Singapore and Colombo to our shore. This has been the aspiration for nearly 135 years. Many attempts have been made in the past both in British India and Independent India to give a shape to this project. Due to various reasons, it was turned down or given up.
Sri Lankan government raised concerns and placed requests to New Delhi against the Sethu project for nearly more than 4 decades. You don’t need to be a rocket scientist to figure out the reason behind that. Surprisingly, India has assured at various occasions that this project, if (at all) gets implemented, will not affect Colombo’s economy. No one paid attention as to why we cared for other nation’s economy than our own.
This dream has (not fully yet) come true under the present Manmohan Singh government. More than Rs2,400 crores were allocated and reportedly the project is on progress. Ms.Jayalalitha opposed simply for the sake of opposing it. But, never mind. The show was on.
But, lately BJP, it’s parivars and some smalltime ludicrous personalities like Rama Gopalan have found Ramar Bridge, a bridge depicted in the Ramayana epic. They claim that Sethu project would destroy that bridge. They quote that Ramar bridge was built by orangutan army led by Hanuman to facilitate lord Ram reach the Lankan island to rescue his wife.
Ramar bridge was a natural formation as per geologists. Even assuming that there was a bridge, it should have been a stone bridge across the sea enabling trade and transport between India and the Lankan island mellenia, if not centuries, ago. Ove the years, it got sank into the sea. The very purpose of the bridge, even if it really had been there, has become obsolete many many years ago.
(Even going by the epic that it was made for Ram to confrot Ravana, what is the use of that now? Sita was already back and had agni bath to prove her purity. Now, Ram does not have to go back to Lanka again where he does not have any more wives captured. Even then the imaginary bridge is under the sea. How will he cross the sea?. He would better of taking a private jet)
All political parties aspire to gain control and be in power. But, taking religion and seting afire superstitious blief as a vehicle is certainly not the way. This becomes more severe when it turns against our economy and national prosperity.
In the late 1940’s there were three nations in south Asia freed from colonial clutches. These three nations, India, Pakistan and Ceylon (as Sri Lanka was called then) were led by three men educated in England namely, Nehru, Jinnah and Bandaranayahe.
But, unlike Nehru the other two gentlemen based their nationality and personal political success based on relegipous and lingual base. India remains the largest and greatest democracy in the world where democracy has been funny thing in Pakistan. Similarly, the island nation declared Buddism as the only allowable belief and Singala as the only language. It only aggravated and the state sponcered amry went on to demolish thousand of lives and tourched the greatest Jaffna library that served as the emblom of Tamil/Hindu tradition.
Fortunately, India was and still continues to be true a federal secular state, despite few horrible incidents forgotten along the sidelines of history. Thanks to our first prime minister Jawaharlal Nehru, multiple nationalities could coexist in this subcontinent under the same federal setup.
But, BJP and its allied forces are making an attempt to rewrite the history and present Savarkar in place of Mohandas Gandhi and Nehru. World histroy has seen nasty damages as religion was mixed into politics and administration. Some radical elements in few Islamic coutries seem to choose that path. BJP tries to match their act in every possible way. Any nation or tribe that wants to travel in the backward direction is destined to peril.
Congressmen may be corrupt and inefficient and that does not jusify making this subcontinent as a Hindu state. BJP arguably has more number of intellectual personalities compared with other political parties. But, mind if not directly properly would invite devil to dwell in there. Trust me, this view is not based on religious or political perspective, but on economical and rational.
These views are purely based on economical and rational viewpoint. No attempt is made to portay shipping minister T.R.Balu and his leader M.Karunanidhi, a shrewd politician as sacred cows. It will require a separate article to critize them.
If the sethu project is going to affect ecology, we need to investigate. But expert team has furnished feasibility report. Gladly we did not pay attention to Colombo’s outcry on ecological impact. If people argue that this project will affect fhishermen, that need to be carefully studied and find solutions. They may be real problems as well some politically motivated statement like that of Janalalitha.
But, if someone is trying to make politivcal milage out of relegious supersitions, we should go ahead, even if the bridge was constructed by Hanuman.
Some people augue that Sethu project would not really create any employment and improve the economy. Answer for that depends not only on the completion of the work, but also the port administration and easy to operate rules, just like Singapore. So, economic prosperity is not very sure without these additional changed. But, it is writing on the wall that it does not do any good to the economy by not going ahead with the project.
Hot debates are floating around in the national capital New Delhi as well as in Chennai, and Colombo is keenly watching with plenty of curiosity. If you assume it is about LTTE and the eternal domestic conflict in that beautiful island, you are mistaken. What I am talking about is the Ram bridge issue.
Parts of India and Sri lanka were originally not part of Asian continent. Lemuria, as geologists call it, was a continent east of Africa or an extended part of that. It gradually moved and collided with Asian plate. The pressure created by that impact erupted the Himalayan mountains. Srilanka was part of the Indian subcontinent and over the years sea swallowed some of the low lying areas and thus separating Ceylon and India.
Even today that particular section of Bay of Bengal is not deep. (Great national poet Subramanya Bharathi sang, ‘lets us level sethu and build it to a street in order to reach Singala island’) It is very close to Rameshwaram and refugees often venture to swim across to reach rehabilitation camps, albeit being bad in condition, on our shores. This section of the see is known as palk straight, through which only boats can sail. Thinking of any ship is absolutely out of question.
Nagapatnam port, which is way in to the sea now, was focal point for sea trade of the powerful Cholas empire. After British established their presence in Madras (Chennai), it turned out to be their political and trade center of South India. Tuticorin is a harbor on eastern coast of south India and has been the port of Pandiya dynasties for centuries. Even now considerable direct trade takes place at Tuticorin port, which is a natural port unlike that of Chennai.
Well, how do all these matter to us, you might ask. If we look for three largest port in the word in terms of trade and activity, we find one of them in china. That is agreed as China is a massive country with huge population and plenty of international trade. However the surprise comes with the other two harbors.
One is Rotterdam in Netherlands, a country which flourished by trade even when the mighty British were conquering the entire world a couple of centuries ago. Holland is a tiny nation with around 15 million population. Their sea traffic is primarily dedicated to other European courtiers than Holland itself. Same can apply to the Amsterdam airport in that country, which is below see level.
Another port among the largest three is in Singapore, a city and a country, which raised itself among high per-capital income spot in the world. Much of its success came from its trade and service activities, as against any manufacturing and agricultural business. Their port creates lot of employment and plenty of income.
Singapore port is an important transit point. Most of the ships stopover for few hours and resume. Many Indian ships from/to the western coast are invariably among them. Ships operating between Europe and south east Asia are huge in number too.
Why do our ships halt at Singapore? Can’t we use one of the ports at our coat for this purpose? Yes, we can. Tuticorin is an obvious choice. But, if the ships stop over there, they have to go around Srilanka and then sail again. That makes it expensive and absurd. On the other hand, if pak straight is canalled deep enough to allow ships, life would be made simple.
It would potentially shift sizable port business from Singapore and Colombo to our shore. This has been the aspiration for nearly 135 years. Many attempts have been made in the past both in British India and Independent India to give a shape to this project. Due to various reasons, it was turned down or given up.
Sri Lankan government raised concerns and placed requests to New Delhi against the Sethu project for nearly more than 4 decades. You don’t need to be a rocket scientist to figure out the reason behind that. Surprisingly, India has assured at various occasions that this project, if (at all) gets implemented, will not affect Colombo’s economy. No one paid attention as to why we cared for other nation’s economy than our own.
This dream has (not fully yet) come true under the present Manmohan Singh government. More than Rs2,400 crores were allocated and reportedly the project is on progress. Ms.Jayalalitha opposed simply for the sake of opposing it. But, never mind. The show was on.
But, lately BJP, it’s parivars and some smalltime ludicrous personalities like Rama Gopalan have found Ramar Bridge, a bridge depicted in the Ramayana epic. They claim that Sethu project would destroy that bridge. They quote that Ramar bridge was built by orangutan army led by Hanuman to facilitate lord Ram reach the Lankan island to rescue his wife.
Ramar bridge was a natural formation as per geologists. Even assuming that there was a bridge, it should have been a stone bridge across the sea enabling trade and transport between India and the Lankan island mellenia, if not centuries, ago. Ove the years, it got sank into the sea. The very purpose of the bridge, even if it really had been there, has become obsolete many many years ago.
(Even going by the epic that it was made for Ram to confrot Ravana, what is the use of that now? Sita was already back and had agni bath to prove her purity. Now, Ram does not have to go back to Lanka again where he does not have any more wives captured. Even then the imaginary bridge is under the sea. How will he cross the sea?. He would better of taking a private jet)
All political parties aspire to gain control and be in power. But, taking religion and seting afire superstitious blief as a vehicle is certainly not the way. This becomes more severe when it turns against our economy and national prosperity.
In the late 1940’s there were three nations in south Asia freed from colonial clutches. These three nations, India, Pakistan and Ceylon (as Sri Lanka was called then) were led by three men educated in England namely, Nehru, Jinnah and Bandaranayahe.
But, unlike Nehru the other two gentlemen based their nationality and personal political success based on relegipous and lingual base. India remains the largest and greatest democracy in the world where democracy has been funny thing in Pakistan. Similarly, the island nation declared Buddism as the only allowable belief and Singala as the only language. It only aggravated and the state sponcered amry went on to demolish thousand of lives and tourched the greatest Jaffna library that served as the emblom of Tamil/Hindu tradition.
Fortunately, India was and still continues to be true a federal secular state, despite few horrible incidents forgotten along the sidelines of history. Thanks to our first prime minister Jawaharlal Nehru, multiple nationalities could coexist in this subcontinent under the same federal setup.
But, BJP and its allied forces are making an attempt to rewrite the history and present Savarkar in place of Mohandas Gandhi and Nehru. World histroy has seen nasty damages as religion was mixed into politics and administration. Some radical elements in few Islamic coutries seem to choose that path. BJP tries to match their act in every possible way. Any nation or tribe that wants to travel in the backward direction is destined to peril.
Congressmen may be corrupt and inefficient and that does not jusify making this subcontinent as a Hindu state. BJP arguably has more number of intellectual personalities compared with other political parties. But, mind if not directly properly would invite devil to dwell in there. Trust me, this view is not based on religious or political perspective, but on economical and rational.
These views are purely based on economical and rational viewpoint. No attempt is made to portay shipping minister T.R.Balu and his leader M.Karunanidhi, a shrewd politician as sacred cows. It will require a separate article to critize them.
If the sethu project is going to affect ecology, we need to investigate. But expert team has furnished feasibility report. Gladly we did not pay attention to Colombo’s outcry on ecological impact. If people argue that this project will affect fhishermen, that need to be carefully studied and find solutions. They may be real problems as well some politically motivated statement like that of Janalalitha.
But, if someone is trying to make politivcal milage out of relegious supersitions, we should go ahead, even if the bridge was constructed by Hanuman.
Some people augue that Sethu project would not really create any employment and improve the economy. Answer for that depends not only on the completion of the work, but also the port administration and easy to operate rules, just like Singapore. So, economic prosperity is not very sure without these additional changed. But, it is writing on the wall that it does not do any good to the economy by not going ahead with the project.
Sunday, April 29, 2007
A $ a day!
Courtesy : The economist
This month the World Bank announced that 986m people lived on the equivalent of less than one dollar a day in 2004—the first time it has counted fewer than 1 billion people in such a parlous state. The bank's definition of extreme poverty is stark, simple and even alliterative. In the latest issue of the Journal of Economic Perspectives, Abhijit Banerjee and Esther Duflo, of the Massachusetts Institute of Technology, describe it as a rhetorical masterstroke. But is it also entirely arbitrary? And how do the poor subsist on such a meagre amount?
When the bank decided to count the world's poor for its 1990 World Development Report, it did not take it upon itself to define them anew. Instead, a group of economists led by Martin Ravallion gathered together 33 national poverty lines that were already knocking about. India's line, for example, defined the poor as those who ate less than 2,250 calories a day. By its reckoning, this requirement would be met by the typical rural Indian spending 15 rupees a month at 1960-61 prices.
Mr Ravallion and his team converted rupees, pesos and rupiah into a common unit of purchasing power. Someone spending 15 rupees in rural India in 1960 had about the same command over goods and services as an American spending $23.14 a month in 1985. But India's benchmark was unusually abstemious. Half a dozen other poverty lines (for Indonesia, Bangladesh, Nepal, Kenya, Tanzania and Morocco) all fell within a few cents of a more generous allowance of $31 a month.
With that observation, the dollar-a-day concept was born, to appear in countless declarations, laments and pleas ever since. Halving the share of people who live on less than a dollar a day is, for example, the first of the Millennium Development Goals to which 189 countries subscribed in September 2000. (The concept's rhetorical appeal was diminished only a little when Mr Ravallion updated the threshold to $1.08 at 1993 prices, which is worth about $1.53 in today's money.)
Cigarettes and alcohol
But what does this line mean to the people who fall below it? Mr Banerjee and Ms Duflo describe the "economic lives" of the poor, drawing on 13 household surveys from Côte d'Ivoire to Mexico. The two surveys from India—undertaken in Udaipur's farms and Hyderabad's slums—they carried out themselves.
Vikram Seth, an economist before he was a poet, has described the "dreary pillage of privacy" these surveys entail. In 2001, for example, bank researchers in Timor-Leste diligently recorded whether a household bathed under a shower or in the river; used a flush toilet or a bucket; built their home from brick or rattan, and so forth. They also asked them to recall what they had eaten, drunk, chewed or smoked over the previous week: cassava or shrimp? Mung beans or papaya? Clove cigarettes or betel nuts? Beer or palm wine?
A dollar a day would seem to leave little room for choice or discretion. Hunger is surely the most binding of constraints. And yet these pillages of privacy show that the poor do make choices. They also suggest they are not always the best ones.
The poor do not complain much, the two authors note. (Only 9% of people in their Udaipur survey say their life makes them generally unhappy.) But they have a lot to complain about. Beset by hunger and illness, many are scrawny (65% of adult men in Udaipur are underweight), over half are anaemic, and about a seventh suffer from impaired eyesight. Many had to go without food on at least one day in the previous year.
And yet they do not eat as much as they could. According to Mr Banerjee and Ms Duflo, the typical poor household in Udaipur could spend up to 30% more on food than it does, if only it stopped devoting money to alcohol, tobacco and festivals. That last item, which includes weddings, funerals and religious events, typically accounts for about a tenth of the household's budget. This spending might be motivated by escapism—the poor have a lot to escape—or perhaps by social emulation. Even those in absolute poverty care about their relative standing.
The authors ponder not just how the poor spend their money but also how they make it. They describe the hard-pressed women of the Indian city of Guntur, who line the road each morning, mixing dosas over a kerosene stove for the price of a rupee. By 10 o'clock the women have turned their hands variously to making pickles, embroidering saris or collecting rubbish.
The poor, whether smallholders or petty entrepreneurs, lack scale and specialisation, Mr Banerjee and Ms Duflo point out. The farmers of Udaipur cultivate the land they own, no more, no less, but only a fifth rely on their plots as their chief source of income. In West Bengal, a poor household will typically have three breadwinners doing seven occupations between them.
It is almost an "item of faith" among development economists that the poor act rationally, however straitened their circumstances. If their undertakings are too small, or their efforts too thinly spread, to be efficient, it is not because they have miscalculated, but because the markets for land, credit or insurance have failed them. As one economist argued in 1993, "More than 40 years of research...should at last have laid to rest the thought that such folk may not know where their real interests lie."
But just such a thought is stirring again in the minds of Mr Banerjee and Ms Duflo. Why, for example, do more Ghanaian farmers not cultivate pineapples, which would fetch returns of 250-300% by some estimates? Why do so few farmers in western Kenya dress their fields with fertiliser, even after the benefits have been demonstrated to them?
"One senses a reluctance of poor people to commit themselves psychologically to a project of making more money," the authors write. When you live on a dollar a day it may be painful to confront your circumstances too squarely, or even to aspire to better things. The "great redeeming feature of poverty," George Orwell wrote after his excursions in the social gutters of Paris and London, is "the fact that it annihilates the future".
This month the World Bank announced that 986m people lived on the equivalent of less than one dollar a day in 2004—the first time it has counted fewer than 1 billion people in such a parlous state. The bank's definition of extreme poverty is stark, simple and even alliterative. In the latest issue of the Journal of Economic Perspectives, Abhijit Banerjee and Esther Duflo, of the Massachusetts Institute of Technology, describe it as a rhetorical masterstroke. But is it also entirely arbitrary? And how do the poor subsist on such a meagre amount?
When the bank decided to count the world's poor for its 1990 World Development Report, it did not take it upon itself to define them anew. Instead, a group of economists led by Martin Ravallion gathered together 33 national poverty lines that were already knocking about. India's line, for example, defined the poor as those who ate less than 2,250 calories a day. By its reckoning, this requirement would be met by the typical rural Indian spending 15 rupees a month at 1960-61 prices.
Mr Ravallion and his team converted rupees, pesos and rupiah into a common unit of purchasing power. Someone spending 15 rupees in rural India in 1960 had about the same command over goods and services as an American spending $23.14 a month in 1985. But India's benchmark was unusually abstemious. Half a dozen other poverty lines (for Indonesia, Bangladesh, Nepal, Kenya, Tanzania and Morocco) all fell within a few cents of a more generous allowance of $31 a month.
With that observation, the dollar-a-day concept was born, to appear in countless declarations, laments and pleas ever since. Halving the share of people who live on less than a dollar a day is, for example, the first of the Millennium Development Goals to which 189 countries subscribed in September 2000. (The concept's rhetorical appeal was diminished only a little when Mr Ravallion updated the threshold to $1.08 at 1993 prices, which is worth about $1.53 in today's money.)
Cigarettes and alcohol
But what does this line mean to the people who fall below it? Mr Banerjee and Ms Duflo describe the "economic lives" of the poor, drawing on 13 household surveys from Côte d'Ivoire to Mexico. The two surveys from India—undertaken in Udaipur's farms and Hyderabad's slums—they carried out themselves.
Vikram Seth, an economist before he was a poet, has described the "dreary pillage of privacy" these surveys entail. In 2001, for example, bank researchers in Timor-Leste diligently recorded whether a household bathed under a shower or in the river; used a flush toilet or a bucket; built their home from brick or rattan, and so forth. They also asked them to recall what they had eaten, drunk, chewed or smoked over the previous week: cassava or shrimp? Mung beans or papaya? Clove cigarettes or betel nuts? Beer or palm wine?
A dollar a day would seem to leave little room for choice or discretion. Hunger is surely the most binding of constraints. And yet these pillages of privacy show that the poor do make choices. They also suggest they are not always the best ones.
The poor do not complain much, the two authors note. (Only 9% of people in their Udaipur survey say their life makes them generally unhappy.) But they have a lot to complain about. Beset by hunger and illness, many are scrawny (65% of adult men in Udaipur are underweight), over half are anaemic, and about a seventh suffer from impaired eyesight. Many had to go without food on at least one day in the previous year.
And yet they do not eat as much as they could. According to Mr Banerjee and Ms Duflo, the typical poor household in Udaipur could spend up to 30% more on food than it does, if only it stopped devoting money to alcohol, tobacco and festivals. That last item, which includes weddings, funerals and religious events, typically accounts for about a tenth of the household's budget. This spending might be motivated by escapism—the poor have a lot to escape—or perhaps by social emulation. Even those in absolute poverty care about their relative standing.
The authors ponder not just how the poor spend their money but also how they make it. They describe the hard-pressed women of the Indian city of Guntur, who line the road each morning, mixing dosas over a kerosene stove for the price of a rupee. By 10 o'clock the women have turned their hands variously to making pickles, embroidering saris or collecting rubbish.
The poor, whether smallholders or petty entrepreneurs, lack scale and specialisation, Mr Banerjee and Ms Duflo point out. The farmers of Udaipur cultivate the land they own, no more, no less, but only a fifth rely on their plots as their chief source of income. In West Bengal, a poor household will typically have three breadwinners doing seven occupations between them.
It is almost an "item of faith" among development economists that the poor act rationally, however straitened their circumstances. If their undertakings are too small, or their efforts too thinly spread, to be efficient, it is not because they have miscalculated, but because the markets for land, credit or insurance have failed them. As one economist argued in 1993, "More than 40 years of research...should at last have laid to rest the thought that such folk may not know where their real interests lie."
But just such a thought is stirring again in the minds of Mr Banerjee and Ms Duflo. Why, for example, do more Ghanaian farmers not cultivate pineapples, which would fetch returns of 250-300% by some estimates? Why do so few farmers in western Kenya dress their fields with fertiliser, even after the benefits have been demonstrated to them?
"One senses a reluctance of poor people to commit themselves psychologically to a project of making more money," the authors write. When you live on a dollar a day it may be painful to confront your circumstances too squarely, or even to aspire to better things. The "great redeeming feature of poverty," George Orwell wrote after his excursions in the social gutters of Paris and London, is "the fact that it annihilates the future".
Friday, April 20, 2007
Strong rupee
- Chellamuthu Kuppusamy
There was a remark made in the previous post on Chidamaram's book.//Why is the government increasing the interest rate to curb liquidity and at the same time inject money by heavily buying dollar to maintain exchange rate? Are the FM and RBI of the view that Indian economy is not resilient enough to absorb strong rupee? //
This statement has beome obsolete within days. Rupee has peaked to its 9 year high. It is alledged that RBI has pulled back from obsorbing excess dollat floating in the market. Government has apparently decide to keep aside economy aside & cool down inflation. Well..how does exchange rate find its relation to inflation?
We have seen multiple interest rate hikes in the recent past to curb liquidity & thus arresting inflation. A good move indeed. But, there is other side effects too. Due to relatively attrative interest rates, foreign money - read dollar - flows towards India. This raises the demand for rupee and brings down the demand for dollar making exchange rate climbe (say from 44 to 42). RBI normally buys such incoming dollar and makes an attempt to maintain greenback demand constant, meaning weaker rupee. Having a stroung rupee is not good for our exports and eonomy as a whole. That is precisely the comment made in the book review.
When RBI buys dollar and injects more rupee into the system, it adds to liquidity and subsequently giving raise to inflation. The oroginal goal is defeated? May be, true. It is duty of the government to maintain moderate inflation as well as exchange rate. But, managing ecconomy is not that simple. They always try to strike a balance.
Having said that, RBI not going ahead in its normal act of sucking dollar is not a surprise. State elections in the north is onsidered to be a reason. One cant help thining that inflation is more of a politivcal factor than eonomic one at this junccture. Otherwise there is no need to let rupee gain strength. I dont have any reason to believe that FM and RBI are confident that Indian economy is resilient enough to absorb strong rupee?
There was a remark made in the previous post on Chidamaram's book.//Why is the government increasing the interest rate to curb liquidity and at the same time inject money by heavily buying dollar to maintain exchange rate? Are the FM and RBI of the view that Indian economy is not resilient enough to absorb strong rupee? //
This statement has beome obsolete within days. Rupee has peaked to its 9 year high. It is alledged that RBI has pulled back from obsorbing excess dollat floating in the market. Government has apparently decide to keep aside economy aside & cool down inflation. Well..how does exchange rate find its relation to inflation?
We have seen multiple interest rate hikes in the recent past to curb liquidity & thus arresting inflation. A good move indeed. But, there is other side effects too. Due to relatively attrative interest rates, foreign money - read dollar - flows towards India. This raises the demand for rupee and brings down the demand for dollar making exchange rate climbe (say from 44 to 42). RBI normally buys such incoming dollar and makes an attempt to maintain greenback demand constant, meaning weaker rupee. Having a stroung rupee is not good for our exports and eonomy as a whole. That is precisely the comment made in the book review.
When RBI buys dollar and injects more rupee into the system, it adds to liquidity and subsequently giving raise to inflation. The oroginal goal is defeated? May be, true. It is duty of the government to maintain moderate inflation as well as exchange rate. But, managing ecconomy is not that simple. They always try to strike a balance.
Having said that, RBI not going ahead in its normal act of sucking dollar is not a surprise. State elections in the north is onsidered to be a reason. One cant help thining that inflation is more of a politivcal factor than eonomic one at this junccture. Otherwise there is no need to let rupee gain strength. I dont have any reason to believe that FM and RBI are confident that Indian economy is resilient enough to absorb strong rupee?
Wednesday, April 11, 2007
A view from outside - P.Chidambaram
- Chellamuthu Kuppusamy
I am writing this from the city of Columbus in central Ohio, the United States. A coworker of mine shares an attention-grabbing information. It is about Indian finance minister P.Chidambaram.
He could not recollect exactly. It might be 2002 or 03. Mr.Chidambaram was out of power, even out of congress party. He was invited to a function in Columbus, organized by an Indian community. Political personalities attending such gatherings, while out of office, is not uncommon. But what is fascinating about this Harvard educated lawyer cum economist is his simplicity.
Former finance minister (at that time) flew all the way from India in economy class. Three and a half hours drive from Detroit was adequate for his commute to Columbus. He had not demanded another domestic flight, even after long journey in the sky. Story did not end there. He stayed with an NRI at his residence & surprisingly did not insist for hotel accommodation.
After the talk in the meeting, folks had offered him to take around the city. He refused and held that he had to write for Indian Express. Indeed, he went ahead and penned down thousand plus word column, despite getting intermittent calls from international bodies like world bank etc. That shows the level of discipline this market savvy politician is made up with. He wrote a column every week in Indian Express between August 2002 and March 2004, except two weeks.
All those articles are collected and tied to be named as ‘A view from outside’, a 372 page book, not to mention being priced at Rs.500. I am making a simple attempt to gaze through that work via a common man’s eyes.
He starts his first article on a positive note. “India is often described as a poor country. I disagree. It is a country where a large proportion of its people is poor.” He talks high that India can grow much much faster than rest of the world. But, growth is a function of investment. He augurs the need to eradicate all stumble blocks hindering productive investment. More emphasis can be seen towards public spending on infrastructure. We join our current FM in pressing the need to accelerate public investment and removing roadblocks for private investment.
At many instances he proves to be a smart politician, principally when it comes to criticizing then ruling BJP and it’s Hindutva policies.
Many of Chidambaram’s remarks on BJP’s term at the center applies now as well. Finance minister might like to forget these statements. He terms Vajpayee
“He presides over the most fractious coalition government ever to rule India. Not a day passes without one party or the other vehemently criticizing the government”
Should we forget the current government at the center flexing itself for every peril from left allies and regional powers like DMK? If one has mind that can be mould just by reading some articulate writing, it would be easy to get a feeling that it was only BJP that had differences in the government. Differences and compromises are not the rule of the game and accepted norm in a coalition government. Even current DMK government in Tamil Nadu faces unprecedented (is there a better word) pressure from its allies, including Chidambaram’s party itself for the first time.
One should have no doubts on his vision and economic acumen. Growth of nation and the living standard of her citizen is characterized by the per-capita consumption. BJP’s inability to push hard power sector reforms, initiate & even achieve preset targets in power generation capacity addition is indicated at various instances. We ought agree with FM on this matter. We are pretty pleased with government’s ambitious target of electrifying every home by 2012, which is no longer a paper target.
He touches upon agriculture, albeit them being short. Even he acknowledges.
“there were only three pieces on agriculture, but I was able to identify the real issues plaguing that sector: low investment, inadequate credit and poor farm-gate prices. These problems persist, but a beginning has been made to correct the situation.”
Book advocates for simple and transparent rules to be incorporated into our administrative system. Author even makes an attempt to touch the roots of corruption in our system and reasons why it stays undiminished. License raj obligated business leaders to be nice with ruler to receive favor, which is percolates down the pyramid to every taluk office and office boy, not to talk of clerks and officers.
Chidambaram also questions ourselves on the important issue of Kashmir. Our governments, for Chidambaram it is more of BJP than congress, have been very comfortable to point fingers towards Pakistan for every unrest in India. It is no different from Bush's 'war against terror' and Sadam Hussain being found guilty for every crisis US faces.
Our failure to embrace Kashmir and its people into national mainstream is cited. Dissident Panjabi’s are now in every walk of life. We have accommodated them on the national dais. Even DMK wanted separate nation and gave up that idea. It is a classical example on how a state (and political dynasties) can prosper through participation and involvement. India’s failure to handhold north eastern states is a symbol of disgrace.
‘A view from outside’ is predominantly economic outlook of this free market preacher. He has quoted lot numbers through the length and breadth of this work. I shall get into those details. Chidambaram’s advocate brain makes sure that he puts forward his views, criticism and comments with relevant statistics. That is some effort for a politician in Indian. No wonder why prime minister Dr.Manmohan Singh praises his finance minister and asks opposition to use their otherwise gratis time effectively.
He goes on talking on many issues ranging from child labor, honesty in politics, low tax – high compliance, fiscal deficit, usage of forex reserves, women empowerment, WTO, Kaveri water problem, tourism industry, budgets, disinvestment, FDI, tourism industry, LTTE and the list goes on. He proves with no doubt that he was Rajiv Gandhi’s pet. Rajiv had a dream and wanted to change the lives of millions. Agreed! But, Chidambaram’s efforts on Bofors are very explicit. Even he proclaims to have taken Vajpayee, a wordsmith himself, by surprise with his statement on this historic arms deal racket.
It is my honest belief that this articulate politician with his ‘scholar’ hat has done a fantastic work using his free time. I would say, “Its a must read”, if you don’t ask back, “Are his criticism hold good for his current governance & government?”
I want to add another question too. Why is the government increasing the interest rate to curb liquidity and at the same time inject money by heavily buying dollar to maintain exchange rate? Are the FM and RBI of the view that Indian economy is not resilient enough to absorb strong rupee?
I am writing this from the city of Columbus in central Ohio, the United States. A coworker of mine shares an attention-grabbing information. It is about Indian finance minister P.Chidambaram.
He could not recollect exactly. It might be 2002 or 03. Mr.Chidambaram was out of power, even out of congress party. He was invited to a function in Columbus, organized by an Indian community. Political personalities attending such gatherings, while out of office, is not uncommon. But what is fascinating about this Harvard educated lawyer cum economist is his simplicity.
Former finance minister (at that time) flew all the way from India in economy class. Three and a half hours drive from Detroit was adequate for his commute to Columbus. He had not demanded another domestic flight, even after long journey in the sky. Story did not end there. He stayed with an NRI at his residence & surprisingly did not insist for hotel accommodation.
After the talk in the meeting, folks had offered him to take around the city. He refused and held that he had to write for Indian Express. Indeed, he went ahead and penned down thousand plus word column, despite getting intermittent calls from international bodies like world bank etc. That shows the level of discipline this market savvy politician is made up with. He wrote a column every week in Indian Express between August 2002 and March 2004, except two weeks.
All those articles are collected and tied to be named as ‘A view from outside’, a 372 page book, not to mention being priced at Rs.500. I am making a simple attempt to gaze through that work via a common man’s eyes.
He starts his first article on a positive note. “India is often described as a poor country. I disagree. It is a country where a large proportion of its people is poor.” He talks high that India can grow much much faster than rest of the world. But, growth is a function of investment. He augurs the need to eradicate all stumble blocks hindering productive investment. More emphasis can be seen towards public spending on infrastructure. We join our current FM in pressing the need to accelerate public investment and removing roadblocks for private investment.
At many instances he proves to be a smart politician, principally when it comes to criticizing then ruling BJP and it’s Hindutva policies.
Many of Chidambaram’s remarks on BJP’s term at the center applies now as well. Finance minister might like to forget these statements. He terms Vajpayee
“He presides over the most fractious coalition government ever to rule India. Not a day passes without one party or the other vehemently criticizing the government”
Should we forget the current government at the center flexing itself for every peril from left allies and regional powers like DMK? If one has mind that can be mould just by reading some articulate writing, it would be easy to get a feeling that it was only BJP that had differences in the government. Differences and compromises are not the rule of the game and accepted norm in a coalition government. Even current DMK government in Tamil Nadu faces unprecedented (is there a better word) pressure from its allies, including Chidambaram’s party itself for the first time.
One should have no doubts on his vision and economic acumen. Growth of nation and the living standard of her citizen is characterized by the per-capita consumption. BJP’s inability to push hard power sector reforms, initiate & even achieve preset targets in power generation capacity addition is indicated at various instances. We ought agree with FM on this matter. We are pretty pleased with government’s ambitious target of electrifying every home by 2012, which is no longer a paper target.
He touches upon agriculture, albeit them being short. Even he acknowledges.
“there were only three pieces on agriculture, but I was able to identify the real issues plaguing that sector: low investment, inadequate credit and poor farm-gate prices. These problems persist, but a beginning has been made to correct the situation.”
Book advocates for simple and transparent rules to be incorporated into our administrative system. Author even makes an attempt to touch the roots of corruption in our system and reasons why it stays undiminished. License raj obligated business leaders to be nice with ruler to receive favor, which is percolates down the pyramid to every taluk office and office boy, not to talk of clerks and officers.
Chidambaram also questions ourselves on the important issue of Kashmir. Our governments, for Chidambaram it is more of BJP than congress, have been very comfortable to point fingers towards Pakistan for every unrest in India. It is no different from Bush's 'war against terror' and Sadam Hussain being found guilty for every crisis US faces.
Our failure to embrace Kashmir and its people into national mainstream is cited. Dissident Panjabi’s are now in every walk of life. We have accommodated them on the national dais. Even DMK wanted separate nation and gave up that idea. It is a classical example on how a state (and political dynasties) can prosper through participation and involvement. India’s failure to handhold north eastern states is a symbol of disgrace.
‘A view from outside’ is predominantly economic outlook of this free market preacher. He has quoted lot numbers through the length and breadth of this work. I shall get into those details. Chidambaram’s advocate brain makes sure that he puts forward his views, criticism and comments with relevant statistics. That is some effort for a politician in Indian. No wonder why prime minister Dr.Manmohan Singh praises his finance minister and asks opposition to use their otherwise gratis time effectively.
He goes on talking on many issues ranging from child labor, honesty in politics, low tax – high compliance, fiscal deficit, usage of forex reserves, women empowerment, WTO, Kaveri water problem, tourism industry, budgets, disinvestment, FDI, tourism industry, LTTE and the list goes on. He proves with no doubt that he was Rajiv Gandhi’s pet. Rajiv had a dream and wanted to change the lives of millions. Agreed! But, Chidambaram’s efforts on Bofors are very explicit. Even he proclaims to have taken Vajpayee, a wordsmith himself, by surprise with his statement on this historic arms deal racket.
It is my honest belief that this articulate politician with his ‘scholar’ hat has done a fantastic work using his free time. I would say, “Its a must read”, if you don’t ask back, “Are his criticism hold good for his current governance & government?”
I want to add another question too. Why is the government increasing the interest rate to curb liquidity and at the same time inject money by heavily buying dollar to maintain exchange rate? Are the FM and RBI of the view that Indian economy is not resilient enough to absorb strong rupee?
Sunday, February 11, 2007
Mr.Honda - 30 yrs ago
A Talented Hawk Should Show Its Talons 1977
A book titled “Hoist Our Sails to take Advantage of Our Strengths,” published in June 1977:
Mr. Honda’s book, “Hoist Our Sails to take Advantage of Our Strengths,” published in 1977, is a new edition of the book of the same name published in 1967. This is an essay in which Mr. Honda insisted talented people should bring out their abilities to the fullest extent. Beginning this year, participation in TT racing resumed.
There are many different types of people. There are people who were born with outstanding talents and abilities. There are people who acquired talents through education or their own efforts. In contrast, there are people who do not have such gifts or talents, but who try to look as if they do. It takes a lot of effort and special skills to accurately evaluate and distinguish these different types of people from a large number of people. However, in Japan, there is an old saying that “a talented hawk hides its talons.”
This was an appeal to the public in the era when the cultural level of people was extremely low, so modesty was made to be a virtue. The trouble is that this thought is still highly regarded and emphasized. In other words, people who have excellent abilities are cautioned not to demonstrate such abilities, and those who don’t demonstrate true abilities are highly regarded. I am having a difficult time understanding why this old saying has been conveyed as if it is convincing. If the person rarely demonstrates the abilities, we don’t even know if the person actually has them. A person should be highly regarded only when his/her abilities are demonstrated and results are delivered. A person should not be highly regarded while he/she is still hiding the talons.
Moreover, holding back on your true ability does not work in this era of speed when things are constantly advancing. Precious abilities will be a useless possession. I am thinking this old saying should be deported from Japan. Instead, I want to insist on “talented hawks do not hide their talons.” In other words, we need to express ourselves saying, “This is how I think.” I want you to express yourself proudly – whether you are a hawk or a dove. I think there are kites or crows in addition to hawks and doves, and there is nothing wrong being a kite or a crow.
In this way, you can do a respectable job and feel your contribution to society only when you can completely understand and express your own individual qualities. Moreover, this strong confidence in your work will lead to your pride.
As long as we live, we will always be beset with various desires. We want to have money and pride. We want love. And we want to be healthy. In that sense, pursuing profit does not satisfy us completely. I am enjoying my life because I have a job that I am proud of. Thieves or swindlers obviously cannot be proud of their job, and thus have no fun.
Everybody is not a hawk. Kites and crows can also do some good depending on how they work. But that is possible only when we declare ourselves kites or crows. As long as we declare who we are, people should let us work in the way we can use our capabilities to the maximum.
In this world, there is nothing completely useless. Even rocks on the riverside become useful as concrete when they are mixed with cement. However, a diamond could be treated as a piece of glass or a rock on the riverside if it follows the concept of “a talented hawk hides its talons” or “silence is golden,” and does not assert itself. Such a non-assertive diamond will end up being buried in concrete. That is asking a little too much if you want to receive a good evaluation while remaining silent.
In other words, it is a virtue in the present day to clearly express one’s opinions and to efficiently provide data which effectively makes one’s value understood.
What will happen if young people keep silent? You must know the answers based on what I have been saying so far. In the area of politics, for instance, if people keep silent and display no reactions, we will not be able to tell if it is good or bad. The same holds for a company. Good company management is possible only by listening to the opinions of employees. A talented hawk not hiding its talons has a major positive impact in all senses.
A book titled “Hoist Our Sails to take Advantage of Our Strengths,” published in June 1977:
Mr. Honda’s book, “Hoist Our Sails to take Advantage of Our Strengths,” published in 1977, is a new edition of the book of the same name published in 1967. This is an essay in which Mr. Honda insisted talented people should bring out their abilities to the fullest extent. Beginning this year, participation in TT racing resumed.
There are many different types of people. There are people who were born with outstanding talents and abilities. There are people who acquired talents through education or their own efforts. In contrast, there are people who do not have such gifts or talents, but who try to look as if they do. It takes a lot of effort and special skills to accurately evaluate and distinguish these different types of people from a large number of people. However, in Japan, there is an old saying that “a talented hawk hides its talons.”
This was an appeal to the public in the era when the cultural level of people was extremely low, so modesty was made to be a virtue. The trouble is that this thought is still highly regarded and emphasized. In other words, people who have excellent abilities are cautioned not to demonstrate such abilities, and those who don’t demonstrate true abilities are highly regarded. I am having a difficult time understanding why this old saying has been conveyed as if it is convincing. If the person rarely demonstrates the abilities, we don’t even know if the person actually has them. A person should be highly regarded only when his/her abilities are demonstrated and results are delivered. A person should not be highly regarded while he/she is still hiding the talons.
Moreover, holding back on your true ability does not work in this era of speed when things are constantly advancing. Precious abilities will be a useless possession. I am thinking this old saying should be deported from Japan. Instead, I want to insist on “talented hawks do not hide their talons.” In other words, we need to express ourselves saying, “This is how I think.” I want you to express yourself proudly – whether you are a hawk or a dove. I think there are kites or crows in addition to hawks and doves, and there is nothing wrong being a kite or a crow.
In this way, you can do a respectable job and feel your contribution to society only when you can completely understand and express your own individual qualities. Moreover, this strong confidence in your work will lead to your pride.
As long as we live, we will always be beset with various desires. We want to have money and pride. We want love. And we want to be healthy. In that sense, pursuing profit does not satisfy us completely. I am enjoying my life because I have a job that I am proud of. Thieves or swindlers obviously cannot be proud of their job, and thus have no fun.
Everybody is not a hawk. Kites and crows can also do some good depending on how they work. But that is possible only when we declare ourselves kites or crows. As long as we declare who we are, people should let us work in the way we can use our capabilities to the maximum.
In this world, there is nothing completely useless. Even rocks on the riverside become useful as concrete when they are mixed with cement. However, a diamond could be treated as a piece of glass or a rock on the riverside if it follows the concept of “a talented hawk hides its talons” or “silence is golden,” and does not assert itself. Such a non-assertive diamond will end up being buried in concrete. That is asking a little too much if you want to receive a good evaluation while remaining silent.
In other words, it is a virtue in the present day to clearly express one’s opinions and to efficiently provide data which effectively makes one’s value understood.
What will happen if young people keep silent? You must know the answers based on what I have been saying so far. In the area of politics, for instance, if people keep silent and display no reactions, we will not be able to tell if it is good or bad. The same holds for a company. Good company management is possible only by listening to the opinions of employees. A talented hawk not hiding its talons has a major positive impact in all senses.
Thursday, February 01, 2007
Tata steel & Corus - Are we cheering??
- Kuppusamy Chellamuthu
Three exciting things involving India and England have occurred recently. Shilpa Shetty winning big brother show in UK amidst racist comment by fellow contestant is certainly interesting. British telecom major Vodafone fishing for Indian cellular operator Hutch is seen as the recognition of India growth story by advanced countries. (NYSE taking a stake in largest Indian stock exchange NSE can be viewed under the same lines). While these two events are certainly noteworthy, what is fascinating is Tata steel's acquisition of British steel maker Corus.
This is the largest takeover by an Indian firm overseas for an all cash deal of $12.1 billion (Rs 53,361 crore). Tata's had to offer 608 pence per share. This is 5 pence more than rival bidder CSN, a steel company from another growing nation Brazil.
While the entire India Inc is celebrating this news, we don't have any disregard towards this brave attempt. Neither can we ignore it as an irrational exuberance, though signs of that are exhibited.
"Today marks the end of the journey that started quite some days ago. An Indian company is making the bid for a European steel company much larger than itself — it is something which has never happened," Mr Ratan Tata, Chairman of Tata Steel, said.
Tata steel – Corus combine would be the fifth largest steel producer in the world. 19 million ton capacity is added to the kitty.
Three exciting things involving India and England have occurred recently. Shilpa Shetty winning big brother show in UK amidst racist comment by fellow contestant is certainly interesting. British telecom major Vodafone fishing for Indian cellular operator Hutch is seen as the recognition of India growth story by advanced countries. (NYSE taking a stake in largest Indian stock exchange NSE can be viewed under the same lines). While these two events are certainly noteworthy, what is fascinating is Tata steel's acquisition of British steel maker Corus.
This is the largest takeover by an Indian firm overseas for an all cash deal of $12.1 billion (Rs 53,361 crore). Tata's had to offer 608 pence per share. This is 5 pence more than rival bidder CSN, a steel company from another growing nation Brazil.
While the entire India Inc is celebrating this news, we don't have any disregard towards this brave attempt. Neither can we ignore it as an irrational exuberance, though signs of that are exhibited.
"Today marks the end of the journey that started quite some days ago. An Indian company is making the bid for a European steel company much larger than itself — it is something which has never happened," Mr Ratan Tata, Chairman of Tata Steel, said.
Tata steel – Corus combine would be the fifth largest steel producer in the world. 19 million ton capacity is added to the kitty.
A company is taking over another bigger than itself. One can't forget IT bubble towards the end of last century and the first few months of this century when unknown IT companies swallowed firm larger in size to bulge the balance sheet & book value. Sure, it is not fair to compare the Tata's with any of those 'get rich quick' dot.com companies. However, there is an apprehension that Tata is biting more than what it can chew.
Tata steel being one of the cheapest steel producer in the world, deserves due admiration. This acquisition would help it spread wings globally, Europe in particular. Finance minister P.Chidambaram has assured that the central government would facilitate this deal go through smoothly. Any flexing of rules from SEBI or RBI should not be a big problem. But, the main question remains the price.
While one compares Tata's initial offer of 475 pence a share with the final deal of 608 pence, there lies little difficulty in determining it to be a high priced shopping. Hindu business line reports, "The 608 pence offer is at a premium of about 68.7 per cent over the average closing mid-market price of 360.5 pence of Corus on the LSE for the 12 months ended October 4, 2006."
But, Tata steel's MD Muthuraman justifies the price. "At 608 pence a share, the enterprise value of Corus works out to $710 per tonne. Today, to set up a greenfield capacity, going downstream as much as Corus has in terms of tin plate capacity, galvanising capacity and construction solutions anywhere in the world, would cost somewhere between $1200 and $1300 per tonne"
But, overvalue or undervalue varies based on the yardstick we use. The final deal for Corus at an enterprise value of over $13 billion works out to multiple of approximately 7 times EBITDA (earnings before interest, tax, depreciation and amortisation) for the year ended December 31, 2005 and 9 times for the 12 months to September 30, 2006. This is much higher than 5.5-6 times paid by Mittal for Arcelor.
On an EV/tonne basis also, the deal works out to $710 per tonne, higher than the Arcelor Mittal deal, though in line with some of the standalone deals in this space.
Alright. How does the stock market see this transaction? Tata steel share price took a beating by 10%. Nothing more to add. Highly leveraged purchase would burn a big hole in the bottom line and net profit margin. A mammoth task is ahead of Tata's to unite both the entities both in terms of operation and culture.
How can one summarize this? Corus shareholders can start running towards their bank with all smile and 608 pence money. I am concerned with lot of caution as a Tata steel shareholder and feel proud as an Indian. This mega purchase is going to be funded by 53:47 debt-equity mode and has happened on the day when RBI hiked repo-rate by 25 basis points. At the end of the day 'it is a matter of pride'? Neeeeyyy.
Note : Facts, figures and news quoted from Business Line.
Tata steel being one of the cheapest steel producer in the world, deserves due admiration. This acquisition would help it spread wings globally, Europe in particular. Finance minister P.Chidambaram has assured that the central government would facilitate this deal go through smoothly. Any flexing of rules from SEBI or RBI should not be a big problem. But, the main question remains the price.
While one compares Tata's initial offer of 475 pence a share with the final deal of 608 pence, there lies little difficulty in determining it to be a high priced shopping. Hindu business line reports, "The 608 pence offer is at a premium of about 68.7 per cent over the average closing mid-market price of 360.5 pence of Corus on the LSE for the 12 months ended October 4, 2006."
But, Tata steel's MD Muthuraman justifies the price. "At 608 pence a share, the enterprise value of Corus works out to $710 per tonne. Today, to set up a greenfield capacity, going downstream as much as Corus has in terms of tin plate capacity, galvanising capacity and construction solutions anywhere in the world, would cost somewhere between $1200 and $1300 per tonne"
But, overvalue or undervalue varies based on the yardstick we use. The final deal for Corus at an enterprise value of over $13 billion works out to multiple of approximately 7 times EBITDA (earnings before interest, tax, depreciation and amortisation) for the year ended December 31, 2005 and 9 times for the 12 months to September 30, 2006. This is much higher than 5.5-6 times paid by Mittal for Arcelor.
On an EV/tonne basis also, the deal works out to $710 per tonne, higher than the Arcelor Mittal deal, though in line with some of the standalone deals in this space.
Alright. How does the stock market see this transaction? Tata steel share price took a beating by 10%. Nothing more to add. Highly leveraged purchase would burn a big hole in the bottom line and net profit margin. A mammoth task is ahead of Tata's to unite both the entities both in terms of operation and culture.
How can one summarize this? Corus shareholders can start running towards their bank with all smile and 608 pence money. I am concerned with lot of caution as a Tata steel shareholder and feel proud as an Indian. This mega purchase is going to be funded by 53:47 debt-equity mode and has happened on the day when RBI hiked repo-rate by 25 basis points. At the end of the day 'it is a matter of pride'? Neeeeyyy.
Note : Facts, figures and news quoted from Business Line.
Saturday, January 13, 2007
Market panic - Business line letter
http://www.thehindubusinessline.com/2006/06/16/stories/2006061600511000.htm
My letter to the Hindu Business Line
This refers to "Stock market panics when politics dominates economics," Business Line, June 15):
Structural inefficiencies, apparent reversal of pro-business policies by the Centre, spiralling oil prices, global tightening of liquidity and scarcity of easy money are some of the factors that the recent crash can be attributed to.
What was informative in the article was that most of the transactions occurring in the major two exchanges are speculative/intra-day/derivative trades.
Short-term investors, as they call themselves, are in fact traders or speculators. This recent correction might act as an antidote to the day-trading epidemic.
My letter to the Hindu Business Line
Market panic
This refers to "Stock market panics when politics dominates economics," Business Line, June 15):
Structural inefficiencies, apparent reversal of pro-business policies by the Centre, spiralling oil prices, global tightening of liquidity and scarcity of easy money are some of the factors that the recent crash can be attributed to.
What was informative in the article was that most of the transactions occurring in the major two exchanges are speculative/intra-day/derivative trades.
Short-term investors, as they call themselves, are in fact traders or speculators. This recent correction might act as an antidote to the day-trading epidemic.
Kuppusamy Chellamuthu
e-mail
Tuesday, December 26, 2006
Rakesh Jhunjhunwala Speaks
From Hindubusiness line 26-Dec-2006.
`2007 will be year of consolidation and rise for the Indian markets'
Bangalore , Dec. 25
"Market is always right. Markets cannot be taught, they have to be learnt.
"We must have an attitude where we must balance fear and greed," was the hot tip by Mr Rakesh Jhunjhunwala, India's high-profile investor and President of Rare Enterprises, when he spoke at a seminar on `Wealth creation through equity investments' organised by Welingkar Institute of Management here on Friday.
Mr Jhunjhunwala spoke about his convictions that made a case for sustaining the India growth story.
Equities, because of their efficiency in allocating capital and ability to leverage, generated superior returns when compared to other assets over the long term, he said.
Since 1979, the Sensex has delivered 21 per cent returns compounded annual growth rate, which compares well with returns on funds managed by the legendary global investor Warren Buffet, he added.
Opportunities
Mr Jhunjhunwala said that enormous wealth was created over the last five years because opportunities in India have been manifold.
There is a strong case for investing in equities considering its under-penetration today.
He predicts the proportion of household savings to equity to rise to 15 per cent in 2011 from 4.5 per cent now as a result of which about $45 billion would flow into equity markets as against $6 billion now.
He expects 2007 to be a year of consolidation and rise for the Indian markets. According to him, the Sensex may have a floor at 12,500 and a peak at 16,500 in 2007.
Admitting that gains were going to be moderate in future unlike the manifold rise over the last few years, he advised investors to be realistic in their expectations.
He said that markets were unlikely to peak unless they were trading at a multiple of 25-30 times forward earnings. They are currently trading at about 16 times their earnings for financial year 2008.
Growth momentum
Speaking on the strength in India's fundamentals, he elaborated on forces that would sustain the growth momentum.
According to him, growth enablers (such as favourable demographics, higher base of skilled people and education base), liberalisation catalysts (such as competition), fall in interest rates, multiplier effect (on account of reforms), structural changes in quality of corporate earnings and micro trends (such as change in mindset of companies who are aspiring to become global) are likely to drive India's growth story to a higher level.
He, however, cautioned that investors should not forget the four-letter word `Risk' while making investment decisions.
"Patience may be tested, but conviction will be rewarded," he said. Mr K. Rajagopal, CIO, Reliance Capital Asset Management, and Mr Joseph Massey, Deputy Managing Director, MCX, were among other speakers on the occasion.
`2007 will be year of consolidation and rise for the Indian markets'
Bangalore , Dec. 25
"Market is always right. Markets cannot be taught, they have to be learnt.
"We must have an attitude where we must balance fear and greed," was the hot tip by Mr Rakesh Jhunjhunwala, India's high-profile investor and President of Rare Enterprises, when he spoke at a seminar on `Wealth creation through equity investments' organised by Welingkar Institute of Management here on Friday.
Mr Jhunjhunwala spoke about his convictions that made a case for sustaining the India growth story.
Equities, because of their efficiency in allocating capital and ability to leverage, generated superior returns when compared to other assets over the long term, he said.
Since 1979, the Sensex has delivered 21 per cent returns compounded annual growth rate, which compares well with returns on funds managed by the legendary global investor Warren Buffet, he added.
Opportunities
Mr Jhunjhunwala said that enormous wealth was created over the last five years because opportunities in India have been manifold.
There is a strong case for investing in equities considering its under-penetration today.
He predicts the proportion of household savings to equity to rise to 15 per cent in 2011 from 4.5 per cent now as a result of which about $45 billion would flow into equity markets as against $6 billion now.
He expects 2007 to be a year of consolidation and rise for the Indian markets. According to him, the Sensex may have a floor at 12,500 and a peak at 16,500 in 2007.
Admitting that gains were going to be moderate in future unlike the manifold rise over the last few years, he advised investors to be realistic in their expectations.
He said that markets were unlikely to peak unless they were trading at a multiple of 25-30 times forward earnings. They are currently trading at about 16 times their earnings for financial year 2008.
Growth momentum
Speaking on the strength in India's fundamentals, he elaborated on forces that would sustain the growth momentum.
According to him, growth enablers (such as favourable demographics, higher base of skilled people and education base), liberalisation catalysts (such as competition), fall in interest rates, multiplier effect (on account of reforms), structural changes in quality of corporate earnings and micro trends (such as change in mindset of companies who are aspiring to become global) are likely to drive India's growth story to a higher level.
He, however, cautioned that investors should not forget the four-letter word `Risk' while making investment decisions.
"Patience may be tested, but conviction will be rewarded," he said. Mr K. Rajagopal, CIO, Reliance Capital Asset Management, and Mr Joseph Massey, Deputy Managing Director, MCX, were among other speakers on the occasion.
Tuesday, December 19, 2006
Best stock market analyst
- Kuppusamy Chellamuthu
Posting some of the mail discussions from 'india_next' yahoo group.
First:
I have been trading in stocks for the last three years and losing money (yearly 2.5 lakhs on an average). I have tried everything from trading on my own intuition to getting tips from experts. There havent been a single three months streak where I have made money. Now what should I do? Do somebody have any idea who is the best analyst in India so that using his tips we can also make money? I dont care if he is a technical analyst or a fundamental analyst. I am ready to daytrade, invest or scalp. Who is the best out there? Please send me a mail if somebody has an opinion. Please do not mix business with this and do not send business advertisements.
Second:
I have a seasoned investor friend who often says, "Trading is one of the most sophisticated suicidal methods".
When you do day-trading your odds of gaining and losing are evenly poised, leaving apart the money you have to make up for brokerage and taxes. When a person comes with an intention of trading, his chance of winning is 0.50 (50%). He can either go broke or get the money enabling him to go ahead to the next day. His chance of gaining on the end of second day is 0.50 (for the previous day) X 0.50 (for second day) = 0.25. His chance of winning is reduced to 25% and to 12.5% on the third day. This has been proven by history. People who go great money in stocks were not addicted traders.
You did not need to beat the index by a substantial margin. But, had you stayed invested in sensex companies, your money would have grown decently during the past 3 years, which has been the best time for Indian stock market. Unless you are a broker, you don't need to advocate trading.
And...As our motive in operating stock market is to make money, seeking day-trading tips is nothing but a quick solution to the question 'how to make money in a day?' I am completely convinced that any person who has an answer for this question won't need to make money by selling his 'tips'.
Aa such, I don't detest trading. But, want to be sure on what I am trading. Otherwise better prefer flying to Los Vegas to try my luck.
Regret if your question did not get answer. I also believe that no other member of this group am not knows any such 'tipsters' who can facilitate us make money.
And finally, you are lucky enough to learn things at the expense of three years and 2.5 lakhs. There are people who paid much more for some trivial lessons.
Posting some of the mail discussions from 'india_next' yahoo group.
First:
I have been trading in stocks for the last three years and losing money (yearly 2.5 lakhs on an average). I have tried everything from trading on my own intuition to getting tips from experts. There havent been a single three months streak where I have made money. Now what should I do? Do somebody have any idea who is the best analyst in India so that using his tips we can also make money? I dont care if he is a technical analyst or a fundamental analyst. I am ready to daytrade, invest or scalp. Who is the best out there? Please send me a mail if somebody has an opinion. Please do not mix business with this and do not send business advertisements.
Second:
I have a seasoned investor friend who often says, "Trading is one of the most sophisticated suicidal methods".
When you do day-trading your odds of gaining and losing are evenly poised, leaving apart the money you have to make up for brokerage and taxes. When a person comes with an intention of trading, his chance of winning is 0.50 (50%). He can either go broke or get the money enabling him to go ahead to the next day. His chance of gaining on the end of second day is 0.50 (for the previous day) X 0.50 (for second day) = 0.25. His chance of winning is reduced to 25% and to 12.5% on the third day. This has been proven by history. People who go great money in stocks were not addicted traders.
You did not need to beat the index by a substantial margin. But, had you stayed invested in sensex companies, your money would have grown decently during the past 3 years, which has been the best time for Indian stock market. Unless you are a broker, you don't need to advocate trading.
And...As our motive in operating stock market is to make money, seeking day-trading tips is nothing but a quick solution to the question 'how to make money in a day?' I am completely convinced that any person who has an answer for this question won't need to make money by selling his 'tips'.
Aa such, I don't detest trading. But, want to be sure on what I am trading. Otherwise better prefer flying to Los Vegas to try my luck.
Regret if your question did not get answer. I also believe that no other member of this group am not knows any such 'tipsters' who can facilitate us make money.
And finally, you are lucky enough to learn things at the expense of three years and 2.5 lakhs. There are people who paid much more for some trivial lessons.
Friday, August 11, 2006
Interview of a Sri Lankan industrialist
This is an interview of a businessman in Sri Lanka that featured in today’s (11-Aug-06) Business Line daily.
It is interesting to see how this businessmen of this island nation look at India how our outsourcing sector looks at United States. Even among conflicts they are growing at a healthy rate. One should not be surprised to if service sector job slowly move from India to low cost countries like Sri Lanka. May be we should also encourage building up huge tourism industry.
Leaving other matters in the discussion apart, I always wonder why both politicians and businessmen of this island tried to constantly persuade Indian government not to go ahead with Sedhu project.
It is interesting to see how this businessmen of this island nation look at India how our outsourcing sector looks at United States. Even among conflicts they are growing at a healthy rate. One should not be surprised to if service sector job slowly move from India to low cost countries like Sri Lanka. May be we should also encourage building up huge tourism industry.
Leaving other matters in the discussion apart, I always wonder why both politicians and businessmen of this island tried to constantly persuade Indian government not to go ahead with Sedhu project.
Thursday, July 27, 2006
GMR IPO..
- by Kuppusamy Chellamuthu
No activity off late in this as it was in the market for retail investors.
Drying volumes, beaten down prices, no cash to buy… none of them was surprise & new. Most hit was the primary market where quite a few companies pulled back their IPO plans and rest that dared got poor response.
Past few days sentiments apparently getting back. However every adverse reason that prevailed a month back still remains intact despite the fact that some of quality stock s available at comfortable valuation. I would love to see the market at the same levels or even further slide. That would give me a long stretch of consolidation period with few more paydays ahead. If buying stock at cheap valuation is the motto of investing, we have every reason to rejoice bear domination. But a bear can last anywhere between a minute to couple of centuries. DJIA was at the same levels in 1964 & 1981, 17 long years. Japanese index fell all the way from 30 thousands points to 4 digits.
You rarely know whether your date is expensive or not. A fancy girl can make a fatty credit-card bill for you to pay for months. As a matter of fact, it is rarer to predict the markets than a fancy girl.
Infrastructure major GMR ventures to tap the primary market, though with a reduced price band. It is learnt that George Soros' Quantum fund and ICICI ventures have taken sizable stake at the price higher than the propose price band. That does not assure anything at the outset for an investor. If this issue gets good response especially from retail segment, it might probably revive primary market sentiment. That should be a good news because that is the only money injected into companies' balance sheet and projects, indirectly fuelling economy. Secondary Markey irrespective of its rise & fall does not have direct influence on economy, except causing fluctuating income for brokers and traders.
GMR is the major stake holder in Hyderabad international airport and modernizing Delhi airport. Interestingly it own hundreds of acres of land around these 2 airports. Company is also into other infrastructure and power generation activities. That makes one interesting. However looking at Fy-2006 earnings its IPO price is at mammoth valuation of around 90 times. Leave the bal to the keeper & wait???
No activity off late in this as it was in the market for retail investors.
Drying volumes, beaten down prices, no cash to buy… none of them was surprise & new. Most hit was the primary market where quite a few companies pulled back their IPO plans and rest that dared got poor response.
Past few days sentiments apparently getting back. However every adverse reason that prevailed a month back still remains intact despite the fact that some of quality stock s available at comfortable valuation. I would love to see the market at the same levels or even further slide. That would give me a long stretch of consolidation period with few more paydays ahead. If buying stock at cheap valuation is the motto of investing, we have every reason to rejoice bear domination. But a bear can last anywhere between a minute to couple of centuries. DJIA was at the same levels in 1964 & 1981, 17 long years. Japanese index fell all the way from 30 thousands points to 4 digits.
You rarely know whether your date is expensive or not. A fancy girl can make a fatty credit-card bill for you to pay for months. As a matter of fact, it is rarer to predict the markets than a fancy girl.
Infrastructure major GMR ventures to tap the primary market, though with a reduced price band. It is learnt that George Soros' Quantum fund and ICICI ventures have taken sizable stake at the price higher than the propose price band. That does not assure anything at the outset for an investor. If this issue gets good response especially from retail segment, it might probably revive primary market sentiment. That should be a good news because that is the only money injected into companies' balance sheet and projects, indirectly fuelling economy. Secondary Markey irrespective of its rise & fall does not have direct influence on economy, except causing fluctuating income for brokers and traders.
GMR is the major stake holder in Hyderabad international airport and modernizing Delhi airport. Interestingly it own hundreds of acres of land around these 2 airports. Company is also into other infrastructure and power generation activities. That makes one interesting. However looking at Fy-2006 earnings its IPO price is at mammoth valuation of around 90 times. Leave the bal to the keeper & wait???
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