Cramer VS NOBEL

Yesterday Mr. Mad money spent 5 minutes blasting the Nobel laureates such as Paul Krugman and other PHDs to stop fear mongering. To stop spreading fear in the people about weak economy. He feels all these PHDs should should shut up and listen to what he has to say. What he says is really is a bull byproduct than the bull rally he keeps talking about. He is predicting housing recovery by 30-Jun and that US recovery will be V shaped.

30-Jun is just about 6 weeks away. We'll see. The April housing report though does not seem very rosy.

Nano Bookings ~200,000

This article in Business Standard confirms that Nano is not as great a success as people had expected. Some analysts expected more than a million bookings. But this is not to be. A Car is not just a way of commuting. Its also a social expression, Status Symbol and small cars are going out of fashion (read affordability going up is pushing out small cars).

About a year ago, I had expressed my skepticism about Nano's success. India is not as poor as Ratan Tata would have you believe. With second hand cars market booming and all kinds of cars available on EMI almost immediately, why would someone want to wait a year for a car?

To measure the true success we need to wait till people start driving the first cars rolling out of the production lines. If these cars face any problems that get published in the media and catch public fancy, we may see cancellations of existing bookings. I say we give it another year and see how it goes.

Housing Sector In India

DLF posted their results for the 4th quarter and the entire year.

Is revenues plunging by 97% is not a catastrophe? House buyers have just clammed down. Comparing it to US, where the dust still hasn't settled, the house sales are actually flat or marginally lower over last year.

I think the only reason India is still standing is because housing and mortgage industry in India is still small compared to other parts of the economy and so not so badly impacted by this precipitous fall. Ppl are much less leveraged and they can hold on to their houses for ever rather than sell at a lower or default. This only makes the housing mkt in India very illiquid in times of downturn. Also, this means that it would take a long time for this housing crises to correct.

Sidebar: How is DLF still making money with 3% of its revenue? Unless all its costs are variable costs, this just does not seem reasonable. What about interest payments to banks and other depreciation? The sales came doen from 1600 crore to 56 crore and yet they made 30 crore profit. I accept I do not get the real estate business.

An Interim World

Interesting Article this one. Freddie Mac Interim CEO thanks ex-CEO to take on the role of Interim CFO as the present Interim CFO committed suicide.

So much so for govt run organizations. After all govt is filling in as Interim Caretaker till Freddie can wriggle out of Interim Crisis ;)

Books This Year

Disclaimer: I'm not a voracious reader.
I generally read about 3-4 books a year. This year has been slow as usual. I started with White Tiger. I loved the brutal, honest, vivid and sometimes repulsive description of life in "The Darkness". Anyone who has journeyed across India in a train can recall how apt the descriptions were. The character of Balram Halwai was too gray and almost impossible to judge. As Oscar Wilde once said, "Every Saint has a past and every sinnner has a future." In the end I'm unable to feel happy for him though he comes out of the predicament on top. I believe Balram had something in common with the tycoons, the dictators and hardened criminals. I call it self centeredness. Anyhow, the book is a gem.

The second one I read was Amitav Ghosh's Hungry tide. I thought there was too much prose in the book without adequate meat. It meandered like the river itself and never really got my interest. I liked Piya's character. I admire women with resolve and conviction. But then the author spent too much time showing off his knowledge of geography, aquatic life in the Ganga basin and such, impeding the flow of the book. I would not recommend it.

Satyam, A Happy Ending

And the winner is... Tech Mahindra! Good job Govt of India! There are are purists that say that govt. should not meddle with business of business. Yet, I could not think of a more expeditious way of handling satyam sell off.

I think responsible governance means knowing when to step in and when to step out. A few months back I read an article in NY times about YV Reddy, our ex- RBI Gov. The columnist went on extolling his work in keeping a check on the banks and regulating their investments in the realty sector. YV Reddy, tried the best he could to rein in the real estate bubble. He disallowed ECB, asked banks to raise risk weighting for real estate investments, limited the exposure banks could have to real estate and raised interest rates. Not that it completely deflated the housing bubble, but it did help in moderating it.

Regulation could be good and bad. Only history can tell if the decisions taken today had the desired results. Obama is making some very bold moves. These could help restore confidence in the US financial sector and US economy in general or plunge it into the abyss of debt for generations. Is he doing the right thing? Lets wait a few years till History Channel brings back the Credit Crisis of 2008 to your idiot box on prime time.

Road to Recovery

Starting 9-Mar-09 when Vikram Pandit, the CEO of Citi sent out the internal memo stating Citi made money in Jan and Feb, Dow has rallied from 6500 to almost 8000. Same with markets world wide. Indian mkt has bounced back from 8K to 10K.

In fact I have started seeing some mkt reports stating the recovery is just round the corner, sometime mid year, and it would be a strong recovery.

I somehow do not think so. I think, this is a false start. The malice is so deep and so wide spread, its going to be at least a year before recovery kicks in.

So I'm predicting that the stock markets will fall again. I've been wrong on numerous occasions. Lets see if this is one another one.

China raising concerns about US Debt

Couple of weeks back Bernanke said he is going to buy back 1.2T worth of long term securities, to inject more liquidity into the market. Where is the Fed going to find $1.2T? What it essentially meant was that US is going to print 1.2T worth of money to dole itself out of the hole.

Now US is not like Zimbabwe which prints money at will. The reason is, most of the countries around the world use USD as their foreign currency reserves. China in particular holds more than 1T dollars worth of US treasury bonds. Its now feeling cheated as US uses its $ mint to work its way out of the mess. This would result in a sharp decline in the value of USD against other world currencies and China will be hurt as its parked its hard earned money in USD.

The problem though is, there is no other alternate currency that can substitute USD. Yen and Euro are worse off than USD and perhaps do not have the scale to become an alternative to USD.

There is some talk about coming up with some other international currency / basket of currencies as an alternative to USD. But in the mean while, if China / Japan lose their confidence in USD, the US economy is going to get into even bigger trouble.

Kindle the Devine Intervention

I've never been an avid reader. My wife though over compensates for me. She went to India last oct and has been missing the public libraries and the joy of reading. She could finish 6 books a week and still have time on her hands. All that changed once she moved back. We do have Crossroads right across from our house in Mumbai and she goes there every now and then to buy books. Yet she maintains that the collection is not as wide as she wants.

When I visited her in Feb, I gifted her an ipod touch and tried to show her eReader/Stanza (ebook readers for ipod touch) but could not get her interested in reading on an electronic device. A few weeks later, "The curious case of Benjamin Button" came to PVR and she loved the movie. She wanted to read the book and fortunately it was available under free books on Stanza. I showed how to download it and slowly her resistance dissolved.

Last week I read that Kindle is now available for iphone and itouch. Yesterday, we sat together (on skype) to set it up. She had seen seen revolutionary road last week and loved it so much that she badly wanted to read the book. Crossroads did not have it and it was available as ebook on Amazon for $9. It took us all but 10 minutes to set up Kindle, buy the book and download it on her kindle. By the time we were done she was as excited as our 4 years old when watching Chota Bheem.

Technology is shaping our lives in so many ways. This is just one of the things but it makes her feel she need not be in us to be able to enjoy the best books. I'm just happy to see her happy. If I could, I'd wind up everything and go back home tomorrow.

Gulaal Music

Haven't really seen the movie yet but heard the songs. Never heard such dark songs in my life. I could have bought the CD but then, some of the songs are not for casual listening at all.

Aarambh is awe inspiring. In contemporary movies, I do not recollect such a song being penned down. I loved Omkara song as it was like an Aalha and Gulzaar did a good job of describing Omkara as a warlord and Sukhvinder did a great job rendering it. Piyush Mishra seems to be a find. I'd say its the most inspirational war cry I've ever heard. Reminded me of Dinkar. I once owned Rashmirathi (his Kaayva on Karna) and this comes close. Real close.

I'm eagerly awaiting DVD release of the movie. Want to watch it.

Loved Dev-D

I saw Dev-D in the theater and loved it. Its in the same class as Maqbool and Omkara. Anurag Kashyap is one of the most audacious directors of our times(Vishal Bharadwaj is another). Paro's depiction is so unconventional that it just blew me away. The scene where she comes to his house and cleans it were one of the most poignant moments of the film. The songs are catchy. Emotional Atyachar is cool.

It was so refreshing to watch a contemporary take on a classic. The end, though a little filmy, did not seem unrealistic as most ppl say. Then perhaps I'm an optimist...

Looking fwd to view Gulaal. Reviews seem to be good.

US vs Japan

Japan had a huge foreign currency reserve when it plunged into recession in 1990. It kept throwing the reserves at the economy in the hope to revive it and yet did not succeed.

US on the other hand has a huge credit line with the rest of the world. It does not have much reserves to talk about but it can borrow from the entire world to revive its economy till? Till the world no longer believes its worth losing their hard earned money on someone who longer has the same credit worthiness as it once had and a bigger debt than it can service.

Give US another 4 years, by the time Obama completes his 4 years US will be in a worse mess than its today.

Mumbai Carnage

As I was flipping through the channels I saw CNN streaming about terrorist attack in Mumbai. It took me time to figure out how bad it really was. I do not think Mumbai really recovered from the blasts of 2006. This time however, their audacity seems to have gone up. Instead of planting bombs, these guys actually went on a rampage, shooting indiscriminately and mowed 125 ppl. The terrorists have become more ambitious. They are not happy just killing India's common man, they want international recognition. And boy, did they get it? CNN in US is streaming nothing else but terror in Mumbai for the last 30 hours.

I think the entire intelligence system in India is rotten. Terrorists have been able to strike at will and at any location of their choice, without our intelligence ever knowing anything about it. Be it Jaipur or Bangalore or Delhi or Surat or Ahemedabad. We haven't really been able to crack these cases even afters months of investigation. Something is seriously broken somewhere. The terrorists are ahead of us and they know how to leverage technology better than us.

Its a problem cutting across party lines and administration. We need to make the right investments in upgrading our forces and making our nation more secure.

I wish I could help, if only I knew how.

Will Obama Succeed?

There are so many expectations around the world from President Elect Obama that he may look like the messiah in a 100 years from now. This article in Nytimes collates the hope of the world. It would be a tall order to live upto the hope or hype as you may see it.

I personally think that Obama has just too many Challenges to overcome. Good thing is he is focusing on the economy first. That itself would take most of his initial months, if not years. As for foreign policies, the middle east would give him a fair chance to come through. It all depends on how he balances Isreal and the Arab world.

I think he will not be able to live up to the hype. When McCain talked about lack of track record, he was right. We do not know which way Obama is going to lean. But this certainly is America's best chance to make up to the world. Somehow I don't feel reassured. I want to be wrong on this one. I want him to be the Glue that holds the world together and yet, I'm not so sure.

Real Danger of Deflation

We have been worried sick by rising prices of commodities. It was largely due to movement of money from stock markets to the commodities market. The issue with commodities is that for most things (such as oil and food) the demand is price inelastic. That is world has to live with whatever the Oil costs. The decrease in consumption due to price shock is not very high. Same with food. In the past year a lot of liquidity left stock markets and fled to commodities. All of that is now changing with tightening liquidity. Punters are unwinding their positions and so size of the futures market is shrinking. I've not seen the numbers but I can promise you that the capital in futures mkt has shrunk more than the equities mkt.

This is also causing the prices of underlying commodity itself to crash. Oil has already come down from 147 to 64 in 3 months despite OPEC cutting production. Same will happen to food and other commodities and by this time next year a large part of the world will see deflation. It would be largely on account of high base in 2008, but I do expect prices to go down.

Same will happen to interest rates in India. By end of next year housing demand will pick up due to softening of interest rates.

Rupee is going to Appreciate

Now that the Credit Freeze in US is thawing, tide of Dollars is also going to reverse. I think the reason Dollar went up against all the currencies(except yen for the same reason though) is that US money was invested in all corners of the world. When the Credit Crisis happened, the US investors bolted from these market, dumped everything they had in local investments to convert to Dollars and brought that money over to US.

With the Credit Crisis blowing over, some of this money will find its back to these markets. In January, with the start of new financial year, US investors will start putting their money in various countries including India. Also, the price of Oil is now more reasonable and therefore I would think that the rupee now should appreciate to 45 like levels by Jan-09

Impact of Global Meltdown on China

This could be the biggest challenge for the most populous country in the world. For decades China has been growing by being the world's manufacturing base. Prosperity had kept the dissenters from voicing their thoughts against the communist regime.

All that is now set to change. With the slowdown, will come slower growth(the GDP growth in China for 3rd Quarter is already come down to 9%) and joblessness and with it will come mass unrest putting great strain on the country's political system.

Unless China can generate internal consumption to keep its people engaged and prosperous the political scene could change there in the next 3-4 years. There will be a meltdown in coming years. How long can the govt differ it is to be seen.

What could help is large scale govt spending on Infrastructure projects and welfare schemes. Good news is that with 2 Trillion dollars they have the deep pockets to make it happen. How well they manage it still needs to be seen. One thing is for sure, in this Global Financial Crises, the stakes for China are as high as for US.

HDFC Bank Market Cap Overtakes ICICI Bank

This is incredible. Just goes on to show that Banking is fundamentally a conservative business. If you do not run it that way, you are likely get into trouble sooner or later. Being bigger, more aggressive etc. has come to naught as HDFC bank whizzes by. FYI, I checked these numbers based on closing price of stocks on 22-Oct-08.

I have known a few ex ICICI guys and they pride themselves in being aggressive and mkt share. Thats what has driven them. Mkt share. That obviously has led to placing bad bets. All of these problems with indiscriminate lending and poor credit control is coming back to haunt them now. I think they got lucky last year when they raised money from the market at around Rs. 980. Now the share price is trading less than Rs. 400.

A good lesson on Banking. Be Conservative.

VP Ansari's Speech at AMU

I read this article in Indian Express and was much moved. At a time of partisan and communal politics, this kind of speech is like a breath of fresh air. I completely agree to this thoughts. Education and Equity. Muslim integration with the main stream will hinge on how the new generation embraces education and if requires asserts itself for equitable treatment.

Housing Market Rebound

Housing market is nowhere near its bottom, per this report. The 1 year rent to price ratio(A surrogate for knowing whether mkt is over or under valued) currently stands at 1:22. For last 20 years its been 1:15. Implying if the credit gets as stringent as it was 10 years ago and if there is no oversupply, then perhaps house prices would have to come down by another 25% before we hit the bottom. Given the oversupply and fears of recession, it might go even lower before it stabilizes.

Am I a pessimist, soothsayer or what?