Ride on our Dreams, Ride to the Moon!
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
Long have we suffered
Too long have we been ignored
Poisoning, self-immolation, drowning
suicides and murders, you name it
Been there, seen that.
Promised the green revolution,
Only to be subsidized in to impoverishment
Herded like cattle in to morchas and stampedes
Guinea pigs for MNCs testing their wares
Are we gullible illiterates? Followers in herd-mentality?
Mass sacrifices at the altar of vote politics?
'Beneficiaries' of many a policy
that enrich the politicians and businesses
who pander our poverty among the powers that be?
Have we been reduced in to dated statistics
for trend analysis in annual reports?
Are we guinea pigs in life insurance scams?
Organ donors for foreigners wealthy?
Insipid, stale news unfit for Headlines Today
displaced in the papers by district sports?
Trashed in oblivion, never picked again?
Now that the lands are in lien,
and we have drowned in misery
Shall we change vocations,
break ships that moved foodgrains?
Move in to town to cook and clean
live in the jhopdi by your high-rise
for a few grains of rationed, export-quality wheat?
Suppressed seemingly in to eternal slavery,
what hope should we hold out now
for our family, our children, their future?
Elections are drawing near,
Perhaps our voices seem a tad louder?
Shall we seek the fruits of democracy?
Equal opportunity, equal access, constitutional rights,
Why, even mere human rights?
Schools for our children, water to drink
A place to call home, remunerative farming?
Or, as they beckon us, shall we
make a beeline to the party leader's?
Perhaps lady luck will smile this time
in order of torture, if not penury?
Will the nuke deal change our lot?
Will color cellphones hasten aid?
Will intra-day hedging in commodity futures
bring my child a meal a day?
Will the PSU IPOs pull us out?
Will policy reform do us good?
Should we buy a handful BT cotton seed
with 'trickle down' disaster relief?
Sell our lands away for an SEZ?
After all, the Green Revolution has passed us by
(Yes Sir, green it was very!)
Shall we now await the IT revolution?
Beep a number come loan-default time?
Is this the nation Gandhi died for?
Where Mother Teresa led by example?
Are we worthy of Ambedkar, Amte and Bhave?
Is this the India they envisioned?
As we sleep in the open and gaze at the sky
The stars seem dimmer and farther away
They may steal our lands and our home
but our dreams, they shall always be
May our dreams be the wind beneath your wings.
Ride on our dreams, Ride to the moon
And when you are there, don't look back,
Go on, go for the stars!
Saturday, October 27, 2007
Monday, October 22, 2007
IPOs, Lies and Videotape (Yes, Lies, All Lies!)
IPOs, Lies and Videotape
(Yes, Lies, All Lies!)
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
Ever so often, the media draws our attention to the zooming stock markets and what the sky-high PE multiples portend for valuation and future course of the market. In developed economies, the stock market is so large and so mature, that practically no IPO, no matter what size, dents the market. The story is very different in emerging economies like China and India where large state-run enterprises, fed with government protection and subsidy, are privatised by offering them in IPOs to the stock market. The relative size of these IPOs in relation to the market capitalization, though small, is significant enough to induce market volatility as investors pull out of their existing holdings to subscribe.
In developed nations, these decisions are unnecessary, even illegal. Entrepreneurs take their enterprise to the market at a time they judge convenient or optimal. That brings to the fore many questions: What the IPO size should be (ie, which enterprise to offer and what percent of the stockholding), when it should be offered; whether it should be graded and what the price band should be. And even presuming the market regulator works independently of the ruling party in the center (yup, have a good laugh!), in what order should the regulator permit these IPOs to open in the market? At any given time, there are 50-odd companies that have filed their prospectus with the regulator. Are these issues timed according to quality? Quality as certified by the grading authority, a certification that is presently entirely optional, giving rise to the signaling and lemons problem economists talk about. (If my IPO is truly a good prospect, why would I have it certified? Then again, I could signal to investors by having it certified. And to the contrary, certification may enhance my image if my prospects aren't that good. After all, I can arrange four quarters of PAT rising at 40% from a quarter with loss!) Do the regulators yield with regard to the timing if the pricing is closer to the government's wishes? (After all, large listing gains are beneficial to FIIs and the stupid small investor who is also a voter!) Wouldn't it be more transparent and informative, if these entrepreneurs competed with each other to bid for IPO slots?
Now that's an idea worth exploring. Entrepreneurs who realize that timing is as much a decision variable as pricing and certification will bid different amounts for their IPO slot depending on the condition of the market, their prospects, their needs and the (perceived) number of competitors. The bidding will ensure that those firms that wish to 'strike the iron when it is hot', perhaps for want of funds to expand, (or reasons not that abstruse) will bid high for a slot. High-priced IPOs will seek the market when the PE is inflated. Bargain IPOs will be deferred to tepid markets. The market PE may not zoom higher than do the realty stocks on BSE. The ruling party, FIIs and IPO funds may no longer be able to play hokey with your fortunes at the market. And that would do the long term investor a lot of good.
Then again, don't read much in to this column. It may have already been 'purchased' away! These days, even lies command a price!!!!!
(Yes, Lies, All Lies!)
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
Ever so often, the media draws our attention to the zooming stock markets and what the sky-high PE multiples portend for valuation and future course of the market. In developed economies, the stock market is so large and so mature, that practically no IPO, no matter what size, dents the market. The story is very different in emerging economies like China and India where large state-run enterprises, fed with government protection and subsidy, are privatised by offering them in IPOs to the stock market. The relative size of these IPOs in relation to the market capitalization, though small, is significant enough to induce market volatility as investors pull out of their existing holdings to subscribe.
In developed nations, these decisions are unnecessary, even illegal. Entrepreneurs take their enterprise to the market at a time they judge convenient or optimal. That brings to the fore many questions: What the IPO size should be (ie, which enterprise to offer and what percent of the stockholding), when it should be offered; whether it should be graded and what the price band should be. And even presuming the market regulator works independently of the ruling party in the center (yup, have a good laugh!), in what order should the regulator permit these IPOs to open in the market? At any given time, there are 50-odd companies that have filed their prospectus with the regulator. Are these issues timed according to quality? Quality as certified by the grading authority, a certification that is presently entirely optional, giving rise to the signaling and lemons problem economists talk about. (If my IPO is truly a good prospect, why would I have it certified? Then again, I could signal to investors by having it certified. And to the contrary, certification may enhance my image if my prospects aren't that good. After all, I can arrange four quarters of PAT rising at 40% from a quarter with loss!) Do the regulators yield with regard to the timing if the pricing is closer to the government's wishes? (After all, large listing gains are beneficial to FIIs and the stupid small investor who is also a voter!) Wouldn't it be more transparent and informative, if these entrepreneurs competed with each other to bid for IPO slots?
Now that's an idea worth exploring. Entrepreneurs who realize that timing is as much a decision variable as pricing and certification will bid different amounts for their IPO slot depending on the condition of the market, their prospects, their needs and the (perceived) number of competitors. The bidding will ensure that those firms that wish to 'strike the iron when it is hot', perhaps for want of funds to expand, (or reasons not that abstruse) will bid high for a slot. High-priced IPOs will seek the market when the PE is inflated. Bargain IPOs will be deferred to tepid markets. The market PE may not zoom higher than do the realty stocks on BSE. The ruling party, FIIs and IPO funds may no longer be able to play hokey with your fortunes at the market. And that would do the long term investor a lot of good.
Then again, don't read much in to this column. It may have already been 'purchased' away! These days, even lies command a price!!!!!
Saturday, October 20, 2007
Auto Loans! Dime a Thousand Dollars!
Auto Loans! Dime a Thousand Dollars!
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
7 years after returning to India, I am still getting used to the way in which policies are set in this country. Recently, I read that the Honorable FM exhorted PSU banks to find ways to lower the interest rate on loans. Specifically, he sought lower interest rates to stimulate the auto sector growing at less than the 'target' rate. That got my old moth-balled brain whirring. Isn't that what the doctor ordered for our beleaguered transport sector? Apparently, what we need is not investment in good roads, road-widening and flyovers, more buses, an MRTS or a better traffic management, but more vehicles on the road. More vehicles for urban traffic that moves at a snail's pace negotiating congestion and snarls. More cars, more smoke-belching RAVs, more vans and more trucks on narrow roads getting narrower by the day. Wonder what motivated the FM's request. Does the Government's IO model reveal new vehicle purchases as the best means to increase the GDP? Perhaps it the best means to couch the increase in CO2 emissions required to accept a baseline emissions in a global warming treaty? If so, the minister figures it right that reducing the interest rate charged by banks is the appropriate policy prescription. After all, the upfront fixed cost is the largest obstacle to purchasing vehicles. And if banks can lower the interest rate on loans to an extent that large, smoke-belching vehicles are affordable even to the clerk scrutinizing the loan document, then that must herald good times in the stock market to those invested in the auto and the steel sector. Right?
Wrong. Aren't we doing exactly the opposite of what we should be? Shouldn't our focus be on infrastructure first? Shouldn't infrastructure projects qualify for the lowest interest rate? And even we do wish to lend money for vehicle purchases, shouldn't we price in the externalities caused by vehicles, if not in 'time of day' road pricing and emissions taxes, then in loans rates? Shouldn't loan rates vary with the emissions performance or the size (and fuel) of the vehicle? Personally, and I suspect many among us, would either defer the purchase or buy a smaller (cleaner) vehicle if the loan rate were 20% instead of 10%. And banks would have more money to divert to transport infrastructure projects at lower interest rates. Wider roads, flyovers and an MRTS. Faster traffic and cleaner air. Now that make a big difference to urban congestion and air quality.
And, I suspect, to the GDP as well, if only years later.
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
7 years after returning to India, I am still getting used to the way in which policies are set in this country. Recently, I read that the Honorable FM exhorted PSU banks to find ways to lower the interest rate on loans. Specifically, he sought lower interest rates to stimulate the auto sector growing at less than the 'target' rate. That got my old moth-balled brain whirring. Isn't that what the doctor ordered for our beleaguered transport sector? Apparently, what we need is not investment in good roads, road-widening and flyovers, more buses, an MRTS or a better traffic management, but more vehicles on the road. More vehicles for urban traffic that moves at a snail's pace negotiating congestion and snarls. More cars, more smoke-belching RAVs, more vans and more trucks on narrow roads getting narrower by the day. Wonder what motivated the FM's request. Does the Government's IO model reveal new vehicle purchases as the best means to increase the GDP? Perhaps it the best means to couch the increase in CO2 emissions required to accept a baseline emissions in a global warming treaty? If so, the minister figures it right that reducing the interest rate charged by banks is the appropriate policy prescription. After all, the upfront fixed cost is the largest obstacle to purchasing vehicles. And if banks can lower the interest rate on loans to an extent that large, smoke-belching vehicles are affordable even to the clerk scrutinizing the loan document, then that must herald good times in the stock market to those invested in the auto and the steel sector. Right?
Wrong. Aren't we doing exactly the opposite of what we should be? Shouldn't our focus be on infrastructure first? Shouldn't infrastructure projects qualify for the lowest interest rate? And even we do wish to lend money for vehicle purchases, shouldn't we price in the externalities caused by vehicles, if not in 'time of day' road pricing and emissions taxes, then in loans rates? Shouldn't loan rates vary with the emissions performance or the size (and fuel) of the vehicle? Personally, and I suspect many among us, would either defer the purchase or buy a smaller (cleaner) vehicle if the loan rate were 20% instead of 10%. And banks would have more money to divert to transport infrastructure projects at lower interest rates. Wider roads, flyovers and an MRTS. Faster traffic and cleaner air. Now that make a big difference to urban congestion and air quality.
And, I suspect, to the GDP as well, if only years later.
Thursday, October 18, 2007
Imagine
Imagine
http://myprofile.cos.com/gangar
Imagine a tussle
between haves and the have-nots
the government and the industry
between man and nature
Imagine global warming
add to it some rhetoric
some deception, some demagoguery
'science', 'policy', and yes, politics
and what do you have? Hmm Hmmmmmmmmm
Why do I think WW-III
was almost a better choice?!
Imagine a conspiracy
so deep, so high;
a conspiracy hatched decades ago
a conspiracy to deny
Imagine MNCs of yesterday
leveraging their hold on lawmakers 'from the outside'
buying in to inventions of tomorrow
only to suppress them for technologies past,
holding deprived nations to environmental ransom
So what if it costs the earth
The earth is but a place to despoil!
Whoa! Ho! Ho! Hooooo oo!
Imagine a nexus
a nexus between religion, industry and government
(don't you forget the mafia!)
a nexus that enslaves the common man
Imagine slavery reintroduced
slavery hand-in-glove with discrimination,
slavery in schooling, in recruitment
and what do you have, Ow Ow Owww!
You may say we are a free people
but are we really?
Imagine large FIIs joining hands
with P-notes, derivatives and options
manipulating markets
playing a zero-sum game on mutual funds
even as they make their millions
Imagine a trap,
to net all you whiz-kids
switching from equity to bonds
in just the nick of time
Imagine controlling the IPO pipeline,
timing issues to FII interests
Imagine exchange rate manipulation
and wonder how the rich got richer over the poor
even under a commie government
Hey Heyyyyyyy!
Imagine John Lennon
revealing plots in his ballads
getting shot in the open
Imagine what his last words would have been
Imagine his imagination
and sleep over it?
...
...
Shout, Shout........C'mon, I'm talking to you!
http://myprofile.cos.com/gangar
Imagine a tussle
between haves and the have-nots
the government and the industry
between man and nature
Imagine global warming
add to it some rhetoric
some deception, some demagoguery
'science', 'policy', and yes, politics
and what do you have? Hmm Hmmmmmmmmm
Why do I think WW-III
was almost a better choice?!
Imagine a conspiracy
so deep, so high;
a conspiracy hatched decades ago
a conspiracy to deny
Imagine MNCs of yesterday
leveraging their hold on lawmakers 'from the outside'
buying in to inventions of tomorrow
only to suppress them for technologies past,
holding deprived nations to environmental ransom
So what if it costs the earth
The earth is but a place to despoil!
Whoa! Ho! Ho! Hooooo oo!
Imagine a nexus
a nexus between religion, industry and government
(don't you forget the mafia!)
a nexus that enslaves the common man
Imagine slavery reintroduced
slavery hand-in-glove with discrimination,
slavery in schooling, in recruitment
and what do you have, Ow Ow Owww!
You may say we are a free people
but are we really?
Imagine large FIIs joining hands
with P-notes, derivatives and options
manipulating markets
playing a zero-sum game on mutual funds
even as they make their millions
Imagine a trap,
to net all you whiz-kids
switching from equity to bonds
in just the nick of time
Imagine controlling the IPO pipeline,
timing issues to FII interests
Imagine exchange rate manipulation
and wonder how the rich got richer over the poor
even under a commie government
Hey Heyyyyyyy!
Imagine John Lennon
revealing plots in his ballads
getting shot in the open
Imagine what his last words would have been
Imagine his imagination
and sleep over it?
...
...
Shout, Shout........C'mon, I'm talking to you!
Wednesday, October 3, 2007
Rate (C/G)ut the Earth!
Rate (C/G)ut the Earth!
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
I am no macro-economist, at least not with the credentials of Greenspan, Bernanke or Dr. Reddy. But I do know that lower inter-bank interest rate set by the Fed cascades down as lower interest rates on home loans and credit card loans on one hand, and to easier credit for businesses on the other. A surprise decision to lower interest rate ultimately means more real disposable income in the hands of the working class and induces higher consumption which in turn spurs production and investment, not to mention a spurt in stock markets globally. Not surprisingly, the boost in consumer confidence and higher economic activity augurs well for the incumbent party that seeks to 'soft-launch' the economy in its campaign to retain power. So what could be wrong with this tried and tested strategy? Nothing, if one did not care beyond the boundaries of one's nation and this generation. But in today's global economy, a move toward a lower interest rate regime by a leader of the industrialized nations, serves as a signal and sets a precedent that is followed by other industrialized and developing nations. The start of a lower interest rate cycle in the US sparks off rate cuts across the globe and turns, what is a purely domestic, even a political, ploy in to a global meltdown of interest rates. And with that restarts the unchecked growth in the chugging economies of South-East Asia.
Now that would not be such a ghastly proposition if the increase in economic activity were environmentally benign. But isn't that the sore spot? Living as we do in 2007, with a century of unchecked carbon emissions behind us and a veritable deluge of emissions on the horizon, even the most trivial increase in global economic activity, sets off alarm bells among global warming experts and environmental policy planners searching desperately for low-cost emissions reductions. In a world where 'luxury and lifestyle' is the mantra of the day, reductions in the cost of borrowing fuel a consumer boom that exacerbates everything from plastic and water pollution to global warming. Makes you wonder if that rate cut was at all warranted. After all, and if you ask me, the sub-prime crisis was carefully orchestrated to provide cover for underground 'just' and 'nefarious' purposes like the Iraq war, energy security and the Cheney Campaign Fund. And I do not buy in to the 'risk of recession' argument that has been bandied about as another reason for the rate cut (Besides, what is the logic behind handing out interest rate cuts to an indebted nation so it may consume and splurge more to 'support' the global economy?). If the FRB governors were at all cognizant of their actions on global economic activity and its environmental repercussions, they would have chosen to raise interest rates, not lower them. It is unbecoming of fed governors, whose decisions alter the course of the global economy and environment, to play in to the political game that has been designed to ensure the election of a Republican President. It will be another 5 to 10 years before we realize the full impact of the rate cut decision on the global environment, by which time it would have already been too late for anything but the most costly and drastic measures, which, predictably, we would be even less likely to undertake. Perhaps the rate cut would then have achieved its purpose? Scorched earth policy. Pray, what is it?
Did you know HSBC has come out with a 'Climate Change Index' to facilitate indexing arbitraging and benchmarking stocks that would be benefited from climate change? Now you may hedge your Carbon Emission Reduction credits, or for that matter, 3-month pork belly futures against 20-year options on climate change stocks. Short-term capital gains attract a 10% tax.
Ganga Prasad G. Rao
http://myprofile.cos.com/gangar
I am no macro-economist, at least not with the credentials of Greenspan, Bernanke or Dr. Reddy. But I do know that lower inter-bank interest rate set by the Fed cascades down as lower interest rates on home loans and credit card loans on one hand, and to easier credit for businesses on the other. A surprise decision to lower interest rate ultimately means more real disposable income in the hands of the working class and induces higher consumption which in turn spurs production and investment, not to mention a spurt in stock markets globally. Not surprisingly, the boost in consumer confidence and higher economic activity augurs well for the incumbent party that seeks to 'soft-launch' the economy in its campaign to retain power. So what could be wrong with this tried and tested strategy? Nothing, if one did not care beyond the boundaries of one's nation and this generation. But in today's global economy, a move toward a lower interest rate regime by a leader of the industrialized nations, serves as a signal and sets a precedent that is followed by other industrialized and developing nations. The start of a lower interest rate cycle in the US sparks off rate cuts across the globe and turns, what is a purely domestic, even a political, ploy in to a global meltdown of interest rates. And with that restarts the unchecked growth in the chugging economies of South-East Asia.
Now that would not be such a ghastly proposition if the increase in economic activity were environmentally benign. But isn't that the sore spot? Living as we do in 2007, with a century of unchecked carbon emissions behind us and a veritable deluge of emissions on the horizon, even the most trivial increase in global economic activity, sets off alarm bells among global warming experts and environmental policy planners searching desperately for low-cost emissions reductions. In a world where 'luxury and lifestyle' is the mantra of the day, reductions in the cost of borrowing fuel a consumer boom that exacerbates everything from plastic and water pollution to global warming. Makes you wonder if that rate cut was at all warranted. After all, and if you ask me, the sub-prime crisis was carefully orchestrated to provide cover for underground 'just' and 'nefarious' purposes like the Iraq war, energy security and the Cheney Campaign Fund. And I do not buy in to the 'risk of recession' argument that has been bandied about as another reason for the rate cut (Besides, what is the logic behind handing out interest rate cuts to an indebted nation so it may consume and splurge more to 'support' the global economy?). If the FRB governors were at all cognizant of their actions on global economic activity and its environmental repercussions, they would have chosen to raise interest rates, not lower them. It is unbecoming of fed governors, whose decisions alter the course of the global economy and environment, to play in to the political game that has been designed to ensure the election of a Republican President. It will be another 5 to 10 years before we realize the full impact of the rate cut decision on the global environment, by which time it would have already been too late for anything but the most costly and drastic measures, which, predictably, we would be even less likely to undertake. Perhaps the rate cut would then have achieved its purpose? Scorched earth policy. Pray, what is it?
Did you know HSBC has come out with a 'Climate Change Index' to facilitate indexing arbitraging and benchmarking stocks that would be benefited from climate change? Now you may hedge your Carbon Emission Reduction credits, or for that matter, 3-month pork belly futures against 20-year options on climate change stocks. Short-term capital gains attract a 10% tax.
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