Rahul Deodhar's Blog, page 5

Interesting Readings 20 March 2018

Lemon Tree Hotels: Employees Check Out FasterLemon Tree is ranked 4th Best Company to Work for but attrition rate is 43%. Readers know that I have my gripes about the practice of HR management. I think most of it is glorified payroll processing. Real talent management has not developed at all. HR can be quite strategic asset if used properly.
Ambani's Triple Play Disrupts Cozy ClubActually some of the ideas Jio is using came for Reliance Communications. RCom, before the split, was going along the exact same way only they were going to use fibre-to-home rather than mobile. Also the choice of CDMA was because it was data efficient. This is back in 2002 when iPhone had not changed the world. Mukesh Ambani is a tech geek and understand new tech very well.
Billionaires behaving badly can be a force for good Andy Mukherjee is at it! Well written. Kumar Mangalam Birla just treated India’s new bankruptcy law with utter disdain. But before you dismiss the behaviour, think of the huge favour he’s doing the legal system.
The return of political riskThis crisis is entirely Modi's making. Modi, when he was campaigning, seemed like Narsimha Rao 2.0 - take political risks but fix the economy. Vajpayee's NDA was not ready to take political risks because of their marginal majority. However, Modi's policies are more in line with Gandhi's (Rajiv and Indira) and Manmohan Singh than either Vajpayee or Narsimha Rao. The sooner he aligns himself with the correct economic model the better.International What We Didn't Learn From the Bear Stearns CollapseBarry Ritholtz finds we haven't learnt much.

How vulture capitalists ate Toys 'R' UsLook at the LBO-based financialization of the firm. This shows the difference between investors such as Warren Buffet and these vulture funds. In one of the meeting with investee, I happened to join with analyst from a co-investor firm. First thing this guys says to the entrepreneur "we own you guys". “She’s a Criminal Who Should Be in Prison”: V.C.s Trash Elizabeth Holmes, TheranosThey blame her but she is getting off the hook. Apparently after being charged with defrauding investors out of more than $700 million, Theranos founder and CEO agreed to a $500,000 fine, gave up her voting control of the company, reduced her equity stake significantly, and will not be able to serve as an officer or director of a public company for 10 years. 
The main culprit here is the silicon valley culture. One fellow suggested to me that entrepreneur should get financed by VCs because "they will open the doors" for him. So if his idea was important and he did not need funding no one will open the door? The once you get first round, you have to get second round at 10X the valuation and third round at 10X till you go for IPO exit where everyone gets off and common investors are left holding the bag. Read some issues raised by this episode at Worden Report.
Has China Overtaken the U.S. in Terms of Innovation? Excellent pointer thanks to Barry Ritholtz. Look at this chart, India should focus on improving patenting of innovations already being used. Indians are quite lax about patenting.
Trump prepared to hit China with $60 billion in annual tariffsTrade war with China was always on the cards. In fact tariffs and trade blockade is the way to keep China from damaging US interests. China was becoming increasingly aggressive with US and its allies. A US trade blockade will put the wages and employment of large population at risk. So will China suffer? I think not. Chinese leaders have shown great strategic depth. I believe they are already working on shifting their economy towards a consumption-oriented economy. However, as I said before, I think consumption driven economy is fundamentally incompatible with restrictive political system.

Indian Bank Scams Public sector banks: Buck passing between RBI and Ministry of Finance Debasis Basu asks the right questions whether RBI is powerless or not. And rightly highlights that there is finger of responsibility points to babus from Finance Ministry too. Must read.
Dealing with this air pocketAjay Shah weighs in on how to manage the bank reform. I agree with him in some aspects. Here is the quote:

A comparison with the experiences of 2008 and 2013 is instructive. India was one of the worst-hit emerging markets immediately after the Lehman failure. Each crisis is different, and this one had a combination of stress in mutual funds, real estate companies, Indian borrowers in the overseas money market, ICICI Bank, etc. The key factor that led to good outcomes was the capabilities and teamwork between the Ministry of Finance, RBI and SEBI. The day to day actions mattered, but even more, the market was reassured that there was genuine capability and teamwork.

Objectively speaking, the difficulties faced in India in 2013 were smaller than the storm of 2008. The difference lay in the capabilities and teamwork. In 2013, we came across there as a jittery government coming out with one new action every day, and lacking an understanding of what we are up against. This converted a small shock into an outsized problem.

Cut loans to firms, focus on retail: Govt to smaller banksThis evokes mixed feelings for me. First, Government is coordinating the various banks and their ensuring that at least there is some coordination between smaller-bank-group vs large-banks-group. It is good for efficiency. But retail credit need not be good credit. It has to be good credit first and retail credit is secondary.  
OthersThe sons of well-off black families do not do so well Tyler Cowen highlights an interesting paper. This applies to "sons" not daughters. It is triggering many thoughts as to why it should be so. Read the comments too. Not much discussion can be carried out without sounding racist so be careful.
India is Ignoring the Jurisprudence of Arrest At Its PerilFormer Additional Solicitor General of India Biswajit Bhattacharya has written a good piece. But like a good lawyer fails to explain the other side. Supreme Court, despite being cognizant of this, has granted custody for many politicians. Mind you this is mostly in case of politicians accused of scams. Others like Salman Khan tended to get off easily. The CBI, government officers and corrupt politicians have extremely tight nexus. It is being sought to be broken and it is not going away without a fight.

World War WatchTwo-front war: a debate for more opulent timesMint believes in pragmatism. But two-front war is something we need to prepare for. General Bipin Rawat is right. The points made by Mint are right too.
Raja Mandala: The China reset Excellent article by C Raja Mohan. I think, India must consider the possibility that China is playing the same game US played with Soviets and the game is economic and not related to armed intervention. Luckily, India has US on its side in this game. The Quad is necessary reality. Shinzo Abe was right and timely (probably late). India must accept this reality.
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Interesting Readings 19 March 2018

Political funding in IndiaV Ananthanageswaran points to interview of former election commissioner. It highlights how the proposal for electoral bonds (a salutary proposal at the time) has morphed into something of a joke against corruption. The mechanism for political party finance remains elusive.
Experimentation that fosters fintech innovation in IndiaIndia is considering creating a regulatory Sandbox for fintech. I think Singapore provides a good model, proactive and with feedback loops.
Uber Scam? David Henderson writes about his experience of Uber Driver cancelling and ponders over the economic motivations.

World War Watch
Govt moves on integrated theatre commands; amends rules to bring three forces under single leadershipInteresting development. Was the need of the hour.
F-16 enables India to be world’s largest fighter aircraft ecosystem: Lockheed MartinLockheed Martin is trying to sell F16s to India. Offering is unique. But F16 still has higher operational cost than Gripen and likes. I would rather have a Gripen aircraft with same deal as F16. Modern air warfare will most likely involve big-team strategies beyond visual range. Gripen can also be modified to carry Indian missile systems.

 Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Interesting Readings 16 March 2018

BJP suffers electoral jolt in Uttar Pradesh and BiharBJP is becoming arrogant. The problem is people realise what reforms are critical. Unfortunately Modi has gone silent on reform and development. He needs to communicate and guide the national sentiment. Further, 80% of BJP is like all other political parties - goons, thugs and fringe elements. They need to be disciplined. BJP is also suffering from prolonged and relentless campaign by the media. Media is wearing BJP down. In the time when prime minister (the main icon of BJP) is not speaking on reform and process government is using, it has become one sided. The institutions too are waging a war against reforms - banks and telcos are relentless in their Aadhar marketing. To make it worse they are threatening with dire consequences causing pain - locking of bank accounts, mobile phones etc. Can the BJP not reign them in?

Made-in-India 160 km per hour train to run from June Suresh Prabhu's efforts are paying dividends. This is the beginning of improvement in Railways. 

A day after Patel’s plaint, finmin points to power regulator enjoys
I don't understand why they have to fight in public. Why can't the RBI and Finmin sit and do a dialogue. I mean even Kim and Trump are talking. This public spats are unwarranted. I was not sure about Jaitley as Finance Minister.
Also Mohammad Shami and his wife should shut up and the press should just ignore them. 
Trade WarsAmerica is not the least protectionist country in the worldThere I have come to first use of Wakanda as an example in Economics.
World War WatchDefence Ministry's major push to make LCA Tejas top priorityHAL production capacity is 6 aircraft per year. The aim is to get 16 aircraft per year production rate. If this is what is priority then I believe we need super duper priority. The aim should be to create about 30 aircraft per year. For next 3 years. As a comparison Lockheed Martin F35 production rate is 17 aircraft per month. It is not totally comparable as there are orders of 3500 F35 pending with Lockheed. But once the Indian capacity is used up for Tejas there will be upgrading and new aircraft etc. HAL's IPO should help proceedings.


OthersThe demonisation of Vladimir PutinMark GB presents a case that Putin is being wrongly demonized. Russian version of Syrian conflict was more accurate than US/Western version. I am also not a fan of US interfering in elections, parties, coups and political assassinations in guise of bringing democracy. 
US has done a great service to the world in second world war. I think the post-war freedom movement was partly result of negotiation by Franklin Roosevelt with the Europeans. That was good. After the World war US entered into a cold-war era which had its issues. Part of US interference in other countries was in light of cold war Soviet financing of the political establishment in other countries. [One can see the parallels with China in this case]. But after the fall of Soviet Russia, US has interfered without reason and merely to further interest of those who lobbied for it. The first war on Iraq was justified but not the second. The mess in Afghanistan was more created by US.   Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Interesting Readings 15 March 2018

No Banking Regulator Can Prevent All Frauds, Says RBI Governor
Urjit Patel, full speech is here. Before reading you might be tempted to count this as a cop out by RBI. However, Urjit Patel raises important issues which merit consideration in overall scheme of Banking Regulation. It is not to blame present government but to highlight the important issues. Most of the points he highlights need careful deliberations which frankly I think are beyond Arun Jaitley. (He may be a good man but mostly misled by his bureaucrats and same goes for Hasmukh Adhia).

All commercial banks in India are regulated by the RBI under the Banking Regulation (BR) Act of 1949. Additionally, all public sector banks are regulated by the Government of India (GoI) under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970; the Bank Nationalisation Act, 1980; and the State Bank of India Act, 1955. Section 51 of the amended BR Act explicitly states which portions of the BR Act apply to the PSBs, most common thread across the omissions being complete removal or emaciation of RBI powers on corporate governance at PSBs:
RBI cannot remove directors and management at PSBs as Section 36AA(1) of the BR Act is not applicable to the PSBs.Section 36ACA(1) of the BR Act that provides for supersession of a Bank Board is also not applicable in the case of PSBs (and regional rural banks or RRBs) as they are not banking companies registered under the Companies Act.Section 10B(6) of the BR Act that provides for removal of the Chairman and Managing Director (MD) of a banking company is also not applicable in the case of PSBs.2RBI cannot force a merger in the case of PSBs as per Section 45 of the BR Act.PSB’s banking activity does not require license from RBI under Section 21 of the BR Act; hence, RBI cannot revoke a license under Section 22(4) of the BR Act as it can in the case of private sector banks.RBI cannot trigger liquidation of PSBs as per Section 39 of the BR Act.Furthermore, in a remarkable exception of sorts, in some cases there is duality of Managing Director and the Chairman – they are the same – implying the MD is primarily answerable only to himself or herself.This legislative reality has in effect led to a deep fissure in the landscape of banking regulatory terrain: a system of dual regulation, by the Finance Ministry in addition to RBI.3 I will now take a few minutes to explain why this fissure or the fault line is bound to lead to tremors such as the most recent fraud.

(...)

In contrast, the market discipline mechanism for public sector banks is appreciably weakercompared to that at private banks. There is implicitly a stronger perceived sovereign guarantee for all creditors of PSBs, and the principal shareholder – the government – has not so far been interested in fundamentally modifying the ownership structure. From an economic standpoint, this weakened market discipline should imply that the government would prefer strongerregulatory discipline of these banks, not weaker. However, as I explained above at length, and perhaps since the original idea behind bank nationalisation was complete government control over credit allocation to the economy, the situation in India is exactly the reverse: RBI’s regulatory powers over PSBs are weakerthan those over the private sector banks.

The owner of our public sector banks – the government –which has provided the IBC, the related ordinances and the bank recapitalisation package to get the churn going, might consider making further, equally important contributions by:
Making banking regulatory powers neutral to bank ownership and leveling the playing field between public sector and private sector banks; and,Informing itself about what do with the public sector banking system going forward as part of optimising over the best use of scarce national fiscal resources.It is an open issue whether centralised government control alone can be effective enough at designing and implementing governance of banking franchise comprising over 2/3rds of the sector’s deposits and assets. It would be better instead to restore regulatory and market discipline.

Read this in context of article below which suggests some ways how to operate publicly owned companies.

Functional capitalism - Scott SumnerScott Sumner talks about past article How capitalist is Singapore? (we linked to this in previous post). Read the article with an eye to Air India and Indian Government owned companies. The first line is : 

Singapore Airlines is majority owned by the Singapore government. Alitalia is privately owned. So which country's airline industry is better described as "capitalist", Singapore or Italy?

India's Clouseau Bankers Deserve a Bigger Stick
Andy Mukherjee says it well suggesting Arun Jaitley should accept Urjit Patel's suggestions. Though I do not agree with the privatisation part. They could well set out a road map saying Banks will be privatised in 8 years or so and then working them towards profitability.

The Return of Haim BodekHaim Bodek is a whistle-blower who exposed Direct Edge a stock exchange help High Frequency Traders. He is back with another expose of NYSE now. Both have resulted in fines of $14m. Also worth reading are articled linked in this one.
Waiting for the Chinese Bear StearnsChinese credit risks are quite severe. It is good that India is reforming its banking system. This will allow for next decade or two of growth. 
China’s Economy Is Not Normal. It Doesn’t Have to Be.A counter-view about China. He points out that China's overall debt is not too high. He makes certain other points in favour of China too.
But the debt is not too high when using normal methods. The Chinese use outside-mechanism to create debt. It's institutions carry too much debt burden backed by the government. This debt has financed investment in factories capacity equal to global demand for many products. When trade policy turns adverse and every country protects its own manufacturing, this capacity will be a huge liability. US is rightly changing the policy and in fact is playing the conflict strategically in the economic theater. US did the same with Soviet Russia - played them economically with Star Wars program.
What should be the international reaction to Chinese debt problem?Global central bankers should increase the risk weightage for firms dealing with Chinese financial institutions. This is the time to increase capital backing these transactions.  That is what I suggested in Subverting Capitalism & Democracy:

In  an  economic  growth  cycle,  it  seems  advisable  to  have  increasing  deposit  reserves.  As  the  pace  of  the  economy  grows, banking system should become taunt and solid. This  moves the banking system from a fractional reserve system  towards  100%  reserve  system.  Of  course,  it  would  never  reach  100%  reserve.  At  the  extreme,  reserves  may  reach  say  40%.

 Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Interesting Reading 14 March 2018

Bank Scam
RBI bans letters of undertaking for seeking overseas loans
Too little too late?

China’s Own Goal: An Unnecessary and Counterproductive (on-budget) Fiscal Consolidation
Brad Setser talks about how Chinese demand and savings affect global demand and savings. Interesting read as usual. He has clarified this issue many times before but read this article as it gives details on Chinese central government debt and savings.

B.R. Ambedkar in the time of farmer protests

China’s US Treasury holdings in focus amid trade tensions
This seems like a fallacy. China would rather use the forex reserves to buy assets globally or in US than just dump them. With countries restricting acquisitions by China [Recently US government vetoed Singapore based Broadcom's bid for Qualcom] things could get nasty but dumping treasuries may not be part of the deal. In case situation worsens however China may use it as an offensive tool. From China's point of view those dollars should be written off already.

Other InterestingMining data on cab rides to show how business information flowsThe Economist has a story on how taxi data was mined around Fed meetings to study what is the potential impact of the policy being announced. The Economist raises some questions about information leakage between policy announcement and release of minutes of meeting where there is no blackout.
My suggestion is that every politician or bureaucrat when he meets with outsiders the meeting should be live streamed with audio on their website. And no meetings should be allowed on outside. Thus when an official meets outsider in a coffee shop or so, a presumption of law may be attributed to that being "illegal" meeting.

John Oliver on CryptoCurrency
Blockchain Revolution Without the Blockchain 
A sensible article about what the block-chain is  and what to expect. This comes from Bank of Canada courtsey Amol Agarwal.

Addressing the Dark Side of the Crypto World
Christine Lagard weighs in on risk of Crypto World. Gives you flavour of what international policy is heading for.

Something Mysterious Is Killing Captive Gorillas
Gut bacteria is very important. Some principles of Ayurveda are coming back to mainstream.

World War Watch
A challenging time for the Indo-Pacific
Brahma Chellaney does a superb post. Must read.
Remember Indian ocean is strategic - it has access to two choke points on trade routes - The gulf of Aden (towards suez canal) and Strait of Malacca (Singapore strait towards pacific). China is trying to get its feet into areas where it feels it can be choked -oil transport routes.

Forget Trade Wars. Trump's ‘Taiwan Card’ Is China's Real Worry

Game Theory Scowls at Trump-North Korea Talks
Tyler Cowen explains the North Korea-US talk in game theory perspective. North Korea is in position of significant advantage. The question is there are some options that are not known to us lay people but known to US security experts.  That is the hope.

Most of China experts believe that North Korea is headache for China. However, I don't think so. There is/must be some tacit understanding between China and North Korea. I feel China is playing US through North Korea. This game is not being played by Kim alone. The behaviour of China & North Korea just don't add up.

 Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Interesting Readings 13 March 2018

What has changed since the 2008 financial crisis?V Anathanageswaran says "The machinery of complex financial engineering that conjured up some derivative products remains intact. The ethical issues that dogged the Wall Street then remain alive."
India Bank Scam watchMaking Indian central bank more accountable for ongoing banking troubles (and generally too)…Amol Agarwal shares his view on making RBI accountable in bank case. I liked this line:

There is generally a lot of fire and fury around Indian central bank’s independence and its actions on interest rates. But very few of such pieces mention that independence should be backed by accountability as well.

Nandan Nilekani’s view: Public sector banks must be privatizedWhile I am for privatization in general, I am against privatising banks right now. Government must show some risk-taking ability.
China Creates Super Regulator for $43 Trillion Finance Industry Interesting to see what China is doing with respect to banking and financial regulator. Remember Chinese banking problem is X times Indian problem and there could be other scams too. But China is action oriented and they move quickly. Interesting to see the comparison.

World War WatchAmerica v China: How trade wars become real warsGideon Rachman says:

For the past 40 years, the world’s two largest economies have both embraced globalisation, based on understandings about how the other would behave. The Chinese assumed that the US would continue to support free trade. The Americans believed that economic liberalisation in China would eventually lead to political liberalisation.

Both of these assumptions are now shattered. On Sunday, China’s National People’s Congress rubber-stamped a constitutional change that would allow President Xi Jinping to rule for life. Three days earlier, President Donald Trump announced tariffs on steel and aluminium and tweeted that “trade wars are good and easy to win”.

Raja Mandala: A Korean miracle?C Raja Mohan gives his take on Kim-Trump talks and implications for various parties. I think Kim's sister may have more influence than understood. Along with her, South Korean President Moon may be the most important voices of reason. Lets us see.
France: India’s new Russia?Another piece by Raja Mohan. He talks about relations between France and India and the a bit of history.

Others‘Mother of Tibet’: Meet The Unsung Saviour of Thousands of Tibetan ChildrenDalai Lama's sister and mentor to many children.
‘Secret Superstar’ Blazes New Trail for Indian Cinema in ChinaThis is second movie involving Aamir Khan to feature in China. Indian Movie industry should look to China for expansion. Some marathi films may do well too. India needs to realise that Bollywood is more powerful soft-power than any. The movie business people are unaware of the opportunity.
 Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Interesting Readings 12 March 2018

Asia's Big Developers ‘More Vulnerable’ to Shocks, BIS Warns

Higher interest rates, sinking property prices or falling currencies are shocks that could worsen developers’ financial health, with the potential for significant economic repercussions, according to the organization known as the central banks’ central bank. Even without external jolts, falling returns on assets and declining interest coverage ratios “could pose problems” for the firms, it said.

The BIS Quarterly review is a must read itself.

How Blackstone Turned India Into Its Most Profitable Market
Interesting points

“Limited partners always used to complain that it’s easy to invest in India and hard to get the money out,” Dixit said in an interview at Blackstone’s office in Mumbai. “That has changed now -- since 2014, there has been a good exit environment.”

How to Construct a New Invisible Hand: A Conversation with Peter Barnes
This conversation needs to be read and re-read. A lot of what he talks about needs to be discussed in detail. It is interesting that Peter talks about lot of benefit arising from common property. I just came across this article about Singapore.

Indian banking purgatory – 2/3 (the Dharma of blocking the defaulter)
There are many links within it. Be sure to read them all.

The Real Engine of the Business Cycle

Credit-driven household demand channel rests on three main conceptual pillars. First, credit-supply expansions, rather than technology or permanent income shocks, are the key drivers of economic activity. Second, credit-supply expansions affect the real economy by boosting household demand, rather than the productive capacity of firms. Third, the main problem is that the economy has a hard time “adjusting” to the precipitous drop in spending by indebted households when credit dries up, usually during banking crises.

Returning the UK’s privatised services to the public
Article illustrates my gripe with unabashed Thatcherism / Reganism. There is a distinct role for the state in the modern economy and no more. Anything too "free market" and too "state-linked" is a problem. Maintaining that sweet-spot is difficult. Read it in conjunction with article about Singapore.  How would you compare the ideas in these two?

Time to tweak the bankruptcy code, again
Indian Bankruptcy Code needs modification again. I do not see why this should be a problem. These codes need to be iterative. My problem is most of the codes do not provide the principles behind the legislation in clear terms. This makes it difficult to interpret the legislation for the judiciary. Indian Judiciary is quite slow in any case. This adds delays and makes process cumbersome.

MIB: Ryan Holiday
Ryan describes how the media works on the eve of his book launch Conspiracy the battle between Hulk Hogan and Gawker! Must read for those who want to reinvent journalism.

Multinationals pay lower taxes than a decade ago
This ties in with what I have written in Subverting Capitalism and Democracy in 2009. Rana Foroohar's Makers v Takes explains the a very similar issue. The evidence is compelling. What we need is a global tax deal that prevents such manipulation.

The Blockchain Pipe Dream
Nouriel Roubini aims to dismiss the Blockchain promise. Some fundamental points there.


Dictatorial China  
 
Will China Out-Innovate the West?
Edmund Phelps asks this question more for what West needs to do rather than will China succeed in this. For that answer refer to articles below.

China Is Not a Garden-Variety Dictatorship
This is thanks to V Ananthanageswaran. Very impressive

Start of the end of China's rise: Xi is reversing elements of Deng formula 
A must piece discusses another author's book and interpretation of events.

World War Watch
Assessing Joint Strike Fighter Defence Penetration Capabilities



Others

Big Sugar Versus Your Body
Sugar is now getting hit as cause of disease. Gary Taubes' case against sugar started this line of research. Now others are getting to speed. We will know soon. Meanwhile carbohydrates - particularly staples - wheat and rice are getting bad rep too.

 Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Interesting Readings 09 March 2018

Today's list is going to be short.
The Indian banking purgatory – 1/3 V Ananthanageswaran has started another series on banking problems. It is a must read as always. He lets the board off with some valid points. Though I won't do so. I think boards' approved ever-greening led to this lax control. If boards had called out ever-greening managements would not have let their guards down easily. Further, as with Nirav Modi case, it was difficult for boards to find out the specific scam. But generally scams are initiated by those with questionable financials. I believe if boards caught those, (a) the scam would not have been this big i.e. possibly these borrowers would be outed early AND (b) overall banking crisis may have been avoided.[Note: Bank managements - not just junior officers, Finance Secretariat, RBI audit dept, all have to take the blame.]

The Case for Central Bank Electronic Money and the Non-case for Central Bank CryptocurrenciesThis one is courtesy of Amol Agarwal who put up the link to this one. It sort of explains my position on the central bank cryptocurrency debate. I think we will have a e-currency soon. It may also be tokenized but it wont be crypto. I also think money (currently what is cash), claims (currently what is bank account money or electronic money) and their interchange will undergo dramatic change. Will write about it some day.[Note: I am fan of blockchain technology but not of the current lot of cryptocurrencies. Also, as an aside, far too many application are going to use blockchain that do not need them. ]

What is 5G and how will it change the world?This video below explains in detail a bit of history from 1G till 5G. Gives a perspective. Must watch for telecom analysts.


 Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Interesting readings 08 March 2018

Finomics
Why American Workers Aren’t Getting A Raise: An Economic Detective Story - By Jonathan TepperTepper highlights reasons as follows: (Please read the detailed explanation it has interesting charts)Companies are keeping more of the economic pieWorkers are productive but are not getting paid for itCompanies have more market powerMany workers are dealing with a monopsonistMany workers live in a rural area with less choice of jobsCEOs are getting paid a lot more than workersThere is no countervailing force to high CEO and low worker payThis is quite comprehensive and well laid out. Check out the charts. They are more impressive. Must read.
The Full Employment Mirage Patrick Watson too weighs in on this. His comments are spot on. Take this quote:

As of December 2017, two the states the CAC named (Alabama and Arkansas) had lower unemployment rates than the national average, yet one of three jobs in those states were in the “low-wage” category. But if all you saw was is the unemployment rate, you might think they were doing fine.

 Now, if you need 2 jobs just to sustain yourself then you need twice the number of jobs as we have. In such a scenario understanding what 4% unemployment means is really difficult.
A Trade-War Road Map for FX Markets: Take Cover, Find Your Niche Interesting perspective on the dollar in short last para.
The shareholder-first corporate model erodes public supportInvestors ready to disrupt far-sighted strategies for short-term gain have ruined trust - says Michael Skapinker. Well written. Companies should focus on the long term. 
Medicine is PersonalDan Ariely speaks about his personal experience. He highlights an important point. What motivates medical professionals is very important. Their motivations in recommending a treatment do not always stem from patient interest. I am not talking about the usual Pharma marketing gimmicks. In Ariely's case the doctor wanted to write a scientific paper and he needed at least 3 sample surgeries. This topic needs to be studied and informed decision matrix needs to be developed for cases where courts examine medical propriety.
How the U.S. Squandered Its Steel SuperiorityHat-tip Tyler Cowen. Must read article. In Understanding Firms I discussed the mechanics of firm advantage. This fits in well with it.
IndiaRural Stocks Are Trade of Decade to Old Bridge on Modi Farm PushKenneth Andrade believes rural stocks are poised for growth. Good perspective. Kenneth Andrade is a good stock picker.
Indian enterprises need protection to growArun Maira wrote this article is former BCG consultant. So I was a bit surprised. Heartening to note that the main focus of the article seems to be in the nature of "anti-dumping" rather than true protectionism. Indian businesses should aim to compete globally on merit. Any other form of competition will be (a) short lived  and (b) bigger disaster for future.
Why Is PM Modi Allowing DACOIT-y On Indian Digital Startups? Raghav Behl asks this question. He objects to the mass sale of companies to Chinese, Amercian and Japanese investors. I am not that concerned. It is important to develop many more companies - some will go to foreign investors some will remain with locals. It is all part of the game.
PNB scam: Check before it’s too late, bullion body had warned Raghuram Rajan about 80:20 gold schemeRaghuram Rajan is not coming out of this mess in a pristine condition. Possibly was coerced by Chidambaram but we will never know.
World War Watch


Indo-Afghan ties hit Pakistan's economyInteresting Quote from the article

According to the Pakistan Bureau of Statistics, the country’s exports to Afghanistan fell to $1.271 billion in FY17 from $1.437 billion in the previous year. Exports in the first quarter of 2017-18 stood at $319 million.

China Is Making a Bold Military Power Play
David Tweed & Adrian Leung write on Bloomberg. I love the maps they have put up. And this one about China's island chain that restrict its naval ambition.  There are a certain missing links in the first map. First, India and US has signed naval treaties allowing each other to use the bases. Thus, the US influence should be measured in terms of Quad+two (US-Japan-Australia-India-Britain-France). That adds a few more bases. India has access to Chabbar in Iran (contentious though but accessible for friends), Australia has one more base in Indo-Pacific (others are purely pacific or southern facing). So my map goes like this.



OthersBook Review: The Accidental EntrepreneurRaoji reviews the book. Seems to be must read about Indian entrepreneurship. Kindle version is at INR 60/- thats cheap. I just bought it. Will read and review it soon.
Finally, a Likely Explanation for the “Sonic Weapon” Used at the U.S. Embassy in CubaInteresting analysis of sonic distortions noticed in US Embassy. Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".

Interesting Readings 07 March 2018

What do you guys think could be a good name for these posts - they have links to articles I read and some bits of commentary. Please write with your suggestions. Here are some interesting readings for today:
Global readings Paul Krugman revisits the Japan PaperIf you have read the old 1998 paper it is quite a refreshing reading. Read both if you have been following Japan.
Seven Fallacies Concerning Milton Friedman’s ”The Role of Monetary Policy”Another paper this time by Federal Reserve Board papers
Elizabeth Warren Slams Democrats for Helping Gut Financial RegulationsYves Smith from naked Capitalism writes about Elizabeth Warren fighting the deregulation of big banks. It highlights the lobbyist-driven establishment that governments have become, globally. Try getting a meeting with local representative, Senator, Member of Parliament, anyone and you will be hounded by gatekeepers. For democracy to work better, this has to change. This is part of the issues I have highlighted in Subverting Capitalism and Democracy.
Killing a Parasite, Part 2 — How to Implement Student Debt Cancellation Part 2 of the Gaius Publius article. First was linked here. Part 1 looked at the Why question — Why should all student loans be canceled? — and answered it in economic terms, since ending student loan debt would benefit not just the students affected, but the economy as a whole. It also answered the Why question in moral terms: Ending the practice of parasitism, humans preying on humans, is a good thing in itself. This piece looks at the How question — How should ending student loans be implemented? A future installment, the last, will address the What Next and What If We Don’t questions. (Hint: Extreme parasitism is not a stable system, and the social consequences of extreme human suffering aren’t limited to the ballot box.) I agree with students being saddled with debt that cannot be reneged was wrong. But the solution is too crude and not imaginative. I would like the solution to put some cost on the borrowers, since they were minor party to this, also helps in moral hazard problem. Second, the lenders have to bear the costs too. Only tax payer cannot be left holding the bag at all times. If we burden the tax payer then we should not wonder why she does not pay her fair share of tax.
How can families afford children?Tyler Cowen explains why as incomes and wealth grows birthrate tends to drop. Quite interesting set of explanations he has put. Short but must read.
Austerity by Design. Yanis Varoufakis's lessons for reasserting European social democracy.
J. W. Mason writes about new book by Yanis Varoufakis called "Adults In The Room: My Battle With Europe’s Deep Establishment". V Ananthnageswaran has a few comments on this article and some additional links for related readings. I read Yanis Varoufakis' book "And the weak must suffer what they must". Interesting books. But Yanis is a great speaker. In fact, if you want to know the deconstructed leftist thought on current affairs it is better to read Yanis' views and better still watch him presenting. Note the parallel between student loans and greek loans as conveyed by Yanis.
Video Of The Week: Albert on Squawk BoxThe person is Albert Wenger, partner, Union Square Ventures. He suggests that we need to relook at intellectual property rights in the current era. It is a topic close to my heart. We need to reinvent intellectual property rights. I was in the process of writing a short book on it, had done all the research for that and stopped it. Need to revive that project.
Bank fraud India
The fight to the finish against banking fraudsMint talks about RBI actions in wake of Nirav Modi fraud. I like the third suggestion:

Third, PSBs need urgent governance reforms. The Punjab National Bank fraud is the consequence of a complete collapse of governance. Governance in PSBs needs an overhaul and government interference in appointments should be minimized. In this context, the P.J. Nayak committee (2014) rightly noted: “Government officers and regulators may not possess the skills to appoint the top management of commercial banks. Banking is a very specialised activity, and top management needs to combine strategic foresight with a good commercial knowledge of sectors to lend to, prudent risk management and human resource skills.” The outcome of establishing the Banks Board Bureau has also not been as desired. Therefore, the government needs to revisit the way appointments are made in PSBs, starting with the board. Only a professional board will be in a position to take the right decisions. It is important for banks to continuously improve operational efficiency by making the right investments in technology and human resources. This is a good time to initiate reforms as the government is in the process of recapitalizing PSBs.

World War Watch
Six top US intelligence chiefs caution against buying Huawei phonesThey are saying something but not saying everything. I hope some mobile phone experts explain the possibilities in greater detail.India seeks global power status: PentagonArticle explores variety of developments in the Indo-Pacific region.

Others Rules for the courtSupreme Court of India has made available the roster i.e. assignment of judicial benches to subject of petitions. This comes in the wake of the crisis earlier this year/late last year. I am surprised that this was not the case earlier. It is a prudent practice and should be encouraged across courts.

One smart guy’s frank take on working in some of the major tech companies
Tyler Cowen shares an email from one smart guy who has worked in tech. Read it for organisational issues and some industry view.

The sad story of Maplin Electronics
Frances Coppola analyses the bankruptcy of Maplin Electronics a retailer. Very interesting to read. Must read for investors who read financial statements. Note how the analysis goes right back to history 1987 to know where the mess started.

CONFLICT OF BENCHES: The SC’s February 8 Judgment in Indore Development Authority Is Not Supported By Text Or Intent Of The Act, Says Namita Wahi, Expert On Land Acquisition...
Namita Wahi interprets two controversial judgements of Indian Supreme Court in teeth of the Five-bench

Damodaran Online: There is an App for that!
Aswath Damodaran links to App for mobile access to website. Also uValue App that explains valuation concepts and other data which users can use.  Buy my books "Subverting Capitalism & Democracy" and "Understanding Firms".