29 September 2013

Sunday Reads - A Singh and a Miss and Wisdom from a MacArthur Genius

  • No, the fall of Lehman Brothers didn't cause the financial crisis. (Ritholtz)
  • Army's Secret Division would have prevented Samba-like encounters. (Sunday Guardian
  • Wisdom from a MacArthur Genius: Grit, not IQ, determines success. (Brain Pickings)

"The great enemy of the truth is very often not the lie 
 deliberate, contrived and dishonest, but the myth, persistent, persuasive, and unrealistic. Belief in myths allows the comfort of opinion without the discomfort of thought." ––John F. Kennedy 

27 September 2013

Infographic: Will Oil Prices Spike?

With multiple crises raging in the Middle East, there are growing fears that energy prices will spike. Will they? Infographic via Visual.ly and Saxo.

Middle East Crisis: Will Oil Prices Rocket?

Explore more infographics like this one on the web's largest information design community - Visually.

25 September 2013

Anil Agarwal on India's Economic Prospects & MSD's Not Alone

Anil Agarwal is the Chairman of Vedanta Resources. He is nicknamed ‘metal king’ for his ownership of a clutch of metals companies, like bauxite and iron ore. In a free-wheeling interview with the Economic Times, Mr Agarwal ­­­rues that “the world wants India to remain an import-based economy”.

He further says that “India produces 130 MT of iron ore. And they are talking about depletion of iron ore reserves. India has potential to produce 600 MT of iron ore annually. We’ll have reserves for another 100 years at 600 MT annually. That is India’s capacity.” 

As a co-owner of an oil major (in partnership with Cairn), he says that, “We need 20 oil and gas companies in India, but we have only three — Reliance Industries, ONGC, and Cairn. Cairn produces oil at three dollars. Can you believe this? And India imports at 110 dollars a barrel. So, priority to local resources has to be given.” Read the complete interview here.

Also read, ‘India’s realty bubble waiting to burst’, from the pages of the Business Line.

M. S. Dhoni is sporting a new hairdo. There have been several before who have had a “good or bad hair day”. Treat your eyes to this DC slideshow on sportspersons with some real weird hairdos.

23 September 2013

When did globalisation start?

When did globalisation start? The Economist tries to answer this important question. Here's an exceprt:

Early economists would certainly have been familiar with the general concept that markets and people around the world were becoming more integrated over time. Although Adam Smith himself never used the word, globalisation is a key theme in the Wealth of Nations. His description of economic development has as its underlying principle the integration of markets over time. As the division of labour enables output to expand, the search for specialisation expands trade, and gradually, brings communities from disparate parts of the world together. The trend is nearly as old as civilisation. Primitive divisions of labour, between “hunters” and “shepherds”, grew as villages and trading networks expanded to include wider specialisations. Eventually armourers to craft bows and arrows, carpenters to build houses, and seamstress to make clothing all appeared as specialist artisans, trading their wares for food produced by the hunters and shepherds. As villages, towns, countries and continents started trading goods that they were efficient at making for ones they were not, markets became more integrated, as specialisation and trade increased. This process that Smith describes starts to sound rather like “globalisation”, even if it was more limited in geographical area than what most people think of the term today. (End of excerpt)

Read the complete piece.

22 September 2013

Sunday Reads - Conflict Minerals & Israel's spies inside Syria

  • Conflict minerals: The minerals inside our electronic gadgets have bankrolled unspeakable violence in the Congo. (Nat Geo)
  • Vandana Shiva on the myths and reality in India's food security act. (AlJazeera

17 September 2013

The Intriguing Story of a Former Goldman Sachs Techie

Finance professionals, especially of the MBA variety, are fascinated with the Wall Street. High finance is seen as a gateway to stratospheric riches and fast-paced career growth.

It is not just the quant/finance guys who make loads of money on the Street. There are the ‘techies’ who create, operate, and manage the backend operations of computer terminals that enable high-frequency trading, which rake in the moolah. The techies also take home fat salaries and big bonuses.

So, what happens when a top-class techie gets arrested by the FBI after being charged with theft by his former employer, Goldman Sachs?
Source: US News

Vanity Fair
has a very interesting piece on the life and times of Sergey Aleynikov, by Michael Lewis, author of The Big Short and Boomerang.

A month after ace programmer Sergey Aleynikov left Goldman Sachs, he was arrested. Exactly what he’d done neither the F.B.I., which interrogated him, nor the jury, which convicted him a year later, seemed to understand. But Goldman had accused him of stealing computer code, and the 41-year-old father of three was sentenced to eight years in federal prison.

Here’s an excerpt:

And then Wall Street called. Goldman Sachs put Serge through a series of telephone interviews, then brought him in for a long day of face-to-face interviews. These he found extremely tense, even a bit weird. “I was not used to seeing people put so much energy into evaluating other people,” he said. One after another, a dozen Goldman employees tried to stump him with brainteasers, computer puzzles, math problems, and even some light physics. It must have become clear to Goldman (as it was to Serge) that he knew more about most of the things he was being asked than did his interviewers. At the end of the first day, Goldman invited him back for a second day. He went home and thought it over: he wasn’t all that sure he wanted to work at Goldman Sachs. “But the next morning I had a competitive feeling,” he says. “I should conclude it and try to pass it because it’s a big challenge.”
He returned for another round of Goldman’s grilling, which ended in the office of one of the high-frequency traders, another Russian, named Alexander Davidovich. A managing director, he had just two final questions for Serge, both designed to test his ability to solve problems.
The first: Is 3,599 a prime number?

The second question the Goldman managing director asked him was more involved—and involving. He described for Serge a room, a rectangular box, and gave him its three dimensions. “He says there is a spider on the floor and gives me its coordinates. There is also a fly on the ceiling, and he gives me its coordinates as well. Then he asked the question: Calculate the shortest distance the spider can take to reach the fly.” The spider can’t fly or swing; it can only walk on surfaces. The shortest path between two points was a straight line, and so, Serge figured, it was a matter of unfolding the box, turning a three-dimensional object into a one-dimensional surface, then using the Pythagorean theorem to calculate the distances. It took him several minutes to work it all out; when he was done, Davidovich offered him a job at Goldman Sachs. His starting salary plus bonus came to $270,000.

(End of excerpt)

This is a very long piece but trust me, it is an utterly fascinating and intriguing read. Please find the entire piece here. I strongly urge you to read Lewis’s The Big Short and Boomerang, especially the latter.

16 September 2013

Infographics: State of the Indian Economy & Banks

We all know that the Indian economy is in dire straits. The GDP growth for 2013-14 is likely to be lower than expected; this has been confirmed by Dr C. Rangarajan, who heads the Prime Minister's Economic Advisory Council (PMEAC). 

(Read The Explainer: GDP)

I found two infographics on the DNA newspaper site; the first one focuses on the current state of the Indian economy and the second one on the tough road ahead for the Indian banking sector. 

15 September 2013

Sunday Reads - India's code of silence over sexual abuse

  • The Syrian War is creating a massive kidnapping crisis in Lebanon. (The Atlantic)
  • India's code of silence over sexual abuse. (BBC Magazine)
  • The Muzaffarnagar Riots: Meltdown of the Majgar Alliance (The Hindu)
  • What Putin has to say to Americans about Syria. (NYT)

12 September 2013

Black Money Abroad: Can we get it back?

It is common knowledge that wealthy Indians, to avoid paying tax, hide their ill-gotten monies in tax havens abroad. (A tax haven is a country/province/territory with very low rates of tax or no tax at all.) 

According to the latest official data released by the Swiss National Bank (SNB), Switzerland’s central bank, the money Swiss banks owed to Indian clients at the end of last year was 1.42 billion Swiss francs (about Rs9000 crore). This amount is about 35% lower than the 2012 figure of 2.18 billion Swiss francs held by Indians in Swiss banks. Now compare this with the quantum of funds held by Indians in Swiss banks in 2006: a mind-boggling 6.5 billion Swiss francs (over Rs41000 crore).

Please note that this is the illegal booty stashed away in Swiss banks only. It can only be a matter of conjecture as to the total size of the illegal monies kept in secretive bank accounts in tax havens around the world, like Canary Islands and Gibraltar.

As you can see, the amount of black money has been coming down in the last few years. It is likely that Indian account-holders (of black money) in Swiss banks may be withdrawing their monies to deposit them in other tax havens, like Bahamas and Liechtenstein.

One major reason behind this fall is the rise in proactive government action against such black money. The U.S. Government has in the past fined UBS, a leading Swiss bank, a record U.S.$780 million. In fact, to avoid indictment, UBS also turned over names of 4000 American clients who had black money accounts. This also helped the U.S. authorities pursue other banks; it is helpful to know that Wegelin & Co., Switzerland’s oldest bank, with no U.S. offices or personnel, was indicted, which soon led to its closure, ending a nearly 275 year run. 

The SNB figures come at a time when Switzerland-based banks are facing growing pressure from several nations, like the U.S. and Germany, to share client details of their nationals.

It is important to bear in mind one important fact: SNB’s figures (described as ‘liabilities’ of Swiss banks towards their clients from India) do not indicate the quantum of the much-debated alleged black money held by Indians in the safe havens of Switzerland. In fact, SNB’s official figures do not even include the money Indians or others might have in Swiss banks in the names of others.

While the Government of India often talks about unearthing black money held in secretive bank accounts, including with some of the world’s leading commercial banks like UBS, there has been no visible work toward recovering such illegal monies.

Amid allegations of Indians stashing illicit wealth abroad, including in Swiss banks, the Government of India (GoI) has said it is exploring all avenues to recover black money hidden abroad; in case of Switzerland, the GoI has signed a treaty for sharing of information on issues related to tax crimes.

One major reason for the massive fall in hidden wealth is the growing international pressure on Swiss banks to come clean on the name of the clients who have hidden their ill-gotten wealth in those banks.

Source: Satish Acharya
The Economist writes that, “The Swiss government has been seeking an agreement with America that would allow the industry to pay its way out of trouble in one go. Instead, it has had to make do with one covering banks that are not already under investigation, which excludes some of the country’s biggest institutions.

The deal is cleverly structured. Of Switzerland’s 300 banks, 285 will be able to avoid prosecution if they provide certain information about American clients and their advisers, and pay penalties of 20-50% of the clients’ undeclared account balances, depending on when the account was opened and other factors.”

The U.S. Government’s approach toward recovering illegally held monies begets one pertinent question: Why can not the Government of India adopt a similar approach? Why can’t it pursue extraordinary measures to recover the hidden wealth held by Indians, belonging to the political and business classes, in Swiss banks and in other tax havens? If the U.S. and Germany could do it, why can’t India do it? 

A couple of years back the Supreme Court chided the GoI for its evasive action on the recovery of black money. Let me cite some excerpts of the SC judgment on the issue.

“The worries of this Court relate not merely to the quantum of monies said to have been secreted away in foreign banks, but also the manner in which they may have been taken away from the country, and with the nature of activities that may have engendered the accumulation of such monies. The worries of this Court are also with regard to the nature of activities that such monies may engender, both in terms of the concentration of economic power, and also the fact that such monies may be transferred to groups and individuals who may use them for unlawful activities that are extremely dangerous to the nation, including actions against the State.

Source: Satish Acharya
Consequently, the issue of unaccounted monies held by nationals, and other legal entities, in foreign banks, is of primordial importance to the welfare of the citizens. The quantum of such monies may be rough indicators of the weakness of the State, in terms of both crime prevention, and also of tax collection. Depending on the volume of such monies, and the number of incidents through which such monies are generated and secreted away, it may very well reveal the degree of “softness of the State.

“The amount of unaccounted monies, as alleged by the Government of India itself is massive. The show cause notices were issued a substantial length of time ago. The named individuals were very much present in the country. Yet, for unknown, and possibly unknowable, though easily surmisable, reasons the investigations into the matter proceeded at a laggardly pace. Even the named individuals had not yet been questioned with any degree of seriousness. These are serious lapses, especially when viewed from the perspective of larger issues of security, both internal and external, of the country.

“We must express our serious reservations about the responses of the Union of India. In the first instance, during the earlier phases of hearing before us, the attempts were clearly evasive, confused, or originating in the denial mode. It was only upon being repeatedly pressed by us did the Union of India begin to admit that indeed the investigation was proceeding very slowly. It also became clear to us that in fact the investigation had completely stalled, in as much as custodial interrogation of Hassan Ali Khan had not even been sought for, even though he was very much resident in India. Further, it also now appears that even though his passport had been impounded, he was able to secure another passport from the RPO in Patna, possibly with the help or aid of a politician.” (End of excerpt; read the complete verdict here.) 

The SC verdict exposes the hollowness of the government's proclaimed intent of recovering black money stashed abroad. I think it boils down to one simple thing: political will. And as we know, in our country, there is simply not enough political will to punish the law-breakers. What else can we expect from a government which itself in embroiled in a slew of scams and which goes to great lengths to protect its corrupt ministers/leaders/MPs/MLAs? 

11 September 2013

DCT, MBA Class Profiles & iPhone over the Years

The Economic Times has two interesting pieces: one, on how use of databases for schemes like Direct Cash Transfer can go haywire and two, on class profiles of the MBA classes at the IIMs and the Ivy League colleges, like HBS. For example, engineers make up 90% of the class at the IIMs while just 36% of the class at Harvard Business School are engineers.

Also, check out this Reuters Blog infographic on iPhone sales over the years, with its different models.

09 September 2013

Global Financial Crisis: Lessons Learnt?

Its been five years since the Global Financial Crisis began. It has since turned into Global Economic Crisis, dragging several developed nations, including the U.S. and Western European nations, into recession. The crisis has singed even China and India. Prolonged contraction in economic activity led to decline in economic activity, great increase in unemployment and engendered social, economic and political crisis.

While the U.S., after several rounds of economic stimulus, backed by the Federal Reserve and the U.S. Government, is back on its feet, several other developed nations, like Great Britain and France are still not yet out of the woods.

As for the PIIGS—Portugal, Italy, Ireland, Greece and Spain—they are still mired in economic morass. Greece has seen six years of contracted economic activity; its GDP is down almost 22% over what it was before 2008.

So, what lessons have been learnt from the Global Financial Crisis? The Economist is running a five article series on the lessons learnt (or have they have been?). 

An excerpt from the first article: 

Start with the folly of the financiers. The years before the crisis saw a flood of irresponsible mortgage lending in America. Loans were doled out to “subprime” borrowers with poor credit histories who struggled to repay them. These risky mortgages were passed on to financial engineers at the big banks, who turned them into supposedly low-risk securities by putting large numbers of them together in pools. Pooling works when the risks of each loan are uncorrelated. The big banks argued that the property markets in different American cities would rise and fall independently of one another. But this proved wrong. Starting in 2006, America suffered a nationwide house-price slump. 

Fascinating stuff. Read it here 

08 September 2013

Sunday Reads - A Declining Empire & Brainwashed Fandom

From today, almost every day, you will find Readings stuff on this blog.
  • How devotees are brainwashed into fandom. (Outlook)
  • All LinkedIn with Nowhere to go. (Baffler) 

Source: Reuters blog

01 September 2013

Sunday Reads - Why India's economy is stumbling & Microsoft's lost decade

  • Abraham Maslow and the pyramid that beguiled business (BBC)