Rebateables » LinkFest

Links: Lehman, ICICI, Billionaires, IIP and Sugar

Deepak Shenoy — Fri, 12 Mar 2010 07:31:00 +0000

WSJ: Lehman Torpedoed Lehman – A bankruptcy court examiner investigates and finds that senior Lehman executives fudged its balance sheet, kept the board uninformed and bumped up asset values.
ICICI Bank stops giving out free lifetime cards. What’s happening in there? They recently sold their CEO’s house. Insiders have started selling – two of them, including an ED, have sold between 70-100% of their holding in the last week. Building up fee income and clearing out assets? The stock has been doing amazingly well, up over 15% in the last month.
The Index of Industrial Production (IIP) data for Jan 2010 shows a 16.7% increase since Jan 2009. The data is unreliable, because the revisions are huge. Example: The December release last month showed an index value of 331.7 – it has been revised to 334. Similar revisions on the downside happen all the time. Better, perhaps to look at seasonally adjusted figures, available online through Ajay Shah’s blog, will probably get updated with Jan figures next week. In December the headline was over 16%, but the SAAR was 11%.
Sugar seems to be in the news, and for a change because prices are going down. Perceptions of scarcity are changing, it seems, with ex-mill prices falling to Rs. 34 from Rs. 40. Sugar is a highly political industry and Maharashtra/UP are the big players. Sugar companies make money – 3-4 rupees a kg – from by-products like mollasses or co-generated power, but both have political controls like how much you can store, who gets paid for excess power etc. Global prices are also on the way down, but nowhere near the cycle lows.
China might increase rates, from accelerating inflation, says Bloomberg. Inflation in China has reached 3.5%, which to India will seem like a fantastically low figure for a country growing, er, faster than us. But the fudging in China is of gargantuan proportions – when the data is bad, the response is usually to keep data hidden, or massage it appropriately. Yes, everyone’s doing it nowadays but China is the master of the art.
Forbes releases the list of worldwide billionaires, and Marketfolly highlights the “hedgies” (fund managers) on the list.

Linkfest: Michael Burry, Real Estate…

Deepak Shenoy — Fri, 05 Mar 2010 12:30:00 +0000

Michael Lewis on The Great One-Eyed Fund Manager Michael Burry. What an inspiring read.
Matt Taibbi on Rick Santelli’s rant on Predatory lending where he said “You can’t cheat an Honest Man”. Yeah, dude, come to India’s ULIP world and I’ll show you how honest people can easily be cheated out of their money. The similarity: Neither regulator gives a rat’s ass.
Mumbai’s BKC land auction fails to get a single bid. A 435 crore expectation for 34,000 sq. foot land didn’t get takers. A friend mails in details – for a (low) construction cost of Rs. 1000 per sq. ft., the project will cost nearly 600 crores, and with a 200 Rs. per sq. ft. rental, realisation will be 38 cr. a year, probably 25-30cr. after costs. That’s a cap-rate of 5%, when rents are as high than downtown Manhattan (where you can get $4 a month rents easy); Comparative returns in Manhattan are near 7% today.
DLF says levy on property tax is counterproductive. A clarification on wednesday noted that only 1/3rd of the agreement value is “service”, so only that portion will be taxed, reducing the quantum of increase to 3.33% on the agreement value. Weighing that as more important than the land sale failure in the earlier link, and the interest rate increases by banks, real estate players went up between 4% and 10% today. [I’m kidding. They could have gone up on any reason, but it’s fun to invent reasons for an indisputable fact]
Martin Wolf on the Indian Elephant charging through the crisis. He says that India’s GDP grew 14% in nominal (non inflation adjusted) terms in the last five years, so why are we cribbing about a 6% fiscal deficit?
Salil Tripathi on how India lost it’s M.F. Husain. I hardly get political on the blog but I find it dirty that a bunch of goons can hold anyone to ransom in this country. When a Raj Thackeray says obviously anti-someone things, there is no move to arrest him; because he is only talking, they say. M.F.Husain didn’t even talk – he just painted – and he should be arrested? We need to change this country; we’re younger than Husain, and we don’t have to leave.

Linkfest on Greece

Deepak Shenoy — Wed, 10 Feb 2010 06:19:00 +0000

Greece is on the verge of default or a bailout or a bit of both, it seems. The idea of any of these events happening has spooked world markets; now any rumour seems to come with big market moves – an indicator of a panic move in the offing. Who knows, maybe we’re in the middle of the panic move – remember, markets the world over have corrected 10% – and the next round is near.

At Naked Capitalism: A description of the rumour that started markets rolling upwards, that Germany would back a Greek Rescue. First, the telegraph kicked in an article saying the German Finance Minister was going to rescue them, and German banks have exposures of €43bn in Greece.

Wolfgang Schäuble, Germany’s finance minister, has asked officials to prepare a plan in time for a summit of EU leaders on Thursday, according to reports in the German media. The options include either a loan from EU states or some sort of institutional EU response.

…

Germany’s apparent backing for a bail-out comes despite worries that it will lead to the breakdown of fiscal discipline across the Club Med region. It also raises troubling questions of fairness. Ireland has tackled its own crisis by slashing wages and going far beyond any measure so far offered by Greece, yet Dublin has not received help.

Germany’s dramatic shift in policy changes the character of the euro project. It follows weeks of soul-searching in Berlin, and after increasingly loud pleas from Brussels, Paris and southern capitals. The deciding factor was concern that letting Greece fail risked a “Lehman-style” run on Club Med debt, with systemic spill-over across Europe.

German exposure to the region amounts to €43bn in Greece, €47bn in Portugal, €193bn in Ireland, and €240bn in Spain, according to the Bank for International Settlements. German lenders are already vulnerable, with the world’s lowest risk-adjusted capital ratios bar Japan…

Of course, it was denied by everyone, with a Reuters backtrack also:

“Government spokesman Ulrich Wilhelm rejects as unfounded reports citing coalition sources saying a decision for aid for Greece has in effect been made,” a government official quoted him as saying. Reuters had earlier reported a senior German ruling coalition source as saying euro zone countries had decided in principle to help Greece.

Reader MK shouts out a link that Goldman Sachs helped Greece mask it’s true debt. With Euro treaties limiting deficits to 3% and debt to 60% of GDP, Greece used complex swaps with “fictional exchange rates” to get some creating financing, thus moving out some debt to 10-15 years later. The treaties don’t treat such swap liabilities (“derivatives”) as real debt, so it doesn’t get counted – but hey, it’s debt because the structure makes it repayable. The problem with derivatives is in their abuse to do regulatory arbitrage – if they now change the rules, everyone else who’s made these kind of trades gets smashed. And heck, that’s the ONLY reason they won’t change the rules. This is just sick.
Roubini on Greece: Greece has 13% fiscal deficits coming up. There’s political problems in actually cutting it (Strikes, unrest and all that – that’s potential alternate venue for the Shiv Sena/MNS). Three coinciding events – ECB’s stimulus exit, Dubai’s default and Greek deficit revisions from 3.7% to 12.7% (Gee, you think that last one might be a little important?) did the damage. Roubini thinks they’ll have to cut spending, no matter what; default is not an option.

Linkfest: Outrage, China, Mutual funds off Trading Terminals

Deepak Shenoy — Tue, 17 Nov 2009 19:36:00 +0000

Links for reading:

Main Street tells Wall Street, "Get A Real Job" (Bloomberg)
In the 14 years I’ve written columns for Bloomberg News, I’ve had plenty of feedback from investors who said they lost money at the hands of corrupt brokers, plus a steady stream of vitriol from financial executives who say I’m clueless, stupid, and deserve to lose my job.
I have never, though, been bombarded with anything like the fury and frustration expressed this time by people far removed from Wall Street, ranging from computer programmers to administrative assistants to the caretaker of an estate. Typically a handful of e-mails will float in; this time the number topped 60 and counting.
It's just starting, but it's too little, and obviously too late. With US unemployment (disguised as "U6") at 17% and counting, there's increasing amounts of despair in the real economy while the financial institutions are smoking something else. It's now obvious that the powers are on the side of the financials - so I think there will be a lot more anger before they even acknowledge that a sense of fairness must prevail.
Naked Capitalism: China Lambastes Dollar "Carry Trade", Diverting Attention from its Currency Manipulation
Excellent article on how the US policy is geared towards helping banks recapitalize easily, with low interest rates (you can't get lower than zero) and high spreads. To understand this - how easy is it for you to make a profit if you know you can buy from a market and sell it to the "Fed" at a slight profit? That's the kind of game going on with things like Mortgage Backed Securities and so on. Plus, the idea is to spike asset prices rather than clean up banks.
More importantly though, on China, Yves Smith says it like no one else can. China's massive growth has been because of a conveniently pegged Yuan; the US can't cut it's debt levels unless it runs a current account surplus - which will spell death for China's export led economy. China hasn't a right to scream Wolf, says Yves, as it was a problem they started by buying up dollars and pegging the Yuan in the first place. Great read.
Mutual funds will soon be traded from brokerage terminals. Sub-brokers are, after all, present in every small town in the country; and allowing them to sell mutual funds provides a distribution reach no one else has. Unfortunately this will mean some entry loads again, in the form of brokerage. But that, at 0.5% must feel a lot lesser than the 2.25% the funds used to charge.
John Paulson buys 2% of Citibank, sells 2 million Goldman shares. He made a killing shorting sub-prime, and now he's buying out the guys the government owns. Sweet. Don't read too much into the GS sale, though.
John Mauldin forwards Hugh Hendry's commentary (Eclectica, November 2009) - a fantastic read on the Dollar, China's huge inventory and capacity and Why Deflation is more likely in the next year than Inflation.

Linkfest: Shadow Inventories, New Normals, Bridges to Nowhere

Deepak Shenoy — Mon, 28 Sep 2009 18:32:00 +0000

Random links:

U.S. "Shadow Inventory" Crosses 7 million houses. With real estate developers going gung-ho again in India, and rising RE prices, it might be cheaper to invest in the US rather than locally - and there you get much better than the 2-3% rental yields you get here.
But the situation in India is not as good as they make it out to be. It's highly non-transparent, very broker-cartel controlled and there's a looming hungama about Diwali. Prices going up? DLF's latest offering in Capital Greens "Phase 2" Delhi, at 7,500 a square foot was lapped up, they say. And yet, you see online ads of sellers in Phase 1 - to be ready much earlier than phase 2 - at 5,500. Been tracking real estate prices in Gurgaon, Navi Mumbai and Bangalore - rates are NOT going up.
John Mauldin welcomes you to the New Normal - where the U.S. needs to create an average of 250K jobs a month, to get back to 5% umemployment in five years. That's not been seen anytime in the last 10 years, or in average 10 year periods, or even the best 10 years of the last 20. They need to create those jobs, for sure. And I have a strong feeling this will result in the going away of jobs from other places, if it has to.
Natural Gas has exploded up 60% in the last month. Yet, the storage capacity of gas has been reached, says Bloomberg. If it wasn't such a bitch to transport, the Ambani brothers would have stopped fighting over these issues long back. Oh, and the government's lopsided policy of "gas allocation" at different prices to different industries doesn't quite help. Will the glut crush them all?
India's Credit Growth, as of Sep 11, is less than 14% - the lowest in the recent three years or so. Banks are raising capital betting on a turnaround; they expect it to scale to 20%. The RBI seems to agree. With the sixth pay commission hike arrears - worth 17,500 cr. - being released in September, the next month should see some improvement in consumer good sales, and provide glitter to Diwali. We'll have to see if it sustains after the earlier-than-usual Diwali season is through.
Interesting reading on China's Investment Boom: The Great Leap into the Unknown (HT @lukkha) China has more spare cement capacity (340m tonnes) than the consumption of India, USA and Japan combined! (And in India's we're going nuts adding to capacity) The story has a lot more fascinating details like how China has overtaken Japan in the infamous "Bridges to Nowhere" madcap infrastructure spending metric. An example: they had to use 380 kg. of dynamite to blow up a bridge in Sichuan so they could rebuild it and thus "spend the stimulus money".

Linkfest: Shadow Inventories, New Normals, Bridges to Nowhere

Deepak Shenoy — Mon, 28 Sep 2009 18:32:00 +0000

Random links:

U.S. "Shadow Inventory" Crosses 7 million houses. With real estate developers going gung-ho again in India, and rising RE prices, it might be cheaper to invest in the US rather than locally - and there you get much better than the 2-3% rental yields you get here.
But the situation in India is not as good as they make it out to be. It's highly non-transparent, very broker-cartel controlled and there's a looming hungama about Diwali. Prices going up? DLF's latest offering in Capital Greens "Phase 2" Delhi, at 7,500 a square foot was lapped up, they say. And yet, you see online ads of sellers in Phase 1 - to be ready much earlier than phase 2 - at 5,500. Been tracking real estate prices in Gurgaon, Navi Mumbai and Bangalore - rates are NOT going up.
John Mauldin welcomes you to the New Normal - where the U.S. needs to create an average of 250K jobs a month, to get back to 5% umemployment in five years. That's not been seen anytime in the last 10 years, or in average 10 year periods, or even the best 10 years of the last 20. They need to create those jobs, for sure. And I have a strong feeling this will result in the going away of jobs from other places, if it has to.
Natural Gas has exploded up 60% in the last month. Yet, the storage capacity of gas has been reached, says Bloomberg. If it wasn't such a bitch to transport, the Ambani brothers would have stopped fighting over these issues long back. Oh, and the government's lopsided policy of "gas allocation" at different prices to different industries doesn't quite help. Will the glut crush them all?
India's Credit Growth, as of Sep 11, is less than 14% - the lowest in the recent three years or so. Banks are raising capital betting on a turnaround; they expect it to scale to 20%. The RBI seems to agree. With the sixth pay commission hike arrears - worth 17,500 cr. - being released in September, the next month should see some improvement in consumer good sales, and provide glitter to Diwali. We'll have to see if it sustains after the earlier-than-usual Diwali season is through.
Interesting reading on China's Investment Boom: The Great Leap into the Unknown (HT @lukkha) China has more spare cement capacity (340m tonnes) than the consumption of India, USA and Japan combined! (And in India's we're going nuts adding to capacity) The story has a lot more fascinating details like how China has overtaken Japan in the infamous "Bridges to Nowhere" madcap infrastructure spending metric. An example: they had to use 380 kg. of dynamite to blow up a bridge in Sichuan so they could rebuild it and thus "spend the stimulus money".