Blase Blasio and other links

New York Mayor decides to sue oil companies for climate change. Seems like a publicity stunt to me.

Stephen Gandel points out that Intel CEO’s share sale – in the context of the problems revealed with computer chips – does not pass the smell test. Quite. Do not miss the chart on Intel CEO’s shareholding before and after the revelation of problems with computer chips.

A Social network company in  China for Truck Drivers decides to slip ‘blockchain’ into the conversation and the stock jumped. Well, it is almost two decades since companies pulled this trick on financial markets. What would poor investors do? They are rational, at one level. They are not buying because they expect this or that company to pull it off. They simply hope to be early buyers so that they stand a very good chance of finding someone else to dump the stock on them, at a higher price, of course. What about the last guys who hold these stocks before they go down? They just happen to suffer from amnesia or they were born after the year 2000. In this context, Roula Khalaf has a good piece on millennials and the crypto-currency craze.

Eastman Kodak said that it would use blockchain to help photographers protect their copyright. The stock jumped 119% during market hours and more after.

Citing precedence from the way that stocks that had dotcom in their names jumped from 1998 until 2000 before the bubble burst, Andy Mukherjee thinks that the collective market value of the stocks of companies using ‘blockchain’, ‘crypto’, etc., may still go up before they go down. But, he does not advocate betting on it. Good for him.

Jamie Dimon says he regrets calling Bitcoin a fraud. May be, JPM wants to facilitate trading in Bitcoins.

Madan Sabnavis has a useful table on how much interest rates had come down in India and yet how little credit growth to industry has revived. But, no amount of evidence would persuade believers that, in the presence of balance sheet constraints, lower interest rates do zilch to revive lending and investing. They may help create asset bubbles and make some richer.

In economics journals, papers written by women authors are more readable. The review process for their papers is longer than it is for male authors. Women authors become more readable as they age. It is not so, for men. Well, damning evidence that male economists-authors are undeservedly privileged. But, will it change things? Unlikely.

MINT has a good Edit on how China is ‘bribing’ its way to superpower status. May be. But, it won’t be the first time nor the last time. There is little outsiders can do about it except to whine. They have to grow their own financial muscles. Is India doing enough on that? I doubt. India, by and large, has retained the control mindset rather than the enabling mindset.

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How to fall if you have to and why two pizzas would do

Megan McArdle presents the unintended consequences of measurement and metrics. Doctors turn away very sick patients because chances of success are slim. Recovery statistics would look bad. How much we excel in confusing means and ends?!

Nobel Laureate Angus Deaton’s comprehensive piece on how inequality works is well written. Even though it reminded me of the piece by Jonathan Rothwell in New York Times on November 17, Angus Deaton’s piece is well written and did not claim exclusivity for his arguments.

Did not know that Professor Deaton had questioned India’s economic growth statistics after the revision. This is from October 2015. He has also had some rather useful observations on India’s official poverty statistics.

The Dutch teach their elderly how to avoid falling and how to fall if they have to! There is a feeling among some in India that Western societies lack the human touch.

A lovely article in Wall Street Journal about Amazon, the company. This line caught my attention:

Amazon famously adheres to the rule that any new business should be built by a team small enough to be fed with two pizzas. [Link]

The year everything went up – some eighteen charts from Wall Street Journal of all assets that went up in 2017. But, that said, do check out  the image in this tweet by Jason Zweig.  He writes about four things sure to happen in financial markets in 2018.

U.S suspends two billion dollars in security assistance to Pakistan. This is for real.  Someone looks at the India angle to this developing story. Andrew Small’s nine tweets on this development are thoughtful. Link to the 9th tweet.

No information; no accountability

Andy Mukherjee’s piece in Bloomberg on how HDFC Bank has likely understated its impaired loans based on research done by Hemindra Hazari. That is a bit unfortunate and sad too. It has been easy for all of us to criticise governments partly because (and correctly too) governments are elected and they are deemed accountable. Therefore, we feel that we have a moral right to question the government. With private sector, it is a different ball game. We are afraid of reprisals and it might have to get more specific. Criticism directed at the government is general and there is no specific ‘naming and shaming’.

But, if private sector chose not to live by the rules of transparency and truthfulness that one expects of government, then government over-reach, controls and more scrutiny will be inevitable. Countries will have the worst of both worlds. People are poorer for it.

I checked out a blog post by Hemindra Hazari on independent research on large cap companies. He mentions how he has been denied access by ICICI Bank and Axis Bank and how another analyst was put through the police wringer for his piece on Indiabulls. There is so much outrage in public space world over about rising intolerance and authoritarian populism. But, what does one make of such behaviour in the private sector?

Smartkarma.com is indeed an interesting platform.

Salvator Mundi and stock market bubbles

Before Leonardo da Vinci’s painting, ‘Salvator Mundi’ went up for sale, this is what the New York Times wrote:

This is your chance to buy a genuine Leonardo da Vinci painting. The last da Vinci painting in private hands, “Salvator Mundi” (Saviour of the World), is expected to fetch $100m at a Christies’ auction in New York. Sotheby’s sold the painting, unaware of its true provenance, in 1958 for £45. In 2011, the work was confirmed as a genuine Leonardo and unveiled publicly — the first discovery of a painting by the artist since 1909.  [Link]

Eventually, an unknown buyer paid USD450 million for it. This comes days after Christie’s sold some impressionist art works for USD479 million. [Link]

In the meantime, Greenlight’s David Einhorn thinks that most of the problems that caused or were raised by the crisis of 2008 have not been resolved. He is right.

Conor Sen, writes for Bloomberg that the big five technology companies could destroy the tech. ecosystem. He too is likely right.

On Monday evening, Venezuela missed a deadline to make an interest payment on its bonds and thus officially defaulted.

India’s Reliance Communications missed an interest payment to China Development Bank and thus has ended up in default. RCom’s Anil Ambani has managed to do what the Indian governments in the past could not do:  hurt China’s interests! Aircel may have defaulted too.

Ajit Ranade’s piece on coal shortages in power companies confirms that India is leader nonpareil in sub-optimal functioning and turning simplicity into complexity.

India’s DMart is more expensively valued than Walmart. Indian IPOs in general are too richly praised to be sustainably rewarding to investors. [Link]

Rakesh Jhunjhunwala says that there is lot of froth in Indian IPO market. He thinks that the Indian stock market may experience a sharp, swift correction and seems to be bearish on the rupee to boot, for 2018 although he presents it differently. [Link]

Andy Mukherjee has a lovely piece on how (Mukesh) Ambani is taking on Amazon in India. A great line:

The e-commerce industry, including online food delivery, is just $15 billion a year, or 40 percent less than Alibaba Group Holding Ltd.’s Singles’ Day sales in China. [Link]

Will be an invaluable case study for B-School students.

Irrational exuberance revisited

Most people had heard of these sentences and even repeated it scores of times:

But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade? And how do we factor that assessment into monetary policy?

But, we have rarely heard this sentence quoted:

We should not underestimate or become complacent about the complexity of the interactions of asset markets and the economy. Thus, evaluating shifts in balance sheets generally, and in asset prices particularly, must be an integral part of the development of monetary policy.

They were both part of the same speech that Alan Greenspan delivered at the American Enterprise Institute in 1996. I saw these in a good blog post at the Institutional Risk Analyst website.

Indeed, one should look at Christopher Whalen’s post on ‘Loss Given Default’ as a possible metric of market overvaluation.

My colleagues at Lumen Capital in Singapore sent me this very thought-provoking table:

US market valuation

Source: https://twitter.com/spomboy/status/925839733523173376

Steph Pomboy has this chart too:

Domestic stock market cap as percentage of pvt. sector GDP

Source: https://twitter.com/spomboy/status/924376083595538432

We are still debating if there is a uniform asset bubble or not! Even if we do not have a uniform (or, universal or global) asset bubble, when the U.S. stock market crashes (not IF), all asset classes will be correlated.

Bloomberg overcompensates for this good and important story with this one – a horribly bad headline. I felt that it was a rather strange headline to offer to readers and I am pleased to note that someone else concurs.

Lewis on Thaler and other links

Been on the road since last Friday. Too much of travel and hence less time to think but made time to read, though.

Thanks to Tracy Alloway’s Twitter handle, saw this Michael Lewis piece on Richard Thlaer, written first in May 2015, republished early in October.

Google/Alphabet’s urban cities project is fascinating, mind-boggling or scary or something to be welcomed? I have no idea.

HSBC might have helped Guptas in South Africa to launder money.  Could be behind a paywall.

A comprehensive interview with CEO of UBS. Parts of it have a wider relevance than only to financial types.

Countries around Asia are banning sale of sand and Singapore’s land expansion is threatened.

Americans are ‘freaking out’ but, as consumers, they are feeling confident more than ever in the last seventeen years.

The scariest chart is the last one – Halloween special.

This – a similar set of scary charts – is from the bond market perspective. The information below boggles the mind:

ECB QE is currently 7 times bigger than net issuance. So is it any wonder why yields have fallen, and what happens when the ECB tries to turn off the easy money tap?

Aswath on Bitcoin and other links

Aswath Damodaran provides an excellent tutorial while explaining what Bitcoin is all about.

Andy Mukherjee’s piece on Yes Bank having had to restate its NPA by a multiple of 4X is a MUST READ.

Billionnaires becoming richer thanks to QE. Surprising piece in FT. Hope FT Free Lunch journalist Martin Sandbu read it.

Good friend Srinivasan Varadarajan sent me this paper – speech by John Taylor, one of the candidates to replace the Federal Reserve chairperson, Janet Yellen, at the Conference on monetary policy hosted by the Federal Reserve Bank of Boston. My forthcoming column for MINT is based on this speech. I was underwhelmed.