GalaTime

1. @pluggdin “Only 13% of existing internet users in India prefer to read in English” … wow! we need an explosion in local language content!

2. MIT TR / Physics arXiv (http://bit.ly/17S5hn): Why compressive sensing will change the world; new sampling method => 25x more compression !

3. http://bit.ly/3kV7wc, @mcuban asks: Are (Your) Tweets Copyrighted? Do you ‘own’ Facebook status updates? See comments on ‘fair use’, etc.

4. Via Scott Adams (dilbert.com): “The white collar sector is all about no activity punctuated occasionally by useless activities.”

5. Just discovered ‘Secret History of Silicon Valley’ video (http://youtube.com/watch?v=…); also a 4-part blog post at SteveBlank.com

6. For macro-econ geeks (http://bit.ly/m8kGv): Slides & papers from NIPFP-DEA Program on Capital Flows

7. Bank Nifty down almost 9%, ICICI -12%: Financial year end madness? End of bear market rally? Bad quarter in the making? Election jitters?

8. http://lipikaar.com/ & http://quillpad.in/ - there’s hope for local language content. Add a 3G netbook for 10k & there’s your Internet boom!

9. SSRN (http://bit.ly/16lxY): Neurofinance: Bridging Psychology, Neurology, and Investor Behavior; primer on manic-depressive humans & markets

10. TCrunch: Follow the Mobile User (http://bit.ly/10zKj) - “Good speed + unlimited data plans”; critical for Indian startups, but ignored often

11. Fred, A VC (http://bit.ly/dbf1T): Venture capital asset class returned 9-10% p.a. since mid-90s (ex-Google). Too much $$$, not much quality?

12. Big Money (http://bit.ly/bV1Q) ‘How Hedge Funds Will Survive’; Avg HF leverage down from 2 to 1.15; Macro & distressed debt funds to win big

13. Times Online, Is there any gold inside Fort Knox (http://bit.ly/6gHMC): Supposedly $137B; Gold Anti-Trust Action Committee (GATA) doubts it.

14. Forbes (http://bit.ly/t6f3G): $500B oil price manipulation / fraud by Goldman et al w.r.t. short oil bets by Semgroup. Highly speculative.

15. Wolfram blog on minimum inventory/maximum diversity systems (http://bit.ly/uB1Wy): restricted means liberate invention, restraint is freedom

16. Sulabh Sanitation (http://sulabhinternational.org) founder & “action-sociologist” Dr. Pathak wins 2009 Stockholm Water Prize

17. Wilmott on *existing* good risk mgmt: CrashMetrics (http://bit.ly/3r1mFO) is a worst-case scenario model, with no reliance on probabilities.

18. “It is time Indian scientists recognize that Saraswati (knowledge) & Lakshmi (wealth) should coexist” R A Mashelkar, ex-DG CSIR - Amen!

19. http://bit.ly/Tnod SciAm: What can magicians (masters of exploiting nuances of human perception, attention & awareness) teach neuroscience?

20. Ocean Tomo - patent auctioneer - doesn’t find buyers (http://bit.ly/19vqFA) “Cos. don’t want open info around IP, want to keep it close”

21. Slate on Narcissistic personality disorder (http://bit.ly/XycE): a cultural virus that has spread … over the past several decades.

22. Saw a talk on the excellent Bell Bajao (http://bellbajao.org/) campaign at #SIMC’s cyber media conclave; check out http://breakthrough.tv

• Foreign Policy: Is China the New America?

The story from the Great Depression has an uncanny echo in current debates about international economic leadership, with the United States playing the role of Britain — the exhausted debtor economy — and China taking the place of the United States as the world’s largest creditor. But if China is the America of this century, can it do a better job than the United States did in the 1930s?

Charles Kindleberger, the late economist, argued that the United States should have acted as a lender of last resort in the early 1930s, continuing to keep its financial markets open to investment and its market open to foreign goods, rather than heading down the path of protectionism. It should also have stimulated the world economy through countercyclical fiscal policy.

• NIPFP DEA Program: India in the Great Recession

The death of Lehman = The day that the idea of India as a closed capital account died.

• Indian firms (financial / non-financial) who were doing money market operations overseas knew their calendar of dollar liquidity requirements
• When Lehman died, they got worried about achieving rollover in London
• Borrow in India, convert to USD, take money out of the country
• RBI tried to sell dollars - but ‘impossible trinity’ kicked in. This exacerbated the problem.
• Companies hedged themselves: money was going to come back so buy INR at a future date.

• Barrons: Credit-Default Swaps: Weapons of Mass Speculation

… the CDS market seems to have become a weapon of mass speculation that is destabilizing international debt and even equity markets. That looks to be true in the subprime-debt-induced crisis of recent months that still has the credit markets in a deep-freeze. At the height of the crisis, in the first quarter, the price of credit-default insurance for key financial companies zoomed to once-unimaginable heights, signaling rightly or wrongly the imminent default of their debt issues.

The run-up was induced partly by panic among debt holders and others seeking to hedge their financial exposure at any price. But other factors, some suggesting a deliberate attempt by bearish investors to sow doubt about a company’s financial condition and thus push up CDS prices, may have played a role. In the CDS market, a well-placed rumor of trouble, or snippet of negative analysis, can have an outsized impact on positions, because much like a put, the investor risks only the premium to control the action on a potentially large position. Buying CDS protection is the ultimate bear bet, and the incentive of CDS holders to accentuate the negative, particularly to the financial press, is almost irresistible.

• Business Standard: TV news channels look for fresh capital

… broadcasters such as Times Global Broadcasting Co Ltd, Network 18 and UTV are looking to raise over Rs 600 crore to fund their growth plans.

Industry estimates show that the business news channels generate about Rs 300 crore a year in advertising. However, with the economic slowdown, ad revenue is expected to drop by about 15-20 per cent this year.

At UTVi, more money was needed to meet losses for the next two years, a source said. The channel, launched in April 2008, earns around Rs 2 crore a month and incurs an operating monthly expenditure of Rs 7.25 crore.

Stay short UTVi.

• Mint: Pre-IPO deals haunt companies

Companies owe their investors at least Rs4,000 crore for their inability to come out with IPOs within a specified time frame, a precondition for such investments.

This condition is built into share subscription agreements between promoters and shareholders, typically through put options, which give investors the right, but not the obligation, to sell back their shares in the company to its promoter if an IPO does not happen by a specified date.

“In some cases, the promoters are saying ‘take me to court, I’m not giving your money back’. But in most cases, the investor does not go for litigation because he does not want to be seen as hostile,”

“One form of ratchets allow for variable pricing determined by a multiple of net income from a few years ahead. If the income is lower than projected, the private equity investor could end up taking a much larger stake in the company than originally planned,”

Oh, those troublesome ratchets!

• DNA: Social networking sites find it tough to make money

… thanks to very low click rates, industry participants suspect the category accounted for just 5% or less of the total online ad spend in the country in the last 12 months.

Prasad Narasimhan, marketing head, Virgin Mobile, says, “We can talk about engagement and all that. But if I have to put in Rs 2 crore of my brand’s money, you need to find some mathematics to measure the impact.”

“The problem is that we are applying the metric of search advertising to social media,” says Mahesh Murthy, founder of the digital marketing agency Pinstorm. “How are you measuring the RoI when you advertise on TV? You are paying because people are spending time in front of your brand. They have to come back to the idea for social networks as well,”

Over hyped, over funded, no economic value added.

• Frontline Thoughts: Why Bother With Bonds?

So what is the actual equity risk premium? Rob Arnott and Peter Bernstein wrote a paper in 2002 about that very point. Their conclusion was that the risk premium seems to be 2.5%.

The US Financial Accounting Standards Board (FASB) changed the markto-market rules last week, which many (including your humble analyst) thought was needed. First, they suspended the mark-to-market rules for assets in distressed markets. Second, they widened the definition of “temporary” impairments of troubled assets, which will “allow banks to write up the value of some troubled assets if these have been hit by falling markets without (yet) suffering any significant credit losses.”

Here’s the important part. The board decided to make the new changes effective immediately, prior to full board approval on April 2.

• Financial Express: The power of 11

• Bloomberg: Bull by Night, Bear by Day Is Best Strategy, Goldman Sachs Says

Buying futures on the Standard & Poor’s 500 Index, or a fund that replicates the benchmark for U.S. equities, just as the trading session ends and selling them when the market opens the next day has yielded 309 percent since 1993, New York-based analyst Peter Berezin wrote in a report sent to clients today. The inverse strategy lost 58 percent.

“A large number of market participants are averse to holding overnight positions, which causes them to sell at the close (thereby depressing intraday returns) and buy at the open (thereby inflating overnight returns),” Berezin wrote. “Such aversion to overnight risk is likely to be higher during bear markets.”

Transcript of a recent speech by RBI Governor D. Subbarao: India - Managing the Impact of the Global Financial Crisis

India’s financial integration with the world has been as deep as India’s trade globalization, if not deeper. If we take an expanded measure of globalization, that is the ratio of total external transactions (gross current account flows plus gross capital flows) to GDP, this ratio has more than doubled from 46.8 per cent in 1997-98 to 117.4 per cent in 2007-08.

Sorry, no decoupling. Fast capital inflows can become fast capital outflows.

… among the many unconventional measures taken by the Reserve Bank of India are a rupee-dollar swap facility for Indian banks to give them comfort in managing their short-term foreign funding requirements, an exclusive refinance window as also a special purpose vehicle for supporting non-banking financial companies, and expanding the lendable resources available to apex finance institutions for refinancing credit extended to small industries, housing and exports.

No quantitative easing, though.

… the demand for bank credit is slackening despite comfortable liquidity in the system. Dampened demand has dented corporate margins while the uncertainty surrounding the crisis has affected business confidence. The index of industrial production has shown negative growth for two recent months and investment demand is decelerating. All these factors suggest that growth will moderate more than we had earlier thought.

No kidding. I say we’ll get 4% GDP growth in 2009-2010.

PS: Unfortunately, the guv didn’t comment on recent bond market volatility, all-time lows in the rupee:dollar rate, the jump in fiscal deficits and such.

1. Hindu (http://bit.ly/3cFIzm) on digital divide: Gujarati (local language) vs. English. Mobile vs. Desktop. Rural (local) vs. Urban (global).

2. Median price for an existing, single-family detached home in California peaked at $600K in mid-07, now at $245K, down 60%! Deflation anyone?

3. The theme for the 2009 edition of the MCCIA (http://mcciapune.com/) #Pune expo (http://punexpo.com) is Innovation

4. DNA http://bit.ly/GYy8r - Not a single original drug brand from India; need R&D $$$ for Center for Cellular & Molecular Biology, CDRI, NIPER

5. http://bit.ly/34yvk GaryNorth buys Soros’ call for 30% drop in CRE & hyperinflation: “He made $$ in currencies, the toughest mkt there is.”

6. RT @ngkabra “What is the monkeysphere?” http://is.gd/2hxG (You can’t have more than 150 friends!) … cracked me up

7. Kessler, WSJ (http://bit.ly/RqoNP): “hedgies’ bear raid saved us 5-10 years’ of bank earning disappointments as they worked off bad loans”

8. Just added myself to the http://wefollow.com twitter directory under: #pune #tech #startups

9. DNA (http://bit.ly/xiJd2)- Mumbai mall owner “looking at starting daily rent collection from retailers based on a revenue-share model” Ouch.

10. Happy days (aka Sensex targets) are here again! UBS says 13,500 by Mar ‘10 (Bloomberg: http://bit.ly/VTOq); next up - Jhunjhunwala on CNBC

11. Bespoke ‘09 country snapshot (http://bit.ly/582lP): all four BRIC countries are now in the black for ‘09, India’s the laggard, China up 30%

12. RT @novoseek 10 science PhD-related blogs you should read http://bit.ly/NYUIH; novo | seek (novoseek.com) is a biomedical search engine

13. RT @venturehacks The latest Wilson Sonsini Entrepreneurs Report has a new excerpt from Pitching Hacks & Q4 2008 financing http://bit.ly/brk

14. BBC Health (http://bit.ly/iCfx): Salt is ‘natural mood-booster’; average adult should eat < 6g a day; guessing avg Indian intake much more

15. RT @pkedrosky a few people have asked, so here is the BBC list of the top 50 documentaries

• The Atlantic Online: The Quiet Coup

Many IMF programs “go off track” (a euphemism) precisely because the government can’t stay tough on erstwhile cronies, and the consequences are massive inflation or other disasters. A program “goes back on track” once the government prevails or powerful oligarchs sort out among themselves who will govern—and thus win or lose—under the IMF-supported plan.

The challenges the United States faces are familiar territory to the people at the IMF. If you hid the name of the country and just showed them the numbers, there is no doubt what old IMF hands would say: nationalize troubled banks and break them up as necessary.

. . . elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive.

Long, excellent piece.

• The Big Money: Mr. Taleb Goes to Washington

To Taleb, Scholes is the Great Oz in this Emerald City because his work on options and derivatives allowed the whole of the financial system to adopt poorly understood products-like the ones that brought AIG down-that hide risk. To Taleb, Scholes’ academic work, which enabled the widespread use of complex derivatives, was like “giving children dynamite.” “This guy should be in a retirement home doing Sudoku,” Taleb says.

“Bank runs now take place at the speed of BlackBerry”—Taleb recognizes that the financial system now possesses an efficiency that creates volatility. That cannot and will not go away. We cannot have both debt leverage and a hyper-efficient system—the volatility is just too great. What Taleb explains—which no one else does—is that efficiency is already a form of leverage. A highly efficient system removes slack and magnifies small changes.

• Economic Times: RIL inks KG gas sale-purchase contracts with 12 fertiliser cos

Reliance Industries (RIL) has signed gas sale-purchase contracts with the 12 fertiliser firms that have been chosen to receive the first produce from the company’s offshore Krishna-Godavari (KG) D6 fields on the east coast, a company official said. The oil and gas major is expected to start production from the KG basin gas fields in a few days. RIL would sell gas to the companies at $4.20 per million British thermal unit (mmBtu), as per the contract.

 I guess this will have a major impact on power woes for fertilizer companies, and in turn everyone else. Also, does this have deflationary impact on food prices? Btw, natgas prices in the US hit a 7-year low.