[ValarMorghulis]

Ashwath Damodaran, the corporate finance guru & Professor of Finance at the Stern School of Business at New York University recently posted his take on the Zomato IPO on his blog.
Quite an interesting take.
You can read it here.

His conclusion:

Zomato is a money-losing, cash burning enterprise now, but it has immense market potential and is on track to delivering on a viable business model. It will face plenty of challenges on that path, both at the micro level (management, competition) and at the macro level (economic and political developments in India). I believe that the company is currently over priced, given its potential, but I would have no qualms about investing in the stock, if the price drops in the near future, with the full understanding that this is a joint wager on a company, a sector and a country.

[dragracer567]

In what is a major development, India will fast track FTAs (Free Trade Agreements) with six different nations (including one bloc) in the coming months namely the UAE, the UK, Australia, Canada, and the EU. The UAE is expected to be the first one of the lot though I believe it’s more symbolic as UAE doesn’t have many tariffs. It’s a significant departure from the government’s stand of ‘atmanirbharta’ from last year bringing back elements of our 70s mindset. But it seems recent events such as the second wave of COVID has given the government a reality check that India can’t grow alone and isolated in the world stage. The recent flight of investors from China due to the tech crackdown there seems to be another impetus.

Nevertheless, some of the comments of Mr. Piyush Goyal - Union Minister for Commerce and Industry, has been less than helpful though, his comments comparing e-commerce rules to the ‘quit India movement’ (even though I agree Amazon and Walmart aren’t angels) and calling out India Inc. specifically Tata (of all companies) as working against national interest. Hate to sound political but even political parties that are significantly left of the political spectrum would refrain from making such distasteful comments when the Prime Minister on the other hand is openly trying to lure more foreign investors.

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[V.Narayan]

https://www.hindustantimes.com/busin...392068197.html

IMF downgrades India's expected growth 9.5% in FY2021-22 on the reduced baseline of FY2020-21 when India's GDP officially shrunk by 7.3% the worst since the 1920s. Personally, like stated earlier on Team BHP by me, my assessment is India's GDP in March'22 will not be higher than where it was in March'20.

Originally Posted by dragracer567

Nevertheless, some of the comments of Mr. Piyush Goyal - Union Minister for Commerce and Industry, has been less than helpful though, his comments comparing e-commerce rules to the ‘quit India movement’ (even though I agree Amazon and Walmart aren’t angels) and calling out India Inc. specifically Tata (of all companies) as working against national interest. Hate to sound political but even political parties that are significantly left of the political spectrum would refrain from making such distasteful comments when the Prime Minister on the other hand is openly trying to lure more foreign investors.

Source 1

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The man was once thought of as a competent minister. Alas! Stupidity mixed with a false sense of impunity leads to such low behaviour. Of course he wouldn't say such things about Ambani and Adani. But naturally.

[AZT]

In what is a major development, India will fast track FTAs (Free Trade Agreements) with six different nations (including one bloc) in the coming months namely the UAE, the UK, Australia, Canada, and the EU.

This is easier said than done. The word Fast track gets you headlines but for the EU and UK auto sector is a deal breaker and I don’t see us allowing free trade there. Same for electronics and heavy machinery, I’m pro FTA but I’ve been seeing these headlines for so long now I won’t believe it till we actually see implementation.

[Samurai]

When do libertarians and even capitalists protest against economic inequity? When they become the victim of it.

Joe Scarborough, one time republican and easily among the top 0.1% is pissed that super wealthy pay less tax than him, while his income tax is about to go up.

A millionaire anchor is finally realizing that billionaires are raking it in at his cost. He can finally empathize with the remaining 99.9% people.

https://www.youtube.com/watch?v=VM4emMmR7rc

[AltoLXI]

Supply chain disruptions, transport and labor costs along with pandemic acting as a catalyst are forcing brands to nearshore the manufacturing. African, East European and central Asian countries appear to be preferred choice to move the production facilities.

"It's a strategic decision to have more control on the production process and also on transport costs," he said, adding the group had already shifted more than 10% of output out of countries like Bangladesh, Vietnam, China and India this year.

For those players who decide to move manufacturing closer to their markets, or "nearshoring", the investments involved mean there is unlikely to be any reversal in the near future.

Advisory firm AlixPartners said the shift towards more regional or even national supply chains was here to stay.

"The more global supply chains are, the more things can and will go wrong," it said in its report on the disruption caused by COVID-19.

"The race amid apparel companies for rock bottom prices today seems to be secondary. Consumers are more quality-conscious, and want their garments to last longer," he said.

Link

[rrsteer]

Some fun at the expense of the economists:



On a side note, Ronald Raegan was quite witty!

[Samurai]

About 82% of the AA+ rated bonds defaulted?

https://www.youtube.com/watch?v=6x5FJgRZumY

[Gansan]

That is why I am always sceptical about the credit ratings. We may see highest ratings and put our money in for a period of time (FD), then the very next year the company may be downgraded and we will be up the creek without a paddle.

That is why all my retirement corpus is parked either in government/Post Office/LIC schemes and Bank FDs. Even though bank FDs fetch less interest and the deposit insurance covers only Rs 5 lacs, the government will not let any bank fold up. It has never happened so far. It will simply be merged with another bank.

I use only the second generation money - interest - for any stock investments I do.

[v1p3r]

Really makes me wonder why I didn't become a ratings 'expert'. They seem to do eff all, anyway.

[SmartCat]

Problem is with the business model. The rating agencies are paid by the same company that they are doing a credit check on. So the rating agencies just slap an AA or AAA rating and then send an invoice to the company.

[sdp1975]

I was reading an interesting article on the Hindu Business Line related to stock markets. It's for subscription readers, so can't post the link here. Central banks have been pumping large amounts of money into economies since COVID started, which explains the growth of stock markets.

Not just since COVID, but since 2008. Whenever there's an economic crisis, the central bank steps in, creates money, which it believes will solve all problems. It tries to iron out all economic and business cycles. But in doing so, it effectively has gotten into the territory of asset pricing, namely that of the stock markets. In fact, the US Fed has had a hard time in increasing rates in the past, as doing so has caused financial stocks to fall. A bearish market leads to negative sentiment, lowered investor confidence, unemployment and so on. Something that the central banks or governments can't afford to do. China hasn't let Evergrande fall so far, and I don't think it will, given the ramifications.

It's hard to imagine what this endless creation of money will lead to. It won't end too well I suppose, since there's no free lunch in economics.

[SmartCat]

Originally Posted by sdp1975

It's hard to imagine what this endless creation of money will lead to. It won't end too well I suppose, since there's no free lunch in economics.

One small thing that these articles miss is that Fed's "creation of money" (Quantitative Easing) is different from Venezuela's creation of money. Fed's QE does NOT inject money directly into the economy. This reduces the risk of high inflation/hyperinflation.

What the Fed does is purchases long term bonds at very very low interest rates. This injects cash into major financial institutions and companies that can now raise funds at dirt cheap rates. These institutions then further lend to consumers or invest in capex or invest in startups. Those crazy valuations of zero revenue companies and also stock valuations of most companies is the end-result.

To better explain the difference:

- Venezuela's creation of money is equivalent to giving 1000 people Rs. 100,000 each every month.
- Fed's creation of money is equivalent to giving 1000 people a LOAN of Rs. 100,000 each every month at 1% pa and principal is to paid back only after 5 or 10 years. In this setup, money does not chase consumer goods (so not much risk of high/hyper inflation). Instead, it goes into investing/lending - since money has to be paid back.

Entirely possible that we’ll see low interest rates forever, asset manager says
https://www.cnbc.com/2021/11/15/gam-...s-forever.html

[sdp1975]

Originally Posted by SmartCat

To better explain the difference:

- Venezuela's creation of money is equivalent to giving 1000 people Rs. 100,000 each every month.
- Fed's creation of money is equivalent to giving 1000 people a LOAN of Rs. 100,000 each every month at 1% pa and principal is to paid back only after 5 or 10 years. In this setup, money does not chase consumer goods (so not much risk of high/hyper inflation). Instead, it goes into investing/lending - since money has to be paid back.

I'm not an expert in economics, but I'll say that nowadays there isn't a significant difference between the two given the manner in which central banks have been operating.

The Fed has $2 trillion in mortgage backed securities from the chart here. I suppose these were bought during the 2008 financial crisis. How much real value do they have today ? Didn't the Fed take a "hit" when it took over these securities ?

If the borrower can pay back, well and fine. If not, it's implicitly understood that the Central Bank will swallow up the loss, effectively doling out money so that the economy keeps running. ( Not really a loss, since they create money anyway ). Much like NPAs our PSU banks have.

As for interest rates, we may be seeing not just zero, but also negative interest rates in the future. A friend in Germany recently told me that banks were moving to negative rates and forcing individuals to sign new contracts with them. In the past, negative rates were reserved for wealthy and institutional investors, but after COVID it has started to affect retail investors. It's a matter of time before these ideas and theories come to India. In fact, he told me that it's better to be a borrower these days than a saver !

[SmartCat]

Originally Posted by sdp1975

The Fed has $2 trillion in mortgage backed securities from the chart. I suppose these were bought during the 2008 financial crisis. How much real value do they have today ? Didn't the Fed take a "hit" when it took over these securities ?

Fed did not take a hit.
https://en.wikipedia.org/wiki/Troubl...Relief_Program

In total, U.S. government economic bailouts related to the global financial crisis had federal outflows (expenditures, loans, and investments) of $633.6 billion and inflows (funds returned to the Treasury as interest, dividends, fees, or stock warrant repurchases) of $754.8 billion, for a net profit of $121 billion. Of financial system bailout outflows, 38.7% went to banks and other financial institutions, 30.2% to Fannie Mae and Freddie Mac, 12.6% to auto companies, and 10.7% to AIG, with the remaining 7.8% in other programs

It's a matter of time before these ideas and theories come to India.

I would not be surprised if interest rates are kept low here in India too. However, India is a lot more susceptible to inflation than USA, Europe or Japan because of weak currency (dependency on crude, current account deficit (more imports than export), volatile dollar inflows/outflows etc).