Friday, 28 December 2012

Coffee is bad

What does Ramamritham have against coffee ? I would have thought the caricature of Ramaritham included a cup of coffee and The Hindu. Yet here's this venerable gentleman having an angst against coffee . Why ?

I am referring to IKEA's application to open retail stores across India. You may recall that the move to allow foreign owned retailers to set up shop in India is a recent one (Didi notwithstanding).  IKEA has been one of the first to submit their proposal, willing to bring it no less than Rs 10,000 crores of investment. You would have thought that they would be welcomed with open arms  - it is difficult to see boxed furniture being a threat to national sovereignty. But what they got was not a red carpet - instead they were treated with the full attention of Ramamritham. (in the guise of the Foreign Investment Promotion Board - FIPB)

I am no fan of IKEA stores. If you've been to one, they are all predictably the same format. You are forced to walk along one km of winding corridors that entirely destroy your sense of direction. You have to gaze at their full force of merchandise even if you want to buy a safety pin. After all those wanderings you are dying to sit down and rest your aching legs. Dutifully at the end of the trail you can buy a cup of coffee. Their format world over is the same.

Its the cup of coffee that has aroused Ramamritham's ire. Believe it or not, Ramamritham has turned down IKEA's application saying that they could not have a coffee shop - it appears that would become multi brand retail as the coffee is not IKEA branded coffee and hence would fall foul of the rules. Never mind the Rs 10,000 crores investment. FIPB is disallowing the proposal objecting to the coffee shop.

Finally the Commerce Minister had to intervene and suggest to Ramamritham that this is utterly nonsensical. He has asked IKEA to submit their proposal again and has promised them that he is partial to coffee.

Long long ago, when P Chidambaram was still a starry eyed reformer , he summoned a character called the Controller of Imports and Exports ( a terror those days) and asked him what he did. The worthy launched an impassioned plea as to how important and onerous his role was. PC's riposte was that he could perhaps understand that he had a role to play regarding imports, but pray, what was he doing trying to control exports ?? Within a few months he simply abolished the post.

I suggest he does a similar hatchet job on the FIPB. They perform no useful role. Open up investment in every sector barring maybe defence (even there there are arguments to  opening up for investment). Remember opening up for foreign investment does not mean that they can violate the law of the land. That provides the country ample protection against misbehaviour.

The only way to deal with nonsensical behaviour of objecting to the coffee shop is to abolish Ramamritham entirely.  Can Anand Sharma, the Commerce Minister, take a leaf out of his old predecessor and abolish the FIPB ?

PS :Newcomers to this blog who may not have been introduced to Ramamritham may get acquainted here.

Friday, 21 December 2012

Bye Bye New York Stock Exchange

OK - the title is pure hyperbole. The New York Stock Exchange (NYSE) is going nowhere. But the company that owns NYSE is just being bought over. The curious part of the story is that the acquirer does not really want the NYSE, but it comes as part of the package- so he has to take it !

Here's the deal. NYSE is part of a conglomerate called NYSE Euronext. The conglomerate consists of NYSE itself, Euronext, which is a combination of three European stock exchanges and Liffe which is a London based derivatives exchange. NYSE and Euronext are ugly spinsters nobody wants. The beauty amongst the beasts is Liffe. For it is the sexy new hottie - a derivatives exchange.

And therein lies the story. In the modern day casino , that is finance , equity exchanges like NYSE are worthless as businesses. Margins are supposedly low. Stock exchanges are the places where almost all companies that require capital list and that's where investors channel their savings into productive investment. One would have thought that  the raison d'être for financial markets was to fulfill that objective, but obviously I am an old foggie.

In today's world, the money is all in running commodities exchanges,  derivatives markets etc - not boring old equity. The acquirer is a company called ICE that did not exist before 2000 (for the record NYSE was founded in 1817). ICE purely handles derivatives trading. The career of Jeffrey Sprecher, the CEO of ICE says it all. He started his career building power plants.  But he realised that there was more money (in facts tons more money) playing on financial contracts relating to power than in generating power itself. So he started ICE , obscurely in Atlanta, in 2000. See where he has got to in 12 years.

We've now come to a stage where even the NYSE is an unattractive prize - in fact positively repellant. Given a choice Mr Sprecher would probably spin off NYSE, or sell it off somewhere or simply forget about it. Unfortunately that is politically simply unthinkable. So he has to live with it and make pious noises of how important it is.

Its a symptom of where the world is going.  This post is one sided and biased (whoever said that a blog has to be objective !). Derivatives markets are not all evil and equity markets are not all saints. Both serve useful economic purposes. But you can see where this is headed. Esoteric, ununderstandable financial structures are getting to be more important than the underlying asset itself. That's why, a wise old fox from Omaha, back then in 2003, called derivatives a weapon of mass destruction.

Many years ago, when the world was a simpler place and when this blogger was a young man (!), he went to 11 Wall Street, entered the visitors gallery of NYSE and gazed at the trading floor in awe.  Little did he know that not in the too distant future, this lovely lady was going to be thrown out into the street as an ugly old crone.

Sunday, 16 December 2012

Round the world for one day

How would you like to chuck it all and travel around the world ? Tempting isn't it ?? Well that's exactly what two wonderful persons I know are doing right now. They blog about it here - follow it if you are interested in traveling ; its a gripping account of far away lands. If you fancy yourself on the road from Rangoon to Mandalay or on the Silk Road between Bukhara and Samarkand, then this is the travelogue for you.

I happened to be in Spain and voila, discovered that they were in Spain too  - Ah the wonders of the internet. I was in Madrid and they were in Granada, so emailed them to meet at Seville which is where I spent a magical day today with them.

No doubt they'll get to updating their blog on this day in Seville. Their blog is still in Turkey, whilst they have physically moved on to Greece and onwards to Spain. They'll write about the Catedral de Santa María de la Sede (Seville Cathedral), an imposing and awesome structure where we stood reverentially in front of the bones of Christopher Columbus interred there. And about the Reales Alcázares de Sevilla (Alcazar) - the palace where you could feel the legend of 100 virgins a year demanded by the Moors from the Christians.  Or the bullring, the oldest in Spain - this being off season, thankfully there were no bullfights. There was the rain in Spain, but it was the gentle variety that added to the charm and mystique of the place.

Its their call to write on the place. Mine to write on the experience with them. Wanderlust is always an instinct of man; and those who wander have a treasure trove of experience. Travel broadens the mind and travelers make wonderful company. If they are as nice as M and V, the time with them transcends words. It was only a day, but to me it seemed that I had somehow partaken of their entire adventure. I had walked with them, had shared the sights, had felt the tug of the journeyers. It was a very special day. As we sat in the station sipping a cup of coffee waiting for the train to take me back, I couldn't but think a wee bit of chucking it all and following in their trail ! Gracias M & V for the magic.

While I come back home to India, they go onwards to Morocco, to Mauritania and wherever else the road beckons. Good luck M &V. May you have many more wonderful experiences and the joys of visiting many a land. 

For me, I am thankful, that for a day, just a day, I trod the path with you. Round the world, at least for one day.

Saturday, 8 December 2012

The strange case of John McAfee

Do you use McAfee anti virus software ? Chances are you probably do. If so, or even if not, you may be interested in the strange story of John McAfee. I'm not sure if its comic or tragic - decide for yourself. In any case its a prime candidate for the script of Gils' soon to be shot Blockbuster from Chollywood  ! (If you want to know what Chollywood is, it is a pun on that stunning  "centre of the world"  where the said blogger now lives and has become completely enamored of )

John McAfee is not your  typical geek. Firstly he was born in 1946 (now which geek can claim that !). While he was working in Lockheed , his computer got infected with one of the first viruses that ever came to prominence - Brain. Readers of my vintage might remember that this originated from Pakistan. which prompted lots of hand wringing in India about loss of software primacy !  McAfee got so pissed that he started writing software to combat viruses. In due course he founded McAfee Associates, the antivirus company which he took public in 1992. In 1994 he quit, cashing in all his stocks and reportedly made some $100 m. So far , very typical of software entrepreneurs. But from now on, his life has been anything but typical.

He retired to the back of beyond in Colorado (where ?)  and became a yoga guru. He established a yoga retreat there and penned a book on yoga. He introduced all sorts of new concepts including "observational yoga" where , I believe, you relax on an easy chair, munch snacks and watch others doing yoga.

In 2008, when the financial crisis hit, apparently he lost a lot of money. He then sold everything in the US and moved lock stock and barrel to Belize (double where ?) He started doing research on herbal medicines in heavily armed compounds. He acquired a reputation as a mad scientist and that led to raids suspecting drug production. He frolicked around with young women, justifying that as an example of trickle down theory - by arguing that parents in Belize constantly promote their daughters to men with money, and he was only obliging thereby increasing family incomes.

But over the last couple of months, his story went even wilder. He got into an argument with his neighbour who complained of his dogs barking. McAfee then claimed that his dogs had been poisoned and therefore he had to shoot them. Shortly afterwards, the neighbour was found murdered. When the Belize authorities wanted to question him, he claimed he was being framed and went into hiding leading the authorities on a wild chase and taunting them through tweeting and blogging constantly. Suddenly he surfaced in Guatemala  claiming political asylum. Guatemala would have none of it and is currently going to deport him back to Belize. The Belize Prime Minister has called him "extremely paranoid; even bonkers".

He blogs at whoismcafee.com. In true spirit, his start page is whacky - but don't worry; it is safe.

Spare a thought for Intel, which now owns McAfee Anti virus suite of products. What an advertisement for your brand .........

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