Saturday, November 5, 2011
PSU Bank' Capital Constraints - Right time now for a Pfandbriefe in India
Was at Bancon2011 today and couldnt but overhear the murmur of the requirement of capital of PSU Banks,considering that the govt has said tighten belts now and Banks need capital anyways (Govt must hold 51% in PSU Bank mind you), i would think that the time is right now for some one at say a large bank like SBI which is also now a force to reckon in the Mortgage market in India to look at innovative yet not 'those shadyderivativestuff' kind of product.
I would say that SBI needs to just look at the German Pfand Briefe Market.
Pfandbriefe or covered Bonds is a unique German(Prussian) Invention popularized on the streets of Westend and cafe' on alte gasse on Frankfurt am Main - The Pfandbrief (plural: Pfandbriefe), a mostly triple-A rated German bank debenture, has become the blueprint of many covered bond models in Europe and beyond. The Pfandbrief is collateralized by long-term assets such as property mortgages or public sector loans as stipulated in the Pfandbrief Act. Total volume outstanding in Pfandbriefe was EUR 806 billion as at end-2008.Pfandbrief bonds make up the third largest segment of the German bond market after public sector bonds and unsecured bank debt.
The roots of the German Pfandbrief system reach back to the year 1769. In the aftermath of the Seven Years' War (1756–1763) that had ravaged the country Prussian King Frederick the Great introduced the Pfandbrief system with a ”cabinets-order” to ease credit shortage for the nobility. Based on his royal decree, Prussia set up so-called ”Landschaften,” compulsory public-law associations of noble landowners, within the individual provinces. To refinance loans to their members Landschaften issued debentures that largely correspond with the present-day mortgage Pfandbrief since the creditor acquired a direct claim over the estates the member had pledged as security. This Pfandbrief system rapidly spread throughout all of Europe. Towards the end of the nineteenth century, it was widely adopted for the refinancing of public sector loans. The second decisive boost to the development of the Pfandbrief occurred when Landschaften outside Prussia started issuing Pfandbriefe for which all the properties lent against by the Landschaft served jointly as security. As before the loans raised by the Landschaften were not paid out in cash, but in Pfandbriefe. In 1862, the first German mortgage bank, Frankfurter Hypothekenbank in Frankfurt am Main, opened its doors. Numerous other mortgage banks followed in rapid succession in almost all German federal states. By the beginning of the twentieth century 40 private mortgage banks existed. Mortgage banks concentrated from the outset on real estate financing. The rapidly expanding towns and cities in the area of industrialization were in need of the housing construction and commercial properties financing. The 1900 Mortgage Bank Act (HBG) is deemed pioneering legislation until today. It provided a legally prescribed, uniform organizational framework for this group of credit institutions. It was in force for more than a century until the Pfandbrief Act entered into force in 2005.
In their cover business, Pfandbrief banks grant property finance, public sector, ship and aircraft loans. Pfandbriefe have an average maturity of about five to seven years. While Pfandbriefe tend to be associated with asset-backed securities they are fundamentally different. Pfandbrief cover-assets remain on the bank's balance sheet. By contrast, asset-backed securities are typically off-balance-sheet transactions. Another difference: Pfandbrief cover pools are dynamic. Their composition can and usually does change over time, depending on the maturities and on the newly registered cover assets. Due to the stringent legal provisions that govern their issuance Pfandbriefe are deemed particularly safe.
An independent cover pool trustee appointed by the Federal Financial Supervisory Authority (BaFin) records cover assets and cover asset replacements in the cover register. In the event of the Pfandbrief issuer's insolvency, Pfandbrief investors have a preferential claim on the cover assets in the cover register because cover pool assets are not included in insolvency proceedings. There has not been a SINGLE Pfandbrief default since 1901. Property financings may be included in the cover pool only up to 60% of the prudently calculated mortgage lending value. The same holds true for ship and aircraft financings. Public sector loans are 100% eligible for cover
So Mr.Whatisyour name who spokeveryfast' sir, from SBI - Innovate!
PS: The 2008 crisis - Pfandbriefe saved the DAY!
PPS: I also belive that in context of india low cost housing,middle cost housing blah blah ... this is the solution and this is definetly Financial Inclusion!
Sunday, February 13, 2011
Sunday, August 8, 2010
Climate Change Sector - Investment Opportunities.
I know this sounds really vulgar! firstly to publicly acknowledge the fact that we are screwing our planet and secondly to have Investmen Opportunities trying to reverse it!
However the recent Hot Investing Topic is that of Investing into the the Climate Change Sector for abnormal alpha!!
What is Climate Change Sector Investing ?
Investing into one of the following three sectors is what the modern economists refer to as Climate Change Sector Investments Energy Efficency, Clean Energy and Agribusiness.
Energy Efficency is using less energy to provide intutively the same level of energy service. For example, insulating a home allows a building to use less heating and cooling energy to achieve and maintain a warm temperature inside home during cold winters, or say installing fluorescent lights and/or skylights instead of incandescent lights to attain the same level of illumination.( btw Compact fluorescent lights uses just about 20% energy and lasts almost 10 times longer than incandescent light bulbs so next time do buy OSRAM Lights(I dont get paid for commercials on my Blog).
Efficient energy use is all about achievieng more efficient technology or processes rather than by changes in our individual decadent behaviour of screwing nature, at which we all are bettering year by year!
Clean Energy
Yours truly passed out in 1996 as a Chemical & Electrochemical Engineer, and found it more sexy to take a career that involved numbers which meant money!so this write up on Clean energy could be the most biased pitch that i have ever made!
Clean Energy obviously has been corrupted (i like it though) by Green piece(correct spelling) activists as Sustainable Energy, which energy is the provision(one cannot create from zero ! remember fundamental laws of Energy! Energy cant be created nor destroyed only converted! sounds more like the scientologist pitch but anyways) of
energy such that it meets immediate needs without a trade off to the future generations needs.
Sustainable energy sources are most often regarded as including all renewable sources, such as Electro Chemical,Bio, solar power, wind power, wave power, geothermal power and tidal power.( It can also includes technologies that improve energy efficiency, inspite of the fact that my father in law retired from a Nuclear plant in Kalpakkam I am not including Fission
power here).
Agri Business
In agriculture, agribusiness is a generic term for the various businesses involved in food production, including farming and contract farming, seed supply, agro chemicals, farm machinery, wholesale and distribution, processing, marketing, and retail sales. The term has two distinctly different connotations depending on context.
Investing into any of these three above sectors is reffered to as Investing into the Climate Change Sector.
As of now needless to say there is tremandous opportunity in this however the fact is that there are not many reliable financial products or benchmarks availible for investors who are invested or intend to invest into this.
Muthukumarn Mani at the World Bank Blog talks about a very interesting technology linked investment opportunity on climate change sector , sounds good but to be honest would work only if one of those money making machines from wall street can really productize this and pimp it to investors.
Cheers
Venkat
PS: Be sure you can expect more on this topic from me.
However the recent Hot Investing Topic is that of Investing into the the Climate Change Sector for abnormal alpha!!
What is Climate Change Sector Investing ?
Investing into one of the following three sectors is what the modern economists refer to as Climate Change Sector Investments Energy Efficency, Clean Energy and Agribusiness.
Energy Efficency is using less energy to provide intutively the same level of energy service. For example, insulating a home allows a building to use less heating and cooling energy to achieve and maintain a warm temperature inside home during cold winters, or say installing fluorescent lights and/or skylights instead of incandescent lights to attain the same level of illumination.( btw Compact fluorescent lights uses just about 20% energy and lasts almost 10 times longer than incandescent light bulbs so next time do buy OSRAM Lights(I dont get paid for commercials on my Blog).
Efficient energy use is all about achievieng more efficient technology or processes rather than by changes in our individual decadent behaviour of screwing nature, at which we all are bettering year by year!
Clean Energy
Yours truly passed out in 1996 as a Chemical & Electrochemical Engineer, and found it more sexy to take a career that involved numbers which meant money!so this write up on Clean energy could be the most biased pitch that i have ever made!
Clean Energy obviously has been corrupted (i like it though) by Green piece(correct spelling) activists as Sustainable Energy, which energy is the provision(one cannot create from zero ! remember fundamental laws of Energy! Energy cant be created nor destroyed only converted! sounds more like the scientologist pitch but anyways) of
energy such that it meets immediate needs without a trade off to the future generations needs.
Sustainable energy sources are most often regarded as including all renewable sources, such as Electro Chemical,Bio, solar power, wind power, wave power, geothermal power and tidal power.( It can also includes technologies that improve energy efficiency, inspite of the fact that my father in law retired from a Nuclear plant in Kalpakkam I am not including Fission
power here).
Agri Business
In agriculture, agribusiness is a generic term for the various businesses involved in food production, including farming and contract farming, seed supply, agro chemicals, farm machinery, wholesale and distribution, processing, marketing, and retail sales. The term has two distinctly different connotations depending on context.
Investing into any of these three above sectors is reffered to as Investing into the Climate Change Sector.
As of now needless to say there is tremandous opportunity in this however the fact is that there are not many reliable financial products or benchmarks availible for investors who are invested or intend to invest into this.
Muthukumarn Mani at the World Bank Blog talks about a very interesting technology linked investment opportunity on climate change sector , sounds good but to be honest would work only if one of those money making machines from wall street can really productize this and pimp it to investors.
Cheers
Venkat
PS: Be sure you can expect more on this topic from me.
Thursday, July 29, 2010
Muthoot Finance raises capital from PE Barings, Therefore Buy JRG
Muthoot Finance Ltd (MFL) has raised Rs.157 Cr from Baring Private Equity Partners India and Matrix Partners India.
The percentage of stake dilution for this fund raising has not been disclosed, but last year, there was an announcement by Muthoot group, that it plans to dilute a 10% stake in Muthoot Finance to PE players in FY10 and a further 25% stake through an IPO in FY12.
Now this makes me very very bullish on JRG Securities !!!
Ask me why ? well JRG is another portfolio of BEP and BEP has this unique strategy of generating value by leveraging synergies in its portolio'.
We had observed that last in the Mphasis-BFL transaction which has so much similarity to what is happening in this transaction that one seriously thinks if this Bollywood trend of remaking old movies is now spread to the PE Business as well.
Well done.... Lets see how the endgame evolves.
Cheers
Venkat
The percentage of stake dilution for this fund raising has not been disclosed, but last year, there was an announcement by Muthoot group, that it plans to dilute a 10% stake in Muthoot Finance to PE players in FY10 and a further 25% stake through an IPO in FY12.
Now this makes me very very bullish on JRG Securities !!!
Ask me why ? well JRG is another portfolio of BEP and BEP has this unique strategy of generating value by leveraging synergies in its portolio'.
We had observed that last in the Mphasis-BFL transaction which has so much similarity to what is happening in this transaction that one seriously thinks if this Bollywood trend of remaking old movies is now spread to the PE Business as well.
Well done.... Lets see how the endgame evolves.
Cheers
Venkat
I am back
Had been one long break thanks to my MBA, I am back! and hope to share and learn some new stuff in that process!
cheers
venkat
cheers
venkat
Friday, December 4, 2009
EFP
I had alway personally believed that only with a product like EFP will our futures market develop.(Esp in Agriculture). I had written about this in the past(actually 2 years back) was really happy to note that this was finally happening in India by MCX
Is this going to be a first mover advantage or first mover disadvantage game ? Well I think the Game that needs to be played by the winner is the 'Burning Bridge Game'
Is this going to be a first mover advantage or first mover disadvantage game ? Well I think the Game that needs to be played by the winner is the 'Burning Bridge Game'
Monday, June 22, 2009
Prediction Markets for Gold 2009
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Thursday, April 9, 2009
Wolf! Wolf!
This was from deal curry
The Chicago Mercantile Exchange (CME), the world’s biggest exchange, is looking at entering India. It is in talks with several Indian exchanges to explore the possibility of picking up equity stake.
Well what else to say this is a good move no doubt and like what lalu dis to the railways by which one day in the future at guntakal railway station you might get Rathna cafe idly sambhar
Let hope for the best, in a business which in the Indian context is mired with venal authorities lets hope cme brings in a whiff of change.
Friday, March 27, 2009
Committe for commodity trading in India
So far there have been half a dozen committee formed to try to improve stake holders value in the areas of Commodity trading but so far....
This, Committee is like a Commode.
First There is a sitting,
Followed by a lot of noise;
Finally the matter is Dropped.
This, Committee is like a Commode.
First There is a sitting,
Followed by a lot of noise;
Finally the matter is Dropped.
Thursday, January 15, 2009
Nortel & Telecom industry Raju and Satyam Software


Exactly 8 Days after (Raju's confession letter)Satyam went officially 'BUST',today Nortel too went bust.
Later tonight the Telecom Industry is going to approach the Congress(US) for a bail out package and later tommorow night Ramalinga Raju is going to approach the Congress(India) with a package for his bail!!
Happy Kanu Pongal esp for my sisters and all the other women folks in my family have a great year !
Friday, January 2, 2009
CHEMEX
The recent global economic crisis has defined a new paradigm for the Chemicals Industry in General and the plastics industry in particular.
The need for a global chemicals(plastics) derivatives exchange(CHEMEX).
The thermoplastics market as of 2007 was worth upwards of approximately $200 billion, a comparable size to that of nonferrous metals. PP global capacity is about 46 million tons, compared to an output of 23 million tons for aluminium. Similarly, the production capacity of LL is analogous with copper, their figures being 15 million tons and 16 million tons respectively.
Price volatility has been a significant issue for the plastics industry for several decades and it exposes both buyers and sellers of polymers to a high level of price risk. With volatility rising to over 50% in recent years, many in the plastics industry supply chain are finding this difficult to manage. Futures contracts provide industry with the ability to manage this volatility.
Futures markets neither increase or decrease volatility, they merely reflect the volatility in the underlying physical market and provide industry with greater price transparency. The Global Chemex plastics contracts will provide a tool for managing exposure to that price volatility through hedging on Chemex’.
Plastics futures contracts will enable the plastics industry to hedge against volatility in plastics prices:
– Hedging is the process of managing the risk of a price change by offsetting it in the futures market
The ability to hedge gives producers, converters and consumers in the industry the choice of how much price risk they are prepared to accept.
Why suppliers owned plastics futures markets?
The lesson post Global Economic crisis, New paradigm!
Suppliers will no more compete in the market place, supply chains will have to compete. Hence the need for transparent efficient futures plastics markets.
The futures and options markets in metals, as well as in agricultural and energy commodities, are widely used with prices fully accepted and embedded in standard industry practice. For the plastics industry, however, the process of managing price risk through hedging has yet to become well established.
Hedging is a risk management tool that offers a similar level of certainty; enabling organizations to lock-in future prices and therefore more confidently focus investment on research, development and other capital expenditure.
The acceptance of these plastics contracts will be important if the plastics industry is to make use of a tool that these Chemex facilitate – hedging.
Hedging
This is the most common term used for a company’s activities on a futures exchange intended to limit the impact of adverse price movements. Hedging is a common practice in the foreign exchange markets for multi-nationals, as well as medium-sized companies with exposure to the fluctuations in currencies that their business requires them to deal in.
Plastics producers and converters,along with the end customer,protect their businesses from price movements in currencies on a daily basis. The hope held out by the such plastics futures market is that they can also protect themselves against movements in plastic (like PP or LL) prices, which have been highly volatile in the past few years .
Another phrase for hedging,“price risk management”, indicates the active nature of a company’s involvement in the strategy, planning and monitoring of a hedging programme and not just the act of trading on a futures exchange.
Price Risk management - the principles of hedging
Through its trading members, the Chemx will serve those at all stages of the plastics supply chain, including both buyers and sellers, the opportunity to hedge their material price risk, and therefore gain protection from future adverse price movements.
Hedging is the process of offsetting the risk of price movements in the physical market by locking-in a price for the same commodity in the futures market. The reasons for doing this are clear: for a converter, for example, it allows for better control of their raw material costs and for a producer, better management of product pricing.
There are predominantly two motivations for a company to hedge:
1) To lock-in a future price which is attractive, relative to an organization’s costs
2) To secure a commodity price fixed against an external contract
When hedging, an organization starts with price risk exposure from its physical operations, and will buy or sell a futures contract to offset that price exposure in the futures market. The ability to hedge means that an organization can decide on the amount of risk it is prepared to accept. It may wish to eliminate price risk entirely and it can generally do so quickly and easily on such Global Chemex’.
Hedging by trade and industry is the opposite of speculation as its primary purpose is to offset risk. Speculators, however, come to the futures market with no initial risk; they assume risk by taking futures positions. Hedgers reduce or eliminate the chance of future losses or profits, while speculators risk losses in order to make profits.
To be successful, a hedging programme must be devised in conjunction with a sale or purchase plan, and all pricing must be basis the Chemex settlement price in order to achieve the most effective hedge and to meet the requirements for international accounting standards.(FASB)
The programme can be as simple or as complex as a company wants to make it, but it will be unique depending on that company’s appetite for risk, internal practices, pricing policies and hedging motives. Not only must a hedging programme be well devised, but it must also be managed continuously in line with the changing circumstances of a company’s physical operations.
It has been observed that companies that use futures contracts to manage price exposure enjoy advantages over those that do not, or that rely on suppliers alone for price protection.
These advantages include :using a transparent and globally recognised 'chemicals' exchange price as the reference for settling supply contracts; flexibility in modifying the level of price protection depending on changes in the market or the company’s strategy; the ability to offer firm prices to a customer while offsetting this commitment in the futures market.
A company needs to decide what its aims are in its hedging programme. There are two main strategies: hedging to fix a price and hedging to offset a price.
Price-fixing hedge
The price-fixing hedge, referred to as a “fair value hedge” by accountants,seeks to eliminate the impact of future price changes in plastics on a business. An example is a film converter wanting to lock in a price for LLDPE which it will need to buy in six months time (December) to fill incoming orders.
A price-fixing buy hedge is put in place through buying LLDPE December futures now, and then selling out the futures contract
in December, at the moment the supplier gives the converter a firm price for its LLDPE delivery.
A price-fixing sell hedge may be undertaken, for example, by an integrated petrochemical company concerned that the price of PP may have declined in three months time after its production has been ramped up. The company would sell futures now and then buy back the futures when the PP is priced out to customers.
Price Offset Hedge
A price offset hedge is known as a “cash flow hedge” by accountants and it offsets the price risk consequence of making a
fixed priced purchase or sale of physical material. In contrast to the previous hedge, an offset hedge is undertaken when the company buys or sells physical material,rather than some time ahead of an expected physical transaction.
A company may use an offset hedge when it is accumulating plastic inventory that has a certain price, selling futures to hedge the risk of price declines and later buying back the futures when the inventory levels decline.
Another converter may find its customer wants a firm price for purchases only when market prices are low. The converter could then buy futures to cover those low priced product sales and then sell back the futures hedge in pieces to achieve an average price over the whole budget period.
The intense price volatility that the industry has suffered post the new economic order in recent years is starting to become unmanageable for many parts of the supply chain.
Producers attempting to pass on rising prices are meeting resistance as the converters themselves are typically under pressure from consumers to maintain previously agreed prices. This means that converters are increasingly ‘squeezed’ in the middle, and supply chains, rather than the suppliers, are competing.
Whilst the plastics industry supply chain grapples with these issues, the emergence of new world economies, such as China, India and their demand for industrial raw materials is fundamentally changing the global balance of supply and demand. With these new market conditions, and with no indication of when they will end, the global plastics industry desperately needs a long-term solution to the problem of price volatility.
Now here is where I Stick my neck out !
I believe the Duponts and the Dows and the monsantos which seize the initiative and form a global electronic market place that trades on carefully designed plastics futures and options contracts would be the New leaders in the Plastics market place, or rather Survivors ?
The Author S.Venkataraghavan is currently with ACE Clean Energy Ventures,New Delhi. as an Entrepreneur in Residence.
Venkat finished his B.Tech in Chemical and Electrochemical Engineering from the Central Electro Chemical Research Institute Karaikudi, and has been with the Altos Group of companies Since 1996.The views expressed here are his personal and need not be the views expressed by his employers.
The need for a global chemicals(plastics) derivatives exchange(CHEMEX).
The thermoplastics market as of 2007 was worth upwards of approximately $200 billion, a comparable size to that of nonferrous metals. PP global capacity is about 46 million tons, compared to an output of 23 million tons for aluminium. Similarly, the production capacity of LL is analogous with copper, their figures being 15 million tons and 16 million tons respectively.
Price volatility has been a significant issue for the plastics industry for several decades and it exposes both buyers and sellers of polymers to a high level of price risk. With volatility rising to over 50% in recent years, many in the plastics industry supply chain are finding this difficult to manage. Futures contracts provide industry with the ability to manage this volatility.
Futures markets neither increase or decrease volatility, they merely reflect the volatility in the underlying physical market and provide industry with greater price transparency. The Global Chemex plastics contracts will provide a tool for managing exposure to that price volatility through hedging on Chemex’.
Plastics futures contracts will enable the plastics industry to hedge against volatility in plastics prices:
– Hedging is the process of managing the risk of a price change by offsetting it in the futures market
The ability to hedge gives producers, converters and consumers in the industry the choice of how much price risk they are prepared to accept.
Why suppliers owned plastics futures markets?
The lesson post Global Economic crisis, New paradigm!
Suppliers will no more compete in the market place, supply chains will have to compete. Hence the need for transparent efficient futures plastics markets.
The futures and options markets in metals, as well as in agricultural and energy commodities, are widely used with prices fully accepted and embedded in standard industry practice. For the plastics industry, however, the process of managing price risk through hedging has yet to become well established.
Hedging is a risk management tool that offers a similar level of certainty; enabling organizations to lock-in future prices and therefore more confidently focus investment on research, development and other capital expenditure.
The acceptance of these plastics contracts will be important if the plastics industry is to make use of a tool that these Chemex facilitate – hedging.
Hedging
This is the most common term used for a company’s activities on a futures exchange intended to limit the impact of adverse price movements. Hedging is a common practice in the foreign exchange markets for multi-nationals, as well as medium-sized companies with exposure to the fluctuations in currencies that their business requires them to deal in.
Plastics producers and converters,along with the end customer,protect their businesses from price movements in currencies on a daily basis. The hope held out by the such plastics futures market is that they can also protect themselves against movements in plastic (like PP or LL) prices, which have been highly volatile in the past few years .
Another phrase for hedging,“price risk management”, indicates the active nature of a company’s involvement in the strategy, planning and monitoring of a hedging programme and not just the act of trading on a futures exchange.
Price Risk management - the principles of hedging
Through its trading members, the Chemx will serve those at all stages of the plastics supply chain, including both buyers and sellers, the opportunity to hedge their material price risk, and therefore gain protection from future adverse price movements.
Hedging is the process of offsetting the risk of price movements in the physical market by locking-in a price for the same commodity in the futures market. The reasons for doing this are clear: for a converter, for example, it allows for better control of their raw material costs and for a producer, better management of product pricing.
There are predominantly two motivations for a company to hedge:
1) To lock-in a future price which is attractive, relative to an organization’s costs
2) To secure a commodity price fixed against an external contract
When hedging, an organization starts with price risk exposure from its physical operations, and will buy or sell a futures contract to offset that price exposure in the futures market. The ability to hedge means that an organization can decide on the amount of risk it is prepared to accept. It may wish to eliminate price risk entirely and it can generally do so quickly and easily on such Global Chemex’.
Hedging by trade and industry is the opposite of speculation as its primary purpose is to offset risk. Speculators, however, come to the futures market with no initial risk; they assume risk by taking futures positions. Hedgers reduce or eliminate the chance of future losses or profits, while speculators risk losses in order to make profits.
To be successful, a hedging programme must be devised in conjunction with a sale or purchase plan, and all pricing must be basis the Chemex settlement price in order to achieve the most effective hedge and to meet the requirements for international accounting standards.(FASB)
The programme can be as simple or as complex as a company wants to make it, but it will be unique depending on that company’s appetite for risk, internal practices, pricing policies and hedging motives. Not only must a hedging programme be well devised, but it must also be managed continuously in line with the changing circumstances of a company’s physical operations.
It has been observed that companies that use futures contracts to manage price exposure enjoy advantages over those that do not, or that rely on suppliers alone for price protection.
These advantages include :using a transparent and globally recognised 'chemicals' exchange price as the reference for settling supply contracts; flexibility in modifying the level of price protection depending on changes in the market or the company’s strategy; the ability to offer firm prices to a customer while offsetting this commitment in the futures market.
A company needs to decide what its aims are in its hedging programme. There are two main strategies: hedging to fix a price and hedging to offset a price.
Price-fixing hedge
The price-fixing hedge, referred to as a “fair value hedge” by accountants,seeks to eliminate the impact of future price changes in plastics on a business. An example is a film converter wanting to lock in a price for LLDPE which it will need to buy in six months time (December) to fill incoming orders.
A price-fixing buy hedge is put in place through buying LLDPE December futures now, and then selling out the futures contract
in December, at the moment the supplier gives the converter a firm price for its LLDPE delivery.
A price-fixing sell hedge may be undertaken, for example, by an integrated petrochemical company concerned that the price of PP may have declined in three months time after its production has been ramped up. The company would sell futures now and then buy back the futures when the PP is priced out to customers.
Price Offset Hedge
A price offset hedge is known as a “cash flow hedge” by accountants and it offsets the price risk consequence of making a
fixed priced purchase or sale of physical material. In contrast to the previous hedge, an offset hedge is undertaken when the company buys or sells physical material,rather than some time ahead of an expected physical transaction.
A company may use an offset hedge when it is accumulating plastic inventory that has a certain price, selling futures to hedge the risk of price declines and later buying back the futures when the inventory levels decline.
Another converter may find its customer wants a firm price for purchases only when market prices are low. The converter could then buy futures to cover those low priced product sales and then sell back the futures hedge in pieces to achieve an average price over the whole budget period.
The intense price volatility that the industry has suffered post the new economic order in recent years is starting to become unmanageable for many parts of the supply chain.
Producers attempting to pass on rising prices are meeting resistance as the converters themselves are typically under pressure from consumers to maintain previously agreed prices. This means that converters are increasingly ‘squeezed’ in the middle, and supply chains, rather than the suppliers, are competing.
Whilst the plastics industry supply chain grapples with these issues, the emergence of new world economies, such as China, India and their demand for industrial raw materials is fundamentally changing the global balance of supply and demand. With these new market conditions, and with no indication of when they will end, the global plastics industry desperately needs a long-term solution to the problem of price volatility.
Now here is where I Stick my neck out !
I believe the Duponts and the Dows and the monsantos which seize the initiative and form a global electronic market place that trades on carefully designed plastics futures and options contracts would be the New leaders in the Plastics market place, or rather Survivors ?
The Author S.Venkataraghavan is currently with ACE Clean Energy Ventures,New Delhi. as an Entrepreneur in Residence.
Venkat finished his B.Tech in Chemical and Electrochemical Engineering from the Central Electro Chemical Research Institute Karaikudi, and has been with the Altos Group of companies Since 1996.The views expressed here are his personal and need not be the views expressed by his employers.
Saturday, November 29, 2008
Mumbai the Day after,Dont blame politicians!
The fallout of the Mumbai Terror attack has definitely made people ask questions, the amount of venom and invectives that are spewed on our politicians is quite understandable, however an analysis in to what is wrong with the system? Makes me conclude that the real villain is not the politician, not we the people, not even the terrorist, but infact is our administrative class and the system that they propagate.
Pay commission Bureaucracy Vs The Armed Forces
A retired civil servant once told me that India is a great democracy and will never get into a Pakistaniske dictatorship situation since It is to the credit of Indian civilian and military leaders and to our burgeoning democracy that the concept of civilian control of the military has been maintained in independent India. Unfortunately, its exact contours still remain unclear, leading to unavoidable incidents of civil-military confrontation.
The Armed Forces argue that while they accept political control, they rightly feel that "bureaucratic interference" is unacceptable. That much of the civilian bureaucracy—particularly the Indian Administrative Service—is seen as conniving and scheming, concerned only with furthering its parochial interests(which is actually fine by the theory of public choice), further inflames the Armed Forces' sense of injustice. As seen in the imbroglio on the recommendations of the Sixth Pay Commission, this resulted in a confrontation between the bureaucracy and the military brass
Angry over what they describe as a deliberate attempt by the bureaucracy to erode the parity of the crucial middle-rung officers — army lieutenant colonels
and their equivalents in the air force and the navy — with the civil servants, the three Defence services decided not implement the new central pay rules, notified on August 30.
The defence services pointed out that four successive pay commissions, including the recent one, had placed lieutenant colonels(The next rank that the NSG Commando Late Major Unni Krishnan would have got on promotion ) on a par with directors(selection grade) from the Indian Administrative Service(Equivalent of State HOD's and takes about 12 years to achieve and who can indefinitely delay passing the reward cheque that Unnis Father has been promised by the political class ). Expressing surprise at the decision of the committee of secretaries, which reviewed the Sixth Pay Commission report to change the award, the services have said that the civil officers of 'group A' services and the central paramilitary forces have also been placed in the higher pay band.
According to the burgeoning bureaucracy, the military's attitude towards the civil service stems from a fundamental misunderstanding of its nature and role. German thinker Max Weber believed that bureaucratic organizations were an attempt to align the decision-making process to "calculable risks", as rationality was inseparable part of the bureaucratic order. While Weber's rather romanticized vision of bureaucracy has been modified by later-day thinkers, the concept of "rational bureaucracy" has continued relevance in an era of increasingly complex decision-making process.
Bureaucrats are believed to act as a bridge between legislative intent and implementable policy—they are supposedly involved with all three functions of formal policymaking: agenda-setting, policy formulation and its implementation.
The civil servants have convinced the system that the tasks of modern governance are too complex, technical and enormous to be left either to the legislature or political heads of departments. Moreover, the political executive and Parliament may lose sight of the broader and serious questions of national importance if they were to enter into the details of routine administration.' The Devil in the Detail'
Therefore, the argument put forward by the armed forces that civilian control of military is restricted to politicians thanks to the prevailing bureaucracy has been made to look as blithe ignorance of basic tenets of public policy as well as the provisions of the Indian Constitution which provides an explicit constitutional basis to bureaucratic services—India's parliamentary form of government is enmeshed intractably with the support of the civil bureaucracy
Where did the civil service go wrong? Was it inheriting the British legacy?
When the country attained freedom, a major concern of our visionary founding fathers was to ensure that there was no disruption in administration and that the unity and integrity of the country was not undermined.
The task was not easy with over 600 Princely States spread all over the country, and each State having an administrative structure of its own. Besides achieving the integration of Indian States, the country had to face the aftermath of Partition
and look after millions of refugees who had to flee Pakistan.
To add to the problems, the country had to fight a war in Jammu and Kashmir, with a depleted Indian Army. The British Indian Army as it existed in colonial India was divided between India and Pakistan, and British Officers left India. So also the
officers of the Indian Civil Service.
Remember this, the so called administrators (Government servants) had an adversarial relation with the national political parties during the fight for Independence the travesty was that post independence it was the same class of adversaries whom the political founders used for implementing the policies of the national government.
Much of the credit for the creation of the All India Services, particularly the IAS and the IPS should go to the first Home Minister of the country, Sardar Vallabhai Patel.
The administrative system was strengthened by the creation of the Indian Administrative Service and the Indian Police Service - as all-India Services. They were conceived as meritocracies. Selections were made on pure merit, on the basis of
competitive examinations, followed by interviews.
The officers were posted to different States after training. While the States had control over them, as far as disciplinary matters were concerned the Centre retained authority. This gave rise to a classic situation, a slave who had two masters becomes completely free.
The worst of the ills that followed were high level of corruption, increasing politicization and absence of accountability(read performance linked pay).The rationale for new pay commission was that these best and bright government officers needed to be benchmarked with say an IT Professional.
(Whereas during this slow down we are seeing these high paid IT Professionals being "laid of" and given "pink slips" what about the Civil Servant?)
Whereas a politician who does not 'deliver' is either kicked ( or atleast can be kicked) out by the real masters(people) or is chased by his vindictive political adversary(I am from Tamil Nadu!) and that a high paid corporate executive can be given a 'pink slip'. The civil servant neither has performance targets nor can technically ever be 'sacked' (at max only suspended or transferred).
There was a time when government servants/civil servants were universally respected. Their honesty, integrity and devotion of duty were taken for granted. This is no longer the case. They do not stand out from the rest of the bureaucracy any more; there are as good or bad as the rest of the system. Degeneration has crept into its cadre since the service no more continues to attract best of talents in the country.
The main reasons for the change that has occurred are
Overwhelmed by the constant feed of praise and adulation, the maturing entrant tends to lose his head and balance. He believes that he is infallible, thanks to his intellectual superiority and his gathered wisdom accumulated while working in different fields of government.
The rather enthusiastic diffident youngster of early idealistic years, in course of time, is transformed into an arrogant senior fond of throwing his weight around; he becomes a conceited prig.
The national emergency between 1975 and 1977. when the leadership spoke of a 'committed bureaucracy' that was running the country irrespective of the political instability.
The value systems crumbled further in the 1980s and early 1990s, when degeneration of political leadership created an ethos of unashamed corruption. The corrupt politician started working hand in glove with the corrupt civil servants and the two
blatantly threw political integrity and Service honesty completely overboard.(Remember the Lage Raho Munna bhai sequence where an old retired government employee strips himself bare to get his pension?)
The official does not realize that some time in the future the hunter would invariably end up getting hunted. This was shown beautifully in the 80's by the national award winning Girish Kasarvallis Kannada film Tabarana Kathe.
Tabarana Kathe is the story of Tabara Shetty, a government servant in the ranks of a watchman. Tabara Shetty serves the Government till his retirement period. He is a dedicated worker and respects the system that sustained him for so long. But problems emerge after his retirement. Tabara never gets his pension money(The System as of Today : A Pensioner even if from the Armed Services needs to prove every month that he is alive by submitting a life certificate collecting the pension in person is not a sufficient proof that one is alive).In his failing old age, Tabara approaches the officials he had served during his tenure. Except for a few sympathisers, nobody helps Tabara get his pension. Matters worsen when his wife and only companion in the world falls sick with diabetes. She has a sore foot which turns to gangrene. Tabara tries all means to get his pension to treat his wife(When Tabara fails to manage his wife's operation, in a moment of desperation, he goes to a local butcher and asks if he would ampute his wife's leg. This intense scene was shot brilliantly.). After a few months, his wife dies. The pension money arrives after that. Tabara curses his higher officials and the administrative system which ruined his life.
The climax was the highlight of the film as in all Girish Kasaravalli's films. Tabara finally receives his pension. But everything is over. His sole companion has left this world. Standing in front of his past government office, Tabara shouts at the office staff and holds them responsible for his wife's death.
The dilution of the original concept of meritocracy has crept in over a period of time.
The first blow to Patel's merit scheme came from the Constitution, which reserved seats for scheduled castes and tribes in the competitive examinations. Next, was the step taken by Charan Singh in 1979 when the promotion quota for the state civil
services was increased from 25 percent to 33 percent.
This was followed by the Late V.P. Singh(who infact died on the 2nd day of the Mumbai terror attack) who brought the total reservation to 50 percent by reserving seats for a new category of 'other backward classes'. Further additions to the list were made by the 'humble farmer' Deve Gowda who proposed to slash the percentage of direct recruits, and Dr Manmohan Singh who has declared reservation of three percent for physically handicapped persons.
The Service lost the habit of taking initiatives and became blind executors or "Dilbert's" of policy, perhaps because a larger proportion of the annual intake drawn from technical disciplines and premier engineering institutions(yours truly a Chemical Engineer) found itself incapable of intellectual initiative and people skills.
They were excellent test takers who could beat by hook or crook any psychometric test(Again Remember Munna Bhai?) but unlike their courses they did not have an exam to be graded end of the year.Blind execution without any application might be good but it also gives rise to comical situations.
The British bureaucracy had a post for a person to climb the cliff of Dover daily and report if Napoleon was coming The post was abandoned in 1946!
The Degeneration has continued unchecked, the service has reached such a deplorable stage that the government and the people would (if not already) refuse to accept it as the premier service if the 'real' truth got out .
Hence the whole strategy has been very cleverly evolved to blame the political class for all ills that ails the system wait for events like these terror attacks stand back and wait for the emotionally charged gullible public (who just want to give vent to their feelings for about 48 or in this case 62 hours) to further make the politicians look like villains, when infact Politicians are really simpletons, puppets who have always been frustrated with the Sir Humphry Appelbys and Bernards of the Burecrautic class.
The Great Britain as a standing Example.
If it can be done in Britain the birthplace of 'using the art of game theory by bureaucrats we can try to do it as well right here in India'.
The British Political class thought that they achieved significant progress by trying to make the civil service considerably streamlined and efficient atleast however it was just another classical case of government servants gaming the theory of public choice.
Public choice in economic theory is the use of modern economic tools to study problems that are traditionally in the province of political science.
In particular, it studies the behavior of voters, politicians, and government officials as (mostly) self-interested agents and their interactions in the social system either as such or under alternative constitutional rules
All these theories tended to support the beliefs of what were then fringe economists such as Friedrich von Hayek, whose economic models left no room for altruism, but depended purely on self-interest, leading to the formation of public choice theory.
The economist James M. Buchanan decries the notion of the "public interest", asking what it is and suggesting that it consists purely of the self-interest of the governing bureaucrats. Buchanan also proposes that organizations should employ managers who are motivated only by money. He describes those who are motivated by other factors—such as job satisfaction or a sense of public duty—as "zealots".
This( as well as works of other leading social engineers like Laing (who was infact a shrink) led to a widespread popular belief that the state created by these bureaucrats was purely and simply a mechanism of social control which calculatedly kept power out of the hands of the public and made it appear to the public that all the powers was with the political bosses and that the bureaucrat was infact a humble public servant. Documentary maker Curtis in this three part Documentary The Trap, shows that it was this belief that allowed the theories of Hayek to look credible, and underpinned the free-market beliefs of Margaret Thatcher, who sincerely believed that by dismantling as much of the British state as possible—and placing former national institutions into the hands of public shareholders—a form of social equilibrium would be reached. This was a return to the mathematician Nash's work, in which he proved that if everyone was pursuing their own interests, a stable, yet perpetually dynamic, society could result. The documentary ends with the suggestion that this mathematically modeled society is run on data—performance targets, quotas, statistics—and that it is these figures combined with the exaggerated belief in human selfishness that has created "a cage" for Western humans.
Way ahead.
'The First step in solving a problem is accepting there is a problem'-Anonymous Alcoholic! We cannot fight terror, with a pathetic back up system.
It must be recognized that a complete overhaul of the civil services structure at this time is neither feasible nor possible and hence the best alternative is to scrape the system completely and start out with a new system of administrative governance with proper checks, balances and performance linked pay.
Suggestions for 'transforming' the civil services into an effective instrument of good governance and hence our Society
1) make the Service politically neutral and to insulate it from political influences or interferences that distort its proper functioning.
2) Raise the level of accountability so that the performance of the civil servants in administrative delivery at every level are objectively analysed to decide their individual future. The third
3) bring about systemic changes designed for qualitative improvement of the Service and the performance of its men and women.
Angry Mumbaikars and Ms.Shobha De.
Hence Ms.Shobha De The reason why the cops dont have proper protection gear is not politicians, it is the Multi layered process which is followed by the treasury and its secretaries by which even if protection gear were available they would have to sign a register which has green colour paper and red check boxes to get that by which time.......
Forgive 'em politicians they are simpletons.
P.S: Do you blame politicians or the administrative system that shepards our pride NSG commandos in BEST Buses? Are we not missing something here and blaming the wrong side?
Pay commission Bureaucracy Vs The Armed Forces
A retired civil servant once told me that India is a great democracy and will never get into a Pakistaniske dictatorship situation since It is to the credit of Indian civilian and military leaders and to our burgeoning democracy that the concept of civilian control of the military has been maintained in independent India. Unfortunately, its exact contours still remain unclear, leading to unavoidable incidents of civil-military confrontation.
The Armed Forces argue that while they accept political control, they rightly feel that "bureaucratic interference" is unacceptable. That much of the civilian bureaucracy—particularly the Indian Administrative Service—is seen as conniving and scheming, concerned only with furthering its parochial interests(which is actually fine by the theory of public choice), further inflames the Armed Forces' sense of injustice. As seen in the imbroglio on the recommendations of the Sixth Pay Commission, this resulted in a confrontation between the bureaucracy and the military brass
Angry over what they describe as a deliberate attempt by the bureaucracy to erode the parity of the crucial middle-rung officers — army lieutenant colonels
and their equivalents in the air force and the navy — with the civil servants, the three Defence services decided not implement the new central pay rules, notified on August 30.
The defence services pointed out that four successive pay commissions, including the recent one, had placed lieutenant colonels(The next rank that the NSG Commando Late Major Unni Krishnan would have got on promotion ) on a par with directors(selection grade) from the Indian Administrative Service(Equivalent of State HOD's and takes about 12 years to achieve and who can indefinitely delay passing the reward cheque that Unnis Father has been promised by the political class ). Expressing surprise at the decision of the committee of secretaries, which reviewed the Sixth Pay Commission report to change the award, the services have said that the civil officers of 'group A' services and the central paramilitary forces have also been placed in the higher pay band.
According to the burgeoning bureaucracy, the military's attitude towards the civil service stems from a fundamental misunderstanding of its nature and role. German thinker Max Weber believed that bureaucratic organizations were an attempt to align the decision-making process to "calculable risks", as rationality was inseparable part of the bureaucratic order. While Weber's rather romanticized vision of bureaucracy has been modified by later-day thinkers, the concept of "rational bureaucracy" has continued relevance in an era of increasingly complex decision-making process.
Bureaucrats are believed to act as a bridge between legislative intent and implementable policy—they are supposedly involved with all three functions of formal policymaking: agenda-setting, policy formulation and its implementation.
The civil servants have convinced the system that the tasks of modern governance are too complex, technical and enormous to be left either to the legislature or political heads of departments. Moreover, the political executive and Parliament may lose sight of the broader and serious questions of national importance if they were to enter into the details of routine administration.' The Devil in the Detail'
Therefore, the argument put forward by the armed forces that civilian control of military is restricted to politicians thanks to the prevailing bureaucracy has been made to look as blithe ignorance of basic tenets of public policy as well as the provisions of the Indian Constitution which provides an explicit constitutional basis to bureaucratic services—India's parliamentary form of government is enmeshed intractably with the support of the civil bureaucracy
Where did the civil service go wrong? Was it inheriting the British legacy?
When the country attained freedom, a major concern of our visionary founding fathers was to ensure that there was no disruption in administration and that the unity and integrity of the country was not undermined.
The task was not easy with over 600 Princely States spread all over the country, and each State having an administrative structure of its own. Besides achieving the integration of Indian States, the country had to face the aftermath of Partition
and look after millions of refugees who had to flee Pakistan.
To add to the problems, the country had to fight a war in Jammu and Kashmir, with a depleted Indian Army. The British Indian Army as it existed in colonial India was divided between India and Pakistan, and British Officers left India. So also the
officers of the Indian Civil Service.
Remember this, the so called administrators (Government servants) had an adversarial relation with the national political parties during the fight for Independence the travesty was that post independence it was the same class of adversaries whom the political founders used for implementing the policies of the national government.
Much of the credit for the creation of the All India Services, particularly the IAS and the IPS should go to the first Home Minister of the country, Sardar Vallabhai Patel.
The administrative system was strengthened by the creation of the Indian Administrative Service and the Indian Police Service - as all-India Services. They were conceived as meritocracies. Selections were made on pure merit, on the basis of
competitive examinations, followed by interviews.
The officers were posted to different States after training. While the States had control over them, as far as disciplinary matters were concerned the Centre retained authority. This gave rise to a classic situation, a slave who had two masters becomes completely free.
The worst of the ills that followed were high level of corruption, increasing politicization and absence of accountability(read performance linked pay).The rationale for new pay commission was that these best and bright government officers needed to be benchmarked with say an IT Professional.
(Whereas during this slow down we are seeing these high paid IT Professionals being "laid of" and given "pink slips" what about the Civil Servant?)
Whereas a politician who does not 'deliver' is either kicked ( or atleast can be kicked) out by the real masters(people) or is chased by his vindictive political adversary(I am from Tamil Nadu!) and that a high paid corporate executive can be given a 'pink slip'. The civil servant neither has performance targets nor can technically ever be 'sacked' (at max only suspended or transferred).
There was a time when government servants/civil servants were universally respected. Their honesty, integrity and devotion of duty were taken for granted. This is no longer the case. They do not stand out from the rest of the bureaucracy any more; there are as good or bad as the rest of the system. Degeneration has crept into its cadre since the service no more continues to attract best of talents in the country.
The main reasons for the change that has occurred are
Overwhelmed by the constant feed of praise and adulation, the maturing entrant tends to lose his head and balance. He believes that he is infallible, thanks to his intellectual superiority and his gathered wisdom accumulated while working in different fields of government.
The rather enthusiastic diffident youngster of early idealistic years, in course of time, is transformed into an arrogant senior fond of throwing his weight around; he becomes a conceited prig.
The national emergency between 1975 and 1977. when the leadership spoke of a 'committed bureaucracy' that was running the country irrespective of the political instability.
The value systems crumbled further in the 1980s and early 1990s, when degeneration of political leadership created an ethos of unashamed corruption. The corrupt politician started working hand in glove with the corrupt civil servants and the two
blatantly threw political integrity and Service honesty completely overboard.(Remember the Lage Raho Munna bhai sequence where an old retired government employee strips himself bare to get his pension?)
The official does not realize that some time in the future the hunter would invariably end up getting hunted. This was shown beautifully in the 80's by the national award winning Girish Kasarvallis Kannada film Tabarana Kathe.
Tabarana Kathe is the story of Tabara Shetty, a government servant in the ranks of a watchman. Tabara Shetty serves the Government till his retirement period. He is a dedicated worker and respects the system that sustained him for so long. But problems emerge after his retirement. Tabara never gets his pension money(The System as of Today : A Pensioner even if from the Armed Services needs to prove every month that he is alive by submitting a life certificate collecting the pension in person is not a sufficient proof that one is alive).In his failing old age, Tabara approaches the officials he had served during his tenure. Except for a few sympathisers, nobody helps Tabara get his pension. Matters worsen when his wife and only companion in the world falls sick with diabetes. She has a sore foot which turns to gangrene. Tabara tries all means to get his pension to treat his wife(When Tabara fails to manage his wife's operation, in a moment of desperation, he goes to a local butcher and asks if he would ampute his wife's leg. This intense scene was shot brilliantly.). After a few months, his wife dies. The pension money arrives after that. Tabara curses his higher officials and the administrative system which ruined his life.
The climax was the highlight of the film as in all Girish Kasaravalli's films. Tabara finally receives his pension. But everything is over. His sole companion has left this world. Standing in front of his past government office, Tabara shouts at the office staff and holds them responsible for his wife's death.
The dilution of the original concept of meritocracy has crept in over a period of time.
The first blow to Patel's merit scheme came from the Constitution, which reserved seats for scheduled castes and tribes in the competitive examinations. Next, was the step taken by Charan Singh in 1979 when the promotion quota for the state civil
services was increased from 25 percent to 33 percent.
This was followed by the Late V.P. Singh(who infact died on the 2nd day of the Mumbai terror attack) who brought the total reservation to 50 percent by reserving seats for a new category of 'other backward classes'. Further additions to the list were made by the 'humble farmer' Deve Gowda who proposed to slash the percentage of direct recruits, and Dr Manmohan Singh who has declared reservation of three percent for physically handicapped persons.
The Service lost the habit of taking initiatives and became blind executors or "Dilbert's" of policy, perhaps because a larger proportion of the annual intake drawn from technical disciplines and premier engineering institutions(yours truly a Chemical Engineer) found itself incapable of intellectual initiative and people skills.
They were excellent test takers who could beat by hook or crook any psychometric test(Again Remember Munna Bhai?) but unlike their courses they did not have an exam to be graded end of the year.Blind execution without any application might be good but it also gives rise to comical situations.
The British bureaucracy had a post for a person to climb the cliff of Dover daily and report if Napoleon was coming The post was abandoned in 1946!
The Degeneration has continued unchecked, the service has reached such a deplorable stage that the government and the people would (if not already) refuse to accept it as the premier service if the 'real' truth got out .
Hence the whole strategy has been very cleverly evolved to blame the political class for all ills that ails the system wait for events like these terror attacks stand back and wait for the emotionally charged gullible public (who just want to give vent to their feelings for about 48 or in this case 62 hours) to further make the politicians look like villains, when infact Politicians are really simpletons, puppets who have always been frustrated with the Sir Humphry Appelbys and Bernards of the Burecrautic class.
The Great Britain as a standing Example.
If it can be done in Britain the birthplace of 'using the art of game theory by bureaucrats we can try to do it as well right here in India'.
The British Political class thought that they achieved significant progress by trying to make the civil service considerably streamlined and efficient atleast however it was just another classical case of government servants gaming the theory of public choice.
Public choice in economic theory is the use of modern economic tools to study problems that are traditionally in the province of political science.
In particular, it studies the behavior of voters, politicians, and government officials as (mostly) self-interested agents and their interactions in the social system either as such or under alternative constitutional rules
All these theories tended to support the beliefs of what were then fringe economists such as Friedrich von Hayek, whose economic models left no room for altruism, but depended purely on self-interest, leading to the formation of public choice theory.
The economist James M. Buchanan decries the notion of the "public interest", asking what it is and suggesting that it consists purely of the self-interest of the governing bureaucrats. Buchanan also proposes that organizations should employ managers who are motivated only by money. He describes those who are motivated by other factors—such as job satisfaction or a sense of public duty—as "zealots".
This( as well as works of other leading social engineers like Laing (who was infact a shrink) led to a widespread popular belief that the state created by these bureaucrats was purely and simply a mechanism of social control which calculatedly kept power out of the hands of the public and made it appear to the public that all the powers was with the political bosses and that the bureaucrat was infact a humble public servant. Documentary maker Curtis in this three part Documentary The Trap, shows that it was this belief that allowed the theories of Hayek to look credible, and underpinned the free-market beliefs of Margaret Thatcher, who sincerely believed that by dismantling as much of the British state as possible—and placing former national institutions into the hands of public shareholders—a form of social equilibrium would be reached. This was a return to the mathematician Nash's work, in which he proved that if everyone was pursuing their own interests, a stable, yet perpetually dynamic, society could result. The documentary ends with the suggestion that this mathematically modeled society is run on data—performance targets, quotas, statistics—and that it is these figures combined with the exaggerated belief in human selfishness that has created "a cage" for Western humans.
Way ahead.
'The First step in solving a problem is accepting there is a problem'-Anonymous Alcoholic! We cannot fight terror, with a pathetic back up system.
It must be recognized that a complete overhaul of the civil services structure at this time is neither feasible nor possible and hence the best alternative is to scrape the system completely and start out with a new system of administrative governance with proper checks, balances and performance linked pay.
Suggestions for 'transforming' the civil services into an effective instrument of good governance and hence our Society
1) make the Service politically neutral and to insulate it from political influences or interferences that distort its proper functioning.
2) Raise the level of accountability so that the performance of the civil servants in administrative delivery at every level are objectively analysed to decide their individual future. The third
3) bring about systemic changes designed for qualitative improvement of the Service and the performance of its men and women.
Angry Mumbaikars and Ms.Shobha De.
Hence Ms.Shobha De The reason why the cops dont have proper protection gear is not politicians, it is the Multi layered process which is followed by the treasury and its secretaries by which even if protection gear were available they would have to sign a register which has green colour paper and red check boxes to get that by which time.......
Forgive 'em politicians they are simpletons.
P.S: Do you blame politicians or the administrative system that shepards our pride NSG commandos in BEST Buses? Are we not missing something here and blaming the wrong side?
Thursday, November 27, 2008
Bombay
Spot Gold has been going up, We have seen in recent years that Precious metal command a "Terror Premium" and we have seen rallies in precious metals during such acts of terror.
Precious metals Futures markets in New York is closed today on account of Thanks Giving wouldn't be surprised to see the Gold Market re open with a Large Gap tomorrow.
Have been reading lot of Blogs and micro blogs on the Mumbai attacks.
Cant help noticing the anger which these guys show in the form of Invectives in their messages.
I think there is only one and quite a simple approach that we as citizens of India can adopt to win this war on Terror.
Just go out and Vote,doesnt matter who you support just go out and Vote and tell all educated people you know to come out and Vote whatever be the election, councillor,legislative,Parliament....
Terrorists hate the spirit of Democracy.
Dedicate this blog to the spirit of Bombay(ya ya you can keep renaming but it will always remain Bombay) and my late dad a true blue Bombayite who introduced me to Cafe Leopold and to Shamiana at The Taj (Cannot forget the unlimited rounds of coffee refils from 200 am (after a mondegar beer,bademiya dinner) till the guys start laying the table for breakfast.
Rafi:
Aye dil hai mushkil jeena yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Ha haa, ha ho ho, ho hi haa ha haa
Hm hm hm hm, hm hm hm , hm hm hm hm hm
Aye dil hai..
(Kahin building kahin traame, kahin motor kahin mill
Milta hai yahan sab kuchh ik milta nahin dil)
Insaan ka nahin kahin naam-o-nishaan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Aye dil hai..
(Kahin satta, kahin patta kahin chori kahin res
Kahin daaka, kahin phaaka kahin thokar kahin thes)
Bekaaro ke hain kai kaam yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Aye dil hai..
(Beghar ko aawara yahan kehte has has
Khud kaate gale sabke kahe isko business)
Ik cheez ke hain kai naam yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Aye dil hai..
Geeta:
(Bura duniya woh hai kehta aisa bhola tu na ban
Jo hai karta woh hai bharta hai yahan ka yeh chalan)
Tadbeer nahin chalne ki yahan
Yeh hai Bombay, yeh hai Bombay, yeh hai Bombay meri jaan
Rafi:
Aye dil hai mushkil jeena yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Geeta:
Aye dil hai aasaa jeena yahan
Suno mister, suno bandhu, yeh hai Bombay meri jaan
Rafi:
Aye dil hai mushkil jeena yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Precious metals Futures markets in New York is closed today on account of Thanks Giving wouldn't be surprised to see the Gold Market re open with a Large Gap tomorrow.
Have been reading lot of Blogs and micro blogs on the Mumbai attacks.
Cant help noticing the anger which these guys show in the form of Invectives in their messages.
I think there is only one and quite a simple approach that we as citizens of India can adopt to win this war on Terror.
Just go out and Vote,doesnt matter who you support just go out and Vote and tell all educated people you know to come out and Vote whatever be the election, councillor,legislative,Parliament....
Terrorists hate the spirit of Democracy.
Dedicate this blog to the spirit of Bombay(ya ya you can keep renaming but it will always remain Bombay) and my late dad a true blue Bombayite who introduced me to Cafe Leopold and to Shamiana at The Taj (Cannot forget the unlimited rounds of coffee refils from 200 am (after a mondegar beer,bademiya dinner) till the guys start laying the table for breakfast.
Rafi:
Aye dil hai mushkil jeena yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Ha haa, ha ho ho, ho hi haa ha haa
Hm hm hm hm, hm hm hm , hm hm hm hm hm
Aye dil hai..
(Kahin building kahin traame, kahin motor kahin mill
Milta hai yahan sab kuchh ik milta nahin dil)
Insaan ka nahin kahin naam-o-nishaan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Aye dil hai..
(Kahin satta, kahin patta kahin chori kahin res
Kahin daaka, kahin phaaka kahin thokar kahin thes)
Bekaaro ke hain kai kaam yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Aye dil hai..
(Beghar ko aawara yahan kehte has has
Khud kaate gale sabke kahe isko business)
Ik cheez ke hain kai naam yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Aye dil hai..
Geeta:
(Bura duniya woh hai kehta aisa bhola tu na ban
Jo hai karta woh hai bharta hai yahan ka yeh chalan)
Tadbeer nahin chalne ki yahan
Yeh hai Bombay, yeh hai Bombay, yeh hai Bombay meri jaan
Rafi:
Aye dil hai mushkil jeena yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Geeta:
Aye dil hai aasaa jeena yahan
Suno mister, suno bandhu, yeh hai Bombay meri jaan
Rafi:
Aye dil hai mushkil jeena yahan
Zara hat ke zara bach ke, yeh hai Bombay meri jaan
Thursday, November 13, 2008
commodityonline.com will be the number one portal for commodities by 31 Dec 2009 ?

Global Derivatives markets have gone to the next step indeed.
Organized Markets have existed to establish a fair value for a service or produce.
Now we have what are reffered to as prediction markets.
Prediction markets are sophisticated markets on which binary contracts are traded.
Derivatives are financial contracts, or financial instruments, whose values are derived from the value of an underlying asset. The underlying asset on which derivatives are based can be commodities, equities (stocks), residential mortgages, commercial real estate loans, bonds, interest rates, exchange rates. Credit derivatives are based on loans, bonds or other forms of credit.
Binary contracts are double derivatives, i.e derivatives of derivatives.
Binary contracts on expiry either yield 100 or 0.
Currently one of the largest prediction market is The Ireland based Intrade(Intrade.com).
Intrade.com has created an exchange for participants to trade (speculate on) events that directly affect our everyday life, like politics, entertainment, financial indicators, weather, current events and legal affairs - these are the various trading categories.
Within each category Intrade.com lists a set of contracts, a contract is an event that will have an unambiguous result.
One trades (speculates on) what one thinks the outcome of that event will be.
For example a political contracts - Will Obama be re-elected President in 2013. There are only two possible outcomes for this contract - Yes, he will be re-elected or No, he will not.
If Obama gets re-elected that contract will close at 100. If on the other hand he fails to win the general election in 2013, the contract - Will Obama be re-elected President - will close at 0.
However, until the election is over that contract will fluctuate in value between 0 and 100 just like a stock, reacting to the news of the day and buying & selling by traders and speculators.
Other contracts listed on them included
1) Will the US economy head into a recession during 2008.(The most active contractlast traded price 91.3 on 13 Nov, this means that participants on Intrade are predicting that there is 91.3 % that US will head into a recesion in 2008, you think they are correct you buy , you think otherwise you sell (Depending on where the prevailing bid and ask are for eg in this contract it is at 91-92)
2) Will Gold close on or above 1000 on 31 Dec 2008.(currently at 15% and quite an active contract)
3) Who will win the Indian elections in April 2009? (not much liquidity)
3) will Britney spears go to the Rehab by 31st Dec 2008? (Dont wish to comment!!)
What the prices mean
Since these contracts trade between 0 and 100, One can think of the price at any time to be the percentage probability of that event occurring.
Going back to our Obama, example, lets say on December 1, 2013 the Obama re-election contract was trading at 63, meaning, traders gave him a 63% chance of being re-elected.
If you thought President Obama will be re-elected you would expect that price to go up - towards 100. In that case, if you bought one contract at 63 and Mr. Obama did get re-elected you would make the difference between your purchase price - 63 - and the closing price - 100 - or 37 points.
Who determines the prices?
Participants decide the price - along with thousands of traders around the world. Just like the price of Google stock is determined by the buying & selling activities of thousands of traders in the financial markets, the price of Intrade contracts are determined by traders,who are confident enough to back up their opinion by risking real money
How does one calculate profits and losses?
Profits are calculates in terms of PIPs, price in points, when a contract trades from 63 to 73 - that's 10 points. Each point is worth 10¢.
If you bought one Obama re-election contract at 63 and he does win the election, that contract will close, or settle, at 100. Your profit will be 37 points x 10¢ per each point or $3.70.
Settlement price – purchase price = your profit
OR
100 – 63 = 37 points X 10¢ per point = $3.70 a profit
On the other hand, if he does not win re-election that contract will settle at 0 and your loss would be 63 points.
0 – 63 = – 63 X 10¢ per point = – $6.30 a loss
Remember, One does NOT have to hold onto any contracts you buy or sell until the election, you can trade out of them any time!
Let’s take another example, you buy 6 contracts at 50 in the morning and sell them out at 73 later that day. You collect 23 points (73 – 50) times 6 contracts times $.10 for each point or $13.80 in profit.
23 points X 6 contracts X $.10 = $13.80.
Coming to contracts of our Relevance, Namely commodities contracts, there are a few active commodity contracts especially in Oil and Gold.
For serious Gold and Oil traders here is a tip, do keep checking every day these markets, they are definetly a clear indicator of the trend and also tell you what one could expect(or not expect) from the market.
Being a new market, Intrade also has a feature called suggest contracts.
And hence i plan to mail them "Commodityonline.com will be the number one portal for commodities by 31 Dec 2009" ? Any one for this bet !
Wednesday, October 29, 2008
The Intelligent Investor.
First they came chasing the commodity broker
and I did not speak out
because I was not a commodity broker.
Then they came chasing the p-note FII broker,
and I did not speak out
because I was not a p-note FII broker.
Then they came chasing the local Stock broker
and I did not speak out
because I was not a local stock broker.
Then they came chasing for me
and there was no one left
to speak out for me!
Inspired by Niemoller
and I did not speak out
because I was not a commodity broker.
Then they came chasing the p-note FII broker,
and I did not speak out
because I was not a p-note FII broker.
Then they came chasing the local Stock broker
and I did not speak out
because I was not a local stock broker.
Then they came chasing for me
and there was no one left
to speak out for me!
Inspired by Niemoller
Sunday, October 19, 2008
Watch out for the Commodity boom ahead
Bail out Good for Commodities.We will see huge run up on commodity prices.
The recent argument that all this financial crisis will lead to economic slow down, causing a soft landing it is also believed that this is going to bring down the price of commodities, however contrary to popular perception people are over looking one fundamental fact, or rather the basic definition of the term INFLATION
In economics, inflation or price inflation is a rise in the general level of prices of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply (monetary inflation); however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflation.Inflation can also be described as a decline in the real value of money—a loss of purchasing power.
Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.Views on which factors determine moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities, as well as to growth in the money supply. The consensus view is a sustained period of inflation is caused when money supply increases faster than the growth in productivity in the economy.
Now is this not the case; The whole world is talking of slow down economic recession et all,lowering of productivity which is causing markets all over the world to tank, and how do the biggies try to solve this 'pseudo liquidity' problem.Presto by printing more notes.Which is extremely inflationary.
One will see the effect of this inflationary measure hitting back at the markets,and leading to a boom in commodities.
SU rep Ron Paul said to CNN " Something has to give. You just can't create more money out of thin air and propping up everybody. It's an immoral system. You're asking the poor people to bail out the rich. You're asking the innocent people to bail out the guilty. You're asking people to just totally defy the Constitution because there's no place in the Constitution that says that we can do these things.
Besides, economically, it's a disaster. This is going to cause a great deal of harm. It's like a drug addict taking a strong fix, and he feels better for a day or two, but believe me, we're going to kill the patient. And the patient here is the dollar system and our entire world economy. I would say let's get off this addiction.
credit markets seem to start loosening a bit to some degree in the short run, but that just means we'll have more inflation. You can't create $5 trillion out of thin air and not expect inflation. So although the dollar may be up a little bit right now because the markets are a little calmer, this just means that in time we're going to all suffer and pay for this, and we're going to pay for it with higher prices"
Obviously Gold investors are going to be very happy about this, since the best hedge against inflation is Gold.
After all The Fed and Treasury are merely cushioning the massive deflationary forces in the financial system by printing more notes!!!
I have been talking to my circle this logic and impressing on them as to why it is still a very good time to be buying into gold and commodities.
After all this is just the beginning of the Commodities Boom,would definitely be surprised if commodity investors do not endorse my view on this! or come with an alternative argument against the commodity bulls who are being now pampered by the global central banks.And definitely the commodity bulls are going to be laughing all the way to the bank.
The recent argument that all this financial crisis will lead to economic slow down, causing a soft landing it is also believed that this is going to bring down the price of commodities, however contrary to popular perception people are over looking one fundamental fact, or rather the basic definition of the term INFLATION
In economics, inflation or price inflation is a rise in the general level of prices of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply (monetary inflation); however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflation.Inflation can also be described as a decline in the real value of money—a loss of purchasing power.
Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.Views on which factors determine moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities, as well as to growth in the money supply. The consensus view is a sustained period of inflation is caused when money supply increases faster than the growth in productivity in the economy.
Now is this not the case; The whole world is talking of slow down economic recession et all,lowering of productivity which is causing markets all over the world to tank, and how do the biggies try to solve this 'pseudo liquidity' problem.Presto by printing more notes.Which is extremely inflationary.
One will see the effect of this inflationary measure hitting back at the markets,and leading to a boom in commodities.
SU rep Ron Paul said to CNN " Something has to give. You just can't create more money out of thin air and propping up everybody. It's an immoral system. You're asking the poor people to bail out the rich. You're asking the innocent people to bail out the guilty. You're asking people to just totally defy the Constitution because there's no place in the Constitution that says that we can do these things.
Besides, economically, it's a disaster. This is going to cause a great deal of harm. It's like a drug addict taking a strong fix, and he feels better for a day or two, but believe me, we're going to kill the patient. And the patient here is the dollar system and our entire world economy. I would say let's get off this addiction.
credit markets seem to start loosening a bit to some degree in the short run, but that just means we'll have more inflation. You can't create $5 trillion out of thin air and not expect inflation. So although the dollar may be up a little bit right now because the markets are a little calmer, this just means that in time we're going to all suffer and pay for this, and we're going to pay for it with higher prices"
Obviously Gold investors are going to be very happy about this, since the best hedge against inflation is Gold.
After all The Fed and Treasury are merely cushioning the massive deflationary forces in the financial system by printing more notes!!!
I have been talking to my circle this logic and impressing on them as to why it is still a very good time to be buying into gold and commodities.
After all this is just the beginning of the Commodities Boom,would definitely be surprised if commodity investors do not endorse my view on this! or come with an alternative argument against the commodity bulls who are being now pampered by the global central banks.And definitely the commodity bulls are going to be laughing all the way to the bank.
Friday, October 17, 2008
Thursday, September 25, 2008
4 E's That Determine Gold Prices
In 2006, My paper 4 E's that cause the Gold Prices to Rise was treated with utmost contempt.
I can now say after 2 years that though I dont consider myself as a clarivoyant atleast I now believe that Markets are after all about common sense which is pretty uncommon.
Thanks to Sangeetha Shah of Financial times for this write up.
I can now say after 2 years that though I dont consider myself as a clarivoyant atleast I now believe that Markets are after all about common sense which is pretty uncommon.
Thanks to Sangeetha Shah of Financial times for this write up.
Sunday, September 21, 2008
Impact of sporting Events on Commodity Prices. Singapore F1 GP ?





Beijing olympics had a huge impact on prices of commodities as China had to procure
previously unheard quantities of Steel,copper, Cement etc ahead of the Beijing Olympics.
Similary Singapore ,started the Same, Last year August 2007,which saw a considerable run up in prices of commodities,My Colleague Manoj and I had the opportunity to see the construction activity of the First Night Race GP at Singapore in person way back in July and had come out with our advisory on the same, Due to Compulsions we had to keep these details in private till now, now that there is Just a week away for the Singapore f1 GP here I share my view as well as Snaps of the same,
The 5.05km long street circuit would offer a number of 'twin side' overtaking
opportunities, fast turns and technically challenging sections for F1 race drivers would definetly make this wet race hot!
More than 70 per cent of the street circuit is made up of Singapore’s existing road network. The Paddock building houses the control tower, garages for the teams, hospitality lounges, Press Room and other facilities( A beautiful view of this from the Singapore Flyer is presented above, thanks manoj for this lovely shot taken on a very ordinary SLR)
i. Construction of a 1.2 km road that will form the eastern section of the circuit
ii. A new vehicular/pedestrian underpass and service road leading to the Pit Building
iii. Widening of a stretch of the promenade between the existing outdoor seating gallery and floating platform in Marina Bay
iv. Widening a section of Raffles Boulevard from Nicoll Highway to Temasek Avenue
v. Modifications to existing road kerbs and traffic islands.
Any guess on the quantity of commodities used, the unofficial news is that the Contractors Chan & Chan Co Pte Ltd estimated almost about 77 million dollars to raw material consumption alone :) !!! (Does not include the Lighting,energy and related tertiary commodity consumption)
Definetly a race that would have delighted Senna(and his fans as well), Afterall you can be 100% sure that it is going to rain in Singapore,not to rule out Proffessor and schumi as well.
There were a section of tracks that I observed (The new 1.2 km eastern section you can view that section from the verandah of the Indian Restaurant at the singapore Flyer).This section inspite of it being new I think would be extremely bumpy hopefully it is safe one.(and not end up a tamborella!)
As of rubber burning be sure that you would go back home with that 'incense' deep in yournose adicttive and making you want more and more of that smell!!
Dont miss out this 'commodity prices sensitive' Race Next week!! !!
More Snaps at http://picasaweb.google.co.in/dindiz/F1GPTrack
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