Now the price rise

It has been made clear by the Government of India that the increase in price of fuel is imminent. One needs to guess the politically stable limit of the same. Lets see the intensity with which the Communists will react!

If you are out there in the market, do not buy fruits and vegetables to eat, do not collect gold, do not invest in mutual funds, just keep piling inventories of the black gold. Who knows that Oil@125 is the result of such covetous efforts!

And thus it began

Since our minsters were not able to arrive at a decision in their meet yesterday, we already have some news flowing from the oil companies. Rationing has begun!

Interesting!

I find the business of Zopa amazing! The problem obviously in the Indian context is of credit worthiness and frauds. But don’t you have the feeling that I somehow have, this online money lending-borrowing model is the next big thing. Over the years to come, the challenges that this business will face are going to be worked out. Lets see.

Also look into the more benevolent sister: Kiva

Oil and GoI

With crude oil prices hovering around $130 per barrel, what options does the Government of India have?

(a) Increase the fuel prices and link them to the international benchmark; essentially dismantle the administered price mechanism: Economists will argue this to be the best long term solution, but a political disaster with certainty, the policy pundits would claim! If prices are determined based on economic situations (supply-demand equations), then it is quite likely that the end usage will reflect it. Even though the global oil prices have peaked to $130 (and counting), our pockets still shell out the same amount as they used to when oil was at $60. Irrational, isn’t it? Now assume that the prices are left free to be changed. What happens? Petrol selling today at Rs 50 will sell for Rs 70-80. Diesel at Rs 40 will sell at Rs 60. What will you do? Optimize. Yes, one will tend to optimize one’s fuel expense. This in turn will provide for more rational demand scenario. Essentially, improve end user habits and drive down the demand. Which in turn will rationalize the price too. After all this is what true price discovery means. This is also going to encourage investments into alternative sources of energy. Man adapts to changes, sooner or later. The immediate effect would be painful but the long term solution looks good. But, as I write, I believe this is going to be impossible at least for the present Congress government, given the devil of inflation in a country where most part of your income burns in buying food. After all, food prices too will suffer. When Oil price rises, it makes the world bend.

(b) Start rationing of fuel: BPCL tried doing this and had to bear the backlash of its agents, the petrol pump owners. This measure will definitely tighten the usage but introduce black marketing of the black gold.
Also, it will be interesting to see how does the government allocate the fuel – and hence important to understand its overall impact on the industrial growth. Gone are the days of 9% plus GDP growth.

(c) Fuel cess: Some reports were being circulated that we might have to pay that extra buck to use fuel, even if we do not own a car. This cess, like the education cess, could be added to your income tax or to the bill that you pay next when you have a wonderful dinner at a nearby restaurant, in the form of surcharge on service tax. So, where is the incentive to reduce the demand of the fuel. On one hand, the government is subsidizing the fuel (and doing a thankful job of asking me to pay less) and on the other hand it will ask me to pay for fuel even if I do not directly burn it. Why would I not buy a car myself and get some pleasure with the fact that at least I am getting something in return for the buck I paid. Thats is exactly the problem. Where is the incentive to promote public transport? Well, you may argue where is the public transport?

(d) Issue bonds to the oil marketing companies: That is what the GoI has been doing so far. There will be a cap to this measure too. An excess issuance will suck out the liquidity from the system. Money will be at a premium. Interest rates are likely to increase. Already on a downturn, the GDP growth is likely to take a beating.

In any case, I think the Government of India is going to go through its worst days or months. The challenge is to handle the situation tactfully, from an economic and political perspective. Also add to this, the N times increase in the fertilizer prices and hence the rising subsidy bill there too. God save UPA!!

Squash after long

This Sunday I got a chance to play Squash. I played almost after a year, all thanks to Gaurav. The club, where I played, allows for 20 minutes of play only and more after that only if there is no one in waiting. Which of course does not happen in India! Anyways, I felt tremendously happy. Hoping to play more now:)

Also, when will I get to play cricket again? Not the version that is played in the drawing rooms!

Maximum City

I have completed reading “Maximum City” by Suketu Mehta. Indeed an excellent read. I found it quite surprising that the son of a diamond merchant from Gujarat has actually written this masterpiece about Bombay (or Mumbai?).

Descriptions about the underworld, the life of the bar dancers, Bollywood, slums, and about every length and breadth of this city have been dealt with seemingly good hands-on research . Definitely worth a read!

If you ask me, I too find myself in a dilemma. Mumbai to me sucks! Bad traffic, expensive housing, dirt and filth everywhere. But somehow the heart is glued to the place. For me it becomes unimaginable to live in an other Indian city. Still, I would want to leave Mumbai asap. Bewildered and confused!!

Carpooling Initiative

Commute Easy is a great initiative (Thanks to Janak for informing me about this) that aims to make your daily commute easier by connecting you to commuters across the city who share your route.

Pooling can radically improve the chaotic traffic scene in our city. By opting to carpool/bikepool, you can

• Help decongest traffic.
• Lower your own travel costs and stress levels.
• Bring about a reduction in pollution levels.
• Increase productivity and morale.
• Broaden your social network.
• And with Oil@130 now, this certainly looks like a cool option:)

The thing will work more effectively if the number of community members keep increasing. I suggest you give it a try.

Three market idiots

This is an interesting analysis of the different kinds of players in the stock (and real estate, commodities, etc.) market.

There are three varieties of idiots in the market you’re likely to encounter during your trading career. Contemplating the above truth from the great site of Despair, I thought I’d give you a heads up, so you can avoid these laggards in the great Darwinian race. You see, social success is not so different from trading success: you ride your winners and dump your losers. And, trust me, these three are not ones you want to ride:

1) Idiot #1: The True Believer – You’ve probably encountered at least one of these dolts during your market sojourns. They are the ones who have figured out the answer to the market. Not an answer, mind you. *The* answer. It usually is some kind of numerological or astrological scheme, and it is always a hidden secret. Unfortunately, True Believers don’t seem content with keeping their knowledge hidden. They’re always after you to “unlock the mysteries” of the market by sharing in their discoveries. A surprising number of True Believers are also True Bears, which means that they’re forever predicting the end of the financial universe as we know it. They predicted it in 1980, 1990, 2000, and they’re still predicting it. And when the market rallies and proves them wrong? Well, that just means the bubble is getting even bigger and the implosion of the universe will be even more profound. My take on True Believers? This is not investing or trading; it’s cultism. And true believers are at the point where they *have* to believe, or they’d come face to face with the awful realization of the utter waste of time and money their beliefs have brought, as the Dow has risen from 775 to over 12,000 within a 25-year period.

2) Idiot #2: The Gambler – This is the “I’m-giving-up-my-job-to-become-a-trader-because-I-don’t-like-working-9-to-5” idiot. Observe that this bottom-dwelling resident of the phylogenetic scale is not giving up his job because he’s had success at trading. He’s also not giving up his career because he so loves trading that he researches it day or night and has found a winning edge. No, The Gambler doesn’t do anything beyond 9-to-5, because what he’s after are easy riches, not effort and earned success. He hears that others have been successful (usually from Idiot #3), and he figures, “That means I can do it too”. Invariably, the Gambler is attracted to daytrading. Why? It gives him a sense of action, and it justifies his decision to abandon all efforts at productive work. Besides, you can’t really explain to your wife and kids why you’re not out there with working humanity supporting your household when you’re sitting around doing nothing, holding positions for weeks at a time. So the Gambler actively trades in and out of markets, pretends like he’s got a job, and every so often berates his spouse when she wonders when the family will be able to pay its bills. My take on Gamblers? They’re not interested in trading; they’re interested in their fantasy. So interested that they’ll take their bank accounts and families down with them.

3) Idiot #3: The Self Promoter – It’s easy to find the Self-Promoters. By their very nature, they’re in your face hawking their wares, lauding their recent market calls, and promising easy trading success. Open any trading magazine and you’ll see their well-coiffed, grinning idiot faces leering at you, usually as part of a trading “event” that just happens to be selling all their products. The key to recognizing Self-Promoters is that they promote themselves, not ideas or methods. Indeed, a substantial number of them don’t trade. Those include the “Trading Coaches” who promise to improve your confidence, but offer no concrete trading guidance that you could ever feel confident in. They also include the “Gurus” who tout simple chart patterns and indicators, carefully avoiding any possible objective testing of their wonderful setups. Self-Promoters never talk about how hard it is to achieve trading success; that would not sell well, especially among The Gamblers. Instead, they borrow their pitches from the “no money down” real estate guys and tell you how easy it will be to succeed with no capital. My take on Self Promoters? I don’t mind people who deceive others; they’re merely dishonest. It’s the ones that deceive themselves that frighten me. That’s when dishonesty becomes delusion.

So there you have it: a rogue’s gallery of trading idiots. Once you tune your mind to this threefold taxonomy, you’ll have no problems at all recognizing them within moments of their opening their mouths. And, if you want to be happy, you’ll follow the advice of literary critic Dorothy Parker and not toss these idiots aside lightly. Rather, you’ll hurl them with great force.

Britannia

Yesterday, I went to the Parsi restaurant at South Mumbai, named Britannia (not owned by the Wadias of Britannia biscuits fame) for lunch. It was Aditya’s (my current room-mate) idea, Gaurav came along too. The look and feel is similar to Crystal (one opposite Girgaum Chowpatty). Britannia is located at Ballard Estate, near Fort.

It too has a raised sub-level. Similarly, there is no air-conditioning, one can experience the fumes (though more at Crystal) and the crowd keeps pouring in with a couple of groups always in queue outside. We too had a similar fate but got a place without much wait. Aditya had been here before too so he took the initiative to place the order for all of us. He requested for different types of Beri Beri Pulao, something called Kaali Boti (both Parsi dishes) and a known desert, caramel custard. Staff was efficient; service was good.

Food was excellent though expensive. In fact, I felt it was severely overpriced for the ambiance they offer. But who cares. This is what you call building a moat around your business. This is what we term as pricing power.

Only bad thing that took place was that I had a bad day with gastric problems. No one else suffered, so I cant obviously blame Britannia:( Nevertheless, it was a good experience overall with the food. I strongly recommend the place if someone else is paying for the food.

Nation of millionaires – 2

Inflation in India, America and Britain is uncomfortably high, but it could be worse—just ask Zimbabwe:

“During the meal, one of my mates was drinking beer – 750ml bottles of Castle Lager (fondly called bombers) he ordered a 5th one, was advised that the price, which when he ordered his 1st, 2nd 3rd and 4th ones was 160 million per bottle, had gone up to 340 million per bottle.”

So you gonna be fast when you are in Zimbabwe, got that!!

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