Archive for December 10th, 2018

RBI Governor Urjit Patel resigns..

December 10, 2018

Well, well, well.

This has come from nowhere:

On account of personal reasons, I have decided to step down from my current position effective immediately. It has been my privilege and honour to serve in the Reserve Bank of India in various capacities over the years. The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank’s considerable accomplishments in recent years. I take this opportunity to express gratitude to my colleagues and Directors of the RBI Central Board, and wish them all the best for the future.

Urjit R. Patel

10th December 2018

Really terrible and sad the way events have been folding in the last few days…

The importance of reading annual reports in company valuation

December 10, 2018

Vikas Vardhan Senior Equity Analyst at Value Research Stock Advisor posts on the importance of reading and figuring annual reports.

After all there is this famous Buffet quote:

‘Other guys read Playboy, I read annual reports,’ said Warren Buffett in an interview when asked about how he discovered and got conviction in PetroChina, one of his best investments, which yielded more then 50 per cent over five years…..


If you are a cricket enthusiast, you can surely make out the difference between a T20 and a test-match commentary. A T20 match commentary gives a ball-by-ball description of the shots played and the runs scored. On the contrary, a test-match commentary is slightly slow-paced and discusses the strategy of players and the teams, how they played in the last match, their future potential, etc. While a T20 commentary reminds us of quarterly results, test matches are the equivalent of companies’ annual reports.

Like T20 matches, quarterly results are more glamorous and attract attention in the market, while the release of annual reports is not celebrated, though they are equally, if not more, important as quarterly results. Going through an annual report should be an inherent part of the investment process and merely relying on quarterly results may lead to missing out on important information.

Annual reports are one of the most reliable sources to gather company-specific information in an exhaustive manner. Ideally, annual reports serve two purposes. First, they help generate ideas and take investment actions and, second, they help identify red flags and early signs of trouble when everything seems to be going well. To summarise, annual reports act like an anchor to your investment decision.

He also tells us how and what to read in the indiv sections of the annual report.

A good and important post..

Figuring the roots of French “Yellow Vest” movement…

December 10, 2018

Olivier Blanchard on the yellow vest movement.

He says one has to go back in history to figure the roots of this movement:

…with the end of communism, it became clear that there was no alternative, only a muddle between market intervention and free markets. So long as growth was strong, and all boats were indeed lifted, the problem was manageable. Then growth slowed down, and inequality and insecurity became more salient, with no simple solution in sight.

The center-right and center-left parties tried their best to manage, but their efforts were not good enough. Sarkozy tried reforms but failed. Hollande, his successor, had a more realistic agenda but did not achieve much. Unemployment remained high and taxes increased. People increasingly felt that the traditional parties did not improve their lot, nor did they represent them.

Then came Macron, who correctly pointed out that the left/right distinction did not make much sense anymore, and he won by occupying the large middle. In doing so, he tore the traditional center left and right parties to pieces, leaving only the extreme right and the extreme left as alternatives.

In the process, he may have made the political system worse. As the economy has not improved much yet, people, unhappy with the lack of results, do not have the traditional parties to turn to. Some have joined the extreme left or the extreme right. More have become skeptical of any representation, be it parties or unions, and have taken to the streets. Thus the gilets jaunes was born, a spontaneous and unorganized response, a form of direct democracy.

But unorganized direct democracy does not work. In a country of 65 million people, ancient Athens’ agora-style democracy cannot work. We have seen this in the last three weeks. There is no coherent voice or message emerging from the movement: The state cannot provide more public services and simultaneously lower taxes. In the streets, the movement cannot avoid being hijacked, to its dismay, by anarchists or vandals. It is going nowhere.

The challenge to the government and the political class is immense. If I am right, the sources of the problem are old and deep. The government must convince people that it is hearing them, while making clear that it cannot deliver the impossible. And the opposition must avoid playing with fire: Unorganized anger can lead to chaos.

Interesting bit..

Nobel Prize 2018 lectures

December 10, 2018

The lectures are up on the Nobel website:

  1. People must understand the gravity of global warming. This involves intensive research and resisting false and tendentious reasoning.
    2. Nations must raise the price of CO2 and other greenhouse-gas emissions.
    3. Policies must be global and not just national or local. The best hope for effective coordination is a climate club.
    4. Rapid technological change in the energy sector is essential.


Changing the way we teach monetary policy…

December 10, 2018

Øistein Røisland and Tommy Sveen of Norges Bank write this nice paper:

Monetary policy plays a central role in modern macroeconomics and many countries around the world has adopted inflation targeting as a guideline for policy. We emphasize and explain policy goals and then we assume that the central bank sets interest rates to ensure that these goals are met. We start with a simple model for a closed economy, where we briefly also discuss financial stability. We then expand the model and consider open economies. We develop the analytical results, but we focus on graphical discussions. Effects of various disturbances are analyzed using comparative statics.

They argue how traditional ISLM curve and its later variants hardly refer to the real world. We should instead start with policy goals of the central bank and assume central banks set interest rates to achieve these goals. Moreover, we also need to include financial stability and open economy considerations.


The history of South India is relatively unknown: Rajmohan Gandhi

December 10, 2018

A new book on South India by Rajmohan Gandhi.

In this article, he says (and rightly so) that we know very little about Southern India history:

Billed as “a masterpiece in every sense of the word”, Rajmohan Gandhi’s upcoming book “Modern South India” is promoted by its publisher as an authoritative and magnificent work of history about that will be read and reflected upon for years to come.

“The sounds and flavours of the land south of the Vindhyas — temple bells, coffee and jasmine, coconut and tamarind, delicious dosais and appams — are familiar to many, but its history is relatively unknown,” Gandhi writes in the 500-page book that traces the history of from the 17th century to current times.

But why this historical amnesia?

“For one thing, the South is a large area, where, dauntingly, a great deal happened during the 400 years covered in my study. Secondly, while the story of each powerful culture within the South has been studied in depth, few in either the South or the North have attempted an integrated view of the South as a whole. Thirdly, India’s political power has resided in the North, influencing the focus of academia, not merely the media,” the grandson of Mahatma Gandhi, who has taught political science and history at two IITs, and the University of Illinois, where he currently serves a research professor, told IANS in an email interview.

But is not the only major region suffering from neglect, Gandhi maintained, and asked: “Do we have many histories of western or 

He pointed out that the Maratha history is rich, so is the history of Bengal, and likewise the histories of Assam, Odisha and Gujarat, but there is a case for broader histories of western and 

“Yet the expression ‘South Indian’ conjures up images hardly matched by phrases like ‘East Indian’ or ‘West Indian’, which Indians never use. In places in the US, an ‘East Indian’ is an Indian from India, different from a native American, while ‘West Indian’ suggests the West Indies,” he said.

In the book, Gandhi tells the story of four powerful cultures — Kannada, Malayalam, Tamil and Telugu — as well as the cultures Kodava, Konkani, Marathi, Oriya, Tulu and indigenous that have influenced them. Asked if there was a common thread that binds them all together, he pointed to three elements.

One geographical and the other linguistic, have given the its unity and distinctiveness. Because of the and the Bay of Bengal, European countries like Portugal, Holland, England and impacted the South in ways not experienced by northern and  Secondly, the South’s major languages have Dravidian rather than Sanskritic roots, even though their vocabularies have been enriched by borrowings from Sanskrit and elsewhere. Thirdly, the Dravidian/Aryan question resonates, not necessarily divisively, in many southern minds,” he shared.

Not just general history. But even Southern economic, banking and business history is relatively unknown and unexplored/

More  here:

Should be an immediate pick and read…

How economy and banking differs in western US compared to eastern US?

December 10, 2018

Interesting speech by Randal Quarles, Vice Chairman for Supervision at Federal Reserve.

We all know that throughout the history of the West, banking and finance have played an important role as vital infrastructure for the economy. That remains true today, although it is often overlooked in the traditional litany of issues critical to the West. A strong banking industry is necessary for households and businesses to engage in the spending, saving, and investment that constitute economic activity, and one of the purposes of financial regulation is to ensure that banks continue to be able to serve this purpose. So it is my plan today to talk about the economy of the West and link the recent and future performance of the western economy to the central and supportive role banks play as vital infrastructure in their communities.

But what is Western US?


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