Hoarding achieves new highs

We in India have heard of cartels and hoarding of rice, foodgrains, kerosene and even some vegetables like onions by the shrewd Businessman to jack up the prices. Also we have never heard of any litigation leave alone prosecutions in any of these cases. Hence I was shocked to know that someone actually filed for litigation against the increase in prices of “Eggs” --- yes you got it right “Eggs” due to cartel created by 13 companies – Wow!!!

“Steve Ribbing, who runs a family-style restaurant south of Buffalo, got fed up with the growing dent in his company's bottom line. The culprit? Egg prices, which have jumped nearly 50% over the past two years. Ribbing griped to his attorney, an act that ultimately led to a lawsuit against more than a dozen egg producers and the industry's trade group.
Critics say the price jump since 2006 was not particularly mysterious: egg producers, the plaintiffs contend, conspired to restrict supply as part of a broad scheme to boost prices. Ribbing's complaint moved from his lawyer to a large national firm, finally becoming a sweeping lawsuit that recently gained class-action status on behalf of restaurants, grocers, and other direct buyers nationwide. The litigation's targets include 13 of the nation's biggest egg producers, including Cal-Maine Foods (CALM), Pilgrim's Pride (PPC) and Rose Acre Farms, as well as a Georgia-based industry association, the United Egg Producers (UEP). The average retail price of a dozen eggs, which had been stable for the better part of a decade, soared to $2.20 per dozen in March, after climbing from $1.63 in 2007 and $1.30 in 2006, according to the Bureau of Labor Statistics.”

I hope Venkateshwara Hatcheries doesn’t get any smart ideas from this one!

What goes up comes down or Does it?

On one of those late night shows I came across the Sikkim Mega Super Lotto lottery or something like that where six numbers are picked up and a winner declared depending on how many of your numbers match up to the selected six. As the beautiful hostess accompanied by a somber man who is supposedly some govt. person roll the container to secure the six numbers I wonder how many people actually win this in a lifetime. (By the way I could never figure out what is the need for that person even though he is the sponsor in some way.
I remember that this was a mega craze some years back with Playwin and Super lotto. Cut to 2008 and there is a similar craze in the stock markets “The market has gone down , now is the right time to buy! It will rise…” Both these events are linked, heres how ---
First regarding Super Lotto --
The idea is to pick 6 numbers and match them to six selected from 51 numbers. Sounds easy. The odds of doing so?
If you programmed a computer to randomly generate six different numbers every second taken from the numbers 1 through 51, you would have to wait nearly seven months before every combination came up at least once.
The odds of matching 6 of 6 numbers are 1 in 18,009,460;
5 of 6 are 1 in 66,702;
4 of 6 are 1 in 1,213;
3 of six are 1 in 63.
The odds of winning anything are 1 in 60.
So for the less mathematically inclined, If you buy 100 tickets a week, you can expect to win the jackpot on average every 3,463 years. If you buy Rs 12,50,000 worth of tickets a week, you can expect on average to win about every 14 years. If you expect to live 50 more years, you should buy Rs 350,000 worth of tickets a week if you want to have a good chance of winning the jackpot in this lifetime. Of course, if you do, you may not even break even. You could well be about Rs 100,000,000 in the hole, depending on when you win.
However, if you would be satisfied with getting 5 out of 6, you will have a much easier go of it. You are likely to get 5 out 6 every 12.8 years on average if you buy 100 tickets a week. However, you will have spent nearly Rs 30,00,000 to win about Rs 75,000.
Phew so basically all it means is that the chances are slim. But wait this is just statistical and real life is different. You may never win regardless of how often you play and how much you spend. For e.g. there is a one in two chance of a coin flip coming up heads, but in reality heads might come up more or less than five times in ten flips.
Now the Sensex --
Most retail investors investing on hunches and without proper analysis run similar odds like above. Now to the fallacy that what goes down will come up. Even in super lotto you might think that you can beat the odds by either selecting numbers that have not been chosen in recent drawings, or by selecting numbers that have come up more frequently than expected in recent drawings. In either case, you are committing the gambler's fallacy. The odds are always the same, no matter what numbers have been selected in the past. This fallacy is commonly committed by gamblers who, for instance, bet on red at roulette when black has come up three times in a row. The odds of black coming up next are the same regardless of what colors have come up in previous turns. Dice players frequently commit this fallacy. When they see a player make his point several times in a row, they think the odds of him making his point again diminish. They don't. Those odds are fixed and they never change. For example you see people saying a lot of times just like that without any economic analysis, over a cup of tea but with all the worldly wisdom ‘The markets have tanked for long enough now they will rise”…. And what do we say --- Correct ‘The Gamblers Fallacy”.

First reversal in the Mobile world

"VietNamNet Bridge reports that Vietnam’s Ministry of Information and Communications (MIC) is planning to raise the inter-province calling tariff on fixed line telephone services, which are said to be below cost price. An MIC spokesman said that the country’s wireline providers have long complained that the more they expand their reach, the more losses they incur.

Under the plan, the tariff for intra-province calls will be increased from the current VND120 (USD0.007) per minute to VND200 (USD0.012) per minute, starting from next year until 2010. Meanwhile, the monthly subscription fee will be reduced from the current VND27,000 (USD1.66) to VND20,000 in a bid to attract new users. After 2010, operators will be allowed to adjust the tariffs in accordance with market changes, but the MIC will set a maximum. "

Now wait a minute – how do users increase because of lowering fixed costs by barely a cent whereas the call rates per minute have increased by 75%.
Is this a sign of things to come even in other markets where given competition there have been brutal price wars leading to customers paying next to nothing. A good thought to think on a weekend over a drink!!!

First impressions: Vietnam

Whats the first thing that’s hits u as you come out of the Hanoi airport – shit did I land in Chandigarh instead of Hanoi!!!! You see Toyata Innovas and Chevrolet Optras roaming around – loads of them. Welcome to Hanoi the Capital of Vietnam where I recently went for a 3 day trip.

Its difficult for an amateur traveler (and all the more an amateur writer) to comment on a country based on a 3 day trip that too a business one and so this is in no way a “Lonely planet guide to Vietnam” but simply an Indians inadverent urge to compare his country with others.

So the next thing I notice in Vietnam is that they already have a well established network of Radio taxis and the average cab is a Hyundai Verna/ Toyota Corolla – the cars which we tout in India as the upper middle class aspiration. And to think of this in a country whose local currency Dong stands at ~17000 to a USD.
A certain politician in Mumbai who opposes the High Court directive for replacement of cabs older than 15 years needs to visit Hanoi – I will sponsor the trip if he promises not to come back ;-)

Roads are better than Mumbai. I fail one more time in finding a city on earth which has roads worse than Mumbai ;-). I think I need to plan a trip to the interiors of Congo next to succeed in my mission.
The trip of 40 minutes from Airport to the Sheraton hotel costs me 300,000 in local currency – and I pay him in 3 notes since they have notes for 100,000. It felt strange for all three days to stay there and talk in millions and thousands for a cup of tea or a short cab drive.

The outskirts of Hanoi could be easily mistaken for the outskirts of any Indian city – agricultural land with small 1 storied houses with thatched roofs. Cows tied in cattle shed and the ubiquitous Innova !!!

You see the conventional headgear of sloping hats and people carrying agricultural produce in baskets hung at both ends of a long bamboo – the image which is unmistakably conjures memories of Vietnam. The people well look the same to me like most others in the region.
I always wonder if I will ever be able to distinguish between a Chinese, Vietnamese or a Japanese face. Try as I may they look same to me. Though people have tried explaining to me several times the difference in the length, width, cheek bone profile etc of the different geographies.

A stroll through mid-town the next day was entertaining and shocking at the same time. Entertaining - The city of Hanoi –as with the entire country – is abundant with small lakes and water bodies which have been converted into parks. The French architecture – they were the former colonists- is beautiful and is evident in the floral patterns and arches. The new architecture retains the old world charm but adds a utilatarian touch to the landscape. There are lake side open pubs and eating places buzzing with young couples and joggers. Though level of physical intimacy is again something at which our high moral ground seeking politicians would smirk at.

Shocking - The retail revolution so evident in neighboring nations seems to have skipped Hanoi. Vietnam it seems doesn’t have a MacDonalds though we did encounter a 3 storied KFC. There isn’t a single shopping mall or a multiplex – atleast I didn’t see any in there shopping district and the trips across town. Most districts is still made up of smaller shops and road-side vendors. There was a brand new CK showroom visible though, so hopefully this is the inkling of the retail revolution.

English is not a common language here and you better be good at explaining in “gestures” to get around, though a lot of people know Mandarin. One thing which is beautiful –As is for me in most countries – is the local food. Its not spicy and is mostly comprised of rice in various forms with roasted meat. A lot of hotels we went to served Pigeon though not sure if it’s a delicacy.

Enquiries with the concierge and locals revealed there is no “watering hole district” or a location in town where the city descends on weekends or nights. This is surprising since generally every city I have visited till date has such a zone e.g. Lang Kwai Fong in HK, Bandra in Mumbai etc. The city doesn’t really have nightlife, though the globally ubiquitous prostitution phenomenon is evidently visible.

Locals were of the view that Ho Chi Minh City is a much more happening place since that’s where the better part of corporates and jobs are. Maybe some other time and some other day I would have a chance to visit HCMC to change my first impressions of Vietnam as a staid place which has still to catch on with “life”

"Jet"tisioned airways

The media got its newsbite from crying employees to sob stories of loans gone bad due to job cuts. Jet airways sacking of 1100 people has sent the media in frenzy. Though I find it funny that people say “I took loans to get educated and now u cant sack me!!!” I remember Irfan Khans dialogue in the movie ‘Life in a Metro’ – “Life doesn’t come with a Guarantee clause” – Did Jet sign a contract to retain you for life? And would these same employees have remained loyal to Jet if Kingfisher offered them a better salary – nope they would jump the ship and cite capitalism. But now that the tables are turned there is a hue and cry. I agree that the way in which they were sacked seems incorrect i.e if media reports are to be believed and they were suddenly told to leave. Again I am sure Jet has its bases covered and the contracts talk of a one day notice.

Two observations on the whole episode for me –

1. It’s a Corporate Communications disaster – Thanks to one of my friends who ‘media-trained’ me I know a little bit of corporate communications and I am sure if he reads this post he can comment more. There is no statement/ communication to the media from Jet airways. Ideally you would expect Naresh Goyal --- (creates much more affinity than the Firang CEO) to come in the media – show sympathy for the employees, place the companies side as to how this is important for the companies well being etc – the message can be different but there needs to be some communication. Instead the Jet attitude is – let the storm pass by
   
2. The Raj Thackeray factor –
   It seems Raj Thackeray is developing an image of “Staller’. You don’t want the taxis to go off road, you are unemployed, anything and anyone “theoretically” wronged irrespective of the basis, larger good, safety and such menial factors whom do you turn to – the Staller. He has mastered the art of politicizing simple initiatives and hats off to him for being such a master politician at a young age. However heres the dilemma he faces – Most of these employees are from out of town i.e Non-Mumbaikars.
   Now how will he make a u-turn of his stated stand against these people?
   Or will he tell Jet to give back 1100 jobs but to Mumbaikars !!! Lets wait for the master to deliver his blow.

How to write a horoscope

Invariably when we open a mid-day or Mumbai Mirror we land up reading our Horoscope – often that’s the only interesting thing to read J. Irrespective of whether we claim to be a believer of destiny and horoscopes we do land up reading and somewhere at the back of our mind assessing its implication/ applicability to whats happening in our life. And to your surprise almost 8 out of 10 times there is some applicability of the prediction on our life. In fact I even have a certain friend of mine who was so influenced by the Linda Goodmans Sun signs book that he decided that based on his sun sign he should marry a “Scorpio” and for a long time attempted only to look for Scorpio girls irrespective of the looks and how they behaved.
So are the Marjorie Orr (Mid-day fame) and the Bejan Daruwalas of Times of India crystal gazers and cousins of the (in)famous Nostradamus? Even if they are how do they write horoscopes which apply to billions of Taureans or Librans worldwide and make them feel it applies to them in some manner? Are the global destinies of all Taureans inter-linked?
The answer to a lot of these questions is “Barnum Effect”

The Barnum effect is the name given to a type of subjective validation in which a person finds personal meaning in statements that could apply to many people.

For example:
“You have a need for other people to like and admire you, and yet you tend to be critical of yourself. While you have some personality weaknesses you are generally able to compensate for them. You have considerable unused capacity that you have not turned to your advantage. At times you have serious doubts whether you have made the right decision or done the right thing.”

Does the above statement sound similar to the ones we read in the news papers or “Sun Sign” based astrology books --- that may be because they did. Such statements are sometimes called Barnum statements and they are an effective element in the repertoire of anyone doing readings: astrologers, palm readers, psychics, rumpologists and so on.

If the statements appear on a personality inventory that one believes has been especially prepared for you alone, one often validates the accuracy of such statements and thereby gives validity to the instrument used to arrive at them. If Barnum statements are validated when they have originated during a psychic reading, the validation is taken as also validating the psychic powers of the medium.

"Barnum effect" is an expression that seems to have originated with psychologist Paul Meehl, in deference to circus man P. T. Barnum's reputation as a master psychological manipulator who is said to have claimed "we have something for everybody."

So the next time you read that horoscope and you think “woow it says I am going to have a financial gain today” – don’t go off and invest in the stock markets, just say “Barnum” five times and move on !!!

A message for the Lungiwala

A recent Business week article speaks of the surplus Forex reserve of India – USD 291 billion as on Sept 2008.
This huge reserve has been build based on years of paranoia about economic fluctuations and need of funds to stabilize the economy. However as per reports we are being too cautious – heres why –
According to IMF guidelines, the forex reserves of a country should be sufficient to meet 3-4 months of its import requirements. In India's case this import coverage is for 14 months.
Further, according to the Greenspan-Guidotti rule proposed by former Fed chief Alan Greenspan, the reserves should be no less than the short term debt liabilities of the country. India is secure by a large margin on this ground as well. Its short term debt totals to less than 15% of the reserves amount.
A case in the point is that before this financial crisis India had Forex reserves of USD 310 Billion. So the entire crisis and all the money used has dented Indian reserves by a mere USD 10 billion.

Regression model by economists suggest that accounting for uncertainities like –
capital account openness,
share of imports,
exchange rate flexibility,
Oil shooting to USD 200 /barrel
and even political stability
India has about USD 106 billion worth of excess reserves.
Currently this entire portfolio is held in US T-bills which fetch 4.5% return compare this with the current inflation we are actually earning negative returns. Now consider what other nations with far lesser reserves do (e.g. Norway) – they invest about 50% of surplus in Sovereign wealth funds (SWF). The average return of these wealth funds has been about 15%. However adjusting for economic shocks and current scenario assume we earn 10% i.e 5% more than current on USD 50 Billion (50% of surplus) we would earn an interest payment of USD 2.5 billion more.
This translated into Rs 12,500 crores. This amounts to ~ 5% of the Budgetary deficit and could fund a substantial portion of the budget deficit for any of the following
- Health and Family welfare – 15000 cr
- School education- ~ 17000 cr
- etc

If its really that simple I hope Lungiwala sees this!!!

Book review: Ravan and Eddie by Kiran Mangrurkar

Recently picked up this book – one for its odd title and secondly as it was highly recommended as an accurate view of the Chawl system – where half of Mumbai lives.
It is the story of two children in a chawl in Mumbai whose lives move along parallel paths on two floors in the chawl. As a child Ravan – with an interesting episode behind how his names changes from Ram to Ravan – jumps of the first floor of his chawl into Eddie (yet to be born) father who is eyeing Ravans mother Parvathi. In an attempt to catch and save Ravan he falls down, hits his head and dies on the spot. Eddies mother Voilet, blames Ravan for “murder” of her husband and inadverently sows the same seed in her Son Eddies mind too – who by the way is born on the next day of his fathers death as Voilet gets here labor pains as the hearse van is moving out and infact is taken to the hospital in the same Hearse van with the dead body ;-). It is a hilarious episode with laugh a second humor – a humor built less in “words’ and more in the characters, they way they think and way they interpret life and events in general. Be it Ravans mother Parvathibai who puts up with her Good-for-nothing husband Shankar rao even when he gets a whore home, or be it Father Angello – the priest who is feb up with Eddies antiques and constant tendency to get in trouble – you can actually visualise the characters through the words – you actualy pause to think “why does he think this way”. But the book focuses entirely on Ravan and Eddie with the supporting cast only making a brief appearance. The book also dabbles into small diversions at the authors whims and fancies into – the rise and fall of Shammi Kapoor or the brief history of Portugese in India – which is extremely entertaining and most down to earth view of these things. Though if you are in a hurry its easy to skip these sections and continue with the section – in fact the author advices u to do so J
True to its word the book does shed light on the life in the chawls of Mumbai and though portrayed in several movies e.g. Katha, is one of the best rendering of the “Chawl mentality’ I have read/seen till date.
The episode where Ravan starts thinking he has also murdered Mohandas Karamchand Gandhi and his confusion due to inability to remember any of the two murders he has been accussed off (atleast that’s what he thinks) is side-splitting.
The grouse about the book –
At times it tends to get explicitly sexual – blame it on Marathi authors and of course it ends suddenly. It leads to no conclusion and should be read only as a rendering of the chawl. In fact it ends so abruptly that you actually turn to see if you have a pirated version with pages missing or something (though I bought an official one online).

Verdict –
For - worth a read for the humor, the characters and for an insider view on the life spent by 50% of Mumbai population in Chawls,
Against - Don’t expect any great philosophy or an ending to the story. Enjoy the ride while it lasts and then just get off!!!

Rating on Sam-meter – 3 on 5