Coffee is bad

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

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

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

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

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

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

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

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

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

Bye Bye New York Stock Exchange

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

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

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

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

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

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

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

Round the world for one day

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

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

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

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

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

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

The strange case of John McAfee

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

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

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

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

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

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

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

Cash transfers instead of subsidies

India is embarking on a major revamp of its social security system - replacing subsidised food, fertiliser, fuel, etc etc with direct cash transfers to the bank accounts of the "poor". Is this good or bad ?

The current system involves heavily subsidised foodgrain, fertilisers, fuel, etc being made available to ration card holders through the public distribution system. This suffers from a whole host of problems. Bribery, corruption, pilferage, etc ensure that only a fraction of the stuff ends up in the hands of the targeted people.  In some areas like fuel, cooking gas cylinders are widely misused and the diesel subsidy lands into the pockets of rich car owners. The waste is so incredible that something ought to be done.

The solution proposed is to eliminate all subsidies progressively and instead simply transfer cash by electronic transfers to bank accounts of the target population. Initially it will cover various anti poverty schemes, then extend to cooking gas and kerosene and only finally to food and fertiliser. The Aadhar scheme is intended to enable foolproof identification. This way middlemen and cheats are largely eliminated. The poor use this money to buy their requirements from normal shops selling products at market prices.

The scheme has lots of advantages. Firstly corruption will go down, although it will not be eliminated. The middlemen taking cuts will be put largely out of business. The country's subsidy bill will drastically fall - as the waste will significantly reduce. The entire rotten public distribution system can be disbanded (although it works quite well in states like Tamil Nadu and Chattisgarh).  Today's technology can ensure that fraud and stealing can be drastically reduced.

However, my worry is that once cash reaches the intended family, what will they use it on. The problem is that their buying behaviour is not predictable or controllable. Undoubtedly many men will use this money to drink . Families will use this money for atrocious causes such as dowry, or  to show status. The brilliant book, Poor Economics, draws on extensive research to prove how their decisions might not seem rational. Research shows, even with present incomes, the poor could spend 30% more on food, if they cut out liquor and tobacco.  When they buy food, the choices are not based on calories or nutrition, but on taste and style. On the medical front, they shun expenditure on low cost preventive measures like mosquito nets or chlorine tablets, even when provided free, and instead go to the local quack for a costly useless injection.

Of course, it is not for me, or anybody else, to prescribe what any individual wishes to spend money on. But I certainly have a problem if my tax rupees  go to fund drinking liquor.

Cash transfers have worked in some other countries, notably the Bolsa Familia in Brazil. But this is a conditional transfer scheme - they get a small amount of money ($12 a month) if  the children stay in school, mothers attend pre natal care, etc etc. India plans to give some $70 a month or so as a straight dole.

On balance cash transfers appears a good thing, but it is not an altogether perfect solution and needs to be implemented with care (not gunghoism). It is wise to recall how Kamaraj in the 1960s raised the literacy levels in Tamil Nadu. With great insight he introduced the mid day meal scheme. Families sent children to school so that they could have a square meal. I doubt the move would have been that effective if he had instead given cash for them to buy a meal.

Oh ! What a mess

Come on Argentina. How often do you ask everybody to cry for you ?  On Wednesday, a US District Court Judge detonated an atom bomb (metaphorically, thankfully), in the world of financial markets. As usual, Argentina was at the centre of it. Here is the story, with a little bit of history.

In 2001, Argentina defaulted on its sovereign debt - one of the rare instances of a major country doing so. A default essentially means that a country has no money on the due date to repay a loan it had taken and tells the creditors to fly a kite. The consequences of such an action are drastic - the country immediately becomes an international pariah in financial markets and nobody would lend to it anymore. That has been Argentina's lot for the last decade, and the situation Greece is desperately trying to avoid today.

When Argentina defaulted, most of its creditors got together and negotiated a "restructuring package" which meant that they would get something back at least - spread over a long period of time. It was a crappy deal for the creditors, but at least they would get something. They did this settlement twice- once in 2005 and again in 2010.

Two hedge funds Elliott Associates and Aurelius Capital, however chose not to negotiate and filed a case in the US courts asking for payment in full. The court gave its sentence last Wednesday, which is the metaphorical atom bomb I referred to. The judge ruled that Argentina will have to pay in full to these two hedge funds who sued, even in priority to the vast majority of creditors who settled ! The amount is some $1.3 bn.

This action is like poking a stick in a hornet's nest. All sorts of ramifications abound. First is the predictable response from Argentina, telling the US judge to go stuff himself, saying he cannot order a sovereign nation to do anything. But since the original debt was issued in the US and in dollars, there is some jurisdiction for US courts. However, short of sending in the army, how would the US enforce this decision ? It is hardly likely to start a war to satisfy two hedge funds.  It can resort to freezing Argentinian assets and the like, creating a messy situation.

The creditors who negotiated and settled are crying foul. They will have to wait for some 30 years and get a percentage of the amount, whereas these two funds are supposed to get their money in full immediately. They are suing to stay the decision giving these two funds priority. So anybody who negotiates in future is an idiot. Greece, which is trying to negotiate a restructuring package currently is quivering in the boots.

Then there is the question of a nation "starving" to raise money to pay "evil hedge funds". An angle that is sure to stoke the fires against wicked capitalists. Cristina Fernandez, the Argentinian President, who can effectively rabble rouse, is already singing this tune.

Argentina is appealing (interestingly while saying that the US courts should f@&* off at the same time !) . This will go all the way to the US Supreme Court. 

All this raises the issue of countries borrowing too much and not being in a position to pay the debt back. Very often the money borrowed is wasted away - in subsidies, doles, etc etc. Every country is guilty of this; just witness what the US is up to with debt at completely unsustainable levels - where are they spending the money they are borrowing ? - in fighting wars in Iraq and Afghanistan, in providing free health care to the elderly and the poor and doling out money to the unemployed. How will any of this yield a return so that the debt can be paid back ? Every country is simply borrowing more to pay back the original debt and keep doing exactly what it has been doing.

 Oh ! What a mess.

What happens behind closed doors in a bedroom

What do people do in bed, other than sleeping ? Should be an easy one, isn't it. Well, it turns out not to be so easy. No, it's not what you thought.  Apparently, the activity that is most often done in bed is working ! 

This blogger has often moaned about the complete encroachment of the office in to the home. The awful mobile phone started the trend. The tyrannical Blackberry, despite offering the serious affliction of arthritis of the thumb, turned zillions into addicts.  The tablet completed the victorious rout. The office has completely taken over the home. Wife and kids - can you move to the garage please. 

You know that working in bed is a reality when you see companies offering products that "improve your productivity" while in bed. I had thought that such a claim would strictly be in the realm of the magazines of a certain slant, but apparently these come with a U certificate. Take the example of this bed (online price $5,999)

No, this doesn't rock and shake. Apparently it has more prosaic qualities. It has power sockets built in and one side of the bed can be propped up to let you work while the other side remains flat for your spouse to continue sleeping.

Or how about this laptop holder from IKEA. 

Or something called the "Pyramid Pillow". While it helps you prop up the tablet, apparently its USP is that it can stop pens from getting lost under the sheet.

What is the world coming to ? The future of the human species is under grave threat, if the result of groping in a dark bedroom yields a pen !  If the dominant sound is a ping, instead of what you would expect (no; not a snore !) . When you missed "action" with your spouse (or the significant other) because it was not on your Outlook calendar ? All right, I shall stop here.

Isn't there anything sacred anymore under the onslaught of the office. Can't you retreat into a private sanctuary of your bedroom, without the office crowds joining you. That is why I am dead against the promise of video calling. If I have to do a call from bed, I would rather not have the calling party see me in my pajamas, or worse ! And I certainly don't want to see the other in curlers - and I thought she was very pretty.

Do me a favour. Erect a minefield around your bedroom and shoot the office if it tries to encroach. If your guard is slipping, remember this blog post. And remember that we would all not have been born if the second most common activity that happened in the bedroom was working !