" That's
the secret to life... replace one worry with another."
—Charles M. Schulz
(American, 1922-2000)
Word for the day
kobold (n)
A spirit or goblin, often
mischievous, that haunts houses.
Malice towards none
Does the government has any
clue how to clean rivers?
First random thought this morning
Let’s say a person kindly agrees to give me Rs100 every day but on
the condition that I have to deliver 15% annualized return for all the tranches.
I will probably start expecting Rs100 every day for the rest of my life but
that’s not the point. Let’s carry on and assume that I do manage to find a
stock with a price of Rs80, consensus target price of Rs92 (15% higher than
CMP) and in my view, fair value more like Rs100 (on a 12-month basis).
So, I start buying the stock. Of course, others have also cottoned
on to the idea and the stock moves to Rs90 after a few days (as discussed, my
buying alone does not matter).
I am comfortable buying up to 15% below Rs100 as per the condition
of my investor. However, the consensus target price has meanwhile moved to
Rs104 (15% higher than new CMP) but my fair value is still Rs100. What should I
do?
Should I still buy the stock? (Reproduced from "The bogus argument
of liquidity", report of Kotak Securities)
Don't mistake corrections for reforms
Reform is the most abused buzzword in Indian context at least. The
governments, policy influencers and opinion makers, politicians, popular
commentators, and media experts have misused this terminology to classify all
administrative changes and corrections, including as insignificant steps as
eliminating or adding few columns in the return to be filed annually by the tax
payers.
I have been insisting that the reforms must be distinguished from
mere administrative corrections. A policy measure in order to qualify as
"Reform" must change the status quo materially.
I f I may reproduce what I wrote few months back:
When faced with the task of catapulting the economic activity to a
higher orbit it is imperative for the policy makers to distinguish between
"administrative corrections", "systemic efficiencies" and
"reforms".
For example, 100% FDI in insurance per se may not qualify as a
reform if it merely enhances the capacity of insurers to take more business on
a larger capital base. Making health and accident coverage compulsory for all
employees and petty service providers, including domestic helps, drivers,
porters etc., compulsory would be a reform.
From this view point, I suggest the following illustrative reform
measure that may change the status quo materially.
(1) To exploit the
demographic dividend fully and generate demand, accelerate the wealth transfer
process. Defining the upper bound of wealth and introduction of material estate
duty on people above the upper bound could be one method.
(2) Transfer the power to
impose and collect direct taxes to the local governments. Local governments
(Municipality or Panchayat) should be empowered to decide appropriate taxation
structure and incentive formulae to achieve the objective of social, economic
and gender equalities, sustainability and development.
For example, each local government shall determine which are the
minority communities, or socially and economically backward classes in that
locality and extend reservation accordingly. Similarly, each local council
shall determine the development priorities and allocate resources accordingly.
Given the diversified demographic, ecological and socio-economic profile,
efficient policies for energy, education, employment, industrial development,
ecology conservation etc could be worked out only at the local level.
(3) The ownership of public
resources should be earnestly handed over to “the public”. Instead of few
feudal ministers controlling the resources, the trusteeship of all the natural
resources should be vested in the local governments. The local people
should determine how these resources should be exploited. Industry based on
these resources should be developed on co-operative model with equitable
ownership of local people.
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