Wednesday, December 02, 2009

As gold scales newer and newer heights, the question on the minds of many a savvy investors is the party nearing an end? Another question that some smart guys in Beijing might be wondering about is - how do we sell some of our 2.27 Trillion USD (T-Bond) reserves without letting the value of the rest of our dollar holdings fall? साप भी मरे और लाठी भी न टूटे

Money will likely start to flow out of gold as more attractive assets emerge. Assets that stand a chance to gain from further weakness in the USD and to a lesser extent, the GBP and EUR. Assets that shouldn't nosedive should it turn-out that the recovery in industrial commodities was purely a result of the Chinese government's USD 586 Billion stimulus package, and that demand appears to limp as the stimulus runs out.

As to the dilemma of the Chinese, we'll have to look at what promoter groups do when seeking to offload a part of their holdings. Some form of pump and dump appears one solution. There could be more. I'll ponder over it over this weekend..

Thursday, November 05, 2009

RBI bought 200 tonnes of gold for 6.7 billion USD, averaging at about 1047 USD/t.ounce..
How do we read into this event? Most news articles i read on this subject suggest that this is a trend likely to continue or even exacerbate with more central banks likely to further stock-up on gold. IMF has 200 tonnes more on the block..and Russia, China and India are being seen as the likely contenders to pick this up. But one of the major factors that has led to the gold rally over the last 2 years has been, sustained purchases by China. I mean when u r the fastest growing countryin the world with a mountain of a forex reserve mostly in the currency that you only see depreciating for the next several years, where do u park ur funds? You scramble all over the world buying coal mines, oil wells, precious metals and mineral assets, currencies of other rising-power countries...but then comes a point when u think - when practically every corner of the world trades with me (and hence uses my money - the yuan) why shouldn;t my yuan replace the dollar as the "world's local" currency? This seems to be the new policy emanating from Beijing. Press reports have been doing rounds that this is already happening with some African countries having significant trade with China now settling bilateral transactions in Chinese yuans. With such unsettling times ahead, what asset do you bet on to grow your wealth? Stocks, gold, commodities, crude, chinese yuan, russian rouble? Will continue this in a sequel.

Saturday, January 10, 2009

Earlier this evening, watching a traffic cop negotiate a "fair" bribe with a offending biker at the expense of total chaos around the intersection he was supposed to control, a thought came to mind - how about making traffic policing an independant professional activity something along the lines of Chartered Accountants? Modest targets may be set for cops manning intersections based on expected average daily collections worked out by the traffic department or other independant agencies. The expected revenue per cop based on a simple formula applied to these targets may be auto-debited from the cops' bank accounts. Any fines cops gather over the target would serve as his incentive. Cops who fail to acheive the target despite retraining and mutiple chances could be weeded out. This would address 2 important problems that traffic police face today -
  1. Curb revenue loss through the distribution chain caused by corrupt cops to a large extent.
  2. Provide incentive to cops who otherwise earn meagre salaries, to make money commensurate with the effort they are prepared to put-in.
As the (A)Satyam saga enfolds, why raju spilled the beans is now somewhat clear - he didn't have much choice. Merrill, the IBs entrusted with the task of finding a suitor for satyam, was about to spill the beans to sebi anyway...

A bunch of theories have emerged on what exactly has raju been up to:
  1. If we are to accept his own admission - the failed maytas deal was his last-ditch attempt to tally his b/s inflated over the last several years and by now showing reserves that didn't really exist. The idea being to create a charge against reserves while infinitely delaying payment to maytas (his own son's outfit) so cash outflow wouldn;t really happen at all and there would be somehting to show as to where the cash went.
  2. As the wise Mr. Naresh Chandra wisely pointed out on cnbc, this fax by raju could be plain lies perpetrated by raju to throw investigators off-track. It is quite unlikely that nobody, especially satyam's bankers would never once have noticed in all these years if satyam's statements had been showing deposits (in thousands of crores) with them that didnt exist! May be raju siphoned-off cash from satyam to pay for losses resulting from the recent fall in land prices resulting from real-estate correction across much of the country. (Remember between him and his family-run businesses, they own over 6000 acres of land mostly in AP)
  3. May be raju, over the last couple of weeks ran out of cash so badly that he decided to siphon-off cash from satyam to meet margin calls on his holdings (post the sharp fall in satyam stock prices post the failed maytas deal) pledged with institutions.
What he was thinkng would likely unfold as he "starts talking" in coming days!