04.08.2008

• Death toll in Himachal temple stampede touches 146!
• Look at how easily rumours kill people! You don’t need any bombs or suicide blasts. Just plain rumours have killed 146 people!
• The stampede occurred in the famous hill shrine of Naina Devi in Himachal Pradesh’s Bilaspur district on Sunday.
• Slowdown in car production
• Car production came down from 1,22,632 units this May to 1,19,307 units in June. The July numbers are expected to be a tad lower.
• An increase in interest rates, a general downturn in the mood and the usual slow down seen in this quarter every year are stated as the reasons for the slowdown. But car makers fear the worst. They are hoping that by October-November things should start moving up.
• But a slowdown does have its positive impact – those many lesser number of cars on our roads. Should we :) or :( ?
  
• Minting money without a penny!
• Read this excellent article that explains how the rich can stay on becoming richer; I suspect at the expense of the not so rich people.
• Very interesting read that throws an insight into the way the market operates.
• Derivatives row heads out of court
• Remember the dispute between various banks and corporates over the derivatives contracts that have gone sour?
• The disputes between banks and companies owe their origin to events over a year ago. At that time, the rupee had touched a new high, below Rs 40 to a dollar. Several banks wooed exporters and convinced them to trade in derivatives. Derivatives offered a better exchange rate than the plain vanilla forward contract. To start with, the lenders advised corporates to borrow from markets where interest costs were lower and, in turn, invest the funds in high-yielding markets.
• Subsequently, these banks told their corporate clients to hedge their positions by buying options. In an option contract, the buyer pays a premium to be able to sell the foreign currency receivable at a pre-determined rate on a future date. Buyers of such products say that bankers convinced them to sign on deals featuring zero-cost structures, in which they could receive an amount to negate the cost of protection.
• However, these structures went haywire after the currencies in which these corporates were holding positions — mainly the Swiss franc and yen —rose dramatically against the dollar. This activated what are known as knock-in contracts — conditions for getting a better exchange rate. As a result, the company ended up paying a lot of money to banks, in some cases every day including Saturdays and Sundays.
• Companies could also not cancel the option contracts, as that would have meant taking the losses on their books. The spiralling losses forced many companies to mount a legal challenge against the banks which sold these products. Companies contested the demands made by banks, saying they were not told of any downside risks when they entered into such deals with banks.
• However, the banks counter this charge, saying that these same companies had not made any allegations of mis-selling when they were making huge profits on the same contracts earlier when the dollar was much stronger.
• This has prompted some corporates taking the banks to court. But the courts did not oblige the corporates with any interim relief. This has forced the corporates now to do a rethink and settle the issue out of court as realization dawned on them that protracted legal battles will not shore up their account books. Some banks too have realized this and have opted for the out of court route.
• Madban, the Konkan village
• Is it set to become the nuclear Madhuban in the post nuclear deal scenario?
• This small, sleepy village along the picturesque Konkan coast, has been keenly tracking the Indo-US nuclear deal. Because this tiny hamlet would probably bear the first visible sign of India’s nuclear resurgence. It will house a giant 10,000-mw power plant that will run on imported uranium.
• Look at this graphic for more info on the plant.
• Anil Ambani set to become the new King on the sporting err… sporting ownership firmament?
• He seems to have developed a penchant for doing seemingly ‘odd’ things. But I suspect that there is a method in this madness.
• He seems to be ready to shell out $260 mn (that is $514 mn) for owning Newcastle United, an English Premier League football club.
• If the deal goes through, RADAG may have a larger visibility footprint in Europe. Think about this: if he were to spend the same kind of money on an ad blitz by hiring some top ad agency in Europe, will he be able to get the same visibility as he could now by owning an EPL club? That too a club which will most probably showcase his turn-around talents?
• Language lesson: epistolary
• Written in the form of or carried on by letters or correspondence
• Usage eg.: You may be surprised to find this letter addressed to you, but I thought you would probably be the right person to engage in this epistolary exercise.
• RBI making a gradual shift to non-dollar currencies to invest?
• At the moment, this report may appear very innocuous. But in times to come – say in the next couple of years – if other Asian central banks also start behaving in the same way and this gains more momentum, we might see a drastic decline in dollar’s position as the reserve currency.
• I am betting that the dollar will take a big hit in the next couple of years to come. I hope my blogs and I will be around to take a review of my call then.
• Am I a paper tiger version of George Soros? Looks like one, with this call.
• On improving our lot in agriculture
• This is a very good essay that appeared in today’s ET on the subject. Recommend a read.