This morning, the Financial Express ran a multi-page special on "The Agri Quagmire", examining the decline of agriculture.
MS Swaminathan wrote " About the controversy concerning moratorium on the release of Bt brinjal, the present system of Genetic Engineering Approval Committee (GEAC) headed by an additional secretary, would not work. In future, we have to have recourse of biotechnology for increasing yield."
Parsing what he said, decisions on technology should not be presided over by a bureaucrat. Let alone a pseudo-politician, like Jairam Ramesh, whose 'decision' to suspend approval for Bt brinjal was a wet thumb held up to see which way the political wind was blowing.
In the same feature, YK Alagh, also an agricultural expert, wrote, "The growth rate of grains is around 2%, but non-grain crops are definitely growing faster, led by a very rapid recovery in cotton, which has been the great success story of the recent period."
The success story of cotton is, of course, the success story of Bt cotton, despite the strenuous (not to mention shrill and strident) protestations of the Luddite Lady Vandana Shiva that Bt cotton would ruin farmers. My friend Barun Mitra did us all proud by awarding her the Bullshit Award. The liberal chatterati who feel good reading about evil corporations were taken in by her. Luckily, the impecunious farmer wasn't, and today 80% of Indian cotton is grown from Bt seed.
Saturday, December 11, 2010
Tuesday, December 7, 2010
The 'Lower Freeze'
The Nifty and Sensex have been flirting - with the 6,000 and 20,000 levels respectively.
Over the last 3 sessions, they have gradually melted away from these benchmark numbers; at these levels, Indian stocks are close to their all-time levels, so reluctance to scale new heights is understandable. The more note-worthy dynamic is the schism between leading stocks which make up the Index, and the broader universe: on the Bombay Stock Exchange yesterday, declines beat advances 2037 to 881, a factor of more than 2 is to 1. And, if my early-morning count is right, the number of stocks hitting the lower circuit-breaker was 256. This is an extremely large number.
When a stock hits a lower circuit, it makes for an interesting statistic; more importantly, it signals a certain desperation for the seller, one which gets frustrated by the unwillingness of any buyer to pick up the stock at that price. When the stock goes into lower freeze for several days, investors are unable to find an exit for several days at an end.
A recent exhibit in this category is Money Matters, the 'consultancy' firm, for want of a better word, which was at the heart of the bribes-for-loans scam. Since the scam burst on Nov 22nd, the share has hit lower freeze every single trading day, taking the price from Rs. 694 to Rs. 241 yesterday. The number of shares being traded has been negligible: yesterday, for example, only 227 shares were transacted. Compare this to the 242 thousand shares transacted when interest in the share had peaked.
A share which joined the 'lower freeze' club yesterday was U-Flex, the packaging giant promoted by Ashok Chaturvedi, who has often been in the news, not always for the most edifying reasons. From July through November, shares of U-flex and other manufacturers of polyester (PET) packaging film had surged impressively as international shortages of PET had allowed prices to rise in a fashion that was punishing to end-users. This was clearly a phenomenon that had to end, and share prices peaked on October 25. Yesterday's 20% drop for U-Flex, however, came on the news that Ashok Chaturvedi has been sentenced to 4 years in jail, along with the IAS officer Neera Yadav, who had headed NOIDA at a time when initial land allotments were being made there; allegedly, Ashok Chaturvedi had a good side business going, helping Ms. Yadav fiddle these allotments for some pocket money. Allegations had been wide-spread at the time, yet they didn't prevent Ms. Yadav becoming Chief Secretary of U.P. Now she seems headed for the lock-up, too.
These are only 2 case studies, out of 250 + stocks, but I wonder whether there is a broader pattern here and investors are sniffing out companies where things are not quite above-board. If markets can punish fraudulent promoters, justice (though partial) will be a lot more rapid than through our creaking legal system.
Over the last 3 sessions, they have gradually melted away from these benchmark numbers; at these levels, Indian stocks are close to their all-time levels, so reluctance to scale new heights is understandable. The more note-worthy dynamic is the schism between leading stocks which make up the Index, and the broader universe: on the Bombay Stock Exchange yesterday, declines beat advances 2037 to 881, a factor of more than 2 is to 1. And, if my early-morning count is right, the number of stocks hitting the lower circuit-breaker was 256. This is an extremely large number.
When a stock hits a lower circuit, it makes for an interesting statistic; more importantly, it signals a certain desperation for the seller, one which gets frustrated by the unwillingness of any buyer to pick up the stock at that price. When the stock goes into lower freeze for several days, investors are unable to find an exit for several days at an end.
A recent exhibit in this category is Money Matters, the 'consultancy' firm, for want of a better word, which was at the heart of the bribes-for-loans scam. Since the scam burst on Nov 22nd, the share has hit lower freeze every single trading day, taking the price from Rs. 694 to Rs. 241 yesterday. The number of shares being traded has been negligible: yesterday, for example, only 227 shares were transacted. Compare this to the 242 thousand shares transacted when interest in the share had peaked.
A share which joined the 'lower freeze' club yesterday was U-Flex, the packaging giant promoted by Ashok Chaturvedi, who has often been in the news, not always for the most edifying reasons. From July through November, shares of U-flex and other manufacturers of polyester (PET) packaging film had surged impressively as international shortages of PET had allowed prices to rise in a fashion that was punishing to end-users. This was clearly a phenomenon that had to end, and share prices peaked on October 25. Yesterday's 20% drop for U-Flex, however, came on the news that Ashok Chaturvedi has been sentenced to 4 years in jail, along with the IAS officer Neera Yadav, who had headed NOIDA at a time when initial land allotments were being made there; allegedly, Ashok Chaturvedi had a good side business going, helping Ms. Yadav fiddle these allotments for some pocket money. Allegations had been wide-spread at the time, yet they didn't prevent Ms. Yadav becoming Chief Secretary of U.P. Now she seems headed for the lock-up, too.
These are only 2 case studies, out of 250 + stocks, but I wonder whether there is a broader pattern here and investors are sniffing out companies where things are not quite above-board. If markets can punish fraudulent promoters, justice (though partial) will be a lot more rapid than through our creaking legal system.
Sunday, December 5, 2010
FX swings
As a result of my interest in bullion prices, I have carefully tracked movements in the Euro/USD rate for the last 3 years, as it is widely held to bear a correlation to gold prices. The weaker the dollar, it is generally believed, the stronger is gold.
While this has often been the case, such easy correlations are far from water-tight:
1. In November and December of 2009, the Euro strengthened marginally, but gold shot up by almost 15%.
2. From April to July of this year, 2010, gold and dollar behaved as though the textbooks had to be re-written, and gold moved in opposition to the Euro -
2.1 as the Euro weakened sharply, from 1.35 to 1.20, gold went up, from 1150 to 1250.
2.2 as the Euro reversed, back up to 1.32, gold dropped by almost 100 dollars an ounce.
Aside from the gold-dollar link, the other major development of this year has been the increase in FX volatility. From November 2009 to June of 2010, the dollar had a clear downward trend, from 1.50 to 1.20. And though the line was not smooth, corrections in the curve never exceeded 4%. Since then, though, the Euro-USD graph has not been able to make up its mind - Greek debt crisis, and the dollar zooms; QE 2, and the dollar swoons. Irish bailout, and the Euro slumps again.
Between June 2010 and early December, there have been four shifts in the Euro-dollar trend line:
June to August 1.20 to 1.325
August to Sep 1.325 to 1.26
Sep to Nov 1.26 to 1.42
Nov 1.42 to 1.30
And the latest move, in the first few days of December - 1.30 to 1.36
This volatility is pretty wild - it seems as if the markets cannot make up their mind which loser to bet against.
There seems to be only one clear winner: gold, which takes me back to where I began. Since August 2010, gold has risen 250 dollas an ounce. Gains in silver have been even more impressive.
While this has often been the case, such easy correlations are far from water-tight:
1. In November and December of 2009, the Euro strengthened marginally, but gold shot up by almost 15%.
2. From April to July of this year, 2010, gold and dollar behaved as though the textbooks had to be re-written, and gold moved in opposition to the Euro -
2.1 as the Euro weakened sharply, from 1.35 to 1.20, gold went up, from 1150 to 1250.
2.2 as the Euro reversed, back up to 1.32, gold dropped by almost 100 dollars an ounce.
Aside from the gold-dollar link, the other major development of this year has been the increase in FX volatility. From November 2009 to June of 2010, the dollar had a clear downward trend, from 1.50 to 1.20. And though the line was not smooth, corrections in the curve never exceeded 4%. Since then, though, the Euro-USD graph has not been able to make up its mind - Greek debt crisis, and the dollar zooms; QE 2, and the dollar swoons. Irish bailout, and the Euro slumps again.
Between June 2010 and early December, there have been four shifts in the Euro-dollar trend line:
June to August 1.20 to 1.325
August to Sep 1.325 to 1.26
Sep to Nov 1.26 to 1.42
Nov 1.42 to 1.30
And the latest move, in the first few days of December - 1.30 to 1.36
This volatility is pretty wild - it seems as if the markets cannot make up their mind which loser to bet against.
There seems to be only one clear winner: gold, which takes me back to where I began. Since August 2010, gold has risen 250 dollas an ounce. Gains in silver have been even more impressive.
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