The Many, Diverse ‘Main Points’ of Adam Smith’s the Wealth of Nations

14 06 2018

Mostly Economics

Prof Barry Weingast of Stanford Univ in this paper:

The purpose of this short paper is to demonstrate that in the modern era Adam Smith scholars make a surprising variety of claims about the “main point” of the Wealth of Nations. In these notes, I collect a range of statements asserting the main point and arrange them by categories. Most statements focus on economic topics (60%), though some entries clearly fall under politics (40%). Nearly half of the statements in the literature argue that Wealth of Nations’s main purpose was to provide a theory of economic development. Other categories include the idea that self-interested individuals can support gains from cooperation; ideas about justice, morals, and liberty; and finally, contributions to economic theory.

The diversity of points is striking, indicating not only the work’s richness, but the many different topics to which it made substantive contributions. An obvious interpretation of these results…

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Coffee-can quality- Some thoughts

11 06 2018

Good read!


(This was published in Deccan Chronicle. A few pointers on building a ‘coffee can’ portfolio. )

I mention this terminology “High Quality” stocks quite often, in my writings. Some people have asked me whether I could be specific in defining or explaining what a “High Quality” (HQ) stock is.

Let me put across some characteristics of HQ stocks, as I imagine them to be.

  1. Longevity with Pricing Power

In this era of technological change, life cycles of companies are shortening. So what it means to find HQ is a tough task. Many years ago, we used to talk of NOKIA as a HQ stock. We thought it would last forever. Or Kodak (do not know how many of this generation even know the brand name ‘kodak’). Even a mighty company like General Electric has metamorphosed.

At the same time, we have companies like Unilever, P&G, Gillette, Cummins, 3M etc which…

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The restrictive law on cigarette shops

27 09 2017

Most of us are familiar and often use the small shops in the corner, who sell many things including cigarettes and tobacco. They usually stock items of urgent consumption and also are open long hours. They will also give you the item on credit when you do not carry a wallet on you, because he/she knows where you live.

The health ministry wants to control the sale of tobacco to children. Hence they want to restrict, the sale of other items in cigarette shops. They want to licence exclusive cigarette and tobacco shops.

I have the following issues with this proposal

– If local govt like municipalities will issue licence for these cigarette shops, this will breed corruption much like the liquor licences
– Already there is law restricting sale of cigarettes and tobacco products around 100 yards of any educational institution. If this is not being enforced properly then what makes them believe that small shops will not violate this new law too
– If ITC as a conglomerate can have a diversified portfolio including candies, biscuits along with cigarettes why restrict the small shop owner to stick to cigarettes only.

Volatility and SIPs

26 09 2017

Financial advisors advice retail investors to enter stock markets through Systematic Investment Plans , SIPs in short. There are two major advantages of SIPs over lumpsum investment, namely, disciplined regular saving ( Franklin advertises it as a good EMI 🙂) and Rupee Cost Averaging.

Rupee Cost Averaging, means you take advantage of the ups and downs of the stock market by buying more units when the markets are low and fewer number of units when the markets are high, thus keeping the average costs,a tad lower, than if you bought the same number of units every month.

SIPs work better than lumpsum when volatility is high. In a rising market, lumpsum investment of the same amount will give higher returns.

In 2017, volatilty has been relatively very low. The number of days when the markets have moved 1 % down is a lot lesser than previous years.


Would SIPs of all the Indian retail investors, be the reason why the volatility is low ? As per the AMFI web-site, SIPs are growing rapidly, in August 2017 the SIPs accounted for Rs 5206 crore as opposed to Rs 3497 crore in August last year. So there is  steady continuous buying by Indian institutional investors.

Individually, each investor wanted to benefit from the volatility through SIPs, but collectively, SIPs of all the investors have brought the volatility down. The very reason for entering into an SIP now is questionable !

Is ITC justified in paying Yogi Deveshwar Rs 1 Cr per month ?

7 09 2017

ITC has filed a defamation case for Rs 1000 crore in Kolkata High court against the proxy advisory firm IIAS. IIAS had written strongly opposing the ITC board resolution of paying Rs 1 crore pm to Yogi Deveshwar.

Yogi Deveshwar ceases to be CMD since April 2017 and is designated Non-Exec Chairman. Sanjiv Puri is the CEO and MD.

Despite his Non-Exec Chairman status Yogi Deveshwar’s package is way higher than the CEO’s. CEO’s package is Rs 1.65 cr p.a plus commissions max of 300 % of salary. Say Rs 6.5 crore p.a.

Deveshwar’s package is Rs 13.5 cr p.a plus perks. So it is over double the salary of his CEO. A Non- Exec Chairman gets a salary double that of his CEO, who has the full responsibility and accountability of running a large conglomerate I.e ITC.

In Corporates, it is often said that the one who gets paid the highest, his opinion counts finally. There is even a fancy acronym for it- HiPPO. ( Highest Paid Person’s Opinion ).

Does Yogi fear that if he gets paid less than the CEO, he would not be able to assert himself as a Chairman and his opinion will no longer count ? Or it is just the board rewarding their Chairman a cosy retirement package for years of leading the company ? Or it is Yogi’s greed at work, rewarding himself a tidy amount knowing fully well there are no owners with management control in ITC and the institutional investors are passive ?

I think IIAS is perfectly justified in opposing this. Hope institutions take their advice. But who are the institutions , LIC, GIC and SUUTI i.e Govt of India owned FIs own 30 % of ITC. These institutions are either passive or wait for the call from Finance Ministry. If Deveshwar makes a call to Jaitley, problem is solved. All opposition gone.

Whatsapp Help Groups for credit

7 09 2017

Consumption is growing a lot faster than household incomes. Net result personal indebtedness is growing rapidly among Indians. People are buying more and more items on EMI. Besides the usual cars and two wheelers,even mobiles and holidays are on EMI. Companies like Bajaj Finance and Capital First are making hay. Credit card cos have actually increased the interest rates, when overall interest rates are declining. No need for it, I guess, there is so much demand.

On the one hand the senior citizens are struggling with declining deposit rates, most banks give only 6.5 – 7 %. Credit card companies continue to charge 38 %. Wish peer- to-peer lending grows among Indian families, so that these card companies can be disintermediated.

The networks are already there, the Whatsapp family groups. Along with Good mornings, recycled jokes and fake news, young members who are paying huge interest on their cards can borrow from retired elders who are seeking higher rates. They would be happy with even 10 % p.a.

The digital wallets and UPI based digital payment systems make money transfers quite frictionless.The family structure creates enough peer pressure , not to default. In some practical families, it may be happening already. The Whatsapp help groups is an idea whose time has come.

Godmen- Who is duping whom ?

7 09 2017

Many of my friends are feeling angry at Godman Ram Rahim Singh, that he has duped poor people.

According to me, there is an unwritten contract between the 1 % ( rich & powerful) , the  Godman and the 99 % ( disenfranchised masses)..Godman plays the ‘beech ka bandar’ ( monkey in the middle ) beautifully, as long as it lasts, that is.

To the 1% ,overtly, Godman  offers peace , health and even road to God. But covertly, he offers the route to 99 % namely, markets and votes.

To the 99 %, he offers overtly identity, dignity, community and even livelihood. Covertly, the Godman is like Robinhood who steals from 1 % to feed the 99 %.

1 % is happy getting exploited economically by the Godman if the returns are good. 99 % adjusts to physical incl sexual exploitation as long as their other needs are met. Each is trying to dupe the other two.

Occasionally the equilibrium is disturbed and Godmen like Ram Rahim goes to jail.

As long as inequality exists in Indian society Godmen will exist.

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