Finally awake or U-turn on cards?

Well finally diesel has been marked up, FDI in aviation and retail allowed...

http://www.thehindubusinessline.com/industry-and-economy/government-and-policy/article3897120.ece?homepage=true

The thing that makes one worry is that is this again lip service which will follow the now routine U-turn or has this page been turned once for all?

Also, are things this bad, fiscally speaking, that this reluctant Government is now being forced to use every option they have?

Eventually things will come out. Lets hope that decision is taken with future glory in view.

Economics, Globalization and News Focus

Economics deals with distribution of scarce resources amongst their seekers. Globalization has brought about a subtle competition between nations in pursuing smart economic policies. Sometimes they group together or raise barriers. Countries often attempt to replicate another country's successful policies. Sometimes desperate times invites pressure from other nations that force a country to follow certain policies.

In the past few years the term BRICS - Brazil, Russia, India, China, South Africa has been used more and more often. The reasons being that these are the growth markets that attract investors. Also, they attract sellers of various products & services from across the world because of their size and potential.

Now, some very interesting commentary on what long term and short term of economics in human history is and how effects of changes being done today will manifest in future is discussed in this NYTimes article. What I find particularly interesting is the author's comment that a nation should consider the option of being dislodged from being the top one in the long run as acceptable.

The article is also relevant to nations which are aspiring to be leaders in the new world order. It certainly takes courage to make decisions that sometimes feel incorrect in short term but help the nation and the world in the longer run. I guess, when a nation transforms at core, it also is able to muster the courage needed to make such decisions.

The article correctly points out on how news is generally focussed around major events. Now, we in India, exactly know how news on items like Economy and BRICS is played. Hype on everything is the norm, a small M&A activity by an Indian company and media may conclude that India has dislodged every other country in everything including baking croissants. The second problem is the excessive focus by business media on the stock market. Stock market is one of the indicators on how the economy is doing, but it is not the only indicator. Stock market is also correlated to international markets and foreign fund flows. So using only stock movements to understand the state of economy is obviously not correct.

Economics Conundrum - Case of Information Over-supply?

I read this amazing article in BusinessWeek - "Why No One Knows Where the Economy Really Stands".

Check this excerpt about the Jobs Data during the boom, "BLS overstated the strength of the economy during good times, and now that fiction will come crashing down on our heads in the first quarter of next year."

The next excerpt of note is on the Stock Markets, "But using what the stock market is doing now as factual data is potentially treating another asset bubble as financial reality."

Just makes me think if the if we are living in a world of Information oversupply where every little bit boosts one section of investor or another? It is Irrational Exuberance, but is it just unavailability of well organized data? Reminds me of our MicroEconomics Professor - Prof. Gupta's favorite phrase, "Garbage In, Garbage Out". :)

Sometimes one feels so much information just leads to more confusion. But then, without it we have the information asymmetry problem. Not sure what we can do of this paradox.

I guess, the author concludes well when he says that real issues can be tackled once accurate data is obtained and analyzed.

Enticing the market - IPO Advertising

As recession has started showing signs of giving way to better times, the IPOs have started coming back. While there is the discussion on IPO valuation, company prospects and other such aspects, I am particularly amused by their TV advertisements.

It is one thing to make a cricketer wax eloquent about an insurance product or a movie star speak about a soap or a phone network. But it certainly needs creativity to make advertisements for things like a power plant or a shipyard or even oil drilling.

And what exactly is the objective of these advertisements? Imagine this scene...

"The board room is in complete silence - pin-drop silence.

The Chief Investment Officer of the big investment company has sweat on his brow. His heart is racing. 2 of his last 6 decisions had failed to enthuse the Chairman. This might be a make or break decision for him. He was not sure what went wrong. He genuinely thought they would have been correct. 

They are watching the top business news channel. They are impatient as the news about current market goes on. They are waiting for the moment. The much awaited break comes and the chairman says "Shhhh".

The entire board room turns to the TV as the first images come of a desert. Then the huge windmills across the landscape. Finally the hero - the CEO of the wind-mill generators climbs atop the windmill and sings ...

"I have got the wind power, 

So I climbed on the tower,

Our IPO is on the market,

Apply and earn $$ by the hour!" 

And the chairman shrieks in ecstasy, "Yes! Yes! We will invest in this company. I love this guy with exactly 4 strands of grey hair. His red tie and the redness of his eyes tell how many nights he has been awake busy assessing the value of his own company. His suit is from Paris and shoes from  Milan. We will invest!"

The Chief Investment Officer heaves a sigh of relief. The board has concurred with his decision. Thank God for the wonderfully towery ad...."

Or perhaps the retail investor chooses IPOs just like he chooses the paint for his home or the next bottle of shampoo. "No, I don't like that this company chose to have 2 kids instead of 20 in their ad for hotels. I will not invest in this one."

Are there any Return-on-IPO-Marketing numbers that prove that IPO advertising has led to more applications? In general, when almost every IPO has subscriptions in multiples of the floated share, does it matter if it is advertised or not?

As long as it is discussed in the business news, I think the interested investors (institutional or retail) will decide yes or no. Of course, there is the question of valuations and order books but that is a fundamental need.

Endpiece - The best part of any IPO (or NFO) ad is the last 0.5seconds when the narrator reads at supersonic speed..."Investments are subject to market risks. Please read the red herring prospectus...".

That is like those 2.5 font asterisk notes by the humongous million rupee assured prize offer ads*

* Conditions Apply. The prize is assured to 1 in million customers. :D