Book review #Eight of 2021: Bulls, Bears and Other Beasts

A Story of Indian stock market by Santosh Nair

I had an induction course at my MBA Campus and a 2-day induction session at my first job at SBI capital markets. The inductions still left me unprepared for the real stock markets.  I suggest this book as an induction material for all present and prospective participants of the Indian stock market as it so aptly captures all the major events of the last 3 decades in the stock market and more so from a personal angle making it a thrilling read. SCAM 1992 series was an awesome series on Harshad Mehta; though I believe the series since it was being told with Harshad as the protagonist tended to be not critical enough of his misdeeds. This book is an apt read after the series has whet your appetite for the stories of market manipulation. 

My Father has been a trader in the stock markets for 30 years, so I have been used to hearing names like Himachal futuristic, DSQ software, and ZEE telefilms very early in my life on a regular basis.  Also, at least 2 of my close family members lost their life savings in the markets triggered by the KP scam. So, the books bring out a lot of memories. My father has been telling me how the markets worked than especially Badla, Kerb trading, and shouting in the pits.  Every trader has their own exploits and my father still remembers vividly how he was able to do arbitrage in a few stocks because of the difference in pricing in Kolkata vs Vizag.

The book mentions few events – where I had a ring side view as well. 

Run on ICICI Bank:  ICICI securities (ISEC) was hosting a conference in Singapore with Chanda Kochhar meeting FIIs and explaining to them why ICICI bank is not affected by sub-prime credit.  Parallelly there was news on business channels that ICICI UK had some exposure triggering a run on the bank.  I was at the conference and the only talking matter was ICICI Bank.  I had friends calling me to withdraw all my money from ICICI bank as both my savings and Job was at risk.   Thankfully, I ignored them for I was clear I did not want the rumors to be a self-fulfilling prophecy and also “ICICI bank is too big to fail”.

P-notes and Chidambaram: ISEC was hosting a US conference and the biggest selling point of the conference was that Chidambaram, the FM will also be speaking at the conference. Immediately before the conference, there was an uncertainty on the P-notes, and FIIs were worried about them.  We had a packed house in New York for the FM session and it is at the ISEC conference Chidamabaram clarified the govt stance on P-notes (not to ban), which led to a rally in the market.

ZEE entertainment and pledges:  ZEE entertainment has been a very active stock and almost all fund managers had very strong opinions about the company and promoters. Old-timers would ridicule it as a Ketan Parekh stock and Bulls would argue it’s a new company under Puneet Goenka. Given the huge amount of interest and history and web of shareholding, a large part of my career was dedicated to researching ZEE. Despite that, I was surprised when I realized how ZEE had managed to bypass reporting of its actually pledging as that done offshore was not reported.

For me, while the book talks a lot about market operators and underlying scams, it’s actually a celebration of how far Indian markets have come in improving transparency and fairness.  I think market participants don’t give enough credit to SEBI for what it has achieved.  Today most retail investors are guaranteed a fair chance in IPOs.  Grey market trading is still very prevalent, but I think SEBI has limited ability to correct that unless it makes IPO grey market as a segment on the bourses. (I own IPR for this idea – please give me due credit for this).

The book also puts in perspective why the Indian market is so glued to every union budget. Despite the reducing impact on the budget in the markets, the old-timers know that the budget was a key event earlier. Also, the role of market operators will continue and this is why my father still believes all stock movements are because of operators.

Quotes from the Book:

Experience tells me that it is a good sign to have some disbelievers.

When stocks become overvalued people try to justify it rather than admit they are expensive.

It is like all milk is adulterated, only the proportion of water varies.

Fun facts from the book:

DSP MF initial full form is DS Purbhoodas.

Harshad Mehta celebrated his triumph over bear cartel by feeding peanuts to a bear in the city zoo and getting that recorded. 

Newspapers carried IPO grey market rates along with regular stock quotations in the 1990s.

On Feb 11, 1986, 110 issues were launched on a single day.

Dot-com boom: Even news of an old economy company launching its website was sufficient to get investors excited.  (Later in 2008, markets got excited about GMR announcing an Ice cream option at its airport.   https://www.capitalmind.in/2009/01/gmr-announces-ice-cream-options-in-hyd/

Fictional Cryptocurrency in India

A satirical note. Please dont try to invest in them.

U-turnCoin – This is a negative cryptocurrency.  All political leaders are given 100 coins by the election commission.  As soon as they do a U-turn in policy, one coin is detected from their wallet.  They cannot contest an election after they have exhausted all their coins. To make things equitable, Delhi CM to be given 500 coins.  

FekuCoin – This is an attempt to mine coins by the relentless work of bhakts on social media. New coins can be mined by coming up with a new Feku idea.  A coin is added for every new Feku idea, once that Feku idea is outdone by somebody else, the coin shift to the guy with the best idea. Ashoka road is the official registrar of these coins.  More than 3 coins can be exchanged for a MLA seat and 6 coins for a MP seat. 56 coins can earn a CM seat.

RagaCoin– These are coins distributed to enhance the stupidity of political discourse. For every stupid political discourse, the participant achieves 1 coin credited to his wallet.  On gaining 5 coins a person can admit himself to the opposition party and on winning 10 coins he is given an MLA seat.  50% of the coins are always with the VP of the opposition party. Given the limitation of earning power of these coins, many people tend to shift to FekuCoins.    

GodiCoins -These coins are for the Media Houses. Godicoins are a replacement to TRPs and all advertising dollars spend to be linked to the new currency instead. These coins can be mined by promoting Fekucoin owners. Govt patronage will depend on Media houses wallet sizes and will be offered exclusive interviews once they earn 100 Godicoins.    In extreme situations this currency can also be used to get swift bail hearing.     

DharmaCoins–  These are coins restricted to the Bollywood industry kith and kin. All current families of Bollywood are given a number of Dharma Coins. New coins are credited for every newborn in the Bollywood family. Dharma house is the official custodian of these coins. All kins of current Bollywood families can exchange these coins for launch in Bollywood. In case, of Dharma house stack is full, the coins can be redeemed at Chopra house.  These coins are strictly guarded and are only at threat from viruses like Kangna.

FreespeechCoin– These coins are specially for standup comics.  This coin can be earned by comics after they approach the Judiciary and win a case.  The easiest way to do this is to challenge the owners of Fekucoins. Any attempt by Muslim comics to mine this coin is a non-bailable offense.

Book review #Seven of 2021: The Ten Commandments of Business Failure

By Donald Keough – A Coco-cola executive and with foreword from Warren buffet.

This book immediately jumps into the best books on business in my list and simply put not many books are worthy of a foreword by Warren buffet (Halo effect).  While, there are many books that talk about reasons for business success and as we have seen it those studies suffer terribly from the “Halo effect”, this book does the opposite of citing references of acts that are bound to lead to business failure.  This book is a must-read for managers and analysts of business and gives a good checklist to evaluate if the company is on the path to failure

Donald Keough has worked for the Coca-Cola Company for 43 years and rose through the ranks to become  President and COO. After retirement in 1993, he served on the boards of Coca-Cola, Buffett’s Berkshire Hathaway, etc. This book is a product of a nudge by Warren buffet to Keough to convert his wisdom delivered into talks into a book.

The 10 commandments of business failure listed:

  1. Quit Taking Risks:  Xerox is a prime example of a company that developed the personal computer interface which was stolen by Apple / Microsoft.  While, Jeff Bezos on the failure of Fire phone said “If you think that’s a big failure, we’re working on much bigger failures right now — and I am not kidding,”. “Some of them are going to make the Fire Phone look like a tiny little blip.”
  2. Be Inflexible.  “A man who never alters his opinion is like standing water, and it breeds reptiles of the mind.”- William Blake
  3. Isolate Yourself (i.e., Be Out of Touch): The book says one way to isolate bosses is to hire a good personal caterer and follow the strict isolationist diet.   Saw this at work in a different way in my career. I had visited Havells plants and offices multiple times and every time the lunch was at the office canteen which was common for all be it top mgmt. or factory staff. At the same time, in ICICI securities (I worked 2007-2019) for a very small office at Churchgate, there is a hierarchy in the canteen.  And most top mgmt prefers to dine in inside their own cabins.  When I joined ICICI sec in 2007, our floor had 3 different conference rooms for meetings and no individual cabin and analysts were required to bounce off ideas with each other in brainstorming sessions. Thematic reports and sector initiation reports were always brainstormed. When I left in 2019, there was not a single conference room on the floor.   
  4. Assume Infallibility
  5. Play the Game Close to the Foul Line.  Essel Group/ Zee groups Subash Chandra has made his empire but can say played close to the foul line. While most of the time he emerged victoriously and therefore did not see the downside risks of the leverage or financial creativity. Things did change in 2019.    
  6. Don’t Take Time to Think
  7. Put All Your Faith in Experts and Outside Consultants One company that exhibits almost all of the commandments of business failure is HT Media and I think one can fill volumes about “how not to run a business”.  While, I tried to be objective about reaching the valuation targets of all companies, my valuation target for HT Media was decided by the current market price less 15-40%.   The company was notorious for hiring consultants to streamline their business, this is despite in every quarterly conference call, I offered them free advice.
  8. Love Your Bureaucracy: MTNL is an awesome example of bureaucracy at work at its best.  The company’s business model from fixed-line was challenged by mobile, making many employees redundant.  the company initiated a voluntary retirement scheme but without enough takers. So to absorb the excess staff, they had to create roles for the excess staff.  The CFO office which I visited had 3 secretaries working behind a single computer. 
  9. Send Mixed Messages
  10. Be Afraid of the Future
  11. Lose Your Passion for Work-for Life: The bonus commandment and the most important as per me.  Passion for work to me is the single most important driver for success and vice versa.
Quotes from the Book:

Having things too good is also not too good.

Here lies a company that died risk free.

Einstein said that he needed at his new office … a very large wastebasket “for all the mistakes I will make”.

Whatever you do in life, surround yourself with smart people who will argue with you. 

I never meta successful person who did not express love for what he did and care about it passionately.

Book review #Six of 2021: Business Adventures by John Brooks.

Twelve classic tales from the world of wall street.

The bizarre move in Gamestop stock last week prompted me to read this book especially to understand a similar stock cornering incident that was executed by a single person. In 1923, Clarence Saunders the promoter of Piggly Wiggly stores was involved in a corner and had a very novel financial engineering attempt to finance it.   Nick Maggiulli had done a detailed twitter thread on it (Read here) and recommended this book.  One can also read the Barons article on the story.  There is another stock cornering incident for control of EL Bruce & co which was a “natural corner” which i intend to read on.

Redditors VS Hedge Funds
Enjoy the Party, But dance near the door

 The key learning from the Piggly wiggly story is that things don’t really end well for individuals and the institutions are able to at time tweak rules. If only the game stop investors had read about this, they would have figured out the end result of Gamestop move.

The book has some other stories on
  • A coordinated action by an exchange to make good the losses for individual shareholders from a brokerage.
  • The attempts to save the Sterling pound from bear attack.
  • Federal income tax history and the peculiarities of the innumerable tax savings route for the smart people.  Esops and Tax deduction for oil drillers.
  • Insider trading in a mining company and the law thereafter.
  • The ruling with respect to what constitutes trade secret and how are employees in knowledge industry impacted.
  • The story of xerox – which is very similar to new age startups.
Some Interesting quotes:

Every dog has one free bite.  A dog cannot be presumed to be vicious until he has proved that he is by biting someone.  A man should not be prevented from taking a job simply because the job presents his with unique temptations to break the law.

Wall street got licked and then called for “mamma”.   (institutions pleading to regulator to intervene when they are on the wrong side of a short squeeze)

In 1913, individual income tax was enacted from 1% to 7%.  In 1918, owing to world war 1, tax rate was 6% to 77%.  In 1925, tax ranged from 1.5% to 25%. In 1944-45, tax ranged from 23% to 94%.

PS: First time tried Audio book . It is a good usage of evening walks but i end up losing on making bookmarks.

Book Review #Five of 2021: Lessons life taught me unknowingly

An Autobiography of Anupam Kher.

The first time I watched Anupam Kher on screen was in the Movie Karma – the Multi starrer and I would repeatedly as a kid enact the scene “iss thapad ki goonj suni tumne”. For people of my generation characters like Anupam Kher, Kader khan and Amrish puri were the quintessential villains and after a period Anupam Kher and Kader khan switched sides to comical roles.

Similarly, between me and Anupam Kher is that both our big breaks came as portraying bald men, I am also rapidly balding and I am also very vocal with my opinion.

Anupam Kher in Saransh at age of 28 portraying an old man. Myself in a play ” The Jury”” .

Around 2018, when I decided to quit corporate life, I was seriously contemplating taking up theatre very actively and for training contemplating joining the acting school of Anupam kher “Actor Prepares” which is known to be training ground of many Bollywood stars. It was then that I bumped into Anupam Kher at the Jet airways lounge in Delhi.  While, I am generally cognizant of not disturbing celebrities, I saw this chance encounter as a sign and I seated next to him and sought his advice on joining acting.  He went on for the next 15 mins or so explaining me why I should immediately join and should never consider age as a factor. He also convinced me that I should also join the dancing session and when I said I have 2 left feet, he said that’s even more reason and told me I would be pleasantly surprised.  Had it not been for COVID-19, I would have by now joined Actor prepares training.  The only doubt in my mind is that its more training for movies whereas I am keen on theatre.

I had already watched the autobiographical play of Anupam kher tilted “Kuch bhi ho sakta hai” and will recommend it to everybody so I was aware of what to expect from the book. The book is frank tell-all by the actor and his struggles and his relationship with Bollywood. It’s a decent read for all aspiring actor and those interested in Bollywood.

What I liked and did not like:

I really like the session were the author talks about how he went into debt due to poor business decisions (At the same time Amitabh Bachchan floated ABCL and had similar fate). Also, despite what we see has a hugely successful actor, he too slipped into depression and sought professional help. What I did not like in the book was some incidents where he felt not being fairly treated by others and the section immediately talks about how the person faired poorly after that. In this case, about a director having continuous flops after he parted ways with Anupam kher.  Also, Anupam kher portrays Salman khan as a person who was always trying to give new comers a chance. My current understanding is that Salman Khan family is very vindictive and Arijit Singh has to face his wrath. 

Some interesting Quotes / lines:

Life is what happens to you when you are busy making other plans.

If you can meet with Triumph and Disaster; And treat those two imposters the same.

Dialogue from movie Daddy:  Sach ko sach banana ke liye, do logon ki zaroorat hoti hain. Ek jo sach bol sake, doosra jo sach sun sake.

My life is not bound, not limited, not defined. My life is free, infinite and immeasurable.