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On Slack: PNB write off, A powerful Saudi prince, Jobless Growth, Commodities frenzy, Looming gasoline, Two-Day Work Week, HCL Technologies slippery slope and much more…

The Slack Discussions

The Slack group at Capital Mind Premium has been extremely active and if you haven’t been there, pop us a note by replying to this email. (If you’re a trial member this probably sound like Greek to you; it will be available when you sign up!)

A brief summary of some of the interesting things discussed there in the last few days:

On Slack: PNB write off, A powerful Saudi prince, Jobless Growth, Commodities frenzy, Looming gasoline, Two-Day Work Week, HCL Technologies slippery slope and much more...

#general: Figures don’t match: RBI says PNB wrote off Rs 8,500 cr but bank says zero

RTI replies to queries from The Indian Express show discrepancies between statistics maintained by the RBI and data supplied by individual banks. (Link)

#general: EPF interest rate reduced to 8.7%; fresh trouble brewing as unions threaten agitation

The Finance Ministry has approved 8.7 per cent interest on PF deposits for over 5 crore subscribers of retirement body EPFO, lower than 8.8 per cent decided by the Central Board of Trustees (CBT). (Link)

#general: Chinese brokers are using attractive female analysts to tout stocks online

China’s biggest brokerage houses are using online videos and live streams of attractive, female analysts to tout stocks—and China’s regulators don’t like it.

The Shanghai and Beijing branches of China’s top securities regulator have issued notices to brokerages under their jurisdiction, financial media house Caixin reported (link in Chinese). One notice issued by the Shanghai office of the China Securities Regulatory Commission (CSRC), said some brokers’ research reports have made the public “question the professionalism and ethics of securities firm’s researchers and analysts.” (Link)

#macronomics: A powerful Saudi prince says his country will be ready to survive without oil by 2020

Saudi deputy crown prince Mohammed bin Salman today announced an ultra-ambitious economic and social makeover that he said would allow the kingdom to survive without oil in just four years. He also said the reclusive kingdom would open up more broadly to tourism.

In a sweeping announcement delivered in a television interview, prince Mohammed painted a future in which the kingdom—for seven decades the single-most influential oil power in the world—would no longer rely on petroleum. Instead, he said, Saudi Arabia will become a financial center and an investment powerhouse. (Link)

#macronomics: The Poverty of the Wealth Effect

The Federal Reserve Bank of Dallas in a recent report noted that several factors affect consumer spending: “Higher incomes and household wealth boost spending. Higher, real (inflation-adjusted) interest rates—which encourage consumers to save—reduce current spending.” (emphasis added).

I emphasized “and household wealth” for a reason. Many of the Fed’s recent monetary policy decisions, including quantitative easing and zero interest rates, were driven by a belief in the so-called wealth effect. (Link)

#macronomics: Welcome to Jobless Growth: Why India is facing an unemployment crisis

Why is an economy apparently on the upswing not being able to generate enough new jobs? Welcome to jobless growth. (Link)

#macronomics: The balancing act: A look at oil market fundamentals over the next five years

The oil and gas industry is in turmoil. A downturn in crude oil markets has taken a bumpy path, resulting in declining oil prices and leading to deep CAPEX spending reductions. What, then, is the future of oil? Although sizeable capital and operational budget cuts could leave a lasting impact, Deloitte MarketPoint analysis delves into that future to provide beneficial insights.(Link)

#politics: The Conservative Movement in USA: Some Lessons For the Indian Right Wing

As the BJP government approaches the completion of two years, there is a growing disenchantment in some sections of the right-wing. While the economic liberals view the government’s actions as insufficiently reformist, the cultural nationalists perceive that the government has decided to focus on the economy and given the cultural agenda a short-shrift. In this context, it may be useful to study the experience of the US right-wing movement of the past forty years and see whether it holds any lessons for India. (Link)

#stocks: PSU banks’ poor asset quality is threat to sovereign rating: Moody’s

The rating agency is of the view that it will take a strong economic growth for the overall debt burden to fall (Link)

#general: This impulse makes investors sell low and buy high

(Link)

#general: India is the biggest virtual exporter of water

Except for Brahmaputra and Mahanadi, all river basins with a population of more than 20 million face water shortage for the major part of the year. (Link)

#macronomics: China clamps down on commodities frenzy

China moved to clamp down on excessive speculation in commodities on Monday after weeks of frenzied trading boosted prices and ignited fears of another bubble in its domestic markets.

Activity on China’s largest commodity exchanges has surged in recent days with turnover in key steel contracts exceeding the combined volume of the Shanghai and Shenzhen stock exchanges on one day last week. (Link)

#macronomics: Next oil downturn? Looming gasoline glut threatens crude’s rebound

A rebound in oil prices this year from 12-year lows is in danger of coming to a crashing halt, as the main engine of global demand growth for the past several years starts to sputter amid signs of a gasoline glut.

Crude oil has rallied more two-thirds from its mid-January nadir on robust demand from refineries worldwide, stoking cautious optimism among producers and exporters that the epic rout that slashed global prices by 75 percent between mid-2014 and early 2016 is finally over. (Link)

#stocks: Tata Motors Fin too has a default story: Over 70% NPAs

As slowdown hits commercial vehicle market, loan holders are not payin
g instalments. Move over public sector banks. Even the country’s highly rated conglomerate Tata Group’s non-banking financial arm, Tata Motors Finance Solution Ltd (TMFSL), a dedicated vehicle finance arm of Tata Motors Ltd, has raked over 70% gross NPAs (non-performing assets).

While gross NPA is the total number of bad loans, net NPA is the total bad assets minus the provision left aside. It means that net NPA will always be lower than gross NPA. (Link)

#stocks-from the past: SEBI issues new norms for buying shares takeover, buyback offers

Investors will soon be able to use the stock exchange platform for tendering shares while participating in open offers, buybacks and delisting offers by companies, a move that would subject them to lower tax rates.

Sebi on Monday said all offers for which public announcement is made on or after July 1,2015,companies would have the option to follow the stock exchange mechanism or the existing tender offer method. Investment bankers said the move encourage wider investor participation in such offers as the tax impact would be substantially lower. (Link)

#general: Blockchain technology will revolutionise far more than money: it will change your life. Here’s how it actually works

(Link)

#macronomics: Venezuela Orders Two-Day Work Week in Bid to Save Power Grid

Venezuela declared a two-day work week for government workers and said it was seeking international help to save its power grid amid a drought that threatens the capital’s main source of electricity.

The two-day work week, after the government added Wednesdays and Thursdays as non-working days to save more power, will last at least two weeks, President Nicolas Maduro said on his weekly program broadcast on state television. Schools will be closed on Fridays starting this week, he said. (Link)

#macronomics: Hillary will elevate ties with India

If elected president of the United States, Hillary Clinton will take relations with India to a new level and better economic and strategic ties with India will anchor the U.S in the region, her campaign chief has said. John Podesta, Chairman of Ms.Clinton’s campaign committee said a future Democratic administration under Ms. Clinton will have a significant presence of Indian Americans. (Link)

#general-from the past: Why management quality should matter for investors

The quality of the people running the show can make or break an investment decision, says master investor Nemish Shah. (Link)

#general: 30% sourcing condition waived for Apple stores

Govt panel does away with condition because of the cutting-edge technology the iPhone maker would bring; only Arun Jaitley’s approval needed for Apple to go ahead with the proposal. (Link)

#general: Facebook crushes estimates for Q1 earnings with $5.4B in revenue as shares rise 6%

Facebook posted $5.38 billion in revenue for Q1 2016, up from $3.5 billion just a year ago, beating expectations of $5.25 billion. The company also posted earnings per share of $0.77, up from $0.42 a year ago, beating expectations of $0.62. (Link)

#general: Qatar National Bank hacked; 1.4GB file archive leaked online

Reports indicate that Qatar’s National Bank (QNB) has been hit with a cyberattack which has exposed roughly 1.4GB of corporate data.

According to Cryptome, it is not known how the financial institution’s data was leaked, and it could be anything from simple human error to an outside cyberattacker or inside job. (Link)

#stocks: Is HCL Technologies on a slippery slope?

As revenues grew by just 8.1% in the January-March quarter, investors are worried. (Link)

#macronomics: Only 7% of Indian business school graduates are employable: ASSOCHAM study

Campus recruitments have seen a 45% drop since 2014, owing to low quality education and the economic slowdown, the report says. (Link)

#general: Haresh Chawla clarifies his Flipkart story

Haresh Chawla answers questions about the data he used for his Flipkart analysis (Link)

#politics: How Hooda took a page from Raja’s book to benefit his chosen builders

(Link)

#stocks: Unable to meet $1 per share requirement, Rediff to delist from NASDAQ

Rediff.com announced that it is delisting its shares from the Nasdaq Capital Markets. Rediff’s shares will now be traded on the over-the-counter marketplace following delisting and deregistration. The quarter ended March 2016 will be the last financial results the company will be posting on the stock exchange. (Link)

#macronomics: India to see severe shortage of jobs in the next 35 years

UNDP says countries such as India could focus on specific industries, particularly in manufacturing, to create jobs. (Link)

#general: From Bihar to Tihar’- the memoir that you have to read

We’re thrilled to announce that we will be publishing Kanhaiya Kumar’s memoir From Bihar to Tihar which will tell  the story of Kanhaiya’s incredible journey from a village school, his deepening involvement in student politics, his controversial arrest on charges of sedition and its aftermath. (Link)

#macronomics: No Jobs Nirvana: India May Have Missed the Manufacturing Bus Altogether

Even if Prime Minister Narendra Modi’s Make in India succeeds, it will not bring with it a huge expansion in employment. Organised manufacturing offers no nirvana, from the way it is playing out all over the world. (Link)

#general: High-Speed Trading Backlash Mounts Pressure on India’s SEBI

India’s markets r
egulator is coming under increased pressure to improve its oversight of high-speed trading after allegations of unfair access at the nation’s biggest equity bourse.

The country’s top brokerage associations are among a growing chorus of voices calling for the Securities and Exchange Board of India to take action after an investigation by one of its own advisory panels claimed that there may have been collusion between the National Stock Exchange of India Ltd. and a high-frequency trading firm. The panel is pushing for SEBI to frame more detailed rules on HFT and punish anyone found of wrongdoing, according to a person with direct knowledge of the matter. (Link)

#macronomics: End of Golden Era for Investors Spells Troubles for Millennials

A coming collapse in investment returns means that people that age today will have to work seven years longer or save almost twice as much to end up with the same nest egg as those of roughly a generation ago.

So says the research arm of McKinsey & Co. in a new report that argues that investors of all ages need to resign themselves to diminished gains. (Link)

#general: Gujarat announces 10 per cent EBC quota, will apply to all whose annual family income is Rs 6 lakh or less

The announcement comes amid ongoing protests for reservations in jobs by the members of Patel community. (Link)

#macronomics: the Future of Jobs: There Isn’t One. The Only Certainty Is Work-Preneurship

Will any government anywhere in the globe be able to deliver good quality jobs in future? America will elect Donald Trump or Hillary Clinton based on who they think will help create more jobs, and both are promising some measure of protectionism. If they create jobs in America, it will be at the cost of jobs elsewhere. (Link)

#general: How a firm linked to Karti Chidambaram earned a fortune from Sequoia

One of the world’s best-known venture capital firms, Sequoia Capital, is now part of a vast investigation into alleged money-laundering by Karti Chidambaram, son of former Finance Minister P Chidambaram.

Documents reviewed by NDTV indicate that the Enforcement Directorate, which looks at financial crimes, has zoomed in to two transactions where Sequoia paid Rs. 32.9 crores for shares that just two years before were worth only three crores. The windfall gain on the shares of Vasan Health Care – which runs clinics across Tamil Nadu – was made by a company in 2010 – that was indirectly owned by Karti Chidambaram. (Link)

#backtobasics:

How to define PE or CE strangle?

A strangle means a PE and CE at different strike prices.

• Typically PE strike < CE Strike = Strangle

• PE Strike = CE Strike => Straddle

• PE Strike > CE Strike = Inverted Strangle

7800:8100STRANGLE = 7800PE + 8100CE

8100:7800STRANGLE = 8100PE and 7800CE (Inverted Strangle)

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Disclaimer

Nothing in this newsletter is financial advice and should not be construed as such. Please do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion. 

Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.

On Slack: PNB write off, A powerful Saudi prince, Jobless Growth, Commodities frenzy, Looming gasoline, Two-Day Work Week, HCL Technologies slippery slope and much more...