Earlier this year, the inimitable Matt Levine (currently on paternity leave) came up with the “boredom markets hypothesis” ($, Bloomberg). If you like eating at restaurants or bowling or going to movies or going out dancing, now you can’t. If you like watching sports, there are no sports. If you like casinos, they are closed.…
Stocks and flows
One common mistake even a lot of experienced analysts make is comparing stocks to flows. Recently, for example, Apple’s trillion dollar valuation was compared to countries’ GDP. A few years back, an article compared the quantum of bad loans in Indian banks to the country’s GDP. Following an IPL auction a few years back, a…
Banks starting to eat FinTech’s lunch?
I’ve long maintained that the “winner” in the “battle” for payments will be the conventional banking system, rather than one of the new “wallet” or “payment service providers”. This view is driven by the advances being made by the National Payments Corporation of India (NPCI) which is owned by a consortium of banks. First there…
Means, medians and power laws
Following the disbursement of Rs. 10 lakh by the Andhra Pradesh government for the family of each victim killed in the stampede on the Godavari last week, we did a small exercise to put a value on the life of an average Indian. The exercise itself is rather simple – you divide India’s GDP by its…
Startup salary survey
I think I’ve come up with what I think is a really cool metric to value the tradeoff between your salary at a startup and the equity stake that you are given. For lack of a better name, I call this “multiple of foregone income”: Let’s say that your “market salary” is $ 100,000 (pulling…
The Quants
Since investment bank bashing seems to be in fashion nowadays, let me add my two naya paise to the fire. I exited a large investment bank in September 2011, after having worked for a little over two years there. I used to work as a quant, spending most of my time building pricing and execution…
Addition to the Model Makers Oath
Paul Wilmott and Emanuel Derman, in an article in Business Week a couple of years back (at the height of the financial crisis) came up with a model-makers oath. It goes: • I will remember that I didn’t make the world and that it doesn’t satisfy my equations. • Though I will use models boldly…
The Trouble With Analyst Reports
The only time I watch CNBC is in the morning when I’m at the gym. For reasons not known to me, my floor in office lacks televisions (every other floor has them) and the last thing I want to do when I’m home is to watch TV, that too a business channel, hence the reservation…
Successful IPOs
Check out this article in the Wall Street Journal. Read the headline. Does this sound right to you? MakeMyTrip Opens Up 57% Post-IPO; May Be Year’s Best Deal It doesn’t, to me. How in the world is the IPO successful if it has opened 57% higher in the first hour (it ended the first day…
Kabaddi and Jesus Navas
I’ve always talked about the Kabaddi style of solving a problem. In Kabaddi, when you are defending, six out of the seven players in the team form a chain in order to encircle the attacker. The seventh defender, however, strikes it alone, in a different direction, trying to draw the attacker into a position where…
A Balance Sheet View of Life
The basic idea of this post is that interpersonal relationships (not necessarily romantic) need to be treated as balance sheets and not as P&L statements, i.e. one should always judge based on the overall all-time aggregate rather than the last incremental change in situation. Just to give you a quick overview of accounting, the annual…
Collateralized Death Obligations
When my mother died last Friday, the doctors at the hospital where she had been for three weeks didn’t have a diagnosis. When my father died two and a half years back, the hospital where he’d spent three months didn’t have a diagnosis. In both cases, there were several hypotheses, but none of them were…
Betting as a hedge
Today’s Business Standard reports that ESPNStar and their advertisers stand to lose significantly following India’s early exit from the T20 World Cup. However, the situation now is significantly better off than in the 2007 World Cup where India didn’t even enter the super8. Back then, India had played a grand total of 3 matches out…
The Eighty-Twenty Rule
I first got this idea during some assignment submission at IIT. One guy in our class, known to be a perfectionist is supposed to have put in 250 hours of effort into a certain course project. He is known to have got 20 out of 20 in this project. I put in about 25 hours…
Taleb’s Recipe
No, unlike the previous post, this has nothing to do about food. It is about Nassim Nicholas Taleb’s recent op-ed in the Financial Times where he gives his “recipe” for saving the global financial system. Two of my favourite bloggers Arnold Kling and Felix Salmon have responded to it, but I didn’t like either so…
Intellectual Property
A blog post earlier this month on Econlog finished off with a very strong quote by Friedrich Hayek: One of the forms of private property that people cherish most is their ideas. If you convince them that their ideas are wrong, you have caused them to suffer a capital loss. I ended up liking it…
Arranged Scissors 5 – Finding the Right Exchange
If you look at my IIMB grade card, one subject stands out. It is one of the two Cs that I have on the card, and the other was in a “dead rubber” (5th/6th term where grades didn’t matter for placements). This C was in introductory marketing management. Where the major compoenent was a group…
Why is Ten Sports sitting on so many rights?
I wanted to stay up last night. I wanted to stay up and watch the WI-Eng match till the very end. Waking up this morning and checking the scorecard, it seems like it was a really good match. And Fidel Edwards seems to have become a last-day-shutdown specialist. This is the second time this series…
Recession notes
Over the weekend I spoke to a few friends, over phone and GTalk. And enquired about their business. Some interesting insights: On Saturday, I spoke to this guy who is a banker in the City of London. He says that one major fallout of the global economic crisis is that the financial markets have become…
IPL Structuring
I remember that this time, last year, I was eagerly looking forward to the IPL auctions. It also happened to be a time when I was actively looking out for a new job (i wasn’t going to find one till about six months later). And I was secretly hoping that one of the IPL franchises…
The Aftermath
Baada collaborated on the research leading up to his post. I hereby acknowledge his contribution and condemn his laziness for not blogging it himself. One of the major problems of the financial crisis that has been happening for about two years now is that investment bankers, as a profession, stand discredited. Before this, they used…