Ratings of Nation Building and Bankrupticies

In a democracy the rating (election) results in govt formation!! :-)

All nations are bankrupt today with the notable exception of a "handful". What prompted this article was the joke that the US government has announced with its case against S&P.

Other than political clout nothing can make this case stick - the fact that it is even admitted by the court means that the heavy hand of politics is at work. If there is an indictment against S&P - the repercussions will be unimaginable. The DUH moment in this is - Rating agencies cant be paid for by the issuers - it has to be paid for by the investors. The same argument that I have been having for appointment of auditors for the past 2 decades!! The same argument for any certification/ verification - the fees has to be paid by the person who relies on the certification not the person who is selling based on the certification - DUH!!

The US went bankrupt in 1929. India went bankrupt in 2008. Since then they have only been printing money and whatever growth has happened post 1929 is there is inspite of the government - that growth went bankrupt in 2007!!

The growth in India is now the growth of the US post 1929 - the only difference is that earlier cycles tend to get compressed in the current world of instant noodles and ADHD - so you can expect the next Indian bankruptcy in 25years or less!!

The congress almost bankrupted the nation back in 1990 - they almost did it again in 1999 which the BJP picked up and cleaned up BUT the people didint have the patience to see the benefits of the hard work put in nation building - they changed the govt and this time around the congress was successful third time around in bankrupting the nation!!

So in all this where is the nation building? That is an art that the americans have mastered by brute force - my way or the highway - one just has to look at the amount of armed conflict zones the US has created or been actively engaged in since WWII. It is this which keeps the dollar in demand - that the supremacy of the dollar will be challenged by anybody is unthinkable (look at Iran's attempt to sell crude in currencies other than dollar - there is an illegal US imposed sanction they are suffering under now!!) and that too by a two bit rating agency?? HOW DARE THEY.

The chinese started late in this game BUT they have mastered it faster than the americans and are now the bully of the eastern world. If one looks at how crime syndicates work - then the US is the godfather and the Chinese are the ones to challenge the godfather. NOW that is something that is keeping the americans from sleeping at night and also those who have stockpiled the dollar to lend protection to their local export based economies. Ironically china can use its stockpile of american dollars in its war against the americans.

So is there a thing as nation building practiced anywhere in the world? Other than the chinese and the above mentioned "handful of nations not bankrupt" I dont think there is nation building happening anywhere!! And when that does not happen bankruptcies happen by the bakers dozen!!

Nirbhaya - the aftermath

Ever since the nation struggling from price rise and corruption adopted girl and prayed for her life - the unanimous cries for death for the perpetrators of the heinous crime has been getting louder. For this case as it is the most heinous of heinous - hang them till they die.

But arent we being a bit trigger happy when saying that all rape should be met with the same end - death by hanging for the guilty?

More punishments over and above what already exists?
Are we proposing these as deterrents?
So am I to presume that the existing provisions (vast and very stringent) are not working? - these new provisions are going to work?

The issue as usual has been masterly sidetracked by  the media and completely missed by those who represent "public opinion on TV".

If anybody heard the boys version of what happened - the key issues are:
1. No public came forward to help!! - That's because we have cases that go on for 100 yrs+ and nobody has the time to be a witness for that long - come on we all have a life - so the first issue is that the witness is to be treated like royalty, he will be taken at govt expense to the court, ONCE.  where he will sign an affidavit in the presence of the magistrate and leave. In the course of the hearing if he is to be cross examined - the court at its expense will provide video conferencing (skype is free) and he can be crossed on his affidavit - nothing more. (we also have cases where the idiot judges have held witnesses in contempt of court for not being present for the 100th + hearing!!)

2. 2nd issue was that of the jurisdiction fight between the 3 PCR's who responded to the 100 call - the jurisdiction is always the place of the victim in such cases and where the victim comes to the station that police station!!

3. No cop as well as anybody in the hospital gave any clothes to the boy and girl who were naked. SHAME. This is the criminal act - where is the punishment recommendation to justice verma for this?

4. The FIR was lodged after the case was taken up by the media and the girl was adopted by an anguished nation. where's the punishment for this - existing or proposed?
If FIR's are lodged online and the investigation has to be completed within say 72 hrs - THEN the rest of the issues will sort itself out.

The criminals do what they do as the public is apathetic to the cause of justice due to reason 1 above and also the harassment at the hands of the police who take money from the guilty party and harass the complainant and his witnesses.(eg ruchika gehrothra case etc).

 Trust me - we dont need more laws - existing ones if they are made humane are more than enough - the public will support it and that is the biggest deterrent to a criminal NOT the current demand for tougher punishments.

FCCB scam

Picture this:

Company A does a Zero coupon FCCB - INR/$ = 40

Amount raised = $100Mn

Fee allowed = 6%

Tenure - 4 yrs

Conversion price is set at 300/-

CMP - 180/-

Gain for the $ lender - he gets an upfront interest of 6% which translates into an annualised yield of 1.56% over 4 years which is 156 basis points more than any competing product in the $ world of Fixed income!!

Result : People start buying the share as there is confidence shown in the company by FII's

Reality : Shares held by the management is sold continuously ERGO the price just doesnt rise BUT falls continuously.

Company A then says that it is not able to repay its FCCB and the price crashes all the way to 10-15/- a share. It is here that the same people who sold the shares at 180 come and buy back the shares.

Suddenly on the appointed time for redemption the said FCCB's are miraculously redeemed and the share makes a stratospheric rise back to levels of 200+. 

Considering the total loss to the company is the forex loss of say INR15/$ ie 150Cr, all they have to do for  the above is to net a profit for them from the price manipulation on the average traded volume of shares to be  in excess of 150Cr. For a company with market cap in excess of 2000Cr this is but a 7% of its total shares outstanding for the price manipulation of 90%. In reality more than 35-40% of the shares are "spread" on gullible investors.

The break even for this works at even higher levels of 20% of shares outstanding.(lower the breakeven - higher the payout as managements with lower shareholding can also engage in this)

Of course where the intent is not to have a business going forward then with all the shares being "spread" the management can one fine day file for a CDR and make a comeback if the sucker bankers give them a break OR just file for bankruptcy and walk away to start the next scam all over again.

The list of shares that are caught in the FCCB mess makes interesting reading. The epitaph on the scheme can be only written when the last of the o/s FCCB's are closed successfully or otherwise. Watch out for those which show a miraculous repayment not supported by any operating flows. In other words the FCCB money was never deployed for what it was meant to do BUT the same was diverted to subsidiaries worldwide to make these illegal trades on the company's share where the real money making lies for the promoters.

Once this is done successfully the next time would be only easier!!

How to nail these cases?

1. Trace all those who bought the shares in 2 years prior to the FCCB announcement

2. Trace all those who sold this company's shares since the time of the FCCB became public knowledge

3. Find the quid pro quo between these seemingly unrealted parties and the management

4. Trace all those who are currently buying the shares prior to the miraculous repayment of the FCCB

5. Find the quid pro quo between these seemingly unrealted parties and the management

Caveat:

There is of course the very simple reality of coincidence making its presence felt as each of the above event is a buy low sell high event - followed by any self respecting investor - the only difference is that the size of the bets in relation to their remaining genre of investing is the give away.