Ten interesting things we read this week

Peek into economic undercurrents, 3D missiles and some other things

Published: Jul 29, 2016

At Ambit we spend a lot of time reading articles that are not directly relevant to Indian stocks. However, since the Indian economy is now umbilically linked to its global counterparts, the articles that we come across have relevance for Indian stocks and the Indian economy. In that context, this report contains the ten most interesting pieces that we read this week.

Here are the ten most interesting pieces that we read this week, ended July 29, 2016.

1) How can India bridge the gap between its middle and median class
[Source: LiveMint ]

Does the proverbial middle class in India refer to the median population between the rich and poor or is it more of a socio-political construct? According to the existing research and statistics, the latter is more likely to be the case. The 2011-12 data from India Human Development Survey (IHDS) indicates that India’s middle class was less than 6 percent of its total population. Astonishingly however, 49 percent of the respondents identified themselves as middle class. The article also captures how at an all-India level, the median household in 2011-12 owned only one of the five assets—a motor vehicle, a TV, a computer or laptop, a cooler or AC and a refrigerator. Further against the common notion, the median class is still engaged relatively more in manual work, rather than in the so-called white-collar jobs.

2) How solo star fund managers stack up against the team players  [Source: Financial Times ]
To avoid the exit of investors en masse as a star fund manager leaves a fund house, funds are now being structured to avoid the emergence of star managers, with most mutual funds run by two or more individuals. However, according to a recent research due to be published in CFA Financial Analysts Journal, placing a team in charge of a fund is not necessarily good for investors. As per the research, funds with a single manager significantly outperform those run by teams on average—by up to 1.3 per cent a year. Also, funds run by a single manager have a higher expense ratio than funds with two or more managers. But even these higher costs were not enough to offset the additional returns single-manager funds offered.

3) Why Unilever really bought Dollar Shave club [Source: Bloomberg
According to this piece, the key to Dollar Shave Club’s appeal is not so much its online prowess but the fact that it built a powerful brand in four years. Dollar Shave Club upended the industry’s traditional business model by offering a subscription service that sells blades for as little as $3 a month (including shipping and handling). The company learns about its audience and curates messages specifically meant to keep them engaged. The blending of a cheap and convenient product with entertaining content helped the company snatch customers away from traditional razor sellers. As per the article, while Unilever and P&G are masters at traditional marketing, they struggle with the direct-to-consumer brand-building at which upstarts like Dollar Shave Club excel.

4) A few useful mental tools from Richard Feynman [Source: farnamstreetblog ]
This article lists seven ‘tricks of trade’ highlighted by renowned physicist Richard Feynman in his series of lectures in 1963, which were later memorialised in a short book called The Meaning of it All: Thoughts of a Citizen Scientist. These tricks show Feynman taking the method of thought he learnt in pure science and applying it to the more mundane topics most of us have to deal with every day.

5) Missiles will be quicker to make as 3D printing blasts off [Source: Financial Times ]
3D printing is making rapid inroads into the missile manufacturing business. In March, the US Navy tested a Lockheed Martin-manufactured missile with a 3D printed component and next year MBDA, the European missile-maker, will use a printed part in its Sea Ceptor missile system. According to the article, the component which flew on the D5 missile—a cover to protect cable connectors— was designed and manufactured in half the normal time. Going forward, additive layer manufacturing, as 3D printing is known, could make enhancements more feasible—for example reducing weight to make room for other systems or to deliver greater range. Also, the ability to print metals and combine alloys in different ways opens up new design possibilities.

6) Elon Musk’s Master Plan - Part Deux [Source: Tesla
Elon Musk, the co-founder and CEO of Tesla Motors, unveiled his second master plan recently. After the success of his first master plan written 10 years ago, this plan revolves around addressing the need for sustainable energy. Some of the salient features include creation of a smoothly integrated and beautiful solar-roof-with-battery product, expanding the electrical fleet from consumer cars to heavy-duty trucks and high passenger-density urban transport, and allowing for your vehicles to be used in a sharing economy wherein these cars can be used to generate income for you (much like Uber) while you're at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost.

7) The chronic spin that blights China’s economy [Source: Financial Times ]
As per this article, a wholesale breakdown in the reliability of financial information in China is exacerbating the misallocation of capital that lies at the root of the country’s waning economic efficiency and burgeoning levels of corporate debt. Right from media reports that are unreliable considering the journalists can be “bought out” to credit agencies that have awarded investment grade status to 99.5 per cent of all public debt outstanding, there is a dearth of sources which can help the lenders weed out value destroying firms.

8) India’s search for policy economists [Source: LiveMint ]
The appointment of Harvard University economist, Gita Gopinath, as an adviser to Kerala chief minister, Pinarayi Vijayan, has led to the usual political drama. Leftist ideologues have angrily asked how a communist chief minister could seek the advice of a “neoliberal” economist. This article brings forward three issues highlighted by the current series of events: 1) India needs a new generation of policy economists to replace an older generation whose greatest achievement was the first generation of economic reforms 2) It is important that quality advisors are appointed in the state government rather than center, given the lack of quality policy thinkers is an especially acute problem in the state capitals 3) India needs to create a new policy ecosystem that encourages the best economic talent to stay behind in Indian universities, think tanks and research institutes so that we don’t have to rely on foreign talent.

9) Can we stop ageing and live forever!  [Source: LiveMint
Immortality as a concept is no stranger to human beings. Called ‘nectar’ in English, or amrita in Sanskrit, even a sip of this elusive elixir is supposed to make humans immortal. This article describes the case of Elizabeth Parrish, chief executive of a Seattle-based biotech company BioViva USA Inc, who claims to have become the first human being to be successfully rejuvenated by gene therapy. Parrish’s BioViva isn’t the only one chasing the elusive elixir of life. A number of big technology companies and some of their founders, too, are investing in anti-ageing research:  Google co-founder Sergey Brin, Paul Allen, co-founder of Microsoft Corp, PayPal co-founder Peter Thiel and S “Kris” Gopalakrishnan, one of the founders of Infosys.

10) How India's changing kitchens have 'modernised' food habits [Source: BBC ]
Referencing Ruchira—a Marathi cookbook—this article showcases how food habits in India have changed on the back of changing kitchen designs in India. Right from using melamine dishes instead of metal utensils to buying readymade, salty yellow Amul butter to spread on toast for breakfast, Indians are adopting ‘modern’ food habits. The article also talks about how refrigerator had brought in a major change in the way food was consumed in India and how modern gadgets were allowing for even the most traditional households to explore eating food outside the Maharashtrian Brahmin repertoire.


- Saurabh Mukherjea is CEO (Institutional Equities) and Prashant Mittal is Analyst (Strategy and Derivatives), Ambit Capital Pvt Ltd. Views expressed are personal.



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