Ten interesting things we read this week

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 August 26, 2016.

1) The seven immutable laws of investing [Source: GMO]
The legendary James Montier of GMO is at his best in this insightful paper as he presents seven principles of sensible investing. Some of the most impactful principles highlight the importance of ‘margin of safety’ while investing and how the “this time is different “ approach is extremely dangerous.  He also shares his concerns around the current ‘artificially stimulated’ rally in global equities and bonds alike and believes cash is the best bet today!

2) Is greed good? No, it’s seriously bad for your wealth [Source: Financial Times]
Greed is good” said Gordon Gekko in the famous 1980s movie, ‘Wall Street’. Now, fresh research, produced by State Street’s centre for applied research, suggests that greed is not good after all. In fact, avarice can be seriously bad for our wealth. The study uses State Street’s Investor Love for Money scale (ILOM), and found that the more someone had an emotional attachment to money, the more likely they were to make mistakes with money. The avaricious were more likely to buy at the top and sell at the bottom — which for investors is the cardinal sin, worse than all others. They also had shorter time horizons and were more inclined to hyperactive investing behaviour. Interestingly, the study also found that while Avarice is universal, it differs according to economic development with countries like India featuring in top of the list.

3) Alternative data firms are shedding new light on corporate performance [Source: The Economist]
Given that financial statements are both infrequent and backwards-looking, getting a sense for how a business is performing in the present can be nearly impossible. This article highlights how to counter this, a cottage industry of a few dozen firms, mostly in America, is gleaning “alternative” data from novel sources - ranging from satellite images to obscure corners of social media. The growth of small, low-cost satellites and machine learning means companies can quickly and cheaply parse millions of satellite images a day. A common trick is to analyze photos of car parks outside big-box retailers such as Walmart to get a sense of daily revenues. A Chicago-based data firm, RS Metrics, sells estimates on the productivity of factories by tracking the number of lorries parked outside.

4) Centuries old sharks hold the secret to a longer life [Source: Financial Times]
This piece highlights how a recent discovery of Greenland sharks that can live upto 400 years has started afresh the discussion on whether human lifespan could be extended dramatically. It discusses how human lifespan can be materially increased given that scientists found that mice could be engineered to live 35 per cent longer simply by clearing ageing cells from the body.

5) Robotics and virtual reality help heal spinal injuries [Source: Financial Times]
This piece discusses how a clinical breakthrough, outlined in a US-Brazilian study published recently, shows how new technology combined with intensive long-term training could help patients paralysed by spinal cord injury to stimulate internal changes in their body and rehabilitate their nerves and muscles. One of the patients in the study, who had been paralysed for 13 years, was able to move her legs on her own after 13 months of training. The researchers use a “brain-machine interface” linked to various devices, including a virtual reality system that enabled paraplegics to simulate control of their paralysed legs.

6) The economics of marriage [Source: LiveMint]
This article dives into the argument that people marry because it makes economic sense. It was in 1970s that this idea originated when Nobel Prize-winning economist Gary Becker first postulated an economic model of marriage, arguing that marriage was based on the principle of division of labour, and that gains from marriage were determined by how efficient this division was. The Beckerian model also said that in a marriage the one with comparative advantage at earning wages will go out and work; the other person has to do the dishes and probably stay at home. The article goes on to discuss some of the presumptions in the model and how the research in recent times has put these to test.

7) Office workers can learn from the Olympians [Source: Financial Times]
As per this piece if there is one thing that distinguishes the Olympians from the average worker carrying out daily tasks it is this: practice. For athletes, training seems to make up 99 per cent of their existence against the 1 per cent of time spent competing in events that the public get to see. For most office workers, by contrast, a little training is quite enough and a “ferocious” desire to do more would be considered distinctly odd. It goes on to highlight that financial incentives are not so useful in encouraging people to complete the complex tasks of the modern workplace and that what really gives athletes the motivation to work so hard continues to remain a topic that needs to be researched further.

8) Indians spurn snacks, shampoo to load their smartphones [Source: WSJ]
Consumer-goods companies in India are not thrilled with the country’s smartphone revolution. Now that their poorest customers have started spending on smartphone data, they have fewer pennies left over for snacks, sodas and shampoo. According to local mom and shop owners, kids have switched from spending their pocket money on chips and chocolates to data recharge. However, these companies have found ways to cope with this effect. Godrej Consumer Products has this year begun giving consumers beauty and hair-colouring tips on prerecorded mobile calls. In return, it said, consumers who answered and listened to these calls the most would stand a chance to win a free smartphone. HUL has invented a free mobile radio station that that lets callers dial in to hear popular Bollywood tracks. Breaks between songs are interspersed with ads for Lux soap and Brooke Bond tea, among other Unilever products.

9) An Indian state may be on the brink of recession because of the Gulf oil crisis  [Source: qz.com]
As per this piece, the global oil slump is wreaking havoc in Kerala. This southern Indian state has built an enviable record of human development indicators thanks to decades of abundant remittances from the oil-rich Arabian Gulf. Now these remittances, which form 36% of Kerala’s net domestic product, are drying up. According to Kerala’s finance minister Thomas Isaac there’s “going to be a very serious regional recession” in this state of over 33 million people.

10) What drives Team GB’s medal machine? [Source: Spectator.co.uk]
Writing a story about the once prevalent sporting culture in Great Britain, the author talks about how rather than a lack of ‘winning mentality’ in Britain, the reason for bad performance at international sporting events like Olympics was lack of a winning system: too much of British sport was a gentlemanly muddle. As a way to turn things around, UK Sport didn’t just look for decent athletes and back them. It also looked for sports in which Britain had a serious chance of winning a medal - sports that would fall to a full-scale assault of money and talent. It wasn’t about funding individuals and teams to fulfill their potential, it wasn’t about the pure quest for excellence and it had nothing to do with idealism. It was about medals.

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