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 15, 2016.
1. The power of altruism [Source: NY Times] This article argues against a widely held notion that people are fundamentally selfish. According to the author, in real life, the push of selfishness is matched by the pull of empathy and altruism. He cites experiments and historical evidence in the article which showcase how once you expect people to be selfish, you can actually crush their tendency to be good.
2. Lithium: Chile’s buried treasure [Source: Financial Times] This article describes how in spite of having half of the world’s most “economically extractable” reserves of lithium, and being the world’s lowest cost producer of the metal, Chile has been unable to ramp up its production even amidst increasing demand. Lithium has been touted by analysts as the likely replacement for fossil fuels as the world steps into a new era of battery powered energy. However, rampant corruption in the country has led to a government quota system in Chile that has led to companies not being able to produce as much as they desire.
3. 225m reasons for China’s leaders to worry [Source: The Economist] Defining Chinese middle class as households making $11,500 to $43,000 a year in current dollars, this article highlights the potential risk facing the Chinese government from this set of people. The author says that although on the surface it looks like the middle class is content with the hardline approach adopted by Mr. Xi, the truth is quite different. While these people are prosperous, they feel insecure, angry and frustrated. Given that nearly half of all people living in cities are under 35 and are willing to stand up and complain if the government doesn’t pay heed to their demands, he says that things could take a nasty turn.
4. Italian banks: Essential repairs [Source: Financial Times] This piece describes the grave uses facing the Italian banking sector. According to senior bankers the issue is not just about bad loans but also about a lack of credibility of the Italian banks vis-à-vis the market. While the Italian PM has undertaken reforms, man believe they are too little and too late. The most important impediment to banking system’s recapitalization is the law that says that no Italian bank can be recapitalised with public money without first forcing huge losses on investors — including, in many cases, retail depositors who were sold billions in questionable bank bond investments.
5. Dallas’ threat to 2016 race [Source: Financial Times] Edward Luce, in this piece, says that in political terms, 2016 is a racial tinderbox awaiting a match. On any sober measure, US society is more racially polarized at the end of Mr. Obama’s term than at the start. The recent shooting episode in Dallas is a testament to this fact - in response to the Black Lives Matter movement, there is now a Blue Lives Matter campaign for the police. Further, 17 states, including key battlegrounds such as North Carolina, have introduced tough new voter ID laws that will disproportionately suppress black turnout – something that can work in favor of Mr Trump.
6. Lunch interview with Philip Tetlock [Source: Financial Times] In this interview with Philip Tetlock – the author of “Superforecasting: The Art & Science of Prediction” – he addresses the strongest objections to his work. He highlights how the “Supers” – the group of people who display extraordinary forecasting skills, fuss over a percentage point or two like an expert gambler reckoning the odds which makes them successful. He also highlights that these “supers” are open-minded, curious people with methodical habits of thought. In Isaiah Berlin’s terms, they are foxes rather than hedgehogs, snapping up useful ideas from all over, rather than leaning on unifying theories. Further, he also emphasizes how experience can load us with biases and hence we should always be looking at ways to counter our own experiences to shape our forecasts.
7. Why this Indian state screams for ice cream [Source: BBC] This piece describes the affinity of Gujarat for ice-cream. As per the article, ice cream businesses have flourished in the state given that Gujaratis love eating sweets and innovating with food, that the summers in the state are long and hot, the milk is top quality (Gujarat is a dairy hub) and electricity is plentiful (aiding uninterrupted refrigeration for retailers). Further, some believe that since alcohol is prohibited by law here, people reach out for ice creams and milk shakes instead. The state also offers an astonishing variety of frozen delights. While Jamaica offers ice cream flavoured with vodka and Japan can surprise you with seafood flavoured ice cream, predominantly vegetarian Gujarat is not far behind: you can get ice cream with grated cheese, peanuts, capsicum and green tea leaves here!
8. Maybe Freud was right about how the mind is structured [Source: nymag.com] Drawing a parallel between Freud’s theory and contemporary psychology this article discusses what shapes our thoughts and behaviour. The ‘id’ is what we call the unconscious today or the idea that there’s a vast reservoir of representations that sits there and influences ongoing processing but without being available to conscious awareness. The ‘super-ego’ in a sense is connected with meta-cognition, with the idea that in addition to first-order awareness, the technical movie that we have as soon as we wake up and the field of sensations we experience and thoughts we have, there’s an additional monitoring and control system. The article further states Metacognition, or the awareness that you have of your own mental events, has been found to have a role in many of the ways we think and behave. People who multitask more are worse — but more confident drivers, because they have less metacognition available (with less available to notice mistakes, their assessment is that they’re doing great).
9. Pokemon Go’s already capturing minds – and money! [Source: Bloomberg] This piece describes the impact “Pokemon GO” - the game which launched in the U.S. last week is having all over the world and its maker Nintendo. It already commands more mindshare per user than apps like Snapchat or WhatsApp and is poised to have more daily active users in the U.S. than Twitter Inc. very soon. However, while Nintendo’s shares have seen a parabolic rise in recent weeks, given the pricing dynamics analysts are unsure if this popularity will have a major impact on Nintendo’s financial performance. It will be interesting to note the popularity of this initial foray into mobile gaming for Nintendo and the pipeline of products it could develop and deploy going forward.
10. Brexit: a coup by one set of public schoolboys against another [Source: Financial Times] Simon Kuper – a contemporary of pro-Brexit leaders like Jacob ReesMogg and Daniel Hannan at Oxford University – describes in this piece how during his years in Oxford he saw Brexit in the making. He recollects his experience of watching ‘elites’ the university organizing witty debates in the Oxford Union – a sort of a children’s parliament at Oxford. He also opines that many of these elites that have entered politics have never actually dreamed of making policy. Their chief interest was in fact oratory. From age six they had been educated above all to speak and write well. Regarding the Brexit vote he says that it was just an Oxford Union debate writ large – with the elites who ran the campaign in favor of ‘out’ having no intention of actually resolving the underlying issues around immigration. - Saurabh Mukherjea is CEO (Institutional Equities) and Prashant Mittal is Analyst (Strategy and Derivatives), Ambit Capital Pvt Ltd. Views expressed are personal.