SUNDAY WEEKLY #32

Hello EveryFinions !

 

Did you hear about the Facebook outage this week? The whole world came to a standstill, No? Well, not really 😉 Life went on. We gathered en masse on Twitter instead. Twitter's twitter handle tweeted, "hello literally everyone". Pretty clever. Life existed before Facebook, life will exist after Facebook.

 

But it certainly was a slight nuisance not being able to communicate. Now imagine a massive power outage instead? Or an outage of cooking gas? Would that only be a slight nuisance? A massive inconvenience? Perhaps a matter of life and death for some? It could just happen this winter owing to the major energy crisis we are witnessing across the world today. Are we getting ready?

IN THIS WEEK'S NEWSLETTER

  • News in brief
  • In less than 200 words - The looming energy crisis

  • Game : Price is right
  • Cover Story - When Vipul Mathur buys HUL stocks, you buy it too
  • In case you missed it - The idiosyncracies that keep us poor
  • Soundbites, In crypto news, Thought for the day
  • Read/Watch/Listen

NEWS IN BRIEF

  • Natural gas prices dropped by 15% this week following Russia’s conditional assurance to Europe that it will pump more. Natural gas prices have been on an uptrend following severe shortages in Europe and hit their highest level recently since August 2008!

  • Softbank backed Oyo filed for $1.1 Bn IPO in India earlier this week. The company’s filing said that it is spread across 35 countries and had over 157,000 storefronts. Total income for the year ended March 2021 fell 69% and its losses to income ratio was nearly 1 (meaning the business made a loss of Rs.1 on every Rs.1 in sales). Pretty frightening! Oh, but it is a $1.9 Trillion opportunity, alright!

  • After over 3 decades of development and testing, the world’s first Malaria vaccine for young children is here! The WHO recommended the widespread deployment of the vaccine in sub-Saharan Africa. The vaccine was developed by the British pharmaceutical major Glaxosmithkline. WHO director Dr.Tedros said, “I longed for the day that we would have an effective vaccine against this ancient and terrible disease. Today is that day. A historic day.” India’s Bharat Biotech will be making that vaccine from 2028.

  • The RBI, in a further push on digital transactions, increased the limit on IMPS transfers to Rs.5 Lakhs from Rs.2 Lakhs. In addition, the central bank also proposed to introduce a framework for retail digital payments in offline mode across the country.

IN LESS THAN 200 WORDS

The looming energy crisis

You may not have noticed, although it is just about everywhere in the news, there is an energy crisis in the works and it is apparently going to hit us very, very hard this winter. There is a shortage of everything from natural gas to coal. Not trying to get you to panic, but just look at the LNG price chart below in Asia. We have never seen prices as high as these!

This shortage of LNG for electricity production has sent countries looking for substitutes, especially coal. And consequently, the price of coal is going up too . This chart below shows the price of coal traded in Hong Kong exchange. Pretty bleak!

A combination of drop in energy production from renewable sources, an unexpected increase in demand, slow catch up of supply has all led to a massive worldwide shortage of energy. Nikkei Asia reported this week that India nears widespread power crunch on coal shortage. Wall Street journal reported the scramble for natural gas ahead of the winter in Europe. Bloomberg reported that China’s energy crisis is hitting everything from iPhones to milk production. Blackouts in China have already hit over 20 provinces and is slowing down economic revival.

 

This is leading to a rethink in terms of how governments plan a transition from traditional fossil fuel-based energy sources to renewables. More importantly, it is going to have repercussions on the economic recovery front as countries across the world are limping back to normalcy. Price inflation at this stage is a definite given, and not a may-be. Equity markets, bond markets will start pricing these risks in over the coming months. The volatility we witnessed over the last few weeks is probably just the beginning.

 

But even more crucially, how are we going to keep the lights on and stay warm this winter?

GAME: PRICE IS RIGHT

This is the new Mahindra XUV 700 luxury edition AX7. It opened for pre-booking on Thursday this week and within the first 57 minutes of launch, the car received 25,000 bookings – A full 6 months’ worth of production. The company said that this is an “unprecedented milestone in the Indian automotive industry” and it most certainly is given that the XUV700 is the first car in the country to get such an overwhelming response. Your job now, is to guess its price!

COVER STORY

When Vipul Mathur buys HUL stocks, you buy it too

Vipul Mathur is the VP at Hindustan Unilever Limited in the Fabric Care division. He has been working for HUL for about 19 years now. An IIT-M & IIM-C graduate, he went straight from B-School to HUL and joined the company as a trainee. And that was 19 years ago. HUL is the only company he has ever worked for and probably knows about far more than any other investment guru/equity analyst/investment strategist. When a man like him buys stocks in HUL, you buy it too. No questions asked. Vipul bought Rs.50 Lakhs worth of HUL shares in an open market purchase 4 weeks back.

 

In a world where there is tremendous fan following for stock pickers and investment strategists, there just aren't enough followers of corporate insiders who are pretty good at timing stock purchases. We develop an algo-trading strategy to exploit the hypothesis that positive alpha can be generated 3-, 6-, and 12- months post large buy transactions by corporate insiders by piggy backing on them.

IN CASE YOU MISSED IT

The idiosyncracies that keep us poor

Renowned British economist John Maynard Keynes introduced the idea of the ‘Beauty Contest’game likening it to investing in the stock market. Here are the rules of the ‘beauty contest’ game.

 

People are shown photographs of 100 people and are asked to choose 6 photographs from the lot. The winner is the person whose selection of photos is the most popular across all contestants. In the words of Keynes himself, “prize is awarded to the competitor whose choice most nearly corresponds to the average preference of the competitors.”

 

So the task, in the minds of the competitors, is not one of choosing the prettiest people. It is not even one of choosing the photos of those faces that other people may find pretty. But it is one of choosing those photos that other people think will be the most popular – This is third-degree anticipation.

 

A lot of stock market investors have reduced the problem of investing to precisely this – Instead of spending their time and energy in finding good businesses, they devote intelligence in unearthing stocks that other people may think are good investment ideas.

 

SOUNDBITES

That's what they said

  • ARK is not a traditional Wall Street asset management firm and we are looking forward to breaking the mold further by relocating to St. Petersburg, a city investing in technology, science, and innovation ,” Cathy Wood in a statement after announcing that her firm will relocate to Florida from New York.

  • Windows 11 marks the start of a new generation of Windows, making it easier for anyone to dream big and turn their ideas into reality. We can’t wait to see what you create. ” – Satya Nadella, Microsoft’s chief on Twitter following the release of the company’s latest OS update.

  • " The new pathways we build together with SEI will offer Indian customers greater convenience and choices within their own neighborhoods. " – Isha Ambani after signing a franchise agreement to launch India’s first 7-Eleven store. Why are they called 7-Eleven anyway? Clue : Something to do with their opening hours 🙂

IN CRYPTO NEWS

  • The newly ‘invented’ Shiba Inu, a cryptocurrency that started just last year was up about 200%+ this week following Elon Musk’s tweet about his dog. Elon’s dog is a Japanese Shibu Inu breed. Bonkers, I know!

  • The US justice department is launching a national cryptocurrency enforcement team to deal with cryptocurrency related crimes and recover illicit proceeds from these crimes. Now that sounds more sensible than an outright ban, doesn’t it? China, you there ?

ANSWER TO PRICE IS RIGHT

Rs.20.29 Lakhs

Is the take home price of the all new Mahindra XUV700 AX7 luxury edition. The newer model will replace the older XUV500 and has received a staggering 260,000 inquiries ever since it was announced. M&M certainly know a thing or two about making SUVs for the Indian market.

THOUGHT FOR THE DAY

A great company isn't a great investment

READ/WATCH/LISTEN

  • A short but interesting read on what happened in Enron, one of the largest accounting and financial fraud in living memory. Investopedia  
  • UK based web only neo-bank, Monzo, withdrew its US banking license application in yet another testimony of why ‘ all that glitters isn’t gold ’. – Financial Times 

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