Golden Ratios

China, it seems, wants to load up on gold. There is an aggressive retail push going on in China towards precious metals. In India, on the other hand, there have been appeals to buy less gold, use our forex for better things, turn out our gold hidden in bank lockers etc. As if we Indians will ever listen to that! The buying continues unabated. This is also in keeping with popular perception that Indians (and increasingly, the Chinese now) have a voracious appetite for gold. Pivoted around this idea, I ran some numbers to figure out gold reserves for the top countries, the amount of gold reserve coverage given the GDP size of each country and finally how much gold reserves exist in a country per person of its population. The latter is an interesting metric – it says that if all the citizens of a country were to line up in front of their central bank’s vault to receive equal amounts of gold, how many grams or kilograms would they get. The results for 41 top countries (by gold reserve holding) is shown in the chart below:

  • USA, with the world’s largest gold reserves drops down to 23rd place when compared to countries on gold per Bn USD of GDP
  • India and China, at 10th and 5th places drop down to 37th and 35th places when it comes to the weight of gold per capita! Clearly, we should buy more!!
  • Lebanon and Libya are pricing in their geopolitical risk by paying rent and holding charges for all the massive horde of gold that they have given the size of their economy.
  • Germany, France and Italy are very well placed. From where did they get all their gold, I wonder.
  • Canada’s position surprised me.

Golden Countries

So is there a trading play in Indian gold? I am not a goldbug enough to know. Goldbugs don’t know anyways. Maybe there is a 5% – 10% scope in gold in rupee terms that is possible now. Constant pressure on the rupee has kept the INR gold chart very subdued as compared to the USD price of gold.

The first chart below shows the daily price chart of a local Indian gold ETF over the last 18 months – on the charts, it does not show a set-up which gets me excited. On the longer 3 year chart with weekly prices, there certainly seems room but again, the present price does not scream a buy (to me).

Gold 3Feb16 18mo DailyGold since 2008 weekly

Bollywood “Chart”busters…Part One

Graphs, Venns and the junoon of the vaudeville that is Bollywood. :) 

ek do teen film stillek do teen


 

naino mein sapna film stillnaino mein sapna

 


 

kabhi mein kahoon film stillkabhi mein kahoon

 


 

aankhon mein kya ji film stillaankhon mein kya ji

 


 

seene mein jalan film stillseene mein jalan chart

 


 

aine ke tuke film stillAine ke tukde


 

Value Investing

Value Investing

Why Do People Make 3D Charts?

3DchartUgghhThe addition of the third dimension to the charts that most people make is something that has always puzzled me. It seems as if restating an essentially flat planar picture by including an added dimension adds more ‘depth’ to the message. I guess folks with a predilection to 3D think that they are adding more weight to their chart (and therefore their argument) by doing this. And also some ‘enhanced’ aesthetics.

That gets me to my main point. This is so so wrong. It is not about the chart at all. The excessive use of 3D talks a lot about the person who prepares this chart. Yes, a lot of criticism has been leveled at Microsoft Excel for continuing to offer super un-intuitive and irrelevant chart options and presets in its charting menus. Ribbons have come and gone but MS Excel continues to offer murderous weapons of data visualization. Now, if a murder is committed and a data story is brutally butchered, the culprit is not the agency that manufactured the weapon but the hands and brain that performed the mutilation.

So why do people do it? I have the following hunches:

  1. Because they are trying to please whoever the reviewer of the chart is. It never happens consciously but the urge to please is present nevertheless.
  2. It serves the chart creator’s misplaced sense of beauty and aesthetics. Isometric views are pleasing and more revealing, yes. But for complicated solid objects. Not for data that most of us play around with. It’s hard for me to relate to this but somehow the folks that render 3D charts genuinely believe that these look better. They even expect to be praised for the extra effort, if at all anyone were to focus on the presentation aesthetics.
  3. Value Add. Anything that happens easily or anything that is free raises suspicion. The much maligned but quite popular chart wizards of MS Excel render a chart at a click of a button. This does not satisfy the chart maker since it comes out pat. So out come the works: pschedelic colours, black backgrounds, 3D, etc. Its almost like a super avid gardener obsessively plucking out imaginary weeds from his patch to justify his extent of his passion for the gardening.
  4. Conformance. Everyone else is doing it or I was told to do it. I may be a newbie and may have been told to make it in 3D since “that’s the way things are done around here”.
  5. The Chart Lie factor. Some people do it because they want to purposely distort the message and “lie” through their charts and make it confusing for the reviewers. This percentage of such people is very very small.

My suggestion: avoid 3D unless showing spatial engineering, scientific or mathematical data. I don’t think too many readers of my website are engaged in visualization of engineering data like the locus of an electron in a cyclotron, or the spatial plot of isomorphic mathematical figures ….

MS Excel is vilified, but it is just a tool and quite powerful at that if one handles it with patience and precision. Maybe passion as well. I have pinned below some of my favourite visualizations that I have posted on this website earlier. Each of them have been prepared by me using standard features of MS Excel and the image editing functions of MS PowerPoint. :)bolly-tempsnakes 2KM Trades till date 06Apr12NIFTY VIX and Volumes00166_SKS The JPM Cuts00158_RIL INFY Creamy Layer00126_Returns Across Holding PeriodsInflation and RBI Repo00142_Diwali Rockets

What Unites India

What Unites India

India’s Shrinking Farmland and the Migration to Cities

Acerage TrendIndia and US trends in acreage per farm plot are opposite. Farms in the US are getting larger while those in India are shrinking. Consolidation lends to economies of scale, higher mechanization rates and therefore greater productivity and profits per acre. Farmers in the US are experimenting with big data, information analytics with farmers showing as much interest in selling the data from their farms as much as their crops. Farmers in India, on the other hand, are contemplating ending their lives adding to the big bigger data points on farmer suicide statistics – at least some of them kill themselves each year. The rate however is not as alarming as it is made out to be. More people die of suicides outside of the farms. I am sure depression kills more in our cities but farmers attract attention.

India Farm Size ShrinkageThe chart above shows the general shrinkage of farm sizes across the India. The average size of farmland in India has fallen from 2.28 hectares in 1970-’71 to 1.16 hectares in 2010-’11. Punjab is an exception. If you want to sell tractors and motor pumps and pvc pipes, this is the place to hang your shingle. Increased mechanization and dwindling farm incomes forced many small farmers to quit farming, migrate to Kanaada leading to a consolidation of farmlands. In almost every other state, there is a shrinkage. It is no doubt a consequence of
increasing pressure on the land due to an ever expanding population. With lower farm plots (i.e. capital) and the low productivity rates, it is impossible for the farm incomes (return on capital) to be enough to feed the stomachs aspirations of all the strapping young village gabrus hanging around in the hinterland. Kerala and Bihar are the two states with the lowest average acreage per chhath_train_71113 [httppost.jagran.com]farm plot. It is not surprising that the villagers from these states are most likely to be found migrating to other parts of the country in search of work. Trains are best avoided during annual jaunts like the Chhath Puja when all the itinerant workers head back to their native places to take the traditional early morning dip in obeisance to the sun who no longer shines on their farms as it once used to.

Tata Motors: Driving in Reverse Gear

Tata Motors 08Sep15The stock of Tata Motors has fallen ~45% in the last 7 months! That’s a big drop for a big company. The stock’s around 10 times it’s trailing 12 months’ earnings.  Upstarts like Flipkart are getting valued more than Tata Motors. That’s surprising. Is it about the unattractiveness of the business of making cars or is it a case of over-valuation of ecommerce businesses or is it both? Tata cars are everywhere, including China. It’s quite a venerable brand not to have a Peter Lynchian roadhead moment on:

 

I am a hard working taxi driver and I have seen my share of cabs and cars (mostly cars that looked like cars) and have even heard of some feline roadhogs (read Jaguars) and then my last passenger told me about this massive 45% drop in the share price of the company that makes these things. I have this Peter Lynch moment and I want to buy this stock.

It’s the crumbling of the Chinese walls that is a part of the reason why the stock’s down. Cool Chinese have been doing uncool things like not buying Jaguars as much as they used to earlier. Things have been very bad for the company during the last couple of quarters. So bad that they chose to raise capital via a rights issue. That’s a sure shot sign of severe financial stress. Worse, the stock price kept of falling leaving the rights price level far behind. And then the unkindest cut was the skipping of dividend by the folks that run this rather complex business.

But then I am a surfer. An opportunist and a speculator. I am rooting for a 35% return on this idea.

Here’s some pointers to mull over:

  1. Commodity prices have hit rock bottom. Cars require a lot of metal to make. Should be cheaper to build a car. Selling them is a totally different matter altogether!
  2. Valuation is attractive. Trailing 12 months’ P/E of around 10.
  3. Stock’s corrected 45% now from 7 months back
  4. The technicals don’t scream a buy, but are giving a very strong hint. The next few days price action should confirm.
  5. We can (and should) forgive the management for skipping dividend for the first time in 15 years. That’s so unlike a Tata. A black swan Tata, perhaps.
  6. We can (and should) ignore the fact that the management seems to have pulled off an opportunistic rabbit from the (minority) shareholders hats by pricing the recent rights issue at 450.

 

 

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