Category: Excerpts

Are equities always the best investment for the long run? It is the message that is usually sold to individual investors. The message is based on theory; equities are riskier than government bonds so should offer a higher return (the equity risk premium, in the jargon) to compensate investors. And the message seems to be borne out in practice, most of the time.

But there is an important caveat. Much of the data quoted by investment advisers is based on America, which is something of an outlier; it turned out to be the most successful economy of the 20^th century but that was not guaranteed in advance. An investor in 1900 might have picked Germany as a rising power, only to see their assets wiped out in the 1920s hyperinflation and the Second World War; they might have picked Argentina, which was a perpetual disappointment. In other countries, there have been very long periods in which equities have not been a great investment.

Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School are the acknowledged experts on global investment returns, having compiled data covering 22 countries over more than a century. As of February 2013, the longest period of negative real returns from US equities was 16 years. But it was 19 years for global equities (and 37 for world ex-US), 22 for Britain, 51 for Japan, 55 for Germany and 66 for France. Such periods are much longer than most small investors would have the patience to wait.

Another way of looking at the same issue is whether equities beat bonds over the long term; whether the risk premium is really delivered. This chart, a favourite of Albert Edwards of SocGen, shows the returns from equities (MSCI World, including dividends), long-dated government bonds (over 10-year maturity) and 3 months dollar cash since 1996. Bonds are still winning, even after the big recovery in equities since 2009.

from The Economist

India said it may seize Vodafone Group Plc’s assets in the country if the company doesn’t pay a disputedRs.14,200 crore tax bill that’s still undergoing international arbitration proceedings, according to a copy of the notice that was sent to the company this month.

Anil Sant, deputy commissioner of income tax, informed the company’s Vodafone International Holdings BV Dutch unit of its dues in a letter dated 4 February, according to the document, a copy of which was seen by Bloomberg News. Spokesman Ben Padovan at Vodafone and a representative at India’s tax department declined to comment.

Any overdue amounts, even from overseas companies, may be recovered “from any assets of the non-resident which are, or may at any time come, within India,” according to the letter.

Vodafone has been fighting Indian tax authorities for years over its purchase of billionaire Li Ka-shing’s mobile-phone business in the country during 2007 in a case that analysts have said may influence foreign investors’ perceptions about India.

It’s not immediately clear what the government’s next steps would be if Vodafone were to decline the payment request.-from Mint

In his biography The Z Factor, television mogul Subhash Chandra has been extraordinarily candid about his past.

He acknowledges what was long suspected: that he profiteered enormously from dubious rice deals with the Soviets in the early 1980s. He was awarded a lucrative contract to export basmati to Russia, on the understanding that he would share 50 per cent of his profit with his benefactors in the Congress party.

Chandra confesses that it was Rajiv Gandhi who steered the deal his way through his aide Vijay Dhar. Chandra writes that he deposited half the share of profits, first with Dhirendra Brahmachari, then with Sitaram Kesri and finally with Arun Nehru.

An interesting sidelight to the story is that while the Soviets were paying for expensive basmati rice, Goyal cut corners by mixing basmati with the cheaper ‘parmal’ variety. The Russians, unfamiliar with the various grades of Indian rice, assumed that he was cheating them since their long-standing rice supplier, Tulsi Tanna, had only been supplying parmal and they thought parmal was the better quality rice. Chandra did not argue with the Russians, but made even bigger profits by exporting only parmal henceforth. – from Indian Express