Linkfest: July 17, 2017

Some stuff I am reading today morning:

Doubled your money in last 3 years?Skill or Luck? (Nooresh)

Interview with Kenneth Andrade (Quint)

Number of PSU Banks may go down to 12 (Mint)

Of Mutual Fund Commissions and Biases (Vinit Conrado)

Few Bets,Big Bets, Infrequent Bets (Mohnish Pabrai)

Earnings Vs Free Cash Flow (Calm Investor)

Dilip Pendse’s unlikely journey (Mumbai Mirror)

When will electric cars go mainstream? (NYTimes)

Every great investment hurts (Collaborative Fund)

The most expensive pizza in history (DR)

Top Clicks on Alpha Ideas This Week

Here are the most clicked on items this week on Alpha Ideas :

Copy-Paste–Hatsun Agro Style (AI)

Portfolio of Mauryan First (AI)

Stock Talk: Wonderla Holidays (Janav)

Software stocks are a buy for Bajaj Allianz (Bloomberg)

Are high valuations justified for record markets? (Mint)

How companies are trying to game the GST (ET)

IDFC Bank has an identity crisis (Quint)

When your Auditors are Jokers (AI)

Chart:  HFCs-Udta P/B, Girta RoA (AI)

4 Signs of a Bubble (Common Sense)

Book Review: Black Edge

“Black Edge” written by Sheelah Kolhatkar is about insider trading prevalent at US Hedge Funds and how the US Justice Department attempted to curb and prosecute the perpetrators.

The Book describes really well the hyper-competitive world of hedge funds where super sharp guys are trying to beat each other and the market and would go to any lengths possible to make that happen.

As the Book explains, there are 3 types of “edges” :

  • White Edge-Readily available information that anybody can obtain and hence not worth much e.g. research reports,public filings etc
  • Gray Edge-Non-public information which may or may not be material. e.g. off the cuff remarks by CFO in an investor meet, or off hand conversation with shareholders by CEO at a AGM etc
  • Black Edge-Non-public information that was obviously illegal and very material e.g. Companies earnings numbers before they are released, or knowledge of the company getting a big order etc

As the Book succinctly puts it, “The Hedge Funds were all playing a game, trying to get the most valuable information they could without getting into trouble.Edge was the water, and they were swimming in it”

After the 2008 financial crisis, the public was outraged at the excesses of Wall Street and wanted some action taken.

The SEC,US Justice Department and the FBI started their investigations and the Book chronicles the struggles  and challenges of the law enforcement agencies.

For the first time, Wall Street was investigated like the Mafia-with wire taps,recording phone calls, flipping witnesses etc

The primary target of the investigations was Steve Cohen of the SAC.He had a great way of getting insider information without getting into trouble.

He had weekly calls with his traders/portfolio managers.In the calls, they were supposed to give their best ideas with a conviction scale of 1-10.That way, he could get access to the best trading ideas with a “Don’t ask,Don’t tell” attitude.

The story of Mathew Maritoma (of Indian origin) makes for poignant reading.He helped SAC make millions of $ with insider tips but was later arrested and sentenced to 9 years imprisonment.

His parents’ reaction at the sentencing sums the failure of the US system to indict Steve Cohen: “Who made the money? Someone made $275 million and they put all the blame on Mathew! The person who made the money is on a yacht.  And my son is going to jail !”

Can’t help but wonder how many of our investing “gurus” would be in jail had the same US standards been applied here.

Do Buy this Book if interested in hedge funds.

Weekend Mega Linkfest: July 14, 2017

Some off beat reads for the weekend:

Kabhi apni shakal dekhi hai? (Pakistan Tribune)

The rioting maids of Noida (Washington Post)

Mamata Bannerjee’s communal politics (Minhaz Merchant)

Why Silicon Valley is censoring itself in India (BuzzFeed)

New Lloyd Blankfein, Same Goldman Sachs (BusinessWeek)

How to sell a Billion $ myth like a French girl (Racked)

When will Earth get too hot for humans? (NYMag)

The Boy who started the Syrian War (Al Jazeera)

A Kingdom for  a Horse (VQR)

How the Mughals sold Bengaluru for 3L 330 years ago (ET)

You sacrifice, I win (J Mathrubootham)

Zia Ul Haq’s grandson goes to Hooters (NYTimes)

Music: 60 years of Bollywood in 4 chords (YouTube)

Auto Review: Isuzu MU-X 4*4 (TeamBHP)

Travelogue: Peshawar (Nat Geo)