Category: Excerpts

At some point Parvizi cottoned to the idea that he didn’t have to wait for shares to move to make money: He could make it happen himself. He got to know reporters at the Financial Times and the Daily Mail and began speaking to them frequently. If they brought up a topic, he knew there was a chance it would appear in the next day’s paper and the shares would pop, he said. By then, he was also a big enough investor that buying shares and letting the market know about it could be enough to ramp up the price.

On his third day on the stand, Parvizi was cross-examined by Financial Conduct Authority barrister Mark Ellison. The lawyer asked him how he had made money by spreading rumors. The trader gave the example of an occasion when he phoned a journalist he knew and tried to “plant the seed” that a takeover bid for Sky, then known as BSkyB, was in the offing. The idea was that the reporter would notice higher than average trading and assume something was going on, he said.

At the prosecutor’s prompting, the judge turned to Parvizi and warned him he was at risk of admitting the separate criminal offense of attempting to manipulate markets by making deliberately misleading statements.

The stock market was “the biggest casino in the world,” Parvizi said. The only offense as far as he was concerned was trading on nonpublic information, which he denied ever doing.

You had no idea about rules on dealing? Ellison asked.

“You’re making out like I’m the only liar in the stock market,” Parvizi said, looking around the room for support. “If everyone told the truth, the stock market would not move.”-from Bloomberg

Value has always been a risky strategy, particularly for those trying to run an investment business.

The drivers of mean reversion are not hugely powerful at any given time, meaning asset prices and even the underlying fundamentals can move in unexpected ways for disappointingly long periods. It is a little glib to say that without this risk, it would be difficult for asset prices to get meaningfully out of line in the first place, but the reality is that the only way you can get really exciting opportunities for mean reversion is to have misvalued assets become even more misvalued before they revert to fair value.

This is the catch-22 of value-driven investing. Your best opportunities will almost always come just at the time your clients are least interested in hearing from you, and might possibly come at the times when you are most likely to be doubting yourself.-wrote Jeremy Grantham

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Source: L&T Infotech Annual Report 2015-16

But for the company itself, the most perilous years were those that followed the first world war. These years form the most interesting part of Keenan’s memoir, especially in light of Tata Steel’s current predicament. If the current glut of cheap Chinese steel has Tata haemorrhaging losses of £1m a day, in 1922, the company was brought to the brink of ruin by the flood of “cheap Continental steel smelted out of scrap from the French and Flemish battlefields”. At one point it seemed that they were not going to weather “the boatloads of Belgian steel raffled off and dumped in Calcutta and Bombay for next to nothing”. The situation became so bleak that someone suggested the colonial government be asked to take over. But the son of J. N. Tata—he had died in 1904—“pounded angrily on the table and shouted that day would never come as long as he lived”. 

Fortunately, there was a plan beyond the theatrics. The company approached the government with figures to prove that it was impossible to survive against tariff-free continental steel. The government acted decisively and set up a Tariff Board to create a protective Act. It saved the day. Soon the company was back to paying shareholders a handsome dividend. All this, acknowledges Keenan, “largely because of the staying hand of a much-maligned Government.”-from Economist