The price is not right.... For whom ?

In this piece by Thomas L Friedman before the G-20 summit, he compares the mispricing of risk between financial systems and the environment...

My comments :

Firstly, he discusses more of market and less of environment and the line seems to be to draw parallels between two deteriorating systems, though one system does not have operational similarities with another, except for the generic "risk underpricing" phrase.

If it's a straight carbon tax, it's feasible.

If it's a regulation that directs the companies to include environ costs as part of their costing, it will be complex to get implemented. It would be difficult to fix which is which in costing, particularly when you leave it to the companies.

Either way, something on similar lines is much required and will have some benefits. Among other things, at least, it will enable environ friendly technologies to sound at comparable costs, not because their costs have come down but the environ-hostile energy options would become costly. Which eventually, by rise in volumes, might bring down the costs of environ friendly technologies.

Assuming it gets implemented perfectly, which might require a cost overhaul, may be in some cases, bloat the costs by a few times, it will push up the costs of goods and services. Should be fine for developed countries or even emerging economies like BRIC , who anyway are resource guzzlers. But, I think, the Third World countries will be at an undue disadvantage.

That is the reality anyway, might as well face it, we might say. True, but we want everyone to raise up and face the reality to which we have suddenly woken up to, and we want it to happen with the same suddenness. Most often in practice, people put survival before nice things like environ care, those who are struggling for survival that is. Survival as an individual is a more basic instinct than the more philanthropic priority of survival of the race.

Every infrastructure plan to reach the last mile in those countries will present before us, the "green" version of the costs, which are high, and therefore, both the pace and quantum of benefits will become inversely proportional to such high costs, making it slower to reach those miles.

It will be like the grown-up daddies, expecting their kids to learn all that they didn't learn in their childhood, plus what they learnt as they grew up plus all the great things all kids should know, ignoring that the such persuasion itself can affect growth !!! Only till the kid asks the grandma, 'what did papa do when he was like me' ?

Fresh Upma and Old Bindi Fry

Let me serve some old cold bindi fry from the refridgerator as promised in the opening post. Here are links to stuff I have written before.

Before I landed with Blogger, I used to linger in BBC's H2G2 for a while and these are links from that phase. (Note: You won't require a h2g2 id to access these links, so you can click on.)

On Leadership and Management
On Micro-Finance
On Open-Source and Healthcare. This is admittedly an emotional-type article, but it isn't entirely off-track since Economic Times mentions this as a development that is brewing in this debate a few days ago.

Quite interesting, that my first movie review is not on a movie in English, Hindi or even Tamil but a Telugu one. Coming of age as son-of-soil of Rayalaseema, Uh ? A kind of content and theme review of Bommarillu on MouthShut, after I saw it at a friend's place. For the type of person I used to be, it might even come as a surprise to many, that I am writing, of all things in the world, a movie review!! But riverside walks and talks may range from pin to plane, so you never know, I might even write about Hindustani Music tomorrow !!

If you have an Orkut Id, you can read up on how I had answered someone's question on:

Why did Jesus Christ and Mohammed not explicitly restrain the consumption of meat and alcohol among their followers?

If you don't have an Orkut Id, please wait till an edited version of that is put up here. Or as they say, watch this space for updates.

Each of the above are longwinding and verbose posts, so typical of a whirling mind and so untypical in this age of SMS-slang blogging. So reserve them for a Sunday afternoon. I always wanted to have a diverse topic cloud on my blog, I guess this post comes close. Life goes on in phases and patterns, so I hope the day doesn't come when I have to post this blog's links on some other website after a few years. :) :) For those who have already read all these before, please wait till fresh upma is served. :)

What goes up, up and further up..... has to be suspended for one hour when it comes down....

I have always thought, a certain amount of stoicism about the markets is a healthy habit to develop. Recently, when the Indian Sensex fell intra-day around 1700 points hitting what they call a 10% lower-circuit, SEBI suspended trading for an hour, probably to cool it off. (For novices like me, I think the phrase 10% lower circuit roughly means that Sensex fell 10% in a single session). I wonder why they didn't do such a restrictive thing when the markets went up, up and up too ? Going up is okay, coming down is not, is it ? Or they should have allowed the free fall under gravity, come what may, so that the market finds its own realistic evaluation bottoms, whatever that might be and rest comfortably on the sofa. If indeed it is overvalued, then a prick of the balloon might actually have been helpful in knowing the solid stuff within. Looks like: It's somehow okay for the market to pick a large number of points spread over a week or so, although such pace is far different from earlier acceleration levels and not reflect fundamental strengths .... but it's somehow not okay when it falls. :). It's okay to make unusual gains when they are spread over a week but not okay to lose such gains on a single day however unusual the gains may have been.

I wonder how the free market enthusiasts would like to look at this : Is this financial systems regulation or interfering with free markets ? Another blog of Ramnath, Free Markets India, tries to keep a log of the various forces pulling and pushing, for or against the pursuit of free markets. I can understand corporate or political lobbying for exclusive economic privileges can be categorised as a pull or a push, but i think it's difficult to categorize regulatory actions. It's tough to draw a line between what is healthy regulation, developing robust financial systems, putting market infrastructure in place etc and what is just ad-hoc damage control. That day, even FM intervened to make a statement, which I thought was a little extra. Of course, I haven't researched to write this post, but I wonder if there is such a thing called breaking a 10% higher circuit, in the SEBI regulations, just like the 10% lower circuit. Asked an economics friend about whether such a thing is of importance to the free markets discussion. He said, in real life, there are a lot of constraints to free markets and these constraints are to be handled first in the pursuit of free markets. I might have to read up Raghuram Rajan to understand what these are.

I tend to subscribe more to the long term value addition approach. I think if one can:
park and wait in good (intrisically value adding) stocks/funds, stoically,
remember a bit of Shankara's references to Economics in Verse 30 of Bhaja Govindam, :) :) ,
be not worried about the everyday ups and downs,
keep cool without looking for reassurance from the FM to heave a sigh of relief,
sit on the eggs and wait for them to hatch for five or ten years,
then equity has the scope to fetch far better returns than other forms of investment in an equivalent period. Of course, this doesnt apply if one is sitting on a donkey fund or a dead stock or special disasters. Otherwise, A little peep, now and then, to just see the eggs are fine should do.

Quite possible, I am over-simplifying here what the Finance guys read across a few semesters. I have seen the non-tech guys trying to figure out a simplistic understanding of the tech abracadabra, and succeed in achieving a functional understanding and the non-finance guys try to do the same thing to finance subjects. When I was first unsuspectingly "exposed" to the verbal weapons called Debit and Credit, when the duo mockingly stared at me from the blackboard, Drawing a T-shaped organism to tally numbers used to cause nightmares and make me sit up and draw the Holy Cross on my chest. I used to cheer myself up with the Lakshmi Ashtothram, try to ignore those two words as mere hallucinations and think of it as just Inflow and Outflow. As if water flowing into a tank would be Debit and water flowing out of the tap, then, must be certainly Credit. Or is it the reverse ? :) . Well, depends on whether we are talking about the tank or about the bucket. Closing the tap and measuring the water must be.... wait, is it Balance Sheet ?. Whateva. Something is better than nothing. Of course, Everything is even better, if you can handle it. There is no powerful substitute to in-depth research into a subject.