Friday, January 30, 2009

The Dumb Japanese "Smart" Money

For years we'd been taught and narrated in low awed tones about the brilliance of the Japanese in business, in negotiations, in quality, in manufacturing, in work ethic, in attention to details, in kinky sex, in kinky foods, etc. etc.. it was mythical status

Books were written and management gurus born just on their "expertise" of the Japanese way. Legend had it they looked at every possible angle of a deal in 27 different ways and discussed each aspect of each way in 3 diff meetings with 3 different interpreters to gain their fabled holistic bird's eye view (despite admittedly short physical stature).. and at the end of it would utter succintly.. "Ahso, Ok.. I buy" .. sheer genius.

Thusly, the Nipponese folk lore travelled the world and some washed ashore on Indian shores where unsuspecting locals (though they can't differentiate between a Korean, Japanese , Chinese or even Nepalese to save their life).. completely believed in the legendary genius of Shinto.

And then news broke about two turbaned Yoyos up North leaving the small army of Daiichi Sankyo management holding so many proverbial bags after intensive due diligence meetings at Ranbaxy offices, that even the interpreters had to help the CEO carry the bags out.

The news was sensational for two reasons .. one, this turbaned community, locally, are widely parodied as the Indian Polish jokes and regularly at the other side of any bag holding event..( and innately talented at such).. secondly, these two spiffy beards were as good at running Pharma companies as Paris Hilton would be at running a biotech firm.
Their father and erstwhile CEOs grew and ran the company, that fell into their clutches after firing all such, which they promptly hocked to the first bidder(after much emotional soul searching, they did admit).That the monkeys were the famed "Japanese" just got them even more emotional.

So the yellow, globe trotting, business leading, opportunity spotting, deal making chimpanzees got oversized bags this time to hold. at Rs. 700 + a share .. which we learn made the globally expanding giant Daiichi Sankyo sputter to a $3.7 billion loss on the writeoffs owing to the turban fomented losses, as the share strangely plummeted to under Rs.200 a share.

As it stands today the same clueless wonder turban, Malvinder Mohan Singh, is still at the helm ( this is the famed inscrutible Japanese strategy at work) rumor has it the CEO Takashi Shoda ( still the CEO as the board dither through their 27 rounds of due diligence to identify the cause and assign an asian scapeGoat) has blamed it all on all interpreters unable to correctly understand the final sale figure spoken through excessive facial hair, as it were.
But, a promise was a promise (japanese honor thing).

But this was weak defence at best and the Nipponese Board (known to nip buds swiftly) made a ceremonial presentation of the ceremonial Samurai Sword to Takashi "cookedGoose" Shoda hoping he will see the light and do the honorable thing (and save them the next 26 iterations of studious meeting rituals).

So what have we, Nomura, another diligent, oriental Goliath had teams of gooks in suits swarming the financial capitals looking for thoroughly vetted deals and valuations when even the Arabs ( historically the second last to the party) finally realised that daft head gear and high oil prices does not add much to IQ and they had gotten these fine financial sector deals not because only they had money , but because only they had dumb money.(note: Luddic is currently doing detailed research into Arab and other cloth-head-geared-investors' investment talents and will shortly publish same)

So the Yellow Smart Money came into play yet again at Nomura ( historically, always on cue, and historically, always the last to the party) to "invest" in Iceland, Madoff, Lehman, RealEstate.. Merrill , name it and the wannabe Jap global opportunistic investment manager is there, loaded with the hard saving Japanese housewife's cash to shovel into another "Branded" deal making. ( Only brands will do, Japan understand only brands).. and promptly declared another $3.8 billion loss after paying all sorts of primates at Lehman their bonuses for last years circus feats.( In fact if I'm not wrong the head orangutan of Indian ops so endeared himself to the nips they took him back to Tokyo on a promotion to be part of the RealLargeLosers club at HO as befits his performance here )

As Luddic Research has long identified.. when the Japs start buying anything.. go short and go double short.. these well dressed gents from the east are here for a dose of some serious Acute Financial Pain which is an (little known but quickly spreading) Oriental sexual Fetish !!

Lately, I'm beginning to think the Japs just don't get and it's not just the language.

Wednesday, January 7, 2009

Satyam, Ethics and Platypus.

So the weeks toiled by as we watched our shorts happily run circles around the long term investors (who were taking full advantage of the amazing buying opportunity that seemed emerged and was visible only to them chosen few) .. while we lay back with a beer in the hand and toes in the sand.

Through oct/nov/dec of '08 the delinquents that flock the Indian financial markets kept themselves and their clients entertained and excited by strange bottom calling dances in different titillating tones that long term investors favor and excitedly pointed to the riches that lay just beyond the corner now that they'd called the bottom expertly and precisly. .but strangely the shorts still made money.

Of course every cabbie (and his maternal grandmother) in Mumbai knew that the worstIsBehindUs.. succour was at hand as come January 2009 the markets would rise and all would be hunky dory.

Half the planet was going .. worstIsBehindUs..worstIsBehindUs..worstIsBehindUs.. to their favored tune from their favored pulpit.. aah it was good to give solace to so many with these simple words..
The other half (of the planet) basically couldn't read and had no access to TV.. or they'd known too.

The US.. we all know that's where it's all at.. declared that the shit had failed to hit the fan and much rejoicing followed announcements by all kind of old fogeys and geriatrics who had, for years, confounded the masses with their stock picking skills , and such gents announced their investments and genius with amazing personal bottom calls (..on live TV sometimes).

Things were gung ho .. the US Govt. was in charge and (though a tad lacking in Iraq) the world felt good ex-Wallstreeters were running the show and would fix things in no time.. yup, time to partake the historic buying opportunity brilliantly identified by people who so obviously knew.

India, not to be left behind, took up the bugle call with gusto.. and soon the dormant dolts (local stock market experts) who'd been left looking morose and bereft for much of last year took up the baton and galloped around to whichever TV studio would have them, to announce yet again (so what) that the worstWasBehind and the time for selective buying was Now!! .. no matter nobody quite knew what this "selective" was.. but it sounded good and sharp expert.

Through the end of 2008 and first few days of 2009, a straggly bunch of bovines could again be seen heading for the bourses to much "expert" cajoling and prodding .. and the deeply underwater fund "managers" watched with cautious joy as they saw the oxen being herded in.. they needed relief.. the pain was bad.. how long can you keep markToMarkets, a la Madoff.. some had even started feeling some guilt..

No matter, the bull market would revive.. there was too much longTermStoryIntactness and too much IndianGrowthStory fundamentals to start getting worried about temporary events. they all told each other.. if not India where will capital go?

And all along Satyam( that beacon) was winning Global Golden Peacock awards for Corporate Governance.. aaaw shucks, though there was stiff competition from many, many other (strangely all Indian) equally worthy, well governed corporates.

So it is really no wonder the stars of global investing game(and fame) like Aberdeen Asset management and Fidelity were the proud owners of much stock of this high potential and multi awarded powerhouse.

Then the Satyam Chairman broke down one morning.
..brokerages with their tens of research "analysts" who diligently followed the stock and issued myriad "BUY" and "OUTPERFORM"s suddenly found themselves bent over and receiving.

At Luddic Research, one of the foremost zoological behavior research shops in India.. even the freshly inseminated mice embryos in our labs knew, Satyam and its mustachio wonder chairman Raju were professionals and ethical.. that much the embryos imbibed post fertilization.

As research grunts at Luddic quickly zeroed in from their regression digressions .. the Great Indian growth Story.. the DeCoupled econnomy theory.. the Infrastructure Boom lasting decades.. the promiscuous Indian middle classes' demand bonanza.. these were all concepts that germinated in the heads of certain pale skinned, farsighted and swashbuckling emerging markets' focused Platypus who quickly got the brown Indian looking at his future and prospects through the same duck billed (or bird snouted) outlook.

Overall, as Luddic's regressive digress proved .. most foreign fund managers and their cousins(read hedgeFund mgrs, PE boys) showed distinct traits very closely associated with the above mentioned Platypus flat foot..snouted.. ungainly walk.. webbed feet.

.. but what really clinched their classification on the Indian subContinent was simply their subsequent performance in the markets :

  • They lay eggs.. mammals but lay eggs. (egg== 0)
.. sadly, Darwinism is catching up and fast.

So Chairman Raju's tear stained letter also sent shivers down the multiple aspirants for the corporate governance awards in this pious land.. news emerges that most of the high growth boys, in this global profitability hot spot, have suddenly taken off to their favorite temples in their choppers for special cleansing rituals before they rewrite the carefully doctored exceededExpectationsYetAgain results they'd planned this quarter and tackle their suddenly chickening Auditors.

In fact the Industry body representing the top 20 houses in India plans to meet the govt. to plead for more time to un-Cook their books and warns that failure to do so can be catastrophic for Corporate profitability and India's long Term Growth targets.