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Raghuram Rajan: What he said, really meant and definitely didn’t

Raghuram Rajan

What he said:

“A 007 James Bond image is very dangerous for a central banker to have.”

Rajan added:

“…the RBI  is being managed well. I have spent a lot of time watching the system and thinking about it from my 2008 report to my stint as an adviser to the Prime Minister and as the chief economic adviser.
There are a lot of things I know can be done. I am trying to push to get those things done sooner rather than later. There is tremendous amount of work inside the RBI on doing things, not just by me but my predecessor, Dr Subbarao. I don’t want to take that James Bond (image). But, a banker on the move — I will take that.”

What he really meant:

“I’m licensed but not to kill. I cannot appear to be running the RBI like a bull in a chinaware shop. Everything has to be planned and methodical. Nothing should be left to chance. I cannot be unpredictable or appear to be so. My very demeanor and presence should reassure my constituents.”

What he definitely didn’t:

“Bonds, equity, cash…I’ll take whatever image comes with that. You may even call me Goldfinger.”

 

 

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Aswath Damodaran: Good corporate governance cannot be legislated

Cover of "Damodaran on Valuation: Securit...

Cover via Amazon

 

What is common between Aswath Damodaran and Forrest Gump, one a widely published professor of finance at the Stern School of Business at New York University and the other a naive, unintelligent fictional hero? Well, both got lucky with investments in shares ofApple Inc. Damodaran bought the shares for around $5 each in 1997, which he describes as an emotional investment, selling them eventually for $600 last year.

 

Damodaran is known for his books on valuation, includingDamodaran on Valuation and the recent The Little Book of Valuation. In addition he has co-edited a book on investment management with Peter Bernstein and has written books on investment philosophies and risk management. A popular teacher, he was voted as the most popular teacher in a Businessweek survey of MBA students in 2011, in addition to winning Stern’s Excellence in Teaching award seven times.

 

Damodaran is in India for Stern’s first India Business Forum and shared his thoughts on investing in India, factors Indian companies should look out for while making acquisitions, following a value investment strategy in a world of momentum investing and high frequency trading. Edited excerpts from an interview:

 

 

Continue reading on LiveMint.com…

 

 

Retaliation against Whistle-Blowers: No Good Deed Goes Unpunished

No good deed goes unpunished. This phrase came to mind after reading the results of a 2011 National Business Ethics Survey titled “Retaliation: When Whistleblowers Become Victims.” The report contains some shocking statistics:

 

  • 45% of US workers observed wrongdoing;
  • 65% of those who witnessed wrongdoing reported it;
  • 22% of those who reported wrongdoing said they experienced retaliation (an increase of 46% from 2009); and
  • 46% of those who observed wrongdoing but chose not to report it, cited fear of retaliation as the reason.

 

Employees who “blow the whistle” or report wrongdoing should be lauded, not vilified. A study conducted by the Association of Certified Fraud Examiners (ACFE) estimates that fraud costs a typical company about 5% of its revenues and that whistle-blowing is the single most common method of fraud detection. Another study shows that “18.3% of the corporate fraud cases in large US companies between 1996 and 2004 were detected and brought forward by employees.” In Europe, the Middle East, and Africa, an analysis by KPMG found that 25% of fraud cases were brought forward by employees and that anonymous tipping was the primary source of detection.

 

Continue reading on CFAInstitute.org…

 

the frauds

the frauds (Photo credit: ivers)

 

 

Why Germany Should Lead or Leave

 

German Logo of the ECB.

German Logo of the ECB. (Photo credit: Wikipedia)

 

NEW YORK – Europe has been in a financial crisis since 2007. When the bankruptcy of Lehman Brothers endangered the credit of financial institutions, private credit was replaced by the credit of the state, revealing an unrecognized flaw in the euro. By transferring their right to print money to the European Central Bank (ECB), member countries exposed themselves to the risk of default, like Third World countries heavily indebted in a foreign currency. Commercial banks loaded with weaker countries’ government bonds became potentially insolvent.

 

 

 

There is a parallel between the ongoing euro crisis and the international banking crisis of 1982. Back then, the International Monetary Fund saved the global banking system by lending just enough money to heavily indebted countries; default was avoided, but at the cost of a lasting depression. Latin America suffered a lost decade.

 

Continue reading on Project Syndicate…

 

 

Fads as social cycles

 

Wonderful (Adam Ant album)

Wonderful (Adam Ant album) (Photo credit: Wikipedia)

 

We don’t follow fashion
That would be a joke
You know we’re going to set them set them
So everyone can take note take note – Adam Ant and Marco Pirroni

 

by Gene Callahan*

 

In his book Knowledge and Coordination, Daniel Klein distinguishes between mutual coordination and concatenate coordination. Mutual coordination is coordination which people intend: you and I plan to meet for lunch, or several con artists devise a scheme to defraud an elderly widow of her fortune. Concatenate coordination is coordination that is pleasing to an impartial observer: one of Klein’s examples is a room designed with a harmonious combination of colors, shapes, and so on.

 

Read more here…

 

 

Finance Quote

EVA is the only reliable and unambiguous continuous-improvement metric.

Source: Stern Stewart’s EVA Economic Value Added – The Real Key To Creating Wealth by Al Ehrbar.

Dodd On Legislation

WASHINGTON - SEPTEMBER 22:  Senate Banking Com...

Image by Getty Images via @daylife

"We can’t legislate wisdom or passion. We can’t legislate competency. All we can do is create the structures and hope that good people will be appointed who will attract other good people."

Senator Christopher Dodd, trying to justify the expanded discretionary power given to regulators to constrain excesses in the financial services industry.