Speculation is Good

Speculation is one word that has been over used and defined by every individual in their own suitable way. There are two kind of Wealth creators, one who create wealth over a period of time, by creating real assets giving consistent and modest returns year on year and then there is a breed of people like Georg Soros, Jim Roggers , Harshad Mehta who rise on the scene out of nowhere, and end up becoming hero’s and legends overnight. They don’t create wealth they own it. One might argue that one should create real assets and Jobs that would add value the Society. And we almost always blame the Speculators for rigging the prices, and take prices of commodities and stocks or for that matter any other asset class to nightmare proportions.
If you ask me speculation is the biggest gift of free markets, to the world. When we talk about great success stories scripted by Real wealth creators, we seldom forget the contribution of Speculators to their achievement. The most important thing that speculators bring to the table is liquidity. Speculators are buyers of risk they buy risk from hedgers or investors having interests or positions in underlying assets.
We have this tendency to blame speculators for bubble formation, and we don’t blame the bubble here, we tend to blame the breaking of it and me make the hoolah only after a crash, as we loose money else , we have a fantastic word for any asset bubble formation and that is ‘Bull-run’, the aftermath obviously brings us the pain , and we start to blame, but is it right to blame the Speculator? The real culprit is the leverage in the system .History has testified that men who were not over levered have survived the carnage of asset bubble bursts.
I am against banning of trading in commodities; the Govt. by doing so is not addressing the real cause of the price escalation. The degree of leverage is extremely high in the Commodities Futures market. For instance if we take the hottest sticky story of 2005 Guar Gum a commodity which saw nightmare prices, and daily trades greater than the actual yearly production. This commodity’s initial margin was 7% ( In case of additional volatility a special margin is charged on both sides in respect of all outstanding position, which will remain in force for next 2 days, after which the special margin will be relaxed.) this translates into a basic leverage of 14.3 times.
The extra leverage though earns you big, but then when it comes to taking back its very brutal. Managing risk’s is extremely important to impart sufficient liquidity and having logical proportions of leverage. Else we will see more asset bubble formations.

*Any Exchange requires its members to deposit and maintain in their accounts a certain minimum amount of funds for each open position held. These funds are known as margin and represent a good faith deposit that serves to provide protection against losses in the market. The Clearinghouse collects margins directly from each of MCX clearing members who in turn are responsible for the collection of funds from their clients. Margin requirements and contract specifications are subject to change.

This document by MCX was used for reference

Failure Of Indian Leadership Model

In the famous Hollywood flick, Gladiator Maximus famously said “Win the Crowd, and you shall be more powerful than the King”. Leaders don’t need official position of authority if people in and around you look up to you for ‘clues in crisis ‘you are a leader. A lot of trees might get cut for the paper work if we try and make a list of qualities an ideal leader must possess, here are few which I believe are of utmost importance. If a human brain looses self control, the same beautiful mind can be its biggest enemy and self destruction is eminent. So a good leader should be able to control his emotions and passions. You might not appreciate me using the word passion, as many entrepreneurs are passionate (almost all), and passion is the oxygen for excellence in entrepreneurship, but what is important is having a control. The emotional attachment towards success should be very less, this is because being a leader on will see failures, and I don’t know a successful man who has not seen them. If a leader is high on self efficacy he can get his team of the slump faster. A leader CEO/Manger can create value on long term basis only if he is passionate about his job but not too emotionally attached to what he has done or he is capable of doing (ego). Let us take case of Satyam Computers it failed because Mr Raju was attached to what he had achieved and feared that all that could be acquired if he showcases the real stuff, thus compelling him to cook the books from inside, let’s not forget he hardly gained personally from it. Emotional attachment stops one from taking decisions for larger good.
Leaders are neither born nor manufactured, they emerge. A good leader should be less individualistic in nature and more of a team-man. As truly said by lord Krishna ‘Hey Arjuna, keep on doing your duty, without expectation of fruits and victory shall be yours’*
Leadership (Management) Style’s across USA, Japan and India…
I used these two countries as its chalk and cheese when it comes to USA and India in terms of how companies are run, that does not mean it’s not all Smoke & Mirrors when it comes to running the Show in USA.
One clear difference I make out is in nature (the mindset), in USA people are very individualistic and the first generation entrepreneurs don’t focus much on legacy, they actually might not mind to hand over to professional Managers to run the show. If we talk about the Indian Large Business houses few names come to my mind are ITC, L&T, Gujrat Ambuja Cement, ACC the Murguppa Group and many more but we can actually count them, but in USA things are different.
I am not saying that Professional Managers create better value for shareholders or not, neither do we have enough empirical evidence, we have seen fiascos like Enron and World Com in the past due to larger than life ambitions of these CEO’s these companies met their destiny.
Talking about styles of managers/leaders major difference between styles of USA and Japan is the relationship between suppliers/vendors and companies are totally different. If we see the case of Auto Industry crippling with lack of fuel of liquidity currently, companies like GM and Ford try to create competition amongst the suppliers to get the best deal.
In Japan likes of Toyota and Honda go for cross holdings in the suppliers companies and make them part of the family and believe in long term relationship, also supporting them to develop new technologies and help them achieve operational efficiencies. And we all know what success companies like Toyota have scripted in world’s largest car market.

*Essence of Bhagvat Gita , but not the exact words.