Month: November 2012

India – Animals

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In India we saw a wide variety of animals. We weren’t on any sort of nature excursion and only saw those that happened to be at our popular tourist locations or out the window of our bus as we sped by (or sat in traffic).

The most famous were the elephants at the Amber Fort. At 8am they begin queuing up for tourists and you can ride on their backs 2 at a time (they apparently used to do 4 passengers but then went down to 2 after complaints from activists). Our elephant was slow and a bit balky but it was a lot of fun. This elephant coming towards us was made up for the Dawali holidays apparently.

Due to the fact that I was pretty much limited to coffee, bottled water, and beer, I spent a lot of time looking at that brightly colored bird on the Kingfisher beer bottle.

All that nature study came in handy when a Kingfisher came and landed right in the pool where we were staying!

Cows of course were everywhere. Cars stopped for them and many of the cows looked to be in decent shape, although some were getting old in the tooth.

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Debt Frontiers – Amazon and Australia

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Amazon, the giant online retailer, recently issued debt at absurdly low rates. Per this Bloomberg article:

Amazon, which had no bonds outstanding, sold $750 million of 0.65 percent three-year notes that yield 38 basis points more than similar-maturity Treasuries, $1 billion of 1.2 percent five-year debt with a 63 basis-point spread and $1.25 billion of 2.5 percent securities maturing in 10 years that yield 93 basis points more than benchmarks

Let’s look at those yields again. Amazon is able to issue 10 year bonds with a yield of 2.5%. That is an amazingly low rate for a company that barely makes a profit, albeit one with a giant market cap.

Nowadays you don’t even have to have a REASON to issue debt. Amazon issued this debt partially to pay for their new corporate campus and partially for “general corporate activities”.

When corporations can issue debt at these sorts of low, low rates you really need to think about the rate of return that you are expecting for your portfolio. These sorts of low rates either point to a “bubble” in corporate debt (it doesn’t look like a bubble to the less sophisticated because they associate high prices for stocks or real estate with a bubble, but in terms of bonds, a low interest rate on a longer term maturity means that you essentially got a lot without paying much to investors in return) or just a long term re-setting of expectations among bond investors, a capitulation of sorts.

On the other side of the world, Australia is having a wild ride. The Australian Dollar is coveted because it is a “commodity economy” and is independent of the typical reserve currencies such as the US dollar, the Euro, and the Yen. Australia also offers higher (relatively) yields on their government debt. When I was in Australia many years ago the Australian Dollar was 60 cents on the US dollar; the Australian dollar is now stronger than the woeful US dollar (or US peso). As a result of these strengths, 63% of Australian debt is now held by foreigners (per the article). Recently some government officials are calling for a more formal registry into who is buying their bonds; the government is attempting to reduce the value of the Australian dollar because it is hurting tourism, exports and their international competitiveness and reduced interest rates significantly as a result. But all is to no avail as the value of the Australian dollar stays high, buoyed in part by the robust demand by foreigners for Australian denominated assets such as government debt.

It is a strange world where a company that doesn’t have much of an actual profit can raise debt at rates not much higher than the US government and a country like Australia has giant demand for their currency and government debt due in part to its diversification from the typical currency basket components.

Cross posted at Trust Funds for Kids

India Electricity

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Since I spent a lot of time in the power generation business I am always interested in electricity systems. India is probably the first country I’ve ever been to where you can regularly witness electricity theft from the system on a large scale.

The electrical systems seemed to be reliable during the time I was there, although it was likely “low season” since it wasn’t very hot out (November) which I assume sets the peak demand for India.

The power routinely turned on and off in one of the hotels I stayed at. The lights would go out completely for a moment until the “hum” of the backup generator kicked in. Likely the inclusion of backup power is an absolute requirement for the type of higher level tourist hotels that I stayed in.

High quality hotels in India had the European model where you had to put your key card in the slot when you entered the room in order to turn the power on or keep it running for more than a few minutes. This model power down the room when you are out.

The newer office parks where the IT service industry was located had what appeared to be modern electrical systems with many of the lines buried underground. The transmission lines along the highway often appeared new, even if they ran right by huts and houses that obviously had no power since they weren’t connected to the local distribution system.

India also appeared to be air conditioned in the major tourist areas for hotels and shopping as well as the newer office parks. The buildings were designed as if to rely on central air conditioning and the backup power was there to provide electricity when the power goes out (although I don’t think they could run A/C indefinitely).

Cross posted at LITGM

Indian Armed Police

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While in India I was struck by the myriad number of police and security personnel that I encountered armed with a wide varied of weapons from a large bamboo stick (a lathi) to an old shotgun to myriad variants of the AK-47 (since the Indians have long relied on Soviet weapons).

I have a general policy of not taking photos of people with guns and I thought this was a doubly wise policy to follow in India. The above security forces were at the Taj Mahal where everyone was taking photographs anyways so I thought that would be harmless.

The number of police forces and security forces you encounter on a regular visit can be staggering. There were armed soldiers (actually paramilitary forces, although apparently they don’t like the term in India) with AK-47’s checking your ticket at the major airports. I always wonder why you’d arm someone with an MG like this in a crowded situation since it would be hell on civilians but I guess they are likely preparing for a heavily armed terrorist attack more than a typical criminal encounter.

At the famous facilities like the Taj Mahal and the Amber Fort many of the security forces were unarmed but in uniform. The uniforms generally seemed clean and organized at the main tourist attractions.

This wikipedia site details the various security forces within India, which don’t include the main branches of the armed services. Malls and stores also had armed guards, particularly those dealing with gold and jewelry, although one old shotgun I’d bet hadn’t been fired in a decade or more.

Cross posted at LITGM