Uncle Scrooge's Economics

  We all try to live in the present and think about the future. But no one ever wants to contemplate their past. As my mentor, Mr. Charlie Munger says, "There is no better teacher than history in determining the future." History has answers which have the capacity to pay us millions, if not, billions, but no one wants to read the past. I think I was fortunate enough to read about Mr. Munger way back when I was 15. I have been a student of economics, markets, and psychology since, but being a student of history gives me the greatest pleasure. This blog talks about one of the most important events that took place in the history of this country and how that event changed the way we live today.  The year was 1971. President Nixon had decoupled the dollar from gold. The US was booming and so were other European economies. But there was this tiny southern eastern economy that was on the verge of bankruptcy. Not knowing what crisis was on the horizon. The country is India. Our curre...

  Who here hasn't heard the name Vedanta? The company is a giant that has been in business since 1965. The company was started by Mr. Anil Agarwal. Vedanta has a presence in two very important sectors: mining and oil & gas. The company runs the oil and gas operations under their subsidiary, Cairn Oil and Gas. The company is in the upstream business, which deals with the exploration and production of oil. The company contributes around 24% of India's domestic crude oil production. Cairn has 58 blocks in India, out of which 51 blocks are under open acreage licensing policy in the states of AP, Assam, TN, Raj, MH and Guj. Then comes the mining operations, for which Vedanta is world renowned. The company is one of the largest mining players in India and also holds the title of being the largest producer of aluminum, zinc, and copper. Vedanta also mines a special type of iron ore from the seas of Goa. That iron ore is used for making rockets and spacecraft. No other type of iro...

In the last 20 years, gold has successfully returned investors a sum of 11.6%, whereas the NIFTY 50 has returned around 14.18%. A sum of Rs 100000 invested in both the vehicles would have returned Rs 898015 and Rs 1418406 respectively.  The logic behind someone investing in the markets have changed over the years, but the logic behind an investor investing in the gold has remained the same. Gold pretty much has very limited uses. It can either be used for making jewelry or it can be used for hedging portfolio. That's it, no further uses. But still, investors over the course of 200-300 years have been investing in gold. I thought a lot about possible different uses, but I had no answers.  Rural India is the largest buyers of physical gold with around 768 Tons of gold reserves. A better rainfall means increased gold demand by rural India. This might be the case because more than 60% of marriages in Indian villages are financed via liquidating gold. I won't say that gold demand w...

  As it is rightly said, "Disturbance between family members makes it easier for vultures to take advantage"  Because of some debates related to position in the company among the early members of the Tata Group, specifically between JRD siblings, it became easier for the SP group members to acquire stakes in the Tata group. It started with Naval selling 4.81% of his personal stake. This act caused angst between Naval and JRD as JRD was serving as Chairman and Naval did not consult him before selling his stake. It was Naval's way of showing that even he has power over the company. Later Darab had fallen out badly with JRD which encouraged him to sell his 6.88% stake to the Mistry's.  A rights issue in 1966 brought SP group holdings to 18.40%.  In sum, JRD's act of kindness, dividing his share equally among his siblings, seems to have spectacularly backfired.  The total acquisition cost was over $11 Million and according to 2022 valuations, it accounts for more th...