On soccer

The popularity if soccer, I think is related to the low cost of  entry to a player; you need to pay only for the ball, the goalpost, and the clothing. When I was a boy growing up in India even shoes were not necessary. Most in India (including the professionals until recently) played soccer bare foot. In fact the reason given for India declining an invitation to attend FIFA world cup (it used to be then called the Jules Rimet cup, not world cup), in 1950, was FIFA's insistence that the players play with their shoes on.

In school I played soccer barefoot until I broke my left big toe. Haven't played it since.  And then my enthusiasm waned and I started playing cricket one of the most expensive games ever invented by humans.

The part of India that my ancestors came from, Goa, was an overseas province of Portugal and not a colony. There, even today, soccer is more popular than cricket. During the world cup every one is glued to the TV, and even today most root for Portuguese soccer team, and if they don't do well, for the Brazilian team. Eben now Goa (as representing India) participates in the Lusophone games.

On retraction of papers by academic Journals

I am quite pessimistic about this. All that one needs these days to publish accounting papers are databases and an army of serfs who can massage those data with arcane statistical methods that statisticians themselves gave up a long time ago. If this business model becomes the standard operating model for academic accounting research, we are in for serious trouble. However, that this is in fact becoming the standard business model is borne by the fact that papers come from schools that can afford these (money for databases, serfs, and expensive faculty to serve as overseers over the serfs). If you don't believe, look at the slew of papers coming out of schools in Hong Kong (and to a much lesser extent from China)  the past decade or so.

I stopped reading the Accounting Review a long time ago when the papers started looking very cookie-cutter-ish. They add little to our understanding of the phenomena under study, and they do not add anything we know about the methodology used or the research methods utilised.

I see brighter prospects for non-mainstream journals and established journals in collateral fields such as Statistics, Economics, Psychology, Sociology, and Computer Science. These days it is routine to see articles entirely outside the field. The best papers I have seen on social network analysis have NOT been in sociology journals but in Physics journals, and the best articles on Operations Research I have seen have been in Computer Science, and so on.

But there is a difference between those fields and accounting. In those fields publications outside one's field are respected. In accounting only publications in the very small number of anointed journals are acceptable. If we persist with this ostrich's-head-in-the-sand policy,  academic accounting might as  well be on its way to being a sterile and useless field.

FASB proposals on inventory and extraordinary items.

The FASB proposal on inventory might make sense, but I do not think the proposal on extraordinary items does.

The information on extraordinary items has value no matter how you define extraordinary items.
____________________

FASB believes eliminating the concept would relieve preparers from the burden of assessing whether events or transactions are extraordinary.

____________________
Does this make sense? It is as difficult to define extraordinary items as it is to define a capital lease (vs. operating lease). In both cases the definition under FASB is ARBITRARY. However, the definition of capital lease LOOKS more complete in some sense because it is expressed in language that is seemingly more "scientific". By the logic of FASB, shouldn't we relieve the pteparers of the burden of estimating useful lives, appropriate interest rate, and whether there is a "bargain" price option by mandating that all leases are treated as operating leases (or capital leases)?  Aren't we on a slippery slope to a regime where no disclosures beyond trial balances are really necessary? Further, is it at all necessary to have any disclosures beyond those mandated by the present judicial system?
Since when the "burden" of classifying events become a criterion for financial disclosures?  Isn't the burden of valuation of derivatives or credit default swaps at least as onerous as the burden of classifying an event as extraordinary?
I think we are better off with  the judicial system determining GAAP.

On Gini coefficient and the poor in India.

Gini coefficient for India is meaningless considering the over $2 trillion of black money stashed by the well-heeled in Swiss and other overseas bank accounts. And that ill-gotten wealth is enough to wipe out most of India's federal deficit and public debt.  If you include that sum, India's Gini coefficient would be much higher. India, Germany and Canada being in the same Gini coefficient range should give you a clue as to what is wrong with that number.

Any one who has ever been to India would have observed staggering inequality of wealth. The costliest family home in the world is in India (Antilla, cost over $1 billion), and it is just one of the hundreds of palaces. On the other hand you see millions who lack a roof over their heads and wander scavenging for food.

Also there are many poor people in India simply because there are many more people there. There are also many poor people because of the socialist and protectionist policies followed for over half a century.

In all this, the most incredible fact is that there has not been a single famine in India since independence. By contrast, famines were a part of Indian life during the Raj. In the Bengal famine of 1943 alone the deaths due to the famine have been estimated in the 1.5-4.5 million range; that famine was caused primarily by the diversion of food from India to Europe to feed the soldiers there during the war WW2.

On High Frequency Trading, Front-running, Basket option contracts, maps and colts.

In my earlier posts I have always defended high frequency trading, but decried the bad behaviour that often accompanies such trading, mostly by hedge funds and trading on dark pools.

An ingenious practice that exploits a a loophole in tax law enables HFT practitioners to treat short term gains as long term ones for tax purposes through strategies using basket options contracts, and products called maps and colts. There is a fascinating article at http://www.theguardian.com/money/us-money-blog/2014/jul/24/wall-street-fooling-people?CMP=ema_565

Most of these contracts involve a hedge fund and an investment bank, partners in crime. Incidentally, apparently there is nothing illegal in this practice that has yielded over $6 billion in taxes avoided. The prime practitioners of this sinister artform, apparently, are Deutsche Bank and Barclays. One of the main operatives in this arena is, unfortunately, a hedge fund (Rennaissance Technologies) founded by one of my heroes, Jean Simons, a mathematician from MIT and Berkeley and a philanthropist.

In all these cases, the trick is to not trade in a usual brokerage account in order to circumvent the 2:1 maximum leverage introduced after the 1929 crash; the conversion of short term into long term gain is the icing on the cake in this game. The leverage in many of the cases has exceeded 20:1. Carl Levin has called these "fictional derivatives" for a good reason. A report by the United States Senate PERMANENT SUBCOMMITTEE ON INVESTIGATIONS, Committee on Homeland Security and Governmental Affairs titled "ABUSE OF STRUCTURED FINANCIAL PRODUCTS: Misusing Basket Options to Avoid Taxes and Leverage Limits"  is attached.

Here are some diagrams detailing the strategies (Source: http://www.zerohedge.com/news/2014-07-21/how-rentec-made-more-34-billion-profits-1998-fictional-derivatives):

1. MAPS (Managed Account Product Structure)

2. COLT

Like Jean Simons, I still think HFTs perform a tremendous service by providing liquidity and better pricing of products. The culprit is the bad behaviour that HFT  engenders (such as front-running and deliberate introduction of information asymmetries). We should hope that in getting rid of such bad behaviour we do not throw the baby with the bathwater.

Some sources:
www.theguardian.com/money/us-money-blog/2014/jul/24/wall-street-fooling-people?CMP=ema_565

http://www.zerohedge.com/news/2014-07-21/how-rentec-made-more-34-billion-profits-1998-fictional-derivatives

http://www.hsgac.senate.gov/subcommittees/investigations/media/subcommittee-finds-basket-options-misused-to-dodge-billions-in-taxes-and-bypass-federal-leverage-limits

On Hindi as a national Language: A personal History.

TV and the media have made gutter Hindi the de facto language. Not the kind of language that is music to my ears. I do not speak Hindi for the fear that by mistake I might belt out some of that ghastly media Bombay Hindi.

There is a need for ONE language for communication between the states. And that language can never be Hindi and has to be English, because there is virtually no opposition to the use of English anywhere but there is opposition to just about every other language including Hindi. Tragically, the old Hindi imperialists brought this fate to Hindi. When I was growing up right after independence, there was a lot of goodwill for Hindi in the them Madras, Mysore, and the itsy-bitsy kingdoms in present-day Kerala (there was no Kerala, Karnataka, or Andhra Pradesh then). And then the Hindi fanatics hit the fan. Had INC been more understanding things would have been different.

You must remember that after independence the politicians tried their best to keep English out of the list of national languages. They failed utterly because in 1967 Nagaland proclaimed English to be their state language; the consensus was that all state languages should also be national languages of India. We all should be eternally grateful to Nagaland for this wonderful gift.

My father was transferred from Delhi to a place Kasaragod (now in Kerala) in 1951. He knew no Hindi but was favourably disposed towards it also because of his interest in Hndustani classical music. He was a botanist working at a research Institute. The the Hindi imperialists ht them and all researchers were required to put their research on the back burner and attend Hindi classes. It was such a joke! I know because my father took me with him to one of those classes. There were these researchers reading some journal article or simply dozing off while the teacher droned.

Rajaji (Rajagopalachari) was favourably disposed to Hindustani but NOT HIndi. Even DMK probably would have lived, though uncomfortably, with Hindustani. But that was not enough for the Hindi zealots. Nothing short of Sanskritised Hindustani was good enough. That was the last nail in the coffin for Hindi as national language.

This chauvinism has pervaded Indian politics even in areas other than language. For eample, in music, Harmonium was banned on All India Radio until fairly recently on the contention that it was not an Indian but a Western instrument. But then much of Indian music, especially that espoused by muslims, was harmonium based (try looking for qawali music without harmonium). It shut out more than a generation of musicians from All India Radio.

In a democracy, in the long run, nothing can survive without popular consent.

On Indian National Language.

Hindi is NOT the national language of India, it is ONE of the national languages. There are 22 of those, each with equal status. This is a fact clarified by court decisions, and is not an opinion. That is the reason that the rupee note carries its denomination in all those languages. If you look at 50 and 100 rupee notes, you will see that Hindi is the ninth language in which the denomination is listed (in alphabetic order since Assamese and Bengali are the first two).

I like Hindi as a language, especially because of my interest in Hindustani classical music. But while in college, I was a victim of Hindi imperialism. I was forced to study and take university exams even though I did not even know the alphabets well. It was "additional English" that saved me since, luckily for me, the university considered pass in Hindi jointly with that subject. I might have been more enthusiastic about Hindi if I was given the opportunity to develop it a more meaningful pace and not within nine months to master the literature of stalwarts such as Sumitranandan Pant, Harivansh Rai Bachan, and Munshi Premchand.

It is important to realise that Hindi will NEVER be the national language of India so long as a majority of the states do not accept it. If even states in the Hindi belt, and Odisha can be considered a part of it, do not accept it, proponents of Hindi have a tough row to hoe.

Hindi will never replace English. At best it will be a very very distant second language favoured by the uneducated. In fact it is not even a language, but just a dialect, it borrows ts script from Sanskrit like many of the other languages.