- australia is a conundrum. their real estate correction can not precede a chinese downturn in my view. bhp billiton and other miners who mainly export to china/asia have recorded multi billion dollar profit. bhp is buying out canadian co potash for c. USD40 billion. aussie economy is based on mining. i think we are far from a correction. aussie mouse is riding the chinese dragon..dangerous at some stage. many experts have started questioning the chinese growth...let's see..timing is key.
- kalpataru/ashok tower at parel now quoting rs 30,000 a foot or slightly below. my friend's 2,000 sft flat leased out at rs 17 lakh (140k pm) pa ie a yield of 3%, similar to sydney! earlier mumbai yields were 5% for residential. everything is booming. it took me 15 minutes to walk out of andheri station after getting off the train at platfrom no 7 or 8 or 9(!). walked in a sea of humanity - thousands of people walking in and out of station with tiredness, patience and enthusiasm at 7pm. the potential human energy is unbelivable - in my view much larger than the heat of all the oil in saudi arabia. just imagine if these people's energy is channelised properly, they could overturn an empire! i won't be surprised with a 10% GDP next 10 years. also spent 2 hours with ceo and directors at a leading investment bank. they are doing great business and are upbeat. couldn't see a person who is complaining about money - whether beggars, housemaids, executives. now in that case why should real estate be any cheaper in mumbai?
Wednesday, 15 September 2010
Friday, 20 August 2010
Saving and Nurturing Gujarati: A Question
I have come across several written and verbal discussions about saving our Gujarati language from the English attack.
We observe that the thinkers and writers of Gujarati language continue to steadfastly refuse to let English dent its ‘purity’. We look down upon the use of English words in our spoken and written Gujarati. We feel threatened that Gujarati will be impoverished if more and more Gujaratis depend on the use of ‘Gujlish’.
In the course of learning Arabic, I have come across interesting facts, which make me inquire into our collective mindset, history and lazily forgotten facts.
Let me depend on a paragraph written in Gujarati on http://www.gujaratindia.com/, a Government of Gujarat website, to make my point.
“ગિરનાર પર્વતમાં મળી આવેલા શિલ્પ-સ્થાપ્ત્યો મૌર્ય સમ્રાટ અશોકના સામ્રાજ્યની ગવાહી પૂરે છે. જેણે શક અને હુણોએ કબ્જેં કરેલા વિસ્તા રમાંથી ખદેડી મૂકી ગુજરાત પ્રદેશમાં સામ્રાજ્ય કર્યું હતું….સમયાંતરે ગુજરાતનો કારોબાર વિવિધ રજવાડાંઓના હાથમાં હતો. ઇ.સ. ૧૯૪૭માં ભારત આઝાદ થયું ત્યાગરથી લઇ ૧ મે, ૧૯૬૦ સુધી સૌરાષ્ટ્રા સિવાયનો સમગ્ર ગુજરાત પ્રદેશ મુંબઇ રાજ્ય હસ્તાક હતો. બાદમાં મહારાષ્ટ્રર રાજ્યમાં મુંબઇ સમાવી ગુજરાતને અલગ રાજ્યનો દરજ્જો મળ્યો….ઇ. સ. ૧૬૦૦માં ડચ, ફ્રેન્ચર, અંગ્રેજ અને પોર્ટુગીઝ પ્રજા રાજ્યના દરિયાઇ સિમાડે આવી ને વસી હતી….ગુજરાતમાં સ્વાભાવે માયાળુ, ખંતીલી પ્રકૃતિ અને મહેનતકશ ગુજરાતી લોકો શહેરો, ગામડાંઓ અને નાના કસબામાં રહી તેની આર્થિક ઉપાર્જન પ્રવૃતિ કરે છે….” Source:
This is just an example all of us can refer to easily. There are approximately 100 words in the text above, of which 12 words highlighted in red colour are of Arabic/Farsi origin! I am not implying that the website is ill written – it is just the way Gujarati today is!
Arabic/Farsi Rooted --- Sanskrit Rooted --- English
Gawahi --- Sakshi --- Witness
Karobar --- Vyavahar --- Administration
Azad --- Swatantra --- Free
Sivay --- Vina (?) --- Without
Alag --- Veglu (?)** --- Independent
Darajjo --- Varg (?) --- Status
Isvi San --- Isvi Samvat --- AD (Anno Domini in Latin!)
Dariya * --- Samudra --- Sea
Etc, etc.
*Actually dariya means river, popularly used in Indian languages to describe sea
** ‘Judu’ and ‘alaydu’ both are of Arabic/Farsi origin
Now you will agree that all of us will protest, if I wrote the same paragraph, replacing all words of Arabic/Farsi origin with words of English or English origin!
On one hand we have this fear and repulsion of English, and on the other, over centuries, we have continued to embrace the rapacious invasion of Farsi and Arabic into the core of our psyche and our written and spoken communication.
The more you read Gujarati, the more you will find Arabic/Farsi living in it. Words of Arabic and Farsi root are almost like the embryo carried in the womb of a pregnant Gujarati – inseparable! Sometimes, it is impossible or at least very very difficult to find a Sanskrit based word in Gujarati for a popular Arabic based word. Try ‘harami’ (bastard), ‘multavi’ (postponed), ‘radd’ (cancelled), ‘khajano’ (treasure), ‘safarjan’ (apple), ‘fakro’ (paragraph), ‘vasiyatnamu’ (will), ‘waaras’ (heir), ‘hakk’ (right), ‘daawo’ (court case or claim), ‘kul’ (total), ‘mushkeli/takleef’ (difficulty). Can you see the damage done already? Or is it enrichment?
Oh, even when Gujarati Hindus celebrate new year on the 1st day of Kartik, we say “Saal Mubarak”, neither of which words has its origin in Sankrit. That reminds me of Hindu, which word (Hindu) is Farsi for Sindhu, a Central Asian Pushtu speaking invaders’ reference to the non-Islamic and much confusing civilization/people of the Sindhu river valley. Hindu probably originates from Indus, a Greek word for or related to Sindhu river.
Check out Bhagwad Gita, any of our vedas and other shastras to ensure the absence of the word Hindu. In pre-Islamic times, not far back - just 1,400 years ago, we referred to our religion as ‘dharma’. The ‘ahlek’ and ‘alakh’ of ‘alakh niranjan’ visibly come from ‘halek’, as in ‘kaif halek’ meaning ‘how are (you)’ in Arabic, a common greeting.
Gujarati is probably the only Indian language which uses ‘Shu/Sha’ for ‘Kya’ in Hindi, ‘Kaay’ in Marathi, ‘Ki’ in Bangla and Punjabi and ‘kay’ in Rajasthani……Where does it come from? Of course from Arabic. If you want to ask “How is everything?” or “What’s news?” in Arabic, just say “Shu khabar?”. Surprising? And we thought it is pure Gujarati?
A simple question like “shu”, words such as ‘sawal’, ‘jawab’, ‘akhbar’, ‘adalat’, ‘maafi’, and ‘vagere’ are the heart of our everyday Gujarati (and Arabic) communication. It matters a lot to who we are and how we think.
I am not a linguist, and have not researched deeply before writing this. However, the presence of Arabic in Gujarati is very obvious if you speak both these languages.
So why do thinkers and writers of Gujarati language continue to steadfastly refuse to let English dent its ‘purity’? Is it this understanding of damage done? Or is it the belief that Arabic has enriched Gujarati, but English will pollute it? Why do we look down upon the use of ‘time’ when some one says ‘Time shu thayo chhe?’ and forget that even ‘shu’ is foreign?
We could probably have the approach one: If my large hearted mother Gujarati has loved to carry the twin babies Arabic and Farsi in its lap for centuries, how justified are we to stop her from adopting English? Pretty easy to implement!
Or our approach two could be: Let’s move to the pure Gujarati with its root firmly in mother Sanskrit. Almost impossible for us to now re-learn how to say, “Aa sawal no jawab shu chhe?”
What I do not understand is the more popular approach three: It’s fine for Gujarati to be laced with Arabic, but it’s not fine if English pollutes it. Difficult to justify, difficult to implement.
We observe that the thinkers and writers of Gujarati language continue to steadfastly refuse to let English dent its ‘purity’. We look down upon the use of English words in our spoken and written Gujarati. We feel threatened that Gujarati will be impoverished if more and more Gujaratis depend on the use of ‘Gujlish’.
In the course of learning Arabic, I have come across interesting facts, which make me inquire into our collective mindset, history and lazily forgotten facts.
Let me depend on a paragraph written in Gujarati on http://www.gujaratindia.com/, a Government of Gujarat website, to make my point.
“ગિરનાર પર્વતમાં મળી આવેલા શિલ્પ-સ્થાપ્ત્યો મૌર્ય સમ્રાટ અશોકના સામ્રાજ્યની ગવાહી પૂરે છે. જેણે શક અને હુણોએ કબ્જેં કરેલા વિસ્તા રમાંથી ખદેડી મૂકી ગુજરાત પ્રદેશમાં સામ્રાજ્ય કર્યું હતું….સમયાંતરે ગુજરાતનો કારોબાર વિવિધ રજવાડાંઓના હાથમાં હતો. ઇ.સ. ૧૯૪૭માં ભારત આઝાદ થયું ત્યાગરથી લઇ ૧ મે, ૧૯૬૦ સુધી સૌરાષ્ટ્રા સિવાયનો સમગ્ર ગુજરાત પ્રદેશ મુંબઇ રાજ્ય હસ્તાક હતો. બાદમાં મહારાષ્ટ્રર રાજ્યમાં મુંબઇ સમાવી ગુજરાતને અલગ રાજ્યનો દરજ્જો મળ્યો….ઇ. સ. ૧૬૦૦માં ડચ, ફ્રેન્ચર, અંગ્રેજ અને પોર્ટુગીઝ પ્રજા રાજ્યના દરિયાઇ સિમાડે આવી ને વસી હતી….ગુજરાતમાં સ્વાભાવે માયાળુ, ખંતીલી પ્રકૃતિ અને મહેનતકશ ગુજરાતી લોકો શહેરો, ગામડાંઓ અને નાના કસબામાં રહી તેની આર્થિક ઉપાર્જન પ્રવૃતિ કરે છે….” Source:
This is just an example all of us can refer to easily. There are approximately 100 words in the text above, of which 12 words highlighted in red colour are of Arabic/Farsi origin! I am not implying that the website is ill written – it is just the way Gujarati today is!
Arabic/Farsi Rooted --- Sanskrit Rooted --- English
Gawahi --- Sakshi --- Witness
Karobar --- Vyavahar --- Administration
Azad --- Swatantra --- Free
Sivay --- Vina (?) --- Without
Alag --- Veglu (?)** --- Independent
Darajjo --- Varg (?) --- Status
Isvi San --- Isvi Samvat --- AD (Anno Domini in Latin!)
Dariya * --- Samudra --- Sea
Etc, etc.
*Actually dariya means river, popularly used in Indian languages to describe sea
** ‘Judu’ and ‘alaydu’ both are of Arabic/Farsi origin
Now you will agree that all of us will protest, if I wrote the same paragraph, replacing all words of Arabic/Farsi origin with words of English or English origin!
On one hand we have this fear and repulsion of English, and on the other, over centuries, we have continued to embrace the rapacious invasion of Farsi and Arabic into the core of our psyche and our written and spoken communication.
The more you read Gujarati, the more you will find Arabic/Farsi living in it. Words of Arabic and Farsi root are almost like the embryo carried in the womb of a pregnant Gujarati – inseparable! Sometimes, it is impossible or at least very very difficult to find a Sanskrit based word in Gujarati for a popular Arabic based word. Try ‘harami’ (bastard), ‘multavi’ (postponed), ‘radd’ (cancelled), ‘khajano’ (treasure), ‘safarjan’ (apple), ‘fakro’ (paragraph), ‘vasiyatnamu’ (will), ‘waaras’ (heir), ‘hakk’ (right), ‘daawo’ (court case or claim), ‘kul’ (total), ‘mushkeli/takleef’ (difficulty). Can you see the damage done already? Or is it enrichment?
Oh, even when Gujarati Hindus celebrate new year on the 1st day of Kartik, we say “Saal Mubarak”, neither of which words has its origin in Sankrit. That reminds me of Hindu, which word (Hindu) is Farsi for Sindhu, a Central Asian Pushtu speaking invaders’ reference to the non-Islamic and much confusing civilization/people of the Sindhu river valley. Hindu probably originates from Indus, a Greek word for or related to Sindhu river.
Check out Bhagwad Gita, any of our vedas and other shastras to ensure the absence of the word Hindu. In pre-Islamic times, not far back - just 1,400 years ago, we referred to our religion as ‘dharma’. The ‘ahlek’ and ‘alakh’ of ‘alakh niranjan’ visibly come from ‘halek’, as in ‘kaif halek’ meaning ‘how are (you)’ in Arabic, a common greeting.
Gujarati is probably the only Indian language which uses ‘Shu/Sha’ for ‘Kya’ in Hindi, ‘Kaay’ in Marathi, ‘Ki’ in Bangla and Punjabi and ‘kay’ in Rajasthani……Where does it come from? Of course from Arabic. If you want to ask “How is everything?” or “What’s news?” in Arabic, just say “Shu khabar?”. Surprising? And we thought it is pure Gujarati?
A simple question like “shu”, words such as ‘sawal’, ‘jawab’, ‘akhbar’, ‘adalat’, ‘maafi’, and ‘vagere’ are the heart of our everyday Gujarati (and Arabic) communication. It matters a lot to who we are and how we think.
I am not a linguist, and have not researched deeply before writing this. However, the presence of Arabic in Gujarati is very obvious if you speak both these languages.
So why do thinkers and writers of Gujarati language continue to steadfastly refuse to let English dent its ‘purity’? Is it this understanding of damage done? Or is it the belief that Arabic has enriched Gujarati, but English will pollute it? Why do we look down upon the use of ‘time’ when some one says ‘Time shu thayo chhe?’ and forget that even ‘shu’ is foreign?
We could probably have the approach one: If my large hearted mother Gujarati has loved to carry the twin babies Arabic and Farsi in its lap for centuries, how justified are we to stop her from adopting English? Pretty easy to implement!
Or our approach two could be: Let’s move to the pure Gujarati with its root firmly in mother Sanskrit. Almost impossible for us to now re-learn how to say, “Aa sawal no jawab shu chhe?”
What I do not understand is the more popular approach three: It’s fine for Gujarati to be laced with Arabic, but it’s not fine if English pollutes it. Difficult to justify, difficult to implement.
Tuesday, 4 May 2010
How do you want to be remembered?
If you are being remembered, you are dead, so it really does not matter.
- Jack Pelton,
CEO Cessna - the aircraft manufacturer
April 2010
- Jack Pelton,
CEO Cessna - the aircraft manufacturer
April 2010
Thursday, 29 April 2010
Why Do You Work For The Same Company For 25 Years?
I read senior Financial Times writer Lucy Kellaway's recent column describing her thoughts on completing 25 years at FT. Especially her need to explain to the world why she was still there, at a time when most successful executives would not be found stable at one place for so long.
------------------------
Dear Lucy,
That was a candid story.
I spent 5 years in accounting, 5 years in teaching/financial publishing and 10 years in investment banking jobs, working with 3 employers over first 20 years. For the last four years I have been busy changing 3 jobs in search for a bigger life picture than just career growth. And I am not feeling stable yet! That should make us quite a contrast!
I experienced that the first 5 years in any job tell you all about your growth prospects i.e. if you grew slow in that period, it is unlikely you will be a senior VP or CEO but also vice versa. The first 5 years also tell you if you like what you are doing, and whether you like to do it for more than 5 years.
All in all 25 years make you bored unless excitement was created by economic uncertainty, change of jobs, geographic movement and so on.
My guess is that in your 25 years at FT, your life remained exciting, as it appears from your smile and your writings, due to one or more of these:
= You have had several children giving you as many maternity leaves to break the monotony. Probably you are also an involved mother or daughter
= You have been cheating on your husband of 20 years or if unable to do so, channelizing the energy into writing even more....(sorry for being cheesy)
= FT is not very demanding and you work at your pace, not chasing higher position/pay in the organization
= You are rich from an inheritance or you have a rich husband and you enjoy frequent holidays
= You can not take the physical discomfort resulting from a change of job
= You most certainly enjoy watching the world go by
As the years pass by, your senses evolve and as you see and read and hear and smell and touch more, that world you have not seen and read and heard and smelt and touched so far looks more exciting to explore. And you realize that the time on your hand is getting shorter!
Therefore, dear Lucy, may I advise you to write out a resignation to FT NOW. The beautiful world outside has been missing you for years. I assure you, FT will fully 'support' your decision to leave.
Yours,
Chetan Shah
26042010
---------------------
Lucy writes -
Re: 25 Years
Thursday, 29 April, 2010 1:59 PM
From: "Lucy.Kellaway@FT.com"View contact details
To: chetan_gshah@yahoo.com
Thanks for your nice message. You are quite right about maternity leaves - as I've had four children.
Best wishes
Lucy Kellaway
------------------------
Dear Lucy,
That was a candid story.
I spent 5 years in accounting, 5 years in teaching/financial publishing and 10 years in investment banking jobs, working with 3 employers over first 20 years. For the last four years I have been busy changing 3 jobs in search for a bigger life picture than just career growth. And I am not feeling stable yet! That should make us quite a contrast!
I experienced that the first 5 years in any job tell you all about your growth prospects i.e. if you grew slow in that period, it is unlikely you will be a senior VP or CEO but also vice versa. The first 5 years also tell you if you like what you are doing, and whether you like to do it for more than 5 years.
All in all 25 years make you bored unless excitement was created by economic uncertainty, change of jobs, geographic movement and so on.
My guess is that in your 25 years at FT, your life remained exciting, as it appears from your smile and your writings, due to one or more of these:
= You have had several children giving you as many maternity leaves to break the monotony. Probably you are also an involved mother or daughter
= You have been cheating on your husband of 20 years or if unable to do so, channelizing the energy into writing even more....(sorry for being cheesy)
= FT is not very demanding and you work at your pace, not chasing higher position/pay in the organization
= You are rich from an inheritance or you have a rich husband and you enjoy frequent holidays
= You can not take the physical discomfort resulting from a change of job
= You most certainly enjoy watching the world go by
As the years pass by, your senses evolve and as you see and read and hear and smell and touch more, that world you have not seen and read and heard and smelt and touched so far looks more exciting to explore. And you realize that the time on your hand is getting shorter!
Therefore, dear Lucy, may I advise you to write out a resignation to FT NOW. The beautiful world outside has been missing you for years. I assure you, FT will fully 'support' your decision to leave.
Yours,
Chetan Shah
26042010
---------------------
Lucy writes -
Re: 25 Years
Thursday, 29 April, 2010 1:59 PM
From: "Lucy.Kellaway@FT.com"
To: chetan_gshah@yahoo.com
Thanks for your nice message. You are quite right about maternity leaves - as I've had four children.
Best wishes
Lucy Kellaway
Saturday, 13 February 2010
Avatar Valuation: Tony Jackson Q&A....
My email to Tony Jackson at Financial Times:
2010/1/18
Dear Mr. Jackson,
That was a fantastic read. I have forwarded it to everyone I know in investment banking, although probably their frequent reference Prof. Damodaran would make an ideal recipient.
I have two arguments to challenge your thoughts.
1) Philosophical argument: Are we concluding here that while prices change, value remains the same? How does it matter, since human decisions are driven by current prices more than by the value. For example, a man dying of thirst on 18th January 2010 may not reach the life saving (value driven) decision if he has the choice of spending his last 500 dollars on (a) buying a bottle of water or (b) buying one kilo of gold sold for 500 dollars. Probably that's the reason why Avatar (gold i.e. $1.3 billion) is more exciting than Gone With The Wind ($26 billion i.e. life…much more valuable than gold!).
2) Statistical argument: While I fully agree with your rationale, please consider this. If you apply the 'double discounting' of inflation and available resources, I wonder how the pre-crash 2007 US house prices appear. Probably you would end up concluding that the house prices in a previous boom were higher than those in 2007. Same for gold and oil? We all know available oil reserves are lesser today than in an earlier oil boom. Sorry for my laziness in not using the actual data and showing the conclusions. Also, I may not replicate your exact number crunching so results may not be comparable. However, you might want to do (or may have done) this and share with me how this theory fits with US house prices, gold and oil.
Regards,
Chetan
-----------------
From: Tony Jackson [mailto:tonyjackson09@googlemail.com]
Sent: Monday, January 25, 2010 7:39 PM
To: Chetan Shah
Subject: Price and value
Chetan - my apologies for this belated reply. On the philosophical point, I think the distinction between price and value is fair enough. But my own point was rather more basic - the distinction between price and affordability. If the price of a thing has doubled but wages have quadrupled, we can all afford twice as much of it as before. Whether it is rational to buy twice as much of the thing - cigarettes, say - is of course a different question.
As to historic prices, I bought my first house (in Edinburgh) for £12,000 in 1978. Adjusted for UK average earnings, that makes £83,000 today. Since that's half the UK average house price today, I infer that house prices are now more expensive. And the gold price, as I recall, was nearly $800 at its peak in 1980 - around $3,000 today on average GDP per head. Still some way to go there ....
Regards,
Tony
--------------------
My response email to Tony Jackson on 26/1/2010:
Tony,
I hate to drag this into a further argument, but can't resist.
Would you say that gold is unlikely to reach $,3000 any time soon? Would you also say that your friends/wife/doctor from Edinburgh i.e. the market does not expect house prices in Edinburgh to fall by 50%? I am tempted to believe so, because I guess most of us do not live by statistics but by real physical experiences and the current - nominal - numbers appeal to us more than the real - discounted - numbers. Probably our priorities change, too and that reflects in our spending patterns breaking out of old expense/earning ratios.
I am certainly not sharing your thoughts on gold with my wife and give her a reason to buy more.
Thanks for your response and hope to read more of your brain stimulants!
Cheers!
Chetan
2010/1/18
Dear Mr. Jackson,
That was a fantastic read. I have forwarded it to everyone I know in investment banking, although probably their frequent reference Prof. Damodaran would make an ideal recipient.
I have two arguments to challenge your thoughts.
1) Philosophical argument: Are we concluding here that while prices change, value remains the same? How does it matter, since human decisions are driven by current prices more than by the value. For example, a man dying of thirst on 18th January 2010 may not reach the life saving (value driven) decision if he has the choice of spending his last 500 dollars on (a) buying a bottle of water or (b) buying one kilo of gold sold for 500 dollars. Probably that's the reason why Avatar (gold i.e. $1.3 billion) is more exciting than Gone With The Wind ($26 billion i.e. life…much more valuable than gold!).
2) Statistical argument: While I fully agree with your rationale, please consider this. If you apply the 'double discounting' of inflation and available resources, I wonder how the pre-crash 2007 US house prices appear. Probably you would end up concluding that the house prices in a previous boom were higher than those in 2007. Same for gold and oil? We all know available oil reserves are lesser today than in an earlier oil boom. Sorry for my laziness in not using the actual data and showing the conclusions. Also, I may not replicate your exact number crunching so results may not be comparable. However, you might want to do (or may have done) this and share with me how this theory fits with US house prices, gold and oil.
Regards,
Chetan
-----------------
From: Tony Jackson [mailto:tonyjackson09@googlemail.com]
Sent: Monday, January 25, 2010 7:39 PM
To: Chetan Shah
Subject: Price and value
Chetan - my apologies for this belated reply. On the philosophical point, I think the distinction between price and value is fair enough. But my own point was rather more basic - the distinction between price and affordability. If the price of a thing has doubled but wages have quadrupled, we can all afford twice as much of it as before. Whether it is rational to buy twice as much of the thing - cigarettes, say - is of course a different question.
As to historic prices, I bought my first house (in Edinburgh) for £12,000 in 1978. Adjusted for UK average earnings, that makes £83,000 today. Since that's half the UK average house price today, I infer that house prices are now more expensive. And the gold price, as I recall, was nearly $800 at its peak in 1980 - around $3,000 today on average GDP per head. Still some way to go there ....
Regards,
Tony
--------------------
My response email to Tony Jackson on 26/1/2010:
Tony,
I hate to drag this into a further argument, but can't resist.
Would you say that gold is unlikely to reach $,3000 any time soon? Would you also say that your friends/wife/doctor from Edinburgh i.e. the market does not expect house prices in Edinburgh to fall by 50%? I am tempted to believe so, because I guess most of us do not live by statistics but by real physical experiences and the current - nominal - numbers appeal to us more than the real - discounted - numbers. Probably our priorities change, too and that reflects in our spending patterns breaking out of old expense/earning ratios.
I am certainly not sharing your thoughts on gold with my wife and give her a reason to buy more.
Thanks for your response and hope to read more of your brain stimulants!
Cheers!
Chetan
Friday, 12 February 2010
Why Avatar Is Not Such A Big Hit...by Tony Jackson, January 16,17 Financial Times
I read the following brain scratcher in FT a few weeks ago...worth a read.
Frankly my dear, that record has gone with the wind
The 3D film Avatar is apparently doing well at the box office. Its $1.3bn sales to date put it in contention with the record holder Titanic (1997), at $1.8bn, and eclipse Gone With The Wind (1939), which managed $390m.
Or so the publicity tells us. But for anyone with an ounce of numeracy, this is nonsense. Adjusted for US inflation,Titanic's sales were $2.4bn and Gone With The Wind's getting on for $6bn. Add another pinch of numeracy and a further thought occurs.
Inflation apart, real incomes rise over time. If a thing cost $10 in 1980, the question is not just what it would cost today, but what it cost then in terms of available resources.
Applying that logic to box office sales, let us adjust for nominal US gross
domestic product per head (a proxy for average wages), which I derive from
measuringworth.com. By that yardstick, Gone With The Wind's sales are worth a rather daunting $26bn in today's money.
As with Hollywood, so with Wall Street.
Today's reader of JK Galbraith's The Great Crash 1929 might find the sums involved rather trivial, since the Dow Jones Industrial Average peaked back then at a mere 380. But do the same adjustment for nominal GDP per head, and the level was more than 21,000.
That is thought-provoking. It has become almost conventional wisdom today that the 2000 peak of 11,700 on the Dow was a record level of overvaluation, based on the twin measures of the 10-year rolling
inflation-adjusted price-earnings ratio and the "q" ratio of price to book value. But even ,adjusted for GDP, that was less than 16,000 in today's terms. All the same, the 2000 peak was higher in that respect than any in history except 1929. It was higher even than the nominal 14,000-odd
which immediately preceded the latest crisis in 2007.
What do these comparisons tell us?
First, distinguish between the two measures. The cyclically adjusted real p/e, developed by the US economist Robert Shiller, works on the basis of reported corporate earnings rather than broad economic activity. The two are, of course, intimately linked. But corporate profits as a proportion of GDP fluctuate over time, depending on the bargaining power of capital versus labour. Those fluctuations tend, naturally enough, to be mean-reverting, that is, they vary around a fairly constant average.
Hence the calculation by Smithers & Co that the 2000 valuation peak was a record, based on deviation from the long-run mean. Our "real" valuation of stocks, based on GDP, is rather different. It tells us, in effect, what level of available resources the population has been willing to devote, to ownership of corporations.
The size of the quoted sector, of course, varies over time. But that need not concern us, since we are measuring an index rather than total dollars.
When we look at the reality of economic growth, the picture is one of false
projections from past experience. Average growth in the US economy in the 1920s was 4 per cent a year, and in the 1930s half that. As ever, the 1929 market peak was just in time to be too late.
In the 1990s, which led up to the next market peak, US growth was a more
subdued 3.3 per cent, a reflection of the fact that the rate had been slowing ever since the 1960s. But the figure for the 2000s looks like being being a close tie with the 1930s for the worst on record. The best decade for growth, on the other hand, was the 1940s - a clear case, you
might think of a rebound from the depths encouraging signal for the 2010s.
But when we recall the enormous impetus given to the US economy by the second world war, we might perhaps temper our hopes. All that said, let us return to our basic premise. It is encouraging that in real terms, the market excesses of the past decade have not matched those of the
1920s. Equally, it no longer seems likely that the world will slip into a 1930s-style depression, though you never know. But given the glum outlook for developed world profits in the changed conditions of the new decade, it remains less than comforting that the market should be as high as it is. Let us recall that in the other great bar market of the past century, in the mid-197Os, the peak in today's adjusted terms was only about
7,700.
Look on the bright side. We were never daft enough, it seems, to pay the kind of prices for stocks our great-grandparents did. And if truth be told, I was never that keen on Gone With The Wind either.
Frankly my dear, that record has gone with the wind
The 3D film Avatar is apparently doing well at the box office. Its $1.3bn sales to date put it in contention with the record holder Titanic (1997), at $1.8bn, and eclipse Gone With The Wind (1939), which managed $390m.
Or so the publicity tells us. But for anyone with an ounce of numeracy, this is nonsense. Adjusted for US inflation,Titanic's sales were $2.4bn and Gone With The Wind's getting on for $6bn. Add another pinch of numeracy and a further thought occurs.
Inflation apart, real incomes rise over time. If a thing cost $10 in 1980, the question is not just what it would cost today, but what it cost then in terms of available resources.
Applying that logic to box office sales, let us adjust for nominal US gross
domestic product per head (a proxy for average wages), which I derive from
measuringworth.com. By that yardstick, Gone With The Wind's sales are worth a rather daunting $26bn in today's money.
As with Hollywood, so with Wall Street.
Today's reader of JK Galbraith's The Great Crash 1929 might find the sums involved rather trivial, since the Dow Jones Industrial Average peaked back then at a mere 380. But do the same adjustment for nominal GDP per head, and the level was more than 21,000.
That is thought-provoking. It has become almost conventional wisdom today that the 2000 peak of 11,700 on the Dow was a record level of overvaluation, based on the twin measures of the 10-year rolling
inflation-adjusted price-earnings ratio and the "q" ratio of price to book value. But even ,adjusted for GDP, that was less than 16,000 in today's terms. All the same, the 2000 peak was higher in that respect than any in history except 1929. It was higher even than the nominal 14,000-odd
which immediately preceded the latest crisis in 2007.
What do these comparisons tell us?
First, distinguish between the two measures. The cyclically adjusted real p/e, developed by the US economist Robert Shiller, works on the basis of reported corporate earnings rather than broad economic activity. The two are, of course, intimately linked. But corporate profits as a proportion of GDP fluctuate over time, depending on the bargaining power of capital versus labour. Those fluctuations tend, naturally enough, to be mean-reverting, that is, they vary around a fairly constant average.
Hence the calculation by Smithers & Co that the 2000 valuation peak was a record, based on deviation from the long-run mean. Our "real" valuation of stocks, based on GDP, is rather different. It tells us, in effect, what level of available resources the population has been willing to devote, to ownership of corporations.
The size of the quoted sector, of course, varies over time. But that need not concern us, since we are measuring an index rather than total dollars.
When we look at the reality of economic growth, the picture is one of false
projections from past experience. Average growth in the US economy in the 1920s was 4 per cent a year, and in the 1930s half that. As ever, the 1929 market peak was just in time to be too late.
In the 1990s, which led up to the next market peak, US growth was a more
subdued 3.3 per cent, a reflection of the fact that the rate had been slowing ever since the 1960s. But the figure for the 2000s looks like being being a close tie with the 1930s for the worst on record. The best decade for growth, on the other hand, was the 1940s - a clear case, you
might think of a rebound from the depths encouraging signal for the 2010s.
But when we recall the enormous impetus given to the US economy by the second world war, we might perhaps temper our hopes. All that said, let us return to our basic premise. It is encouraging that in real terms, the market excesses of the past decade have not matched those of the
1920s. Equally, it no longer seems likely that the world will slip into a 1930s-style depression, though you never know. But given the glum outlook for developed world profits in the changed conditions of the new decade, it remains less than comforting that the market should be as high as it is. Let us recall that in the other great bar market of the past century, in the mid-197Os, the peak in today's adjusted terms was only about
7,700.
Look on the bright side. We were never daft enough, it seems, to pay the kind of prices for stocks our great-grandparents did. And if truth be told, I was never that keen on Gone With The Wind either.
Economic Theory of Divorce: FT Responds - January 23,24 Weekend Edition 2010
While I am not happy the way Tim Harford responds to my economic wisdom, I am quite flattered I could reach out to the world's most influential people of business and finance who read FT.
Dear Economist: Resolving readers' dilemmas with the tools of Adam Smith
Should we rethink the reasons for divorce? The betting markets reckon Elin Nordegren will divorce Tiger Woods. Given the experiences of The wives of Shane
Warne and Bill Clinton, that seems hasty. Warne’s wife tolerated his scandals for years before divorcing him. Cricketers do not make as much money as golf stars, so the probability of her receiving a large alimony was low. Hillary Clinton had a much
lower probability of political success as a divorcee. should look at economic rather than emotional reasons for divorce.
Chetan S.
Dear Chetan,
You need to clarify your reasoning. You contrast Shane Warne's earnings with those of Tiger Woods, which suggests you have in mind some kind of income effect, where the richer the husband, the more likely the wife is to divorce him. This has the merit of being a falsifiable theory, but I am not sure it is true. Such cases belong instead to the theory of the firm. When two units of production - Hillary and Bill, say - are worth more together than they are separately, we call them "complementary assets", and there is a strong reason to keep them together. It's a question of how annoying the affairs are versus how strong the
complementaries are. Hillary and Bill are complementary assets; this is less obvious for Nordegren and Woods. As for a general theory, there is plenty of data - a project for a student of economics such as you?
Tim Harford
Questions to economist@ft.com
Dear Economist: Resolving readers' dilemmas with the tools of Adam Smith
Should we rethink the reasons for divorce? The betting markets reckon Elin Nordegren will divorce Tiger Woods. Given the experiences of The wives of Shane
Warne and Bill Clinton, that seems hasty. Warne’s wife tolerated his scandals for years before divorcing him. Cricketers do not make as much money as golf stars, so the probability of her receiving a large alimony was low. Hillary Clinton had a much
lower probability of political success as a divorcee. should look at economic rather than emotional reasons for divorce.
Chetan S.
Dear Chetan,
You need to clarify your reasoning. You contrast Shane Warne's earnings with those of Tiger Woods, which suggests you have in mind some kind of income effect, where the richer the husband, the more likely the wife is to divorce him. This has the merit of being a falsifiable theory, but I am not sure it is true. Such cases belong instead to the theory of the firm. When two units of production - Hillary and Bill, say - are worth more together than they are separately, we call them "complementary assets", and there is a strong reason to keep them together. It's a question of how annoying the affairs are versus how strong the
complementaries are. Hillary and Bill are complementary assets; this is less obvious for Nordegren and Woods. As for a general theory, there is plenty of data - a project for a student of economics such as you?
Tim Harford
Questions to economist@ft.com
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