‘Bond King’ abdicates his throne at PIMCO

Bill Gross aka ‘Bond King’ (name given by financial press) stunned the investment world on Friday when he left the firm he co-founded (was taken over by Allianz) and joined rival Janus on Friday. At PIMCO, Gross managed $ 2 trillion + fund and he is set to join a rival to manage a fund with ‘mere’ millions in corpus. Reuters columnist gives a great analogy here Its like resigning from the US Presidency to become a city manager of a small town.

The question remains Why would a 70+ year old multi – billionaire (drew a salary of $ 200 million pa.) bail out of the company he found to join a rival ? El Erian the chief econ at PIMCO had quit some time back and there were murmurs back then that he had a fall out with Gross. There were talks of Grosss’ short temper and his shouting at his subordinates. There were also talks of how it was ‘my way or the highway’ kind of approach that Gross was known for. There is this anecdote that i read somewhere whereby one of Grosss’ traders saying that one of their investment holding being expensive and Gross asking him to buy more of it for him. More about his behaviour (in lighter vein) by Deal Breaker here

There was the SEC investigation going on, news of which broke only recently. The investigation related to whether PIMCO returns were inflated in any way.

More importantly his funds had displayed poor performance and had witnessed outflows to the tune of $ 70 billion since May 2013 (16 straight months of outflows).

The ‘Bond King’ sure was fighting a tough battle for the past many months. Regarding the possibility of being fired? Grosss’ rival Jeffery Gundlach however says he couldnt have been fired by Allianz and the move was just that Gross wanted to move on on his own terms.

Bestselling author bats for our heritage

It came as a breath of fresh air when i opened today’s ToI. It was Amish Tripathi, one of India’s best selling authors, batting for our heritage. Agreed, his books are essentially based on Indian mythology but then he is being politically incorrect by promoting our ancient texts and heritage and encouraging their study.

The media goes breathless and beserk at the very mention of the attempts to revive the study of our rich past. The terms “saffronisation”, “right wing agenda” etc etc. are thrown around. Well, this is the direct result of the dominance of so called secular media for whom pandering to the tastes of just one section of the society is what matters.

I think the government could contribute by establishing Institute’s that contribute to fundamental research or better still revive university departments of Ancient Indian history / tradition.

Remember Amol Muzumdar?

In an era of hero worship there are also stories of grit, determination and extreme hardwork that dont necessarily result in fame and success but due to sheer fate things just dont fall in place and in some cases even fall apart. My earliest memories of Amol Muzumdar were from the newspaper stories of the kind of runs that he scored. I came across this via my friend Amol’s (Agarwal) blog which in turn is courtesy here

If you grew up in the nineties and watched cricket, chances are that you must have heard the name of Amol Muzumdar, the stylish middle order batsman from Mumbai. Yes, he too featured in that historic match, yes you guessed it right, Shardashram vs St. Xaviers or better known as the match where Tendulkar and Kambli broke all kinds of records, Amol was slated to come in next. He never got his chance then.

Despite scoring ~ 10000 runs (second only to Wasim Jaffer) in first class cricket and having a batting average of ~ 50, Amol wasnt able to break into the India team and sadly his name wont even ring any bells in the minds of this generations of Mumbaikar’s. Such is the fickle nature of fan adulation.

It was the era and the position that he played, the nineties and nno.3 & 4. There were the awesome 3some of Dravid, Laxman and Ganguly who were knocking on the doors of the selectors pretty much at the same time as Amol was.

At the fag end of his career, he even switched teams and played for Assam and Andhra Pradhesh, continuing to display his class. The following captures his commitment and dedication to the game,“I simply could not have anything in my mind but batting. No outings with friends or family functions. I don’t even remember celebrating my birthdays”. More on him here

Another Gorilla – This time a Chinese one – growls

Alibaba comes out with its public issue at $ 60 – 63 / share. At the upper end of the price band, Alibaba would have a market cap of $ 160 bln +. With the promoter, Jack Ma holding ~ 10% stake, his networth would equal ~ $ 16 bln. This is simply wow, considering that co. was established in only 1999.

Some Alibaba stats;

– GMV – $ 300 bln (50% share in the Chinese market)

– Revenues – $ 9 bln

– Profits – $ 5 bln

– PAT % – 55%

– ROIC – 20%

Seems like a highly profitable enterprise, may be this has much to do with the business model that it follows, i.e. the market place model. It essentially acts as a platform to bring together buyers/sells. Much like the equity / commodity exchanges and other platforms. Now, this is different from the other ecommerce model, i.e. the merchant model whereby the company takes care of the logistics and warehousing too. But this comes at a cost, as it is a low margin business due to the increased costs. Desi Flipkart, follows this model. Amazon.com of US follows this particular whereas EBay follows the marketplace model. So no one model seems to be superior, one is a high volume low value whereas the other is a low volume high value.

Valuation: At the upper end of the price band, Alibaba would be trading at 33x FY14 EPS. Now, 33x in for a fast growing internet co. is not much, infact its cheap. So, whats it that we might be missing. FT has this . Essentially, the ADS holders would get shares in a holding co. which in turn has holdings in subsidiaries which in turn has holdings in various operating cos. who have cross holdings in certain “variable interest entities” who crucially control the government liscenses and payment platform, Alipay. These are ultimately controlled by Ma and Xie. This explains the discount.