In this week's wrapup we talk about Bitcoins, losing an oil field, Cairn Energy, gold exchange, and auditing banks. But if you're looking for a break from the more mundane stuff and crave something exciting, then you should definitely read this week's Finshots Markets on the psychology of speculation.
Why Musk denounced Bitcoin?
In February of this year, Tesla announced that it had purchased $1.5 billion worth of bitcoin while also suggesting that it intended to accept Bitcoins as a mode of payment from people looking to buy its vehicles. This was a show of confidence by all accounts. And the value of the cryptocurrency soared.
But then, just last week, Elon Musk broke his promise. After selling about 10% of the company’s bitcoin holding he announced that Tesla had suspended purchases using bitcoin amid concerns surrounding the use of fossil fuels in mining. The price of bitcoin crashed and investors were up in arms. And if you're wondering why Elon did what he did, this story may help you connect the dots.
Losing an Oil field
Back in 2008, ONGC Videsh and a couple of other Indian entities discovered a massive oil field in Iran. It was called Farzad-B. The hope was that India would sign an agreement with Iran to develop the oil fields and eventually extract some oil. We even invested about $400 million to show our commitment. However, the project never took off and it now seems that Iran has finally decided to develop the oil fields with a local entity. Wondering why India lost out? This story will set the record straight.
Will Cairn really seize and sell Air India's planes abroad?
Cairn Energy has had a long-running dispute with the Indian government, which dragged on till it reached the international court of arbitration at The Hague. India lost and the international court asked the Indian government to pay up $1.4 billion. Ever since, the company has been looking to recover its dues by seizing government-owned assets. What is the whole picture? Why are they doing this? Will they even succeed?
This doozy of a story got a full-scale Finshots breakdown. Read more here!
A new platform for trading gold?
You’ve probably heard about it already. SEBI wants to set up a new trading exchange for gold. It’s like this place on the internet where you can trade stocks. Only in this case, you get to trade electronic receipts that will have physical gold backing them. And while everybody’s curious to see how all this might play out, we have to address the elephant in the room. Why? Why do this in the first place? Read on to find out...
The New Auditing Engagement
India has seen its fair share of scams, frauds, and rackets in the financial sector. We have witnessed banks collapse, NBFCs capitulate and directors making a run for it. But the common denominator in almost all of these seemingly dubious engagements has to be auditor oversight. These are the people expected to tip off dodgy behavior. They’re the ones expected to stand up to the board and curb malfeasance. So when you see them underperform and routinely gloss over blatant violations, you have to look at the whole arrangement and ask — “What can we do to potentially alleviate some of these problems?”
So the RBI decided to put out a new set of guidelines to govern the appointment of auditors. You can read about them here.