In this week's wrapup, we will talk about bilateral netting, the Tokyo Stock Exchange, a sanitizer glut in India, stagflation, and LIC. But first a note on this week's Finshots Markets.
Are Cinema Stocks dead?
Cinema halls are opening up next week. And so we thought maybe it’s time to look at India’s largest movie chain PVR and see what’s happening down there. You can read the full draft here.
Laws of Simplicity and Bilateral Netting
On Monday, we talked about bilateral netting. In his best selling book, The Laws of Simplicity, John Maeda says that the simplest way to achieve simplicity is through thoughtful reduction. His advice is - "When in doubt, just remove." And while Maeda’s arguments are restricted to products and services, you could apply the same principles to processes as well.
Take for instance the recent bill on the Bilateral Netting of Qualified Financial Contracts Bill. The ministry argues that its introduction would help big banks and other financial intermediaries to save costs and transact more efficiently. But at the heart of it all, the government is telling you that it wants to simplify processes and remove overheads that might actually be redundant. We explain all of this here.
When Tokyo Stock Exchange Failed
On Tuesday, we talked about how a failing data storage device brought the Tokyo Stock Exchange to its knees. The Tokyo Stock Exchange (TSE) is the largest stock exchange in Japan and the third-largest stock exchange in the world. It processes close to 100 million orders per day with transaction value totalling over $28 billion. Hundreds and thousands of market participants log in every day in the hope that the exchange does its job. And since they are putting millions of dollars on the line, any failure to execute transactions on time could result in catastrophic consequences.
So what happened when the TSE shut down down for an entire day? We answer that question here.
The Sanitizer Conundrum
On Wednesday, we talked about the problem of plenty. When the nationwide lockdown was imposed a few months back, India had a problem no one ever thought we would have - a shortage of hand sanitizer. In a survey of 8000 consumers in March, half of them said they couldn’t purchase sanitizers because there was a supply shortage. 26% of them were forced to buy brands they weren’t familiar with. Prices were rising exponentially. And it was complete mayhem.
But according to recent reports, we now have too much sanitizer in the market, pushing prices lower each day. So how did we get here? Find out here.
What is Stagflation?
On Thursday, we talked about stagflation. In the 1970s, classical economists were puzzled to see a disturbing trend emerge in the US.
1. There was a decline in general economic activity
2. Unemployment levels were rising
3. Prices were also increasing each day
This was weird. Think about it. How can prices increase when people are unemployed and hardly thinking about splurging on stuff? It didn’t make any sense. So economists finally conceded that this was a unique case in every respect and coined a new term to explain the phenomenon — Stagflation. Find out all about it here.
What does LIC do with its money?
On Friday, we talked about what LIC does with its money. The Life Insurance Corporation of India is the country’s largest financial institution. It manages close to ₹30 lakh crore in assets (out of India’s ₹40 lakh crore insurance industry). It sells 5 out of 4 insurance policies sold in the country. It’s much bigger than the 23 private sector life insurance companies put together. And it is a profitable entity which has consistently delivered value to its only shareholder — the Government of India.
The pressing question however is, how exactly does the behemoth manage its money? Find out here.
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Well, that's it from us for today. You go on and have a great weekend!