It is somewhat surprising that this has taken so long (as one of my friends quipped). While I avoid political topics in this newsletter since it also about generative AI, which is a hot technology topic, I am covering it here.
1.ChatGPT Has Been Sucked Into India’s Culture Wars: Hindu nationalists claim that the chatbot has insulted their deities, sparking an online uproar.
ChatGPT uses large language models to provide detailed answers to text prompts, responding to questions about everything from legal problems to song lyrics. But on questions of faith, it’s mostly trained to be circumspect, responding “I’m sorry, but I’m not programmed to make jokes about any religion or deity,” when prompted to quip about Jesus Christ or Mohammed. That limitation appears not to include Hindu religious figures(yet).
On January 7, an account tweeted a screenshot from ChatGPT to its more than 185,000 followers; the tweet appeared to show the AI-powered chatbot making a joke about the Hindu deity Krishna. Within days, it had spun into a full-blooded conspiracy theory. Read on.
2.India's first big lithium find boosts electric car hopes
India has announced its first significant discovery of reserves of lithium, a rare element crucial for manufacturing electric vehicles. The government said on Thursday that 5.9m tonnes of the element had been discovered in Jammu and Kashmir.
So far, India has depended on Australia and Argentina for lithium imports. Lithium is a key component in rechargeable batteries that power numerous gadgets like smartphones and laptops, as well as electric cars.
3.Why do high IQ people stagnate in their careers? Emotional intelligence? Popular perception is that raw intelligence makes people successful. But research suggests that emotional intelligence may be what differentiates star performers. You can cultivate your emotional intelligence, but you'll need self-efficacy to do so.
4. Ethiopian and Indian Food have an Interconnected History.
From injera to appam and sambusas to samosas, the similarities between Ethiopian and Indian food can be traced to their interconnected history. The Juggernaut explored how 2,000 years of trade have shaped the cuisines of the two cultures. “A blind tasting would leave even chefs unable to tell certain dishes apart,” Mehr Singh wrote, pointing to the likeness between dishes such as Ethiopia’s miser wot and India’s dal, or nicer kibbeh and ghee. A key difference, she noted, is how both nations use spices: The blend of garam masala, the Indian staple, varies by household while Ethiopia’s smoky berbere rarely changes in proportion.
5.Matt Levine, writes popular daily opinion piece in the Bloomberg called Money Stuff. His recent piece on the Adani imbroglio is lucid and carefully reasoned and worth reading. A Long Read.
“One important way for activist short selling to work is that a short seller makes a big bet against a company’s stock, the short seller publishes a report saying that the company is a fraud, the company publishes a rebuttal saying that actually it is good and the short seller is the fraud, and then some outside referee with some official power evaluates both reports and decides who wins.
This is not an absolute requirement: The short seller might publish a report saying “this company’s sales growth is not going to be what the market expects, so it is overpriced,” and the company could publish a response saying “no,” and then some combination of (1) the company’s future performance and (2) the reactions of other investors will decide who wins. Here, there is no outside referee and no single definitive determination of who is right and who is wrong.
But if you are going to bother with activist short selling, you mostly aren’t putting out noisy reports about growth and valuation doubts. You are mostly putting out noisy reports about fraud or crime or “the entire product is fake.” And if you are noisy enough, some responsible regulator will look into your report, and the regulator will either (1) decide that the company is a fraud and bring charges, in which case its stock probably crashes and you win, (2) decide that you are baselessly slandering the company and bring charges against you, in which case you lose, or (3) close the case without action, in which case the stock probably recovers and you probably mostly lose. An activist short report is often an indirect request for regulatory action, and it succeeds if there’s an enforcement action and fails otherwise.”
Last month Hindenburg Research put out a report accusing India’s Adani Group of being “the largest con in corporate history.” (Adani put out a rebuttal calling Hindenburg “the Madoffs of Manhattan,” Hindenburg put out a reply to the reply, etc.). Adani is a network of large infrastructure companies that are publicly traded in India and that are controlled by Gautam Adani. The infrastructure is not fake — Adani really builds stuff and makes money — and Hindenburg does not claim that it is. Instead, Hindenburg’s essential claims are:
1 The prices of Adani Group stocks sure seem high? (“Even before examining the evidence put forward in this report and based solely on financials taken directly from its companies, the Adani Group appears to be highly overvalued.”)
2 A lot of the public shareholders of the Adani Group companies seem to be offshore shell companies that are secretly affiliated with and perhaps controlled by Adani, and that might be manipulating the stock. Under Indian rules, listed companies need to have a free float of at least 25% of their shares, that is, at least 25% of the shares have to be in the hands of outside investors. Hindenburg alleges that a lot of the outside public investors in Adani companies are actually controlled by Adani.
3 The Adani companies are highly leveraged, and (says Hindenburg) “intricately and distinctly linked and dependent upon one another. … We believe it could take only one serious liquidity event at a single entity to trigger a negative cascade of events at other group entities which could affect the entire Adani Group.”
Adani denies these claims. The Hindenburg report is very long and miscellaneous (“Gautam Adani’s Brother-In-Law, Samir Vora, Was Allegedly A Ringleader Of The Same Diamond Trading Scam,” ah!) and frankly I am not sure what the payoff is supposed to be. But if you put those three claims together and assume that they are true, then you could imagine them pointing in a direction something like: “Adani Group might be a bunch of real companies with fine businesses, but their stock prices are way too high because they are manipulated by insiders trying to pump up their valuation by making heavily levered trades on a deceptively small float, and when that is discovered the stock prices will collapse.”
The Adani Group stocks fell a lot after the Hindenburg report — wiping out more than $100 billion of market value — and Adani had to delay stock and bond offerings, though more recently the stocks have recovered somewhat. None of that … none of that is an answer, though, you know? Are Adani’s outside investors real, or are they Adani affiliates? The stock price action doesn’t tell you that.
In theory the referee here might be the Securities and Exchange Board of India: Hindenburg is accusing Adani of violating its listing requirements, and Adani is denying those claims. But in practice there is another set of referees: the index providers. Index providers are mostly not in the business of deciding questions like “is this company overvalued” or even “is this company a fraud,” but they are in the business of deciding questions like “how much of this company’s stock is held by insiders,” just because many indexes are weighted by free float. (The idea is that, if an index fund has to buy X% of every company, it should have to buy X% of the available shares of each company, not the ones that don’t publicly trade.) If Adani says that 25% of its shares are publicly held, and Hindenburg says that really the number is much less than that, then that is a factual dispute that the index providers can, and sort of has to, referee.
Global index provider MSCI is set to change its weightings for Adani Group stocks after reviewing how many shares can be freely traded, in a further setback for the Indian conglomerate reeling from fraud allegations.
The lenders were in talks to refinance the loan up to a week before the critical report from Hindenburg Research was published, according to people familiar with the matter. Those negotiations stalled after the report alleging fraud led to a massive selloff, chilling the banks’ willingness to refinance, the people said, asking not to be identified discussing a private matter.
