MUMBAI — Reliance Power Ltd.’s 117 billion rupee ($2.98 billion) initial public offering has been set at 450 rupees a share, company Chairman Anil Ambani said.
India’s largest capital raising closed to record subscriptions as investors submitted bids valued at more than 7.5 trillion rupees. Demand for the issue, which was open for subscriptions between Jan. 15 and Jan. 18, exceeded supply by 72.9 times.
“This is the largest-ever subscription in the history of global capital markets. It received applications from more than five million retail participants,” Mr. Ambani said.
From “Economics: Public and Private Choice” by Gwartney, Stoup, Sobel and Macpherson:
Pitfall #2 to Avoid in Economic Thinking: “Good intentions do not guarantee desirable outcomes.”
In a Sunday NY Times article “Unintended Consequences,” Freakonomics authors Steven Levitt and Stephen Dubner explain why “do-good” laws often fail:
1. The Endangered Species Act is actually endangering, rather than protecting, species.
2. The Americans with Disabilities Act, enacted in 1992, has led to a sharp drop in the employment of disabled workers.
There is virtually no empirical evidence that tax rebates are an effective response to economic slowdowns. The main benefit of a tax rebate would seem to be political — giving politicians a way of appearing to be doing something about the nation’s economic problems that is superficially plausible.
It’s an insult to Keynes even to call a tax rebate Keynesian economics. It should be called “feel good economics” because its only real effect is to make politicians feel good about themselves and buy re-election with the public purse.
~Bruce Bartlett in Saturday’s WSJ editorial “Feel Good Economics”
A Packer fan was enjoying himself at the game in a packed Lambeau Field, until he noticed an empty seat down in front. He went down and asked the guy next to it if he knew whose seat it was. The guy said, “Yes, that’s my wife’s seat. We haven’t missed a game since the Lombardi days, but my wife just died suddenly.” The fan offered his sympathy and said it was really too bad he couldn’t find a relative or friend to give the ticket to and enjoy the game together. “Oh no, none of them were available” the guy said, “they’re all at the funeral right now.”
The uneasy sign in the nation’s economic picture is not the statistical droop but the mood. If too many consumers postpone purchases out of worry, shrinkage in sales may bring on a real recession. “Psychology,” says Vice President Dr. Arthur A. Smith of Dallas’ First National Bank, “is the joker in the economy’s deck of cards.”
Now I’m not saying I think the U.S. economy is about to go into a recession, but it does seem like there is a certain amount of “recession psychology” going on, and some have suggested that we might be “talking ourselves into a recession.” Recessionary fears seem to generate more media attention than maybe more realistic talk of an economic slowdown, which feeds the “recession psychology” (see the increase in “recession” hits above on Google Trends for January).
According to futures trading on Intrade, there is now about a 71% chance of a U.S. recession in 2008. So let’s assume it happens: the U.S. economy goes into a recession this year. How bad will it be and how long will it last? The chart above shows the average length of U.S. recessions going back to 1854, using data from the NBER.
We know this for sure: It could be a lot worse, recessions used to last almost two years during the 1854-1919 period, and 1.5 years in the 1919-1945 period. Since WWII, the average recession lasted 10 months, and the last two recessions (1990-1991 and 2001) lasted only 8 months. With the support of a booming world economy, we could expect a short and shallow 2008 recession, IF if happens. If futures trading is correct, there’s a 29% of NOT having a recession, so don’t give up hope.
We would have to experience at least 6 months of significant economic downturn to have a recession, and there’s no evidence yet that there’s even been one month yet of serious decline in the important recession-indicating variables. I’m still saying the U.S. economy is not in recession. But then there’s always the joker….
“High Gas Prices Truly Cut Dependence on Foreign Oil,” Wired Magazine 2008
“Why $5 Gas is Good for America,” Wired Magazine 2005, here’s an excerpt:
Rising oil prices are more than just an irritant or even an ominous nick out of the GDP. For anyone with a fresh idea, expensive oil is as good as a subsidy – with no political strings attached. Indeed, every extra penny you pay at the pump is an incentive for some aspiring energy mogul to find another fuel.
For the better part of a century, cheap oil has fatally undercut all comers, not to mention smothered high-minded campaigns for conservation, increased efficiency, and energy independence. The changing outlook opens horizons – for conventional drilling, sure, but also for alternatives. Some new technologies merely produce more crude. But others tap energy supplies that have nothing to do with black pools under the Middle East.
What to do? Keep driving. In fact, drive more. The longer gas stays expensive, the higher the chance we’ll see alternatives.