Indian Markets Developing

Two new proposals this month.

• Permission for Short Selling with Securities Lending and Borrowing


• New F&O Products.

In the Indian markets, it was difficult to take a short position so far. Some time ago, ICICI Bank came out with an FPO where they virtually guaranteed allotment of shares to retail investors for Rs.900 when the shares were trading around Rs.930 in the market. I was evaluating whether I could apply for the maximum shares under retail segment and then short the equivalent in secondary market and capture the Rs.30 per share almost risk-free. That is when I found out that short positions could not be carried for more than one day. It would be interesting to see if the market progress at a more normal levels than what it is doing now after the proposal goes into effect.

The new F&O products bring LEAP type longer term options, volatility index similar to VIX, exchange traded products for strategies, exchange traded currency F&O, Bond index F&O etc.

Cost of Capital

IFRS 3 requires allocation of goodwill among intangible assets. Click here for details on the IFRS . All is well when you read the IFRS. In practice, it means having to reconcile between WARA (Weighted Average Return on Assets) and WACC (Weighted Average Cost of Capital). What is the WACC?

One additional thought though, thinking in parallels of Ricardo's theory of comparative advantage, does it mean that assets will move from the hands of the investors with a high cost of capital to the ones with a low cost of capital? Comments invited.

I am reminded of the Charlie Munger discussion (source: http://articles.wallstraits.net/articles/1361) which I am copying here:-

"Charlie Munger often quotes the late Nobel laureate physicist Richard Feynman, who said the first rule is to not fool yourself, and you are the easiest person to fool. Munger can be merciless if he believes he has caught someone in the act of silly self-deception.

Pitty the poor professor who gets caught up in a debate with Munger on the academic treatment of investment policy. Such was the case at The Benjamin Cardozo School of Law in New York City in 1996 when, due to the death of a close friend, the scheduled moderator was unable to attend. Charlie Munger was asked to step in.

Charlie told the audience: "The accidents of mortality have given you a Baptist bumpkin suddenly put in charge of a bunch of Catholic archbishops who are going to debate revisions of the Catholic mass, in Latin. But I figure I could moderate such a convention."

It was the panel's assignment to discuss the research of Professor William Bratton of the Rutgers-Newark School of Law, which dealth with the corporate decision to pay dividends to shareholders rather than reinvest profits. Munger soon nailed Bratton with what he considered a flawed assumption in the research.

Munger: I take it that you believe that there is no one-size-fits-all dividend policy and that you're with the professor (Jill E. Fisch of Fordham University School of Law) who said yesterday that there wasn't any one-size-fits-all scheme for corporate governance?

Bratton: On that simple proposition I am entirely in concord with Professor Fisch.

Munger: But you say there is some vaguely established view in economics as to what is an optimal dividend policy or an optimal investment?

Bratton: I think we all know what an optimal investment is.

Munger: No, I do not. At least not as these people use the term.

Bratton: I don't know it when I see it... but in theory, if I knew it when I saw it this conference would be about me and not about Warren Buffett. (Laughter from the audience)

Munger: What is the break point where a business becomes suboptimal in an ordinary corporation or when an investment becomes suboptimal?

Bratton: When the return on the investment is lower than the cost of capital.

Munger: And what is the cost of capital?

Bratton: Well, that's a nice one (Laughter) and I would...

Munger: Well, it's only fair, if you're going to use the cost of capital, to say what it is.

Bratton: I would be interested in knowing, we're talking theoretically.

Munger: No, I want to know what the cost of capital is in the model.

Bratton: In the model? It will just be stated.

Munger: Where? Out of the forehead of Job or something?

Bratton: That is correct. (Laughter)

Munger: Well, some of us don't find this too satisfactory. (Laughter)

Bratton: I said, you'd be a fool to use it as a template for real world investment decision making. (Laughter) They're only trying to use a particular perspective on human behavior to try to explain things.

Munger: But if you explain things in terms of unexplainable subconcepts, what kind of an explanation is that? (Laughter)

Bratton: It's a social science explanation. You take for what it's worth.

Munger: Do you consider it understandable for some people to regard this as gibberish? (Laughter)

Bratton: Perfectly understandable, although I do my best to teach it. (Laughter)

Munger: Why? Why do you do this? (Laughter)

Bratton: It's in my job description. (Laughter)

Munger: Because other people are teaching it, is what you're telling me. (Laughter)

The audience laughter points are essential in this exchange, lest it sound like a food fight at a junior high school cafeteria. The bantering was done in a good-natured tone, but the point of the exchange was quite serious. Later, to make sure his comments were not misunderstood, Munger made amends:

I don't want my remark about the cost of capital to be interpreted as meaning that I think the great bulk of Professor Bratton's paper is wrong. I think it's profoundly right. When he talks about agency costs in corporations and the discipline caused by levels of debt and the discipline caused by dividend conventions, I think he is profoundly right. And to the extent that those are the conventional academic explanations, I think it's wisdom he's giving. It's just the cost of capital thing that always makes me go into orbit. (Laughter)

Although he did not say so then, Munger has his own idea of how the cost of capital should be measured. Buffett has explained that at Berkshire, the cost of capital is measured by the company's ability to create more than $1 of value for every $1 of earnings retained. "If we're keeping $1 bills that would be worth more in your hands than in ours, then we've failed to exceed our cost of capital," Buffett said.

Sage@wallstraits.com

Credits: Much of this article is extracted from Damn Right by Janet Lowe, 2000.
Posted on 20 Feb 2006."

Gujarat Industries Power Company

Here were the key stats when I came across this company:-

RONW - 16%
P/BV - 0.92
which meant that I would get more than 17% if I just hold on to the shares. I wasn't expecting to write so soon about this particular company.

The reason for the discount was obvious. GIPCL was going for an expansion of their capacities and was taking on new debt. The new project is expected to go online by 2008-09. It would almost double their capacity. The expansion is for their lignite based power plant and GIPCL has captive lignite mines which implies that the cost of extraction will remain pretty much unchanged over the next years.
As per the projections by the government, power supply is going to remain behind peak demand for the coming years.
Considering this scenario, it is a great investment, though I have concerns about the pricing power of the company.

The share price almost doubled in the last few months. I booked the profits over the course of last few weeks. GIPCL will still be on my watch list for any future buying opportunities.

Shivering with Greed

I had a busy August. I started looking in India after a while for fresh investments with the pre-conceived notion that opportunities would be hard to find in a market that has gone up 40% and upwards in the last 5 years. Surprise, Surprise!!!!
Here's what I am looking at:-
Company A trades at 0.92 times book value, earns c.16% RONW in a industry facing lot of regulatory tailwind.
Company B trades at c.8 times earnings from multiple industries and impeccable management.
Company C trades at 2.5 times earnings and pending a few value unlocking trigger events in the coming two years.
I hope to find similar "disappointments" in the future and hope to write about these three companies in the near future.

Against the Gods: The Remarkable Story of Risk

Peter Bernstein examines the historic evolution of the concept of risk in about 268 pages of this 337 dedicated to the writing. He takes the reader through a journey from the Greeks through the days of Luca Paccioli, Pascal, Bernoulli, Leibiniz, Bayes, Gauss, Galton, Keynes, Kenneth Arrow, Frank Knight, John von Neumann to Markowitz, Kahneman, Tversky, Sharpe, Merton, and Scholes.

I plan to re-read the book at least a couple of times and search for the books listed in its bibliography.

Some of my favorite quotes:-

"The idea of risk management emerges only when people believe that they are to some degree free agents." - This simple statement to some extent answered my question as to why despite all the writings in other subjects ranging from weaponry to logic, didn't ancient Indians (East Asian Indians) talk about risk. I guess it meant going against the wills of the Gods for them.

Quoting Pascal's idea from Port-Royal Logic "Fear of harm ought to be proportional not merely to the gravity of the harm, but also to the probability of the event."

"...Only the pathologically risk-averse make choices based on the consequences without regard to the probability involved.....only the foolhardy make choices based on the probability of an outcome without regard to its consequences."

"..people with a phobia about being struck by lightning place such a heavy weight on the consequences of that outcome that they tremble even though they know that the odds on being hit are tiny."

"..this does not mean that numbers are useless in real life. The trick is to develop a sense of when they are relevant and when they are not."

"...coined the term "Quetelismus" to describe the growing popularity of discovering normal distribution in places where they did not exist or that failed to meet the conditions that identify genuine normal distributions."

"..it is easier to assume that the future will resemble the present than to admit that it may bring some unknown change."

On regression to mean "..never depend upon it to come into play without constantly questioning the relevance of the assumptions that support the procedure." This statement has a new meaning to me after reading "When Genius Failed" recently.

"The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome and the linkage between effect and cause is hidden from us"

Quoting Poincare' "..what is chance for the ignorant is not chance for the scientist. Chance is only the measure of our ignorance"

"The information you have is not the information you want.
The information you want is not the information you need.
The information you need is not the information you can obtain.
The information you can obtain costs more than you want to pay."

Quoting Arrow "The possession of actual money lulls our disquietude; and the premium we require to make us part with money is the measure of our disquietude"

Quoting Knight "Uncertainity must be taken in a sense radically distinct from the familiar notion of Risk,......a measurable uncertainity or "risk" proper...is so far different from an unmeasurable one that is not in effect an uncertainity at all."

How to play a lottery?

I just loved this comment left on the freakonomics blog by another reader that I decided to post it here:-

“Do our economists play the lottery themselves, or do they consider it a tax on people who are bad at math?”

I found a way to play the lottery with positive expected winnings.

Every week I pick a bunch of numbers, and don’t buy any tickets. Every time my numbers don’t come up, I declare myself the winner of the $2 I didn’t spend on each ticket.

It’s an amazingly lucrative way to play.

Hypothetically it’s possible I could lose millions of dollars one day under this method. But I don’t lose sleep over it for the same reason I don’t lose sleep over the possibility of a meteor hitting my car.

- on 29 Jun 2007 at 9:23 pm # Mango

Portfolio Performance Update

Here is the update on the performance of my portfolio.

Not surprisingly, I underperformed in 2006-07 after overperforming for the last 5 years. I have been short on ideas in the Indian market.

It is not that I lost money during the year; on the contrary, I made 8% on the beginning value of the portfolio. But the indices did better - Nifty at 12% and Sensex at 16%.
My overall margin of over-performance for the 6 years is still way better at 316% 204% over Nifty and 288%176% over Sensex. The over-performance is a little over-stated since my portfolio includes dividends and the value of indices do not. However, the difference is still not significant, considering that the published annual dividend yield of Sensex during these years has ranged only between 1.13-2.61%, translating into 8%-14% difference at compounded rates. S&P CNX Nifty's dividend yield is at a wider range of 0.59%-3.18% translating into 4-20% difference in total.

It is disheartening to note that I have made only at government yield levels (National Savings Certificate and Public Provident Fund yield 8%) after taking the risks I have taken during the year. However, the consoling factor is that it is only 1 in 6 years.

Modified July 21st 2007

Wesco Financial - 2007 Meeting

CM started with a short speech on the confluence of factors in WB that contributed to Berkshire's success.
1. Mental aptitude
2. Extreme interest in the subject - there is no substitute
3. Early start
4. "Learning Machine" - avid learner. Lucky to be in a subject where he can learn effectively. It is more about learning the method of learning.
5. Decision making concentrated in one mind. Vs. Committees CM compared Singapore to USA in the pace of success.
6. Not being naive relates to mental attitude - by avoiding negatives like self-pity, envy, overspending income, being an extreme idealogue. This is maximisation of objectivity.
7. Reinforcement through rewards for good decision.
Some Mungerisms:
Quoting Will Rogers - There should be a better way to learn not to pee on an electric fence than actually doing it.
Irish Alzheimer's is when you forget everything except the grudges.
Quoting a German proverb - Man is old too soon, and too late smart
Sit on your ass and read
Academics & Learning:
Fatal disconnect of academics
pick up main ideas of each subject - for instance opportunity cost from economics
Checklist method of learning
Always invert
Sell yourself the best hour of the day
Accounting for derivatives
Marked to model and marked to market are different
Being rational
wonderful feeling to be right
even better to be trusted by others
Why Berky is not repeated
1.Simple - no advantage in being simple
2. Institutional reward system and hierarchy make it difficult
Investing in Commodities
POSCO is not, it is technology from Nippon Steel
Commodity business can be attractive at a price
Nature Vs Nurture
In a non-pathological environment, mostly pre-ordained by nature than people give credit for
Know your strengths
Don't be a prisoner to your talents
Inefficient Markets
1. Small Markets, or
2. Crazy People doing crazy things
Motivation
Wanted to be independent to make 'a man of himself'
Best from his list of human misjudgements in Poor Charlie's Almanack
Self serving bias - 'Little me wants it, why can't little me have it'
Opportunity cost
Best measure to look at life

Berkshire Hathaway – 2007 Meeting – Part Two

Views on:-

Right Margin of Safety:

WB - If we don’t understand something, we don’t try to compensate with a higher Margin of Safety. If you cannot see out what the business is going to be like for 5-10 years, do not invest in it.

Healthcare:-

WB – Berky would be interested in investing in a business with low frictional costs of distribution.

Intrinisic Value of Berky:-

WB – Should not be judged solely based on Book Value, but on use of retained earnings as well.

Derivatives:-

WB – There are valuation issues. Both sides of the same trade can value the same instrument differently and come up with different values. This is unusual.

Comments:- Usually, when a liability or a receivable is valued, the debtor and creditor always assign the same currency value to the transaction.

WB – Leverage and various forms of program trading are prevalent

Trade Vs. Buy & Hold:-

WB – Constant trading of assets can be an unhealthy practice. You have to understand human behavior to understand trading better.

CM – Bad results cannot be predicted with Gaussian distributions. The use of Beta and other statistical tools are prevalent because it is easy to teach and easy to compute.

Intrinsic Value: –

WB – Refers to Aesop’s fable – “A bird in hand is worth two in the bush”.

Global Warming:-

WB – Catastrophe exposures in insurance companies. Suggests that the US Govt. should err on the side of the planet.

CM – The effects of global warming can be tackled with capital.

Stocks Vs. Bonds:-

WB – Stocks are still a better investment than bonds

Small Funds:-

WB – High returns are possible for smaller funds compared to large

Sub-primes:-

WB - As long as the unemployment does not rise and inflation does not rise, its effects on the housing market will not affect the economy.

Volatility:-

WB - Volatility is not a good measure of risk. Use of Beta is not appropriate. Risk comes from not knowing what you are doing.

Management Quality and Integrity:-

WB – Look for direct and honest reporting

Filter of trust:-

WB – People give themselves away with the things they talk, the things they think are important

CM – Be especially suspicious when the proposals are too good to be true.

Discount Rates:-

CM – Just because you can measure something doesn’t mean it is the controlling variable.

Inflation Protection:-

WB – First level of protection, earning power

Second, owning good business with pricing power defined as the customers willingness to give up current income for use of its products

Railroads:-

WB – Vs Trucking – cost of fuel affects trucking 4X more than railroads and there is not much capacity addition in railroads.

Self-Development:-

In response to the question of a 10 year old girl who wants to earn money

CM – Sell yourself the best hour of the day and sell only the rest to others.

Investments:-

WB – Do not own a business with a weakening competitive edge.

Dollar:-

WB – Bearish without any significant policy changes on the part of US.

Cm – Weakening dollar not resulting in higher inflation is a surprise.

Good Board of Directors:-

WB –

1. Have the right CEO
2. The CEO does not over-reach.
3. Independent judgement on big acquisitions.

Berkshire Hathaway - Meeting Notes Part I

The meeting opened with the cousin Jimmy Buffett playing the Berkshirehathawayville version of his song.
WB announced his plan for a cartoon series for children to impart financial education in an enjoyable manner.
The Q1 2007 results were posted with WB explaining that insurance rates have come down recently, but the effect will start showing up in a couple of quarters or so due to a lag effect in rates ratcheting down. He offerd caution on cat. insurance and mentioned that over a long term berky would be expect to break-even in tnis business and still come ahead because of its ability to manage float and generate float income.
He brought up the issue of a high accounts receivable by 7 billion than normal due to the Equitas deal closing in April.
Views on:-
Private Equity
* Funds invested are locked in. It's hard to get out for the investor.
* Fund Managers are compelled to invest since it is in their interest to earn more fees by generating more funds. They cannot go back to investors with surplus funds in hand.
* Trigger for the slow down could be junk bond yield spreads going up higher hampering leverage.
Overseas investments
WB has no bias against. Low holdings not reported in annual report. Reporting limit threshold of 3% in Europe a deterrent.
Executive Compensation
* Ratcheting and envy at play
* Non-independent comp committees.
* Compensation should be based on controllable factors. For instance, extraction cost based comp for an oil executive, not oil prices. Factor should be relevant as well.
Interest rates
* Credit contraction as a result of higher rates.
Contraction as was historical is not probable. Fed not likely to orchestrate a credit crunch. Follies of excess liquidity may bring about unhealthy legislation.
High Corporate profits
WB - Share in GDP getting higher, labor's share down It is not likely to persist.
CM - Share of financials is higher is the causw. Investment banks etc earning abnormal profits. Historically high consumer credit is also the reason.
Naked Shorting
WB welcomes shorters, sees it as a money making opportunity by lending stocks.
It is a hard position to take.
Gambling
* Excitement seeking is the underlying.
* Tax on ignorance - making it easier to gamble is preying on ignorance, not the job of a govt that serves people.
How to become a good investor
* Read everything you can
* Fill your minds with ideas, sort out the good ones
* Jump into investing. Reading about investing and actually doing it is as different as reading a romance novel and actually doing "something else".
* WB has same thought pattern as when he was 19 abt investments
CM - Rationalise - "What do you own and why do you own it?"
WB - Write an essay on why you would buy the company at the price

Sum of Parts

Here is the story of an interesting trade that I closed at the end of last month. I was running my screens the first weekend of March and encountered this stock. Here are the vitals:-
Price to Book - 1.2
Price to Earnings - 2.0
This meant that you could get more than 40% return on this stock just from earnings. It seemed too good to be true!!! I dug further on this stock - Thermodynetics(TDYT) and found that they had reorganised after the end of the last fiscal and now owned only one subsidiary. The subsidiary - Turbotec - is listed in the London AIM market and has been trading at GBP 0.70. TDYT owns 56.32% of Turbotec. On a per share valuation basis, this puts the value of the investment in subsidiary at USD 2.44. There were no other major liabilities on the balance sheet. The stock was trading at around USD 1.65. I didn't know much about the industry segment TDYT was in - heating, cooling and refrigeration applications.
I immediately placed an order and ended up with shares averaging 1.68 in the next two weeks. As is my practice for such trades, I immediately placed a sell order - good till cancelled
- at my target price of USD 2.40. The order executed at the end of the month. A good return of 36.6% in less than a month's time!!!

Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger

I was interested to know more about Charlie Munger after reading the almanac. The opportunity presented itself in the form of this book. I had read Janet Lowe's Warren Buffett Speaks: Wit and Wisdom from the World's Greatest Investor some years ago as well.

A few things about Charlie comes out:-
* Love of books - biographies and other non-fiction
* Great thinking ability
* Charlie's personality hidden behind the curmudgeonly shell
* Social Responsibility through support of various causes like abortion rights and health care

Even an accomplished author like Janet Lowe is unable to do justice and unravel the life, thoughts and business history of the complicated personality of Charles Thomas Munger. The book is divided into various chapters, not so much in a chronological fashion. There are some of his speeches reproduced in the appendix as well.

Buffett 2006 Letter

The 2006 annual letter from Berkshire Hathaway Chairman Warren E. Buffett makes an interesting read (Tell me something new!!!)

I was attracted to where he explains about the Equitas deal where Berkshire re-insures Equitas against upto $13.9 billion claims for securities and cash of $7.12 billion. Assuming the 10.4% return of S&P 500 as laid out in the letter, they will break-even in 6-7 years and changing the return to 21.6%, the break-even would be in 3-4 years. In Buffett's estimate, the payout period for the $13.9 billion is as long as 50 years. Just one word to describe the deal - ingenious!!!!!!!!!!!

India Budget 2007-08 and 2006-07 report card

Indian Budget was presented today. A few quick observations:-

On Economy:-
* A 9.2% growth in GDP with services and manufacturing growth at more than 11%
* Real Growth (i.e.inflation adjusted) per capita income is 7.4%
* A high level of savings rate at more than 30%
* Fiscal Deficit at 3.7% for 2006-07 and budgeted at 3.3% for 2007-08

Areas of concern:-
* Money Supply (M3) grew by 21.3%. High inflation risk.

Structural Initiatives/Changes:-
* Social Security Net to be expanded to cover the heads of 80 lakhs (8 million) rural landless households not covered presently. Government proposes to pay the 50% of premium of Rs 200 (approx USD 5) per year.
* Government plans to acquire RBI's 60% stake in State Bank of India. Why?
* Proposes to use a small part of the foreign exchange reserves without the risk of monetary expansion for financing infrastructure. RBI will be assured of a return higher than the average rate of return on its incremental investment.
* Proposal to set up an autonomous Debt Management Office and as a first phase a middle office, in a move towards better fiscal discipline.

Mortgages
* Announces creation of "Reverse Mortgage" through National Housing Bank.
* Creation of Mortgage Guarantee Companies I assume, along the lines of Freddie and Fannie.

Taxation:-
* Asset Management Services provided by individuals will be levied service tax.
* Small and Medium Enterprises (with less than 1 crore (10 million) in taxable income) will have a reduced rate of income tax.
* Proposal to grant pass-through status to venture capital funds in respect of investments in venture capital undertakings in biotechnology; information technology relating to hardware and software development; nanotechnology; seed research and development; research and development of new chemical entities in the pharmaceutical sector; dairy industry; poultry industry; and production of bio-fuels and for investment in hotel-cum-convention centres of a certain description and size.
* Definition of capital gains to extend to include certain works of art
* Proposal to raise the rate of dividend distribution tax from 12.5 per cent to 15 per cent on dividends distributed by companies
* Proposal to raise the dividend distribution tax on dividends paid by money market mutual funds and liquid mutual funds to 25 per cent for all investors.
* Proposal to bring ESOPs under Fringe Benefit Tax

Influence: Psychology of Persuasion

I just finished reading Influence: Psychology of Persuasion by Robert B. Cialdini, Ph.D. Charlie Munger of Berkshire Hathaway recommends it in his Almanack.

Robert Cialdini discusses the six categories of "weapons of influence" used by "compliance" professionals. To list them:-
1. Reciprocation: The Old Give and Take.....and Take
2. Commitment and Consistency: Hobgoblins of the Mind
3. Social Proof: Truths are us
4. Liking: The Friendly Thief
5. Authority: Directed Defense
6. Scarcity: The Rule of the Few

The basic premise of the book is that there are "hot-buttons" that can be and are used to extract automatic responses from human beings. We have developed, consciously or unconsciously, short-cuts for dealing with everyday challenges or "click" and "whirr" actions. In the words of the author:
"You and I exist in an extraordinarily complicated stimulus environment, ...... To deal with it, we need shortcuts. We can't be expected to recognize and analyze all the aspects in each person, event and situation we encounter in even one day....we must very often use our stereotypes, our rules of thumb to classify things according to a few key features and then to respond mindlessly when one or another of these trigger features is present."

"....Sometimes the behavior that unrolls will not be appropriate for the situation, because not even the best stereotypes and trigger features work every time. But we accept their imperfection, since there is really no other choice. Without them we would stand frozen-cataloging, appraising, and calibrating- as the time for action sped by and away."

What is surprising is the nearly mechanical process in which all the six weapons can be activated, and the consequent exploitability of this power by anyone who knows how to trigger them. The author compares it to Jujitsu where the practitioner exploits gravity, leverage, momentum and inertia. Paramount to all of this is the ability to manipulate without the appearance of manipulation.

One of the techniques used commonly for all the weapons is the contrast principle. I have experienced it first hand while I was trying to buy my first house in the United States. My realtor took me through some of the not so well-kept houses that were priced within my low range and then took me to the one that was at the high range which would earn him higher commission. The order in which it was presented was interesting. I was tempted; however, unwittingly, I ended up using the defense that the author prescribes - gave my realtor an excuse about how I had no immediate access to the extra funds that would be required for down payment to that particular piece of property.

How does this apply to the business at hand - of buying securities? Have you had to compare a stock that is now cheaper from what it was a month ago? Or have you had to compare two stocks that are priced differently despite different EPS?

Let me discuss one of the techniques here
Reciprocation - Watch the technique used by Amway Distributors and any other process that starts with uninvited gifts. It can work in two ways - an obligation to repay favors we have received or an obligation to make a concession to someone who has made a concession to us. In the second case, the compliance practitioner starts with a bigger request and after a few "No"s ratchets it down to smaller ones. The author calls it the 'rejection-then-retreat' technique.

The good thing about the book is that it is replete with anecdotes and detailed instances of the weapons in practice. The other is having outlined the use of the weapons, the author goes on to talk about how to defuse its effects. This is where the academic nature of the book ends and practicality begins, in my opinion. Let me end the review with author's motivation for writing the book. In his own words from the epilogue to the book:-

"..When making a decision, we will less frequently enjoy the luxury of a fully considered analysis of the total situation but will revert increaingly to a focus on a single, usually reliable feature of it.
When those single features are truly reliable, there is nothing inherently wrong with the shortcut approach of narrowed attention and automatic response to a particular piece of information. The problem comes when something causes the normally trustworthy cues to counsel us poorly, to lead us to erroneous actions and wrongheaded decisions...one such cause is the trickery of certain compliance practitioners who seek to profit from the rather mindless and mechanical nature of shortcut response..
...more than evasive action, I would urge forceful counterassault. There is an important qualification, however. Compliance professionals who play fairly by the rulse of shortcut response are not to be considered the enemy; on the contrary, they are our allies in an efficient and adaptive process of exchange. The proper targets for counteraggression are only those individuals who falsify, counterfeit, or misrepresent the evidence that naturally cues our shortcut responses.....
In short, we should be willing to use boycott, threat, confrontation, censure, tirade, nearly anything to retaliate.....
It is important to recognize, however, that thier motive for profit is not the cause fo hostilities....the real treachery, and the thing we cannot tolerate, is any attempt to make their profit in a way that threatens the reliability of our shortcuts."

Emerging Market Century

I had a chance to attend a Lunch meeting by CFA Society of Washington DC. The title of the topic had caught my attention - The Emerging Market Century. The speaker was Antoine van Agtmael. It was also an introduction to his book to be published in Jan 07. What I didn't know was that Mr.Agtmael had coined the term Emerging Markets to describe the Third World. It was an interesting talk. He took World is Flat to the next level. The talk also touched upon the resource crunch we are going to face not only in oil but also water and other natural resources.
I pre-ordered the book in Amazon and received it today. I am eagerly looking forward to reading it soon.