The much acclaimed Pune-headquartered Symbiosis International University (SIU) is very soon coming up with its second largest campus at Nagpur. The Nagpur Municipal Corporation (NMC) has already allotted 75 acres of land for the proposed campus at Wathoda.
The SIU will reserve certain number of seats for local students who will also get concession in fees.
At a press meet in Nagpur, Principal Director of Symbiosis Society Vidya Yeravdekar informed, “The Nagpur campus will be the second largest campus of the Symbiosis after its Pune campus. It will be first time in the history of Symbiosis that out of the total student intake, 25 per cent seats will be reserved for Nagpur-domiciled residents along with 15 per cent concession in academic fees.”
“She took pride in detailing, “Now students of Nagpur will not have to go and take up professional courses at Pune or Mumbai. Even students from Afro-Asian countries will be studying here, thus establishing Nagpur as an education-hub on the global map,” .
The society manages the SIU, which provides courses in different streams ranging from law to management.
Mrs. Yeravdekar also added that “The Nagpur campus will offer courses in management (BBA-MBA), law (BA LLB and BBA LLB), design (fashion & textile), skill development in fields of health, information technology and communication.”
Thus, the students passing out of the varsity will be a brimful talent pool of professionals required in the second capital of Maharashtra. Nagpur is an aviation hub and hence courses in aviation and airport logistics along with a top notch architecture centre will also be a part of the curriculum of this SIU centre.
Speaking on the occasion, Municipal Commissioner of Nagpur Shravan Hardikar said, “A detailed tendering process was followed for the allotment of land. Two conditions were primary: 25 per cent reservation to Nagpur-domiciled students and financial concession in fees to local students. Major emphasis has been given on introducing management and skill-based courses.”
The Panama Papers is the biggest data leak in history. It is 2.6 TB worth of data, consisted of 11.5 million documents leaked from a Panamanian law firm Mossack Fonseca that cover 38 years from 1977 to 2015. As many as 214,488 business entities and 14,153 intermediaries are apparently involved, connecting 202 countries, 12 country leaders (both current and former), 61 relatives and associates of country leaders, 128 politicians and public officials (both current and former), including 29 of Forbes-listed billionaires.
The data were leaked by an anonymous source to a German newspaper Süddeutsche Zeitung, and were investigated by more than 400 reporters for over a year by a huge coordination by International Consortium of Investigative Journalists, Süddeutsche Zeitung and more than 100 other news organizations. And as we can read all over the global news the results of the investigation are astounding, although they are not really that surprising.
According to an expert on tax heaven Nicholas Shaxson, the offshore system that tore financial control apart since the 1970s has served as an accelerator for flight of capital, as well as a distorting field that altered capital flows not to where they necessarily find the most productive investment, but rather lured to where they can provide the most lenient regulations, accommodate evasion of prudential banking regulations, offer zero or lenient taxes, grant freedom from rules of civilised society and where they can provide the greatest secrecy. Hence, money becomes increasingly out of reach for those who need funding and investment to build a better future, and instead the majority of those who have money prefer to hide their money where nobody can touch them.
Today there are more than 80 tax havens around the world, including the Caribbean havens, Luxembourg, Lichtenstein, Cyprus, Andorra, Switzerland, Singapore, Hong Kong and indeed Panama; and the number of listed offshore subsidiaries in them are staggering. For instance, the British Virgin Islands (with population of 25,000 people) hosts approximately 460,000 corporations, one modest building in the Cayman Islands host more than 18,000 entities, while the tiny South Pacific island of Nauru (with population less than 10,000 people and have only 1 road) host 400 banks and provide laundering services for billions of dollars of Russian money.
In other words, the leaks from one law firm in Panama that we are currently digesting are most probably just the very tip of the iceberg. But the tip of the iceberg might just be sufficient enough to shed a light on the secretive world of offshore economy, and could be used to tackle some of the biggest problems in the world right now that are connected to tax havens.
Because on paper more than half of world trade now passes through these tax havens, with a third of foreign direct investments by multinational corporations are channeled through the offshore routes. Moreover, over half of all banking assets also routed through offshore, with around 85% of international banking and bond issuance take place in Euromarket, a stateless offshore zone. In 2008 the Tax Justice network discovered that 99 out of 100 Europe’s largest corporations use offshore subsidiaries, with a bank as the largest users in each country. Meanwhile in a December report of the same year, the US Government Accountability Office (GAO) reveals that 83 of US’ largest 100 corporations had subsidiaries in tax havens, including the big banks that receive bail-out money.
The intentions are clear, thanks to tax havens many of the world’s largest and profitable corporations pay no or little tax, making these corporations more profitable by the years, at the expense of depleted government funding for the development of the country and the wellfare of its citizens. For example, according to US-bases Citizens for Tax Justice from 2006 to 2011 General Electric’s net federal income taxes have been negative $2.7 billion, despite the fact that they gained $39.2 billion in pre-tax US profit over the same period. Google was able to cut its tax rate by more than $3 billion through a technique called the “Dutch Sandwich,” where the company channel its profits through Ireland, the Netherlands and then to Bermuda. Also thanks to tax haven network, in 2010 the likes of Bank of America, Exxon/Mobil, Boeing and Citicorp paid no federal taxes.
To be fair, by law the number 1 objective for any publicly-traded corporation is to maximise shareholders’ wealth, and this includes seeking the best possible tax arrangements in order to maximise profit. Hence, tax avoidance is not necessarily a bad thing, and it is even legal (tax evasion, on the other hand, is illegal). However, legal tax avoidance is one thing, but it is a completely different matter if bribing is involved. A March 2012 investigation revealed exactly this, where 30 large US corporations that paid no federal income tax between 2008 and 2010 were also major contributors to US politicians in both parties, specifically to the committee members that control tax policy in both Chambers of Congress. But even this form of bribing is still technically legal, as it is protected by the First Amendment, and more crucially because the rules and regulations are made by among themselves, thanks to the revolving-door policy.
The usage of tax havens are finally considered illegal when they play a role in illegal activities such as the existence of insider trading ring, gigantic frauds and the growth of complex monopolies in certain markets. With this regards, almost every big financial catastrophe – from the collapse of Long Term Capital Management to Lehman Brothers to AIG and Enron – are illegal tax haven stories. In the case of Enron, before being exposed as a fraud the company had more than 6,500 shell companies in several tax havens, 600 of which were registered in the Cayman Island, that were used to artificially jack up their stock price, before the whole cornering scam collapsed spectacularly.
All in all, in 2010 the IMF estimated that the balance sheets of small island tax havens alone added up to $18 trillion, a sum equivalent to around a third of the world’s GDP, and that, it said, was probably an underestimate. Therefore, as we can see, tax havens and the offshore transactions have become a big problem for the world economy, although some of their transactions are still technically legal. But remember, what Hitler did in Germany were also legal, but it doesn’t mean that they were right.
By the end of 2010, according to James S. Henry, a former chief economist at the consultancy firm McKinsey in his report The Price of Offshore Revisited, the global super-rich elite has at least $21-32 trillion of financial wealth hidden in tax havens, or equivalent to the size of the US and Japanese economies combined. Henry’s report was commissioned by UK’s Tax Justice Network, and it used the data from the Bank of International Settlements, International Monetary Fund, World Bank and national governments to highlight the impact on the balance sheets of 139 developing countries that have its citizens’ money held in tax havens (financial wealth only, not including assets such as property, racehorse, goldbricks and yachts) and thus out of reach from their local tax authorities.
In the report, Henry discovered that since the 1970s, with aggressive and often illegal assistance from the international private banking industry, around $7.3 to 9.3 trillion of unrecorded offshore wealth have been accumulated by private elites by 2010 in this sub-group of 139 countries, even when their country were flushed in debts and enduring Structural Adjustment Program. When looking at the 50 leading private banks alone, they already collectively managed more than $12.1 trillion for their clients in cross-border investing, with the top 3 private banks in handling the most assets offshore are Goldman Sachs, UBS and Credit Suisse. Henry then commented that “The lost tax revenues implied by our estimates is huge. It is large enough to make a significant difference to the finances of many countries, [and it creates] a huge black hole in the world economy.”
On this scale of the black hole, the offshore economy is large enough to significantly alter the estimates of national income and debt ratios, estimates of inequality of income and wealth, and above all, the negative impacts on the domestic tax bases of key source countries (countries that project net unrecorded private capital outflow over time). A case in point, in 2010 these same developing countries had aggregate gross external debt of $4.08 trillion, and were categorised as debtors. But when the debts are subtracted with their foreign reserves (most of which are invested in developed countries’ securities such as US Treasury bills) their aggregate net external debts were actually minus $2.8 trillion. This has been increasing steadily since 1998 when these 139 countries’ external debt minus foreign reserves was at their peak at plus $1.43 trillion.
In other words, by way of the offshore system, these supposedly debtors countries are not debtors at all, instead they are actually net lenders to the tune of $10.1 to 13.1 trillion. The problem, however, is that the assets of these developing countries are held by a small group of wealthy individuals, with the the majority of the assets ended up stored in tax havens, while the debts of the countries are shouldered by the ordinary citizens through their governments, where the debts normally imposed under dreadful conditions and interests. Henry then elaborates that “these private unrecorded offshore assets and the public debts are intimately linked, historically speaking: the dramatic increase in unrecorded capital outflows (and the private demand for First World currency and other assets) in the 1970s and 1980s was positively correlated with a surge in First World loans to developing countries: much of this borrowing left these countries under the table within months, and even weeks, of being disbursed.”
David Graeber illustrates this point in his book Debt: the first 5000 years, where after the Petrodollar Recycling in the 1970s and 1980s Western banks suddenly flushed with OPEC profit money from the oil crisis, and these banks began to send agents around the world trying to convince Third World dictators and politicians to take out dollar-denominated loans from them. A surge of First World loans to developing countries then occurred, a lot of which were to African countries, with corrupt dictators borrowed a lot of money with national assets as the collateral (often persuaded by the bankers themselves), with the majority of the borrowed money would end up being directly transferred to their offshore bank account (i.e. unrecorded capital outflows) and created a black hole in the country’s economy.
But then, when the dictators were toppled or simply replaced by a honest regime, these offshore bank accounts remain untouched while the country (more specifically, the people) have to bear the burden of the debt repayment + interests that they never use, or worse, forced to surrender their control over the country’s economic sovereignty or loose their national assets for plundering. And thus the countries forever remain poor, stuck in a vicious cycle of debt refinancings and plunders.
And this is where the Panama Papers can make a big difference. As the 11.5 million documents are revealed one by one, one day at a time, we are gradually learning what the database of names are doing with their offshore accounts, whether it is perfectly legal or shaddy like what have been revealed in details on day 1 about Vladimir Putin and the prime minister of Iceland.
Although right now it is still a huge mountain to climb, the specific information that the leaks provide could become the shed of evidence, and perhaps the leverage, needed to finally start the serious discussions for a global regulation on tax havens. Because not only they facilitate tax avoidance transactions, tax havens also facilitate illegal financial transactions, fund the smugglings of drugs and weapons, fund human trafficking, fund wars and sectarian violences, and become the harbour of corrupt money that has created a huge black hole in the world economy – all of which are the root-causes of the world’s main problems.
This is also a good explanation on Mossack Fonseca, the Panama Papers and the offshore system in general [Vox / Matthew Yglesias]
How reporters pulled off the Panama Papers, the biggest leak in whistleblower history [Wired / Andy Greenberg]
Here’s the price countries pay for tax evasion exposed in Panama Papers [The Intercept / Jon Schwarz]
The geography of financial secrecy: what the Panama Papers don’t reveal may be more important than what they do [The Atlantic / Uri Friedman]
Everyone are freaking out about the Panama Papers, but the biggest fallout is yet to come [Mother Jones / Kevin Drum]
Road to reform: How the UK government has the power to make its tax havens stop enabling crime and corruption [Global Witness / Robert Palmer and Oliver Courtney]
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Book review: The summary of every single Berkshire Hathaway annual shareholders meeting between 1986 and 2015 – EDWIN SETIADI
Book review: The summary of every single Berkshire Hathaway annual shareholders meeting between 1986 and 2015
“University of Berkshire Hathaway: 30 Years of Lessons Learned from Warren Buffett & Charlie Munger at the Annual Shareholders Meeting” by Daniel Pecaut and Corey Wrenn
Warren Buffett never writes a book. Instead, he delivers his wisdom through 4 mediums: Berkshire Hathaway annual meetings, his op-ed pieces, his TV interviews and his letter to shareholders. This book is about the 1st medium.
Often dubbed the Woodstock of Capitalism, Berkshire Hathaway annual meeting have grown significantly in attendance size from only half a dozen people in 1970s, to 300 in 1986, 1000 people in 1989, 10,000 people in 2001, and up to 45,000 people in 2013.
Present in every single one of these meetings between 1986-2015 is Daniel Pecaut, which later joined by his longtime business partner Corey Wrenn. This book is the accumulation of their note taking from those meetings, 30 years worth of the shareholders’ meetings, which they summarized into 30 short chapters that contain only the gold, the best gems worthy of a university education.
Just like any company’s annual meeting, it is first and foremost filled with the discussion of their holdings and its issues. With their usual wit and wisdom, Warren Buffett and his partner Charlie Munger provide a very open reasoning of why they purchase a particular company (including the methods they use to calculate the values), explain us the way they solve or avoid any problems that arise, and lay out their detailed-enough plans for the future for these companies. The 2014 chapter in particular gives a great summary of the inner workings of Berkshire Hathaway and Buffett’s and Munger’s thought process, which is nothing short of a masterpiece.
True to their nature, Buffett and Munger deliver all of their information in such an entertaining way. For example, Buffett referencing a Woody Allen quote on being bisexual increases the chance of having a date on a Saturday night, to make the case for issuing 1 million shares of preferred stock. Or when asked about buying a stock at a premium price, he responded with “if you were going to buy a parachute, you wouldn’t necessarily take the low bid.” Or his analogy on reverse engineering as singing a country song backwards, “then you get your house back, your wife back.”
Moreover, never absent in their annual meetings are their hilarious take-downs on the likes of efficient market hypothesis and modern portfolio theories, in which Buffett said “people market these fad theories to justify needing high priests”, while in contrast his winning investing method is astonishingly simple: he said if he were teaching a business school, he would only teach “1.) How to value a business, and 2) How to think about market fluctuations – that the market is there to serve you, not influence you.”
Indeed, Buffett and Munger believe that investing and running a business should not be complicated. Berkshire is buying companies like people buying groceries or cars, they welcome lower prices and deplore price increases. They avoid buying companies with confusing accounting because the confusion “may well be intentional and reveal the character of the management.” To them an attitude of trust is the best compliance, and they don’t even employ lawyers for their deal makings. And as we all know, these clear and simple methods of investing and running a business have resulted their stock price to grow from $2475 in 1986 (a benchmark of the year the authors first attended the meeting) to a whopping $226,000 in 2015.
Moreover, as they grow in stature, a growing majority of the attendants of the meetings come to the annual meetings to seek investment lessons, and they were not disappointed. Buffett and Munger believe the key to investment success is to buy wonderful businesses, and that “3 wonderful businesses is more than you need in this life and would serve you much better than 100 average businesses.”
But they also warn that “there is no one easy mechanical formula to determine intrinsic value and margin of safety. You have to apply lots of models. So it takes time to get goos at it. You don’t become a great investor rapidly any more than you become a bone-tumor specialist quickly.” On this matter, Buffett said that in 40 years he has never gotten an idea from a Wall Street report, instead he directly reads annual reports himself. This highlight the importance of doing you own due diligence.
This approach is probably best described by their analogy of buying a farm: “Let’s say you want to buy a farm, and you calculate that you can make $70/acre as the owner. How much will you pay for that farm? You might decide you wanted a 7% return, so you’d pay $1000/acre. If it’s for sale at $800/acre, you buy, but if it’s for sale for $1200/acre, you don’t. You wouldn’t base this decision on what you saw on TV or what a friend said. You would do your own homework. It’s the same with stocks.”
Buffett also claim to have read the entire investment section of the Omaha public library by the age of 10, and that he is big on reading everything in sight. In fact he concluded that “if you read 20 books on a subject you are interested in, you are bound to learn a lot.” He also recommended a number of good books along the way, such as “The Intelligent Investor” by Benjamin Graham (especially chapter 8 and 20 which changed his life), and John Maynard Keynes’ “The general theory of employment, interest and money” (with chapter 12 Buffett regard as the best description of the way capital market function), while Munger noted that “we’re here to go to sleep each day smarter than when we woke up”, and recommended Robert Cialdini’s book “Influence.”
However, Buffett also highlight the importance of temperament: “being clever and very informative are nothing if we don’t have the right temperament. Successful investing requires not extraordinary intellect but extraordinary discipline”, in which he pointed out the story of the genius Issac Newton who lost a lot of money in South Sea Bubble.
Yes, the amount of wisdom from Buffett and Munger is abundant, and could not possibly fit all into this short review. Some of my personal favourites are the theory of Ovarian Lottery (which puts the world in perspective), the story of a genie granting a 17 year old any car he wants with a condition that he takes care of the car for the rest of his life (which underline the importance of maintaining our well-being), and the newspaper standard (how we should behave as if our actions will be on the front page of the local newspaper).
Munger also repeatedly remarked the importance of good habits, and knowing what to avoid (such as bad marriage, an early death, risking AIDS, experimenting with cocaine or getting into debt). And when asked about their theory for life, Munger said “pragmatism! Do what suits your temperament. Do what works better with experience. Do what works and keep doing it. That’s the fundamental algorithm of life – REPEAT WHAT WORKS.” Buffett added that “if you’re fast, you can run the 100 metres for the gold medal. You don’t have to throw the shot put. The key is knowing the edge of one’s circle of competence.”
Indeed, the grandfatherly wisdom that come out in these meetings are plentiful, and this book construct the writings in such a way that we will feel that we are there all along for 30 years, attending every single meeting ourselves and directly learning from the maestros themselves. That’s an invaluable experience, which is why this book is one of the best on Buffettology.
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