By J Mulraj
March 2-8, 2024

Turn to Ayn Rand to explain how

In January, a court in Delaware decided, on an appeal by a shareholder of Tesla, that a compensation agreement the Board had signed with Elon Musk, its founder, should be terminated, as the Board hadn’t considered its fairness to other shareholders. Under it, Musk was offered a bonus to achieve milestones, over a ten year period, which were considered impossible to achieve, but which he did!

Under the agreement, Musk was entitled to exercise options for 304 million shares of Tesla, at a strike price of $ 23.33, when, thanks largely to his stewardship, the market price had risen to $ 191.59. This led to a whopping, but well deserved, gain of $51 b. For Elon, under the agreement. An envious Tesla shareholder, holding 100 shares, objected to the agreement, and this was upheld by the Court.

Whether or not you agree with the judgement, what followed was absolutely bizarre! The lawyer who represented the shareholder is asking the court for a fee of, hold your breath, $6 b. payable in Tesla stock! indicating he believes in the future of the company built by Musk.

More bizarrely, he wants Tesla to pay this fee by issuing $6 b worth of stock! His logic is that Tesla saved $51 b. because of his efforts!

In essence, the lawyer believes in the future of Tesla as he asks his fees to be paid in it, yet he denies the person who has worked hard to build the company, his just reward for doing so! And the judgement agrees with that. Now re-read Ayn Rand’s quote.

Wokeness is being alert to, and conscious of, social injustice and discrimination. This is good, but has been taken to an extreme.

The open border policy of President Biden seems to be predicated upon wokeness, allowing deprived migrants from other countries the opportunity to make themselves a good life. Worthy sentiments, but not if the migrants are allowed in unchecked (witness incidents of rape and murder of American citizens) and given shelter, food, a cell phone, and a $1000, which is straining the already stretched budgets of several cities.

Or consider the woke policy of California to allow shoplifters the freedom to steal upto $1000 worth of goods from stores, with no punitive action. Management of stores, as also the police, are instructed not to stop the theft! This is extreme wokeness. It has consequences. Stores are closing down, unable to sustain continuing losses. Recently Macy’s, an old department store, announced the closure of its store in San Francisco, as did Walgreens, a drugstore chain. Closure of stores, together with lower demand for office rental space after work-from-home, has created a huge problem for commercial real estate. Veritas Realty, one of the biggest CRE owners, has put up for sale, several of its properties in SF. Ultimately, owners of CRE will go belly up, leaving lender banks holding the sick babies. These are mostly community banks, like Silicon Valley Bank, which was recently rescued. There is a high probability that more such community banks will get into trouble, unless interest rates come down sharply, soon. There are no indications of that, yet, from Fed Chair, Jerome Powell.

In America it’s almost certain to be a Biden-Trump race again in November, with Trump having trounced all his Republican opponents. His roadblocks seem to be the several cases filed against him, including the one in New York where he has been ordered to pay some $ 450 m in fines, for over valuing property he offered as collateral for a loan he sought, obtained, and fully repaid. He has appealed the ruling. He also faces other legal challenges, including on charges of insurrection. His removal from the ballot by North Carolina was overruled unanimously.

After a fiery State of the Union address, by a charged up Biden, he now faces the challenge of Congressional funding to fund the US Government. Dems and Republicans often drive dangerously close to the edge but reach a compromise at 23:59.

Other geopolitical risks are there, and, stupidly, increasing. The EU is mooring the idea of some countries putting boots on the ground (sending soldiers) to Ukraine, which will be like poking the Russian bear in the eye. Janet Yellen is poking the other eye by, yet again, threatening to send $3 b. of frozen Russian funds to Ukraine. Bears are not known to take eye pokes stoically. Putin has threatened a nuclear war should NATO deploy boots on the ground.

Another geopolitical risk, perhaps heightened last week, is that of a military takeover of Taiwan by China. China has been announcing, for several years, it’s intention to reunify with Taiwan, which it considers to be a renegade province, either peacefully or by force. Last week, it officially dropped the word ‘peacefully’. Perhaps it may be an attempt to divert public attention away from the country’s myriad economic problems. But a military attempt may escalate into a regional war, and is a dangerous turn of events.

In India, the Supreme Court held, last week, that MPs did not have immunity from corruption charges. This begs two questions. One, why did they get immunity in the first place? It seems to have been given when Narasimha Rao Government was ruling. Two, why, under the Modi Government, ushered in on the promise of rooting out corruption, was such immunity not cancelled? Why do we need to rely solely on the legislature to clean up messes?

Effective Apr 1, as per the Finance Act 2023, MSMEs (medium, small and micro industries) must be paid within 45 days. If, at year end, any purchaser has outstanding amounts due to MSMEs for over 45 days, the amount will be treated as income, and taxed. (A rebate will be given when subsequent payment is made). The idea behind this move, to assist the financially less ambled MSME sector, which creates huge employment, is understandable. But actions sometimes have unintended consequences. In the last quarter of the financial year, buyers are now diverting orders from MSMEs, where the rule applies, to large companies, where it doesn’t! So, instead of aiding MSMEs it may be hurting them.

Last week the BSE Sensex ended at 74119 for a weekly gain of 374  points.

Stockmarkets are rising on a flood of global liquidity and on hopes that the global polity does not start more conflicts, heaven forbid, not nuclear ones. Liquidity rings diurnal in the treasure chest, but hope springs eternal in the human breast! Pray that the polity has some self preservation instinct left in theirs.


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