Month: February 2015

India does not need a fiscal stimulus

indian rupeesIn the recent past there has been talk of the government launching a fiscal stimulus in the next budget. Fiscal stimulus essentially refers to the government increasing public spending. The idea is that with the government spending more money, economic growth will be faster.
If the new gross domestic product (GDP) numbers are to be believed, India is likely to grow at 7.4% in this financial year (2014-2015). And at that rate of economic growth a fiscal stimulus may clearly not be required.
Nevertheless, high frequency data suggests otherwise. Exports fell in December 2014. The number of stalled projects continues to be huge. The car sales remain muted. Bank loan growth continues to remain slow. The bad loans of banks, especially public sector banks, continue to remain high. And corporate profitability continues to remain dull.
With these factors in the background, there might be pressure on the government to launch a fiscal stimulus. The question is would a fiscal stimulus be appropriate at this point of time?
One reason offered in favour of a fiscal stimulus is that the combined fiscal deficit of the central government plus the state governments has been falling over the years. It had reached 9.33% of the GDP in 2009-2010(GDP at current market prices as per the old GDP series). Since then the combined fiscal deficit has come down to 6.78% of the GDP in 2013-2014. It is expected to fall further to 6.03% of the GDP in 2014-2015. Fiscal deficit is the difference between what a government earns and what it spends.
Since the combined fiscal deficit has fallen over the years, the government might as well spend some more money in the next financial year, is one logic being offered. There are a number of reasons why this does not make much sense.
First and foremost, the fiscal deficit as a proportion of GDP has fallen primarily because the GDP at current market prices has gone up dramatically between 2007-2008 and 2013-2014, at the rate of 14.7% per year. Much of this increase was due to the high inflation(at times greater than 10%) that had prevailed during this period.
Hence, the fiscal deficit to GDP ratio has come down primarily because the denominator (i.e. the GDP) has gone up at a very fast rate due to inflation. Along similar lines the general government liabilities which includes total debt of the central as well as state governments, loans from the central government to state governments and other liabilities, has fallen over the years. In 2008-2009, the general government liabilities were at 70.6% of the GDP. By 2013-2014, they had fallen to 65.3% of the GDP.
As economist Tushar Poddar of Goldman Sachs wrote in The Economic Times recently: “ India’s stock of government debt has been eroded by high inflation in recent years.”
Hence, just looking at the fiscal deficit to GDP ratio or the general government liabilities to GDP ratio is not enough. What we also need to take a look at is whether the ability of the government to service the absolute debt that it has accumulated over the years has gone up. And this is where things get interesting.
One of the ways through which the government repays debt is through the tax revenue that it earns. Chetan Ahya and Upasana Chachra of Morgan Stanley in a recent note point out that the tax revenue earned by the central government as a percentage of the GDP has been falling over the years.
In 2007-2008, this had stood at 11.9% of the GDP. By 2013-2014, it had fallen to 10% of GDP. And in 2014-2015 it is expected to fall further to 9.6% of the GDP. What this means is that the ability of the government to service the debt that it has already accumulated has come down over the years.
Further, interest payments as a portion of the total expenditure in the annual budget of the central government have started to shoot up again. As economists Taimur Baig and Kaushik Das of Deutsche Bank Research point out in a recent research note: “India’s central government spends nearly a quarter of its total spending on servicing the large debt burden. Despite the decline in the debt/GDP ratio in recent years, interest spending has begun to rise again, both as a share of GDP and a share of total spending.”
In fact, the interest that the government pays on its outstanding debt is the biggest line item in the budget. As Baig and Das point out: “Indeed, interest spending is bigger than any other line item in India’s current expenditure (e.g. defence, subsidies, health, and education) budget. Bringing this down would create valuable space for other far more important expenditures.”

Interest spending taking up a large chunk of the budget

Source: CEIC, Deutsche Bank

Also, it is worth remembering that countries do not operate in isolation. While the fiscal deficit and the overall liabilities of the government may have come out as a proportion of the GDP, they still remain high in comparison to other countries. As Poddar points out: “At 6.7% of GDP in 2013-14, the general government fiscal deficit[combined fiscal deficit of centre and states] is significantly higher than the Asian average of under 2% of GDP.”
Further, government borrowing tends to crowd out private sector borrowing and ensures that interest rates remain high. As Ahya and Chachra of Morgan Stanley point out: “We believe that national fiscal (central plus state government) deficit below 5% of GDP will be ideal to allow real borrowing cost for the private sector to reduce meaningfully and encourage private investment.”
To conclude it is worth pointing out what economists Baig and Das of Deutsche Bank Research point out: “A 1% of GDP reduction in deficit leads to growth rising by 0.4% within 2 years subsequent to the effort. Most interestingly, the effect is persistent…suggesting a lasting impact on growth from fiscal consolidation.”
What all this clearly tells us is that the government should continue on the path of fiscal consolidation that it had laid out in the last budget. The finance minister Arun Jaitley had said in his budget speech that the government wants to achieve a fiscal deficit of 3.6% of the GDP in 2015-2016 and 3% of GDP in 2016-2017. He should continue working towards these goals.

The column originally appeared on www.equitymaster.com as a part of The Daily Reckoning, on February 12, 2015

India growing faster than China is like saying Bihar’s growth quicker than Gujarat

chinaVivek Kaul

The ministry of statistics and programme implementation released the GDP growth forecast for the current financial year a few days back. It expects the Indian economy to grow by 7.4% during the course of the year.
This is significantly higher than the GDP growth of 5.5% forecast by the RBI. The ministry has moved on to a new method of calculating the GDP, which has led to this massive jump. In fact, in late January, the GDP growth for the last financial year (2013-2014) was revised to 6.9% using this new method. The GDP growth as per the old method had been at 5%.
Explaining this jump in growth, a Crisil Research note points out: “The Central Statistical Office’s explanation for the upward revision in GDP for previous fiscal is premised on improved efficiency. For instance, the manufacturing sector is generating more value-added from the same level of input. This has led to faster growth in manufacturing GDP which is a measure of the value added.”
The jury though is still out on the possible explanation for this jump in economic growth. The high frequency data doesn’t explain this jump. Car sales remain muted. Tax collections have seen slow growth. Corporate profitability isn’t anything to write about. The number of stalled projects continues to remain huge. Exports are on a decline.
Also, it is worth remembering that the numbers highlighted above are real numbers, unlike the GDP which is a theoretical construct.
Nevertheless, the 7.4% GDP growth number has got the media going. Several news reports have compared India to China and said that India is now growing faster than or as fast as China. Here is a PTI news report which says: “Indian economy will grow by 7.4 per cent this fiscal, outpacing China to become the world’s fastest growing economy, after a revision in the method of calculations.”
Another news report in the Wall Street Journal says: “India expects its economy to grow at 7.4% in the current fiscal year, a growth rate that rivals China’s, reflecting a strengthening recovery but also a recent radical revision in the way the country calculates its gross domestic product.”
It also needs to be pointed out here that for the period October to December 2014, the Indian economy grew by 7.5% as per the new method of calculating GDP. During the same period the Chinese economy grew by 7.3%, in comparison to the same period in 2013.
While technically there is nothing wrong with saying India is growing faster or as fast as China, we also need to keep in mind what base are we talking about. India’s GDP last year was $1.87 trillion. On this base it is expected to grow by 7.4%. China’s GDP last year was almost five times larger at $9.24 trillion. So China has a significant larger GDP than that of India. Even if the Chinese GDP grows by 1.5% it would be adding as much to economic output as India would at 7.4%.
Given this, comparing Indian growth with Chinese growth just doesn’t make any sense. Further, if we look at the GDP growth data provided by World Bank since 1980, it throws up interesting results. Only four times between 1980 and 2013, has the Indian GDP growth been faster than that of China.
Two of those years were 1989 and 1990 when China was probably facing the after effects of the failed Tienanmen Square revolution. In 1981, China grew by 5.2% and India by 6%. The only other year when the Indian growth was faster than that of China was 1999, when the Indian economy grew by 8.8% and the Chinese economy grew by 7.8%. This was when the dotcom bubble was at its peak.
In fact, in 17 years during the period under consideration the Chinese economy has seen double digit growth rates. On the other hand the Indian economy has grown by greater than 10% only once since 1980. This was in 2010 when it grew by 10.3%. The Chinese managed to beat us even then by growing by 10.4%.
Over the years, the Chinese economy has been growing faster than that of India on a much higher base. This has increased the gap between the GDP of the two countries.
In short, saying that the Indian economy is growing faster than China is like saying that Bihar is growing faster than India or to be more specific faster than Gujarat. The gross state domestic product for Gujarat in 2012-13(the latest data that is available and at 2004-05 constant prices) was at Rs 4,27,219 crore. It had grown at a rate of 7.96% in comparison to 2011-12.
Now compare this to Bihar, where the gross state domestic product had grown by 10.73% in 2012-13, which was higher than the GDP growth rate of Gujarat. In fact, between 2006-07 and 2012-13, the economic growth rate of Bihar was higher than that of Gujarat, on five out of the total seven occasions.
But the question is on what base? In 2012-2013, the gross state domestic product of Bihar stood at Rs 1,58,971 crore. As mentioned earlier the gross state domestic product of Gujarat was at Rs 4,27,219 crore or nearly 2.7 times. It is important to further point out that Gujarat has a population of 6.27 crore people and the population of Bihar is 9.9 crore. Hence, Bihar has been sharing a significantly lower GDP with a larger number of people.
So, the point here is that Bihar (like India) is growing on a lower base. Hence, saying that it is growing faster than Gujarat, which is 2.7 times bigger in economic terms and has a smaller population, doesn’t make much sense.
The same logic holds when we compare the Indian GDP growth to that of China. Like Bihar’s economy has a long way to catch up to that of Gujarat, the same stands true of India’s economy when compared to that of China.

The column originally appeared on www.firstpost.com on Feb 12, 2015

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek) 

Numb and number: new GDP data can be knotty, nutty and naughty

discount-10The ministry of statistics and programme implementation released a new set of gross domestic product(GDP) numbers for this financial year on February 9, 2015. A new method has been used to calculate the GDP and as per this method, the GDP growth in the current financial year (2014-2015) will come in at 7.4%. This is significantly higher than the 5.5% growth that had been forecast by RBI earlier.
It needs to be stated upfront that revising the method of calculating GDP is par for the course as government gets access to better information and at the same time needs to take into account the changing structure of the economy.
This revision of the GDP number and in the process GDP growth has got everybody excited. Nevertheless, the new GDP number needs to be looked at very carefully. Take a look at the following table which has the nominal GDP as per the new method compared with the nominal GDP as per the old method.

YearNominal GDP
Old MethodNew Method
2011-12Rs 90.52 lakh croreRs 88.30 lakh crore
2012-13Rs 100.03 lakh croreRs 99.90 lakh crore
2013-14Rs 114.03 lakh croreRs 113.50 lakh crore
2014-15Rs 129.55 lakh croreRs 126.54 lakh crore

Source: Press information bureau and budget documents


The nominal GDP is calculated using current prices in a given year and hence, is not adjusted for inflation. As per the old method, the nominal GDP has jumped by 43.1% between 2011-2012 and 2014-2015. As per the new method, the nominal GDP has jumped by 43.3% between 2011-2012 and 2014-2015. Hence, as far as growth in nominal GDP is concerned, it is more or less the same over the last four years, using both the methods.
Let’s get a little more specific now and look at the jump in nominal GDP between 2013-2014 and 2014-2015. As per the old method the nominal GDP was expected to go up by 13.6%. As per the new method, the nominal GDP is expected to go up by 11.5%. This is slower than the growth expected through the old method. In absolute terms the difference in nominal GDP between the old method and the new method is more than Rs 3 lakh crore.
Nevertheless, the growth in real GDP in the current financial year is expected to come in at 7.4% as per the new method. As mentioned earlier RBI had forecast that the real GDP growth in the current financial year would be at 5.5%. Real GDP growth essentially takes inflation into account.
So, what explains this disconnect? The nominal GDP growth is faster as per the old method but the real GDP growth is faster as per the new method. The explanation may very well lie in what sort of GDP deflator was used to convert nominal GDP numbers into real GDP.
Investopedia.com defines the GDP deflator as: “An economic metric that accounts for inflation by converting output measured at current prices into constant-dollar GDP.” Deutsche Bank economists Taimur Baig and Kaushik Das write in a research note that: “The…nominal [GDP] growth of (11.5% year on year) and real GDP growth (7.4% year on year) estimates for FY14/15[financial year 2014-2015] imply that the GDP deflator is likely to be 4.1% for the current fiscal year.”
This is where things get interesting. Inflation as measured by the consumer price index has been falling this year, but it still hasn’t fallen to a level of 4.1%. For the month of December 2014 (the latest number available) it stood at 5%. The average inflation for the period April to December 2014 was at 6.8% (a simple average of monthly inflation numbers). As Crisil Research points out in a research note: “The new GDP series accounts for much lower inflation than recorded by CPI-2010 base[the method currently used to calculated inflation based on the consumer price index].”
So, the question is if the inflation has been at 6.8% for the first nine months of the financial year, how can the GDP deflator be at 4.1%? (It needs to be mentioned here that inflation as measured by the GDP deflator can be different from the inflation as measured by the consumer price index given that the coverage and weights of different items differ.) But the difference between that the two numbers is fairly significant.
If we consider the deflator to be at 6.8% then the real GDP growth for this year falls to 4.7% (11.5% minus 6.8%). This number is much more closer to the 5.5% real economic growth that has been forecast by RBI. It is also in line with a lot of high frequency data that has been coming out.
In fact, for the period October to December 2014, things get even more interesting. The nominal GDP growth during this period as per the new method was at 9%. The real GDP growth was at 7.5%. This implies a deflator of 1.5%. The inflation measured by the consumer price index, during this period was around 5%. Hence, how did the deflator turn out to be 1.5%?
Given this, there are too many points in the new way of calcuating GDP that do not make sense. As Baig and Das point out: “Overall, we are unsure about how to reconcile this new data with indicators that show companies struggling with earnings and investment, banks seeing rising bad loans, credit growth slowing, and exporters reporting negative growth.” Other than this car sales have been muted, tax collections have been slow and the total number of stalled projects continues to be huge. Businesses also remained cautious about making fresh investments. As Crisil Research points out: “India Inc remained cautious on fresh investments. While there was some pick-up in investments from -0.3% in fiscal 2013 to 3% in fiscal 2014, a large part of the rise in consumer demand was also met by utilising existing inventory.”
Numbers highlighted in the last paragraph(from slow growth in bank lending to companies struggling with earnings) are real numbers unlike the GDP which is a theoretical construct. And these numbers do not reflect in any way a GDP growth of 7.4%, given the inflation level of 6.8% during the course of this financial year.
So what possibly explains this jump in growth? A possible explanation, as highlighted earlier, is that the inflation that has been considered to arrive at real GDP numbers is much lower than the prevailing inflation as measured by the consumer price index.
Further, on February 12, the ministry of statistics and programme implementation is going to release a new method of calculating inflation based on the consumer price index. If the new inflation number turns out to be considerably lower than the numbers that have been released during the course of this year, then we will have a possible explanation for this jump in GDP growth. If it does not we will have to look somewhere else.
To conclude it is worth remembering what the American professor Aaron Levenstein once said: “Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital.” (And no Navjot Singh Sidhu did not say this).

(The column originally appeared on www.equitymaster.com as a part of The Daily Reckoning as on Feb 11, 2015) 

Fiscal deficit is not for our grandchildren to repay: Here’s why I agree with Arun Jaitley

Vivek Kaul

In my past columns I have been critical of finance minister Arun Jaitley for saying things that he has. Take the case of people not buying as many homes as they were in the past. Like the real estate industry in India, the finance minister seems to believe that Indians are not buying homes simply because interest rates and EMIs are on the high side. “If you bring down the rates, people will start borrowing from banks to pay for their flats and houses. The EMIs will go down,” Jaitley had said in December 2014.
This as I have explained more than a few times in the past is the wrong argument to make. The EMIs simply don’t matter any more when it comes to buying homes—Indians are not buying homes because homes prices are way beyond what they can afford given their income levels. Figuring this out isn’t exactly rocket science and given this, the finance minister of the country shouldn’t have been making such statements.
Nevertheless, for once I agree with Jaitley. He recently told an industrial gathering: “The whole concept of spending beyond your means and leaving the next generation in debt to repay what we are overspending today is never prudent fiscal policy.”
As Mihir S. Sharma writes in his new book Restart—The Last Chance for the Indian Economy: “Economics has very few real laws. In fact, it only has one, but that one is of iron: you cannot spend more than you earn forever.”
Typically governments spend more than they earn and thus run a fiscal deficit. This deficit is financed through borrowing. When the borrowing keeps piling up, it needs to be repaid by taxes paid by future generations(our children and their children). And that can never be a prudent policy. The fact that Jaitley understands this (or at least says so in the public domain) is a good thing. It will work well for him during the process of formulation of the next budget which is scheduled to be presented on the last day of this month.
It has been suggested that the finance minister should not bother much about the fiscal deficit while presenting the next financial year’s budget. He should unleash a public investment programme in order to ensure that the Indian economy grows at a much faster rate in the years to come, than it currently is.
Leading the increase in public investment charge is  Arvind Subramanian, the Chief Economic Adviser to the ministry of finance. In the Mid Year Economic Analysis released in December 2014, Subramanian wrote: “Over-indebtedness in the corporate sector with median debt-equity ratios at 70 percent is amongst the highest in the world. The ripples from the corporate sector have extended to the banking sector where restructured assets are estimated at about 11-12 percent of total assets. Displaying risk aversion, the banking sector is increasingly unable and unwilling to lend to the real sector.”
This has led to a situation where banks aren’t interested in lending and corporates aren’t interesting in investing. In order to get around this problem Subramanian suggested that: “it seems imperative to consider the case for reviving public investment as one of the key engines of growth going forward, not to replace private investment but to revive and complement it.”
A major reason being offered in favour of the government increasing public investment is the fact that oil prices have crashed. As on February 6, 2015, the Indian basket of crude oil was priced at $$55.62 per barrel. On May 26, 2014, the day the Narendra Modi government took oath of office, the oil price was at $108.05 per barrel. Hence, the price of Indian basket of crude oil has fallen by 48.5% since then.
This fall has ensured that the amount of money that the government would have had to pay out as subsidy to oil marketing companies has come down. Oil companies suffer from under-recoveries while selling kerosene and cooking gas. The government compensates them for a part of this loss. Further, it is being assumed by analysts and economists that oil prices will continue to remain low and this will help the government limit the oil subsidy payout in the next financial year.
With the oil subsidy payout being limited the government can spend more money on public investment is a theory that has been put forward.
As analysts Neelkanth Mishra, Ravi Shankar and Prateek Singh of Credit Suisse write in a research report titled FY16 Budget: From famine to feast and dated January 27, 2015: “We believe that the government can raise capex[capital expenditure] by at least 1.2% of GDP in FY16E. It is pocketing a large part of the gains from the oil price decline, and can spend to generate growth.”
This is a reasonable assumption to make if the current state of affairs continues. But as I have often pointed out in the past forecasting oil prices is a risky business. There are too many variables at play, especially politics. And once politics enters the equation, normal demand-supply analysis goes out of the window.
As Eric Jensen writes in writes in The Absolute Return Letter for January 2015 titled Pie in the Sky: “ “It is now a highly political chess game and, as I have learned over the years, when politics enter the frame, logic goes out the window.” The Saudi Arabia and the OPEC, the United States, Russia and many other countries are players in this political game.
Also, it is worth remembering that budgets of countries that produce oil are not balanced at the current level of oil prices. As Eric Jensen writes in The Absolute Return Letter for February 2015 titled The End Game: “The one additional dynamic to consider is the large fiscal deficits in most oil producing countries which is only made worse the further the price of oil drops. Clearly the biggest risk factor in this context is Russia which needs an oil price of around $105 to balance its budget this year.”
Countries typically borrow money when their expenditure is more than their earnings. But as Jensen puts it: “It is a fact that virtually none of the world’s leading oil producing countries have as easy access to bond markets as we are used to in this part of the world.” Hence, low oil prices are hurting oil producing countries the most.
Given this, it is in their interest to ensure that oil prices start rising again in the days to come. In fact, oil prices have been rising from mid January onwards. The price of the Indian basket of crude oil as on January 14, 2015, was at $43.36 per barrel. Since then it has risen by 28.3% to $55.62 per barrel.
Hence, it is important that Arun Jaitley and his team while making the budget make a conservative estimate for the oil price and not get carried away by the recent low levels.

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

The article originally appeared on www.firstpost.com on Feb 10, 2015 

One thing that Jaitley can do to control speculation in real estate

India-Real-Estate-MarketIn response to yesterday’s column I got an interesting email from a reader. The email has prompted me to write another column on real estate.
Talking about the budget presented by the Narendra Modi government in July 2014, the reader said: “The most detrimental thing that the government did was hike the deduction limit from Rs 1.5 lakh to Rs 2 lakh!!!”
The finance minister Arun Jaitley had said in his budget speech: “Housing continues to be an area of concern for middle and lower middle class due to high cost of financing. Therefore, to reduce this burden, I propose to increase the deduction limit on account of interest on [home] loan in respect of self occupied house property from Rs 1.5 lakh to Rs 2 lakh.”
This should not have been done the reader suggested, as it leads to more speculation in real estate. As he wrote in his email: “ Even in Vasai or Virar or any other distant suburb from where people come to Mumbai to work, flats are not cheap.” What makes the situation worse is the fact that “people with high incomes living in Mumbai invest in such distant suburbs to avail tax benefits and capital appreciation.”
What the reader was basically saying is that individuals who already own flats and are living a comfortable life in Mumbai, buy “cheaper” flats in suburbs to avail tax benefits. I am sure something similar must be happening in other cities as well.
At the same time such individuals hope to make capital gains from the purchase in the years to come, as real estate prices keep going up. With more money chasing the same number of flats, prices go up. This makes flats more expensive for people who want to buy and live in them.
While the reader has got the speculation bit right, he has got the tax part of it wrong. It doesn’t make any sense for an individual to buy a flat for the sake of investment, so that he can get a deduction of Rs 2 lakh on it and save Rs 61,800 in the process (assuming he comes in the top tax bracket and pays a total tax of 30.9%).
The amount is too small to be taking on the headache of owning a flat in a distant suburb. Further, chances are that the individual would be already repaying a home loan for the flat that he lives in. Hence, he can’t take the same deduction for two flats.
Nevertheless, it would still make sense for an individual looking to buy a flat(and this need not be limited to just one flat) for investment purposes to go ahead and save money in the process.
In fact, the Income Tax Act actually encourages people to speculate in real estate. There is no restriction on the number of homes against which a tax payer can claim a tax deduction on the interest paid on the home loan to fund the property. Only one of these properties needs to categorized as a self-occupied property. On this self-occupied property, an interest of up to Rs 2 lakh can be claimed as a tax deduction.
This limit applies only to the self-occupied property and not on other homes that a tax payer may choose to buy. Any amount of interest paid on home loans can be claimed as a deduction as long as a “notional rent” is added to the income. We all know that these days “rents” are relatively low in comparison to the EMIs that need to be paid in order to repay the home loan.
Hence, the interest component tends to be massive during the initial years and helps people with two or more homes, claim huge tax deductions. This was the point that the reader who sent in an email was trying to make, even though he got the tax deduction part wrong.
This “deduction” has been used over the years by well paid corporate employees to bring down their taxable income. Further, individuals who use this deduction benefit on two fronts—tax deduction as well as capital appreciation. Even if, the capital appreciation is not huge, such individuals are happy in claiming just the deduction than actually making money from an increase in price. Hence, they may not sell the flat, even in a scenario where prices may be falling.
While offering a tax deduction on a self occupied property makes some sense, there is no logic to offering a tax deduction on a home, one is not living in. This “deduction” needs to be plugged immediately as it encourages speculation.
Arun Jaitley has an opportunity to do a huge favour to the people of this country by removing this deduction in the forthcoming budget. Whether he goes around to do that will only become clear once the budget is presented on February 28, later this month.

Postscript: I had written in a column last week that I would be surprised if the economic growth for this financial year would be greater than 7%, as per the new method of calculating the GDP. Data released yesterday by the ministry of statistics and programme implementation suggests that the Indian economy is likely to grow by 7.4% during this financial year. Turns out I was wrong in writing what I did.
As per the old method of calculating the GDP the economic growth during this financial year was supposed to be at 5.5%. No reasonable explanation has been offered for this jump in growth. At the same time other high frequency data like bank loan growth, corporate profitability, stalled projects, massive slowdown in collection of tax revenues etc., seems to suggest that the economic growth should be more around 5.5% than 7.4%.
I will keep track of this and in the days to come will try and come up with a possible explanation for this huge difference in the two numbers.

The column originally appeared on www.equitymaster.com as a part of The Daily Reckoning on Feb 10, 2015