Die you shall...

Die you shall...Live you should...

The wise men

Once upon a time, some time ago, there were a group of men who were very very rich and owned around 40% of the world's resources. They had land, industries, gold and what not. They were wise and understood how to maintain and grow their wealth throughout time. They very well knew that value is in the thought of the beholder. If the thought of value in something vanishes, the value in the product is zero. To further help themselves, they thought upon an idea to globalise the world to make use and exploit the best of everything. Further, they spread the benefits of globalisation and free market access. At this point of time, they realised that with free markets, value is being interfered by the exchange rates. The group of wise men, decided that they will have to be proactive and move as a group to maintain order and control of the maintenance and growth of their precious valuables in the world. Since they own a substantial part of the world, and markets are never deep enough for them, they could influence the markets with ease. Moreover, they realise the people's psychology and the various govt.'s response to the situations they would create. They start buying into an 'item' initially and start spreading the word how that would be the next 'big' thing in the world. The high risk takers and loyalists start buying it immediately. As the value of the 'item' increases, more people start believing the prophecy and start buying it while all the while the wise men's value increases. After a few years, the wise men believe that they have milked the 'item' to its limit and their value has stopped growing at a fast rate. Further, before someone else calls that the 'item' is overvalued, they start selling the 'item' and buying into another 'item'. And the next prophecy of how this item is undervalued and how it is the next 'big' thing, starts to grow. This cycle keeps repeating over periods of time and the only people who are always in the green are the wise men and the loyalists, while the general public is bled and slaughtered each time when they start buying at the height of the cycle and when the wise men are selling it to the blind public. These "items" could be various currencies, gold, silver, commodities, bonds, houses, land and what not. The frequency with which these wise men are interchanging the 'items' has increased in the recent years. It is not clear whether another set of 'wise men' are on the street trying to call shots on an item which is different from the first set of wise men. This fight between the two sets of wise men having contradictory ideas on some 'items' is probably being seen in the high volatility of the markets. E.g: Crude oil falling by around 6% in a week, INR moving by 1% in a day, gold falling by over 9% in 5 days.

Moral of the story: Besides the all the financial porn being thrown by the media at us and all the talk of finding value, in the end it seems you just have to stick to the side of the 'wise men' if you want to make money/store value. If only, we could easily pinpoint who are these 'wise men' and know their next move.

P.S: This is just one of the hypothesis I have to show that most people have know idea of how the market could be working against you all the time. At times, I feel like one of the little guys who feel like they are born to just get exploited by the 'wise men'.

Genders and colours

Innovation in dressing

Goof ups

In 2011, Blackberry services outage down for 3 days, UBS illegal trades and Billion $ losses, S&P mistakenly downgrades France, NATO bombing Pakistan's guard-posts and Indian govt. accepting a USD 9 billion export error.

Previously, irresponsible statements "We do Gods work" by Goldman Sach's CEO Lloyd Blankfein, 

"Its not our fault" by Tony Hayward, then BP CEO.

The frequency of the goof ups are increasing and the scale of it is getting bigger and bigger.

It is for someone to find out why. Could it because of increasing pressures of the jobs & faster deadlines to produce results without having enough quality checks? I believe so. Also, the touhgher environment thanks to the slowdown and recession is causing the extra pressure on growth and profitablity.

Compared to this, is any goof up we do in our daily work really that bad? Everyone screws up. As far as NASA's philosophy is supposed to go, the reason for any screw up is not any person, but the fault of the system. If there are enough checks and balances, screw ups should never happen, atleast of the kind mentioned above. It is time systems are given importance, and not just the profits. It is time systems are held responsible for irresponsibility and not the people on whom ridiculous expectations are held!

Heightened uncertainty

There was a time, sometime ago, a few years back actually, when things could be predicted "long term". Today, that word if used either tends to show your lack of knowledge on anything, or a surprise that he isnt already perished along with the dinosaurs.

Today, almost nothing can be predicted even for 5 years (or less). Not even govt. bonds. Not sure when a govt will topple and default on all the previous commitments/bonds. The existence of worldwide currencies (e.g:euro) is at stake. Gold, once upon a time long term investment is at peaks and nobody is entirely sure why its rising. Whether it is because it is supposed to be a hedge against inflation (as traditionally "they" say), or against currencies, or against a no growth scenario...?

Oil is also equally uncertain. the volatility in this commodity has been huge despite nowhere near corelation to its demand, which is more or less steady.

During the good olden days, assume maximum fluctuations where near 20% a year, meaning both the crest and the through. Today, just the crest or the through have a minimum movement of 20% a year, irrespective of whether it is currencies, gold or oil (or even interest rates in India).

Are all the companies factoring their worst case scenerios in reality in their business plans? I think not. They should ideally be more conservative and have more cushion for a negative surprise currently, and for the next few years. 

What does this entail for investing in particular? Previously, we used to bet for growth alone assuming all the above mentioned factors as constant or with a little movement. But today, these assumptions cannot be taken for granted. They entail enormous effect on the results and each of these are inter-co-related in many different known and unknown ways and levels. The effect of one can either neutralise the effect of the other or compound the effect of the other and this influence can change day to day. Today you need to better analyse more than one variable to get to the base and expected scenario.

There is some opportunity in all this afterall. The high volatility in everything obviously means there is more money to be made with the highs and the lows as there is to lose money also. The question is are you treating this as a cautious opportunity or as a complete threat?

What a conviction!

Goldman Sachs added Sintex Industries to the India conviction buy list on 6 September 2011 and on 16 November 2011, it has removed the company from this list "based on account of European exposure and FCCB concerns." Weren't these factors present even when the company were added to the list?
Conviction is when you trust something especially at hard times, not backing off and selling it at the sign of the first trouble (share price from ~Rs.150 to ~Rs.93)

Reduce tax on short term profits

Transactions work in a funny way when taxes are involved. Here's a demonstration:
Here's how to lower your average buy price of a share with tax benefits:
Assume you have bought a share of scrip A @ 700. Now the share has fallen to 600 within a week/month. Assume you buy 1 more share, this time @600 and also sell one share at the same price.
Looking from a layman's/superficial perspective, these 2 transactions are wasteful and costs are involved (brokerage and taxes on the transaction) as no useful purpose has been solved.

Now lets look at this from the tax perspective:
As shares sold is always in FIFO (First in first out) in India, your would have effectively sold the first share at a loss of 100(sell@600- buy@700). This gives rise to a short term loss of 100 which is adjustable against other short term profits. Assume you have made a 100 short term profits in some other transactions. Then, your net tax payable is 15% * (100-100) = 0. So you have effectively saved 15% taxes on the amount of losses if you have profits elsewhere in other transactions. Now, your effective by price of A is also 600 (the price of the second share you bought). The lower buy price will help you break even and make profit faster.

Lets extend the case. Assume that after a year of buying the second share, the price has reached to 630. If the 2 seemingly dummy transactions had been done, then you would have saved 15 in short term taxes by adjusting against other short term profits and when you sell this at 630, you make a long term profit of 30 (Sell@630 - Buy@600). And since long term equity capital gains is taxed at 0%, the total profit/loss you would have made is -100+15+30 = -55.
If these two dummy transactions had not taken place, your buy price would have been 700 and sell price would be 630, meaning a loss of 70. Note that long term losses are not adjustable against anything.
So, you can effectively reduce your losses or taxes and also make more profits by taking an immediate short term loss and entering into a counter transaction by buying an equivalent amount at the same price(assuming you have short term profits).
This is not only applicable for buying and selling at the same price, it is also very much applicable if you bought the second share at at a rate less than the selling of the first share.

London riots - Proof of Deindividuation - "Civil society": An oxymoron phrase

http://youarenotsosmart.com/2011/02/10/deindividuation/

The London riots just prove that the innermost bad desires are inherent in every person irrespective of whether they are in the developed world or in the developing world, whether in a civil society or not. As a matter of fact, the phrase "civil society" seems to be an oxymoron phrase now. People are civil by intimidation or by force, it just doesn't seem normal. Greed, action, thrill, survival instincts are all part of true human nature. It is only by continuously conditioning that we stop doing it and think twice before burning down other's properties and looting others' things.

P.S: written long ago, but forgot to post it.

Gold & Investment poker

There is a nice game in town called "Predict the price of gold and win a jackpot". It is well known that a lot of cheap money has gone into commodities over the last few years (perhaps 2 years or so). And that means a lot of speculation has also gone into it. One of them is Gold. There are many theories floating around why Gold is rising and the theories predicting the immediate future of this shining metal. The most traditional theory says "Gold hedges inflation". Meaning, it can store the same value and you can get the same goods worth in gold irrespective of the depreciation of a currency which happens with high inflation. The second and a consequential theory says "Gold is an alternative currency in itself when other major currencies are as volatile as Molotov cocktails". The third theory says "When the world is headed for deflation, gold is a better investment as it will atleast hold value rather than depreciate". Another theory says "Gold is usually measured in USD and as Gold and USD are usually always negatively co-related to each other, hence, Gold prices can be predicted by the prediction in the USD strengthening/weakening against other currencies". The fifth and sixth reasons are speculating based on one of these theories and buying based on hearing the blind calls of others respectively. There is no one clear and present reason for putting money in Gold.
Now, coming to the poker side of things, it gets more interesting/confusing based on how you see it. It is a fact that Gold has run up so much because many people/institutions have bought/speculated loads and loads of it. Some of them have been satisfied with the returns and thought it was in an overbought region/overpriced at around USD 1800+ per troy ounce and had started selling it and realising profits. Now at around USD 1600+, when an organisation/person says it will reach higher, one has to understand if he is saying so to protect his own interest. He can make others buy by saying so while he himself is selling it to you. Without your invaluable buying support, it is very possible that more people would be selling and his realisation of profits would be that much lower. Now, considering all the talk about Gold, are you willing to buy Gold at this highest level? Arent the retail investors falling into the same trap of investing at the very highs and again burning their fingers for the sake of a best case 5 or 10% returns and the worse case of a huge downside? Now, thats a call you have to take. The answer looks simple enough to me, I hope it is for you too.

Its getting worse by the day

The Govt. of India's or rather India's problems are getting worse by the day. One of them being inflation.

If it was not enough that inflation has been high in double digits for so long is not enough and all the economic govt. authorities (Mr.Kaushik Basu, Chief economic adviser; Mr.Rangarajan, head, Prime Minister Economic Advisory Committee; Mr.Subbarao, Governor, RBI; and Mr.Montek, Planning Commission Deputy Chairman) have been shooting arrows in the dark about when the inflation would come even close to the target rate. They have (including Pranab da, Finance Minister) have been directly and indirectly saying that inflation will come down in the next few months for over a year. And yet, they have all been wrong or have been lying.

To make matters worse, they continue to say the same without looking at the ground realities.

1. Everybody says food inflation is due to supply side problems. Yet. there has been no major policy changes to increase production of goods that are needed. In an ironical step, Minimum Support Prices(MSP) have been raised drastically over the last two years which has increased the overall cost of buying all the grains for everyone. Whats very depressing is that some of the policies that have traditionally caused farmers to increase wheat/rice/pulses by having MSPs, have caused more grains to be grown than can be stored in warehouses leading to huge losses of grains. This subsidies/incentives are skewed in such a way that even if there is demand for vegetables/fruits, many farmers will continue to grow certain grains as it is more profitable because of the subsidies/incentives. Why is the govt. sleeping?

2. There is also a case that the MGNERA has given a lot of money to the villagers and this is increasing demand for goods which previously did not exist. A report I read says that there have been hardly any  productivity changes due to the scheme. Meaning, that most work is namesake and no real useful work has been accomplished with so much money being given.

3. Petrol prices are going up continuously and there are indications that even diesel prices may rise. If diesel price rise, the whole of India will undergo another level of price rise as most things in India are transported by trucks. A multiplier effect will increase inflation more.

4. Many coal power plants are running on 4 to 7 day stock of coal (norm:21 days) and are lacking coal. Many power plants in India were designed and viability studies assumed that they would import Indonesia's coal which used to sell it at a discount to international market at large. The recent law in Indonesia to sell its coal at an international rates has made the power plants unviable and the companies are asking the govt. to increase the rate at which they sell the power to the govts. 

5. The state electricity boards(SEBs) have run up losses of Rs.80,000 crore (and counting) as they have been inefficient and many have not increased electricity prices for years together. With the power ministry proposing to ask the state govts. to write off all the losses and start the SEBs with a clean slate, where are the state govts. to get so much money? Also, even after this is done, unless the SEBs increase the rates of electricity substantially (many times over in some states), the SEBs will again start going into losses.

6. There is a proposal of a food subsidy bill to be introduced. Where is the money for it? Unless the govt. starts saying things like 2 grains of rice per person per day is enough to fill hunger (like the Rs.32 a day is the Below Poverty Line), where is the money?

7. With the downgrade of the State Bank of India by Moody's, the govt. has shown some hurry to infuse ~8,000 crore into SBI with an overall of ~14,000 crore into all public sector banks, within this year. (Increased from the budgeted 6,000 Cr)

8. Oil prices are still high and any number of reports in the global arena do not predict oil prices to fall to any meaningful lower level in a permanent way. This means India's import bill is only going to rise in the coming years. And the govt. will need more money to buy the imports.

9. Some specific national liabilities like the Air India are contingent liabilities which will need more money in the future from the govt.

All the above imply only two things directly: Prices are going to stay up/rise and govt. is in need for a lot of unplanned money. If the govt. starts borrowing more, rates are further going to go up and would make further investments in new projects unviable (which are supposed to increase supply). The second would only reinforce the price inflation permanently.

Oh, and there is one more thing. Inflation measures prices year-on-year and even if the govt. claims victory over inflation once it reaches a target rate of say 5%, inflation has remained high for so long that these rates are year-on-year. Meaning that the price rises have become permanently embedded. Unless there is a price deflation, things are bad and permanently.

You don't need to be an economist of calibre to predict (wrongly again and again) that inflation is going down. The truth is prices are going to remain high and may further rise, irrespective of whatever the above  economists mentioned say/lie. In effect, the Govt. is screwing all its citizens very well.
P.S: The high impact of inflation is given here: http://www.firstpost.com/investing/govt-is-ruining-your-savings-and-the-rbi-shouldnt-let-it-124932.html

Campari calender 2012

P.S:click on the images to get larger size photos

http://www.rediff.com/getahead/slide-show/slide-show-1-glamour-the-campari-calendar-2012/20111031.htm

The Suicide knot

Ever wondered the misery of a poor fellow who has decided to commit suicide and on the selected day, at the time when he/she is alone in the room, and with the rope in hand, he/she gets frustrated that he/she is unable to tie the knot - the 'Suicide knot'.
Take an unrelated topic: we all have seen the lasso in many a cartoons and a few cowboy movies. It seems simple, but if I ask you to make me a simple lasso, do you know how to make it?
Ok, can you atleast tie a tie?
It may seem that most of us, the vast majority don't know how to do the first two, but may know the third, but in reality it is not so. It is just that you don't know that you know it already.
Here's the secret: If you know how to tie a tie, you know how to tie both the suicide knot and the lasso. Because it is all one and the same.
Lateral thinking...using a solution from one problem to solve another problem.

How to save more by using Credit Cards

I know how the heading sounds. Like a typical debit/credit card issuing bank. But trust me, this isn't what it seems. I am talking about exploiting your bank/credit card to the limit, the same way the Banks squeeze you off your money. Tit for tat.

The idea of a credit card is that you dont have to pay for the purchase immediately, but after a 'credit' period which is usually 45-50 days at the maximum and 18/20 days at the minimum. This means that you have a minimum of 18/20 days to pay your credit card bill after the purchase (if this purchase happens to be on the billing date of the credit card). And if you make the purchase the very next day of your billing date, your credit period is maximum.

If we assume that you dont really time your purchase and it can occur on any given day of the month, your credit period would vary between 18 to 50 days. The average credit period is (18+50)/2 = 34 days.

For safety measures, I always recommend you to pay your credit card bill 2 days in advance of your last payment date (in case internet is not working, bank holidays, computer maintenance at the bank, etc.; Be careful not to delay the credit card payment even by one day as this will make you pay huge late payment charges and a high interest rate of 24-36% per annum is used for paying the pending amount and the whole idea of bank's trying to exploit you will occur.)

So your average credit period is 34-2= 32 days, approximately a month of free credit.

If you spend around 10,000 per month on your credit card bill (groceries, provisions, eating out, air tickets,etc) instead of your debit card or other cash methods, you save around (10,000* 4% p.a/ 12) = Rs.33.33 per month or Rs.400 annually. It may not seem much initially, but that 4% per annum is what you are/were getting on your savings bank account without paying for the purchases immediately using a debit card/cash/netbanking. You would obviously save more if you had more expenditure on your credit card or time your flexible purchase to the day(s) immediately after your billing date.

With RBI deregulating savings bank accounts, and Yes Bank already upping the interest rate on the savings accounts by 2%, it is in the near future that other banks will also increase the rates. In this scenario, your savings from usage of credit cards is going to only increase. 

Usually this savings is far more than the reward points one can earn from the credit card company. The reward points are usually some 1.33% for some premium card and the rewards redemption is so calculated that for every 3 or more reward points, you get Rs.1 worth of stuff. So the maximum benefit you can expect is  1.33%/3 or around 0.44%. This is next to nothing compared to the nearly ten times more 4% per annum (or greater) you can get on all the purchases made with the cash lying in the savings bank account and paying the credit card bill just before the last date.
P.S: I have been using this strategy for over 5 years and have faced no problems at all. Financial discipline is necessary to get more out of your money.
Paraphrasing the line in the book "Rich Dad, Poor Dad": Don't work for money, Make the money work for you.

Nothing is impossible

The last words of people who were executed

~ Che Guevara

~ John Wayne Gacy, before being executed by lethal injection

~ George Appel, executed by electric chair in 1928

~ Gary Gilmore, executed by firing squad in 1977

~ Robert Erskine Childers, to his firing squad during the Irish Civil War in 1922

~ James W. Rodgers, asked if he had any requests before facing the firing squad

~ Stanley "Tookie" Williams, founder of The Crips, executed by lethal injection. His executioners appeared to be having trouble with the machinery.

~ Edward R. Rulloff, the last man executed by hanging in New York state.

~ Sir Walter Raleigh, to his beheader

~ Carl Panzram, serial killer, hanged in 1930

~ Melchor Ocampo, Mexican politician, when asked to kneel by his executioner

~ Harry Morant, Australian war criminal

~ Joe Hill, after hearing his executioner say: "Ready...aim..."

http://www.buzzfeed.com/mikehayes/the-last-words-of-people-who-were-executed

Lifes' risks in the new world

Any uncertainty leads to risk. There are many types of  Risk. Many are non-financial and related to lifes' uncertainties. In a continously changing and evolving world, new uncertainties arise and the same old uncertainties have more (and seldomly, less) risk than the previous decades/generations. When the old parameters to measure risk are inadequate, inaccurate and inappropriate, how can one measure risk? Risk is always measured with respect to certainty just like dark is defined to the relativeness of light. And when certainty itself (the reference point) cannot be defined/yet to be refined, how do you measure risk? At a macro level, it is possible to say that the risk is more in the new world compared to the old world, but measuring it against another new world situation is impossible. And when risk cannot even be known accurately and measured, how can you successfully hedge the risks? Having huge exposures and open positions may have upsides even in life, but the downside risk is huge and scary.

One unique aspect about each of lifes' risks unlike financial risks are that you cannot be semi-hedged. You are either fully covered or stark naked!

This is ...

Reinvestment opportunities

Suppose you have made an investment three years ago at a cost of 100. Today, say the investment is worth 160. Your rate of return for 3 years is 60% and your compounded annual rate of return is (160/100)^(1/3) =16.96% per annum.

Suppose you expect the investment to go upto 165 in another quarter but under some risk that it may also go down, what do you do and what should you do? 

At the rate of 165, your profits would be 65 instead of the previous 60, at a new annualised rate of return of 18.16% from the previous ~17%. Should you now go for it?

It sure looks tempting to get a rate of return of 18.16% with a little risk, but this is identical to driving a car looking at the rear mirror. Let me explain. There are two ways to look at the rate of return. One rate of return based on the investment done 3 years ago and one assuming you are investing today. With the old investment, yes, your calculation comes to an attractive 18.16%. But assuming you are investing 160 today, you are expecting a rate of return of a mere 5/160= 3.125%. The truth is that you have already made most of your money till now and your marginal rate of return is only some 3 odd %. 

By keeping the investment, the truth is that you are actually wanting to make an investment giving a rate of return of ~3 % in a quarter with the risk of a downside too and not the 18.16% per annum that the calculation shows. The question to be asked is "Is this what you really want when you could have other more worthwhile investments to make which can give you better returns?". 

The comfort of previous returns makes people biased to calculating from a historical perspective and make them feel that the investment is good. By doing so, you are indifferent to reinvestment opportunities and are  missing real opportunities that will make you more money.

Faith and fraud

Blind faith and fraud go together. Looking at the below 2 instances (out of many other miracles), I am led to believe what I have thought of many a times. The blind faith in God itself is a fraud perpetuated by our ancestors for personal gains. Separate the people based on religion and ask them to fight your wars. In short, divide and rule. Buy out shops/areas around a religious place, and then spin a story based on that temple and make throngs of people visit it daily and make super-normal profits by selling all things the people need there. In short, create demand where there is none by spinning a story.

Lets look at the two instances:

http://indiatoday.intoday.in/story/board-admits-makarajyothi-at-sabarimala-is-man-made/1/136300.html

http://www.saibaba-x.org.uk/7/lingam.htm

 I am not an atheist, but being an open and logical thinker, I am forced to question my faith in faith.

World's natural resources

Scheduling emails

If you are unavailable and cannot access internet for a few days and yet want to send a pre-meditated email to someone (liking wishing someone on their birthday/anniversary) through Gmail, there is a solution at hand. Though gmail is yet to provide this functionality, there is atleast one chrome/firefox app that enables you to do this.

http://www.boomeranggmail.com/download.html

Its simple and fast. I wish the various email providers introduces this feature soon.

Crowdsourcing to the next level

http://timesofindia.indiatimes.com/world/europe/Icelanders-hand-in-draft-of-worlds-first-crowdsourced-constitution/articleshow/9419934.cms

A similar idea is being tried in India to form a strong lokpal bill by the civil society to check corruption in the high places and the government is vehemently opposing it as many of their crooked tricks to loot the country will have to be surrendered.

Scrips and their personalities

Each scrip has a unique character/personality to it. It is defined by both its internal strengths, weaknesses & policies and the external perception of these vis-a-vis other scrips.

Each scrip behaves in a way that is particular of its industry, maturity of the company, liquidity of the shares, segmentation based on capitalisation, debt levels of the company, EPS, expected future growth, dividend policy, stock split/bonus shares, volatility of the stock, seasonality of the sector, overall economic/business  cycle, correlation to interest rates, correlation to the historical PE of the industry, correlation to its own historical PE, how the mkt usually treats this stock to each event(excitedly/anxiously with lot of volatility or indifference with hardly any movement), mindshare and brand image it occupies in its investors among many other things.This is something that is not usually taught in the books. Experience in the markets teaches you this. It is important for every short term investor to follow the scrips through the ups and downs and be able to predict how much and how long will the scrip prices rise/fall due to the event, just as one knows and understands a family member's reaction to various life's events. You cannot estimate the right reaction and the depth of the reaction precisely, but you know that the person would be upset or excited to hear it. Since each scrip has a personality of its own, its important to understand them to deal and profit from them.

The idea of dying

"The idea is to die young as late as possible" - Ashley Montagu

Another conspiracy theory

One of the most romantic hindi songs was probably actually written and sung to shut up wife/gf "kuch na kaho, kuch bhi na kaho..." :D

How much Sunscreen? SPF?

http://www.informationisbeautiful.net/2011/the-sunscreen-smokescreen/

What's your pose?

http://www.dailymail.co.uk/news/article-2016104/Leisure-dive-Summer-posers-caught-mid-air-new-photography-craze.html

XXXtreme testing

http://www.cnn.com/2011/TECH/mobile/07/18/iphone.skydive/index.html?hpt=te_bn2

The ultimate test: "The Skydiving Test!"
If any electronic system can survive this test, it is simply awesome :)

Aerial views

Try taking a guess what these actually are  :)

http://www.businessinsider.com/amazing-aerial-photos-2011-7

Impossible trinities

wrt Job: Profile, Location & Compensation

wrt Financial economics: Fixed exchange rate, Free capital movement & Independent Monetary policy

wrt Life: Health, Money & Time

Let me explain the last part:

As a kid, you have the time and health to travel the world and enjoy life while no money. When you are working, you have the money and the health, but no time. When you are old, you have the money and the time, but no health.

Unnaturally natural

We do so many unnatural things that the most natural of things seem unnatural.

10 most thrilling airport landings

http://www.businessinsider.com/thrilling-airports-2011-6#

Life insurance isn't everything

One usually thinks that getting life insurance is a great way to cover for your life and to provide for your family 'Zindagi ke baad bhi'. I am sure at least it is portrayed that way and many more believe it so. Till, you go through the 'fine' print.

Forget, about dying doing dangerous stuff like sky-diving or adventure sports and getting yourself killed.

Whats shocking is that a lot of risks are just not covered in the policies.

Being a victim of a terrorist attack on the way home need not necessarily be covered in your life insurance. My document clearly mentions "War, invasion, hostilities (whether war is declared or not), civil war, rebellion, revolution or taking part in a riot or civil commotion are excluded". This means that tomorrow if a neighbouring country bombs some city and people die, then life insurance won't cover you.

Imagine being part of a peaceful protest and suddenly police starts lathi charging you and some commotion occurs. The insurance may mostly deny your claim.

What's worse is that certain accidents are also not covered. Especially nuclear contamination. I find this highly ridiculous. Why cant all these risks be covered as riders. I believe a price can be put on any risk. If you believe its impossible or too difficult to measure such a risk, stop being in the life insurance business because you are no longer insuring lives.

Whats the point of having a life insurance when all it effectively covers is just road accidents and we need to depend on the govt. money for decades together after a disaster like the Bhopal tragedy. 

The worst part is life insurance is it makes me stupid even if I am smart enough to buy life insurance. Thats the real irony of it.

Organisation charts

Sorry, dear friend!

My policy of unfriending: If I cannot remember one conversation I have had with you, you are going to be unfriended right away...unless of course, you are one of those whose posts are interesting and fresh.

Levels of connectivity

A solution to the Govt.'s Agency problem

Almost all govts. in the world are not working in the most efficient way they possibly can. One of the major reasons is the internal looting of the govt by way of corruption (lobbyists influencing policies in a way that the govt and its people suffer), internal fighting among many others. All govt jobs have fixed pay and perks. The motivation to not harm the organisation they are working for is not much (excepting Patriotism and Morality). 

One of the possible solutions for solving the agency problem of the govt officials can be possibly found in the concept of capital markets. (Related post disecting the problem: http://ajitjagan.blogspot.com/2011/04/aligning-interest-of-govt-and-its.html) Capital Markets are inherently more efficient and way faster in doing things.

One solution I am proposing is to have the concept of stock markets with the very govt. itself being treated as a company. Lets take the one market which is most open to accepting free market concept - USA. So USA could be a stock which is freely traded by the citizens in the country just like its sovereign treasury securities.

Source of capital:

Now, lets assume 5 or 10% of all the govt officials salaries are given in the form of the employee stock options with the stock of USA.

Concept of Returns:

As a stock price indicates the problems of the entity and the future potential of the entity, investors will make money if they work in such a way that the country's future is better. They would like to see higher prices of all their 5-10% of their salaries in pensions to not greatly affected. This has the potential to stop the govt. official to work harder, not do things that will harm the country. Similar to how a employee stock option feels for an employee. A sense of ownership is created. These people will be willing to work harder and make better policies as they now have a stake. Once a critical mass is attained in any organisation, the peer pressure will make the others also work more efficiently and effectively.

Valuation of Stock:

This is the most tricky part. Unlike companies where future earnings is the most important parameter to be considered (if today's company abides by rules and destroys the environment, so be it. The investors dont care). But, in case of the country as a whole, there are many subjective parameters to be considered. National Security, Environment,  Sustainability of natural resources, mortality rate, quality of the govt officials making decisions, etc

Maybe an earnings index can be calculated based on the other indices. Take for example the Transparency Index the topic it relates to which is corruption and ease of doing business. Say, Corruption is given a weightage in the earnings as 10% and Ease of doing business as 5%. Next, if the country comes in the top 5 countries where corruption is least, it is given a full score of 10 points= full weightage; Top 10, 9 points; top 20, 7 points; so on and so forth.

So this will enable the country to come to a number based on the current ratings of Indices. As valuation is always subjective and depends on the uncertain future, different investors will predict different ratings and better/worse situation of the country on various parameters. This will make the people govt understand what is it that people want. If they dont do as per the wants of all their citizens, they get a lesser share of their pay/pension. If they manage to reduce crime, increase efficiency, etc, people will be happier and the govt officials will get more money. This also prevents petty politics in the country, which is nothing but a drain on national resources.

Foreign entities as investors:

Once foreign entities buys these stocks, there is an opportunity for the country to get someone who is interested in the well being of the country and get more favourable responses to various initiatives.

Concept of Holding company:

Since USA is made of various states and states resources/financials actually have a major role to play in the countries well being, state govts. should also give their employees the shares of their states.

Today, the govt. officials can play petty politics and get all their money in cash in priority. If the people can have a indirect say in what they think about the decision everyday instead of once in 5/6 years, I am sure better wiser decisions will be made by the govt. officials.

Live a well-lived life

http://blogs.hbr.org/haque/2011/05/is_a_well_lived_live_worth_anything.html?cm_sp=most_widget-_-blog_posts-_-Is%20a%20Well-Lived%20Life%20Worth%20Anything%3F

Useless Debates

The debates we take part in in schools are unrealistic and non-practical. The world doesn't and can't function from an extreme point of view. Maybe these debates may play a part in a students' narrow thought process by not accepting the whole picture or talking about things he/she doesn't believe in. Why should kids at a young age take stands on issues where the best solution in the real world is usually the middle ground.

If indeed the students' thought process has to be evaluated, his vocabulary and speaking skills have to be tested, let there be a competition of how should certain problems be solved instead of blind arguing as in a debate.

Let big or small or technical problems be thrown to this non-brainwashed people to come up with maybe some very innovative solutions.

How should India tackle the China threat? Or what kind of new design will you make for machine that has to clean up mines. What kind of mobile games would be a hit with adults or children?

Why not make the students really think, discuss and speak about it? 

Guess what, Nokia went to kids around the world and asked them to draw what they would like their mobile to look like with what features. And, this is how even big companies get ideas for the future.

Lets make tomorrow's future think about the future rather than make them recite about the past and argue about the present.

Extreme product development/marketing

Look at the two pictures:

What did you think it was? Liquid chocolate and strawberry syrup? You would be forgiven to think that. That is what I thought it was when I first saw this. Coloured shapely bottles with pictures of two tweens on it. I opened and smelled it and found the smell of chocolate and strawberry syrups respectively. But what was surprising was the brand name on it: Parachute advansed. Parachute brand is the most popular cocunut oil brand which is mainly used as a hair oil(and also for cooking). Ok, so I assumed Parachute has entered the edible eateries segment with syrups. But advansed is like a technology used for refining the hair products for specific use. Just to be sure, I read what the product actually was. Turns out it was shampoo.

Almost 99% of the people would have thought it to be something other than a shampoo(with the word shampoo written in such small words on the bottle)

Lets look at the consequences: How will a parent convince a three or four year old that the product the kid is demanding to eat is not an eatable in the first place. It looks like a delicious eatable, smells like one too. Big trouble ahead for parents!

What suppose the parent adds this 'syrup' on a home made cake or on an icecream/milkshake and gives it to the kid? I wonder if the company is going to get sued for making kids ill...

Since the marketers are "always" "trying" to make things "easy" and "convenient" for the consumers, why not they come up with a product which can be used for multiple purposes? Say you get up, and brush your teeth with this product as a toothpaste, then squeeze out some more of this stuff and use it as a soap, wash off and then apply some more on the body and let it dry working as a moisturiser. Then scoop some more and apply onto the bread and enjoy a delicious sandwich on way to the office. Won't such a many-in-one product "delight" customers?

Consumers can then need not have to remember so many things to buy when they go to a supermarket. Things will be more easily manageble. From cleaning the shelf of the bathroom that has on the average 3 to 5 or more different products to not throwing away unused product since it has reached the expiry data as it will be used frequently. A frequent traveller can slip in one of these many-in-one products into the travel bag and not have to worry to find the many things as used currently running across the house to just pack a bag. Maybe consolidation of products is the next level/generation of marketing and product development in particular for the marketers. The irony of this game is that fewer marketers would be required when this is done. A true revolution!

5 reasons why US is going to go downhill

Frequent International Interferences

The frequency with which US is involved in fighting other countries since 2001 is very high. Iraq, Afganistan, Pakistan and now Libya. The costs are huge, but the benefits in terms of oil is greater for USA. But the skepticism of the world on its activities is increasing all the while. The conspiracy theory on the attack on the pentagon, the non-provability of Weapons of Mass Destruction in Iraq, Contradicting claims of the US and North Korea on the torpedo that sunk the South Korean ship, Doubts if Osama Bin Laden was actually killed by a US raid,etc are helping build the skepticism on what US says.

Spill Out of Crises

The European debt crises in Ireland, Greece and expected crises in Portugal and Spain have brought the attention of the economists to the debt amounts of the countries and see a realistic picture of US debt. They have started questioning the assumptions and no longer see it as rational in blindly justifying US debt as something godly and always safe. The US crisis itself has forced the US economists to relook at the US debt and justify themselves being called rational. S&P's negative outlook on US sovereign debt is just the beginning of being rational. Faith of and on the dollar has diminished and is expected to further diminish. No one has yet able to think a perfect currency/thing which can be used to measure against all other currencies. The only possible solution that seems close to come to place in a few years time maybe the equivalent of the SDR(Special Drawing Right) of the IMF. It is equivalent to the basket of freely convertible currrencies. But in the coming scenario, Yuan may be added to this basket sometime in the current decade when China allows complete convertibility. The complete faith on the US Dollar is going to come down. The draw down of the US Dollar forex reserves is also going to play a major role in the downhill of US.

Internet

More internet availability and accessibility in the world in helping others know of the torture faced by US victims in Guatemala and the killing of two unarmed Pakistanis by a CIA contractor. Not to mention, the widespread news of wikileaks and videos of violent human rights violations by US soldiers in Iraq is there for all to see. Add to this, the ease and fastness with which conspiracy theories  are spread.

Weapons Technology

One of the main strengths of US has been its military muscle. The world's dependency on that is reducing. China is growing rapidly in weapons technology with the development of the anti-satellite missile, the anti-aircraft carrier ballistic missile, the stealth aircraft and of course, their own aircraft carriers. Japan has initiated developing its own fighter aircrafts and it is expected to reach the market in the coming years. India is planning on ICBMs(Intercontinental Ballistic Missiles) and the Brahmos is world's leading cruise missile. The FGFA program with the Russians for the development of the fifth generation fighter aircraft is also supposed to be leading edge. With money always acting as a crunch to all the countries, most of these countries will be willing to sell the products to 'their' allies. The market share of US is going to go down. Compared to the other countries, US cannot fight on price too.

Rising Developing Countries

The rise of the BRICS countries and their collective power to say 'No' to US to bulldoze its way in trade agreements and climate change conferences at the cost of others shows reduced US ability to force others. The recent mention of British PM David Cameroon wanting the next IMF head to be from Asia also shows the way things are going in the world.

Strange relationship

There are many situations one comes across in life where you have a strange relationship with the other person. One category of them consists of meeting people with whom potential relationships are possible but is not yet converted into a formal relationship.For e.g., interacting with a potential tenant, a potential in-law, etc. Sometimes, the relationship cannot even be defined as a 'potential relationship' category.

What about a tenant, showing the house to a potential new buyer of the place who is going to kick out the guy showing the house. What relationship could this possibly be called? It is just a strange relationship...

Dance moves

Decode your present and your future

http://swapnikaramu.blogspot.com/2011/04/gene-reading-decode-your-future-with.html

A real Optimist

An optimist is not one who sees the glass half full, but one who sees a glass half empty and asks for a refill

Improving your Personal IT productivity

1. Customise and refine your gmail account:

http://economictimes.indiatimes.com/quickiearticleshow/8094947.cms

2. Install wordweb software for offline instant access for dictionary meanings and alternative words while writing documents

3. Install Adobe Flash plugin, Quicktime and Microsoft Silverlight plugins for non-prohibitive access to all webpages.

4. Preset webpages to be loaded when you open a new browser using the settings in the browser.

5. Block pop-ups from the browser settings with exceptions to certain sites.

6. Have a handy searchbox (google/bing/yahoo) in the browser.

Aligning the interest of govt. and its people

There is a serious lack of alignment in the interests of the government and the collective of the people ruled. How else can anyone explain the future government's intention to liquidate the state/country in the name of helping the poor people.

Take the example of Tamilnadu. The DMK government came to power promising a television for each household (along with )if they win the election. They won the elections and this time upped the ante. Now, they want to give grinder or mixie to all the women. Plus, a laptop to all the students studying in govt. and govt aided colleges. The opposition party, AIADMK, is desperate to win and is playing the DMK's card even better. If they win the election, they promise to give grinder, mixie & a fan to all the women. Students of govt, govt aided and private colleges will get a laptop each and even class 11 and 12 students.

One question that begs to be asked here is: at whose cost? Is it at the  leader's personal cost? Of course not. It is with OPM. Other People's Money. In this case, the very people they will rule.

This problem is occuring and re-occuring due to two different reasons. One, the politicians and the government say that the ultimate test is people's vote and thats all that counts. Easy for them to say. After all, they have no stake or interest in the common people and it is the people who are going to suffer in the medium to long term.

They are no KPI (Key performance Indicators) that their bosses(the common people) or an independent arm of the government have setup or are monitoring. And there is no reward/punishment for the government and its officials based on these KPIs. The KPIs are usually used as a passive parameter to compare the policy initiatives with the effect on the ground by statistical organisations and is used more for academics and deciding policy directives. They are not currently being used as a strict performance measure of the government based on which its rewards are based.

Two, the government is able to exploit the differences between the poor and the others (working middle class and rich). The non-poor have televisions, fan, can afford spending on gold in marriage, etc. The poor on the other hand cant think of months or years ahead when they are focussed on earning their next meal to survive another day. This difference in interests gives the government ample leverage to play the pro-poor populists game while ignoring the long term impact of the decisions. This is equivalent to selling the family silver to get some income to dispose off immediately. I am not against poor, but providing televisions to all of them doesnt serve the purpose of taking them out of poverty. Where will they keep the television? Whats the use of the TV if the government doesnt have enough money to setup power plants and hence doesnt provide electricity to run the TV.

This problem of differed interests in similar that of secured and unsecured lenders in case of a distressed company. While the secured lenders would like a restructuring to happen and turn around the company, the unsecured lenders would like to see the company liquidated. The secured lenders have nothing much to lose as they have security cover over what whatever amounts have been lent. On the other hand, the unsecured lenders have some amount of money to get out of liquidation and if the restructuring doesnt turn the company around, they lose everything. One of the solutions used to align the interests of the secured and unsecured creditors is the concept of strips. Here, all the debt(secured and unsecured) is pooled up and stripped into equivalent pieces. So now, each creditor has both secured and unsecured portions in his 'strip'. Once, these strips are there, all the lenders can come to the best effective way to solve the problem (restructuring or liquidation) based on the business risks involved. 

A similar approach needs to be planned and used to align the interests of the poor and the non-poor so that the government doesn't play the divide and rule game with its people. I am yet to figure out how to make the 'strips'.

Value

"Value lies in the mind of the Beholder"

Congizant India: another Enron/Satyam?

Congizant Technology Solutions has come a long way from being a mid size player to a heel behind the third largest IT company (Wipro) and will soon overtake it. The growth it has seen in the last three years has not been even matched by one of the peers and is far ahead of the peers(TCS, Infosys, Wipro, HCL Tech,etc). I have a few friends in this company who have been lucky to get 200% bonuses (never ever heard of in IT companies). I asked a few of them, what is the reason for this tremendous growth in topline and profits? All of them say "I really dont know." Nobody I talked to clearly is able to tell me what magic they have done in getting new businesses and maintaining margins.

This answer sounds similar to a few earlier cases. The magic of Enron seemed to be accounting. Satyam was not far behind, though they used magic to just show the industry growth level.

The lack of clear insight and understanding of what CTS did to get the outperformance even from their rivals is whats startling.

I just hope it is not one of the Enrons' or Satyams'.

Procrastination

An excellent article on Procrastination (long but worth it)
http://youarenotsosmart.com/2010/10/27/procrastination/

Chocolate Bonds

Financial innovation and returns have never been sweeter and more delicious (literally, really) :D

The company has issued bonds for which the coupons are not paid out in cash, but in chocolates :)

http://www.springwise.com/retail/chocolatebond/

mmm....mmmm....

Funny business quotes

• Early to bed and early to rise probably indicates unskilled labor. John Ciardi
• The problem with the rat race is that even if you win, you’re still a rat. Lilly Tomlin
• Don’t piss on my back and tell me it’s raining. Old West quote
• When you assume, you make an “ass” out of “u” and “me.”
• The successful man is the one who finds out what is the matter with his business before his competitors do. Roy L. Smith
• Eagles soar, but weasels don’t get sucked into jet engines.
• Every employee rises to the level of his own incompetence. The Peter Principle
• Work expands so as to fill the time available for its completion. Cyril Northcote Parkinson/Parkinson’s Law.
• The light at the end of the tunnel has been turned off due to budget cuts.
• A successful man is one who can lay a firm foundation with the bricks others have thrown at him. David Brinkley
• A meeting is an event at which the minutes are kept and the hours are lost.
• She should go far. The sooner she starts, the better.
• The higher a monkey climbs, the more you see of its behind. Joseph Stilwell
• Success in almost any field depends more on energy and drive than it does on intelligence. This explains why we have so many stupid leaders. Sloan Wilson
• The wheels are turning, but the hamsters are all dead.
• Make it idiot-proof and someone will make a better idiot.
• I learned long ago, never to wrestle with a pig, you get dirty; and besides, the pig likes it. George Bernard Shaw
• If you give him a penny for his thoughts, you’ll get change.
• There’s no secret about success. Did you ever know a successful man who didn’t tell you about it? Kin Hubbard
• If work is so terrific, why do they have to pay you to do it?
• There’s an enormous number of managers who have retired on the job. Peter Drucker
• By working faithfully eight hours a day you may eventually get to be boss and work twelve hours a day. Robert Frost
• Accomplishing the impossible means only the boss will add it to your regular duties. Doug Larson
• Success is going from failure to failure without loss of enthusiasm. Winston Churchill
• A budget tells us what we can’t afford, but it doesn’t keep us from buying it. William Feather
• The worst part of success is to try to find someone who is happy for you. Bette Midler
• Success is relative. It is what we can make of the mess we have made of things. TS Eliot
• If you would like to know the value of money, try to borrow some. Benjamin Franklin
• Don’t stay in bed, unless you can make money in bed. George Burns
• If not controlled, work will flow to the competent man until he submerges.
• If you don’t know what to do with many of the papers piled on your desk, stick a dozen colleagues initials on them and pass them along. When in doubt, route. Malcolm S. Forbes quotes
• It is better to spend money like there’s no tomorrow than to spend tonight like there’s no money. PJ O’Rourke
• Never invest in anything that eats or needs repairing. Billy Rose
• It’s hard to lead a cavalry charge if you think you look funny on a horse. Adlai Stevenson
• If at first you don’t succeed, try, try again. Then quit. There’s no point in being a damn fool about it. WC Fields
• Rome did not create a great empire by having meetings, they did it by killing all those who opposed them.
• If at first you don’t succeed, failure may be your style. Quentin Crisp
• Never put off until tomorrow what you can avoid altogether.
• A clean desk is a sign of a cluttered desk drawer.
• All you need in this life is ignorance and confidence, and then success is sure. Mark Twain
• If at first you don’t succeed, try management.
• Indecision is the key to flexibility.
• If at first you don’t succeed, take the tax loss. Kirk Kirkpatrick
• Aim low, reach your goals, and avoid disappointment. Scott Adams/Dilbert
• Life is like a dogsled team. If you ain’t the lead dog, the scenery never changes. Lewis Grizzard
• The best way to appreciate your job is to imagine yourself without one. Oscar Wilde
• In the early days all I hoped was to make a living out of what I did best. But, since there’s no real market for masturbation I had to fall back on my bass playing abilities. Les Claypool
• Do not underestimate your abilities. That is your boss’s job.
• Right now, this is a job. If I advance any higher, this would be my career. And if this were my career, I’d have to throw myself in front of a train. Jim Halpert/The Office
• Success is simply a matter of luck. Ask any failure. Earl Wilson
• Never interrupt your enemy when he is making a mistake. Napoleon Bonaparte
• There’s nothing so improves the mood of the Party as the imminent execution of a senior colleague. Alan Clark
• A consultant is someone who takes the watch off your wrist and tells you the time.
• An expert is someone called in at the last minute to share the blame.
• Speak the truth, but leave immediately after.
• For maximum attention, nothing beats a good mistake.
• One of the symptoms of an approaching nervous breakdown is the belief that one’s work is terribly important. Bertrand Russell
• http://www.businesspundit.com/100-funny-business-quotes/

What motivates people?

In diagrams

Src: www.thisisindexed.com