Appeasement-Cowardice?

Was British Prime Minister's "Neville Chamberlain" policy of peace treaty ( munich pact) with Nazi Germany justified.History would prove otherwise because it gave time for hitler to become so powerful that he would unleash his sinister agenda and remembered as the worst tyrant ever.
History sure is not forgiving.Appeasement politics has been around for a period of time.
Mahatma Gandhi did it after his vain attempt to dissuade muslim leaders from striving for a divided new pakistan.
Even when pakistan accused India of usurping states within its boundaries (i.e. J&K) Mahatma Gandhi made sure they got their fair share of the finances ( movable assets) when a lot of leaders were against such an action and India needed them the most because it was going through a famine.
Pakistan for the next 60 years has been following its thousand cut strategy to hurt India where ever and whenever it got a chance.
History has also called the policy of appeasement a pact of weakness or cowardice.
It is all about showing your enemies that you are willing to relent thus giving them enough reasons to attack back.You let them live up their plans just by giving them the space.
So is it right or wrong?
Having the benefit of hindsight and history to back-upon,appeasement even out of good intentions has ended as a firepower for the cannon of the enemy.You know they will only stockpile it for an opportune time and send it back your way.

How did I navigate the recession of 2008?

Bubbles they say are evolutionary. They burst suddenly and then give rise to another one. From as early as the tulip mania to that of the housing bubble all were based on too many chasing too few.

Bubbles are formed when euphoria reaches the level of insanity.

The Dotcom burst of the 2001 was no different.

 It started with money pumping into the sector after realising its long term potential (Demand-Supply mismatch).Microsoft had come out with an interface after extensive research that would make computers operable by common man. Every business shifted its work on the computer. Internet made data accessible. Websites were set up and wares were put to be sold on the internet.E-commerce took off like hot cakes. Not too long after that everyone started fabricating his business into an IT business just to raise money or realise a higher valuation from the market. Fibre optics were laid down as if there was no tomorrow. There was no concern for the outstripping supply and then it happened in an instant.

They say bubbles burst when the biggest fool refuses to pay the valuation that the market demands and then the market came tumbling down.

The recession was restricted to a particular sector. IT became the dreaded word People lost big money but the hurt was beyond repair for people who joined the bandwagon late. Students on campus who took IT specialisation just because of the hype were left jobless.

The damage was widespread. Businesses went into bankruptcy. Valuations were lowered and sanity was restored.

However there was a blessing in disguise for a country like India. Outsourcing and call centre business took off because of cheap labour and a huge supply of fibre optics which brought down the prices of calling abroad thus making the business viable and profitable. Once the country solved the Y2K bug problem business started pouring in.

.

This was the time when the president of United States started towing with the idea of housing for the marginalised.

These were the early days of a gradual shift towards housing. They specifically decided to engineer financing of housing which would bring in people who could not have afforded to buy a house till now.

This was the beginning of what would turn out to be the recession of 2008.

“Teaser loans” where rates are kept lowered for an extended period of time were brought in so that people with lower initial income could still afford a loan.

Down payments were reduced to as low as 10% on the price of property.

Credit scores were shoved away under the carpet (credit score being the past payment record of a person showing the ability to pay off loans).Sub-prime crisis was a direct outcome where people who had a lower credit rating were also provided a loan on a higher interest rate. It this was not enough you could mortgage a property and raise a loan to buy another one. It became the order of the day as everyone thought that the property prices would see a perpetual rise.

Though what was happening on the main street was not as sinister as what was happening on the Wall Street. Banks were making a killing out of commissioning products. What became a simple proposition got complex by the day.

The loans that were provided by the banks were stuck in their books which meant that they became illiquid. Banks realising the importance of liquidity started bundling these loans into debt papers which were then sold to the public as bonds so as to convert their holdings into cash. That money again went into providing loans for property thus creating a spiral effect of leveraging up to as much as 100 times. Even credit card debt was bundled and sold off as unsecured bonds.

Fancy products became the talk of the town even when no one knew their functioning.

Collateralized debt obligations (CDO)-were the loans bundled backed by an asset.

Collateralized Mortgage obligations (CMO)-were the loans backed by a mortgage property.

CMBO-Commercial mortgage backed obligations which are bonds backed by a pool of commercial mortgage loans.

They all depended on the payment by the final consumer holding the loan.

If that was not enough people in the insurance industry brought out derivatives on these underlying which started trading on the exchange.

CDS-Credit default swaps are the obligation on the insurance company when there is default by the borrower of the loan. People also used it to speculate on the default by the borrower.

Every industry became interconnected out of the interlinked products. That is when the sceptics started to warn the industry to reform or face a blown out recession. But no one was listening as the party was growing louder.

It did last for a while as the markets tend to remain insane for an extended period of time and that is why the hurt was also bigger.

Meanwhile the teaser rates on loans started to lapse and interest rates started to rise. The default rates started rising. This is when the prospect of a slowdown hit the shores.

Even though the default was the reason what brought the recession into the market it was not the main one.

The loans that were bundled and sold off were clustered and not differentiated as prime and sub prime. When people started defaulting no one was able to classify the value of the portfolio as the papers containing these sub-prime mortgage loans were clubbed together with prime loans and the default was mainly in sub-prime loans.

The market panicked. When no one was able to value the price of the underlying the insurance company providing insurance on these underlyings came under pressure because the portfolio held by these co’s was humongous.AIG came under distress. Suddenly there was a crisis of confidence. Bear Stearns and Lehman Brothers were the ones who came under massive bear hammering. Citibank also faced similar terrain. Every investment bank and every bank was holding the same paper securities and they had leveraged it over and over again.

Everyone started deleveraging in the market. Money suddenly went off equities and properties from all over the world.

Cash became the king in the market. Countries holding chunks of cash were being scouted by major American investment banks to help them deleverage and put off liquidation.NOMURA was said to have shown interest in Lehman brothers but had sidestepped at the last moment.

When the market could not value the underlying securities it could not put a bottom to the prices of those securities. Once there was a crisis of confidence there was a run on the banks. Lehman brothers which was trading  at 60 dollars a share two months back came down to 3.When it could not raise the necessary capital it went into bankruptcy.

Everyone started predicting the end of the world. Money started drying up in the markets.

The secular fall in the market and a run on the banks became too much to ignore for American Federal Reserve. This is when it stepped in and provided a bottom thus restoring sanity into the market (bailed them out by providing capital). By this time some of the most reputed investment banks had gone down under. Federal Reserve brought down rates to as low as 0% and gave out money to anyone who could return it back. Banks started deleveraging out of that money and save themselves from default.

The talk of a “V” shape recovery had made its way into the market. Analysts with major investment banks had seen the bottom and started putting money back in what would turn out to be the easiest way of making money in the market.” Go long” was the anthem on the Wall Street with an occasional one or two companies falling into default now and then. The money sitting on the sidelines made its way back into beaten down stocks.

Back here in India, developing countries were also facing the axe. There was no crisis of confidence as the market was not highly leveraged. But as developed countries were deleveraging they started taking out their portfolio from developing nations. Stocks and properties started to tumble. As the markets started falling stocks got hammered to an extent that they became so attractive they became hard to resist. Property prices also became attractive because they became undervalued.

A similar “V” shaped recovery was predicted by technical analysts. Most of the money that was available with investment banks came back into India as they found out the economy to be resilient and not dependent on the export sector. A country like India where everything was undervalued and had an inflationary economy, the money went back into commodities, property and equities.

Once I saw the opportunity I put my clients on it and made money by simply investing in for the long term.

Property prices doubled up and stock prices quadrupled thus bringing handsome profits to my clients.

2010 and beyond

With every recession the president of United States has changed priorities. This time President has been propagating Energy revolution and energy efficiency in sectors like gas guzzling automotive sector. Solar photovoltaics have also got the necessary limelight. Major impetus has been given to the electric vehicles.

Various countries have also taken the cue and started working on these fields. Major R&D has been set up into these sectors which could revolutionise the industry and change the way we consume.

Manufacturing is back and going green is the new status symbol. Toyota prius has been the trendsetter and many concept vehicles are being showcased in auto expos around the world.

Alternative fuel sources are being scouted and major investment sources are betting on the sector. Shale gas has become a huge opportunity and major investment is tapping into that source.

The industry might look different from what it is today as new sources are being discovered every day but the momentum has been turned on.

Gradually we are reaching a point where the system will stabilise and interest rates will be raised by the Federal Reserve which will take back excess liquidity from the system. Will it lead to a “W” shape fall?

We can only look into the possible scenarios. Federal Reserve will increase rates when they see growth in the system. Deflationary economy is not the point when they will take the risk of increasing interest rate in the system.

Developing economies have been major beneficiaries of the liquidity. Are they the ones who will face the music when the tide turns? Will it lead to another recession?

Stock market has been a barometer for the state of the economy. A new normal has been established in the system which signals that the market will find a support far higher than the low seen in the last recession. This would end up as a point which could become the support for a new benchmark.

Developing countries are also facing inflationary pressures in the economy. When money is abundant it is put into commodities. Gold and oil prices are hitting the roof. Gold is a hedge against inflation and a sign of safety. When there is a risk of default in the system gold becomes the best bet. Oil prices are also flared up with any crisis in oil exporting nations. With a major amount of import being oil it is bound to affect inflation in any country.

Inflation is a tax on the poor. A developing country like India where major spend is into food and transportation it affects the standard of living of its population. Governments have been trying to grapple with excessive liquidity by increasing interest rates now and then but to no avail.It is yet to be seen what happens when American Federal Reserve starts increasing interest rates.

Excessive liquidity in commodities should be sucked out so as to restore normalcy into the system or it could act as a harbinger of an impending collapse in the system. This time the hurt could be far more damaging.

How Indian public sector banks are corrupting the system?

Banks are behemoth's among themselves.They are so big no one will ever be able to put together the pieces of the puzzle.The presiding govt's have used them as a source of funding their vote banks.
NREGA, loans to farmers at concessional rates, loans to co-operative banks funding small scale industries owned by the politicians and their relatives,loans to priority sector i.e. recently real estate sector in distress,extending the time for a loan to have become a default one which will increase penalty are some of the reasons why banks are sitting on such a huge amount of NPA's(Non performing assets) which otherwise affect the interest rates charged from well performing sectors.
If that was not enough we have various amounts of quota to fill up in the job  department.After that comes the mother of all i.e. "paid seats/jobs" and the commission on loans provided by the bank which is an end in itself.
If this is the state of the system,the market is giving them unrealistic valuations and the bubble might burst sooner rather than later.

Confessions of a sham NGOite

Money is a prime driver of our emotions.
It takes a trick or two to reach to the bottom of a scandal.Journalists put up a lot of hard work uncovering the truth.
Seems like something landed on my doorstep without having to have asked for it.
Meeting people is a hobby and uncovering the truth is what I like to do.
This chance meeting with a person opened my eyes to the happenings in the NGO world. A world that is decorated from the outside with words like goodwill and corporate social responsibility but is also the biggest scandal of all especially in India.
All you need is a website and some advertisement to attract gullible foreigners into giving their money for a so called good cause.
This person I met was quite candid about it.
This person with his wife setup a website and was backed up by a  chartered accountant (C.A).The CA put in some donations to the NGO.
The person running the NGO dressed the website with snaps of them visiting villages and teaching young children for free.They also put testimonials of donators happy  with the ground reality.
The money that came from the CA was 100% tax deductable.He got  80% of the money back from the NGO thereby making 80% on his investment and also a cool 100% tax deduction in his business returns.
The remaining 20% was pocketed by the NGO.  
Meanwhile the word spread in US and other countries about the good work done by the NGO.Money started pouring in.
This is how the scandal continues.
CAVEAT EMPTOR....

What's with advertising?

They say advertising is the barometer of a society.
In times like these when remote is the kingmaker advertising has to attract as well as keep us glued to the screen for the next 15 seconds.

So how do they do it?
They read the customer preferences thoroughly.TAM being the device capturing the data regarding the viewing preferences of a particular target audience and then creating programming out of the mass behaviour.
There are certain people employed by malls just to watch their customers.The preference for brands, quality, price and even comfortability while picking up from a shelf so that the next time a better margin product can be put there to increase profits.
Sounds insidious.We have only started.The reality TV phenomenon is a manifestation of a voyeuristic society.We all like to know or overhear about what's happening in our neighbours life.We like to live vicariously  through the ups and downs of a successful person.Facebook has caught on the fever where youngsters like to post everything they are doing even as small as the latest gift  they received.
Google being the biggest of them all.They keep track of your emails and then put advertising around the web pages acc to the data collected and then collate and sell that data to the respective companies.

Co's also have to sell you the product.They make advertisements to entice you with emotions.
The Mcdonald ad where a healthy boy (read chubby/fat) is expecting His GF and she arrives with her sister.It could be that the ad is saying that there is nothing wrong with being fat and the person could still have a Gf.
In the blackberry ad,there is a smart slender boy( read not hunk) who is propogating the uses of applications of blackberry.It could be the acceptance of a slender built man which has also been seen by major clothing brands who have brought out that size shirts in the market not available long ago.
Times of India has an advertising treaty where it has sold out the content ( even editorial ) which was considered a virgin territory.
Virgin mobile,where the boy is not breaking up with his GF but making her do it on his behalf thus manipulating her.The ad ends with a caption "Think Hatke" i.e. think differently.
Tata capital where the boy has given up his bigger gift for a smaller one to his brother is trying to make us emotionally attracted to the brand.
I have personally seen advertising as a creative expression and not get swayed by it towards the brand just because of it.
Look around, the advertisements, you will find all they are trying to do is enter your sacred space and manipulate you one way or the other.

Looking back into the Flowerpower Gen

An era has gone by. Since the start of 1960's when hippie brigade had started showing signs of sprouting to the close of the 20th century, a time when everything was popularised by the zeitgeist.

The hippie counterculture (against the mores of a middle class hypocrisy culture) brought about a revolution in the way American youth lived. They say at a brink of precipice mankind takes a drastic action to change. Youth suddenly found the hollowness of the middle class living. And they started confronting by voicing their opinions.  Lifestyles were changed, religion tweaked to live up to the rebel generation.

Hippies took to marijuana ( a drug known to expand consciousness ) living like nomads hitchhiking from one place to another without any concern for possessions, a culture had taken root.

 A person born in the early 80's can only look back and forth to prove what this generation of youth was going through to have taken an action of distancing itself from the regular society. Popular rock bands, popular singers everyone seemed to have lived up to the same voice.T.V shows, movies of an era gone by are the only momentos that help put together the pieces of the puzzle.

Hippies seemed to have taken over every aspect of the society from green living to organic food to clothing to march protests against the Vietnam War, the rebellion was everywhere. Where ever there was a live music concert, there were a large number of hippies. They believed in freedom of choice and a life on their own terms. Rock bands were the voice of the youth and this was the time in the history that these bands funnelled out some of the best songs of a generation.

Lot of people say that youth had lost its way but they only tried the society to look at life differently. They could see the worthlessness of the war and a huge amount of money being spent to build piles of arms and ammunitions. They could see through the middle class show off culture was only to cover its emptiness.

By the end of 1960's hippie counterculture had started to wane but had left an undeniable mark on the years to come.

This was the time when movies and television started portraying the times gone by which had a memorable impact on the the generation born till the late 80's.Having lived and gotten into college in this  period reverberations were bound to be felt .Music and movies became the source of inspiration for the next generation.

Talking to friends we remembered some of the best T.V shows, music concerts and singers and not many came to our mind from the current lot.

Maybe because we cling to the past coz future is uncertain and people are afraid of the uncertain.

But for me and some of my older friends it was an era that allowed its youth to voice their opinions and live by them and not drown them out.

Spread the word: Are Gold and Oil prices signs of an impending doom...

Spread the word: Are Gold and Oil prices signs of an impending doom...: "Bubbles they say are evolutionary. They bust and give rise to another one.There are many reasons behind the price of gold and oil to go hig..."

Is "DEMOCRACY" the reason behind Prime Minister's compromise?

When we say “Money can buy anything”, we are only becoming a part of the system that has led to the plunder of India by corrupt politicians and business men hand in glove.

Democracy is about the power of majority (i.e. Vote banks) be it a polity society or a business organisation.

On the verge of independence, it was decided by politicians like Nehru, Mahatma Gandhi and other esteemed functionaries that the power will flow from the bottom to the top and not the other way round. It was stressed by Gandhiji that we strengthen the panchayati raj because it was the first step to empowering an individual which would bring out the best to the top of the political ladder.

No one would have anticipated that it would become a money free for all i.e. the more the money the more the people can be bought (i.e. majority) and thus rise in the system leaving the people with no or little resources to be left out of the democratic setup.

The world was shocked to find out Dr Manmohan Singh who couldn’t even win his constituency being given the post of prime minister.

Now being a part of such a setup means running a democracy represented by its majority (the one we vote for) and history has enough to prove that the majority is not always right.

This is not to say that the corrupt should be forgiven or people in the know-how let go scot-free. But systems take time to change and one man does not have the power to bring that about without a backing.

It is now up to the next generation to cringe on the state of the system or bring about and encourage even reluctant honest and hard working individuals to join  the system and vote for them so that they rise to the top.

I am here reminded of the movie “The Time Machine”. The scientist build the machine to go back into the past coz he had lost his love to a terrible accident and he wanted to change it. After repeated attempts he was not able to change the past.

Suddenly by mistake he was send into the future. There was destruction everywhere. That is when he realised his folly that

“You can never change the past but you have the power to take steps so that the future will be different”. That is what he did and helped avoid a catastrophe.

Something worth learning for.

Why Do we need Dr Manmohan Singh?

“Behold I send you as a sheep among the wolves” says the Bible. Is it a conundrum or a necessity for a man of this stature to follow the coalition dharma (i.e. compromise) or is he mimicking the party protocol.

Political parties have always tended to be bigger than individuals. An individual gets attracted to a particular party either due to its star functionaries or out of the party manifesto or because the party allows them the space to bring out the change that the individual thinks is a necessary part of the society.

But a party is a sum total of a lot of elements put together and coalition is all about strange bedfellows. Sometimes when everything seems to be going wrong you bet on the lesser evil.

Any political party is a family and head of the family has to see that it functions properly or it will end up as a dysfunctional one.

Uneasy lies the head that wears the crown. They say corruption is the filth that grows on itself until it engulfs the whole space and those who are not a part of it get kicked out or voluntarily leave.

A shimmer of hope for the coming generation that all is not lost till yet

Are Gold and Oil prices signs of an impending doom?

Bubbles they say are evolutionary. They bust and give rise to another one.

There are many reasons behind the price of gold and oil to go higher to insane levels. There are many reasons that can bring them down as well.

Gold has always been a hedge against inflation i.e. higher the inflation higher the number of people putting money on gold making it costlier. Inflation is a result of many domestic as well as external factors.

When U.S economy is pumping money into the system so as to avoid deflation some money is bound to come into Asia.

A lot of countries in Asia are unproductive economies so the bulk of money is going into equities, real estate and commodities (these are unproductive assets) which is eventually driving up the prices of everything.

Oil is a commodity which is traded on the exchange. Any unusual occurrence like the Libya crisis is going to add momentum into the already galloping prices because there   is a risk of supply being cut off from the Middle East disrupting the supply-demand equation.

Oil is a major commodity which is imported by India and any price hike is going to affect the inflation.

Only way out for the government is to increase interest rate to dampen demand but will also hurt the growth sentiment.

U.S is virtually giving out money at 0% to anyone who can return it back with surety which is a sign of an inherent macro economic structural inefficiency (i.e. risk of default) in the system which is also making gold a protection against risk thus increasing its prices.

It is said that markets can remain insane for a considerable period of time. And suddenly they realise that the economy cannot take the burden which eventually leads to a collapse of the bubble.

Are gold and oil prices a harbinger of an impending collapse or will the financial system take the necessary steps by sucking out liquidity thus restoring sanity into the system. Only time will tell.

Financial planning- A passing fad ?

Financial Planning- A passing fad?

“Follow the money” this is what the investigators did in the Watergate scandal when it hit a roadblock and the trail helped them reach the culprits.

But you don’t need a scandal to start thinking about your hard earned money. Times are a changing and managing money has become a job in itself.

That’s where someone saw an opportunity and brought about a revolutionary concept to define money management “Financial planning”

FP consists of risk management, insurance planning, investment planning, tax and estate planning

FP is for salaried class of individuals and families. It is all about bringing individual financial needs and aspirations of the future together and managing money so that they are able to live up their life securely.

It’s about defining your current income sources, your future needs and investing in a manner that everything is taken care of without having to leave you with an uncertain future.

A Financial Planner has to manage your money within the dynamic financial environment and your own fluctuating future expectations. Nothing is set in stone and can be tweaked but has to be able to live up to the big picture i.e. financial security.

Anything that has to do with money is a part of financial planning. From taking people out of debt trap to taking measures to avoid it, to providing financial advice considering the persons risk appetite, FP is a concept from an individual point of view.

Every financial company be it banks or brokerage houses have products from a generalised point of view. But a financial planner makes a plan and buys a product from the client’s point of view.

Financial planner stands for you so that no one is able to take advantage of the client’s ignorance.

FP is a be all and end all for all financial needs of an individual.

IF you have a financial planner, he is following the money for you.