Thoughts in a New Year

A New Year, and a new day, week, month, and if you so believe, even new decade. A time to sit back, relax and count the innumerable pleasures of life. A time to feel the privilege, bask in joy and burst with happiness :-)

Worries on the horizon? I can not recall a single day when I was not worried about something or the other. One year out, I don't even remember 95% of the things I was worried about - feels funny that such trivial inanities should fill 95% of my waking thoughts. When I count my joys, my reasons to be happy, I find I discount them very quickly. Life moves on instantaneously towards the next goal, the next struggle, the next trivial pursuit. How much of this do I really care about? How much of this do I desire? How much can I do without? Mostly all.

The fundamental bedrock of needs - health, safety, family, friends, freedom - are all present in abundance and for free. It is up to me to savour these or take them for granted. I hope I can make the right choice!

Happy new year :-)

Tis the season to be merry...

1) Give a man a fish and he will eat for a day. Teach a man to fish, and he will sit in a boat and drink beer all day

2) If at first you don't succeed, skydiving is not for you

3) It is darkest before dawn. That's the best time to steal your neighbour's newspaper

4) Before you criticize someone, walk a mile in their shoes. That way, when you criticize them, you are a mile away and you have their shoes!

5) Warning sign on a Japanese food processor: Not to be used for the other use

6) Instructions on a Chinese product used to relieve painful haemorrhoids: LIE DOWN ON BED AND SLOWLY INSERT POSCOOL UP TO THE PROJECTED PORTION LIKE A SWORD-GUARD INTO ANAL DUCT. WHILE INSERTING POSCOOL FOR APPROXIMATELY 5 MINUTES, KEEP QUIET

7) Market definition: Bear market: a 6-8 month period when the kids get no allowance, the wife gets no jewellery and the husband gets no sex

8) Market correction: the day after you buy stocks

9) Institutional investor: someone who sells a stock big time a day or two after you have bought it, for no apparent reason

10) From an engineering exam:

What does this mean?

If this is marketing strategy, then I'm really glad that I didn't major in marketing. This is the sign put up by Haagen Dazs in a posh south Delhi mall.

Not only do I not understand what this means, I don't think anyone else does, either!

Are they trying to stress how premium their ice-cream is? So premium that only foreigners can eat it? Well, perhaps. But then, why are you launching in India???

In my opinion, this is a really stupid and 'guaranteed to fail' method for launching any new brand. In fact, it is probably downright illegal. If I were sitting in the head office of Haagen Dazs, I would fire the top management.

The biggest paycheck in history

There is probably a lot of happiness in becoming rich. However, there is almost certainly more happiness in being right. And its best to become very very rich by being right about something that others didn't agree with! To my mind, no one captures the essence of being right more than John Paulson. Boy, he was right. And how!

This article from the tech ticker is worth a read:

The bursting of the housing bubble cost the American economy trillions of dollars and brought Wall Street to its knees. But a few savvy investors, most notably hedge fund manager John Paulson, made fortunes betting against housing and related securities.

In The Greatest Trade Ever, Wall Street Journal columnist Gregory Zuckerman details how Paulson pocketed $6 billion as his firm made $20 billion betting against the boom from mid-2006 through early 2009. These returns included $4 billion for Paulson personally in 2007, which Zuckerman describes as the single-most lucrative payout in history.

While few, if any, will ever approach Paulson's staggering accumulation of wealth, Zuckerman says there are some timeless lessons for the rest of us, including:

Have the courage of your convictions: Paulson stuck by his thesis even as the trades didn't initially pay off in 2006, myriad housing "experts" told him he was on the road to ruin, and seemingly all of Wall Street's machinery was working against him. And when the bets starting paying off in 2007, Paulson didn't book profits and run as many advised -- and some clients begged. After shorting subprime in 2007, Paulson effectively doubled down in 2008, shifting some of his firepower to bets against Fannie Mae, Freddie Mac and Wall Street firms knee-deep in the MBS market.

See the forest for the trees: As an outsider to the mortgage world, Paulson was able to see the carnage coming that those on the inside missed. The ability to think independently and see beyond what the "experts" are saying is critical for individual investors because more financial bubbles are likely, Zuckerman says.Hindsight being 20-20, it's clear the housing market was a bubble and Paulson's strategy of buying cheap insurance against subprime mortgages - in the form of credit default swaps - seems like a no-brainer.

But as Zuckerman details in the book, getting the trade right wasn't easy; others tried but failed to match Paulson's stellar returns because they were either too early, had the wrong trading strategy or didn't see the bet through to its ultimate conclusion.

Furthermore, Paulson struggled in early 2006 to raise money for a fund dedicated to betting against housing securities, Zuckerman reports; Paulson was viewed as an "outsider" in the mortgage market at the time and didn't reached legendary status until after the mega-profits had been booked.

I'm a rightist libertarian!

I read a blog post about the political compass today. Nothing spectacular about it, just a simple questionnaire that lets you know a bit more about yourself. I took the test, and found no surprises :-( It was as I always suspected - I'm a boring kind of centrist guy - leaning towards libertarianism (i.e. laissez faire, live and let live etc etc) as well as economically rightist (the market may not know best, but it sure as hell knows much more than the smartest planner in the world)

Here is my map:

No politicians are like me :-(

Milton Friedman is the closest match. Does that mean I should have been an academician? I think, very very deep down, that I was cut out to be an academician or a researcher!!!

I love such games :-)

The end of a dream?

Today I spotted a Toyota Fortuner on the road - the first time I saw the car outside of a picture or a website.

Unfortunately for me, it was quite a disappointment! I first mistook it for some version of the Innova, then double checked the name, and finally figured that the damn thing does not remotely resemble a power-packed animal. No doubt it is very efficient and indeed powerful, it just does not look so! I think the key factor is the ground clearance - our desi cars have high clearance and a higher back, while the firang cars (while more elegant) have lower centers of gravity and rounded backs. A bit of crudeness is missing!

Give me the Scorpio or the Safari anyday (till then I can dream about the Land Rover and the Audi Q7)!

Some photographs:

Fortuner:

Land Rover:

Q7:

Scorpio:

Tata Safari:

How much is too much?

A question that a lot of people have asked me, and I many! How much is enough? What is the magic 'x' amount of money/assets/material stuff that if one owns, one does not desire anymore?

Clearly, unlike the ultimate answer to the question of life, the universe and everything, the answer is not 'forty two' or any other number. It cannot be, is my personal experience. When I was an engineering student, I used to think a salary of 40k per month was the end-all of most dreams. Then the investment banks came in and spoiled us with dreams of many zeros at the end of some obscene number of dollars in annual compensation. The bar kept rising higher and higher (as indeed did inflation - of houses, cars, food, everything else).

My buddy, who probably earns in fractions of millions of USD in Hong Kong, has also undergone the same phenomena. Last when we spoke of such things, he said he would be happy with something that gave him risk free income of some x amount. Needless to say, he has surpassed that target quite some time ago, but is still on the hunt for more mammon. He sometimes feels unhappy at his pace of life, but on the whole the feeling of being on-the-move energizes him.

Of course, money is not the only thing most people desire. I always like to read the stupid celebrity interviews where the subject is asked to rate by order of priority - fame, money and power. Invariably fame and power get higher billings than money. This is true for a lot of us as well. Money is just a way of keeping score!

The answer to the question therefore, in my mind, is truly what you limit yourself to - and also what you can aspire to. It is a bit like Maslow's heirarchy - when one target is met, one automatically moves to the next one, because without targets there is only boredom. Rare (and very lucky) is the person who has enough! How does this mythical dude entertain himself??

The big bear turns positive on India

Nouriel Roubini shot to fame thanks to the global financial meltdown of 2008. He didn't make too much money out of being right (unlike John Paulson or George Soros), but certainly earned name and fame!

Since his heyday at the height (depth?) of the armageddon in October 2008, he has been as vocal as before, but not quite so prescient, as markets everywhere have ignored his calls of doom, and have rallied massively. It is interesting to see what the big bear says about Indian markets now...

And surprise surprise! The guy predicts new highs for us next year. The reasons he gives are: 1) The USD carry trade and 2) the fact that India is the top pick in the emerging economy universe and is relatively scarce (i.e. foreign investment can come into India only in the equity market, not through debt, real estate or other investment classes). Both points are well taken.

But I start getting sceptical when the sceptics start becoming believers!! Will Mr. Roubini be right this time? That is the trillion INR question :-)

More on politics

Thanks DD for this pic - check out the gold on this 'social worker'!

This is what we have become

Politics always repulsed me. But our politicians every single day plumb new depths, and still retain their ability to deeply wound and trouble me. Today I am ashamed to be part of this venal, hypocritical and spineless country. It has a doomed future.

The immediate provocation - a common thug, whose only claim to fame is that he is related to so-and-so, with a very very calculated and cynical eye to a vote bank, commands a diktat which is illegal, unconstitutional and immoral. He says that new MLAs to the Maharashtra assembly should only take their oath in Marathi. While this in itself should be reason enough to put the guy in jail for the rest of his sorry life, what actually happens is that one particular person takes the oath in Hindi, and 4 MLAs from the thug's gang actually beat up this person in the assembly in full view of cameras, security and the country. These people are elected representatives who are supposed to frame our laws.

But what gets my goat is this - I quote verbatim: Eknath Khadse, the BJP group leader, called for a sympathetic view of the entire incident. "Nobody supports what happened today. But, there is nothing wrong in checking the footage again to verify the MNS claim that it was Azmi who had provoked them through his body language," he said. Khadse said since it was the first day of the new house, a lenient view should be taken.

Indeed. Punish the victim. This is what we have become. This is what we stand for. We have lost all humanity, dignity, and morality. We are doomed.

Alliterative flights

Mom: You need to lose all that unwanted ungainly weight

Me: Verily wanton weight

Unwelcome unwholesome weight

Ultimately ululating weight

and then later (staring ahead on an airplane):

Me: Verisimilitudinally vituperative weight
Finally my favourite: Vacuously vaccilating weight!!!

Art.. and a new vocation :-)

The wife is very artistic, and spiritual to boot. She has demonstrated an aptitude for a dazzling new career :-) Meet Mata Gayatri Devi (drumbeat roll....).

The following pics say it all...

Old email folders

I happened to look through some old email folders recently (the kind that you file away while you were a young student and never look at again), and I was amazed to see that I had worked with some really great people!

Even when I was just a (supposedly lowly) intern, in a (supposedly parochial) country where I did not speak the language, there were these guys who were super friendly, considerate and helpful! While I did not value all this at the time, I really am quite touched to read those emails again as the memories come flooding back! Really, there is so much more to life than the pursuit of money and constant compromises to achieve this pursuit. Work is something we all do, and a enabling work environment really does wonders for productivity and efficiency. In my earlier avatar as a management consultant, I was (ironically!) very cynical about this mythical beast called the 'culture' of an organization. I now think it matters tremendously more than I thought. And that it exists in a good form very very rarely!

Note to self: Try to spend the rest of my days in the pursuit of happiness, and not moolah!

Amazing what some old emails can do!

Wise and Otherwise

The wife picked up this book by Sudha Murty last week. I've been reading it, and its contents make me wonder a bit at how removed I am from the pulse of the our country. For those who do not know, Sudha Murty is the wife of one of Infosys' founders and runs the Infosys Foundation, a charitable and social organization.

The book itself is very easy reading, with short 'stories' each commenting upon some idiosyncratic aspect of life in the real India. It is easy to get moved by the plight in these stories of the common person in India, grappling with poverty, social pressures and ills and yet maintaining a stoic and dignified attitude. That said, the book is not heavy at all (something I had feared) and has a liberal dose of light moments.

For me the real story was the kind of transformational work being done by the foundation and the amazingly simple and direct approach of the author. It is easy to see after reading this book why Infosys is a real revolution, and why it (and its founding philosophy) will survive forever. It is easy to throw money at charity or social work (something I've been guilty of) but difficult to devote all one's time, efforts and skills at it. This is the real greatness of the author and the foundation.

I'm going to stop shorting Infosys as a mark of respect. The company has a wonderful future!

I'm very pissed...

...with my bank (hypothetical situation). What do I do?

I ask the bank for compensation for my ire.

How much? One lakh? Ten lakhs? One crore? Hundred crore? One million crore?

Or a sextillion? (i.e one followed by 21 zeros)?

Not enough? How about ten sextillion?

Yeah! that sounds good! Ten sextillion then, is what this gentleman decided!

To call this absurd is akin to saying that Mallika Sherawat is ugly. i.e. highly understated!!!

When melancholy strikes...

...one remembers some old time poignant movies. E.g.

1. Ijaazat: The story of a couple and how they discover each other when its too late. For the story click here
2. Parinda: The story of two brothers and how fate intervenes to tear them apart. For story, click here
3. One of the all time greats: The English Patient. Lyrical, forbidden love which is doomed. How humanity transcends nationality. Story here
4. On the Waterfront. I could'a been a contender. I could'a been somebody! Story here

The common theme running in these classics is that of loneliness. Terrifying, slow loneliness. Attractive, alluring loneliness.

Very good interview

To complete the troika of bad, good and best, here is the final quote from the same website (but a different analyst):

Q: What do you do now for someone who has been left out in this rally for the past couple of months?

A: Conventional wisdom would suggest that as more and more people who have been left out get frustrated, they get sucked into the market and when the last of them gets sucked in that is when this market will break. Having said that, for me it has been a period of frustration, we are now less in cash than we were earlier much against my better judgement. We are clearly not looking at new ideas, at new stocks but adding a little bit to existing stocks in the midcap space which were looking cheap earlier, which are still looking cheap. My fundamental sense still tells me that there are too many dichotomies in this market, in this purely liquidity led. On the one hand you have consumer price inflation running away with itself but nobody believes that interest rates will go up. Commodity prices are heading higher but nobody believes that global economic recovery will suffer. The world has been through its worst economic crisis over the last twelve to fifteen months but everyone believes that the worst is over. The party is now well and truly on. I don’t think we are going to find too many people coming onto your channel and saying the next band is down. Everyone is saying that the next band is up and rightfully so because a lot of levels have been taken out. But this is a dichotomy. China is another huge imponderable here, three or four months ago, everyone was saying that Chinese growth will bailout the global economy but today China seems to be slowing down. But the view of the world has not changed. It is like one should not worry about China, everything will be fine. It is like the question you asked about the monsoon a little while earlier. The monsoon has not recovered but one should not worry, everything is fine, this market will go up. So that is the mood and it is the liquidity that is driving this mood and who are you or I to buck that trend.

And this is how it should be done...

This is a different guy on the same question:

Q: What about Tata Motors, can the current price be justified? Are you revising your price targets there?

A: Fundamentally, it’s difficult to recommend buying Tata Motors at these levels. First of all the biggest chunk of revenue at about 65-70% still comes from JLR which is geared to the US and Western European markets. That revenue and earnings stream remains quite unpredictable so there is this huge degree of variability in the earnings forecast for Tata Motors. With that kind of a risk I think, these valuations may not be justified at the current levels. In the auto’s side, there are far better opportunities which have a far steadier earnings stream and a lesser degree of risk associated with the business which one can buy. It’s difficult to recommend a risky earnings stream at high valuations at this point in time.

This is a decent answer - the guy talks about headwinds for the company, says that financial performance is difficult to predict, and that a risky earnings stream trading at high valuations is not to be recommended. Anyone who buys after this knows that she is taking a pure punt. This is what a good analyst should do.

What is bullsh***ing 'analyst'

Just read this 'expert' on business channel CNBC's website. I quote:

Tata Motors a good buy?

Betadpur said, it was difficult to figure out a valuation for Tata Motors. “We have looked at the street estimates. It is all over the place as far as earnings per share (EPS) for 2011, our own numbers are around Rs 20 and we can give it a 30 multiple and that gives you Rs 600 - 30 multiple seems a little too much but that is where we are. If we say everything goes well for the stock, Jaguar-LandRover picks up by 2011, that is generating a lot of cash flow for the company and the EPS goes from our current estimates 20 to 30 and then you give it a 30 multiple, you get to Rs 900-1,000 target. That is what some people on the street are saying that Tata Motors can get to Rs 1,000. That is how we believe on the numbers but I don’t think everything is going to go positive for this company. “

What a jerk!!

1) He is not saying anything

2) He is not even providing any justification for his dumbass arguments - why should it trade at 30 times? What will make EPS increase 50%? Cash flow does not equate EPS. So what specifically will make EPS rise? What about the debt overhang? What about historical valuations?

Jokers like this really get my goat. And what business does CNBC have putting such brain-dead pretenders on air? The irony is that about 20,000 people would have read this and will call their brokers tomorrow with orders to buy Tata Motors, saying they have heard (on authority) that it will soon touch Rs 1000!!

They deserve the slaughtering they are going to get!

PS: I have nothing against Tata Motors. I think they make damn good SUVs!!

Mo' on co-bro

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