National award for Shakeela please

Whats the criterion for selection of the Padma awardees one may ask? It’s a topic that raises questions repeatedly, it is by the way our money that is being spent for the awards. Maybe we should use RTI to find out what exactly goes through.

This year atleast a few blokes must have been easy: you can beat Kazakhs and Cubans as Sushil and Vijender did but that would mean little to the organizers. You need to have a life time full of achievements like that of an Akshay Kumar who s made a khiladi of generations of Indian s and our very own death knell of acting, that 27^th wonder of India, Mrs Bachan, not the older one, but Aishwarya. Other notable awardees include the Tamil comdedian Vivek for his outstanding contribution to the mirth in Tam land.

I think in the same breath I propose to give a national award to Shakeela (imdb reference here, and maybe a posthumous reference to Silk Smitha) too, those beauties who have provided to large part of South Indian lands (or maybe South Indian xxxxx after the close sounding Hindi word). In an era where women were not seen in pubs (and hence did not get bashed up), the only (ok not the only) source of entertainment to those masses have been these two breath taking women. The horny southie (it progressed very fast across south of the vindhya s I am told) male s lust was quenched by banging the moth filled chair in some dingy theater (or his own home after all those channels started beaming them later) and more often than not the first introduction of the male to nirvana. For educating thousands, I hereby propose Shakeela name for national awards – lifetime contribution.

The other way to do this is for someone to stand up and say, “we give a damn to what you guys think about who should win awards, we will award them to whoever we please”. Maybe they already did and I did not listen. Too dense to understand about national honours.

PS: No offense to the actors mentioned...i mean Shakeela and Silk Smitha

Chart of the day (via bloomberg)

Bloomberg shows the attached chart on performance of banks in which the Govt. has bought in through TARP. They have lost 4 times more than the S&P.


How far will the fed go in its bailout?

Surreal, Dilbertesque.

Drop in Merchant Power Demand?

The Indian Electricity Exchange started operations over a month ago and some of the trends in the day ahead market (the so called merchant/spot) market have been interesting. The peak tariff went up close to 9 rs/kwh and now has moved back to close to 6 rs / kwh (currently we may even have excess capacity, almost as if the power companies prefer load shedding rather than buy expensive power).

IEX is promoted by the Financial Technologies (there is another Power Exchange too promoted by the NSE) and has some key players with stakes in it. Currently the regs are a bit unclear (ahem - when were they clear? ) on who will regulate the prices (you cant allow profiteering you see). The govt. also might want to control the prices because buying/selling electricity is a zero sum game.

Each state is allocated a certain quota based on its requirements (given by the SLDC s to RLDC s to the national grid). If you overdraw, it becomes kind of an overdraft and that would force the defaulting state to pay up. So states can make a killing by managing their demand effectively.

A quick download:

Source of fuel: Non-thermal power plants can ride the merchant game much better because they can be switched on that much faster. Thermal plants cannot really be shut down and hence their ability to service the spot market entirely is questionable.

Transmission: Regional Load Dispatch Centers to State Load Dispatch Centers to the national Grid on the broad level. Transmission returns are still regulated (the new CERC ROE applies to transmission too? ).

Contracts: Contractual obligations are usually over 10 years, you just cant sign variable fuel contracts in the country.

How does it work? Power traders buy capacity from producers (PTC, Adani etc) and sell it in the day ahead market (producers need to give the schedule of availability in intervals 24 hr s before production).

There is likely to be a pricing upturn close to the elections as every party will maximize power availability in this parts of the country. Any clue on how to trade this?

Tata Capital: Public Issue; Why now?

Some of the large Indian Business Groups true to form diversified into every conceivable business and Tatas possibly lead the pack in this.

2008 was a forgettable year: Corus, JLR, Singur and the blasts took a toll on the group that still possibly represents true blood Indian Corporate: Mai-baap types.

So which is the one business that trust is very important? Banking for sure. Considering that financing as a NBFC was not making any great deal of money (and NBFC s have gone of out of fashion) now, banking is the only business left. Tata Capital (coming in with a fund raise, download document here) is possibly the first step in that direction.

The prospectus will be for non-convertible debentures, 500 Cr raise. The pricing possibly will be determined at the time of the offer. The total leverage of the NBFC would be about 3.38 times post the issue, not bad except that most the funding is in the retail sector which could end up leaving higher NPA s than the current 0.5 times. The document per se is very interesting.

Proceeds of the issue is general purposes mostly. At 6,000 odd crores, the business does possibly need capital - but the timing is odd. RBI is unlikely to hand out banking licenses to industrial groups, primarily because of the obvious conflict of interest.

In a falling interest rate regime, should be interesting to look at the pricing that the market offers.

Retail is dead - long live retail?

With the numbers of Pantaloon Retail coming, finally the wheels of the Indian Retail dream seem to be falling apart. The economy might be contributing to this, but the problems are more deep rooted. Same store growth, the benchmark for most organized retail has been stagnant or negative for most retail chains for quite some time now.

The very same reasons that were touted for the success of organized retail seem to be sounding the death knell:

1) One stop shop: High overheads - power, personnel. One needs to provide for a/c in the whole bloody store to keep customers entertained. Look at the number of clueless salesmen in most of the retail stores. You keep training them and they keep leaving. Very little connectivity.

2) Centrally located: The lease rental kills you - this would likely change. How much leeway the contracts leave for such an eventuality can be debated.

3) Sourcing: Central sourcing is not very easy, especially given the high Logistics costs in the country.

4) Strategy: Retail chains make the most money from in-house brands. And most in-house brands across chains are priced in a similar range as other brands or are absolutely inferior in quality. No headway made there.

5) Buying behaviour: Unless someone is shifting to a new place or wants to buy a lot of things together most of the items under sale in a Big Bazaar are just not useful to most customers. Food and groceries fly but every other section mostly has a deserted look to it.

Retail chains have transformed the way we think about buying, but will they ever make money? In an environment where ROE will drive investments, will retail see further investments or are they scheduled to go through a bout of restructuring? A bit of both, managements will get time to figure out what works. Indian consumer is not so easy.

Play Review: The Shape of Things

Writer :Neil LaBute, Director : Sid Kumar, Cast : Vivek Gomber (Adam) , Diksha Basu (Evelyn) , Nayantara Roy (Jenny) and Digvijay Savant (Phil)

I saw it in Prithvi - amongst the sprinkling of short skirts kurtas and strong perfumes. There is no Indian adaption (that would be interesting na, it somehow seems more personal with identifiable names), the play continues to be set in a small town university town somewhere in the US of A.

Plot (Spoiler Alert!!!): Evelyn has a chance meeting with Adam when she sets out to vandalize a nude male sculpture in museum Adam is supposed to be guarding. Adam is your typical nice guy or loser as he would put it. The interaction with Evelyn brings about a change in him and he begins to change under her guidance, first his external appearance and slowly begins to change internally. Adam s friend Phil (extremely full of himself) warns Adam about this, but Adam boy has moved on to make out with Phil s fiancee. He becomes a much more desirable person in his obsession with Evelyn. Evelyn is an artist on a project, we learn very little about her except her arguments on the act of vandalism with Phil. She eventually forces Adam to drop his friends too.

In the final act, Evelyn is making a presentation to the audience on her project and reveals that the material used for it is none other than Adam. She has achieved what her professor told her, if not the world she has made someone better. Not only did she change Adam s outward appearance but his inner perception of himself and his conscience itself. She had chosen him and delivered. No more no less. In their final confrontation she reveals to Adam that there was only one true moment and Adam is left reflecting on that.

Very very good. The execution is near flawless. Basu has so much energy, as the audience you will fall in love with her let alone poor Adam. A lot of scenes, including the love-making is captured on a screen and the effects are telling. More of the screen could have been used perhaps and in some places Vivek is not audible at all. The music and the lighting make the flow of the story very smooth.

Nice. Should do more of these.

Rating: 8/10

All Govts should give Citi money?

City (aka s****y group) split into two and got lots of money from the US govt. Now only the US govt seems to be having fun printing all those currency (their balance sheet has now expanded by more than a trillion) , the world should follow in their foot steps and pay money to the large US banks.

Of course, our nationalist brigade wont like it if we paid to Bank of America you know ( its not a Global Trust Bank you know) but then Citi is different na. They have local arms who employed a lot of people (citi financial in India et all). If these local arms close it would be catastrophic. I mean even Venezuela wont mind up paying for their erstwhile one-stop shop even if the shop resembled a butcher selling groceries (no offense to the poor butcher).

Actually you know what Goldman is probably pitching to foreign govts. on what can be done to bailout the world. According the some sources, now that Goldman has a veto on all important positions in DC they want global domination. And this whole mars methane has got them all excited, They are selling Greenpeace (or was it peas?) backed securities on the impending colonies in Mars. The theory, if not actual construction we are producing enough manure these days to atleast create a Mars farm. The US govt leads in this manure for its companies, some of it can only go to Mars. The world generally follows the US so we are likely to follow suit in creating a lot manure you see.

We should give these companies money from a global stabilization fund, we do not want to give up the comforts of a gargantuan under-regulated global financial system to leave us without financial engineering can we? What will happen to us mortals?

Raju will be accepted back

http://www.rediff.com/money/2009/jan/17satyam-once-hes-out-the-society-will-embrace-raju.htm

This puts what most of us think in perspective. You have a lots of investigations going on, what will come of it? What came out of Harshad Mehta, Telgi, JMM, Bofors, Tehelka ? The facts get muddled, what is right or wrong gets lost further from what we can comprehend. We will just harbour the feeling that something was wrong, a lot of people were involved.

But what happened exactly will soon get lost, the numbers (whatever you can make of them) would come out, a few more stories. And thats about it.

Raju is a celebrity atleast. Maybe a book ?

The White Tiger Review: Hunt it down

The booker can to better! That s what I first thought while reading Arvind Adiga s "The White Tiger".

The plot is simple enough: Balram Hawai, a nameless faceless man from the "darker" part of India rises to become a successful entrepreneur. Along the way he undergoes countless changes in his search for his one chance to escape his drudgery. When it finally comes, Balram changes forever by committing the ultimate crime: he kills for the money.

The tale is refereshingly told, in first person but not to you. Even though the hardback was over 300 pages, the writing style is very fluid and the first person account sometimes does feel like reading a print version of Forrest Gump. That s the pity. Everything could have been much more layered. You are not expected to linger on any page, to think about the what the implications of what is happening are. The hero (or the anti-hero) is not subtle and neither is his handling by the author. Everything is single-layered, almost as if the audience is expected to be dumbed down. The entrepreneur phase is unexpectedly short - the moment till the total transformation takes place consumes most of the book. The settings are very sketchy at best - not enough research possibly (I can see an alternate career for myself here). Is there a dark underbelly that is shown? Hardly.

Is there a receptive global audience for this sort of writing? India has moved on, where it has not - the problems are much more complex than the books suggests. India is the land of entrepreneurs and it is the ultimate escape from drudgery but its got nothing to do with situations. And a guy on nation-wide poster is not caught? A mole perhaps?

What was Balram s destiny. His parents wanted him to be the one that escaped, was what he did a fact of that choice of their parents? would his brother have acted similarly? Was the white tiger just acting as it was supposed to? The white tiger is one of a kind - is he hunted more than the others?

Rating: 3/10

Emosanal Attyachaar - Lyrics

One of the wildest songs of recent times:

Jia Jia Jia Jia Doleh…
Ek-do-teen-char, cheh.

Yeh dil pighla ke saaz bana loon,
dhadkan ko awaz bana loon,
smoking smoking nikle re dhooaan.

Seene mein jalti hai armanon ki arthi,
Arrey what to tell you darling kya huaaaaa.
Hai sapne dekhe jannat ke par mitti mein mil jaen,
phooken re ghar baar ki duniya to bole good bye..
Chad jae haye Allah,jisko bhi yeh bukhaar.

Tauba Tera Jalwa, Tauba tera pyar,
Tera Emosonal Attyachaar!
Tauba Tera Jalwa, Tauba tera pyar,
Tera Emosanal Attyachaar!

Jao Jao dilbar,
oh dilbar oohh!!
Tauba Tera Jalwa, Tauba tera pyar,
Tera Emosanal Attyachaar!

(This part is the awesome scene, where the bride just starts dancing :D )

Ho gai dil ke paar tragedy,tragedy.
lut gai re bahaar, gul sukh sukh murjhae,
Ho gai dil ke paar tragedy, tragedy,
lut gai re bahaar, gul sukh sukh murjhae,

Bol Bol why did you ditch me,Zindagi bhi lele yaar kill me,
Bol Bol why did you ditch me whore.
Bol Bol why did you ditch me, Zindagi bhi lele yaar kill me,
Jao pia jao pia jao pia….

Tauba Tera Jalwa, Tauba tera pyar,
Tera Emosanal Attyachaar!
Tauba Tera Jalwa, Tauba tera pyar,
Tera Emosanal Attyachaar!

For original source (minor edits above) and the rock version lyrics, please click here. Awesome fun this.

Here is more about the song (through Pradosh Biswas):

http://passionforcinema.com/devd-emosional-atyachar/

Rocking.

UN Predicts Zero Growth

http://timesofindia.indiatimes.com/UN_predicts_zero_world_growth_in_2009/rssarticleshow/3985430.cms

How about that, UN also should comment on the runs that Sachin will score the next time he comes to bat.

Anyway assuming its true, world GDP would remain FLAT (unlike my abs) at 55 trillion. US, UK, EU will contract, Japan will be a small negative. Thats atleast -1% for 30 trillion of the world . Can the rest of the world bridge this ?

Interesting times. Why not contraction?

One of those days - why was the Sensex up today?

Even the review of Chandni Chowk was pretty poor, if i was trying to attribute it to people in good spirits.

The days news was dim:

Bank Am bailed out

Jet loss widened (amid calls from mallya to make aviation infrastructure = ROFL)

HCC had a 7.4% dip in profits (too low maybe? optimism)

Everything was green otherwise - was it general buying on dips or was there any news I missed. I remember by boss Sunil asking me, Srickant why did the solar stocks move up yesterday? Over a period of time he seemed to indicate (Sunil was never explicit) that we are looking for possible analysis - and even he seemed to have days in which it just did not make sense.

One of those days maybe?

India Slowdown: Brace Yourself

http://ibnlive.in.com/news/slowdown-hits-india-govt-braces-for-50k-cr-shortfall/82869-7.html

Tax collections are down for 3 q (as expected), govt will be short of funds. They should resort to printing currency. How are we going to fund the next election (a few thousand crores at least) ? Parties representatives want an RBI bailout. Long painful period ahead. Actually we dont have too much data about what is going on actually - lets assume we grew at 10+%, we will get some data which will neither be timely nor accurate.

"It is a demand driven programme. They cannot reduce the funds in this. Poor people are getting work, food with this scheme and he will not starve." Raguvansh Pratap Singh

Very concerned about poor people not starving arent we?

In other news the $2 billion Mukesh bhai home does nt seem to be galloping around either and the website about the world s coolest job crashed. I say its all this wannabe people who are spoiling it. Rajni is arranging a bailout, not to worry.

Cult of Hero Worship: Steve Jobs an Alien?

For a guy who left a company and came back later as a professional Steve Jobs is as close as you can get to a "Promoter" (a uniquely Indian animal) in the US. Jobs is the man, be it giving the employees a piece of his legendary mind (thats how they make those products - my roommate says it give our energy vibes) or coming up with "one final thing" at the mac worlds and goading an almost dying tribe of American designers into out gunning (or out designing) the rest of the world for producing those definition of cool gadgets.

With the 5 month break, Jobs has now confirmed what was always our lingering thought, he is an ALIEN. Yes ALIEN, you read that right. Most people know its true, its reflecting in the stock price, everyone s been dumping the stock in-spite of near domination of every possible market segment.

Jobs was actually being laid low by a stone from China, the stone was procured by a secret space probe (Jobs was stronger than superman & superwoman put together). He has gone to speak to the ghost of Marlon Brando (or one of the saints from India who act as medium s .... dont believe me, jobs spent six months back packing in India no less) on how to recover.

The world awaits with bated breath on what will happen to this American Treasure.... Rajni is getting the Sanjeevni to save him.

Modi as PM?

"If one Narendrabhai can be so much for Gujarat, imagine what is the possibility of India by having Narendrabhai as the next leader of India?" said Anil Ambani, group chairman of Reliance Anil Dhirubhai Ambani Group

Are you kidding me? Running a fascist state in a democracy and trying to cover up the whole in the guise of development is extremely short sighted. And we have the large corporate leaders becoming fascists now?

Bailout for Fraud?

http://ibnlive.in.com/news/satyam-may-get-rs-2k-cr-govt-aid--debate-worth-it/82663-7.html

There are bailout s and then there are bailouts. The Indian Govt. plans to give 2,000 cr to Satyam to pay salaries. Good business model this, create company indulge in fraud and govt. will bail you out.

There are more frauds to be unearthed here. Tip of iceberg shall we say?

God bless the govt., now the poor employees will at least get salaries.

Ronaldo is world player of the year & Hayden retires

It some how does not feel great to have Ronaldo as the World Player of the Year or to consider Hayden amongst the all time greats. Ronaldo is supremely gifted - athletic, can score and can be inspirational (after being criticized for failing on the big stage his performance in the Champions League final was stupendous). He is also eminently marketable.

Hayden changed the way opening batting was looked at. He was to tests what Jayasuriya was to ODI s. Together with Langer he formed one of the most formidable opening partnerships in tests. His broad shoulders, authoritative posture and his drive have tormented a lot of teams (not the least India). He was bully on the field, thankfully except for a bit of his comments on India, you did not hear a lot about his off field exploits. A fighter to the core he can truly be called the comeback king.

But there is something lacking in sportsmen like these two. In my part of the country, they would have said "woh baat nahi hai". Something is missing. Sport is more often a celebration of the individuals ability to rise above the ordinary than about talent. That celebration is surely missing among them.

Gimme Figo or Jayasuriya anyday.

'Contracting' problems

http://business-standard.com/india/storypage.php?autono=345902

Are contract terms sacrosanct? Yes, they have to be, unless you want to be drawn in cases of perennial litigation. Its important to understand that a large contract makes or breaks a promoter. GMR is identified by Delhi Airport, GVK by the Mumbai Airport, Reliance Power by Sasan UMPP and the corporate brands are identified by these assets. We have a lot of cases in the infrastructure space where the incumbent contractors have been asking for a change in contract terms because the economics that they had envisaged have not panned out.

The idea is preposterous and will put the whole PPP program at risk.

1) Bidding will become meaningless and promoters quote crazy numbers hoping for a future adjustment in contractual conditions. Risk will go for a toss.

2) Extended litigation by the parties that were L2 and more in the bids, bringing infrastructure development to a stand still.

It is not as if govts use feasibility studies for different bid models (think Navsheva - Sewri or the the earlier ballooning contracts in many infrastructure projects), while choosing the winners. As far the bid evaluation is concerned, once the technical specs have been met, the govt. does not care who executes the project as long it makes the max. money (or looses the least money). While ensuring that projects get completed does indeed need top priority, in case companies are unable to meet their obligations the govt can cancel the existing contracts and call in fresh bids (with significant up front deposits to ensure that there is no random bidding). The govt. does not participate in the upside of projects, so it should not bear the downside risk.

Comment: Getting the facts right!!

Surjit Bhalla writes in Business standard about what the likely growth rates are going to be in FY10 second half FY 09. Cut interest rates, increase fiscal deficits the trade will get better and the focus should be on growth is his general conclusion. And we should grow at healthy growth rates.

Quite unlikely I would think:

1) India has never seen a steady asset price de-growth (if the world is talking about a 20 year asset inflation cycle we are talking 60 + years). Simply put, India has never really been in a recession. About time that corrected.

2) Fiscal space exists but the worry is deflation that too decade long Japan style deflation. Interest rates is possibly the only instrument that the govt. has.

3) Credit Availability: Indian corporates are still unable to avail of credit easily. The situation is better than a couple of months ago, when there was no money, but even now money is available at very high rates - unsustainable for most corporate. Once this changes, we should be in a slightly better shape.

4) The problem of over-capacity: Capacity utilization and productivity are two metrics which would indicate whether we have over built capacity or are we still a long way to go. This is not easy to answer. While we have not built capacity in a lots of areas, in many more we have built spectacular capacities based on specific sectoral domestic consumption/exports. A lot of lenders have taken exposures to this sort of capacity expansion. These guys have a long way to go.

I don't know what the growth number will be, but based on current scenario, 7%+ in FY10 seems unlikely.

Paulson screws US taxpayers

There is a bloomberg piece doing the rounds that essentially says Paulson dint give US tax payers as good a deal as they could have got

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAvhtiFdLyaQ&

Many people I know in global investment banks goldman, morgan et all (the ones that are left i.e.) still were paid hefty bonuses eh. US tax payer funded.

The TARP could turn out to be the mother of all scandals actually.

Found this piece in Financial Express and Big Picture.

The gults are here

Indian workplace has many cultural undertones that are clearly defined.

Mumbaikar: Cosmo

Ghati: Local populace of a metro

Delhiwala: Pompous, you know dont you :) (if you dint, it typically refers to the one who knows the value of everything but the price of none types)

Punjabi: Not Singh is King, but definitely up there - you cant really miss them can you?

Sardarji: Singh is King

Madrasi: The delhiwala classfication to all south indians.

Tam (usually with a bram): 0 or 1 types. Sambhar/curd rice loving freaks and usually the butt of a lot of jokes (and possibly huge rice driven butt/bellies too)

Mallus: Em,vo yet another vo, yen. Brilliant, creative you need them - even if their fantasy does not go beyond Shakeela

Then there are the Gujju s: Now we are talking, Gujju s are a class apart, the rest of them talk and make fun of the Gujjus - at their tastes, clothes,food, group sex (groupism), their petty politics, their garishness etc - while marveling at their spectacular sense of numbers. You need their competence and they dont mind being mocked. Usually not :D

Now here come the gults to give competition: I never know the gult stereotype existed other than in IT, they mostly go abroad and save money. Turns out that its a strong stereo type, apparently other than Gujju s the only community to have effectively done fraud are the Gults. Satyam takes the crowning glory, now we have competition to the Ketan Parekhs and the Harshad Mehta s.

Stereotypes themselves are such a pity, that this episode had to cast a gult stereotype is extremely sad.

Dont think that a gult stereotype has set in? Look at the Hyderabad based company stocks for the last 2 days. Raju saab, kya kiya aapne?

Satyam everywhere

http://www.livemint.com/2009/01/09135447/With-Satyam-perfect-storm-hit.html

"A year ago a seemingly unstoppable global juggernaut, the once-confident India is now reeling from a perfect storm of a corporate IT scandal, the Mumbai attacks and economic slowdown."

http://www.blogger.com/post-edit.g?blogID=12819537&postID=2635841455554079770

Andhra CM orders review of projects under Maytas

http://business-standard.com/india/storypage.php?autono=345754

Employees to be laid off. How many employees are there anyway?

http://business-standard.com/india/storypage.php?autono=345750

Is it supposed to be surprising that the maytas shares were pledged too?

Links for the day

Satyam scam not the first involving IT companies

Were the analysts sleeping then? Someone was telling me that there is no continuity in sell side analysts either these days, maybe a problem. But no one even investigated?

Country held to ransom

Its so easy to hold India to ransom,we all should go on strike.

Bank of England cuts interest rates

Ahead of the Friday US employment data

Report from Paris - BP Cafe

"The last point that struck me is how damaging the Madoff affair is to the image of the United States. Revelations like the failure of the Austrian Bank Medici are front-page stuff in Europe. Madoff’s tentacles reached far". Replace Madoff with Satyam and US with India and Europe wiht the globe.

Links for the day

http://business-standard.com/india/storypage.php?autono=345581

"Against this background, the major relaxation of ECB guidelines and raising of the cap on FII investment in corporate bonds strikes me as a trifle adventurous"

http://www.thehindubusinessline.com/blnus/15071691.htm

"The (Satyam) issue cannot be generalised. This is not the first corporate fraud nor it is going to be the last. But you cannot generalise it and throw the baby out with the bath water"

http://www.livemint.com/2009/01/07224041/The-consequences-of-confusing.html

"Also, why punish smart managers and only help companies in trouble?" Good question


http://www.financialexpress.com/news/Suffered-a-shock-play-Tetris/407919/

Play tetris, recursive.

http://www.financialexpress.com/news/column-truth-after-satyam/407906/3

Awesome piece.

In closing, black holes were always there, now they tell us. All companies are blackholes

Personal Finance: Lethargy all the way?

I have been asking around all junta that I know about their level of financial planning and its comes as a huge surprise that barring very few people most people do not seem to know where their money is going. These guys are very intelligent and are probably helping other s make money through their advice. Why then such gross negligence on their own money ?

Money is usually sitting in savings a/c s (some people even have it in current a/c), loan payments (housing/education) & credit card payments are regularly missed, investment options are regularly discussed but rarely executed and the year end rush to submit proofs. And the question " where does my money go?" is an often enough heard refrain. (There are guys who have made a killing on part of their portfolio s but end up paying arbit charges on late payments?)

One obvious reason is lethargy but psychologically when it comes to deploying your own capital (especially when that is the only source you have) decision making is not easy for people. There is always that better opportunity that will come along, that equity buying opportunity which the whole world has missed/the real estate opportunity (which few from my age group saw in its 'fallen' days) - during which you of course miss the rallies (g-sec made some neat 15-30% last 6 months) Thats why I guess you have the whole industry of financial planners and to some extent mutual funds. And with me any money that stays, gets spent - on ahem eating out.

What did I miss in 2008: Shorting the market - I did not invest too much (stayed in cash) but not shorting was an error. The g-sec play in a falling interest rate regime. Trading profits after the October cash. Entered gold in early 2008, but did not enter again even when the prices fell for a short while.

I dont see 2009 being any better.

Satyam: What does it mean?

Initial feed back seems to be one of disbelief. The money was already siphoned off and what we are now seeing is methods of covering up the tracks. More likely that Raju was trying to save his family over himself. (Madoff inspired).

It transpires that lots of IT analysts always wondered about the quality of the Satyam earnings but always believed that with size and the US listing the underlying problems have evaporated. Funny, no one knows till it happens.

Whatever be the end game, we are at the end of an era. During the bull markets, not only did valuations get bumped up, overall crucial pieces of governance were swept under the carpet. All that is going to change in one single event. Investors are going to require higher levels of compliance before putting money to work and the world is going to look at SEBI s response to protecting global investor wealth. (The SEC is no angel/maybe far far worse , but its easier to point fingers at emerging economies). If we thought sentiments were turning, we just stepped right into October. This happens during bear markets the experienced hands tell me.

In fact, many believe that Satyam should be the first of the India corporate horror stories. This is my first bear market, I just hope that this is an isolated case.

Satyam: Raju ban gaya gentleman?

In a scene straight out of investor hell and mimicking the Bernie Madoff scandal, Ramalinga Raju of the famed Satyam Computer Services tenders his resignation admitting years of fraud.

The chronology of events:

1) Satyam grows from a humble beginning to one of the largest IT companies in India with global clients

2) Satyam s becomes a darling of the masses through the investor bull runs: Wins awards of corporate governance and appoints a impressive list of independent directors

3) During the great fall of 2008, Satyam announces that it wants to use the cash in its books to buy out two promoter owned companies at valuations that are detrimental to its shareholders. ADR sinks

4) World Bank bans Satyam for 8 years for alleged malpractices. Satyam demands apology.

5) Promoter share holding in the company fall to precipitous levels (sub 3.5%), Independent Directors resign. There is talk of a merger.

6) In a shocking move, Ramalinga Raju announced that he has cooked up the books for > 6,000 Cr ($1.2 Bn) by overstating cash, receivables. He has been doing this consistently to tide over poor margins in his core operating business. Stock tanks 80%

Satyam? The name is misleading.

There is more to meet the eye tho’. According to the September disclosures promoters held 8.6% of the company (which had remained stable last 3-4 quarters), media reports suggest that this fell to sub 4%. There were definitely margin calls on the company. What was the additional funding used for? Raju claims that the funding was used to tide over operating problems of the company (he quotes a figure of 1200 Cr).

PWC was the accounting firm and there is an ADR. No one caught this, that is possible (think Enron), but what is intriguing is the need for Raju to come out by himself. Was he trying to protect his sons and their companies by laying the entire blame on himself? Most likely he hand was forced to disclose.

India Credit Squeeze: The end is not in sight yet

Even as the RBI is trying to pump in liquidity in the system there seems to be no visible impact at the corporate level. The interest rates that were charged for project financing (read long term) loan s have still not come down. If it was around 12-14% for large corporate houses, the rate is still the same, how it is split has marginally changed. (Syndication/arrangement fees, upfront fees, commission etc). Do banks still fear that they would have to face a capital call? Not anymore.

What they are really worried is about the ability of the Indian corporate to pay back the loan, because quite frankly the demand has disappeared. We seem to be hurtling towards a deflationary environment with almost no end in sight. We should take a look at what the local media is saying, has the willingness to spend disappeared across social/geographical strata or is it a purely urban phenomena. Deflation is the worst case scenario for any banker/policy maker, because your conventional tools fail as a means of spurring demand.

But still, the underlying story for India is slightly different. If we have a bumper agricultural crop this year, there will be spending. Might not be large ticket urban spending, but there will be incremental spending across large part of our population - this demand has not increased because of credit (in fact the availability of micro credit has possibly done a wealth of good for this segment of the population, but then that is another story), it appears only when there is surplus form what is required for the next agricultural season. I think we should start praying to the gods.

Till then, for all that RBI tries bankers are not going to lend, already their books would be 'infested' with NPA s, I doubt anybody would have the guts to venture out further, "where no banker has gone before types " ahem. A friend says that treasury profits have zoomed in this volatile environment, expect the private banks to cash in on this big time. If you cant produce, you can atleast trade.

Deflation, Deflation Deflation it reads as of now. Hopefully it will turn soon.

Governance in India: Different strokes

An old woman is looking for something under the street light. A good Samaritan (you had stories with them some time ago) passes by an noticing the old woman 's plight starts generally looking around. "What are you looking for grandma? And where did it fall?", he inquired. "A coin fell down son, it fell in my house. But it was too dark there, so I am looking here".

Somewhat similar seems to our response to lack of political willpower on issues such as terrorism, infrastructure etc. Quite frankly, the politician does not give a damn about what your issues are simply because you are not the voting public (Its not an attack on politicians, they know who their audience is).

In India no. of candidates of a state is determined first by demographics rather than its contributions to the country. So you have a situations in which states that contribute very little to the progress of the country vote in politicians who are driven by their own divisive agenda s (caste, land et all) . A politician from the state of Jharkhand, will at the minimum want to make enough money to win the next election, ensure that the rank and file of his support makes enough money for him to get through the next phase or at best work towards the development of his constituency. To expect him to do more than that in just a matter of 5 years is probably stretching it too far. Our systems seem to be geared for advanced economies. If most of the population is the same of level of development you could afford to fight battles on ideology else it becomes a battle of survival and attrition.

Now get such a bunch of diverse politicians from across the country belonging to different parties, the equations change completely. First you need to get in a stable coalition, then there are hierarchies of issues that need to be tackled. Now should national security or some local level caste issue be given more importance? That purely depends on how far ahead on the development curve you are.

Politics cannot easily tide over disruptive tendencies simply because their survival depends on it. How are we to tackle this problem? Maybe something similar to the IAS cadre, no regional party can have a national minister. That way you have regional parties too, but essentially you are forcing a two party system. Or maybe have constituencies declared as belonging to one party or another (is that how US works?) so that there is no change in the developmental work that goes on, essentially changing the way how we elect our representatives .

Too simplistic or too impractical ? Maybe. But then I don't really see any drastic changes in our policy because lets face it, the voters face different reality than the one s we face. We will soon be driven by a largely urban population, maybe then the issues will become similar across the whole of society rather than being confined to any particular region.

Should Satyam be defended?

Rajeev Srinivasan thinks the actions of Satyam are not that heinous. He seems to suggest that since every body is corrupt, Satyam is allowed to be corrupt too. Read his views here.

The main arguments:

1) The advisers are responsible. I agree partly to this, but the board and the promoters have to clear this. There are no uni-lateral banker led transactions. Not when $1.6 bn and the company 's reputation was at stake. And how can someone not expect a backlash? An 8% owned company buying out majority owned promoter companies? The father was trying to rescue his sons a la Madoff?? Give me a break.

2) It was a poison pill against takeovers. The argument would have stood if the two target companies had lots of capital at hand. And taking over companies is not exactly so easy in India.

3) It happens everywhere - why only bother with Satyam? True, but a bunch of wrongs don't exactly make a right. The board has been manipulated, the deal was being contemplated at crazy valuations and the deal would only have made the promoters rich. Need anyone say more?

Of course Satyam may have had exemplary governance up until now, but these mistakes cannot be forgiven because they will take down the company and the shareholders. That's the only analogy - mistakes made by the management costing investors dear, Lehman or Bear anyone?

India RBI Fund Infusion

Stimulation Package 1: 20, 000 Cr
Stimulation Package 2: 20, 000 Cr
SPV for liquidity: 25,000 Cr

The number around the older schemes seem to rotate around 2,80,000 Cr. (Will try and get a handle on that).

But cool stuff @ 3,50,000 Cr, we have 10% of GDP has already been infused as liquidity.


And what is cost of this potentially disastrous move (RBI Circular of second jan) :

(a) All accounts covered under the circular dated December 8, 2008 which were standard accounts on September 1, 2008 would be treated as standard accounts on restructuring provided the restructuring is taken up on or before January 31, 2009 and the restructuring package is put in place within a period of 120 days from the date of taking up the restructuring package.

(b) The period for implementing the restructuring package would stand extended from 90 days to 120 days in respect of accounts covered under the circular dated August 27, 2008 also.

(c) The special regulatory treatment will also be available to 'standard' and 'sub-standard accounts', covered under circulars dated August 27, 2008 and December 8, 2008 even where full security cover for WCTL is not available, subject to the condition that provisions are made against the unsecured portion of the WCTL, as under:

• Standard Assets: 20%.
• Sub-standard Assets: 20% during the first year and to be increased by 20% every year thereafter until the specified period (one year after the first payment is due under the terms of restructuring).
• If the account is not eligible for upgradation after the specified period, the unsecured portion will attract provision of 100%

Basically you can push some of the NPA s later, why not give full disclosure to investors and then intervene later? Will any shortfalls of capital be met from the SPV above?

The Lost Generation

I can imagine a conversation about the people born between 1980 -1985 taking among the later generations. The answer to the the then search engines about famous personalities, achievements is likely to result in a "404 error". Did they exist, would be the back question, I don't know if its India or if it is the same with the whole world. A bit confusing? I just think that the generation born between 1980-1985, i.e. people of my age group in 2009, are caught in a time warp. Each and every field has sort of hit a saturation limit and there is nothing path breaking to do.

Astronomy: No major discoveries or explanations.

Physics: Nothing path-breaking has happened in the last 10 years

Mathematics: I dont know, but considering the dwindling interest levels among the general population, maybe there is nothing interesting to work on.

Politics: Young achiever s anyone?

Finance/Economics: Almost all the products/technologies are products of the great wall street churn of 1980 s. Even behavioral economics is pretty old. Most of finance is a development on EMH

Sport: Fed ex, Bolt, Phelps have taken what is possible to another level. Barring James nothing Jordanesque in Basketball, no Maradona in football (messi would come close despite his name), cricket - more physical. Most sporting events are about being physical now.

Entertainment: Other than looking at our own stupid selves through reality shows is there some thing new?

I maybe generalizing about most of the above or about our generation as well, but is the broader theme of having hit an information plateau hold? Is all incremental information useless considering that collectively its very easy to retrieve any piece of information?