Monday, November 1, 2010

grab grab grab

There used to be a time when people got in to public life, both politics and administration to provide public service. I remember my dad who used to proudly call himself a Government servant.Public service was considered the highest possible career option, and I still recollect spending months learning European history, so I too could become an IAS officer. Thank God I did not make the cut.

The politicians used to be outstanding examples of public probity, and were poorly paid but richly respected for the sacrifices they made to be of service to the people.

In less than 20 years how things have changed.

Politicians are now grabbing everything they can get, and the most passionately debated subject in parliament revolves round their own salaries and perquisites. Their cost to the exchequer is now well over 100 times our per capita income. And this does not include the much larger rewards in terms of bribes and other unmentionable fringe benefits. And they want more..All the time.

The so called Government servants are now masters of the universe, and command and get privileges that the common man can only dream about. Little does the common man know that he is paying for all of this. Whether it is bending the rules on coastal construction, Floor space Index, security, you name it, they have bent it like Beckham, either for money or to acccomodate themselves in sylvan surroundings. The Adarsh controversy in Mumbai, and the latest proposal to allot the CWG flats to themselves are but tips of the iceberg of corruption, which we all tolerate.

And shamelessly they grab more for themselves.And helplessly we watch this pillaging and looting of our country.

Tuesday, October 26, 2010

microfinance muddle

A few weeks ago they were saviours of the poor, reaching where no bank had reached before, providing credit to the unbankable and changing the rules of the game. Today they are reverse Robin Hoods who steal from the poor to incredibly enrich themselves. All it took was a successful IPO, a CEOs sacking, a scorned wife and a few probably unrelated suicides to reverse public opinion about Indias micro finance industry so dramatically.

Everything that went before, 70 million customers, almost 5 billion dollars in loans to the poor, high profitability, near zero debt defaults and of course 100% + growth rates, attracted a huge amount of professional institutional capital to this industry. The management which was initially fired by the social impact they could make, got carried away by commercial motivations and what we now have is a real threat of a regulatory response which can kill the industry.

It is useful to understand that the Government of India and various State Governments (notably in Andhra Pradesh, which is considered the micro finance capital of India) have been attempting various versions of microfinance with very limited success for many years. In fact the earliest attempts at financial inclusion for the poor in India predates even Prof. Mohammed Yunus's efforts with Grameen Bank in Bangladesh. Sadly, as is the case with most well meaning but poorly executed policies of the State, they failed to make any significant impact anywhere.
It took the private sector micro finance industry less than 10 years to grow to its present size and in the process help millions of poor families out of abject poverty.

How did that happen? State sloth is squarely responsible for its inability to capitalize on the opportunity that the private micro finance industry has successfully demonstrated in a few years. Early social sensitivity, access to serious capital and talent all helped the industry to grow the way it did. They developed relatively sophisticated systems and implemented a vision with a passion that the State can never muster.

And now the same State which failed miserably, despite a three decade head start, continues to be a competitor, but is now taking on the role of judge, jury and executioner. With the press fishing in muddy waters, the muddle can kill the industry and simultaneously kill the hopes of millions of the urban and rural poor to find a route out of poverty.

The intention here is not to make a case for apathy towards the sensitive issue of financial inclusion. Market practices will evolve, and competition will ensure that the weak and expensive players will be acquired by stronger players or eliminated by customer choice. But for the State to presume it knows best, especially when they blew their own chance at doing what the micro finance industry did, is questionable if not downright dangerous.

Tuesday, August 17, 2010

SKS and the IPO

The SKS IPO has been controversial for many reasons. The core issue was if it was ethically right to privately profit from serving the poor. This debate has raged in the front pages of the pink papers and the international press and everything ranging from the methods used, the interest rates charged and the marital status of the promoters have been scrutinised and criticised.

The fact is that the issue was a huge success and heavily oversubscribed. It listed at a premium and closed the first day of trading at a premium of over 10% to issue price. After a long time an Indian IPO generated profits for flippers who borrow and subscribe to IPOs and sell on listing. Needless to say original investors and promoters who cashed out made huge profits. All in all the market has pronounced its verdict and it is indeed OK to profit from the poor.

The fact that the market now views this segment as investment worthy has huge implications. Every investment manager round the globe will now look to allocate a percentage of the portfolio and large capital flows will reduce cost of capital to this segment and the ensuing competition will eventually result in lowering the cost of borrowing to the poor. With over 300 million of our population not having any access to formal credit markets, for productive, consumptive or housing needs the importance of formal capital cannot be overemphasised. Over 1 trillion dollars of capital is required of which at least $250billion has to be in equity form.

So let us not waste our breath debating ethics but laud SKS for unlocking a new source of much needed capital.

Friday, August 13, 2010

the underbelly of delhi

12000crores being spent on the common wealth games? Did I hear right? In a country where between 30 to 40% earn less than $2 a day. And what do we get for it? I am told prestige.
Of course prestige is priceless, but only if we have something to be proud about.

If we spend 12000 crores and create ugly non functional monstrosities, and do not win a single medal, will that still be prestigious?And who is paying for this anyway? and who gets the so called prestige? the politicians? the sports officials? In any case the politicians are the sports officials , and get not only the prestige but also, as i understand, most of the money.

Then someone told me that Delhi in the process will get some world class infrastructure. Now, I have been in and out of Delhi for quite a few years now, and happen to believe that Delhi relatively speaking has the best infrastructure in the it the broad roads, a swanky airport, a metro system that compares favourably with any that I have used anywhere in the world. So why take money from the rest of the country which is literally crying for some decent infrastructure spend and create more in Delhi? Just so that our worthy netas can feel proud? And get richer?

Any why are our regional Netas not crying hoarse at this daylight robbery to feed Delhis underbelly? Do they get to share in the prestige and the loot too?

Tuesday, July 20, 2010

Wednesday, July 7, 2010

where is the money?

Where is the money I ask? Every day I pick up the pink papers, the Government has raised more money by selling spectrum, increasing oil prices, increasing taxes, GST, Vat, Service tax etc etc and more. Plus they are selling stakes in PSU s to all and sundry at prices at which even seasoned Investment Banks are baulking to take the mandate.
I would have thought that with all these resources that are being raised we can see better infrastructure, better security, better standard of living for everybody, education, health care, unemployment insurance. There are so many wise and pressing ways to spend the money. But wherever I look, any new investment or infrastructure is all private..So you have swanking new airports being built with private money, roads being privatised and tolled to death, new private and expensive schools ( when is the last time the Government built a school, or hospital for that matter?)
And if you have the misfortune of having no choice but to use Government schools or hospitals, God help you, cos they are not spending money there either. Armed forces are ill equipped and the police force have weapons that they stole from Noahs Ark. They announce big schemes with impossible acronyms like NREGA and JNUURM, and no one knows where it is spent. Because if anything is built it is being built with private money and political patronage.They are doing less and less and it is costing us more and more..
So where is the money going?
Is it gone?

Wednesday, May 26, 2010

predictability of market volatility

Financial markets in the recent times have foxed the pundits. Volatility is a given, and predictabilty is zero, leaving one to wonder if there is such a thing as a financial pundit. There are so many variables ranging from Icelandic ash to Greek tragedies to senate hearings, to UK elections to the Yuan valuation theories, to almost any financial and non financial behaviour of market players that effect markets all over the world, that it is naive to believe that anybody can predict the future price of an individual security or market.
I read almost all the financial dailies and am a CNBC addict and the confidence with which analysts are making buy, sell or hold recommendations amazes me. I suppose it is easier to make these recommendations with other peoples money and with no responsibility. or skin in the game.
To make matters worse we all suffer from selective memories when it comes to evaluating portfolio performance. The losses that we avoided by not following advice are ignored and the gains and losses arising out of following the same are overweighted.
It seems obvious to me that for for every gain made someone somewhere has to have lost and the overall stock market or bond market is a zero sum game. In fact if you take out the transaction costs charged by he exchange and the intermediaries , the markets are a negative sum game, whether you are long or short over a long period of time.
The only thing certain is the current price. How that price will behave in the future, how much it will change up or down and by how much are pretty much a matter of chance, and nobody has privileged information on that, much as they pretend to fool you with jargon, quantum theory, string theory or random theory. Fact is your maid or driver or your teenaged daughter can make as good a prediction and there is a good chance that they will be right 50% of the time, which is better track record than the so called professional view.
Some of my friends consider me a financial genius and often ask me for stock market tips. The only advice I can give them with confidence is to buy low and sell high. That invariably works.

Thursday, May 20, 2010

The Greek tragedy

First it was Iceland. It got financially ruined by investing in toxic waste assets generated by Wall Street. It ended up kicking ash, which disrupted flights across the European skies.

And now a Greek tragedy plays itself out creating ripples across the global financial markets. From a peaceful holiday destination and home to some of the worlds wealthiest, to a financial basket case did not take too long. Did they buy something toxic like the others, or did sell themselves short, or did some other genius from Goldman Sachs custom make the Greek recipe for disaster.

Italy Spain and Ireland may soon follow. And then the entire Eurozone is fair game for short sellers. Regardless of what the learned Pranab Mukherjee tells us, it would be naive to believe that India is insulated. We now swim or drown with the global tides, and as Mr. Buffet says, you can only see who is naked when the tide is low. And the global financial tide is getting alarmingly low.

Asset prices in India, across classes, whether it is real estate, gold or stock prices are all over priced and heavily dependant on foreign capital flows. Global money managers are becoming increasingly risk averse, and will also be under pressure to book profits in the few markets where they are in fact making money, India, unfortunately being one of them.

Duetche Bank is maintaining a price target of 22000 for the Indian market. Are they smoking he stuff that has been recently legalised in California and Colarado? Or are they planning to sell before the tide that is sure to wash up here?

It is better to be a spectator to the Greek tragedy, than have a lead role in the Indian financial tragedy that is buiding up.

Tuesday, April 27, 2010


Does anybody remember a bank that went by the name BCCI? that went bust? Nowadays when one talks about BCCI , it is generally about the cricket board. BCCI the bank eventually came to be known as the Bank of crooks and criminals international. Maybe the Board could use the same expansion as well.
BCCI that spawned the IPL (Pirates League), is now distancing itself from the child and pretending that they saw nothing, heard nothing. They must have at least smelt something. Whatever,... they DID nothing.
Meanwhile the brat they spawned, outgrew the board and is now the tail wagging the dog. Everybody enjoyed the parties, sweated their equity, tweeted on twitter and generally had a blast. Who is complaining? not the fans, not the franchisees, not the broadcasters, not the advertisers, not the sponsors..who was the victim in this crime.
The cricket afficiando will tell you that the gentlemans game of cricket has suffered..Really? The game which was dying a natural death having been replaced by the EPL at the home of cricket in England and in cricket crazy India. The IPL was the last big hope for cricket. And the Board may have landed the last killing blow.
Good riddance to bad rubbish.

Friday, April 16, 2010

Love, sex , drugs and the IPL

For now, i prefer the front pages to the sports and stock pages. Between Lalit Modi and Shashi Tharoor they have created the equivalent of a bowl out in T20 cricket. All the ingredients of love (for money) sex (for glamour) and drugs (for performance) makes this an ideal topic for money and other things.
It has been well known for a long time now that there are curtains behind curtains of ownership of the franchises, and that ownership has nothing to do with the investments. In fact control always was and always will be with the powers that be in BCCI. In this case what probably happened was the Kochi franchise owners, bid a little more than what they were advised to thereby upsetting the apple cart for Ahmedabad who had already paid for and been committed to.
When the proverbial sh... hits the ceiling, a lot of unrelated stuff spills out, such as Shashi Tharoors
external affairs, Lalit Modis graduation from armed robbery to daylight robbery, Sunanda Pushkars nose and other jobs..
Wow...why cant they postpone the rest of the IPL matches so we can pay undivided attention and play the role of cheerleaders for this soap opera?

Saturday, February 13, 2010

Sunday, January 3, 2010

chetan bhagat and 3 idiots

Yes it is one more issue dealing with money and other things...there is a common understanding in commerce and economics that goes caveat emptor or simply put...buyer beware....but in the case of chetan bhagat and the 3 idiots, the concept has been turned on its head...chetan is claiming that seller should beware....after selling the rights, he is pretending to have some kind of interest in the goods sold. It is like the seller of a house complaining that the buyer has painted it blue. Come on Chetan, you are an ex investment banker, you should know better. You should sit back and appreciate the fact that they made a damn good movie of your plot less book and bask in the reflected glory, instead of balming it on your mother who cried cos she did not see enough credit to you..grow up son.
also Aamir, why get involved? you are just an actor and a damn good one at you have not even read the did not need just acted out brilliantly the script that was handed out to you..why take sides? it just muddies the water further..