Catching up…

Being not in great health at times is good to catch up with friends, write and read. And I can’t ask for more if it happens over a weekend and when my boss is out of country :)

I just finished reading “The 3 mistakes of my life” this morning at 4am as I couldn’t stop once started. No doubt it’s a good and simple read. But I sincerely feel Chetan could have done better for his 3rd novel. Brida is my next one for now…

“The 3 mistakes…” novel reminds me of my birthday as it is a gift from my friend. Though I started reading it almost after 2 months of my bday, I was stuck on the first page (after the cover) which only had book’s title (when bought). My friend had penned bday greetings on it and the whole page now reads… Dear Gaurav… “The 3 mistakes of my life” Happy birth day… - . Hope it is unintentional. :P

Coming back to my bday (which was made special by Rajesh and a group of friends) I got my first car on that date. Yes, it was planned. It’s a major milestone for me as I always wished of owning a car as I grew up. Though the one I really looked keenly on the glossy pages of Times of India, long back, was Sonata but I can do with (m)i10 for now. It looks sexy and feels great to drive.

Taking note of other macroeconomic conditions there appears to be a bear bubble in the cap markets. Till Dec the market was always ready to go up by 500 points on very little good new and now it is just the otherwise. But wise should continue to invest on all these levels with 3 years perspective. Only caveat is … Don’t invest any money that you are going to need in next 3-5 years.

The IT industry along with the financial services sector looks down for now and more so the latter. IT players have been reacting with cheap gimmicks like retrenching 700 freshers, giving less than inflation hikes, cutting napkins, charging for tea and I guess the next one will be a charge for more than x no. of pees a day. I sense a cartel here. I feel there is a need to have a group of IT/ITeS employees like a labor union where one can raise voice and fight ever changing policies of these companies. This is a signature of maturing industry. This is not a leftist view but just a view. The industry is going through a rough phase and companies need to rationalize expenses and more so stop charging peanuts net margin’s to big clients. May be one can have cartel for this. Anyways, I feel that the mature companies will survive this phase and the scenario is good for industry overall as it has made us to re-think and grow above number-revenue linearity.

So that is it… I loved movie “Jaane Tu…” as it has Genelia of “Boys” fame. I remember to have watched “Boys” thrice in Tamil. Its songs are one of the best I’ve ever heard. It is music at the end… words hardly count…. Stay cosy!

Presentation Paradox

Daniel Kahneman, a Nobel prize winning expert in cognitive psychology, and his long timecolleague Amos Tversky designed the following simple, if somewhat dramatic test to show how achange of presentation can affect our decisions. Their test consists of presenting two variants ofa choice between two public health programmes that address a threat to the lives of 600 people.

The first variant is:
‘With programme A we know that 200 lives will be saved, whereas with programme B there is a one-third chanceof saving all 600 lives and a two-thirds chance of saving none.’

Kahneman and Tversky found that a clear majority of the people they presented with this choicepreferred A to B.

The second variant is:
With programme C we know that 400 lives will be lost, whereas with programme D there is a one-third chancethat none will die and a two-thirds chance that all 600 people will die.’

A majority of the people presented with this choice prefer D to C. Now, looking at the fourprogrammes, it becomes clear that, on the one hand, A and C are the same and, on the otherhand, C and D are also the same; the people saved in one presentation are the people not dyingin the other. So, whether one prefers A to B or the reverse, one ought express the same order ofpreference between C and D, and that is not the case with many of the people interviewed; thesepeople are violating the axiom of independence of choice.

Kahneman and Tversky (1979) developed a new theory to explain their findings. They suggestedthat people are generally risk averse when choosing between a sure gain and a chance of a largergain, but the same people may take a chance when forced to choose between a sure loss and onlya probability of a worse loss. The snag is that what appears as a sure gain or a sure loss is often aquestion of perspective that can be easily manipulated by the way a problem is presented.

Optical illusion eh! :) Be wary of your financial advisor!

Discount sale on Dalal Street

The once in a year discount sale is now in progress on D-Street. All items are either available on buy one and get one free (if you consider Dec end prices) or up-to 60% off on all items. The sale is on all brands like Reliance, Bharti, Tata, Birla etc. And what can be better than a complete ease of online shopping. Stocks will be directly delivered to your account. No postal charges. Sat and Sun off.

So this summarizes the scene of Indian markets currently. It’s funny that heavens have turned complete upside down is two months. What was considered a heaven for development is now at the brink of complete collapse. With US indexes on respirator and no amount of medication showing any sign, the Indian scene is getting gloomier day by day.

Now is there an opportunity here? Well there is plenty I would say.

Why I’ve been not writing about markets on this blog is because of my un-easiness with the market movements searching for a bottom. As of today I see a 700 points correction taking Sensex to 15K. Here I smell opportunity is a big way. I would suggest one to go all out and invest in small quantities and keep doing so for next 3-4 months. Remember, buy in small quantities.

Another opportunity is for investments for tax purposes. Do invest at the beginning of April in ELSS schemes. I would recommend investing about 25% of what you want to invest in ELSS for the year. One should not time the market is the often repeated verse but now is the time to do so.

I see some more correction happening once the Q4 results are out as financial, auto, real-estate companies are going to perform badly. However, even this is a buy opportunity where one can deploy total of 75% of investment corpus for the year. I would even go to say that give a skip to PPF, FD’s in this scenario and invest in MFs for this year at 15K level and below that.

Now the important question is: When does this discount sale close. My response is let’s not get worried about it as we are investing for at least 3 years and the return will be more than 12% per annum tax-free which is better than most instruments if not all. I believe in investment for compounding and this is a God sent opportunity as you would be investing at much higher prices as the years go by.

Many ask me weather I believe in SIP (systematic investment plan) or not. I would say if you don’t know there are 30 stocks in Sensex then better invest through SIP. Personally there is still time for me to start believing in that. I have not said I don’t believe. J

Stay Cosy!

Bihari Bihari Go away!

Thackrey’s are going back to their ugly basics due to lack of political agenda. And being an Indian (and a Bihari), this hurts.

Current aggression against Bihari’s and UP’ites in Mumbai is very saddening. More disheartening is the fact that no national leader other than Nitish Kumar and Mayawati has come against this strongly.

I am lucky to have spent considerable time in various big cities of India including Hyderabad, Bangalore, Ranchi, Delhi and economic heartland of Mumbai during last 10 years of my education and job. I’ve interacted with local people in all these places and to an extent, appreciate their pulse. At all these places I’ve not seen a clear case of discrimination or hatred but a subtle hint of protectionism is visible which for me is quite human. So what makes Mumbaikar’s agitate against my presence and not Bangalorian’s or Hyderabadi’s? Or is it just a matter of time and little ignition!

Last month we saw Delhi’s governor asking for ID cards for all residing there. The move was seen mostly against Bihari’s working in the state. He soon went back on his words after political outbursts. So, will it be suitable if all Bihari Taxi drivers in Mumbai, all Bihari rural workers in Punjab and Haryana, all road side operators and driver in Delhi and all software engineers in Bangalore and Chennai from Bihar go back to their own state!

I was watching “Lead India” show on Star Plus when one of the judges asked one of the contestants for his opinion on this issue. He came up strongly saying we need to take strong actions against people who are basing their politics on this and put them behind bars. Don’t know if that approach will be suitable. Something more fundamental needs to be done.

The core issue:
Flight of all classes of workers from Bihar is just based on lack of opportunity in the native state. This is very similar to flight of students from India to America or exodus of engineers or doctors to other countries.

We become very protective if America modifies rules to accept less H1B visa or Britain changes rules for stricter entry of post graduate doctors from India. Similar is the case when Raj or Uddhav Thackrey protest against Bihari’s to safeguard their Marathi Manus.

If I get the opportunity there is cent percent chance that I’ll go back to Bihar. But if I go back to my state now, the best possible job I can think of is farming on my grandparents land or may be teaching. Till then I’ll have to make do with “Kannada gothilla’ (don’t know Kannada language) and “Telugu raadu” (don’t know Telugu). But should I wait till eternity for that opportunity to come!

Everything within me says to go and contribute to my state. And I will one day. But won’t every Bihari say this… ‘one day’! Why am I not acting on it now! It’s only I who is to be blamed for the inaction now.

The whole episode is an eye opener for the management of these two states of Bihar and UP. The problem doesn’t lie with those Thackery’s but it’s within us. We need to make changes with haste to the conditions of these states. Until then these issues will keep coming up.

State governments need to make the environment conducive for many enterprising Bihari’s to come back and create a new Bihar. The message sent to the outside world needs to be strong that we are coming as well. I wish and will definitely contribute in big way to this transformation.

Cosy Hut reviews - Books

The first month of 2008 is coming to an end. I could lay my hands on three novels during the month. Here are my comments for them.

1. To kill a mockingbird By Harper Lee (***)- It's an overly hyped novel and i could not understand practical purpose of its name. A good story non-the-less, that engages you. It's a tale of two young kids who grow to the realities of the world following and often revolting against the disciplined and moral upbringing by their father. It has lessons.
2. India Unbound By Gurcharan Das (****)- One of the best novels i've ever read in all categories. I salute Mr. Das for so succinctly briefing the journey of modern India from pre to post independance days.... from Statism to Market economy, from Nehruvian era to Rao-Manmohan-Chidambaram combination market economics. This book is best read after one has understood the fundamental differences of Keynesian and Freidman economics.
3. If God was a Banker By Ravi S (**1/2) - Hmmm... was this a Hindi flick i was watching! A good novel by a first time writer who, i guess, wishes to be a movie director. It talks about the different approaches two highly educated bankers take to make their careers in Retail division of an International bank. It's a good read for budding managers.

This is all for Jan... i'm getting on to another pupular book named Wealth of nations Vol I By Adam Smith. I wish to complete it.

- Kumar Gaurav