Archive for January, 2009|Monthly archive page

Moved to

I finally moved to my own personal domain ->

Long time in the making, but atlast neverthless. A long winding explanation of the story on the new website.

So long

Kindly change your RSS feeders – power up that feedreader and plug in the new details. Thanks again. God bless.



As I sit in a dreary meeting at work, I find this irresistible urge to do a pathetic attempt at poetry which is somber, poignant, solemn and all that. When a tedious meeting meets a wandering mind, SH*T happens. So, here it goes –

I understand the practicality
I understand the reality
In other words, I understand the futility
Mulling over some things
But I still do.

Which career is better than the other?
Which profile is better than the other?
What is ambitious and what is not?
What is important and what is not?

What will it take to be successful?
In fact, what is success?
What will it take to be happy?
In fact, what is happiness?

Bigger, Faster, Stronger
Am I wanting too much?
Another walk rather than a run
Shed no tears? Spill no blood?

As I mull and mull,
I understand the practicality
I understand the reality
The futility of it all.

One Upmanship – Bernie Madoff vs Ramalinga Raju

Scene: Bernie Madoff and Ramalinga Raju are put in the same jail, for crimes of similar essence – defrauding shareholders/investors. Both wanted to prove that one was better than the other – in swindling. And so began the argument –

Madoff: You bloody brown fellow! How dare you steal thunder under/from me?

Raju: You racist cheater! How long do you want to be in the limelight? Forever?

Madoff: Why did they put you here after all? I mean, what greater crime did you commit than me?

Raju: I defrauded, actually made fun and fool of atleast a billion people into believing that I was building the next IT behemoth. What did you do?

Madoff: You are just talking about Indians and a bunch of Wall Street Americans who have invested in your ADRs. I have defrauded, again, made fun and fool of millions of people across continents – US, Europe, Asia to quote a few.

Raju: That is nothing! My company was one of the SWITCH of India (Satyam, Wipro, Infy, TCS, Cognizant and HCL). We were believed to take over the outsourcing world. Haha, I have left India Inc. with a WITCH now. That should settle it.

Madoff: Not so soon you brownie, although that’s an insult to the food item itself! I defrauded banks and other investors to the tune of $50 billion. What was the little amount that you cheated people with?

Raju: You can’t understand the Indian measuring system, do you, you imbecile?! I defrauded the investors with a much greater amount than you did. 8000 crore is the amount – translating to 80 billion – a much greater number than you.

Madoff: You moron, you can’t understand the simple conversion of Rupee to Dollar. How did you ever become the Chairman of a company?

Raju: You couldn’t pay up little money in a ponzi scheme. How come they made you NASDAQ chairman once? How come they all considered you to be one of the makers in Wall Street?

Madoff: That’s because I was cheating them for a little over 48 years dude and I became one of the most powerful people on Wallstreet! They had to watch their words very carefully. Between, how many years were you cheating a billion people, which I admit is quite a huge number?

Raju: Haha, thanks! Well, publicly, its been about 8 years but before that we hardly had any revenue to cheat. Between, I appreciate that you had the talent to cheat people for 48 years. Awesome!

Madoff: Now that we have mutual appreciation and admiration for each other, how did you get caught?

Raju: Well, I technically misstated the accounts, showing more revenue than what was coming in. You know, all that ‘doing business on a cost basis’ funda. However, I and my dear family members made a lot of money (wink, wink).

Madoff: And then?

Raju: Then, I had to cover the tracks of this cheating or give money to my sons in Maytas, I forget which. But all hell broke loose in the US simply because I was transferring 7000 crore of fictional money to my son’s company. And then, Merill Lynch pulled out citing some esoteric ‘material accounting irregularities’ which I never understood. I wrote a letter to my dear employees, who in fact, worked like dogs for me that I cheated them happily, actually, screwed them happily for close to 8 years. What happened in your case?

Madoff: Well, my conscience pricked. I confessed.

Raju: Haha, that’s a very good joke! I can’t stop laughing.

Madoff: Haha (high-five) The jury and the media couldn’t make this out at all (high-five). You are indeed very sharp.

Raju: Haha, thanks. What happened?

Madoff: Well, with this stupid sub-prime crisis, some morons in Europe asked for money which I didn’t have. And then, everything blew up.

Raju: Well, we both have one thing in common

Madoff: What is that?

Raju: We both had auditors who hadn’t done their homework or classwork.

Madoff: Bunch of idiots. What do they know anyway? Sarabanes-Oxley – WTF is that? Losers!

Raju: Haha, fun, fun, fun. Now, let’s just get a bail and get the hell out of here tomorrow.

Madoff: And cheat more people…hahahah!

Raju: (high-five) hahahah!

And so the saga ended. Madoff and Raju from a mode of one-upmanship had transformed into partners-for-the-next-fraud over a conversation in the jail.

Preview – 2009

One phrase to sum it all – ‘Hold tight, brave the storm’

Now that we are done with the excitement and enthusiasm of ushering in the New Year and all that, let’s look at what 2009 has in store for us.

With the hypothesis of ‘data doesn’t lie’, let’s look at some of the news across the world and India before meshing in our conclusions depending on the data  –

a) RBI has cut key lending and borrowing rates, esoterically called repo and reverse repo rates (Simply put, these are rates banks pay to borrow from the RBI and get from the RBI for keeping cash there). Repo stands at 5.5% and Reverse repo stands at 4%. RBI cut interest rates for the fourth time since October and has unveiled thousands of crores of stimulus package. If this doesn’t amount to ‘measured panic’, I don’t know what is.

b) In September-October 2008 timeframe, inflation was 12%. It is around 6.6% now. (Inflation, as a simple concept, is rise in prices). Since inflation has reduced from 12% to 6.6%, it is a good thing, no? Actually and worrisomely not. In usual circumstances, reduction in inflation is good for the economy. However, we now have a serious risk of deflation where it might touch 0% or go negative. Economics 101 will tell you that reducing inflation is a slightly easier job than pulling out an economy out of deflation, or even worse stagflation (Lots of jargon like inflation, deflation and stagflation used. Our dear friend Wiki has loads of explanation on them).

c) If Indian economy was on the rise over the past 4-8 years, Real Estate in India was on cocaine. Simple example. In 2003, a 2 BHK (bedroom-hall-kitchen) in one of the very good localities in Hyderabad cost Rs. 17 lakh. In 2007, the same flat costs Rs. 50 lakh. That’s close to a 200% increase. I am not sure any of our salaries rose by 200% in the same period, barring a lucky few. If income doesn’t keep up with investment avenues (or is it the other way round), sooner or later, that particular investment avenue has to be disbanded. Now that we hear that prices are coming down (drastically in some places), speculators will go out of business which will lead to a further spiral. My call is that real estate should correct itself by atleast 20% if not more by end of 2009.

d) Other general news in India includes

– Investments being drastically cut down by manufacturing and service companies.

– Risk of layoffs (massive in some places) to calibrate supply and demand (the offshoot of this being that people would be fraught to take home loans where EMI is more than 1/3rd their net income and hence further reduction in real estate demand)

– Good startups would find it difficult to find funding, and hence many a innovative idea would die a death for now.

– With banks not reducing interest rates in line with RBI reduction (although they had no problems increasing it immediately when RBI was increasing the rates), discretionary spending will drastically reduce. Small businesses will have difficulty getting working capital (Wiki again!) to sustain their business in this difficult economic scenario.

e) Globally, US has cut interest rates close to zero percent, while Japan magnanimously has reduced interest rates from 0.3% to 0.1% to stimulate the economy. US, UK and Japan are already in a recession, while I believe Asia will be truly hit by a recession in 2009. Asia’s biggest revenue generator is exports. With worldwide spending clampdown, exports have already taken a hit and are expected to take a bigger hit in 2009. US’s economic stimulus package – $850 billion, China’s stimulus package – $585 billion. Aren’t those numbers just plain awesome. I think they are avoiding mentioning a ‘trillion’ since it sounds a big number. In fact, I forget the number of zeroes in a billion or trillion now. South east asia’s manufacturing and shipments are down dramatically and expected to continue over the next half year. I wonder what’s up with Antarctica?!

By now, you would have arrived at a conclusion that I am extrapolating at a doomsday scenario. Not really. The end of 2009 will see some light, although recession is going to continue well into 2010.  IT service providers especially will benefit due to the strong dollar-rupee equation along with increased outsourcing from US and UK companies. The health sector is not cyclical and will not be affected by the recession. There are some stocks which you can really buy cheap (although, for the risk of repetition, the word ‘value’ is being bitch-slapped around in media for any and every stock). As Buffett says, ‘I don’t know what will happen 1 year down the line or 5 years down the line. The only thing I know is if I invest in good businesses, they will give me a decent return over the long run’. The advice is valid both for stockmarkets as well as life.

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