Institutionalized rumour

Today going through one of my collegue’s website I can across this article

Some of the skeptics of Wikipedia always said, now the rumours are going to be institutionalized. Well that day has already come. A lot of print media (esp. tabloids) are quoting some obscure article in some website/blog as the breaking news. Then the website/blog publishes a copy of that article to prove their point. Net result a figment of imagination of a nerd becomes a popular opinion. Spreading disinformation was never easier.
Search Engines also add to the trend. If my website had a million hits, then anything I would say would be in the third best match (google reserves top 2 matches for commercial links). Its more convinient for the search engines to return a dubious information then no information.

Luckily, there is still BBC news website which gives me trust worthy news.

Humor Thoughts

Change happens

A man was talking to his grandson.
“Tommy, I was born before television, penicillin, polio shots, frozen foods, copy machines, contact lenses, Frisbees and the pill.
There was no radar, credit cards, pantyhose, fast food, pizza joints, computers, lasers or ballpoint pens.
The only ‘aids’ we knew of were helpers in the school office, chips came from wood, hardware came from hardware store and software wasn’t even a word.
Only millionaires had air conditioners, dishwashers, or clothes dryers. Our clothes dried outside, in fresh air and sunshine.
Not only had man not walked on the moon, nothing had ever gone into space, and no one had even broken the sound barrier.
Families got married first and lived together after. Most families had a father and a mother.
Until I was 25, I called any man older than I, ‘Sir.’ After 25, I still called policemen and every man with a title, ‘Sir.’
We didn’t have gay rights, equality for women, dual careers, daycare centers, or group therapy.
Many schools were racially segregated.
Our lives were governed by the Ten Commandments, good judgment, and common sense.
We were taught the difference between right and wrong and to take responsibility for our actions.
Serving your country was a privilege. Living here was an even bigger privilege.
‘Having a meaningful relationship’ meant getting along with your cousins.
Time-sharing meant spending time with your family.
Grass was mowed, coke came in cold bottles, pot was for cooking and rock music was a lullaby from grandma.
We never heard of FM radios, tape decks, CDs, MP3s, electric typewriters, yogurt, or guys wearing earrings.
We listened to the radio.
Anything that said ‘Made in Japan’ was junk.
There was no instant coffee, let alone a four-dollar cup of coffee.
We had 5 & 10-cent stores that actually sold things for those prices.
Ice-cream cones, phone calls, streetcar rides, and Coke all cost a nickel.
Postage stamps cost 3¢ and postcards a penny.
You could buy a new car for $600 and fill it with gas at 11¢ a gallon, but it had almost no safety equipment, not even a seat belt.
We even thought a woman needed a man to have a baby.”

“Gosh, Grandpa. Just how old are you, anyway?” asked Tommy.
His grandfather replied, “I am 59.”

The only thing constant is “change”



A young woman gazed up from her hospital bed at the very handsome doctor who was examining her chart. She fluttered her eyelids and said, “They tell me that your are a real lady killer.”

The doctor smiled and shook his head. “No, I make no distinction between the sexes.”


Entrepreneurship in india

How do you define entrepreneurship? I measure it on the following 2 scales.
1) Innovativeness, ability to anticipate the changing trend and find a unique solution. One size does not fit all.
2) Having the dignity towards labor and understanding what you do is not important, but what difference you make is important.
3) Ability to scale up this enterprise to increase revenue many folds.

If I look at the rich and well to do, I see them opening up new malls, high-rise buildings, bridges and industries everyday. So most of them have a vision, grand plans and they live to complete them. The era of Tata, Birla where richness was due to inheritance is gone. Most of the Indian richest are self made man.

I was also amazed to find the level of entrepreneurship in the common Indian. If there is a Parent-Teacher meeting, or admissions queue in front of the school, tens of hawkers will swarm the place. Each of them have a unique eatable to offer thus placating the taste buds of everybody. If there is a water-logging, immediately youth will form gangs helping the car-drivers roll the cars to safety. Even before an office is opened, a Pan shop and a tea stall opens up right in front of it. Most tourist places have multi-lingual guides who not only speak their native languages and English, but also the foreign languages. No organized enterprise even in developed countries can match the speed with which they customize their offering to grasp the new window of opportunity. The security guards of most buildings double up as car washers, milk/newspaper delivery boys to earn extra income demonstrating that even people who have a stable source of income keep their eyes and ears open.

Unfortunately most of these success stories are not scalable. If you meet a small time entrepreneur after a decade, most likely he will still be doing the same job, will have the same number of wares. For someone who always thought that taking the first step is like completing half of the journey, this was an eye opener. However little research found a variety of reasons why they failed to grow:
1) The acid test of any business is cash flow crunch. Most enterprises fail not because they were not profitable, but because they could not manage their cash flows. Indian govt, by their postal schemes which pay 2.5% above the bank rates, suck up a lot of free capital.
Banks which have the best information about the credit rating of the people shy away from their duty of lending. They prefer to keep the money in treasury bonds instead of issuing business loans.
2) Harassment: Most people have to pay Hafta/protection money to either local mafia or police, sometimes to both. Not only it kills the spirit of free enterprise, but these people act like parasites damping the whole environment
3) Black money in Indian society: A lot of under the table transactions happen in Indian society. Unless the owner himself is involved, there is huge likelihood that he will also get duped. This is the single largest factor why there are not too many professionally managed enterprises.

to be continued…..



90% reservation

Read the advertisement of Karnataka Power Transmission Corporation Limited in today’s newspaper (Hindu page 6 date 16th June 2006)
14 seats out of 104 is now open for general category persons under general merit… That’s like 90% reservation… Clearly flouting the supreme court’s 50% reservation ceiling.

Humor Investing


THE STOCK market rollercoaster has left many people dazed and confused, if not broke. Hindustan Times decided to ask some of the finest

minds around about what they thought of the crash, boom, bang on the BSE.

MANEKA GANDHI: What did you expect! I have it from reliable sources that those stupid brokers had been running a bull market, alternating it with a bear market. Disgusting! Serves them right.

BAL THACKERAY: It’s providence. The government should have renamed the BSE the Chhatrapati Shivaji Stock Exchange. Fits in nicely in the area too, since it’s pretty close to the Chhatrapati Shivaji Vaastu Sangrahalaya [the museum, in case you didn’t know] and the Chhatrapati Shivaji Terminus.

MALIKA SHERAWAT: It’s the Sen-sex, after all. So it goes up and down, up and down, up and down…

ARJUN SINGH: The HRD Ministry is proposing a 27 per cent reservation on the 30-share index for penny stocks, since they may be considered backward. The current ‘correction’ is nothing but a manifestation of years of neglect of such shares.

SHAYAN MUNSHI: I saw nothing, I heard nothing, I don’t even speak Hindi.

ESHA DEOL: Sen? Sex? Isn’t that the story of my latest movie, Ankahee?

SALMAN KHAN: Let’s just shoot those damn bears!

LALU PRASAD YADAV: Kya bole? Bull bhaag gaye? Arre, hamaare paas bahut hai, ek do le jaaon. As it is, Nitish Kumar has taken over our bungalow and we have nowhere to keep them.

MANMOHAN SINGH: We’re introducing a bill making it illegal for the Sensex to fall below the 10,500-point mark. Brokerages are, after all, offices of profit.

BILL CLINTON: Sen-sex? I did not have sex-ual relations with that woman, Miss Sen.

GEORGE W. BUSH: Let’s bomb the BSE!


How Interest rate changes effects your stocks.

How the Balance sheets of corporates are affected:
1) Take banks and financial institutions.
Calculating their impact is simple. They pay the depositors a particular interest rate and buy treasury bonds, or distribute it as loans. Many of the fixed deposit, bonds have fixed rates which need to be honored irrespective of the present conditions. So a fall in the interest rates causes higher profits and vice versa.

2) Leveraged industries
These are companies which have taken huge loans for their new plant, expansions etc. Any rise/fall in the interest rates has huge impacts in the interest outgo, hence the profitability.

3) Fall in the sales
The real estate is rising because the interest rates are low and it if often cheeper to pay an EMI then to pay a rent. A rise in interest rates greatly effects the spending of consumers and corporates, less houses, machinary and cars will be bought leading to a slowdown in the production and revenues of the corporates and hence lower profits.

Common sense says, most IT companies, and established Business houses have little or no debt, so their valuations should not be impacted much. But no:

1) Growth oriented companies:
They are traded at very high PE ratios, because their revenues are expected to increase by 30-40% each year and this expectation of future earnings beef up their stock prices.
100 rupees 5.5% interest grows by 1.7 over 10 years but will grow to 1.8 if interest rates is increased to 6%. So any change in interest rate changes the present value of the future earnings and hence changes the stock price.

2) Stable companies:
Their impact is also almost the same. If bond market gives 5.5%, you expect that your blue chip stock gives you at least 7% (1.5% risk premium) through dividends and stock price appreciation. Now if the interest rate increase to 6%, the only way you will get (6 + 1.5 = 7.5%) returns is that if the stock value dips from 100 to 99 ( .5% change in interest rate cause a 1% dip in the stock price)



Mutual fund fraud

Today’s Sensex value: 9468

Let me continue my discussion over mutual funds

A few days ago there was advertisement of Mutual funds investing contrarily to the market, having hedging features so that you make money even during a downturn, and all sorts of promises. Last weeks crash gave me a golden opportunity to check the validity of these claims.

1) Market fell by 25% last couple of days and there were not even a single mutual fund that had shielded itself and fell by less than 15%. The only ones who survived seem to be the new funds who were sitting with stockpile of cash.
2) Even funds which advertised they had hedging features, or ones which boasted that they invest smartly and do not follow the herd mentality seems to have taken the hit. My question is that are all these promises just on paper or does the investment adviser actually practice what he preaches?
3) I agree that Mutual funds have restrictions on the amount of liquid cash they can carry, so even if they know that the market is overheated, they cannot exit. However, while mentioning that the Mutual fund forgets 3 things:
a) The mutual fund may not keep lot of money in the bank accounts, but nothing stops them from buying bonds/gold or maybe bullion from the cash. Common sense says that if the market is overheated, you invest in safe (low return instruments) and buy when the markets fall as it is been happening for past couple of days.
b) Most of Indian mutual funds do not significant holdings in privately listed companies or have too much stake in a company that they cannot reduce their exposure during boom time profitably.
4) When the market reached its peak, FII started profit booking. In other words doing the same thing which MF were expected to do. Divert the money from the volatile stock market to bonds till the market returns proper realizations. Indian mutual funds start blaming them for the fall rather than learning from them and protecting their subscribers from the downfall. (even tough the value of the stock the sold was trivial when compared to the money they had pumped in over past couple of months)

I might sound a lot abrasive towards stock market today, but I had sincerely hoped that at least a couple of funds would have done good and I would extend my exposure in them. But I was disappointed.


quote from simpson

I found a wonderful quote in the Simpson in which the junior was saying:
“I don’t know! I don’t know why I did it, I don’t know why I enjoyed it, and I don’t know why I’ll do it again!”


value our veterans

SENIORS are more valuable than any
of the younger generations:

We have silver in our hair.
We have gold in our teeth.
We have stones in our kidneys.
We have lead in our feet.
And . . .
We are loaded with natural gas.

This was an conversation I overheard on night:
HUSBAND: Leave me alone!
WIFE: It won’t take long.

HUSBAND: I won’t be able to sleep afterwards.
WIFE: I can’t sleep without it.

HUSBAND: Why do you think of things like this
in the middle of the night?
WIFE: Because I’m Hot.

HUSBAND: You get hot at the damnedest times.
WIFE: If you love me I wouldn’t have to beg you.

HUSBAND: If you love me you’d be more considerate.
Wife: You don’t love me anymore.

HUSBAND: Yes I do, but let’s forget it for tonight.
WIFE: (Sob-Sob)

HUSBAND: Alright, I’ll do it.
WIFE: What’s the matter? Need a flashlight?

HUSBAND: I can’t find it.
WIFE: Oh, for heaven’s sake, feel for it!

HUSBAND: There! Are you satisfied?
WIFE: Oh, yes, honey.

HUSBAND: Is it up far enough?
WIFE: Oh, that’s fine.

HUSBAND: Now go to sleep and from now on
when you want the window open, do it yourself.