Personal moments in office

What do you do when the lady that sits in the next cubicle, is crying uncontrollably at her seat while talking over the phone.  As a human being often it is important to walk over and ask her if she needs any help. But this is not as simple as it sounds.
Firstly, one should not butt their nose into everything. Clearly the lady understands the unwritten rule of workplace and my going over will only embarrass her. The old school philosophy is not to undertake any personal calls at the workspace. If one needs a personal moment to recompose then it should be done in the rest room.
However clearly people do use their personal cellphones at work and nobody wants to be a moral police. Also not responding or reacting to the lady’s cries will make me sound like a heartless snob or not even empathizing or acknowledging her plight.
Not that I like to eavesdrop, but as a human sometimes one cannot totally ignore the tears. Still my hands are tied and I might be conducting a transgression by invading her privacy. The moment someone picks a phone, they assume that they are immediately transported to a remote & soundproof box. The physical neighbors cannot make head and tail of the conversation and the person on the other end of the line is ignorant of the background noises.
Lastly, she is between the phases of newly married/ engaged. So there is a high probability of my two words of empathy turn into an hour long monologue about boyfriend trouble, in-laws trouble, issues with marriage shopping etc. She is a dear friend, but still this is a place of business and I have a backlog to clear.
PS: I waited for two hours for her to take a tea break. There, I casually asked her how she was doing. Trust me I wasted two hours about various scenarios for nothing, the entire conversation got over in 10 minutes. Won’t life be so easy if everybody got soundproof cabins at work.


Secret Double life

As a rule of thumb dual life leads to a lot of stress. It comes from a deep rooted desire of not being free in the real world. In some cases one might argue that certain situations were forced on you, but one always has a choice to come clean. Also double life comes with double or more costs. One needs to travel a lot, need a lot of free time to manage the commitments, always be cautious of not spilling ones bean, ensure that whatever words you share are consistent with your previous lies (and who knows which version). Also you need to maintain boundaries: the closer you come to someone, harder it becomes to hide in plain sight. The diversion tactics become so ingrained that you will be unable to answer a straight question. Some people find maintaining one life difficult, I wonder with twice the complications & hundreds of secrets how does one manage. Not to mention the risk of exposure, blackmailing, and being outcast in professional or personal front.
Yet why do people do it? Does living on the edge give people the thrill to sustain it (esp. true with philanders)? Or they get their alternative lifestyle, sexual orientation, gambling, drugs or drinking that any cost is justified? Is the shame, guilt & deceit worth it?
Most study shows that successful people & those in high stress environments are more likely to have a secret double life. Some say success gives people a sense of entitlement. After gathering all the laurels, recognition & financial success, they try to create secret fantasies of their own. Their money & influence allows them to make it grander than others. Some say that it is because it is a secret cry for help and that some people secretly sabotage their own success. However I believe it’s because success brings more public scrutiny and gives more reasons to hide. Stress encourages people to find a release value and living out a fantasy often tops the list. After all most dual lives start with a harmless, playful, lively & forward looking fantasy.
Everybody has special fantasies and it’s normal and harmless. It could be as simple as pretending to be someone else while on a vacation, doing role-plays or just taking a temporary break from everything. I have heard homemakers hire a babysitter and spend a day meeting strangers (platonically) and pretending to be bachelorette again. Incidentally it is perfectly OK to have a different set of personality in your professional and personal life. As a matter of fact people with roles as auditor, celebrities or with public/client dealing have an expected personality and a real personality. So when is it OK and not-OK to lead a double life?
Often people have an inherent duality and an individual’s inability to integrate the two inconstant, reverse factors lead to this kind of behavior. One step leads to another and lying takes over their lives. The question is when does the obsession becomes excessive, unreasonable and dangerous and takes over. Having a secret is perfectly normal but spending all your time & resources in managing & hiding it is crossing the limit.
PS: I don’t have anything against gays or queers, for most households these are taboos and people realize that no amount of persuasion will help them retain their family as well as their lifestyle together.


SPX Vs. SPXL (Direxion Daily S&P 500 Bull 3X)

With the low interest rates, everybody has become Beta chasers and a lot of ETF has opened up to encash on this opportunity. The idea being with interest being low/zero & stock market expected to generate positive return over a long term. Higher the beta, better will be the returns. However, is it wise for long term?
Take the case of SPXL which delivers 3X returns (positive or negative) compared to the underlying S&P. On a daily basis, their ability to track consistently has been stellar, yet on an annual/5 year term, they have been underperforming . For example over the last 12 months S&P is down by 2.83% but SPXL is down 12.44% or 4.4 times the loss instead of expected 3X.
Couple of reasons for this drift:

  1. The effects of volatility & compounding. Do a simple calculation If S&P goes up by 10%, you would expect Direxion Daily S&P 500 Bull 3X to go up by 3*10% or your $100 become $130. However due to volatility if S&P goes down by 9% (or back to same level) your $130 will do down by 27% and become $94.5/-. Even assuming that these high swings don’t often daily, but small swings (up down movement) that happen every day over the year will definitely eat into your savings. This is the reason why on a flat volatile market these funds will under-perform. Here is an illustration from the fund manager explaining the effect of daily volatility on the annual yield that this fund will deliver. Essentially one can expect to lose 17% of the fund value if the S&P return is zero and volatility is 25% (2015 volatility was avg of 14.28%) You can find more details at this NASDAQ link. Essentially there is no free lunch, high beta comes with its own cost & challenges. But in my opinion, buying derivatives directly is always cheaper than getting funds buy it on your behalf.

Other reasons why the ETF will underperform over long run would be:

  1. Expense ratio which is 0.95% per annum compared to 0.05% for S&P index funds.
  2. Due to daily rebalancing, there is very high turnover (254% of average portfolio value). The transaction cost & bid-ask spread do eat into your profits.
  3. To achieve a 3X return, the fund needs to invest into derivative products and buy other funds on margin. This not only adds a leverage cost but also has a roll over expense when one contract expires and new one needs to be purchased.
  4. Also remember this is a fund of funds. Instead of buying the underlying assets the fund buys swaps, other ETF, index funds & treasury/liquid instruments. Each of which has its own cost which adds up to the overall expense that the long term investor ends up paying.

Some of the ETF also have an option to short (get negative beta). Now this might be good when part of a portfolio or for opportunistic short term trades. But in the long term this might not be a viable strategy.


Rakshash Taxes on my Provident fund

Updating my earlier piece where I had asserted that Indian legal system is designed to break the backbone of the salaried and subsidize the rich.
Hail Modi ! Now The Rakshash Modi has come up with an innovative solution to all retirement planning woes, FREE CYANIDE PILLS on your day of retirement. Because if you refuse to take it, he is going to extort 21.1% of your EPFO balance. Already the high inflation would mean that any amount that we save cannot buy anything once we retire. So it better all senior citizens better roll over and die rather than clogging the overpopulated system.

Interest rate 8.80%
Year 1 2 3 39 40
Opening Balance              –                    104,400    217,987    28,062,962    30,636,902
Employer contribution      50,000                      50,000      50,000            50,000            50,000
Employee contribution      50,000                      50,000      50,000            50,000            50,000
Interest        4,400                      13,587      23,583      2,473,941      2,700,447
Closing balance    104,400                    217,987    341,570    30,636,902    33,437,350
Total over 40 yrs % of total
Employee contribution              2,000,000 6.0%  4,650 per month
Employer contribution              2,000,000 6.0%
Total Interest            29,437,350 88.0%
Tax            (7,064,964) -21.1%
Total balance            26,372,386 78.9%

Here is a brief calculation that I did. Assuming that you diligently save 50,000/- (4,165/-) every year for the 40 years of service till you retire. Your total savings with interest will amount to 3.3 Cr INR at current EPFO interest rate of 8.8%. If the Rakshash eats 40% (30% + a zillion surcharges + swach Bharat tax etc.) then you will end up 70 Lakh or 21.1% less money than what you had anticipated. So my fellow hard working salaried mules, either work 21% harder or buy cyanide pills.