Friday, October 31, 2008

Bear Sterns, Lehman brothers, Meryll Lynch, AIG, WaMu, Wachovia, Iceland (oh yeah, I meant the country).... what next ??

This has been my Gtalk status for the past few weeks and quite surprisingly (and sadly) the list has been growing in length consistently. While I was engaged in this publicity stint, I received many queries and thoughts from different people and most of them felt under the water when I started off any discussion on it. It's high time that I demystify the confusion that I sowed in them :). As a proven non-expert in finance, it is definitely in the reader's interest to add a pinch of salt to what I write in here.

A is A

Let's try and understand some terminologies that we come across in papers these days.

Investment bankers:

Banks which involves itself in activities of lending funds for industrial ventures and involves itself in the capital markets. Investment bankers generally do not accept deposits or make commercial loans.

MBS (Mortgage backed securities):

This seemingly daunting acronym refers to any investment that directly/indirectly refers to a credit on a housing asset. For instance when you invest by lending money to someone who buys a house, you are creating a very simple form of MBS. But practically, MBS consists of a bundle of mortgages which is securitized by the banks and sold to the investors in the market. Now that that this has become a marketable commodity, it can be bought, sold, traded, speculated or thrown about in the market.


The ease with which a commodity can be sold in the market without any substantial decrease in its value. Traditionally liquid assets are more in demand due to its characteristic nature of easy convertibility.

Credit Crunch:

A credit crunch is a scenario where in the working capital for an industry is unavailable or difficult to obtain. This generally happens when there is a decrease in confidence in the firm by its investors. This situation makes it difficult for the industries to borrow and hence they end up borrowing at higher rates. There is general loss of liquidity for the firm and they have a lot of trouble running their day to day business. Credit crunches are usually considered to be an extension of economic recessions.

With these basic ideas, let's try and figure out why financial institutions that had ruled the world 150 odd years would become bankrupt overnight. Well, it all started with the banks adopting a lending spree. Even without the sub-prime coming into play the bubble has to burst! Say, you actually have the potential to repay a loan worth 10 lakhs. An aggressive bank would give you a loan for 15 lakhs with which you buy a property. Now if this happens for a lot of people, the property value rises in the area (a simple demand-pull inflation) to say 20 Lakhs. Now that your property is worth 20 Lakhs, the bank can safely give you another loan of 5 lakhs based the property that you possess(Why should I worry when I can always sell the property for 20L - says the banker). Now with more liquid cash in the market (thanks to the bank loans) the price would again shoot up for the property as there are more people with cash who are ready to buy the property at higher rates. Now consider a hypothetical case where this happens in a vicious cycle - the property attains a spiked notional value, a value that would never have existed for the property if not for this voracious liquidity in the market.

Now why would all the world get drowned in a crisis if the reality market goes down? Welcome to the world of finance! One of the ways invented by man to make money is speculation. The banks would bundle these property loans and securitize them (say MBS) and roll them out into the market. From then on, the market plays havoc with the security, pull/push the price of the security, speculate over it, sell, buy, re-bundle - literally do anything with it. Now that the underlying security has undergone so many transformations, it is always going to be difficult to price the base commodity, it just gets lost into the multitudinal transformation that it has undergone. So when people began to realize that the underlying assets are grossly overpriced, their confidence in the derivatives began to drop. Result - Panic. We ended up with a huge amount of these securities which do not have the worth we have estimated or bought it for.

But why go bankrupt? Wont the security at least fetch me the 10 Lakhs that it initially had? The answer is it would. to understand this paradox we should first understand the fact that there is not as much physical cash as there is virtual cash - in the form of bonds, equities and what not. When there is panic, people start sitting on piles of their cash which is the most liquid assets ever possible :) Thereby, most of the physical cash which is essential for day to day economic activity is all locked up with investors. And this spells doom for any firm - the dreaded credit crunch and loss of liquidity. More so for financial firms where liquidity is essential for *any and all* activities. It is therefore very obvious why companies go for a merger when at the brink of a credit crunch. When these mergers fail, that's when it goes bankrupt.

"When American economy sneezes the world gets pneumonia, when they get pneumonia countries go bankrupt." It goes without saying that the American dollar has ceased to be an American currency anymore, its become a commodity used primarily in the world markets. You wouldn't believe when I say that when India and Japan want to trade, they do it in dollars. So when there's a liquidity crunch in America, the demand for dollar rises and it becomes more expensive (eg, 50 INR = 1 USD ). Plus when American investors pull their money out of the world markets causing a further plummeting in the country's local economy. This is worsened by the various banks across the world investing in the Realty Securities which are bundled out of America. Would you believe that Iceland, an entire country, went bankrupt because of heavy investment of its three major banks in Mortgage securities. Their currency had a free fall within days and even the government couldn't do anything about it. Imagine, a country going bust despite no fault of its citizens and without any decline in its productivity (it still has a strong tourism based economy).

The solution..well, everyone knows and no one knows. While some are of the view that the bailout plan should bring back the economy to a stable state, many are of the opinion "Bail out the investors not the banks". Some prefer to sit on cash while some perceive a smart and cheap investment opportunity. Some even say that the banks should be held responsible for the crisis that they have wrought on themselves. So what's the plan for the future? Simple - "Introduce a little anarchy. Upset the established order, and everything becomes chaos. I'm an agent of chaos. Oh, and you know the thing about chaos? It's fair."

Thursday, August 21, 2008

Olympics 2008 - A revelation to India

And suddenly, everyone's excited about India's performance in Olympics. Most of the papers are blaring victory horns over India's medal winning performances. They definitely should - it is indeed laudable that Indian's have had a historical performance at Beijing - 3 medals and counting.. But most of us fail to notice the pattern that spreads large around the medals that were won. I might be even taken to be a pessimist, but I couldn't help observing that except for the pugilists, none of the other medals were won by planned effort. Amongst the entire lot who went to Beijing, only the pugilists managed to put up a good show as a team. And perhaps it is for the same reason that Vijendar's effort seems to be of lesser magnitude than the rest - that he perform well was almost taken for granted. I could see in our boxers what I saw in Federer, doing extremely well was casual and winning a mere consequence. The confidence which comes with quality practice (thanks to Bhiwani boxing nursery - a dedicated boxing school) shone brightly in them.

Take nothing away from Bindra - he was brilliant, but the results could have easily gone either way as he himself stated. Oh yes! even the shooters had to go to Italy for quality practice. Sushil's success was purely individualistic talent and the brave man's fortune for he couldn't even manage to get support for his diet from the authorities. While everybody's mesmerized with our performance in Beijing, it is time for the Authorities to stand up and deliver - they better take good care of the athletes. That would be the only way to ensure that a billion strong nation doesn't need to be rapacious over a solitary medal.

Most of us wonder what it is that we lack - 'facilities' which most of us would agree upon. I had chanced to read in a recent article which says that the lack of communication and reachability is the culprit. It says that the athletes go unnoticed as they are not able to communicate and commute to the locations which would facilitate honing their skills. They are not able to project themselves and their abilities to the right channel. Antagonists would say thus "Talent can hardly go unnoticed". But doesn't this seem logically improbable? A country with half our population are able to produce talents of such variety - Are we genetically decrepit that we don't possess physical talents? No way! the issue is not with the lack of talents for sure, but with exposure and channelization of resources - as our pugilists have demonstrated: practice and the right kind of facilities were the key.

I'm excited, not because we won three medals, but because we have exposed to ourselves, the sure-shot way to excellence. For me, the proudest moment was not when the athletes stood on the podium kissing their medals, but when the coach of a boxing nation like Cuba stood up watching and said when we were going for weigh-in before the match "you are going to win".

Friday, August 01, 2008

A Pensive Thinker - Part one

"What do you think could be the difference between an invention and a discovery?", I asked, trying not to spill the glass of water that I held precariously, trying to balance myself on one foot, for no seemingly good reason whatsoever. "None, I think..." came the reply, quite instantaneously from one of my room-mates. Four of us stood in a conglomerate within precincts of our tiny kitchen, trying our hand at a cup of tea - one at making, two of us at drinking it and one other abstaining from it. An uneasy silence of fifteen seconds was broken by me again - "Okay, Let's start with the definition of both." That got the person making the tea into the act, and said he : "invention is creating something new, innovative, something that is non-existent at present. Discovery is finding out something that is already there. Like the discovery of America..". "Precisely!", answered the third, probing with his fingers, for the existence of a imaginary pocket that would never be found in his track-shorts. "Anything that is created new is an invention. Electric bulb is an invention!" said another with finality, flinging a tennis ball careless amongst the pile of dishes that was strewn around.

I decided to take it one step further - "Okay. Now that we have the definitions in place and agreed upon. Can one us try and corner how an invention takes place. For instance, electric bulb was being worked upon for ages and every input required for the creation was already known to the inventor..". "Not really!", he snapped his fingers still groping for the pockets - "Agreed that he had the data/analysis required for the right configuration, but it was by a stroke that the right permutation of these inputs clicked." A mild smile played on the others lips. "Okay, now you have to identify or at least provide me with a quantifiable example of the spark, that you had mentioned", I said. "There's a very thin line of difference!!" he managed to spur it on having been able to recover the tennis ball from the mess. "Perhaps he learn't the correct permutation for the invention" volunteered the one with the probe on. "But, isn't learning and documenting discovering a fact that you haven't known so far?", said me again.

The next ten minutes was one of the rarest happenings in our house - all were in deep contemplation between cups of steaming tea. "It is impossible to identify that" said one placing his tea cup down with determination to put an end to this conversation. "You know what? Let's just call this as a lucky chance or an educated guess that we call as an invention." said another trying to put through the same determination in a gentlemanly fashion.

post-mort: If we all had agreed that the inventor had all the inputs for the invention, then is it not closer to discovery, because the invention comes about by chance? If yes, doesn't it mean that there is nothing to be invented in this world? If yes, don't we all know everything in the world and that we are just trying to remember things that we already know everything about? What a miracle!!

Tuesday, July 08, 2008

Wimbledon 08 ..07 reloaded

Almost a year ago, I had written a post on the finals of wimbledon(Reference). And it's time to write again, especially because history was scripted by two friendly 'rivals' in the centre court at the very heart of England. The five set epic between Fedrer and Nadal is undoubtedly one of the best that one has seen in the recent years. If you read my last year's write-up, you'll realize that Nadal's win wasn't as dramatic as people say it is. I would once again re-iterate what I had said last year: this doesn't make Federer No.2, it only shows that he is beatable. Being an admirer of Fed, I would have felt bad had he lost to anyone but Nadal.

While Fed is a class act, a mix of grace and power, Rafa is actually the exact opposite. He seems brutish (or so his muscles seem to indicate) but if you look beyond that, his strengths are top spin, depth and accuracy. Quite unlike Fed, Rafa banks on the base line and wins rallies. Any observant fan can easily understand this by comparing the number of Aces fired in by Fed (24 vs 6). That said, Rafa did punch in some powerful forehand smackers that won him his first break point. Quite in contrast to last year, the match began ominously for Fed, the score board reading 2-1 and Nadal notching up his games steadily. Fighting to save the match in the fourth set, Federer played the most amazing tennis I have ever seen to claw back into the game. A couple unforced errors and double faults by Nadal also helped his cause.

While Nadal had clearly been the better among the two on the rain hit day, he definitely wasn't perfect either. Having got ample of opportunities to wrap up the game in the fourth set, it would be fair to say that they were pitiably squandered away by double faults - a rare sign of nervousness from the raquet of Nadal, which otherwise played near perfect tennis. It was the sheer resilience of the FedEx.. that dragged the match into the final set which was an ode to the legacy of these two which will be sung in the ages to come. The duel ended when Fedrer netted a backhand and the FedEx was derailed finally after a long time in this decade. The King of grass was fettered for the first time in 67 matches and six years. The disappointment was writ large on the face of the crowd but it was heartening to see them give a standing ovation to a worthy heir to the crown of Wimbledon.

It is an undeniable fact that Nadal has definitely been the better among the two in the past year - He retained his the clay stronghold and conquered the grass for the first time in his career (Oh yeah, he's the second best in grass!!). Either would have equalled the Borg record, but this was special, the act of conquering the opponent in his turf. The part I liked the best was the courage and humility with which they accepted the reality - Fedrer accepted that he was outclassed today and Rafa acknowledged that he was still at No.2.

Having said this, I would close with the very same words that I had said last year -

Whatever be the result of the match, one thing is pretty evident.. these two are the rulers of modern day tennis be it grass or clay... They have simply discarded the others from either versions of the game.

Thursday, June 19, 2008

What's in a name ?

Folks, this is going to be yet another of my quick grumblings (you can call it a tech post if you like) connected closely with IE and Javascript yet again. I recently came across a requirement where I had to toggle the visibility certain elements (which happened to be TRs in my case) and not failing the tradition, yet again faced inexplicable problems with IE. Most naturally, I used the function getElementsByName for this purpose. Oh, no! For once, IE cannot be blamed this time around. The method getElementsByName was the core of the recent problem I faced. This method comes is specified as a part of DOM1 Core whereas it has been moved from core to HTML in DOM2 ( Reference). However, the all benevolent FireFox continues to provide this method to all the elements quite unlike its counterpart. So while IE wont accept elements in the DOM structure to be picked up by their names, Firefox gleefully does the same.

Now that we know the problem, what is the solution ? As is the case with most of the javascript fixes, it is a hacky solution which can be easily observed from the code frag given below :

The simple idea is to use some other identifier to recognize the elements that you want to get hold of -


tr id="blah_1" name="blah"
tr id="blah_2" name="blah"
tr id="blah_3" name="blah"

Javascript :

var elts = document.getElementsByTagName("TR");

for (i=0; i< elts.length; i++)
if(elts[i] != null && elts[i].name != undefined && elts[i].name.indexOf("blah") >= 0)
//got the element !!

That's it folks ! If the elements are not of the same tag type, you can as well use .className or any such identifier to fetch the elements that you would want to :)


Tuesday, June 17, 2008

Dasavatharam.. An intricately carved design

It's time I donned the garbs of a critique yet again. Thankfully, in the recent past, not many movies had moved past benchmark required to make me think about writing a note on it. If you had been a regular follower of my reviews, you would even suspect me to be a very captious critic. But then, so is the nature of the job and I am but a faithful follower of the decalogue pertinent to this fraternity. No suprises, this time around friends, this is going to be another abstract set of observations from Kamal's latest flick, Dashavatharam. The first feel that you get immediately after the movie is that of vacuum, not awe, just the general feeling of discomfiture at the hanging pieces of screenplay that you had just witnessed.

The crux of the movie revolves around the well known Chaos theory, in particular the Butterfly effect (Chaos theory ). With such a dicey concept as the baseline, it has to be agreed that Kamal has done a remarkable job of constituting a story out of it. The entire movie is based on the conceptual premises of the cause-effect system. Kamal has done a excellent job in the characterisation of all the ten different roles that he dons. However, it should also be mentioned that some of the roles could have been a mere fabrication to increase the count to 10. If you think it is just a ploy to justify the title, then I'd ask you to read further through the post, just in case your thought needed a revision.

The actor in Kamal has done a resplendent job with regards to the acting, appearace, demanour and dialogue delivery. The job is more than merely well done, it is a class act. Each of the character is distinct, beautifully accented, cleverly masked and well placed. Among the flurry of characters, Nambi, Fletcher, Naidu, Shingen Narahashi and Poovaraghan deserves special mention. The character of Naidu which combines intelligence with wit, accentuates the comical flavour in the movie. Nambi is the epitome of "Bhakthi" with all the characteristics of a blindly devout man. Fletcher dons the most important role for any movie, the villain. Action and comedy are given their due respect and are magnificiently executed. Of course, there are a couple of places where you would still find the hero flying the air and doing somersaults, which are so much an integral part of South Indian movies. All things said and done, you would still feel a couple of characters to be a mere count incrementors. For Non-Kamal fans, the number might be a tad Kamal-Overkill.

The movie is extremely fast paced with Fletcher giving Govid the chase until the end. Thankfully, there are no redundant comedy track that runs between the story line. Neither do we have any dream sequences or songs that seem out of place with plot of the story. The BGM are neat and cleanly done. However the songs are quite unlike the traditional South Indian ones that you would expect from such movies, they definitely show traces of Modern North Indian touch that one cna hear blaring across the street. The most common comment that I have heard from people who watched id was "Disconnects". Yes, the movie definitely doesn't provide you with the connects but leaves it to open interpretation. Which brings me to tell you what I had interpreted (there were some perceptions that aren't mine, the ones that I couldn't connect to).

As I had initially mentioned, the key to perceive the connection in the story is the chaos theory. A set of seemingly insignificant events contributing to a much larger phenomenon. Similarly, a set of distinct, insignigicant characters contributing to a greater cause of saving the world from a bio-chemical infection. The scientist, Govind comes across so many characters and forms a part of the intricate pattern which conspires to bring the plot into effect. To follow a simple chain, Govind got knocked off the railings to fall into the package that went to India. He meets the mentally unstable lady, Krishnaveni paati, who drops the infectious vial into the idol. Comes Shingen, who, for the sake of revenge protects Govind. Similarly, all the characters in one way or the other, knowingly or unknowingly helps Govind's cause. It fairly conforms to the chaos theory that we have seen earlier. Kamal has also touched the concept of re-incarnation in the form of Govind and Nambi, if you had noticed the similarities among the two characters including a scar in the forehead :). Asin's dual portrayal is just another allusion to the same fact. The concept of Karma has also been dealt with deftly. In the previous life, Asin was ready to give up God for the sake of her husband's life whereas Nambi was too attached to let go off. In the later life, they swap places where Kamal says, "It would have been great if God were there". Also they re-unite in the same place where they were separated, another implication of the chaos theory and circular pattern of events. The idol that was immersed ignobly into the ocean wedged itself between the tectonic plates triggering the Tsumani at the easiest provocation of the phenomenon. Another instance of the chaos theory.

The ten characters in the story can be roughly mapped to the mythological dasavatharams by Lord Vishnu. Some of the most obviously visible juxtapositions are

* Kalki - Govind, the humanitarian out to save the world.
* Balarama - the name is indicative enough, Balaram Naidu.
* Matsya - Nambi, who went into the ocean with his Lord's idol.
* varaha - Krishnaveni paati who hides the vial inside the idol.
* Rama - Avtar singh who is ever devoted to his wife, ready to sacrifice his voice for his wife.
* Krishna - The dark complexioned, compassionate Poovaraghan says it all. Like Lord Krishna, he dies due to a foot injury!
* Parasurama - Fletcher, who else ?? :). A killing machine, just like Parasurama whose purpose was to eliminate the Kshatriyas.
* Narasimha - The name Shingen Narahashi, does it ring a bell ?
* vamana- Kalifulla who is as gigantic as the Vamana ?

Well, these are just some interpretations that I managed to secure from various sources and the choice is upto you to reject them. As you can see, there is a lot more than mere screenplay and fast paced action that you can see obviously in the movie. I would really not know if these facts were introduced into the movie consciously, but if it were, Kudos to Kamal !! If not, perhaps, yet another example of chaos theory ! ;-)

Monday, June 02, 2008

Inflation ?

There is no time to stand and stare. Last week was one of the rare occasions when the social 'server' in me woke up. I was out buying our meagre weekly stock of vegetables, wondering at the rising prices of common commodities. It hit me when I realized that 'rising' had long ceased and it was now rocketing ! Believe it or not, a Kg of Carrot that used to cost me 22 bucks not long ago now costed me 64 bucks! That was the inspiration for me to come up with this blog. No mincing of words people, I WANT this to be an eye-opener to anyone who's not been aware of this mercurial rise in prices.

For those of you who have been following newspapers - you might have come across the Govt. officials quoting a 8.1% increase in inflation. Doesn't that strike a chord in you ? Didn't a mere 8% rise seem too ridiculous to believe ? You can see for real that the prices of carrots have gone up by almost 300% and still the official rate indicates 8%... If you now think that the figure 8.1% is absurd, THEN, you really are is INDEED absurd !. Okay, that said, what does this 8.1% indicate ? what is the trick employed here by our financial magnets ?

Bingo ! India uses the Wholesale Price Index (WPI) to calculate and then decide the inflation rate in the economy. WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market. Now you can sit and wonder which one of us would buy anything on a wholesale price. Perhaps the barely surviving middle-class are the ones who buy wholesale commodities!! Now you know how inflation rate in India has been projected.

If you think that's the limit, there's more in store for you. This WPI is not calculated for all commodities, but only for a chosen few commodities. Some of the commodities that I found in this wonderful list was coir-fibre, raw-silk, Fodder, Papaya, Guava, Hessian-cloth, tyres, Medical X-ray films, Excavators, Cranes, Jeeps, Truck chassis. Getting a feel of what is happening around here? The proportion of commodities that are used by the common man are less compared to the commodities that go for bulk consumption. It struck me to see that none of the commodities in the housing, entertainment and the education sectors comes into picture here. Given that India is definitely a service economy, where did all these entities disappear? I would want each of you to be aware that the 8.1% that is projected in the official figures can be subjected to severe manipulation. Please go through the list available to see the entire list. ( Ask for proofs and I'll point you to your very own expenses ledger of the yester years and you'll clearly see that the expenses indicate the rise to be a greater than 8% atleast by a few orders.

A few of you might argue that CPI would provide more reasonable statistics and I would completely agree with you. But please remember that the basket of commodities still remain the same. India is the only major country that uses a wholesale index to measure inflation. Most countries use the CPI as a measure of inflation, as this actually measures the increase in price that a consumer will ultimately have to pay for. On the top this, the recent food crisis has led to further increase in the price of all basic commodities.

Result - the lower income group find themselves not able to afford carrots. Even trivial entities like chillies have registered an dramatic increase of 400% (50 gms of chillies now costs 4 rupees). People like me, who typically "buy" food would seldom realize the gravity of the situation. With such a drastic shot of price rise people are going hungry by the thousands with each passing day. A family with a monthly income of Rs.2000 would find themselves on half-empty stomachs for most part of the month. I hate to end this post on such a grotesque and sordid note, but I couldn't help saying this.. Govt officials expect the "WPI" to reach the 10.1 mark very soon.

Thursday, January 03, 2008

Primeval laws...

Herbert Spencer in his famous paper "The principles of biology" in 1864, says, "This survival of the fittest... is that which Mr. Darwin has called 'natural selection, or the preservation of favoured races in the struggle for life'." I have very often envisaged the possibility of this law perpetuating into our daily lives and its possible outcomes. Not a very comforting thought, is it ? The more I contemplated on this, the more apparent were the foot-prints of it's carnage. Extinction has been on a steady proliferation leaving its evident impact on our already cacophonous existence.

There has been umpteen opinions on the theory of evolution, but all concur the fact that the struggle for life is an instinctive action of all living things. The better
entity, not necessarily the one at the top of the food chain, survives by eliminating the inferior species. We have arguments that disdains man's will to have more, which I would deny with great indignation. It is his innate nature to strive for his progress. As John Nash once said, the best probability for success lies in the working towards the betterment of the group. Group at a macro level corresponds to humanity where as at a more granular level boils to communities. Those who think this would be a boon, think twice; for once we have achieved the best for us, the 'us' would no longer exist. Elimination would begin within the community.

If you consider my prior statement a whim, please find real examples in real world. The dinosaurs once reigned supreme on earth though through more brawn than brain. Their annihilation came about by mutual carnage, the law of the survival of the fittest. Guess they lacked the knowledge that Mr.Nash possessed. If you still fail to see the reason, 'competition' is a usage of great artifice which provides an efficient camouflage for the 'survival of fittest' (SOF) rule. When we say that today's world is competitive, what we inadvertently imply is SOF. A person vanquishes another for better education, better opportunities and better life. We forge a loser for every winner that we create.

Theories are quite frightening I would say, with great reticence though, as they expose to us the glimpses of what the future holds for us. This particular theory of SOF is no exception.. It never ceases to amaze me when I think of what would go through my mind if I am found the most powerful being after subjugating the rest of the world, "What next... ?" Well, the search goes on....