Top ten mis-conceptions about the US

And yes, the saviour is here! Let me try and sort out some mis-conceptions that we, Indians possibly had about the United States -

1. The streets are always clean like a polished mirror
This is something that I had always wanted to be done better in India until I actually saw the underlying expectation and New York. To put it clean and straight, it was better but it wasn't very different from our roads in Bombay, Chennai or any of the metro cities. I believe that population is the key factor in contributing to the un-cleanliness of a place more than anything else. Any village in Kerala would easily match your conception of cleanliness and pro-nature.

2. People are financially strong enough to support themselves
Another revelation! There is always a strong contention for the job of begging all around the world. Fifteen minutes into the heart of New York would tell you that. I even saw a huge billboard saying "Almost 40% of New Yorkers have to choose between food and medication". WE are running a race buddy!

3. Hoodies are COOL fashion garments
The next time I hear someone saying this, I'll be more than glad to throw a punch right on their face. Well, that applies to anyone wearing a hoodie in central-southern India too. We, Indian's have adopted hoodies as fashionable elements to ones wardrobe just to appear "COOL" (thanks to SRK and bollywood). However hoodies are designed to save the exposed parts of your body - face, neck, hands from an impending amputation surgery.

4. Employment benefits are way too good
The exchange rates are to blame here - imagine paying Rs.80 ($2 - a very conservative comparison) for a pack of chips. You could eat a couple of full course meals with that in India. The age old mantra still stays afloat - Earn in Dollars, spend in Rupees.

5. People are self-centered
Well, who isn't ? I found as a fact that people in India are no less self-centered. Perhaps the media here projects only those wacky bunch just to keep us interested? I actually found the people there to be very nice, polite and professional there.

6. Subway systems are highly sophisticated
Perhaps I am making an unfair comparison here- NY subway system has been in vogue for a hundred years and infinitely complex to maintain. But for a fact, subways in calcutta are way better and cleaner.

7. There are sprawling green meadows
Bollywood, bollywood! If its winter season and they show you sprawling green meadows, its probably some place in the Hawaiian islands or Conoor that you are seeing. For one thing, Mother Nature has been so benevolent on India - the climate is so moderate and conducive to the survival of all life forms.

8. You don't get vegetarian food
That was a scary proposition that was proved wrong the moment I landed there - there are ample options (and very tasty ones too) for vegetarians! You even have vegetarian burgers (Burger King - BK Veggie) if you want one :)

9. Brown people get stared at
Yes, the only people who stare at you are Indians! And the stare ends up with an expression of surprise - every one of us thinks he is the only Indian out there!! A watchword here though - Italians look exactly like Indians, so watch out for that before you start off showing your prowess with Hindi.

10. Concrete Jungle - there are sky scrapers everywhere
For a change, Hollywood is at fault here - Every hollywood movie that you see right from Godzilla to Mars attacks shows you nothing but Manhattan!! Manhattan is the only place in US that is strewn with skyscrapers. There are ample farm lands, parks, forest reserves and mountain ranges in other parts of US.

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.

Liquidity:

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."

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".

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!!

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.