My Place In The Sun

How would you like to earn $250,000 per week? No this is not a scam. This is happening and we are all contributing. But more of that later down the post.

27-March-2007 is a date I will remember for ever. It was on this date I first published my blog. On that date I became someone who just searches for information on Internet to someone who provides information. That in itself is a huge satisfaction. The blog on DO-178B is niche.

It took me another year or so to decide to start blogging on more general topics and monetize - this blog. As of this moment this blog has been viewed by over 90,000 individuals.

But consider this. There are more than 50 million bloggers world-wide. In India alone there are more than 6000 bloggers. These are conservative estimates. So, my blog is one among 50 million? What are the chances of getting any readers? Where is my place in the sun?

And then Chris Anderson comes to rescue. It turns out that I am part of a LONG TAIL.

So what is a long tail? For example, if you plot the graph between number of visitors (in Y-axis) against all the blogs in the X-axis. Now arrange the blogs on X-Axis from those getting maximum hits to those getting minimum. You would get a rapidly declining curve with the first few blogs getting huge number of visitors. The curve rapidly declines but the value never touches zero on the X-axis. The curve goes on and on.

Let me take a better example ... an example that I am familiar with. My blog has non-zero visits. Everyday there is at least one visitor. The visitor may or may not check out any advertisements. But in a month there is at least one click on the advertisement. That amounts to a few cents. Now it seems 98% of the more-than-50-million-bloggers fall in my category (more of less). So that is 50 million cents a week. And even if we take 50% of these blogs to be inactive, it is $250,000 per week. Not bad earning for someone like Google whose advertisements adorn most of these blogs.

Google, e-bay, Amazon, i-Tunes have all understood this new economy. And are exploiting it.

The ancient Indians too understood this. There is a proverb: "drops fill up oceans." (translated from Hindi)

So, even if I am a tiny cog, I am contributing to the Internet economy. Not bad for a five month old blog.

Predictions For 31st December 2009

You may call this wishful thinking.
I call it prediction.

By 31st December 2009 ... Yes 31st December 2009 (not 2008)

1) The economic crisis turned out to be a damp squib. It recovered faster than what was predicted by the pundits. It was predicted that the recession will last the whole of 2009 and then some more. By the mid-2009 the things turned around. Economists are now predicting another 4 years of prosperity. So I guess we should look forward to a disaster soon!

2) There are indications that the environmentalists were wrong after all. Turned out that there is no conclusive evidence of a global warming. Looks like this is earth's natural cycle. Besides, scientists have discovered that the trees - with all the excess carbon-dioxide in the atmosphere - have actually grown taller and bigger. As a result, the excess CO2 has been neutralised by the oxygen produced by these trees. Man must therefore take care not to destroy trees. Governments all over the world have hailed this discovery and have promised to dedicate at least 30# of their country's land to maintain forests.

3) Pakistan's latest flirtation with democracy has ended. Midway through 2009, Nawaz Sharif was made the president. He was successful in reining in ISI to a large extent and most of the terrorist camps in Pakistan were being dismantled. However, the Army has now overthrown the civilian government in a coup. Obama and other world leaders have severely criticized the Pakistan Army. The Indian Army has increased its presence on the border.

4) India has been nominated as one of the permanent members of the UN Security Council.

5) UK has abolished Pound Sterling as its currency and has adopted the Euro. The integration of European Union is now complete.

6) Nadal becomes the first man since Rod Laver to win the Tennis Grand Slam.

I think that much is sufficient. I will revisit this post on 31st December, 2009 to see how much off I am.

7) I almost forgot ... I will get 25,000 visitors a day to my blog. Ok! Ok! This is not a prediction. This is just a dream ;)

If you wish to add your prediction, please leave a comment. I promise to send you a mail on 31st December 2009, if you leave an e-mail. Thanks.

Note: The picture used here belongs to 'CJLUC'. To see more such pictures visit his/her gallery.

Does India View Economy Using American Lens?

Being a non-economist trying to understand the complexity of economics, I guess I have certain advantages. Like asking stupid questions and getting away with it.

In any case, I am unable to understand how India is really affected by the economic crisis. We all know that none of the Indian Banks (except as rumoured ICICI) are hit by the sub-prime crisis directly. The MNC banks do not dominate the Indian market yet. And it is not as if the industrial growth in India is heavily dependent on exports (we still have a negative balance of payment). So how come there is a sudden drop in risk appetite in the financial sector?

Why is there a credit crunch in India? How do I know? For the last two months there has been no pestering calls from bank representatives offering loans! Have you noticed? Some days ago there was news that Ratan Tata has recommended setting up of a separate fund so that the flow of fund to established companies don't dry up. So even they are not getting funds.

Some say the fall in the Sensex value is an indication of how closely we are linked to the world economy. May be. The fall in Sensex is not because Indian companies suddenly started doing badly; rather because of withdrawl of funds by Foreign Investors to book profits and pump cash back to the parent. Sensex is not the Indian economy. Or is it? It is an indicator of investors assessment of the state of econmomy under normal circumstances. Not when there is a flight of capital due to external factors.

The Indian economy is not longer as isolated as it once was. But it not closely coupled as yet. Export is only about a quarter of India's GDP. This is bound to drop as the world enters recession. As per the news item in Financial Times: "India’s exports, which have been hammered by a sharp fall in demand and liquidity, have declined 12.1 per cent in October from a year earlier to $12.8bn, the first drop in absolute terms in seven years, according to the RBI."

On the other hand, this could be an opportunity for India too. To survive the west may shed (outsource) even more aggressively what they see as non-core elements of their business.

Besides, the steel prices are falling ... oil prices are falling ... inflation is down and does not look like deflationary right now. So shouldn't this actually boost domestic consumption? For the size of India the growth should be ideally sustained by internal consumption alone. Exports should only be considered binus. At least that is what common sense dictates.

Or do our Harward and Stanford educated bankers and industrialists view Indian economy through an American lens? No? Then why is the recent announcement by RBI termed emergency measures (are we in trouble?) and why does India Inc feel that the measures are not sufficient?

There I am done. I have asked lots of dumb questions that should infuriate the economists. Now if only they read this post and think it important enough to react.

Is Washington DC The New Chinese Capital?

The pattern I see is as follows ...

First, US sinks into a financial mess.

Second, US looks at China for help -- see here

Then, US begs China not to devalue their currency -- see here.

Thereafter, China lectures US on how to manage their economy. China also tell US that Chinese assets and investments in US should be protected. See here.

Then comes the news that Chinese property hunters are planning to pick up property in US on a large scale. See here.

So are we seeing a Chinese take over of US? This could be a great story for a Hollywood blockbuster. I am just conducting a thought experiment here and the conclusion (and the title) is just fiction. Or is it?

Present Financial Crisis Is For the Wimps

The following passage from Against The Gods by Peter L. Bernstein. (The beginning almost reads like Harry Potter)

"This was a dark time, one marked by a series of ominous events: Watergate, skyrocketing oil prices, the emergence of persistence inflationary forces, the breakdown of the Bretton Woods Agreements, and an assault on dollar so fierce that its foreign exchange value fell by 50%.

The destruction of wealth in the bear markets of 1973-1974 was awesome ... After adjustment for inflation, the loss in equity values from peak to trough amounted to 50%, the worst performance in history other than the decline from 1929 to 1931. Worse, while bond-holders in the 1930s actually gained in wealth, long-term Treasury bonds lost 28% in price from 1972 to the bottom in 1974 while inflation was running at 11% a year."

The effects of the 1973-1974 crash was felt world-wide and the impact lasted some 20 years. See here.

Why is everyone panicking now? It is not as if the world has not seen this before.

What do we have now?
Oil prices are down ... dollar is holding (actually going up - see here) ... The World Bank and the IMF are going strong ... inflation is actually falling (oh I see! deflation!)

Or are we condemned to repeat history for ever?

Note: the picture used here belongs to "duchesssa". To see more of her photographs visit her gallery.

Americans! These Companies Are Still Fleecing You!

Is it TARP or a trap?
You think your money is being used. Actually it is being abused. AIG executives will still get HUGE bonuses.
See here.

My Response In Financial Times Blog - What’s the best way of sharing the petrol bill?

Just wondering if the simple one-person-cuts-the-cake-and-the-other-person-chooses-her-share will not solve the problem. That way, Lucy pays for a tank full of fuel and both sisters drive like maniacs and the next time Lucy’s sister pays for the full tank and both sisters drive to extract maximum benefits and then the next time … you get the idea. They would soon settle down to an equilibrium where both are satisfied and the frequent gas station trip reduces.

To follow the blog visit here

My Response In Financial Times Blog - How do I calculate an appropriate salary?

“Fair Figure” as opposed to real figure (which is entirely decided by the market; and by market, I mean your market where you see yourself as a commodity unless you have an USP) should be determined by the value you bring to the company you are working for. You have to therefore convince your employer that you are worth £££’s based on how much ££££’s you can bring in to that company. Given the (impending) recession, I would advice you to stay put for some time and improve your USP.

And oh! By the way, your quality of life does not depend on how much you earn; rather on how well you save, invest and spend.

To follow the blog visit here

My Response In Financial Times Blog - Should we take a pay cut?

I often visit the FT blogs. I leave my comments there. Since the views are mine and the viewership is different I though I should duplicate my responses here. For the complete blog please visit here. Unless the options are clearly spelt out any decision would be foolish. Under what terms are the pay cuts being introduced? Is it till we turn around? Or till the present financial crisis is over? Ideally the company should share with you the plans for recovery so that you are clear when you are likely to get back you original salary.
There is another side to the story too. A job loss could unleash the hidden talents you always suspected you had but never managed to get it going. Who knows? Perhaps you have an entrepreneur hidden within you, just waiting for such an opportunity. The current situation may not seem to be an ideal time to launch a business, but the best opportunity comes along during such times of crisis. In addition, if it is an eventual job change you are looking for, then taking a pay cut may actually reduce your bargaining power with your future employer. Generally, when you job hop, the future employer either matches your existing cost to the company or exceeds it.

India and Pakistan To Form An Economic Union

I would love to see that as a headline someday ...

I wonder if this is a pre-condition laid by IMF. In any case, this is the best piece of news to come out of Pakistan since ages. (I think the last good news was Abdus Salam winning the Nobel prize - ok I am being a little over the top here!)

According to the Financial Times, "Pakistan is prepared to withdraw its first-strike nuclear threat and push to create an economic union with India in an effort to bring peace to south Asia."
I am aware that a SAEZ - a South Asia Economic Zone - on the lines of EU will take time. Years of distrust needs to be overcome. And then one needs political will on either side. But then we have in the past seen economic realities overcome political stances very rapidly. Remember, USSR, Perestroika, Gorbachev, ...?

Actually, I hope the countries of South Asia grab this opportunity. The bargaining power of an economic zone comprising of India, Pakistan, Bangladesh, Srilanka, Nepal, Bhutan and Maldives will be tremendous. Perhaps, Iran would like to join. And someday Afghanistan.

The end of the present economic crisis could see a rearrangement of financial clout. US may not remain the financial superpower. Already the EU has powered its way to the top. But even they face economic recession. Japan is also in recession. The south Asian countries seem to be unaffected (to an extent). If we can create a large market of consumers, we could see prosperity coming our way.

Pipe dream?

At least we can try!

High Bank Interest Rates

Either I have not understood economics - which is more likely - or nobody has paid attention to this.
Every public sector bank in India is offering 11% - 11.5% interest rate on long term deposit (starting from 1 year). This, of course, makes sense for the banks, given the volatility of the markets and reduced confidence in multinational banks. More funds are likely to flow into the bank coffers.
But doesn't this also result in money getting siphoned off from the market? Now that deflationary conditions hover around our collective heads? Besides, how are banks going to show any profits? Banks are not lending money to the common man.
Ok! I get it. They are perhaps lending money at a very high rate to the businesses citing the current financial crisis and the banks can afford a high interest on term-loans.
A puzzle then: RBI has been announcing various monetary measures to release funds in the market. I haven't see much of that benefit being passed to the common man.

Financial Mess Explained

Economists and Financial gurus still trying to understand the financial meltdown phenomenon. That way they could offer solutions that hopefully make them as famous as Keynes, post-1929 depression. Come on! I would do the same if I were one. This kind of opportunity does not come every other day, does it?

Ok now seriously, A very good analysis of the financial mess and a solution is offered in a blog here. This was published as recently as 14th November.

This blog used the term "CDO" very liberally, assuming that everyone would understand it. In case you do not, please go here for clarification.

Pictures speak a thousand words. Very true. Take a walk down the 'bank street' in this interactive feature in the Financial Times website (here). Very interesting.

Staying with the theme of pictures-speaking-a-thousand-words, visit another interactive at FT, here, and launch the interactive to see pictorially what happened. It is brilliant.

Did you like this post? Why don't you visit my other posts here.

Blast From The Past - Financial Crisis

The main goal is to emphasize the role of financial panic as an essential element of the crisis. At the core of the crisis were large-scale foreign capital inflows into financial systems that became vulnerable to panic. The paper finds that while there were significant underlying problems and weak fundamentals besetting the economies at both a macroeconomic and a microeconomic level, the imbalances were not severe enough to warrant a financial crisis of the magnitude that took place. A combination of panic on the part of the international investment community, policy mistakes at the onset of the crisis by governments, and poorly designed international rescue programs turned the withdrawal of foreign capital into a full-fledged financial panic, and deepened the crisis more than was either necessary or inevitable.

Sounds familiar? It should be ... there is hardly an educated person who does not claim some knowledge on the present financial crisis. Only that this is a paper that was written to explain the 1997 Asian Financial Crisis. I just edited out the word "Asian". I picked it up on a random scan of the Internet (no copyright violation is meant).

Humans have not yet become the economic animal it claims to be.

Are we condemned to repeat history for ever?

News That Make Headlines And Those That Don't

Citibanks' axing of 52,000 odd jobs have made headlines. And so has the Dunlop's closing of its unit for an indefinite period. But there are so many more stories that do not make headlines. Here are a few ...

1) A paint manufacturer in Bangalore is in trouble because there are no new orders. He says that most of the constructions are stopped. There no new projects launched.

2) A fork-lift company that used to sell 20-25 units a month sold only 3 last month.

3) The textile mills in Mumbai and Coimbatore that saw a huge spike last year are on verge of closing down or have already closed down. There are no new orders.

4) It is now "buy one; get one free" if you buy appartments in Mumbai.

5) In Mumbai, the banks are no longer issuing credit cards.

6) A dear friend told me that if you have money in bank, go to a house constructor, open your check book and offer cash. You will get an appartment at the price you name.

These will not make the headlines. These have been told to me by people I meet and talk to. So when Infosys declares that they will recruit 25,000 this year, I am filled with hope. But then my eyes fall on Ratan Tata's suggestion of an US like injection and I am all confused.

The HCL CEO Was Right After All

In one of my previous log, I differed with what the HCL CEO had to say about the current economic condition. See I Think HCL CEO Got It Wrong.

Well looks like he had seen furtherthan I had. Check out this piece of interesting news where US is inviting Indian IT companies to help.

Cheers everyone!

The Liquidity Crunch May Actually Do Some Good

Ok. Liquidity crunch is bad and there is a global slowdown and there is a threat of recession looming large - some say it is already on us. But I see a silver lining in these very dark clouds.
Terrorism thrives on funds flow. At least that has been my hypothesis. See Suicide Bombings in Pakistan and NATO attacks I really hope that the liquidity crunch hits them real hard. If the liquidity crunch results in wiping out terrorism it is worth going through the recession-pain.
Note: The picture used here belongs to Agata Urbaniak. Visit gallery for more pictures.

Keynes Warning To The Financial Institutions

This is taken from the book by Peter L. Bernstein Against The Gods.

John Maynard Keynes, the great English economist had predicted today’s financial chaos.

“When the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done.”

In the coming days I will extract some more interesting extracts from this international bestseller.

Note: The picture used belongs to Richard Styles. To see more of his photographs visit his gallery.

Counter Intuitive Actions To Take At The Time Of Recession

In my experience counter-intuitive actions almost always make sense. Especially because it is invariably a thought out process. While human intuition is good to hunt as a cave man, in a complex world intuition just does not work. Yes I know Blink is a best seller. But if you fall fro Blink you might as well guve up. The hypothesis behind Blink is that spot decisions could make more sense than very well thought out process. What is convenient to forget is that the spot/intuitive decisions are often manifestation of years of hands-on experience that the brain has internalised.

So what is counter-intuitive action to be taken about the present financial crisis? Before I answer that we need to understand one simple fact: like good things, bad things also don't last forever. So ...

For small investors like me ...

1) Do not sell shares. Unless you are sure that the company shares you are holding is sinking. Or unless you desparately need cash.

2) Do not stop your Systematic Investment Plan (SIP). Keep your monthly investment going. SIP will fetch you larger units right now. In any case SIP's are a long term investment.

For small companies ...

1) Go aggressive cost cutting. All those costs that you always wanted to prune but could not because of upsetting some employees. However, do not shed people. Hold on to them, whatever the cost. Focus on process reengineering to cut costs.

2) Hold on to your marketing expenditure. Don't reduce it. Tough! But look at the benefits. When everyone else is cutting back you will remain on the top of the buyer mind by using clever marketing techniques. This is your chance to beat that big brother.

For large companies ...

All what is said for small companies apply plus

Fulfil you ambition of overseas growth by buying property and companies in US and Europe. You will never get it cheaper.

When the tide turns, this effort will pay off tremendously.
The key is focused innovation.

Note: The photograph used here belongs to Cristina Miguel. To see more such photgraphs visit her gallery.

Who Moved Their Cheese?

One of the most enjoyable management parables I have read till date happens to be 'Who Moved My Cheese by Dr. Spenser Johnson. I find it better than all others I have read, including The One Minute Manager, Our Iceberg Is Melting, and even better than the delightful oldie 'High Five! The Magic of Working Together,. The characters are so believable. It is a story of 2 'small' people, Hem and Haw and two mice, Scurry and Sniff. And how they react to a life altering change. The change comes abruptly but the signs were there for all to see.

The four lessons that comes out of the book are:

Anticipate change
Adapt to change quickly
Enjoy change
Be ready to change quickly, again and again

This is a best seller and I bet, one out of every two corporate manager must have read this. It sold a few million copies. The lesson does not seem to have sunk in though.

To make my point let me take only the first two lesson and one fact.

The sub-prime crisis began more than a year ago. So, Lehman and AIG and the US government had one year to react. Do you see them anticipating change and adapting to the change quickly? And were the other countries, UK, Germany, India waiting for the problem to reach their shores before pressing the panic button?
Point made.

It takes about 15 minutes to read this book. I would recommend this to all the politicians/managers to read in TODAY - before they go about their daily work.

Note: The picture used belongs to 'Sardinelly'. Please visit the gallery to see more of such photographs.

A Brief History Of Market Panics

A brilliant article on history of market panics (including the present one) is published in the Financial Times. See here. It gives me confidence that whatever I have posted under market is a chaotic system is correct (at least in my own twisted logic).

Note: The picture used here belongs to Joonas Lampinen. To see more of his picture visit his gallery here.