How does it feel to face a Y-intersection, but the decision is not in your hands? The decision is going to decide the course of the rest of your life. Also you have played your cards, best to your knowledge, talent and drive. (It is not a job interview/marriage, as 90% would think) Your life has been a daze the last fortnight and the only thing you have spent your waking time, is conceptualizing, drawing and implementing. Still you do not have the go ahead from the echelon. Is there any way, competition comes up with a better proposition? Or has the stated demand for the necessity fizzled away under new circumstances?

If it goes the expected way, then sleep is going to become a priceless commodity for the next month. All mundane things in life will be postponed, quickened or ignored. If it goes the other way, then life is going to slow down, take deep breaths and get back to square one.

But in all this flurry of activity, the single mindedness gives a natural high which nothing else can. Basking in the glory of the aftermath could not even come near it. Efforts almost equivalent to insanity in terms of volume and difficulty, but could anything else provide such motivation? So is it the riches driving it? Or possibility of recognition? Delving deep, it rather is the challenge and the credence in the idea that with a little effort, the possibility frontier can extend well into the infinity. And your ticket to that journey is through your dreams.

-Dreambig2win

Quickie
Happy Diwali!!

Notwithstanding my strong resolutions on frequent posting and dwindling audience, here I am again. Back in Amchi shahar, battling with the autowallahs everyday to hitch a ride, here are a few updates from my side.

Surprises
1. Been driving the Accent a lot with no incidents including a weekend getaway
2. Cleared Level II
3. Laptop has died (Multiple organ failure). Assembled a desktop, but hate Asus MBs
4. Got hooked to facebook, only due to Mafiawars
5. Daily grind too boring (Hope the world feels that way), but the slimmer of hope being, boredom will drive me to something far better
6. New company policy keeping me away from stocks, and it is not a good feeling

Usual
1. Capital constraints not withstanding, Level III registered
2. RX-100 needing a total rehaul and the dilemma on going for stock or fake parts

Stocks
1. ITC, DLF, Unilever, Powergrid and NTPC are showing high resistance, probably indicating that on the upside they have betas lower than on the downside. (Always believe there can be two betas for either direction of price movement). Potential to exploit using options. Sell widely out of the money call options on these stocks and pocket the premiums
2. NHPC though fundamentally stronger than Adani Power, which by the way has some regulatory issue on its mining license, with the matter under litigation, seems attractive

This side of Shangri-La
Few days passed, routine found, options tested few at a time (literally as well with NIFTY options) and found peace with myself. Anger at the injustice subsiding, acceptance is sinking in.
Almost all the emotions that a break-up conjures. Alas!! When did I ever start loving that daily grind.
Procrastination tossed out of dictionary, except for one instance of conveying the news to the ones that it mattered the most. All unfinished chores including laundry, cleaning, reading and blogging finding space. Movies at one a day will exhaust my collection in about a year, optimistic period to get back to a paying desk job.
Have spent quite a lot of time finding mispriced options in NSE, have to say Indian markets are heading to EMH. Took a few soulful walks rather out of hunger lead by the prolonged absence of the maid (No we cannot afford to fire her. Apparently we only care about her work).
The only big decision in my radar is to whether to go for that Xbox 360 or not? If yes, then to modd it or try to afford original games? Other than this indulgence, cost controlling comes naturally. Restaurants, autorickshaws and mobile all seem expensive inspite of India registering deflation.
Arundati Roy is quite pompous (No idea how many people feel that way with me). Glad that I got initiated with her when the next best thing I can do is nothing. :)
Of the movies seen, Waking life struck a chord with the possibility of controlling dreams, the 12 minute brain activity after death which could create memories that parallel your wakeful life's and the free will theory.

Rest later.

Srini - KIA
The axe finally falls on yours truly. Initial thoughts; sarcasm at the system, sea of options popping out of nowhere, adrift love, time value concepts rocked and release from suffocation. Life altering events trying to overshadow each other, the chutzpah sticks it out at the system, mocks it and bolts out.
Few friends carried forward, though might make me stick around here for a while before the homing missile gets activated.
Life loses its routine, psyche loses its respect, money increases in value, phone battery dies out faster, wallet feels the pinch and sense of humor improves.
Have a few things up my sleeve, let us see how life pans out.
If life wants to know whether it is Shangri-La or Hades this side, Shangri La it is.

Bail-outs

At the cost of making my page look like another dissertation column or a who-is-responsible-for-the-mess forum, here comes a post on the bailout saga.

We live in unprecedented times might sound too much of a cliché, but let me explain that with some numbers to get us off on the right footing. Stock markets around the globe have wiped out $ 23 trillion wealth, excluding the derivatives (which are a zero sum game). What number pops into your mind, when you hear bailout? Imagine how much value that holds for you, for a minute. Now let us correct ourselves. The bailout touted at $ 700 billion is much more. A random total of announced packages exceed $ 16 trillion, more than the US GDP ($ 13 trillion). (Bloomberg says bailout is $ 7 trillion)

Bailout	Amount
Most glamorous of the bailout package	$ 700 billion
Latest bailout to reduce blockades on credit cards, auto loans, mortgages and other borrowing	$ 800 billion
Fed program to buy all Companies commercial paper	$ 2,400 billion
FDIC guarantee for inter bank loans	$ 1,400 billion
FDIC guarantee for Consumer loans increased to $ 250,000 per account	$ 10,608 billion *
Individual commitments outside $ 700 billion package
Bear Stearns	$ 29 billion
AIG	$ 123 billion
Citigroup (Inc. $20 billion as cash infusion)	$ 326 billion
Automobile sector for alternative fuel development	$ 25 billion
Automobile bailout (expected in December)	$ 25 billion

*- Calculated from marginal impact of $ 250,000 instead of $ 100,000 insured

This gives a running total of $ 16.4 trillion. And it is for sure, that this is not all the kitty, given the non disclosure policies of Fed. So where will the Fed conjure up all the money from? One argument could be, all of this would not require funding, but in a worst case scenario (as if it is not now?), this would be the amount that Fed will have to cough up. We will address this later.

FDIC had a reserve ratio of 1.25% previously under the $ 100,000 of consumers deposits insured meaning it has $ 1.25 for every $ 100 insured, but now under the new legislation, it would fall to an abysmal 0.5%. This suggests that they should have new risk mitigating mechanism which drastically reduces bank failures. But given the conditions, the FDIC is just bracing itself for the surprise of its life.

Historically other big bailouts in the US have been,

Bailout	Amount adjusted for inflation
1933 Public Works Administration Created to reduce unemployment (25% then)	$ 3.3 billion (unadjusted)
1938 Spending program to provide stimulus	$ 5 billion (unadjusted)
1979 bailout of Chrysler	$ 4.2 billion
1990 Savings & Loans bailout	$ 210 billion

For all the bailout money, Fed is buying toxic assets, which are not disclosed. The crisis has been created by the run ups of the prices of these assets, which by their nature, is illiquid, high risk and inflated. Now the Government is not addressing their problem of being over priced. It is gleefully accepting these at the sky high prices, thus trying to sustain the bubble. But the free market ideology suggests that we allow these asset prices to correct themselves till they become an attractive buy to someone. This sounds like just another American parent trying to give his kid some dough to kick the bucket on his doping addiction.

Another challenge that the administration faces is the high unemployment rate, now at 6.5% and could not take long to reach 8%, a high in the last quarter century. The worrying situation is that of the 6.5% unemployed, less than 22% are able to find new jobs (Thomas Lam, economist). A higher portion of skilled employees getting the pink slip will also hurt the wage levels badly. And all of this is in the face of all the massive bailouts announced by the Government. Fed’s actions just seems like they are telling folks, ‘It is all a nightmare. Please wake up now, get over it and give all your pains to us.’

Now that all the promises of infinite lines of credit have been made, it is time to produce all the money without hiking up inflation. Debt could be a way out. Then it will just be a simple transfer of corporate debt to Government debt in one big swoop, without touching the leveraging issues, as the underlying assets remain the same. And under the burden of so much debt, the Government would be forced to raise taxes, impose trade restrictions, cut down on unemployment subsidies and cut down on infrastructure spending naturally putting into jeopardy Obama’s second term, even before getting off the mark.

Suc(k)cess

The biggest of human weakness is a craving for success. Genetically programmed to only yearn for such outcomes, exceptions are viewed with disdain. Even the few who risk to differ, are treated as outcasts and toe the conventional line soon enough.

To make it more simple, how many times have you felt emptiness when you completed a novel, that had an unconventional ending wherein the author left scope for your judgment or the protagonist died. Or for that matter, how many of us would have abused the director of a movie, when the movie had an unconventional ending. Actually it should have been, the more complex/different emotions the movie/novel draws, the better it is.

The whole point of bringing this up is to put in perspective, the global financial turmoil. All through my life, it has been drilled into me that, capitalism is better than all other forms of economy. And testimony was the success of US of A as a nation. Laissez Faire was touted to be panacea for global inequity.

But the rough ride now takes everything for a toss. And even my idealistic economy, is no longer market driven. It looks more socialistic than even yester years Russia. Sample this.

1. SEC banned shorting of financial stocks. When the companies were allowed the luxury of having all the bull runs they have had, why throw them a lifeline now. Why not allow the system to correct itself. If traders are shorting it, the companies had it coming for long. That is what free market means right? Allow Darwin to choose, who emerges from the rubble. Why intervene?

2. And the regulators do not want to cap the executive pay packages of these troubled companies because then they feel that these executives will not approve of the bail out plans and disagree to sell assets. Who are we kidding here?

Can the trouble be saved by these impartial measures? Only the pain stands to be delayed. This duality of US in acting capitalistic in good times and wielding the stick, as things turn awry is going to spell doom for its own future.

And I am sure our kids will grow up, being told that the Chinese form of economy is the best and all countries need to emulate them. The Americans need to blame themselves for squandering away their chance of being on top of the world. Along with the baby boomers, Uncle Sam is fast approaching senility.

P.S: It is around 2 AM. Thoughts are not so coherent. So pardon me

We(e/a)kend- week after week

Some obscure (shuffled) track blaring in the room gleefully, more so as I cannot identify it, lethargy in thoughts, narcissistic urge to check the blog ticker (now at 1299, though I made half the hits) and the guilt of not preparing anything since morning (CFA Level 1) brings out the boy in me. What the heck? Half an hour won’t harm me much. But isn’t that what life is all about?

When you think you have zilch to do, warming your ass and the recliner all day, you cannot do the simplest of productive things. And likewise, when you are smothered by work, you end up doing the silliest thing you can ever imagine. Voila, my post.

Probably, ‘Phoonk’ played spoilsport on my weekend. Did RGV even script it or did his cook? Add to it, my 300 GB of priceless movie collection lost (disk failure). Orkut’s never been this boring. And so is my portfolio, as its steadily downhill. And mid day is around the time, all the brats will manage to pull themselves out of bed and the slew of calls will start now, even conference to conclude that this ain’t the right way to spend a Sunday and try to find out a ‘fun’ way to amuse ourselves and thus restore Sunday’s dignity.

And the supposedly fun way begins with going to a new place, snacking and then start talking about GIRLS. Probably we are on a mission to exhaust talking about all specimens of the fairer sex around here, and I should tell you, we are doing pretty well. May be the new locale every week adds spice to the otherwise bland species (object of discussion).

And by end of day, when we all feel, that it was another good weekend spent, all of them hasten back home, riding at mad speeds usually. Then back to my recliner and T.V. Gosh I missed so much of the EPL and yeah the CFA preps of course.

P.S: I have made it 1300 refreshing. But please do not stop the referrals.

23 and WORKING!!

Finally yours truly has set his own cash registers ringing :D. A good feeling agreed, but a lot limiting since needs have to be prioritized and missing the comfort of an infinite revolving credit facility bestowed upon by biological relations. And if you are feeling lost by now, then yours truly is working as a financial analyst.

With almost two dozen years in places of learning, finally some place where you can win your own bread. But gosh, the same old classroom welcomes me there. Typical day begins with me going a little late and sneakily entering the supposedly official time as entry. (Gosh there is no way to get over the biometrics… he he that’s what the HR thought…. Simple.. don’t use biometrics when late and explain later forgot to use it :D). And then a couple of lectures, which strangely sound interesting proved by the decreasing ratio of napping to wakefulness. All interspersed with enough breaks for smokers and non-smokers. Then the best part of the day, LUNCH!!

Toil for sometime with EXCEL and then the inevitable birthday celebrations. I still wonder how we have them daily, in an office populated with 40 analysts, which means 4 out of 5 times, people are bluffing. (Din’t use EXCEL now, and if you want to run a check, discount the weekends. OK don’t frown 4.23 or since I have not bluffed, 4.25). But what the heck! Much needed breaks.

Resuming the EXCEL work, people start looking around for inspiration to leave home. And as always, I never disappoint friends. :P

Stock cues: Best time to enter into solid sectors including utilities (Higher crude justifies public transport. So any company supplying to public transportation vehicle manufacturers), cement (terribly undervalued with average PE around 5x), healthcare (people will never stop falling sick). Wise to stay away from banking, finance, IT, auto and realty. But if you got the dough, nice time to buy into anything. Rarely valuations get this cheap. Sit tight. Happy investing.

Disclaimer: Author has exposure to all sectors discussed above irrespective of bullish or bearish view on it :D

Duality

Traffic is something that is less researched, less discussed but something that affects everybody’s lives. It has a direct effect on productivities. You will appreciate more of this when we are done with this post. As with other things in the world, traffic perfectly follows a free market concept. More of which I will explain by exploring the duality of traffic and stocks (Some day I will write a research paper on this one).

The objective of an individual in traffic is to minimize the time he spends to reach his destination. An investor (equity alone for simplicity) would like to maximize his returns and wealth. The duality does not end there. In a perfect equity market, there is no strategy that can make money consistently. All stock prices take random walk. Similarly in traffic (perfect conditions), no shortcut can get you quicker to your destination as enough people will know about it and hence will crowd the shortcuts.

In investments, bigger the investment size, the more you have the potential to affect prices by your buy/sell decision. Similarly in traffic, bigger your vehicle, you affect the overall traffic (Others' time savings and wastage) more. And similarly smaller the investment or the vehicle, it is possible to maximize returns or reach destination quickly. (This explains motorbikes darting across quickly)

Apart from the fundamental strength of a company and its business model, what can explain the stock price of a company is ‘Herd behavior’. And similarly with traffic, apart from concentration of companies and other institutions in locations, ‘Herd behavior’ can explain congestion in the time all people choose to commute and the routes they prefer to take.

The role of regulators can also be thrown light on in parallel. The stock market watchdog (SEBI) would like to aid investors in enhancing their wealth by improving efficiency and transparency. They would prevent creation of cartels and monopolies. They tax the profits moderately to keep themselves functioning and to balance out the earnings. The traffic regulator works to improve overall efficiency. It penalizes offenders. It uses duties on new vehicles to control the number of new vehicles that are added to the roads every day.

And as investments (stock picking), to succeed in traffic (without accidents and be quick), you need to regard traffic as an art as well as a science. I am trying hard at both. :P

P.S : The post can be utterly meaningless to a lot of people, but it gave me tremendous satisfaction penning it down. But I am confused if that really is a blogger’s objective or should play to the crowd.

Web 2.0 sites are amazing. The template choices and widgets offered by blogger pale in comparison with its web 2.0 peers. I have reconstructed the blog at http://srini.weebly.com

But it still does not offer comments. Also I would prefer to have sub-tabbing and multiple page articles. So till weebly figures all that out, this page will be alive.

Also recently was launched, the web 2.0 portal http://yiktik.com A news aggregator site for Indian Business. Refreshing design, great usability and hassle-free registration are its novel USP. The user base is small now and hence the content lacks depth, but it is a great portal in the making. Watch out.