A Fleeting Moment of Clarity

Hi folks! Some good news has come my way and I'd like to share it with you: I finally cleared my CFA Level I exam.........yay!!! Though this development has come after one miserable year, it still is a development and I have some clarity about my future now. Next on the cards is GMAT on 5th March that i'll be writing the 2nd time as well, so I hope I do well this time.

As far as the world around me is concerned, the latest on the block is The World Economic Forum at Davos and all business newpapers seem to have acquired a very Davosian twang to their usual tone. I don't really understand what purpose does the WEF serve except for lavish receptions serving expensive champagne and caviar. To common men like us, it seems to be nothing more than a congregation of the rich and powerful who gather to blow the trumpet of capitalism and exchange visting cards to sniff for business opportunities. I don't care about the fruitless discussions anyways but wouldn't mind an invitation just to have a taste of the expensive wine and food in one of the most picturesque Swiss ski resorts.

Of late, I have been reading a lot about inflation in the Indian economy. Today's The Mint also had an article suggesting the urgent need for RBI to raise interest rates. I guess they are right in their claim that raising interest rates should set things right for the economy which has been seeing an encouraging outlook due to the increase in corporate earnings.

Besides that I have finished reading quite a few books lately; The King of Oil by Daniel Ammann, The Greatest Trade Ever by Gregory Zuckermann and Inside the Iron Triangle: A Secret History of the Carlyle Group by Dan Briody. The first 2 were quite amazing actually. I read a book by Haruki Murakami too, it was called A Wild Sheep Chase. The book had an interesting supernatural plot that slowly unfolds but I hate the extreme use of metaphor at times.

I have not been regular with my blogs lately and I think the trend shall continue until I get over with GMAT and TAS.

The Faustian Bargain

I recently finished reading a very interesting book called 'The King of Oil: The Secret Lives of Marc Rich' by Daniel Ammann. The book, as the title clearly mentions, is the biography of the most infamous and most powerful white-collar criminal in the history of the USA, March Rich, who was accused of evading $48 million in taxes and trading commodities with enemies of the USA while circumventing all embargoes and was at large from the US since 1983. After getting a very controversial last minute pardon by the then US President Bill Clinton in his last day in office, Marc Rich has still remained in Switzerland, his adopted country. The book also chronicles his lesser known achievements such as the invention of the spot market for oil trading in the 1970s and breaking the virtual oligopoly of the 7 giant oil companies. While the book showed that Marc Rich did not exactly stick to a very moralistic stance in his business dealings with all the countries he traded with, a lot of his vilification in front of the US public seemed to be the handiwork of people such as Rudi Guiliani, the former mayor of New York, who championed the cause of the American public against corporate greed. I have already read about his expolits in another book called 'The Den of Thieves' which was an account of how the Junk Bond king Michael Milken was caught by the US attorneys on charges of insider trading and indicted.

More importantly, the book was an eye opener for me with regards to global politics and the double standards practised by almost every major state involved in the production/consumption of some of the world's most precious resources such as oil. I was stunned to read that while Ayotollah Khomeini's Iran did not recognise the existence of Israel along with the rest of Arab nations, there existed a secret pipeline that supplied Iranian oil to Israel for a long long time and the transportation of oil was authorised by none other than the Iranian state owned oil company!!! I was shocked to read how most of the world's most important commodites come from countries that have been war torn and ruled by the most corrupt governments for decades while the liberal democracies have turned a blind eye to all of this while looking for fulfilling their own needs. On one hand, we see embargoes and sanctions against nations that refuse to accord the basic human rights to their citizens and are ruled by oppressive governements, on the other hand, the same liberal democracies made secret deals through middlemen to acquire those resources they most coveted paying top dollar to those same oppressive and corrupt governments.

I want to ask why this sham of self-righteousness even exists???? What purpose does it fulfil except global summits that make media headlines and ultimately lead to no concrete resolutions whatsoever???? As far as my understanding goes, it's a simple case of 'you scratch my back and I scratch yours'. While developed and developing democracies need commodities for their survival, the corrupt regimes that hold control over these resources need a lot of cash to sustain their rule and fill their coffers with this cash, whether any of this trickles down to the poor is a different matter altogether.

Now comes the question of morality. While no one wants to know that the material making up their mobile phones is coltan that comes Congo which is one of the most war torn places in the world and the bauxite used to make aluminum is mined in Guinea which is a terrible dictatorship, people are more comfortable resting in ignorance and choose to turn a blind eye to these events that tend to disturb their lifestyle that has become accustomed to these things.

Chronicling a Very Forgettable Year

Happy New Year folks!!! I hope it's a new year with new hopes and new beginnings yada yada yada......I am happy that a new year has begun, it gives me a chance to forget the worst year of my life. It was a very eventful year, bringing me lots of emotional stress, misery, anger and sadness with almost no progress on the professional front. I am happy it's behind me now, and I wish I could erase this year of my life from my time line forever. Though I must say that I learned a lot about life in this 1 year. I learned how inconsiderate and insensitive people are, how easy it is for them to leave someone smarting while they go out and squeeze every moment's worth of fun. I also learned a few good lessons about love and friendship. I learned to distrust people and I realized that I was once again out into the open, looking for my lost self, trying to find my identity and individuality. I realized that my naivete caused me a world of trouble and I began questioning the very principles I grew up to believe.

I can still feel the strain while writing this post and I think I need to stop this here. It's all coming back to me again and I don't want that to happen anymore...............bye!

Capitalism on Steroids

I, a common man, can only stand at the sidelines watching the chaos in the global capitalist arena. I, like many others, have seen the rise of the i-banks, the roaring pay days of Wall Street, the wave of rapid modernization of the emerging markets bringing them together with the developed Western markets, the massive industrial expansion plans that are roiling in dust now, then the impending gloom ensued by the irrationality and hubris practised during the hay days of capitalism and then the downfall of the goliaths of high-finance and the begging cries of those corporations that had aimed to reach for the stars but unfortunately landed in gutters. I have seen it all, all that a common man can see through his innocent eyes and unmanipulative mind, about the ways of the world. And as every common man would wonder, when will this vicious cycle end???

Pick up any news magazine or wire service and bright are the chances of seeing some big corporation being rescued by the government of the country it belongs to. Companies given lifelines, bridge loans, bankruptcy protection and what not. Isn't this what you can call capitalism on steroids? There are side effects that are being ignored in a mad scramble to survive, the consequences can come later. In an ideal (read steroidal) world, a corporation big enough would never fail, which essentially means that no matter what you do, no matter how much you screw-up, Uncle Sam or his counterparts will save you. In short, it's a license to screw-up as much as you want.

I feel capitalists through the ages have not only become more perverted but also have become equally good at hiding their perversion when it suits their end. On one hand, capitalism argues for no government intervention in the markets, in Greenspan-speak laissez faire capitalism. On the other hand, the same government becomes an object of worship when the free ways of free markets don't seem to work. The hypocratic stance is compounded by the fact that governments are criticised for not taking an interest in saving the companies from failing and when it demands for more regulation in return to save the markets from further upheavels, the capitalists cry foul for too much government interference in business.

Agreed that we vote a government into power in liberal democracies to make sure that they serve our common interests, that the interests of all sections are taken into account and appropriate provisions be made in government policies to take care of demands, but, there is a simply a limit to the amount of concessions that can be extracted from policymakers in the name of free markets or bailouts. The inherent flaw in the entire capitalistic mindset is the extereme subservience it demands out of government. The government is supposed to relax the rules when we want them to be relaxed to suit our needs and then we expect the government to pull us out of doom by using its monetary muscle when we blow up and then the government is supposed to stand back in a corner and watch us go about our business in the laissez-faire way. I think this is blatantly unfair. It simply shows how easy it is for a bunch of rich capitalists to hold the economy to ransom and then do what they please expecting no intereference from the government whose job is to not just serve the capitalists but also the common man.

I find myself grumbling: "Down with capitalist pigs!"

Securitizing Poverty

Yesterday i read an article in The Mint about the securitization of microfinance loans by Deutsche Bank AG. The article was upbeat about the prospects of microfinance being linked with the world of mainstream capitalism and the possibility of using this to alleviate poverty. However, the piece also gave a very cautious note about the perils of modern day finance and how it can possibly lead to the takeover of microfinance by greedy i-bankers.

In a report published by the BusinessWeek magazine many months ago, in Latin American countries such as Venezuela, microfinance has failed to make the planned impact because of the collusion between consumer good companies such as LG, Samsung and microfinance firms. In a very disturbing example, the loans are shelled out by microfinance firms to the poor people who are lured by these producers into buying high-end LCD screen TVs that are practically useless given the cost incurred. When the debtors default, local goons are hired by the finance firms to force the debtors into repaying the debt.

While microfinance moves from an NGO based model to a for-profit model, financiers need to keep in mind the basic principle behind the foundation of this industry. People need to understand that while the US housing crisis was more or less due to the misuse of government policies and lax monitoring of Wall Street dons, a crisis of this sort in microfinance will not just impact the capitalists again but the intensity of it will be exponentially ampilified for the poor helpless people who find it hard to eke out 2 square meals a day without some assistance.

While pursuit of profit is indeed a noble goal in itself, the pursuit of inclusive prosperity with the less fortunate is nobler.

The importance of being Nobel: Why Indians need to!

I have been quite involved lately in the frenzy surrounding the awarding of the Nobel Peace Prize to Barack Obama. Before I have readers wondering which side I am on, I want to clarify that even I think that the prize was quite premature. However, not getting further into a topic that has been much debated and much written about, I want to appreciate the symbolism that a Nobel Prize carries and why Indians should think more of getting some.I remember that when I was a kid, I wanted to be a physicist, I wanted to discover how the world works, how nature or nurture plays its part and how the mind of God works. I did a lot of digging into the general stuff about physics, read lots of books by some famous authors who wrote for the general audience but could never get myself past a 12th standard physics textbook forget about quantum mechanics and astrophysics. Soon I realised that it was not for me and chucked all of that to think in an old-fashioned way about making money like most of my predecessors have done. I think I fit in that mould and I am comfortable.
However, there is one little quirk that I still have despite my dissociation from all scientific thought and that is my eagerness to know the names of the Nobel Prize winners every year. I do this partly out of curiosity and partly due to my hopes that someday another Indian will win the Nobel Prize. Thankfully I didn't have to wait for long and this year an Indian won a Chemistry Nobel. I was extremely delighted but I was also sad that the winner did not work in an Indian laboratory, he was working in one of the Ivory Towers of Cambridge where he had access to everything and the freedom to do what he wanted.
I still don't understand why Indians have not woken up to the idea of original thought. That is precisely what the Nobel Prize stands for. It is a celebration and appreciation of original thought! Why is it that after 62 years of independence we still think that original thought and scientific pursuits are a ticket to full-fledged madness???? Why is it that Indians survive and do well not because of the system but despite the system????This world is changing and it is changing fast enough to make all that irrelevant which cannot keep pace with it. We risk becoming irrelevant too if we don't start thinking with a mind of our own and start endorsing sincerely the idea of free thought, entrepreneurial spirit and scientific pursuits. If nothing else, a Nobel Prize can atleast act as motivation for future generations of Indian students to go out, into the wild, and do something original!

Sovereign Wealth Funds: The New Imperialist Weapon and Why India Shouldn't Possess One

I have been reading quite a bit about sovereign wealth fund recently. I found that startling amounts of money is being poured into such funds by the governments that own them. For laymen, a sovereign wealth fund is an entity that is funded by the forex reserves of a nation and is directly managed by government appointed fund managers who are entrusted with the task of investing the money on behalf of the government to generate above normal returns. The investment is usually made in global companies in the private sector in the form of debt or equity. In the recent times, a spate of new SWFs (as they are known) owned by governments in Asia have sprung out with ludicrous amounts of money. Some of the owners include Temasek Private Equity and GIC owned by the Gov. of Singapore, Abu Dhabi Investment Authority owned by the Abu Dhabi sulatanate and CIC owned by the Gov. of China. These funds have been equipped with enormous amounts of money, in the range of $100-$200 billion each and have been in the news recently due to their invetsments in beleagured American banks desperately looking for cash to avoid shutting shop. A lot of this money has been lost by the funds as their cash could make little difference to save the misery of these banks. While this is definitely of concern given the amount of forex lost, it is also a weapon of strategic dominance in economic realm. Somehow, it seems that the money these funds have is spent on investment in strategically important companies, such as financial services behemoths, natural resources companies such as oil and gas producers. There have been questions in the US Senate about the growing dominance of SWFs as the US gov suspects ulterior motives of other governments than just pure risk-return play.

It is interesting that while some SWFs such as GIC or Temasek are actually pure risk-return plays, others such as CIC owned by China seem more politically motivated as a means of driving the Chinese agenda of world dominance. While China is developing at breakneck speed, it is still not a developed nation and the government stills has to do much more and spend much more to put China in the league of developed nations. So it's a little fishy out there!

Coming to the question of why India should or should not have it's own SWF given the growing pile of forex reserves, it is easy to answer the question in not just one, but many ways. First, India is far behind China in development and there is a crying need for government investment in providing basic amenities and infrastructure for the whole country. According to recent estimates, India needs an investment of around $350 billion in the next 5 years if it aims to sustain it second fastest growing economy status in the world. Second, the rampant corruption in India and the bureaucracy that is deeply entangled will prove a huge deterrent in meaningful deployment of funds that are entrusted with the managers. Also, the political climate of the country does not seem conducive as it is easy to see that even the fund managers will fall prey to political manouvering and nepotism that hasn't spared even the best run PSUs. Third, it is not the government's business to be in business.