In pursuit of happiness

Back Again

2011-05-28T19:45:00.000-07:00

People I am back again...Has been a good year till now...both on the business and personal front...Will starting making regular updated on my thought process from now on...

New year readings

2009-12-30T05:53:00.000-08:00

Hi ppl...long time since I connected with you...life has been a whirlwhind the last six months...lots of new ideas to work on...including marriage (but then it is a reality now )....

Wrapping up my year end....2009 has been a fruitful year for lots of reasons....kept business steady despite turbulent times (in fact grew it a bit)...got married to an angel who has been a fresh breeze into my life....got to a new office which is working out to be productive... the more important thing is i have a lot to look forward to for 2010 ...lots of new ideas lots of growth to confront etc....

All said.... I am planning to spend the next day in 2009 in kind of chewing 2009...reading ...The Secret ...watching the Avatar...planning my style for next year etc....

Thought of leaving you with a great speech by Steve Jobs...Guess it is one of the most important videos I ever watched my life....

Connecting dots....taking the hit and moving forward...and living life to its fullest are the mantras each entrepreneur have to follow in his life...I will be needing all my quivers stacked for the next year..right guys see you in 2010...

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Reflections

2009-07-15T00:46:00.000-07:00

I has been a pretty long time since I updated this blog....within the last 6-7 months lots of new things have happened both in the personal and professional front...
Most of them good and a few setbacks....throughout this time Rocky Balboa's phrase has me kept me moving forward....So there...just wanted to reflect on this quote today

"The world ain't all sunshine and rainbows. It's a very mean and nasty place and I don't care how tough you are it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain't about how hard ya hit. It's about how hard you can get it and keep moving forward. How much you can take and keep moving forward. That's how winning is done! "

One of my life time ambitions is to practice boxing over that building in the US ( u know which one I mean) :)

The Sky has fallen---but only good can happen from now on!!!!

2009-02-02T19:49:00.001-08:00

okay guys...my famous predictions (although Prediction is too crude a word) dating back to July 2007 have come true...The sky has fallen..

However, It is only a matter of time for people to realise that only good things can happen beyond this point....Some of the positive take aways from the current scenario are

1)Only the best will survive (all the market dependent guys who jump their jobs every three months for a small hike..wouldn't)...steady people who are doers would prosper
2) Cost of business is going to go down --- more room for acquisitions and entrepreneurs
3) Housing Affordability Index is going to increase --- People for whom housing was was a distant dream like moon walk .....can buy houses at reasonable prices
4) Banks are going to be more careful in handling people's money...things like credit and repayment capacity are going to be heard more in the coming years
5) The stock market is going to become more lucrative (in fact some of the stocks are trading lower than their liquidation value).

Overall, there can only be growth after a steep fall- let it be stock market, real estate prices or life or any other thing...So guys buck up...the happy days are going to be back ..no doubt that things are going to be tough (before they get better)....but uncertainty is good...uncertainty keeps you on toes and uncertainty brings out the best in you...

Indications - Had to have this on my blog

2008-12-23T05:21:00.000-08:00

Off all things I looked during the entire year (the terrorists, the market fall, the housing crisis) this is the only sight that brought me hope. :)

2008-12-17T21:47:00.000-08:00

Mad(off) - is really brillaint

2008-12-17T21:36:00.000-08:00

Some strategic gems extracted from Madoff's interview during 2001.I couldn't make head or talil off it (Lots of Puts and Calls involved) but now that there was no "Secret Recipe"

People having the time can go through this great article during 2001 flagging off Madoff...
People who have lesser time can do well to read this gems from the "Financial Expert"

"Market timing and stock picking are both important for the strategy to work, and to those who express astonishment at the firm’s ability in those areas, Madoff points to long experience, excellent technology that provides superb and low-cost execution capabilities, good proprietary stock and options pricing models, well-established infrastructure, market making ability and market intelligence derived from the
massive amount of order flow it handles each day. The strategy and trading, he says, are done mostly by signals from a proprietary “black box” system that allows for human intervention to take into account the “gut feel” of the firm’s professionals. “I don’t want to get on an airplane without a pilot in the seat,” says Madoff. “I only trust the autopilot so much.”
As for the specifics of how the firm manages risk and limits the market impact of moving so much capital in and out of positions, Madoff responds first by saying, “I’m not interested in educating the world
on our strategy, and I won’t get into the nuances of how we manage risk.” He reiterates the undisputed strengths and advantages the firm’s operations provide that make it possible.

Now we know what the strategy was...

Another investment Gem before I signoff

Madoff says the baskets comprise the most highly capitalized liquid securities in the market, making
the entry and exit strategies easier to manage. He also stresses that the assets used for the strategy are often invested in Treasury securities as the firm waits for specific market opportunities. He won’t reveal how much capital is required to be deployed at any given time to maintain the strategy’s return characteristics, but does say that “the goal is to be 100% invested.”

I am highly compelled to add these finishing lines from Madoff (Man this guy is a genius)...it more or less summarises the whole thing... A strategy is a strategy and a return is a return......oh yeah

Madoff, who believes that he deserves “some credibility as a trader for 40 years,” says: “The strategy is the strategy and the returns are the returns.” He suggests that those who believe there is something more to it and are seeking an answer beyond that are wasting their time.

Too good--- The face off between Investment Bankers and Consultant

2008-11-11T20:13:00.001-08:00

How very true..I had First hand experience

2008-11-11T04:21:00.000-08:00

Asset Quality and health

2008-09-18T21:07:00.000-07:00

I have been pretty busy with my work for the last two months (OK I was too lazy to write a post) but the current happenings in the world economy has forced me to comment on the ongoing crisis.

Based on a bit of research ...I have found the following to be the reason of the current crisis .. more clear info on this page

1) A shakeout of the investment banking business model... Where people went long on long term mortgages with short term debt from more aggressive investors or banks
2) Lack of transparency on the value of the underlying assets ...More complexity in reporting
3) A fundamental premise that real estate assets have only one way forward...UP

Now wat lessons can we learn from this crisis situation (especially from an Indian economy point of view)

1) Health and value creation is key --- at the end of the day from a "Layman's" point of view ...you need to look for the balance sheet health before looking out for growth... companies with better balance sheet are more likely to weather this credit crunch period as compared to companies dependent on bank Overdrafts for fueling operations.
Verify ratios such as debt to equity and interest coverage ratios before looking out for income growth rate and revenue growth rate

2) Retail and Mortgage loans are intrinsically more riskier as compared to corporate loans...Although the returns might not be commensurate with the risks for banks.To further stress this point let us consider the case of ICICI BANK (the god of all banks in India)...The banks asset composition is as follows

As shown in the figure RETAIL FINANCE accounts for a whopping Rs 1,292 Billion (or 65.2 percent) of its assets.The below figure shows the composition of the retail finance loans

Out of this Personal loans, Automobile loans, credit card and Home loans combined together contribute to 80 percent of the total loans.The underlying assets for these loans are not "self income generating" meaning unlike enterprises , capital loans or commercial loans the underlying assets in case of these loans are used for luxury purposes and are repaid by individuals whose "credit quality" are questionable or subjective and depends on several uncertain factors such as economy, employment and "repayment capability"

In its most recent quarter the Company reported about Rs 60 Billion in Non Performing Loans i.e approximately 10 percent of its total retail portfolio size . This ratio is pretty high when compared to its total NPA to total asset ratio of around 3.5 percent...The Company is also not that gung ho about retail loans anymore...infact they have
reduced on their retail loans as per the Company management

As we have said we
stopped doing business on the small ticket personal loans in
the month of November 2007 and that book is still running off.
So, once that book runs off say by the end of this calendar year,
one would see a lower impact in terms of provisioning on that
count. Overall we continue to be quite cautious on the retail
lending which I guess would be apparent from the retail loan
growth that we have seen in the current quarter and may be in
the last two or three quarters. We have tightened our credit
screens over the last six or nine months and we think in the
current environment with interest rates rising, inflation at a
higher level, we would not want to aggressively grow on the
retail side right now.

Clearly, retail loans are a pain area for banks.And banks with utmost exposure to the retail side of the business are likely to get fucked up in near to medium term.

3) Are we seeing a situation similar to sub-prime crisis here in India?

Ans: the real estate industry has clearly peaked during the last 3 years and is expected to dampen. Banks have become more cautious about their credit screens...and every Tom Dick and harry in a software Company with a total experience of 2 years wouldn't be getting housing loans for now....previously they used to get loans

But wat will happen to the loans already dipersed...only time can tell...depends on whether the employee taking the loan is leveraged (a typical leveraged employee earns approximate 70,000 per month but has EMI of 45 K for home, 10K for car ), the chances of him becoming unemployed ( once he becomes unemployed the risk of him coming under the NPA list is very high), income growth and as such the income generation capacity of individuals.

In a recessionary environment the chances of all this happening is pretty large . Consequently, although, a situation like the sub prime crisis appears to be far fetched, it does'nt look impossible.We would be able to analyse this situation in a better way once we have data on

1) the token size of each loan provided, te corresponing loan provided and the income generation capacity of each loan taker
2) the industry served by the loan taker (software, investment research and other service oriented industry might be risky currently)

I would get all the relevant data in a later post and analyse the gravity of the situation ....

As of now ...be careful...keep your cash, job... buy commodities and stock them and weather this downturn....

The Sky has started to fall

2008-07-01T08:48:00.000-07:00

i feel like bitching about the current status of the economy today

The last ten- twenty days have been pretty eventful ...what with the international summit on oil prices,more evidence of a global slowdown, increase in interest rates and the tanking of the fundamentally strong indian growth story...Guess the reality stocks and Banking stocks were the most affected...

whatever...My line of thoughts started with this small EMI calculator provided in QVCs website ...(a pretty useful one)

http://www.qvcrealty.com/resources/index.html...a pretty cool resource for calculating home loans....and repayment schedules..

My line of thought flew like this ...Let us assume I take a home loan worth Rs 35,00,000 from a bank at 11 percent (the current interest rate)for a duration of 15 years...My monthly EMI falls around Rs 37,000 per month for the next fifteen years...(I for one would be daunted by the nature of this recurrent payment)

Let us assume that an average software-engineer cum houseowner has taken this liability...he will have to pay about Rs 37,000 every year for the rest of his productive life to repay this loan(25- 40 years) ...All is well when things are going smoothly...The problem with this guy is...he is highly leveraged

Let us say the current economy plays the villain and jobs are slashed (the likelihood of it looks more probable as days go)...any job loss would have a direct impact on the guy's repayment capacity and inturn NPA figures of banks...Key things to be noted
1) Current salary levels are the highest in the industry...I dont see any significant increase going forward (what with new taxes and a depreciating dollar)
2) While the education industry pumps lakhs of software engineers into the economy the number of jobs in the IT industry are likely to remain same if not decline in the medium term.
3) Approximately 30 percent of ppl in the industry are on the bench (currently)

In short, highly leveraged lifestyle of SW engineers, volatile economic conditions , stagnating industry structure and chances of job slashes are directly pointing at a looming housing loan fiasco.

Of course dual income families can safely wade through this threat...but overall the Sky is falling :)

US Deteriorating?

2008-04-14T22:02:00.000-07:00

Last weeks news involving

1)The bankruptcy of more than four airlines within a single week
2)the rescue of more than 200 childrens from the poligamist church and
3) of course the news of Bears and Stearns planning to sack a considerable chunk of its employees in the coming quarters

makes me wonder if the US is losing its touch.It is intersting to note that a country known for upholding the rights of women has left the poligamist cult survive this long even after arresting its head during 2001.

Being a hardcore believer in capitalism I have always liked US for its cultural values...but recent news about the crumbling capitalism in the country is pretty disturbing.

Jim Cramer--- Bears Stearns is safe and healthy :)

2008-04-04T20:08:00.000-07:00

Randy Pausch - a great man who I always admire

2008-04-04T20:01:00.000-07:00

The Reason for the crisis explained in a funny way

2008-04-04T19:54:00.000-07:00

Sky is falling

2008-03-31T10:45:00.000-07:00

How much I like this sentence...I am planning to start a new series of posts on this "title"...generally giving commentary about the ongoing credit crisis...and about how the sky is falling :)

I was just talking to an analyst friend of mine about the crisis "situation"....He covers the entire gamut of investment banks (including bears stearns )and came up with very good insights on the current scenario.

Overall ...seems like the situation seems to be far from over (despite the bears stearns incident)..Big banks such as DB and Citigroup are getting ready for making their next round of write-downs this quarter...amounting to bilions of course this would cause severe repercussions and volatility in the market...

NYTIMES has a good article about the current scenario...

All said...I am getting ready for significant bottom fishing by the next two months

How true

2008-03-24T11:14:00.000-07:00

You cannot ask the sun for more sun and the rain for less rain....
Very meaningful words..
From the memoirs of a Geisha

Forecasting is tough work...every guy has his rainy day :)

2008-03-17T21:30:00.000-07:00

Here is Jim Cramer's take on Bears (funny the company has a bear in its name...from $180 - 0 (ok $2) in one year ...that is real bear stuff) one week ago...After all Analysts are humans...they are bound to mistakes (however bad it might be)

Found this link from pmarca's blog ...thanks Mark

valuing financial companies

2008-03-17T08:46:00.000-07:00

Bears and Stearns sbeen gobbled up for a paltry$2/per share by JP Morgan (Valuation of around $250 Million) today compared to its last trading price worth billions of dollars of market cap...on account of significant liquidity risks ----that posed a threat of shutting down the company if not bailed by an outsider...the trouble with Bears and Stearns was it dealt with too much mortgage securities....
That brings us to the fundamental question of taking into account the quality of assets( and balance sheet) while valuing an investment bank(or bank's or NBFC's ) .
After being in the financial indstry for two years..(in india)...I know that most of the finance companies act as punters (I touched on this industry characteristics way back in 2007)....

1) Very open minded credit screens( with loopholes that helps anybody to get loans)
2) lack of quality people at ground level to assess credit risks
3) stiff marketing targets(that drives every mktg guy crazy enough to sanction loans)
4) a Fundamental lack of accountability (which i guess is global)

Given all these factors...Banks might look good on paper but their true quality could be found out by the way the number of NPA's they have in their balance sheet...so keep a close eye for these numbers when you come across a financial institution....
1) Portfolio Mix
2) NPA accounted (a growing percentage generally smells trouble)
3) The kind of Equity mix involved with these securities (the higher the better)
Taking these factors into account ....

I find that banks exposed to the followig assets might face significant risks going forward.
1) Personal loans (on account of their lack of security to back-up on)
2) Housing loans (due to highly leveraged positions by employees in certain industry (IT in particular) that outstrips salary levels)

I believe commecial vehicles and construction equipment portfolios are relatively stable due to the reletively shortly payback cycle and the underlying quality of the assets to generate volume)

In short a business is like a human being (career , drive,education etc matters )just as generating profit matters for business...but at the end of the day balance sheet quality is vital (Health for human can be taken as a suitable anology) ...without health people die as organizations die without proper balance sheet quality...

However, the trouble with balance sheet problems faced by financial institutions are ...failures occur when things are not good (meaning failures are driven by events ..such as the recent mortgage chaos in the US)...mor of how to find if times are good or bad in another post

Health is wealth

2008-03-10T22:04:00.000-07:00

After several weeks of struggle with headache and spending 2,000 bucks on a CT scan (I was thrilled to see photos of my brain though)...everything is normal at my end.The headache taught me several life lessons
1)Getting burned doesn't improve your productivity (it makes you less productive)
2) Everyday in life is gods gift--I was anxious if the doctor would pronounce some mysterious disease name that doesn't have a cure, (as the cause of my headache) ...I even started making plans for my remaining days ...such as withdrawing to a hill resort...spending my rest of life with my kith and kin etc...Alas luckily the headache was diagnosed to be migraine..(which is really ok).After all these events I resolved that I would visit the temple daily and thank god for giving another shot at this place called earth.
3) I really understood what work-life balance meant...I read a post by my long time blogging friend Feld abot how he found worklife balance by restructuring his life....Although I might not be disciplined as Feld I plan to make it a priority

So there you go ...lessons learnt the hard way....
I will be back with more posts...(as it is also forms a part of the work life balance thingy)

Real Value

2007-12-23T06:07:00.000-08:00

I recently read a book (which was long overdue in my reading list) about Google's Story..What a great company.... this made me wonder about companies which have really added value to people's lives ...Lots of companies could be added to this list of "Value Adding Companies" ....but there are three major ground breaking companies that stand out

These companies actually didn't add value ...rather they changed people's lives...they saved millions of hours for the people and brought major revolutions along with their growth...Those three companies are Ford( As a large scale car manufacturer), Microsoft and google....The next question that enters my mind is...what made them so successfull....

Three things came to my mind when I searched for a common thread binding these three companies....... "simplicity, Scaleability and ofcourse ground breaking innovation " ...the likes of windows and google could reach hundreds of millions of people with their friendly user interface...and could be easily understood by a common man( One of my friends during my computer illeterate days ...used to tell me that .."No matter what happens with the windows you always have Ctrl Alt Del to save you"...That gave me much more confidence to play with my PC....ans i also used Ctrl Alt Del frequently)Also each company had a key competitve advantage on account of their technology...The technology that was simple at the front end...was pretty robust at the back end (what with loads of data centers and algorithms for delivering search results in case of google and the new method of manufacturing introduced by Ford that mainly depended on economies of scale)...

Another important aspect of their business was that their products were scaleable....This made it easier for them to reach millions of people with their robust technology....Also, if you look at the way they scaled their operations..... it is worth noting that all the three businesses were started by a 1- 2 member team ( 2 in case of google)..and used very low adertising dollars for promoting their services to consumers(at least to make people use their products)...Actually I hardly saw a google advertisement...asking people to use google....On account of the scaleability factor they actually became generics in their product class....online search has become equivalent to googling and operating systems have become equivalent to Windows XP ( Please note I am not using Vista here)....

So at the end of the day ...key takeaways from these success stories are ...1) generate a product or service that is scaleable 2) try to do some ground breaking innovations ...also on the way to your success try to enhance the quality of lives of people and of course earn handsome profits ( .....As simple as that...but easier said than done...)

Also another important that needs to be answered is ...who is gonna be the next google...A future company that could really add value at a global level....facebook or Apple?....Apple could definitely be a likely contender with their IPOD ..

However, I doubt facebook could be a likely a candidate.... despite its recent whopping valuation..I dont see them actually improving lifes of people...And I also doubt their strategy of monetizing....by using user activity to place advertisements on their profile page....Social networking could be another VOIP or ethanol fad in the making....So Apple is the most likely candidate...

but as of now I would like to say my thanks to Google and Microsoft for deeply impacting and improving my life....Thanks google and Microsoft

Time is up---- IT

2007-12-15T18:47:00.000-08:00

I recently watched a film named "Katradhu Tamil" (Learnt only Tamil) which talks about the tribulations of an youngster who has just learned tamil and is offended by the lifestyle of "IT Workers"....Although the film goes to the extreme and the hero turns into a psychopath.....It has opened-up many questions related to the current parallel economy running in our country...

I have sometimes wondered about how a growing industry (with high salary levels) impacts the quality of life of others....To give you an example two years before Hyderabad was considered to be one of the cheapest cities and I stayed in a posh apartment for peanuts (Akthough I still live in a decent place).Taking this as a benchmark I started my venture in Hyderabad after two years of working in Mumbai...I was in for a shock...Real estate prices and rentals have skyrocketed (literally 4 times in the last 2 years)..I guess this is due to the viral impact of IT workers migrating into cities

Another core aspect of the IT industry is the Social Discrimination it stamps on other community of works....House owners hesitate to give houses for rentals to "Non IT guys"...(I actually faced this kind of discrimination when a house owner actually told me that they dont give their houses to Non-IT guys..Although I typically earn 3 times more than an IT worker).....The discrimination also seems to be ripe in the marriage market(yes that is what it is currently ) where brides only want IT employed guys as Bridegrooms....So overall, although IT has contributed significantly in terms of fueling the national economy and setting a name for India in the global level ....it sure has its flipside....

But the honeymoon period seems to be over .... the Rupee is strengthening against the dollar...This is likely to atleast maintain salary levels at current levels(if not reduce them)...Saturday is gonna be working (Many companies have already started doing this)...And I hope these guys dont get thrown out of their job due to the declining US economy...(The banking sector ...one of the major IT spender in the states...is currently coming to terms with the sub-prime crisis)......and the industry is going to get taxed from 2008 (I think it is long overdue).Overall, the situtation will turn normal with real industries such as banking,steel and retail taking the economy forward....

But this might also impact real estate ...scores of IT people who have taken housing loans at preposterous debt service levels....would find their pants drawn down when the slow down hits....

What I like about the whole correction is...This entire cycle would get rid of the many fake (who are currently "On the bench") guys who are posturing as IT "Consultants" currently and bring high-class It guys to the front...

Long live IT..F...K IT

Naming

2007-12-11T09:56:00.000-08:00

Brad has a nice post about naming companies.Although I am not as experienced as Feld in this area I have had my days of "naming companies".

My first start-up was a call center trying to provide lead generation solutions.Since we thought "Lead" is the core of our service offering, three of us people sat together and started searching for a name with " Lead" as the theme.There was also this site http://www.dnsstuff.com/ which used to tell whether a concerned ".com" name was registered or not....Then the ranting started "Lead Pointer".(this one almost got selected), Lead Analsyst...and the ranting continued...(since three ppl were participating...a name suggested by one was not accepted by others and so on...and if at all three accepted the website was already booked) ....So the ranting continued for 2 more hours..

After sometimes a fourth person entered and told "Lead Achievers"....... although all of us were not satisfied , it worked out to be a decent compromise among us......So the name was set us LeadAchievers...

even now I am not comfortable with the name...Also somehow the idea didnt work out well too....

The second time I named my cmpany I never made compromises....

2007-11-08T22:32:00.000-08:00

i have been a looong time reader of Ben's blog and have always been inspired by his thoughts and actions.....he has a new video interview on his blog about his experiences and his startup trouble...pretty informative...

all wannabe entrepreneurs and running business people need to view this....

All the best Ben

Barbarians at the gates?

2007-11-07T20:49:00.000-08:00

Seems US now are worried anout Pakistan's Nuclear weapons...you gotta make out the ramifications of this worry on your own.....

Also Happy Diwali....