Friday, December 26, 2008

2008 : A Phenomenal Year

For a lot of pple the year 2008 has been a phenomenal year, for the right and for the wrong reasons but there is no doubt that its been a phenomenon. For instance, let’s take Indian sports as a whole and not just cricket, I believe its been the best Sports year ever as far as India is concerned, be it the Bindra, Vijender and Sushil in Olympics, Vishy in Chess, Saina in Badminton or even our much loved superstar Dhoni in Cricket (ya, when I mention Dhoni, I mention Indian Cricket, quiet a synonym you know). Ofcourse, Tennis has had a quiet year with Sania falling out of the top 100 but lets forgive her this time, after all she has been our most googled person for the year, ahead of the likes of Sachin and Dhoni, so in a way its been a phenomenon for her too. But please don’t even think of Hockey, I would suggest that we watch a ‘Goli Gundu’ game instead of a game of Hockey, I really don’t know who the hell made it our national sport.

At the other end of the spectrum, it could be the worst imagined year for the financial markets and the economy in general. The year started with the stock markets on its peak and ppl going crazy with their unrestrained equity investments supported by the much hyped decoupling theory. But the honeymoon didn’t last long as the market came crashing down for 2 consecutive days on Jan 21 and 22 and the Sensex plummeted to 15,000 levels from its 21,000 highs. From then on its been one bad news after another and all of a sudden ppl realized that the Indian markets are infact coupled with the global economy and its corresponding markets, the decoupling theory, all of a sudden, was thrown out of the window.

For the next 5 to 6 months (i.e, from Jan), there was hardly any hue and cry around the markets as the ppl stayed away from the markets citing a bear run, while the Sensex kept hitting new lows and as such creating lower support levels, if at all there existed one. For the last 6 months, the financial sector came crashing down, starting with the lehman brothers declaring bankruptcy, Morgan Stanley being taken over by Bank of America and the rest of the investment banks all over the world just followed suit. The Sub prime crisis theory indeed became a reality and had a cascading effect, as the economy in all over the developed countries officially fell into recession.

Quiet a phenomenal year for quiet a lot of ppl, recessions and gold medals don’t happen every year. For me, its been quiet phenomenal as well but of course not for the right reasons, infact there is a chance that I would fit into your ‘amazingly bad loser’ and ‘how not to be someone’ books. It all started with my desire to clear CFA level 1 without even having a faint idea of what it was or how tough it was, way back in February. I was getting a bit pissed off with the routine trading job in kotak and wanted to push myself a level higher in my professional ladder. That being the case, I had booked for the level 1 examination of CFA, which was quiet a costly exam mind u, amounting to about 45,000 rupees. Luckily, I had saved the required amount working in kotak and used up all I had to book for the exam.

CFA (Chartered Financial Analyst) is a recognized institute in USA and has been in existence for about 5 decades and is the epitome of finance related examinations till date. So for anyone with the desire to be recognized in the field of finance, CFA was a step towards that direction. Rightly so I took that direction not knowing or even foreseeing the repercussions of that decision.

The materials arrived from U.S, in mid February only to bamboozle my parents back home as they were flabbergasted as to how I would ever finish off those 6 thick finance related books to clear the exam. But for me, I was just a bit excited to know what its all about. When I started i was even unaware of the schweser material which is considered ‘God’s own material’ for all CFA aspirants.

As days passed, I realized the gravity of my decision, as even to get an orientation about all the materials would take a couple of months and it was already end of February with the D-Day being June 8, just three full months left. On the other side, work was consuming quiet a big chunk of my time resource and I was left with just the evenings to prepare. On trying to be rational and optimist I thought I would push off till April and request for a month off from office to aide my preparation. The request was considered by my group head but was not approved, instead of giving me a clear cut answer, he just insisted on buying some time from me.

By that time, my patience was running out and it was already 3rd week of March with a couple more months to go. From the last week of March I got a bit desperate for the leave approval and was pushing my group head to make a decision quickly so that I can plan my preparation accordingly. Finally, by my constant pressure, I had him open up his mind and he said a clear cut no for the leave approval. That made me quit the job in a week’s notice and I decided to give my all for this exam and then join a B-school by mid June in Mumbai.

I had never been a great student but there were times when I had faced the exams with really good preparation. This time it had to be better than the best since I was taking a big chance to scale up my career. I crammed for about 11 to 12 hours a day for the next 2 months and finished all the materials before the D-Day. Unfortunately I had little time to focus on the application front which proved to be my Achilles heel later on.

On the other side, there was an ongoing tiff between ICFAI (which was an Indian version of international CFA) and CFA, a court order was issued that made it illegal for CFA to conduct exams in India and so I had to fly to Singapore to take it. Luckily, I had some good company with Aravind (who is my cousin), Burange and Anuk (who were Aravind’s friends) who took the exam along with me in Singapore. However, there was a huge contrast in attitude between them and me, while I took the exam as though my life depended on it, these ppl appeared to come all the way to Singapore to just have some fun.

On June 8, the D-Day, all four of us completed our mission and were destined to have the fun of our life, the next 4 days. I had been a teetotaler so far and had no desire to drink even though some of friends were pretty much drunkards in college. But here I thought I would be spoiling the party if I appeared to be goody goody boy and so I decided to throw out the abstaining habit atleast for the next couple of days. As such my decision triggered the best drinking habits all these 3 guys as we jumped from one pub to another, to have the best time of our life, atleast that’s how these three guys perceived it, as I was pretty much unaware of what’s happening around me most of the time. I still remember that these guys ordered a tower in one of those pubs, which was a tall Jar like thing containing about 10 litres of beer. I almost fainted at the site of it, I thought these guys were crazy to have ordered one but still we finished every drop of beer and I hold the distinction of drinking most of it. Phew, I am the new found drunkard.

By the end of the Singapore trip, Burange and Anuk managed to get close to me and said that I made all the difference in the Singla trip to be remembered as an awesome one. Infact they even nicknamed me as ‘bhai’ because back in Singapore, I had lost these guys in the Mustaffa bazaar for about 3 hours and these guys kept saying ‘array bhai kahan gayi’ and so I had become a bhai for these two guys. Wow, hail the nicknames for all the irrationalities that it brings in. However, I knew I was more of a clown than a friend to these ppl, they were all of a different league altogether and I still had quiet a distance to travel before I could be considered on par with them.

On the flight back to India, these guys convinced me to take Cat one more time and then take a call on b-schools next year. That being the case, I discarded my initial plan and joined TIME in July with about 5 months to go for cat 2008. I was banking on the momentum that I had obtained by preparing for CFA and I thought if I could carry forward that momentum for the next 5 months I could atleast manage to get to the 90 percentile range.

In the meantime the results for CFA had come out and it was the first stroke of disaster for me, I wasn’t able to cross the line this time but the other three guys who had come for a picnic made it through. Now there is nothing more worse than failing to get through a exam giving your best while your friends get through as though it were a school level English exam. I couldn’t imagine a much dumber picture that I could possibly cast on myself, I wonder what these guys thought about me.

The result didn’t upset me as much as I expected it to but my parents weren’t much comfortable to know about it, after all it was about 80,000 for the whole trip. Already I was regarded as the dumbest person ever to have born in the history of my family and now am just adding proof to their theory. But still the proof was not proof enough, there was much more to follow.

I decided that I was going to see the failure in a rational manner and not take it emotionally. I realized that I was not prepared on the application of the concepts and that if I just screw in that area of my preparation next time then I would probably make it. Somehow my optimism was still undeterred and I booked for the exam again in the December slot.

But from then on the decisions that I took had only one result written on it – ‘FAILURE’. Let me just list them with little explanation.

In the meantime, which was in mid July i wanted to clear the bond market module of NCFM and booked for it. I wont say I was exceedingly prepared but I did a decent prep only to get 40% in the exam when the pass grade was 60%. Here it goes again ‘failed’.

In about August, I heard about the SP Jain institute which was conducting international MBA programs in Singapore and Dubai, the course was to start in December. I thought I would just get done with all these preparations, if I could get a 650 plus score in GMAT. I had promptly booked for gmat on September 30 with about a month and a ten days to go for that date. I had prepared for the exam and took 3 tests before the actual gmat exam and scored 620, 650 and a 610. I thought I would score above them on the day that mattered but things panned out rather differently. I got a horrible score of 490 on the actual test, puncturing my confidence like hell and putting me on an emotional turmoil for quiet a few days.

Well, yes, ppl can say that I was not up to the task, I had never been a great student and so what’s happening to me was only a reflection of what I had been in the past. Tough exam required top notch preparations and my run-of-the-mill preps just won’t do. Whatever the reasons maybe, I had some hard times to follow.

Let’s forget about the exam for the moment, my bro in US was having a great time and had just brought a house for 3 lakh dollars. I thought it would great to stay there for a month before I join some b school back in India. That being the case, I had booked the U.S Visa interview date for my mom and me on October 24th for a tourist visa. But when times are bad, things don’t pan out as planned, I was rejected a tourist visa on grounds that I was a potential immigrant. One more blow, one more dejection but this blow was like adding insult to injury.

I was preparing for about 5 to 6 hours everyday, right from second week of July but after the gmat debacle, the focus was just not there. I knew my state of mind was an ideal recipe for failure but still I wasn’t able to do anything about it. When I tried to put things behind me and try further, I was only getting dejected. What was happening to me was too bad as my subconscious mind was registering myself as a failure, I was getting scared to try again with all my josh.

Days passed by and cat arrived, the paper can be rated anywhere between moderate and hard with a significant weightage given to verbal section. I just decided to attempt the questions that am sure of and not take a chance on everything. I had attempted just 23 questions, thinking that a score of above 85 plus would put me atleast in the 80 percentile range. I was quiet sure of the answers that I had marked but a shocker was waiting for me in the answer key, I got most of them wrong and had a total score of just 42. That score brings in a percentile of a horrible 59.17. Even in my mock cats, I havnt scored so low, infact in the last few mocks I was getting above mid 80 and 90 percentiles.

Clearly, the year 2008 has not been the year for me, infact its been a phenomenal year of failures when whatever I touched turned only to disappointments and disapprovals. The good thing is that when you hit the bottom of the cycle, the only way forward is the way upwards and I hope the coming year brings in a fresh stream of luck.

Friday, December 19, 2008

Puppet Regime

Right after the Mumbai massacre we have been noticing the Indian government raising intense pressure against Pakistan to act against those terrorist who were responsible for 26/11 and many other attacks on the Indian soil. But the Pakistan government has been in the denial mode ever since the attack, denying the terrorists to be Pakistani nationals, when the whole world knows it’s a naked lie.

So why is the Pakistan government reluctant to accept the obvious and take concrete action against those trained terrorist, instead of making contradictory statements day in and day out. Why does the Pakistan government want proof when Ajmal kasab has openly confessed that he is a Pakistani ? Why do they want a medical forensic report when there has been a public rape ? The reason is pretty simple and quiet disturbing as well, the ministers at the helm of affairs and the President of Pakistan have been commanded to make those statements by the ISI. When the officials want to be any different, their threat to life becomes a reality in no time.

Near about a decade back, when Benazir bhutto visited America during her regime as the Prime Minister of Pakistan, the U.S official showed her the satellite pictures of nuclear weapons that were being proliferated in her country. Benazir was shocked and denied knowledge of any such proliferations in her country, which looks like a blatant lie to any of us but the matter of fact was that, she was right and she was honest, the ISI and the army chief had concealed the nuclear proliferation from her. Such is the level of decentralized system that exists in Pakistan and the ministers the helm of affairs are mere puppets who are entirely controlled by the ISI of Pakistan.

That being the case, a war on Pakistan, which currently holds the distinction of being the epicenter of terrorism, looks like a real solution that would dismantle all the terror outfits in the Pakistan soil but before we jump into the war option, lets do a post mortem of the recently concluded war in Afghanistan and Iraq by the Americans. Has the terrorism reduced by any extent ? Was Osama caught ? Did the situation get any better ? The answer is a big ‘No’ because when the basic system that exists in any country is destroyed, what results is absolute chaos leading to further creation of terror outfits which are much more motivated and determined. After all, Americans are not neighbors to Iraq and Afghanistan, they are thousands of miles away from them, therefore retaliation takes quiet some time and is all the more difficult but the case of India is much more sensitive and dangerous, since having a neighbour in total chaos will pose quiet a big threat than ever before.

The most effective way to drive for a solution would be to choke all economic activities with Pakistan and convince all other countries to isolate Pakistan until all the terrorist outfits, that lie quiet conspicuously, are dismantled. Such a stand would force the common man to raise his voice and power to bring in a centralized system that restores peace and a proper system that can be relied upon.

Such a stand will have serious repercussions on the economic and social front of India as well but atleast it’s a better stand than staying ignorant, when our neighbours breed terrorists and send them across for massive destruction.

In short, we will have to force our neighbours to form a real government and not a puppet one.

Monday, December 8, 2008

Terrorism but Chalta Hai

Fantastic reactions (please the pictures below and then come back to this letter), i salute NDTV, CNN IBN and other news channels for turning the tide against politicians. This is one rare occasion when the public are showing strong reactions and the politicians are just running for cover. I just love it, for a change lets make them run.

When i was coming back from Singapore yesterday, there was a person called Vijay Nambiar who was sitting beside me. He is settled in Indonesia and showed me a big letter from the Indians living in Indonesia showing strong reactions against the politicians in India. In one of the para, they ask that when Indonesia with far less GDP and technological advancement (compared to India) can capture and execute the men behind the bali blast that happened on October 2002 whose intensity and the impact is similar to the Bombay blast of 1993, why is the Indian government or lets say the political fraternity reluctant to do the same ?

Ofcourse, we all know the answer, dont we ? when power, politics and money play the game then rationality and justice jumps out of the window.

Its good that we all are reacting, atleast the politician gets to know that there is a limit to our 'Chalta Hai' attitude. But my point is until we create a proper system or a process through which our political leaders are selected, nothing will ever change. Until we make it a law, that requires the politicians at the helm of affairs to be highly qualified with a clean criminal background, nothing will ever change.

We all can shout slogans today, shout anti politician mantras today but how long can we do that, a week ? a month ? or a year perhaps ? and then we all would naturally return to our Chalta Hai attitude.

If we are not able to bring in a law that requires the politicians to be highly qualified and with a clean criminal background now then nothing ever will change.

If atleast a handful of highly qualified youth, watching all those tragedies and horrifying pictures doesnt decide to jump into politics and make a change for the better then am scared that nothing will ever change.

If nothing happens now then 'arrey bloody sub kuch Chalta Hai yaar' !!!

Friday, October 24, 2008

When Common Sense is not Uncommon but Rare

The famous cliché that "common sense is the most uncommon of senses" can’t be so right; I take it a step forward and say that its infact rare. Let me give you a sparkling example, I had a US Visa interview today at about 11:45 am and had gone to the consulate office promptly with all the necessary documents. I was called inside and all the mandatory checking’s were done, after which I waited for about 15 minutes for the interview which was to be conducted by an American Lady.

The Visa I had applied for was for a tourist visa - b1/b2, yes, TOURIST visa and not for a h1b or a student visa, when that’s the case I expected questions on where I wish to stay, places I would like to visit, a few questions to check on my financial soundness to support myself in US and finally to check that I don’t have any criminal records against my name but on the contrary I was asked about half a dozen questions on my educational background and on my employment. Please don’t get me wrong here, am not saying that those questions shouldn’t be asked but they are no decisive questions to determine a simple TOURIST visa and dear me, what more, I was denied a tourist visa saying that I was a potential immigrant.

Now, this was a shocker to me for a very simple reason, if u can deny a simple tourist visa citing my educational or employment background as an appropriate reason then how the hell can u even think of giving a h1b or a student visa, as everyone of them is bound to be a potential immigrant. Of course, this was a case where I can strongly say that lack of common sense was at its best and not likely to be the same on some other day but my point here is that, if a place like the US Consulate can be an epitome of uncommon sense then should I even cite other places where u find them?

This little incident, even though it doesn’t mean much lose to me, has strongly pushed me to believe that common sense is very much likely to be endemic and as a result a rarity and we all have subconsciously or unconsciously have started to accept its prevalence around us and what more, we find it to make a lot of sense.

May God save us!!!

Wednesday, July 30, 2008

CFA preparation guidelines for level 1

Hi friends,
I had taken my CFA level 1 exam on June 08 and thought that my insight and perceptions on level 1 could help you all prepare better for the exam.

* CFA material is pretty voluminous that’s probably because it’s designed to be a 6 month course.

* Schwezer material is much more precise and more than enough for level 1

* CFA material or Schwezer material alone is not enough, you will need the full length question papers and question bank.

* If you are able to solve about 2000 questions, then you should feel confident on giving the exam

* The examination focuses on application of the concepts.

* The problems are pretty simple if u know how to solve them, there would be no lengthy or complex calculations.

* There are totally 10 sections and its better if you show competence in all the sections. (i.e) score at least 50% of marks in each section. Else you may have to cover if it up in other sections.

* The total time given for examination is 6 hours which is split up into two sessions of 3 hours each.

* There are totally 240 questions and the weightage for each question varies. Each session carries 120 questions.

* You can attempt the questions that you are comfortable with first and then come back to other questions.

* I would recommend solving the ethics questions in the end since they are the lengthy questions and would consume more time to read through them.

* Though 6 hours are given for the examination, all the questions can be pretty much solved within 5 hours if you had done a perfect exam oriented preparation.

* If you have done your MBA in Finance or PG in Capital Markets then you should feel comfortable with a max of 2 to 3 months of preparation.

* Try to have the last month solely to solve problems, so that you go into the exam on the right mode.

* If you make an effort and clear the NCFM (NSE’s certification in Financial Markets) modules ( namely the Derivatives market and Debt market before your CFA preparation then it would actually make your preparation much easier.

* On an average about 30 – 35% of pple clear the level 1 examination, I do have a doubt as to how it can always to be only that much or only in that range. So it’s obvious that you need to be at least in the 70 percentile range to get through.

Outline of CFA Course

As a CFA Program candidate, your course of study is determined by the Candidate Body of Knowledge™ (CBOK). The course includes

* Ethical and professional standards
* Quantitaive methods
* Economics
* Financial statement analysis
* Corporate finance
* Analysis of equity investments
* Analysis of debt investments
* Analysis of derivatives
* Analysis of alternative investments
* Portfolio management

Some popular CFA preparation forums

* AnalystForum
* CoolAvenues
* FTC Kalpan
* AnalystNotes
* FinancialExams
* FinancialCertification

Free online CFA Mock Exams


Important CFA Video Links


All the very best.

Friday, July 25, 2008

Exchanges around the world

African Stock Exchange

GhanaStock Exchange, Ghana
Johannesburg Stock Exchange, South Africa
The South African Futures Exchange(SAFEX), South Africa

Asian Stock Exchanges

Sydney Futures Exchange, Australia
Australian Stock Exchanges, Australia
Shenzhen Stock Exchange, China
Stock Exchange of Hong Kong,Hong Kong
Hong Kong Futures Exchange,Hong Kong
National Stock Exchange of India,India
Bombay Stock Exchange, India
Jakarta Stock Exchange, Indonesia
Indonesia NET Exchange,Indonesia
Nagoya Stock Exchange,Japan
Osaka Securities Exchange, Japan
Tokyo Grain Exchange, Japan
Tokyo International Financial Futures Exchange (TIFFE), Japan
Tokyo Stock Exchange, Japan
Korea Stock Exchange, Korea
Kuala Lumpur Stock Exchange, Malaysia
New Zealand Stock Exchange, New Zealand
Karachi Stock Exchange, Pakistan
Lahore Stock Exchange, Pakistan
Stock Exchange of Singapore (SES), Singapore
Singapore International Monetary Exchange Ltd. (SIMEX), Singapore
Colombo Stock Exchange, Sri Lanka
Sri Lanka Stock Closings, Sri Lanka
Taiwan Stock Exchange, Taiwan
The Stock Exchange of Thailand, Thailand

European Stock Exchanges

Vienna Stock Exchange, Austria
EASDAQ, Belgium
Zagreb Stock Exchange, Croatia
Prague Stock Exchange, Czech Republic
Copenhagen Stock Exchange, Denmark
Helsinki Stock Exchange, Finland
Paris Stock Exchange, France
LesEchos: 30-minute delayed prices, France
NouveauMarche, France
MATIF, France
Frankfurt Stock Exchange, Germany
Athens Stock Exchange, Greece
Budapest Stock Exchange, Hungary
Italian Stock Exchange, Italy
National Stock Exchange of Lithuania,Lithuania
Macedonian Stock Exchange, Macedonia
Amsterdam Stock Exchange, The Netherlands
Oslo Stock Exchange, Norway
Warsaw Stock-Exchange, Poland
Lisbon Stock Exchange, Portugal
Bucharest Stock Exchange, Romania
Russian Securities Market News, Russia
Ljubljana Stock Exchange,Inc., Slovenia
Barcelona Stock Exchange, Spain
Madrid Stock Exchange, Spain
MEFF: (Spanish Financial Futures & Options Exchange), Spain
Stockholm Stock Exchange, Sweden
Swiss Exchange, Switzerland
Istanbul Stock Exhange, Turkey
FTSE International (London Stock Exchange), United Kingdom
London Stock Exchange: Daily Price Summary, United Kingdom
Electronic Share Information, UnitedKingdom
London Metal Exchange,United Kingdom
London InternationalFinancial Futures and Options Exchange, United Kingdom

Middle Eastern Stock Exchanges

Tel Aviv Stock Exchange, Israel
Amman Financial Market, Jordan
Beirut Stock Exchange, Lebanon
Palestine Securities Exchange, Palestine
Istanbul Stock Exhange, Turkey

North American Stock Exchanges

Alberta Stock Exchange, Canada
Montreal Stock Exchange, Canada
Toronto Stock Exchange, Canada
Vancouver Stock Exchange, Canada
Winnipeg Stock Exchange, Canada
Canadian Stock Market Reports, Canada
Canada Stockwatch, Canada
Mexican Stock Exchange, Mexico
AMEX, United States
New York Stock Exchange (NYSE),United States
NASDAQ, United States
The Arizona Stock Exchange, United States
Chicago Stock Exchange, United States
Chicago Board Options Exchange, United States
Chicago Board of Trade, United States
Chicago Mercantile Exchange, United States
Kansas City Board of Trade, United States
Minneapolis Grain Exchange, United States
Pacific Stock Exchange, United States
Philadelphia Stock Exchange, United States

South American Stock Exchanges

Bermuda Stock Exchange, Bermuda
Rio de Janeiro Stock Exchange, Brazil
Sao Paulo Stock Exchange, Brazil
Cayman Islands Stock Exchange, Cayman Islands
Chile Electronic Stock Exchange, Chile
Santiago Stock Exchange, Chile
Bogota stock exchange, Colombia
Occidente Stock exchange, Colombia
Guayaquil Stock Exchange, Ecuador
Jamaica Stock Exchange, Jamaica
Nicaraguan Stock Exchange, Nicaragua
Lima Stock Exchange, Peru
Trinidad and Tobago Stock Exchange, Trinidad and Tobago
Caracas Stock Exchange, Venezuela
Venezuela Electronic Stock Exchange, Venezuela

Friday, July 4, 2008

Bateson's Belfry

In about the mid nineteenth century, in an era of quacks and inept American and European doctors, arose a problem of identifying the dead from the alive because pple where not skillful or knowledgeable enough to confirm for sure whether a person was dead or was just unconscious and they didn’t even know that cardiac arrest could be reversed. As a result, there were a lot incidents, wherein a person was buried alive not knowing that he was just unconscious and to compound the problem further, there were a few occasions when a person who was considered dead, got up and started to move just when the person was about to be buried.

In one such incident, a little boy of about 10 years of age, got sick and fell unconscious, the boy didn’t get up or move even after several attempts by those quacks and inept doctors. Hence he was considered dead and all arrangements had been made by their parents to bury him the next day. The next day, with a heavy heart, the parents took their son’s body to bury him in a place that was reserved for him but by that time it was more than a couple of days since the boy had been unconscious and when a shovel full of sand was thrown on him, the slight impact made him gain some consciousness and started to get up and move. This made the pple around him scared and unsure if the boy was indeed a human or a ghost in action.

Incidents like these caused a lot of inconvenience to the family and the pple in general. As a result, whenever a person was declared dead by doctors, the body was still kept by the family members for about a few weeks to at most a month to confirm their death. But this practice reached an extreme when the Duke of Wellington died in 1858; his burial was postponed for about 2 months.

This resulted in pple burying the bodies with a crowbar and shovel in their casket, assuming that the person, if alive, would dig himself out and rescue himself. In the case of wealthy pple, they would make one of their servants to stay near the casket for a couple of weeks and would fix a pipe with one end into the casket and the other end propping out of the ground so that person could communicate throw the pipe just in case he was alive. But even after this effort, pple were still living with a guilt feeling of burying their own family member alive.

Seeing this as an opportunity, a gentleman named George Bateson invented a mechanism which was economical, efficient and something that promoted peace of mind amongst the bereaved in all walks of life. His invention came to be known as Bateson’s belfry and consisted of an iron bells on top of the casket with a cord being attached to the dead person’s hand, making sure that even the slightest movement would set off the alarm.

Though there has been no case recorded, wherein a person had been saved due to Bateson’s belfry, the demand for such a casket grew by leaps and bounds making Bateson a very rich man.

Ironical as it may sound, the belfry casket produced a sense of fear in Bateson as he reached the latter years of his life, for he was scared of being buried alive in the belfry casket. The fear in him grew so large and worse that he immolated himself by dousing in linseed oil and setting himself on fire.

So next time you plan to invent something, beware, chances are that your own invention may get you. :)

Sunday, June 29, 2008

Economic Jargons

Marginal Propensity

The proportion of your excess money or excess income that you spend

Marginal Revenue Product

The revenue that an additional unit of labour would bring into the firm

Real wage rate

Quantity of good and services that an hours work can buy


It’s a combination of recession and inflation i.e a contradictory phase where both unemployment and inflation are high

Okun gap

The amount by which potential GDP exceeds real GDP is called the Okun gap. Its also called the recessionary gap

External Economies

Factors that are beyond the control of a firm that lowers the firms cost as the industry output increases

External Diseconomies

Factors that are beyond the control of a firm that raises the firms cost as the industry output increases


Amount by which price exceeds marginal cost. In perfect competition, the price is always equal to marginal cost but in monopolistic competition, the buyers will always pay a price more than the marginal cost


Action taken by an informed person to pass on the information / message to an uninformed person

Derived demand

When the demand of a product or service is derived from demand for other goods and services then its said to be derived demand

Substitution effect

Higher the wage a person is offered, the more a person is willing to work.

Income effect

Higher a person’s income, the more, will the person be inclined for leisure and the more he is inclined to forgo work for leisure.

Backward bending supply of labour curve

When the wage rates raises, the substitution effect brings in an increase in the quantity of labour supplied while the income effect decreases the quantity of work supplied. At low wage rates, the substitution effect is larger than the income effect so pple tend to supply more labour. But as the wage rates keeps raising, the income effect eventually becomes larger than substitution effect and thus decreases the labour supplied. This brings in a backward bending curve in the labour supplied.

Types of Demand

Elastic demand

When an increase in price of a product brings about a greater decrease in the demand of the product, then its termed as an elastic demand.

E.g: Fancy pens, fancy items. Electronic goods.

Inelastic demand

When an increase in price brings in a slight or no change in demand of a product, then its termed as inelastic demand.

E.g: Cigarettes, Oil, essential commodities.

Perfectly elastic demand

An increase / decrease in the price of a product brings about an equal increase / decrease in demand of that product

Perfectly inelastic demand

When an increase in the price of a product does not bring about a decrease in the demand of the product then its said to be perfectly inelastic demand

Friday, June 27, 2008

Economics and its basics

When talking about economics one can simply define it to be a branch of social science that studies the production, distribution and consumption of goods and services. In other words it shows the human mentality towards consumption and production of goods and services at a given point or period of time.

Economic can generally be classified into Macroeconomics and Microeconomics.

Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. Microeconomics focuses on supply and demand and other forces that determine price levels for specific companies in specific industry sectors.

Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as whole and not just on specific companies, but the entire no. of industries within a country. Factors that are religiously followed in macroeconomics are GDP, unemployment rate, national income, rate of growth, price levels and the level of inflation.

The economics of any country be it democratic or communist generally is based upon one of the two principle given below, though I believe that world wide it’s the symmetry principle that’s followed by the majority.

Utilitarian Principle

It simply states that everyone has the basic needs and wants to enjoy life and hence there should be no rich or poor people and that everyone should be equal atleast wealth-wise.

Its motto is “things are not fair if the results are not fair”.


Every individual has the same basic wants and similar capacity to enjoy life.

The millionth dollar spent by a rich man has far lesser marginal benefit than the thousandth dollar spent by a poor man. Hence it makes more sense to transfer the excess money from the rich to the poor.


The rich person will start to work less and thus the quality of work will fall dramatically.
Cost of transferring the income from the rich to the poor will create a lot of inefficiencies in the whole process
Such a process ultimately shrinks the economic pie

Symmetry Principle

This principle is sort of opposite to the utilitarianism principle. Its just says that pple in similar situations should be treated similarly.

Its motto “Its not fair if the rules aren’t fair”

It follows 2 rules:

Private property must be protected from theft by implementation of strict laws.
Property must be exchanged from one person to another only by voluntary exchange.


It doesn’t bother about how the economic pie is shared amongst pple hence there raises a natural inequality among pple.

Having just touched the two basic principles, the next in line is the macroeconomic view or the macroeconomic school of thought that one can probably have. They are:

1. Classical view
2. Keynesian view
3. Monetarist view

Classical View

The classical view is about believing that the economy is self regulating and that its always at full employment.

It believes that the economy doesn’t need automatic stabilizers (like loan waiver, providing certain amount of cash to unemployed pple) and that the economy stablizes by itself.

Believes that if there are no disincentives in the economy (like taxes and other externalities), the economy will always be efficient and would expand at a rapid pace.

Aggregate demand

According to Classical view, technological change or advancement has the most significant influence on both aggregate demand and supply since the same amount of capital invested brings in more utility.

Aggregate supply

Believes that the wage rate adjusts quickly (either increases or decreases) to maintain equilibrium in the labour market. This is one point that doesn’t happen in the pragmatic world.

Keynesian View

The term Keynesian is derived from the famous twentieth century economist – John Maynard Keynes.

He believes that the economy, when left alone, will never be at full employment and to achieve full employment there has to be an active fiscal and monetary policy.

Aggregate demand

He believes that peoples expectations has the ultimate significance on aggregate demand and that a wave of pessimism about future profit can lead to a fall in aggregate demand and thus would plunge the economy into recession.

Aggregate supply

Believes that the money wage rate and the prices of goods and services are extremely sticky in the downward direction and hence there would be no automatic stabilization of the economy once it goes into recession.

Monetarist View

Believes that the economy is self regulating and efficient if the monetary policy is not erratic and the pace of money growth is kept steady.

Believes there should be minimum disincentives (likes taxes) for the economy to function smoothly.

Aggregate demand

Quantity of money has the most significant impact on the aggregate demand.

Aggregate supply

Has the same view as Keynesian

Hope a bit of economics helps you. [:)]

Thursday, June 19, 2008

Ironies of life

I board a public transport bus in Chennai and sit near a big black lady, she looks at me as though am an indecent chap and that am trying to make a move towards her.

I do the same in a Mumbai public transport bus and sit near pretty chick but here the girl is cool and is even ready for a small talk.

This is as big an irony as it can get .. dear god i must say that you ve written ur equations wrong but the best part is 'i dont mind'.. he he.

Saturday, May 24, 2008

Bush and inflation

Many pple were making fun of what Bush said a few weeks ago about the increase in income levels of middle class pple in India and China to be a major reason for inflation, infact i was one among those pple too. On a rethink i may possibly be wrong in my estimation, there is another school of thought who make sense in what bush said. When bush said that pple in India and China had started to consume more, it doesnt mean that we all had started to eat more (which is a blatant form of taking it), it means that the affluence levels of a majority or lets say a portion of pple in both countries has gone up. When that happens the supplier will know that u will pay more for the same commodity and hence charges u more. Well, there can be more than one definition of demand, first one is when pple have started to ask for more quantity and the other is when pple are ready to pay more for the same quantity, we may probably be experiencing the second one.

Various commodities of food are generally inelastic which means that significant increase in price does not bring about a decrease in demand. When thats the case, the supplier will keep testing the sensitivity levels of the consumer by increasing the prices untill a point where he feels that pple have become real sensitive i.e a point where the commodity becomes elastic. Between these two levels i.e the insensitive and sensitive level, the prices would mostly skyrocket.

However, an increase in affluence levels of pple alone may not be the only reason for inflation. In an country like India who happen to be net importer, our annual fiscal deficit for 2007-08
is around $80bn even if we remove importing oil out of the equation we would still be $3bn in deficit which says that we are a net importer and we have always been importing wheat and other essential commodities in the past to satiate our local demand. That being the case, there has been a shortage of food production, world over for the current year which adds to the supply side inflation. When it comes to food, what we have is a world food market, something that affects other countries affects us also. Hence to an extent, we can say that, the inflation that we have now to be an imported inflation.

Ofcourse this is a definite demand-supply mismatch but the good news is that famers will start to produce more wheat, rice and other essential commodities and that should satiate the demand and possibly bring down the price. As per the recent study, the farmers in Afghanistan have switched from growing opium to wheat owing to greater price for wheat. Isnt that good news ??

Now, the only reliable and sensible way to mitigate the increasing food prices when the economy is booming is not by banning exports or putting a cap on price but to use the futures market and hedge yourself from increasing price rise akin to what the IT organisations does to protect itself against decreasing $ value.

Hope the govt. listening :)

Tuesday, April 8, 2008

Dad and stock markets

The other day i showed my dad the trading terminal and said this is
how the stock market works. I thought he would actually be
awestruck by the amount of capital that comes into this game called
Stock market but i was taken aback when he said this thing called the
stock market is an absolute bullshit and that it doesnt add any value
into the economic system. I wonder how he can possibly say that
especially since stock market is the place where capital allocation
takes place and where dormant cash is set into motion to create more
GDP and the GDP indicates the ultimate form of an economic growth.
Ofcourse my dad is pretty new to stock markets and i can understand his
naive comments but i wonder how everyone who knows the word 'Stock
market' and not much more than that do eventually say that its as a place
to gamble, it doesnt make sense, its a place where u loose money and
its a place where u get fooled more often than not.

oh .. Common give me a break .. if u have a certain yardstick on stock
market then why the hell dont u have the same yardstick for the other
sections of the economy as well. Let's take for instance the
advertisement industry who on a lot of occasions overemphasize their
product to a level that they say "if u drink horlicks daily then u will
become a SUPERHUMAN for the rest of ur life" .. my goodness me .. why
cant u pple see this as a blatant form of cheating ??? .. In another ad
a youth tries to woo a girl but without much luck, when he tries it
again with wrigleys chewing gum, the girl comes right into his arms and
they start loving forever after .. so is Wrigleys going to give me a
girl if the its chewing gum doesnt work ?? .. u will call me a stupid
if i ask that question but dear why do u pple use a different yardstick
here .. this is cheating as well .. afterall he is advertising
something for which he has no intensions of giving a guarantee.

Another criticism has been the extreme levels of price discrepancies in the stock market.
Now lets have a check on the price discrepancies in the outside world :
Diesel (regular) in Mumbai : Rs.36.08 per litre Petrol (speed) in Mumbai : Rs.52 per litre Coca Cola 330 ml can : Rs.20 = Rs.61 per litre (does that make sense)
Dettol antiseptic 100 ml Rs.20 = Rs.200 per litre
Radiator coolant 500 ml Rs.160 = Rs.320 per litre
Pantene conditioner 400 ml Rs.165 = Rs.413 per litre ( i never knew maintaining my hair was such a costly affair .. i better be bald)
Medicinal mouthwash like Listerine 100 ml Rs.45 = Rs. 450 per litre
Red Bull 150 ml can : Rs.75 = Rs.500 per litre
Corex cough syrup 100 ml Rs.57 = Rs. 570 per litre
Evian water 500 ml Rs. 330 = Rs. 660 per litre
Rs. 660 for a litre of WATER???!!! And the buyers don't even know the source (Evian spelt backwards is
Kores whiteout 15 ml Rs. 15 = Rs. 1,000 per litre
Cup of coffee at any decent business hotel 100 ml Rs. 50 = Rs. 500 per litre
Old Spice after shave lotion 100 ml Rs. 175 = Rs. 1,750 per litre
Pure almond oil 25 ml Rs. 68 = Rs. 2,720 per litre
And this is the REAL KICKER... HP deskjet colour ink cartridge 21 ml Rs.1,900 = Rs. 90,476 per litre!!!

Are u pple by any chance trying to tell me that the explicit costs
for a HP deskjet or a coffee or a bottle of pepsi is much greater than
the expenditure of an oil producing company ?? .. If u do that would be
the joke of the century .. yes i know that the govt. is subsidising
their costs but even then explicit costs of other industries are no
where near.

Give it another thought and then u will tell me that all these price
discrepancies is because of the demand-supply equation. This equation changes on a continuous basis and hence u will always see a change in price. The same goes
for stock markets as well, when lakhs of players play the game at the
same time there is bound to be a price discrepancy. People who
understand that play well and pple who dont lose the game.

Am not trying to say that there has been no fraudulent activity here
but please tell me an industry that has none.