The whole collapse was fueled by the excesses of the financial institutions and the professionals who were a part of them.  Technology ensured that that complex financial products like CDOs were sold to institutions, retail investors.  People with no jobs were given loans to buy property, excessive salaries for brokers, heads of major financial companies only made them greedier leading to more and more desperation in inflating sales so that they could take a bigger and fatter pay packet at the end of the month.

Prostitution, fake bills, consuming cocaine and other forms of drugs, splurging on luxury goods, bay-front properties, casinos etc was the order of the day for the bankers, brokers employed in these institutions on Wall Street.

According to this list provided by the Federal Deposit Insurance Corporation, more than 370 banks have closed down since the beginning of 2008. An estimated $14 trillion was lost because of the crisis.  And that is just a lower estimate.  The true cost of the whole crisis might never be known.  Millions of jobs lost, tens of millions of people pushed back into poverty.

All those responsible for the crime were never brought to justice, nor will they ever be. Some of the ones who violently opposed any form regulation of the financial industry which was the basic cause of this financial crisis are now sitting comfortably in the seats of power.  They are today part of the government.  Alan Greenspan, Ben Bernanke, Timothy Geithner; everyone contributed their part to the crisis not to mention Dick Fuld (Lehman Brothers), Angelo Mozelo (Countrywide Finance), Hank Paulson (Goldman Sachs & Treasury Secretary in 2006), George Bush, Bill Clinton etc were in some way or the other responsible for the mess we find the world in.

During the boom years of the 2000s, there were lots of people hectoring the Reserve Bank of India (RBI) for taking a conservative stance and blaming the RBI for not opening up the financial markets to the so-called reform that the US was doing. Its that same conservatism that shielded India and its banks from getting smashed up by the tsunami created in the US and world financial markets.

For years, the Wall Street had been my dream place to work.  I loved the whole idea of minting money the way the bankers made.  From the late 90s till the collapse in 2008, i had a rosy idea of these places. In fact, my dream job would have been working with Lehman Brothers, Merrill Lynch etc.  As i kept reading about the collapse in 2008 and the circumstances that lead to it, it not only crumbled my dreams but also made me think if i could have handled such a life of debauchery & lies that were commonplace in this industry.

Would i be able to mis-sell a product to a retail investor and then go home and sleep peacefully?  The movie raises a lot of questions about morality and your job.  For every parent who wanted their kids to join the financial industry and make tons of money, this movie is an eye opener.  Money is there in abundance, but what we need to realise is if there is the moral compass that can guide us when the excess money flows in.

Are you an investor in real estate, stocks, bonds, mutual funds etc?  Are you planning to make a career in the financial industry?  Do you know someone who works there?  This movie is a must watch and the book “The end of Wall Street” is a must read.  Roger Lowenstein writes a blow by blow account of the last few days of the collapse of the Wall Street.  Its a riveting read.

And yes, if this doesn’t outrage you, nothing will.  Because in the world of finance, there is something called TBTF (Too Big to Fail).  Just become big by hook or by crook and then the government will ensure that you will never fail.  They will always bail you out no matter how big an asshole you have been.

“If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” – J Paul Getty

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Work is too hectic.  Been more than a week into the new position.  Lots of responsibilities and lots to learn.  Challenging no doubt, but happy that Iam learning a lot.  Been stuck in the rut for some time now.  Took this leap of faith and till now, its been pretty satisfying.

The markets have been on a roller coaster.  Up one day and down the next 2 days.  Havent had time to look at my portfolio which has been red when i saw last week.  Not thinking much about it.  Bought some good companies (i believe) on the dips and i will now wait for the market to go up.  There are indications that it might go down further.  No worries.  Will wait for it to go up.

Meanwhile, the cricket world cup is in full flow.  India is now on the top of the table, but had just one challenging match (against England).  The match against South Africa this weekend will be the one to watch out for.

Meanwhile reading a lot of finance / investment books.   Am in the process of making changes to my career and life in general.  As and when significant changes happen, i will update here.  Till  then, let things drift.

There was a time when i had trouble reading one book.  Today, am simultaneously reading 4 books, 2 magazines and books related to the course iam attending.  Not to mention technical documents related to work.   I cant believe that i have time to do all that.  Wifey hasnt had any complaints that iam not spending time with her.  In the past few months, have gone to the Zoo, Bird Park, Marina Bay Sands, Singapore Science Center and a few other places with her.  More places here in Singapore to explore.  Wanted to go overseas for a holiday, but am waiting for some time for me to get settled into the new job responsibilities.

Time isnt a hindrance if one plans properly.  Earlier, i was too lethargic. This year of the rabbit has been too good for me already.  Hope the luck stays.  I need it.  Have a lot to achieve this year.

The woods are lovely, dark and deep,
But I have promises to keep,
And miles to go before I sleep,
And miles to go before I sleep.
- Robert Frost

A big thank you and wishes to all the women who have touched me in some way and been a part of my life.  Thanks a million.  Wishing the best on the centenary celebrations of the International Womens Day – 2011.

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Kumar’s symbol (on the left) is an amalgam of the Devanagari ‘Ra’ and the Roman capital ‘R’ without the stem, very much in line with what Finance Minister Pranab Mukherjee had envisioned. “We intend to formalise a symbol for the Indian rupee which reflects and captures Indian ethos and culture,” Mukherjee said in his Budget speech this year.

The chosen symbol has the Finance Minister’s approval, said a Ministry official.

The Ministry had organised a symbol design competition with a prize money of Rs 2.5 lakh with the condition that it should be applicable to the standard keyboard, be in the national language script or a visual representation and should represent the historical and cultural ethos of the country.

Full news here

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The authors of this book are Bill Bonner & Addison Wiggin who have been writing the free daily newsletter, The Daily Reckoning for more than 10 years now. The newsletter covers a lot about the daily economy, world politics, investment strategies, gold, stock market etc.  Bonner is also the founder and president of Agora Publishing.

The authors believe that the America of today has left the values of its founding fathers far behind and has become an imperial power instead of being a country.  Bonner also believes that the end of America is also coming soon.  The author talks about the dollar crisis, the coming end of the US economy. He writes about how successive US governments have gone to war and wasted all resources, the decoupling of the dollar to the gold standard, the federal reserve under Alan Greenspan with his inflationary policies totally wrecked the US economy.

Quoting from Amazon,

Bonner and Wiggin view ancient Rome as the classical model of empire. Running an empire was an expensive business; the folks in the homeland needed to be mollified with government handouts (bread and circuses), while a large military had to be maintained in the frontier. Rome used its military power to exact tribute from neighboring states; it was a protection racket, no different from the Mafia. Nevertheless, this scheme generally kept the central state solvent and the territories at peace. The United States is also an empire, Bonner and Wiggin maintain, but it does not follow the classical model. It placates its citizens with massive distributions of government largess while using its powerful military to exert influence and keep peace abroad. However, “[i]nstead of getting paid for providing protection, the United States is on the receiving end of loans from its tributary states and trading partners ” (p. 77). This is how the United States became the Empire of Debt.

Empire of Debt: The Rise of an Epic Financial Crisis
Authors – Bill Bonner & Addison Wiggin
Pages – 384
Publisher – Wiley

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The GDP growth rate had slowed to 6.7% in 2008-09 following the global economic crisis, after topping 9% in the previous three years. On Monday, finance minister Pranab Mukherjee reiterated his confidence that the economy would grow at 8.5%-plus in 2010-11.

Finance secretary Ashok Chawla also pegged economic growth at 8.5% in 2010-11. “The growth numbers are pleasant but not really surprising, because we were expecting them to be robust which they turned out to be. This clearly indicates the momentum which is in the economy and the expectations that the 8.5% estimation for 2010-11 is going to be a clear possibility,” he said.

Full article here

Above picture courtesy: Moneymint

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Bank of Rajasthan, one of the oldest private sector banks in the country, on Tuesday announced that it would merge with the largest private sector bank, ICICI Bank.

The board of ICICI Bank, which met later in the day, also agreed to give in-principle approval for merger of Bank of Rajasthan with it “subject to due diligence and valuation by an independent valuer jointly appointed by both banks.”

“The board will consider the due diligence report and the valuation report at a subsequent meeting. The proposal if approved by the boards of ICICI Bank and Bank of Rajasthan would then be placed before the shareholders of both banks for approval and would be submitted to the Reserve Bank of India (RBI) for its consideration,” ICICI Bank stated after its board meeting here.

Full article here

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“There is a drop both in the number and the quality of Ph.D. applications, more noticeably in the last two years.” says Anand Sivasubramaniam, professor of computer science and engineering, Pennsylvania State University (Penn State). “This year, of the more than 700 applications we received from prospective graduate students worldwide, the number of applications from top Indian institutes such as the IITs and IISc was in the single digit. Less than three years ago, this number was in the double digits,” he says. An article this February in The Chronicle of Higher Education reported a 50 percent decline in the number of new Indian graduate students this Autumn at the University of Georgia. The computer science department at California State University (Long Beach) saw a spate of prospective master’s students from India abandoning their application process midway.

“It’s the beginning of a trend, an indicator that something is happening and that Indian students are not coming here like they did in the past,” laments Dr. Nathan Bell, director of research at the Council.
You don’t have to look far to find the reasons for this. With the US economy in a shambles, there are severe budget cuts at state-funded universities. The prospects of obtaining a full waiver of tuition fees are slim. Dwindling grant money also means that local students stand a better chance of getting a research fellowship than foreign students. So, many Indian students end up working for free. Last semester, Atulya Prasad, a master’s and Ph.D. candidate in biomedical engineering at New York’s Stony Brook University, worked as a research assistant sans the stipend.

The situation doesn’t improve upon graduation. The growing political backlash against the loss of American jobs, and the rising anti-immigrant sentiment means that getting a work visa — let alone getting a job — is as tough as it can get. So much so that now, even the lure of a US-located son-in-law is starting to fade. “The classic America-educated son-in-law syndrome is almost nonexistent as students, especially from tier 2 schools, hardly get jobs in the US after they graduate,” says Satyavrata Samavedi, a Ph.D. candidate in tissue engineering at the Virginia Institute of Technology (Virginia Tech).

Full article here

Above picture courtesy: Associated Content

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“Buy when everyone sells and sell when everyone buys” is probably the only way to make money in the market.  Following the heard mentality is sure to give a lot of heart pain in the long run.

The exhilarating bounce from the lows that the Indian equity market touched on 9 March 2009 is now a year old—and what a year it has been. These 12 months have been a wildly profitable time for those brave souls who held their nerve and bought stocks, while it has been a missed opportunity for those who thought it was a short-lived bear market rally and thus preferred to sit on cash.

The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, closed on Tuesday at 17,052.54, up 109% over a year ago, though just about nobody believes the next 12 months will be as good.

Read the full article here

Above picture courtesy: Livemint

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Thomas Friedman & Bill Bonner

In his article, The Long and Short of China, Bonner goes hammer and tongs at Thomas Friedman saying…

Oh happy days are here again. Obama is going to get our money back from the banks. Jeffrey Sachs is telling Haiti how it can get its economy back in order (with other people’s money, naturally). And Thomas Friedman is offering investment advice.

This should be fun. We’re all on the bus…and it’s driven by the blind, the deaf and the very dumb. Oh, sorry, we meant the visually impaired…the hearing impaired…and the mentally deficient.

Friedman is, as we all know, full of advice on just about everything. He advises finance ministers on how to soup-up their economies. He advises the Arab world on how to update its religious institutions. He advises whole nations on how to improve the future before it happens.

And here he is now counseling Mr. James Chanos, noted short seller, on how to make money

Big egos are at play here.  But its not to discount the value of the words being spoken here.  Bill Bonner, Thomas Friedman and James Chanos are all good at what they do.  They have built up a career full of backing their claims with the work they have done.

Last word on whether China is a bubble or not is yet to be spoken.  Meanwhile, Thomas Friedman finds another supporter in Keith Fitz-Gerald of Money Morning.

Above pictures courtesy: Theteemingbrain, Cityfile & Stockopedia

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The tallest building, the biggest man made island, the biggest snow world in the midst of a desert, the largest mall in the world, the glitziest and grandest hotels in the world…the list of biggest, largest, tallest was never enough for Dubai to conquer.  And in this context, the tiny city state of Dubai over leveraged itself and built an empire of debt.  A debt that is bigger than its GDP now.

For a country that hardly has any oil, it had to build its future on something else than oil.  So, the charismatic ruler of Dubai, Sheik Mohammed bin Rashid Al-Maktoum decided to move to finance, tourism to hedge its economy.  Good vision no doubt, but its the execution where the fault lay.  Mindless borrowing was fun and fine till the economic collapse happened in the USA.  With the collapse of Lehman, Merrill Lynch and a host of big banks, the easy money dried up.  And it was just a matter of time before which this was to happen.

Just three days before Eid, the Dubai government’s announced a six-month reprieve on debt repayments. This  sent shockwaves through the world markets, as it raised doubts over the Gulf emirate’s ability to meet its financial obligations.

Dubai is being crushed under a mountain of debt. The emirate has a debt in excess of $80 billion which it incurred by expanding in banking, real estate and transportation. Dubai World with $60 billion liabilities has sought a six-month standstill on its debt repayment to all its lenders.

The Dubai government requested the creditors of Dubai World (one of three conglomerates that are backed by the emirate), to agree to a ‘standstill’ on repayments until May 30 2010.

On one hand the Finance ministers and bankers are saying that the markets are behaving erratically.  But believe them at their own peril.  These are the same people who just days before the collapse of the American banks proclaimed that all was well.

For most of this decade Dubai has been the Victoria Beckham of the Arab world–the biggest, glitziest, most heedless spender. It’s been the sort of place that invests $7.6 billion subway system few of its 1.6 million people are likely to use, the sort of place that builds artificial islands in the shape of palm trees, the sort of place that builds the world’s tallest skyscraper, the sort of place that sells designer seat-belts to encourage drivers to be safer in the very cars it wants them to trade in for a subway ride, and the sort of place where office buildings have been the Gulf’s most copious crop of the decade.

Dubai hasn’t limited its excesses to its corner of the United Arab Emirates. Through Dubai World, the Emirate’s investment arm, it partnered with MGM Mirage and invested in such projects as Las Vegas’ City Center, a 67-acre development that includes a 4,004-room hotel-casino, 2,400 high-rise residential condos, dining and entertainment venues and its own retail district. At $8.5 billion, it’s the most expensive privately financed construction project in the United States.

Now the bad news.

The Dubai subway has been running since September, albeit to empty quarters. A quarter of Dubai’s office space is vacant. Workers have taken salary cuts of up to 30%. The Emirati government is in debt to the tune of $80 billion to $120 billion. CityCenter? It’s “worth about half of what it cost MGM Mirage and Dubai World to build the massive Strip development,” the Las Vegas Review-Journal reported in October. lost half its value. MGM Mirage took a $1 billion write-down already, Dubai World ate a $348 million loss (so far).

Read rest of the article here

So, does that mean that the Dubai dream is all over?  Not really.  Am sure the more conservative cousin of Dubai, Abu Dhabi will come in with its oil money to rescue it.  But Abu Dhabi has conveyed that the help will on a case to case basis.

That would mean that we would see lesser flamboyance from everyone associated with Dubai, at least for some time now.

More articles on the Dubai mayhem

Recession and debt dissolve Dubai’s mirage in the desert
Dubai’s Debt Troubles: Beginning of the Next Leg Down?
Dubai: an emirate in crisis
Sober ruler of Dubai whose vision is crumbling in the face of the storm