A load of crap from an idle brain

Wishing the best of Onam to you and your loved ones.

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Am not neglecting you.  Just been busy.

Will write soon.

Somewhere in 2003, fed up of perennially running out of cash at the end of every month and just before the salary for the next month was to come in, i realised i had to do something drastic. Also the thought of not wanting to work till 55 or 60 years old (like everyone else) was always in the back of my mind.

I decided to not only save a small part of my salary but also start investing. Real estate was out of question as it required a bigger monetary commitment and i was loathe investing in land that could some day be encroached and i would need to run around the authorities and people in power to get them evicted.

The next best option was the stock market.  It didn’t require a huge upfront money and also because of Systematic Investment Plan (SIP), i could invest a small amount every month in the mutual funds.  Also because of demat, it was easy for me to buy small number of shares of the companies that i liked.  Since my knowledge of economics, finance and the stock market in general was a big zero, i had to educate myself.  I attended a few seminars, but at the end realised that they were nothing but big money making scams.

This is when i truly realized the power of the internet.  With some great help from Google uncle, i jumped headlong into an intense 12 month study of the stock markets. I searched for information like crazy on equities and mutual funds. By then i had more or less realised that i was going to concentrate primarily in the Indian stock markets.  A developing economy which
was consistently clocking above 7% growth every year and a huge market, i realised that if i could get in early, i could probably ride a 20-30 year long boom.

India was then just starting off.  The BSE Sensex was then around 4500 (it has since climbed to 21,000, then fell to 9000 odd and is now back to 19000). I remember reading an Indian business magazine that pointed to a target 8000 for BSE Sensex in a few months time.  I chuckled to myself at the audacity of that heading.  But still deep down in my heart somewhere I had the belief that we were looking at something spectacular that was about to happen.

Imagine a country of a billion people and with the economy clocking 7-8% annual growth in GDP, it was sure to hit a trillion dollars soon and if the rate of growth could be kept up, then the next trillion could come in 8-9 years.  Yes, there were and are lots of things that could derail the growth. Terrorism emanating from Pakistan being just one such issue. Poverty, rampant corruption (that has become a norm these days), a closed economy, religious and regional violence…many issues could be an impediment to India’s growth and thus hit my investments in the market.

But honestly, when you realise that you are in the pits, the only way to go is up.  I took the risk and opened a demat account.  Tata Consultancy Services (TCS) was getting listed on the Indian stock markets for the first time ever in 2004.  I applied for the IPO and was allotted a measly 7 shares at 850 rupees each.  I was disappointed at not having been allotted more. Nervethless,  i held on.  A few months later the stock hit 1400 rupees.  I sold off at almost 550 rupees profit per share.  I made more than 3800 rupees (not accounting for taxes) in a few months by investing in TCS.

I had tasted blood.

Target 2015 continues….

Above target picture courtesy: David Hawkins

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… since i got married.  How time flies

First & Second Anniversary posts

Above picture courtesy: Lovelife

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Over the weekend watched a movie, “Inside Job“.  A movie that tracks the collapse of the Wall Street in 2008 which caused the worldwide recession from which the world is yet to recover.  It tracks and interviews many of those responsible for the financial crash.  Many financial behemoths like Bear Stearns, Lehman Brothers collapsed.  Many were taken over by other financial firms like Merrill Lynch bought over by Bank of America, Wachovia by Wells Fargo, Bear Stearns by JP Morgan etc.

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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