This is incredible. Just goes on to show that Banking is fundamentally a conservative business. If you do not run it that way, you are likely get into trouble sooner or later. Being bigger, more aggressive etc. has come to naught as HDFC bank whizzes by. FYI, I checked these numbers based on closing price of stocks on 22-Oct-08.
I have known a few ex ICICI guys and they pride themselves in being aggressive and mkt share. Thats what has driven them. Mkt share. That obviously has led to placing bad bets. All of these problems with indiscriminate lending and poor credit control is coming back to haunt them now. I think they got lucky last year when they raised money from the market at around Rs. 980. Now the share price is trading less than Rs. 400.
A good lesson on Banking. Be Conservative.
Wednesday, October 22, 2008
Saturday, October 18, 2008
VP Ansari's Speech at AMU
I read this article in Indian Express and was much moved. At a time of partisan and communal politics, this kind of speech is like a breath of fresh air. I completely agree to this thoughts. Education and Equity. Muslim integration with the main stream will hinge on how the new generation embraces education and if requires asserts itself for equitable treatment.
Friday, October 17, 2008
Housing Market Rebound
Housing market is nowhere near its bottom, per this report. The 1 year rent to price ratio(A surrogate for knowing whether mkt is over or under valued) currently stands at 1:22. For last 20 years its been 1:15. Implying if the credit gets as stringent as it was 10 years ago and if there is no oversupply, then perhaps house prices would have to come down by another 25% before we hit the bottom. Given the oversupply and fears of recession, it might go even lower before it stabilizes.
Am I a pessimist, soothsayer or what?
Am I a pessimist, soothsayer or what?
Greenspan is Culpable for this mess
I've been reading about the housing bubble since 2004 on fool.com. They knew it was coming but no one knew when. Greenspan knew about it but dismissed it as mere froth 2005.
I think the reason he chose to overlook it instead of dealing with it was because he wanted US to come out of the recession that started in 2000-2001. People were afraid that like Japan, US will also face a long recession. Housing bubble delivered US out of the recession in a much shorter time.
This time however, even that hope is gone. There is no froth left anywhere in any sector. The winter is going to be long and harsh. Remember, the US "lost decade" started in 2007...
I think the reason he chose to overlook it instead of dealing with it was because he wanted US to come out of the recession that started in 2000-2001. People were afraid that like Japan, US will also face a long recession. Housing bubble delivered US out of the recession in a much shorter time.
This time however, even that hope is gone. There is no froth left anywhere in any sector. The winter is going to be long and harsh. Remember, the US "lost decade" started in 2007...
Monday, October 13, 2008
A Whacko Idea on building employable skills.
I think, we should conduct IQ tests for ppl, mostly for illiterates and uneducated. If someone scores above the baseline, govt trains them in manufacturing or some other useful skill and also educates them for free. Mostly in basic reading and writing so that these ppl can carry out their work and life responsibilities better.
Create an institution. That will go around, conduct tests and recruit these people. It will train them and keep them on their payrolls while lending them out to industry. It will also pay part of the money they get as unemployment insurance while allowing industry to hire and fire at will. Or there could be two such agencies. One for training and other for employment. It would need initial funding but in the long run, we have to find a way make it sustainable.
I think its a whacko idea, none the less, it might get us better trained for the future and give the young but illiterate people hope.
Create an institution. That will go around, conduct tests and recruit these people. It will train them and keep them on their payrolls while lending them out to industry. It will also pay part of the money they get as unemployment insurance while allowing industry to hire and fire at will. Or there could be two such agencies. One for training and other for employment. It would need initial funding but in the long run, we have to find a way make it sustainable.
I think its a whacko idea, none the less, it might get us better trained for the future and give the young but illiterate people hope.
Secular India?
This is bad enough to catch the fancy of the west, including the pope. Hindus and Christians. The only way mass hatred / hysteria is channeled is through religious bigotism, regionalism (Maharashtrians vs the North) and Castism(Rajasthan). With growing economy, extremism is also on the rise.
Is it a way the have nots are venting their anger? Is it coming from those who feel untouched by economic boom?
Whats the solution? We know we have to have inclusive growth. We understand that better than most other nations. I feel there are enough opportunities around us, but only for the educated and well trained. Is there a way to train ppl to be economically useful?
Is it a way the have nots are venting their anger? Is it coming from those who feel untouched by economic boom?
Whats the solution? We know we have to have inclusive growth. We understand that better than most other nations. I feel there are enough opportunities around us, but only for the educated and well trained. Is there a way to train ppl to be economically useful?
Sunday, October 12, 2008
World is going to be poorer
I was reading this post from Ny times. Experts may say that the world will be fine once the money starts flowing again. I am not convinced. I think at the end of it all, world will be a poorer place than it was till lets say mid 2007, for a long time. For how long? At least 5 years. It could be more.
Yes, wealth or at least illusion of it can be created by borrowing and overextending oneself. But without creating underlying wealth to support it it can't go on for ever. When eventually the bubble bursts, a lot of this wealth will disappear. This will show up in reduced prices for houses and reduced values of 401K for all Americans.
This will impact rest of the world too. If US can't afford the accesses any more, all the asian economies that make a living out of selling to the Americans will also be poorer.
The good thing about this crises or the bad thing, depending on how you see it, is that it will bring down the wealth of the over leveraged part of the world (that is most of US and first world). But there is an irony there. Wealth is always relative. This means that everyone is poorer, people may not be as poor as they think they might be. Let me explain, when all people earn less, the house rents and mortgages will also be smaller. Its not to say that their disposable income in terms of its buying power will remain the same. It will not. It will diminish. But it might not be as bad people think when compared to current price levels.
The asians that did not invest in this crises will be relatively richer.
I think, India will turn out on the winning side of this. Its exposure to sub-prime crisis is minimal and its not a export driven economy. All that will help. Though India is also facing liquidity crisis, I think its temporary. Its caused by outflow of hot capital as FIIs needed to cover their positions in their county or origin. It can be addressed by relaxing CRR and reducing rate. What will also help is that given all this slowdown, oil may remain subdued for a few years to come. If India does not get drunk on low oil prices, it would not have to spend all foreign money to buy it. Over all, its good for India's standing in the world. This event will narrow the gap between the rich and the poor.
Yes, wealth or at least illusion of it can be created by borrowing and overextending oneself. But without creating underlying wealth to support it it can't go on for ever. When eventually the bubble bursts, a lot of this wealth will disappear. This will show up in reduced prices for houses and reduced values of 401K for all Americans.
This will impact rest of the world too. If US can't afford the accesses any more, all the asian economies that make a living out of selling to the Americans will also be poorer.
The good thing about this crises or the bad thing, depending on how you see it, is that it will bring down the wealth of the over leveraged part of the world (that is most of US and first world). But there is an irony there. Wealth is always relative. This means that everyone is poorer, people may not be as poor as they think they might be. Let me explain, when all people earn less, the house rents and mortgages will also be smaller. Its not to say that their disposable income in terms of its buying power will remain the same. It will not. It will diminish. But it might not be as bad people think when compared to current price levels.
The asians that did not invest in this crises will be relatively richer.
I think, India will turn out on the winning side of this. Its exposure to sub-prime crisis is minimal and its not a export driven economy. All that will help. Though India is also facing liquidity crisis, I think its temporary. Its caused by outflow of hot capital as FIIs needed to cover their positions in their county or origin. It can be addressed by relaxing CRR and reducing rate. What will also help is that given all this slowdown, oil may remain subdued for a few years to come. If India does not get drunk on low oil prices, it would not have to spend all foreign money to buy it. Over all, its good for India's standing in the world. This event will narrow the gap between the rich and the poor.
Thursday, October 09, 2008
GM and Ford in Dire straits
Read this article and then this one.
The US Flagship Auto Makers are on their death beds. A company like GM and Ford were the pride of US for decades till Japanese started making inroads in the 80's and irrespective of what Lee Iaccoca might have said in his book about Ford and then Chrysler its now evident that the slide that started then is now reaching its culmination. US Auto companies face annihilation. All 3 of them GM, Ford and Chrysler and even though there might be talks of merger between GM and Chrysler, I feel their time has run out.
Unless the US govt bails them out they are going to go under by this time next year.
The US Flagship Auto Makers are on their death beds. A company like GM and Ford were the pride of US for decades till Japanese started making inroads in the 80's and irrespective of what Lee Iaccoca might have said in his book about Ford and then Chrysler its now evident that the slide that started then is now reaching its culmination. US Auto companies face annihilation. All 3 of them GM, Ford and Chrysler and even though there might be talks of merger between GM and Chrysler, I feel their time has run out.
Unless the US govt bails them out they are going to go under by this time next year.
Sunday, October 05, 2008
Unconscious Discrimination
A Good article in NY Times on Unconscious Discrimination made me think about the discrimination against Muslims in India. During my short stay here in US I've come to believe that the Muslims in India have the same status as Blacks in the US.
However open minded we call ourselves, we are in some way uneasy in our dealings with our Muslim countrymen. When Shabana Azmi expressed her views on moderate muslims, a lot of people came up with examples with how our president was a Muslim and so on and so forth, but the truth is that since 1992, we are living in an increasingly polarized society.
1992 brought the Hindu-Muslim divide to even the most moderate citizens. That singular event has created a mistrust that has only grown with time. In many cities, Educated muslims have sold their properties in otherwise Hindu dominated areas and have moved to predominantly Muslim areas. Ghettos have come up in all major cities.
A relative of mine has done PHD on the biases against muslim traders and she gives examples of how the municipal corp of Mumbai neglects Muslim areas. The basic cleanliness and hygiene is missing.
Its true that given everything else is identical, if we were to choose between a Muslim and a non Muslim candidate we would lean towards non-muslim. Its a fact of life and we are all guilty of it.
That the builders discriminate against muslims is a known fact. There are Muslim only buildings and then there are non-muslim buildings. Any other religion is fine, christians, parsi, sikh all are welcome. North Indians and south indians and jains and bengalis are welcome. Muslims are not.
My theory is that the spate of violence recently is in news is an aftermath of 1992 and Godhara. Unless we make attempts to address the deep psychological divide between Muslims and the rest, there will be no peace in India.
However open minded we call ourselves, we are in some way uneasy in our dealings with our Muslim countrymen. When Shabana Azmi expressed her views on moderate muslims, a lot of people came up with examples with how our president was a Muslim and so on and so forth, but the truth is that since 1992, we are living in an increasingly polarized society.
1992 brought the Hindu-Muslim divide to even the most moderate citizens. That singular event has created a mistrust that has only grown with time. In many cities, Educated muslims have sold their properties in otherwise Hindu dominated areas and have moved to predominantly Muslim areas. Ghettos have come up in all major cities.
A relative of mine has done PHD on the biases against muslim traders and she gives examples of how the municipal corp of Mumbai neglects Muslim areas. The basic cleanliness and hygiene is missing.
Its true that given everything else is identical, if we were to choose between a Muslim and a non Muslim candidate we would lean towards non-muslim. Its a fact of life and we are all guilty of it.
That the builders discriminate against muslims is a known fact. There are Muslim only buildings and then there are non-muslim buildings. Any other religion is fine, christians, parsi, sikh all are welcome. North Indians and south indians and jains and bengalis are welcome. Muslims are not.
My theory is that the spate of violence recently is in news is an aftermath of 1992 and Godhara. Unless we make attempts to address the deep psychological divide between Muslims and the rest, there will be no peace in India.
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