An excellent article to understand the cause for current economic crisis

This is an excellent article which was forwarded by my friend Sudi on the current economic crisis... It highlights how the crisis started and where its heading in a different way..... It goes like this...........

Heidi is the proprietor of a bar in Berlin.

In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later.

She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).


Word gets around and as a result increasing numbers of customers flood into Heidi's bar.
Taking advantage of her customers' freedom from immediate payment constraints, Heidi increases her prices for wine and beer, the most-consumed beverages.

Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Heidi's borrowing limit.

He sees no reason for undue concern since he has the debts of the alcoholics as collateral.

At the bank's corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS.

These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.

One day, although the prices are still climbing, a risk manager (subsequently of course fired due his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Heidi's bar.

However they cannot pay back the debts.

Heidi cannot fulfill her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95%.

PUKEBOND performs better, stabilizing in price after dropping by 80%.

The suppliers of Heidi's bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation.

Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.

The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties.

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Finally an explanation we can all understand ……..

Growth to Recession --> Globalization to Protectionism –>Tax breaks to Stimulus packages and Bailouts

“Polite Indian voices answered when we rang our banks. Spanish firms owned our airports, the Germans bought our water, Dubai controlled our ports. Our homes were flooded with cheap imported clothes, toys and electronic appliances from China. And, anyway, we were like an orchestra being conducted by an invisible hand” wrote Times columnist Janice Turner.

But now that music has stopped , the orchestra is coming apart. Suddenly Protectionism is the buzz word replacing Globalization.

Italy has threatened to retaliate against British workers if the Italian company in Britain is forced to sack its Italian and Portuguese staff.

Barrack Obama’s Buy American plan makes it mandatory for US companies taking bail out plans to purchase all goods and services from domestic supply has triggered a shock with the supporters of Globalization... Banking firms which have been bailed out have been asked not to issue H1B visas – a majority of H1B visa holders are Indians working in IT industry.

The debate has started… The debate is no longer about the merits of free markets and globalization but how to stop them from causing further havoc. The mood is now about protecting national interests and rights of local workers, farmers etc. A diplomatic row is simmering between US and Europe over the Buy American plan.

Paul Krugman, noted economist in his column on New York times Who will stop the pain? quotes from the minutes of a meeting of US Fed officials - “All participants anticipated that unemployment would remain substantially above its longer-run sustainable rate at the end of 2011, even absent further economic shocks; a few indicated that more than five to six years would be needed for the economy to converge to a longer-run path characterized by sustainable rates of output growth and unemployment and by an appropriate rate of inflation.”

Every day you hear governments bailing out one industry after another and recession in Europe is spreading. Anti government street demonstrations, sparked by mounting job losses and fear of an uncertain future has erupted across Europe in the face of a deepening economic crisis. The anger has been fuelled by by the perception that governments are too busy bailing out banks and big businesses and not bother about the common man. Its a tough call for governments as well.

This morning got a call from a friend working as a techie and he painted a gloomy picture about the impact of recession on IT industry in India. He predicts darker days ahead for the Indian IT companies and this might go on till the end of 2010.

What lies ahead for Indian IT industry… IT bubble bust in 2001 was largely attributed to dot com bubble and it was specific with IT sector. But todays depression has not spared any sectors. Its pervasive..

Well i advice passing graduates not to waste time and do a PG or Masters abroad so that when the industry picks up they are qualified to take up the opportunity. But there will be cut throat competition and the survival of the fittest will hold good in future...

If Indian IT industry starts laying off in a large scale i do predict a sub prime crisis (people defaulting on housing loans because of layoffs) in India and banks would be the first victim. One of my colleague predict that Banks will face pressure if students who do not get jobs and who have taken educational loans start defaulting. Though its too early to conclude this, things certainly look gloomy.

Looks like the mother of all depression is round the corner..

Is India a poor country? Swiss Bank has the answer :-) :-)

India is always projected as a poor country by the western world and even we think so looking at the fiscal situation and the number of people living below poverty line... But wait.... Here is a revelation from Swiss Bank....

Is India poor, who says? Ask the Swiss banks. With personal account deposit bank of $1,500 billion in foreign reserve which have been misappropriated, an amount 13 times larger than the country's foreign debt, one needs to rethink if India is a poor country?

Recently, due to international pressure, the Swiss government agreed to disclose the names of the account holders only if the respective governments formally asked for it. Indian government is not asking for the details..... ..no marks for guessing why?
We need to start a movement to pressurise the government to do so! This is perhaps the only way, and a golden opportunity, to expose the high and mighty and weed out corruption!

DISHONEST INDUSTRIALISTS, scandalous politicians and corrupt IAS, IRS, IPS officers have deposited in foreign banks in their illegal personal accounts a sum of about $1500 billion, which have been misappropriated by them. This amount is about 13 times larger than the country's foreign debt. With this amount 45 crore poor people can get Rs 1,00,000 each. This huge amount has been appropriated from the people of India by exploiting and betraying them. Once this huge amount of black money and property comes back to India , the entire foreign debt can be repaid in 24 hours. After paying the entire foreign debt, we will have surplus amount, almost 12 times larger than the foreign debt. If this surplus amount is invested in earning interest, the amount of interest will be more than the annual budget of the Central government. So even if all the taxes are abolished, then also the Central government will be able to maintain the country very comfortably.

Some 80,000 people travel to Switzerland every year, of whom 25,000 travel very frequently. 'Obviously, these people won't be tourists. They must be travelling there for some other reason,' believes an official involved in tracking illegal money. And, clearly, he isn't referring to the commerce ministry bureaucrats who've been flitting in and out of Geneva ever since the World Trade Organisation (WTO) negotiations went into a tailspin!

Just read the following details and note how these dishonest industrialists, scandalous politicians, corrupt officers, cricketers, film actors, illegal sex trade and protected wildlife operators, to name just a few, sucked this country's wealth and prosperity. This may be the picture of deposits in Swiss banks only. What about other international banks?

Black money in Swiss banks -- Swiss Banking Association report, 2006 details bank deposits in the territory of Switzerland by nationals of following countries:
TOP FIVE

INDIA $1,456 BILLION
RUSSIA $470 BILLION
U.K. $390 BILLION
UKRAINE $100 BILLION
CHINA $96 BILLION


Now do the math's - India with $1,456 billion or $1.4 trillion has more money in Swiss banks than rest of the world combined. Public loot since 1947:


It is further estimated by experts that one per cent of the world's population holds more than 57 per cent of total global wealth, routing it invariably through these tax havens. How much of this is from India is anybody's guess.

What is to be noted here is that most of the wealth of Indians parked in these tax havens is illegitimate money acquired through corrupt means. Naturally, the secrecy associated with the bank accounts in such places is central to the issue, not their low tax rates as the term 'tax havens' suggests. Remember Bofors and how India could not trace the ultimate beneficiary of those transactions because of the secrecy associated with these bank accounts?

Its anybody's guess that the money deposited in such safe heavens will continue to grow astronomically and we will never be able to get those back... Any way out... A BIG NO IS THE ANSWER....

Click on the following links related to this....

http://www.deccanherald.com/Content/Oct242008/editpage2008102396843.asp
http://www.telegraphindia.com/1090116/jsp/opinion/story_10397236.jsp

A true Story which makes u think......

A man sat at a metro station in Washington DC and started to play the violin; it was a cold January morning. He played six Bach pieces for about 45 minutes. During that time, since it was rush hour, it was calculated that thousand of people went through the station, most of them on their way to work.


Three minutes went by and a middle aged man noticed there was musician playing. He slowed his pace and stopped for a few second and then hurried up to meet his schedule. A minute later, the violinist received his first dollar tip: a woman threw the money in the till and without stopping continued to walk.


A few minutes later, someone leaned against the wall to listen to him, but the man looked at his watch and started to walk again. Clearly he was late for work. The one who paid the most attention was a 3 year old boy. His mother tagged him along, hurried but the kid stopped to look at the violinist. Finally the mother pushed hard and the child continued to walk turning his head all the time. This action was repeated by several other children. All the parents, without exception,forced them to move on.


In the 45 minutes the musician played, only 6 people stopped and stayed for a while. About 20 gave him money but continued to walk their normal pace. He collected $32. When he finished playing and silence took over, no one noticed it. No one applauded, nor was there any recognition.



No one knew this but the violinist was Joshua Bell, one of the best musicians in the world. He played one of the most intricate pieces ever written, with a violin worth 3.5 million dollars.Two days before his playing in the subway, tickets for Joshua Bell's performance at a theater in Boston were sold out and the seats averaged $100.


This is a real story. Joshua Bell playing incognito in the metro station was organized by the Washington Post as part of an social experiment about perception, taste and priorities of people. The outlines were:

in a commonplace environment at an inappropriate hour: Do we perceive beauty? Do we stop to appreciate it? Do we recognize the talent in an unexpected context?


One of the possible conclusions from this experience could be:If we do not have a moment to stop and listen to one of the best musicians in the world playing the best music ever written, how many other things are we missing ???...

Watch the video of this experiment at

www.youtube.com/watch?v=sn6KMSq_vaE

Engineering lab exams... VIVA :-):-)

Its lab examination time and its the time where we ask students lots of questions as part of VIVA.. Here's some of the answers from students.. :-):-)

1. A student got a simple calculator program as part of C lab exam.. One of my colleague was the examiner. He asked him to give input as 25 and -5. Student gave it as 25 and 5. Sir again asked 25 and -5. He got bit tensed and again gave 25 and 5. Sir asked again.. This time he took some time but again typed 25 and 5..... Later Sir got to know the reason.... He doesn't know how to type -5 and was searching for the - symbol in the keyboard :-):-)

2. Sir asks whats Fibonacci sequence. Student writes the equation and starts explaining f1,f2 etc for a few minutes..... Sir asks her to write the sequence. She writes the sequence as....
1 2 3
1 2
1
:-):-):-)

3. One student had got a program to find Combination.. i.e NcR.. He had typed the program.. The code goes as follows...


void main()
{
int ncr, n,r;
printf("Enter n and r");
scanf("%d %d", &n,&r);
ncr=n!/(n-r)!r!
printf("Result = %d", ncr);
}

:-):-):-)

PASSION FOR LIFE - JESSICA COX - HAS NO ARMS BUT FLYS AIRPLANEs

We have innumerable examples of people achieving beyond their ability and We always take inspiration from them.. Was watching a news channel where i came across this lady called JESSICA COX who has no arms but flies airplanes.. Searched for more information on her... Was amazed.. I am presenting a brief profile of this amazing lady... (downloaded from net)

JESSICA COX was born without any arms.. Doctors dont know the precise reason for it.. Like all children, she went through the various stages of development. She learned to feed herself and write with her feet. Throughout childhood, she participated in many activities including swimming, gymnastics, and tap dancing. Jessica started tae kwon-do when she was ten, earning her first black belt at fourteen in the International Tae Kwon-Do Federation. She rejoined American Tae Kwon-Do Association in college and earned a second black belt.

When first learning to drive, Jessica was encouraged to use special modifications. Even after her car was modified, she decided to remove them and drive without. She holds an unrestricted driver's license.

As an undergraduate at the University of Arizona, Jessica attended classes taking notes with her feet. At 25 words per minute, Jessica was able to type out her papers with a regular computer keyboard on the floor.

Jessica's greatest challenges are not the ordinary daily tasks required for her to live independently. Putting in contact lenses, washing and brushing her hair, and fixing breakfast in the morning are all tasks that come second-nature to her as they would to anyone else. Her greatest triumph in life stands far above any physical feat. It is her unrepentant regard for herself a whole person, her high degree of self-acceptance that gives her the freedom and power to insist that society accept her, too, just as she is.

Born without arms, Jessica now flies airplanes.. Watch the video at
http://in.youtube.com/watch?v=QuMHSFPOzpc

Jessica Cox - A Living legend who amply demonstrates the passion for life. Her determination to do things against all odds should inspire us in realizing the goals which we have set for ourselves.. We have so many good things going for us but still we end up putting the blame on God for not achieving something we desire..

NOTHING IS IMPOSSIBLE....

SHAMELESS POLITICIANS PLAYING POLITICS WITH TERRORISM

Few months back we had Jamia Milla encounter in New Delhi.. An exceptional police officer was shot dead but politicians fearing their vote banks demanded an enquiry into the shoot out because they felt people from one community (Muslims) were specifically targetted... So called Intellectuals also questioned the encounter… Amar Singh gives a lakh to dead police officer and then questions the encounter..
ATS Chief Hemant Karkare did an exceptional job in cracking the Malegaon blasts. Now Politicians from the other spectrum questioned him for targeting Hindus deliberately. And when the Police officer dies, Mr Narendra Modi announces 1 crore to him.

Its a big farce... Rightly the families in both the case refused to receive compensation.

Terrorists whether Muslims or Hindus are inhuman. They have no right to kill innocent people. Terrorists kill innocent people in hundreds, and when police gun down two terrorists, human right activists and so called intellectuals question it as if their son or daughter is shot dead.. Police are doing their best. I am not saying they are right always but they need a free hand to deal with this evil. Every time police kill or arrest a terrorist a big hue and cry is raised citing ridiculous reasons. Let Police do their job. If the evidence is good enough court will punish them.

Every time a terrorist attack takes place, our Prime Minister says they will pay for it. We will not let them go scot free.. Condemns the blast.. Declares compensation to victims and promises stern action. But action remains on paper only…

Opposition parties accuse government of soft pedaling on terrorism. Elections round the corner these guys would love to have few more blasts so that they can come to power easily.

They get power and exchange places. And the farce continues…

Our great MNS leader Mr. Raj Thackrey was busy fighting the North Indian immigrants a few days back. He was holding Mumbai to ransom. He may not like if NSG or MARCOS commandos are from North Indians or Sounth Indians who played a major role in saving many lives and flushing out terrorists.. Where were his activists.. Bloody regionalism... The identity of being an Indian first is more important.


Nobody is held accountable after the terror attack. Our Home minister continues to be in the same position probably thinking what attire to wear tomorrow morning on his visit to Mumbai.. Our policemen continue to wear a bullet proof jacket which may not prevent them getting hurt even if it’s a fire cracker leave alone a bullet from a AK 47…

All Police reform system remains on paper. Nothing changes. 1993 Mumbai blasts they used the sea route, 2008 they did the same. Coastal security guard is in shambles with lack of adequate resources. Few years later blasts or terror reigns. And blame game begins. Talks of police reform surface again and the story continues….. And I will be writing a blog on this or might probably end up copying the same thing what I have written today. I am an eternal optimistic person but looking at the system and with the innocent loss of lives, I end up becoming a pessimist…

As one of the SMS which i received this morning SAID " Our fight is not against Terrorists. Commandos will take care of them. Our real fight is against our very own enemies.. THE POLITICIANS.."

A TRIBUTE TO MARTYRS

First and foremost hats off to the guys of operation CYCLONE and BLACK TORNADO. National Security Guard (NSG), Marine Commandos (MARCOS) fought the might of Terrorists and saved many lives knowing well that their life is in danger. Kudos to them.

I would like to profile few policemen who lost their valuable lives in fighting the terrorists.

Hemant Karkare. Vijay Salaskar. Ashok Kamte, Major Unnikrishnan. These men, who fell to the bullets as terror raised its ugly head again in Mumbai, were all professionals highly specialized in their chosen field of law enforcement and were held in high esteem.

Mr. Karkare was on his way home when he heard about the terror attack at the Trident. He was heading there when he was told that the firing at the Chhatrapati Shivaji Terminus (CST) was much more severe. Near the CST station senior officer Sadanand Date was holding off the terrorists holed up in a lane alongside the Cama and Albless Hospital. Armed with automatic weapons, Karkare, Kamte and Salaskar got into a jeep and rushed to take on the terrorists. Unfortunately, the terrorists proved much too lethal for them and all three were gunned down.

HEMANT KARKARE

Hemant Karkare, Maharashta Police's Anti-Terrorism Squad chief, was among the 11 police officials who were killed while fighting terrorists in Mumbai on Thursday. Karkare, a 1982 batch IPS officer, had returned to his state cadre after a seven-year tenure with the Research and Analysis Wing, Indian external intelligence agency, in Austria. Hemanth Karkare, was under immense pressure investigating the Malegaon blasts. Politicians from all quarters were making baseless allegations against a man of integrity. He managed to keep the issue apolitical and continue with the investigation. One should admire the decision of Mrs Karkare to refuse the compensation of Rs 1 crore offered by Mr. Narendra Modi, the very man who had blasted Karkare for his handling of Malegaon blasts. Mr. Karkare was known for his discipline and sense of fairness. Appointed ATS chief in January this year, he was instrumental in cracking the September 2008 Malegaon bomb blasts.

VIJAY SALASKAR

Encounter specialist Vijay Salaskar on the other hand belonged to the Mumbai’s very own group of ‘untouchables’ who won accolades for their much-publicised ‘encounter killings’ targeting wanted gangsters and criminals. Mr. Salaskar was a quiet man who had an air of confidence about him. A key member of Mumbai police’s exclusive and somewhat controversial “encounter” squad, he is said to have killed close to 75 criminals. Known for his ability to weed out information about underworld gang activities in Mumbai, Mr. Salaskar was often at the helm of combating gang wars in the city. A 1983 batch officer, he was appointed the head of the anti-extortion cell at the Crime Branch.

ASHOK KAMTE

Mr. Ashok Kamte was known for his fearless ways. A 1989 batch IPS officer, he was very popular when he was commissioner of police in Solapur. A close associate said even after he left Solapur he was treated as hero whenever he was in town. Daring, but with an exceptionally cool head made Ashok Kamte an excellent negotiator in crisis situations - a quality for which he was summoned late Thursday night to deal with terrorists holed up in Mumbai buildings. Kamte, a 1989 batch IPS officer of Maharashtra cadre, who died fighting terrorists near Mumbai's Metro cinema, was one of the brightest of his batch, and one of the few officers who dared to take on challenges directly. Having undergone special training for negotiating hostage situations, Kamte was chosen to tackle one of the worst crisis faced by the financial capital of the country. "A cop that turned Solapur from a wrong city to the right one. The person who every responsible Solapurkar liked and loved. This community has been created to pay the respect and gratitude that he deserves," wrote one of his fans on the social networking web site. Survived by his wife and two children, Kamte had a panache for body building during his college days. His friends at the IPS academy also remember him as a great athlete and one of the brightest cadets of his batch.

MAJOR UNNIKRISHNAN

"Do not come up, I will handle them", these were probably the last words which Major Sandeep Unnikrishnan told his men as he was hit by bullets while engaging terrorists inside the Taj. "Major Unnikrishnan was rescuing an injured commando when he was hit," Director-General of NSG J K Dutt said after he announced mission accomplished at the Taj and quoted the slain major as telling his crack team, "Do not come up, I will handle them".
"During the operation, when a commando got injured Unnikrishnan arranged for his evacuation and started chasing the terrorists himself," a senior National Security Guards (NSG) official said here. The terrorists escaped to another floor of the hotel and during the chase Unnikrishnan was seriously injured and succumbed to his injuries, the official said.
It was Unnikrishnan's second deputation with the elite NSG force. Unnnikrishnan was commissioned in the 7th Bihar Regiment of the Army in 1999 and he first served the NSG during 1996-99 and again came back to it's 51 Special Action Group (SAG) in January 2007.
The 31-year-old officer was the lone son of his parents who hailed from Bangalore.

GAJENDER SINGH

The other braveheart, Havildar Gajender Singh, was a specialist in heli-borne operations. "Gajender Singh was chosen for the Nariman House operation as he qualified for the job extremely well. He was leading the slithering act and its follow up action," the NSG official said while paying homage to the slain commandos at the NSG headquarters in the national capital.

Informative article regarding current financial crisis published in Hindu...

Published in The Hindu - Sunday Magazine on Oct 5, 2008 (picture of Alan Greenspan, head of US Federal Reserve Bank)


The bursting of the speculative bubble in the U.S. housing market has destroyed billions of dollars in investor wealth across the world, crippled the banking system, expunged close to a million jobs.and India has not been spared either. With banks failing by the day.definitely, these are uncertain times for the financial services industry. While many people who have lost their jobs, are faced with permanent shrinkage of their lifestyle, others in the industry are going through the trauma of not knowing if and when their turn would come. Who is to blame?

Flashback to year 2003:
Rohit (name changed to protect identity), a good friend of mine and someone who was officially considered to be a genius with an IQ of 150+, graduated from one of the leading IIM's. Rohit managed to make it into the New York Headquarters of the most sought after firm that had arrived on campus for the first time - Lehman Brothers - a top U.S. Investment Bank (then). On joining, he was assigned to Lehman's mortgage securities desk that dealt with Collateralized Debt obligations (or CDO's).

Following is an extracted transcript of a chat session I had with Rohit back in 2004:

Me: So man, you must feel like you are on top of the world.
Rohit: Yes dude, the job here is amazing, I get to interact with people around the world, investment managers - who want to invest millions of dollars

Me: great.so tell me something interesting. What's your job all about?
Rohit: You know there is a great demand for American home loans, which we buy from the U.S. banks. We then convert these into what is called as CDO's (Collateralized Debt Obligations). In plain English - this refers to buying home loans that banks had already issued to customers, cutting them into smaller pieces, packaging the pieces based on return (interest rate), value, tenure (duration of the loans) - and selling them to investors across the world after giving it a fancy name, such as 'High Grade Structured Credit Enhanced Leverage Fund'.

Me: Wow! I would've never guessed that boring home loans could transform into something that sounds so cool!
Rohit: hahaha.actually we create multiple funds categorized based on the nature of the CDO packages they contain and investors can buy shares in any of these funds (almost like mutual funds.but called Structured Investment Vehicles or SIV's)

Me: Dude, you make your job sound like a meat shop.chopping and packaging. So, in effect when an investor purchases the CDO's (or the fund containing the CDO's), he is expected to receive a share of the monthly EMI paid by the actual guys who have taken the underlying home loans?
Rohit: Exactly, the banks from whom we purchased these home loans send us a monthly cheque, which we in turn distribute to the investors in our funds

Me: Why do the banks sell these home loans to you guys?
Rohit: Because we allow them to keep a significant portion of the interest rate charged on the home loans and we pay them upfront cash, which they can use to issue more home loans. Otherwise home loans go on for 20-30 years and it would take a long time for the bank to recover its money.

Me: and, why does Lehman buy these loans?
Rohit: Because we get a fat commission when we convert the loans into CDO's and sell it to investors

Me: Who are these investors?
Rohit: They include everyone from pension funds in Japan to Life Insurance companies in Finland

Me: But tell me, why are these funds so interested in purchasing American home loans?
Rohit: Well, these guys are typically interested in U.S. Govt bonds (considered to be the safest in the world). But unfortunately, Mr. Alan Greenspan (head of Federal Reserve Bank - similar to RBI in India) has reduced the interest rate to nearly 1% to perk up the economy after the dot-com crash & Sep 11 attacks. This has left many funds looking for alternative investments that can give them higher returns. Home loans are ideal because they offer 4-6% interest rate.

Me: Wait, aren't home loans more risky than U.S Bonds?
Rohit: We have made home loans less risky now. In fact they have become as safe as U.S Govt bonds.

Me: What are you saying, man? What if the people who have taken these underlying home loans default? Then the investors would stop getting the EMI's, and their returns would take a hit. Wouldn't it?
Rohit: Boss, may be some will default, but not definitely more than 2-3% of them. Moreover, we have convinced AIG (a leading insurance company) to insure our CDO's. This means that even if there were big defaults - the insurance company would compensate the investors.

Me: that's amazing. What are these insurances called?
Rohit: Credit Default Swaps

Me: Definitely you guys are the most creative when it comes to naming.
Rohit: Thanks

Me: and why has this AIG guy insured millions of home loans?
Rohit: see man, the logic is simple. Home prices in the U.S always go up. In fact over the last 3 yrs alone they have doubled. So even if someone defaults paying the EMI, the home can be seized and sold for a much higher price. So there is no risk. Insurance companies are actually competing to insure this, because they can earn risk-free premiums.

Me: no wonder investment managers from all over the world want to put money in your CDO's. *end of conversation extract*

NINA and the Housing Bubble

A global financial cobweb started getting built around the American dream of purchasing a home and it rest on the assumption that "home prices will keep rising". As demand for the CDO's started growing across the global investment community, the investment bankers (like Lehman) who were meant to sell these instruments also started investing a significant portion of their own capital in these. I guess after selling the story to the whole world, they themselves got sold on the seemingly foolproof concept. Gradually the markets for CDO's and Credit Default Swaps started expanding with traders and investors buying and selling these as if they were shares of a company, happily forgetting the underlying people behind these products who took the home loans in the first place and on whose capacity to repay the loans, the safety of these products depended.

As Wall Street firms like Lehman were churning more and more home loans into CDO's and selling them or investing their own money, there was a pressure on the banks to issue more loans so that they can be sold to the Wall Street firms in return for a commission. Slowly banks started lowering the credit quality (qualification criteria) for availing a home loan and aggressively used agents to source new loans. This slippery slope went to such an extent that in 2005, almost anyone in the U.S could buy a home worth $100,000 (45 lk INR) or more - without income proof, without other assets, without credit history, sometimes even without a proper job. These loans were called NINA - 'no income no assets'.

The U.S. housing market went into a classic speculative bubble. Home loans were easy to get, so more and more people were buying houses. The increased demand for houses caused the price to increase. The rising prices created even more demand, as people started to look at homes as investments -- investments that never went down in value.

When I touched base with my friend Rohit in late 2005, he was on cloud nine. During the previous one year, he managed to buy a home in Long Island (a posh area near New York City) worth almost a millions dollars, and got himself a Mercedes. All this was interesting to hear, but what shocked me was that although he was earning close to $20,000 a month (that is what CEO's in India make) he was not able to save anything because his lifestyle expenses where growing faster than his salary.

The popping of the Housing Bubble

In late 2006, Mortgage lenders noticed something that they'd almost never seen before. People would choose a house, sign all the mortgage papers, and then default on their very first payment. Although no one could really hear it, that was probably the moment when one of the biggest speculative bubbles in American history popped. Another factor that lead to the burst of the housing bubble was the rise in interest rates from 2004-2006. Many people had taken variable rate home loans that started getting reset to higher rates, which in turn meant higher EMI's that borrowers had not planned for.

The problem was that once property values starting going down, it set off a reverse chain reaction, the opposite of what had been happening in the bubble. As more people defaulted, more houses came on the market. With no buyers, prices went even further down.

In early 2007, as prices began their plunge, alarm bells started going off across mortgage backed securities desks all over Wall Street. The people on Wall Street, like Rohit, started getting calls from investors about not getting their interest payments that were due. Wall street firms stopped buying home loans from the local banks. This had a devastating effect on particularly the small banks and finance companies, which had borrowed money from larger banks to issue more home loans thinking they could sell these loans to Wall Street firms like Lehman and make money.

Everyone got into a mad scramble to seize and sell the homes in order to get back at least some of the money. But there were just not enough buyers. The guys who had insured these loans thinking they had near zero risk (e.g. AIG) could not fulfill the unexpectedly huge number of claims. The best part was that since these insurance policies (credit default swaps) could themselves be traded, multiple people had bought and sold them, and it became so tough to even trace who was supposed to compensate for the loss.

Back to 2008: The carnage

The global financial cobweb built around mortgages is on the brink of collapse. Firms, large and small, some young some as old as a 100 years have crumbled as a result of suing each other over the dwindling asset values. Lehman's India operations- that employed over a thousand staff is up for sale and many of the employees have been asked to leave. The Indian stock market has crashed almost 50% from its high (and so have markets around the world) as the Wall Street giants sold their investments in the country in an effort to salvage whatever is good in order to make up for the mortgage related loss. Hedge funds, pension funds, insurance companies all over the world have lost billions in investor's money. Many Indian Bschool graduates with PPO's (pre-placement offers) in the financial sector (India and abroad) have either received an annulment or indefinite postponement of joining dates. IT firms that built and maintained software for the U.S. mortgage industry or the related Investment Banks, have shut down their business units, laid-off people or transferred them to other verticals.

For all the hoopla over the sharp and sophisticated people on Wall Street, the current financial crisis has exposed the fragility of the system. Wall Street is blaming the entire episode on people who could not repay their home loans. But the reality seems to point towards the stupidity of people who lent all this money, financial institutions that built fancy derivative packages and in effect facilitated billions in trading and investments in these fragile low quality loans.

The U.S. Govt is planning to grant 700 billion dollars to the Wall Street firms to compensate the financial speculators for the money that they have lost. Isn't this like rewarding greed and stupidity? The head of a leading Investment Bank has stated, "This is necessary to sustain financial ingenuity. We don't want to spend this money on ourselves. We just want this money to go into the market so that we can carry on trading complex securities, borrowing and lending money." (Yeah.right, so that one can act as if nothing had happened without analyzing too much into it). The real question is: who is going to compensate the common investors across the world who have lost their wealth in the resultant market meltdown? (either directly or through pension funds).

After being unreachable for a month now, finally I heard back from my pal, Rohit, saying he is back in India to take a break from the roller coaster ride that he had lived through. After Lehman's collapse he has lost his job and probably the house that he had bought by taking a hefty loan. I really don't know whether to feel happy for him, for getting an opportunity to learn a lesson or two from the experience or to feel sad for him for losing his job. May be I'll get a better sense of things once I meet him next week.

Anil Kumble - The legend calls it a day...

"Only one team played in the right spirit" - This statement from Anil after the Sydney fiasco made a huge impact on Australians and their media... People who supported Aussies way of approaching the game suddenly paused to take note of this statement from Anil Kumble - the legend who hang up his boots yesterday...

The visuals of Anil wearing bandage over his head and coming on to bowl against West Indies and trapping Brian Lara plumb in front of the wicket conveys a lot about the legend...

No one ever believed that Anil will play for longer with so many limitations up his sleeve.. Kapil Dev felt the same when he saw Anil for the first time.. Critics wrote an obituary for Anil.. He cant turn his leg breaks, is a medium pace bowler etc......

But credit to Anil Kumble for what he his today... More than 1000 wickets in both forms of the game.. Career spanning 18 years... A man who never gave up.. A Smiling Assasin.. our very own Jumbo...

Felt very sad that he will no more be part of cricket... Loved to watch him bowl.. His determination to bowl irrespective of the match condition is phenomenal... Words are not enough to describe Anil.. An era has come to an end....

A Wednesday... A film not to be missed..

Yesterday watched A Wednesday - Hindi movie directed by Neeraj Pandey with NAseeruddin Shah and Anupham Kher in the lead roles... Performance of the duo is stellar.


Terrorism has taken the centre stage after the recent bombings ( its so frequent that cant remember the exact sequence of bombings and the cities ). It talks about how a common man anguished by the frequent bombings takes on the system in his own way...

Nasiruddin Shah plays the role of a common man and Anupam Kher, as the Police commissioner. The conversation between the duo is exceptional and raises a lot of questions about the way we deal with this dreaded evil called Terrorism and also the incompetence of our Police, Intelligence and our polticians in dealing with this..

The film makes me wonder whether being too democratic in dealing with terorism is costing us many lives.. Take the Jamia Milla encounter.. An exceptional police officer was shot dead but politicians fearing their vote banks are demanding an enquiry into the shoot out... Amar Singh gives a lakh to dead police officer and then questions the encounter.. Its a big farce... Terrorists kill innocent people in hundreds, and when police gun down two terrorists human right activists and so called intellectuals question it as if their son or daughter is shot dead.. Police are doing their best and am not saying they are right always but they need a free hand to deal with this evil...

Its time to be tough rather than too democratic in dealing with TERRORISM

IGNITE - 08 ....

IGNITE 08 - a two day state level symposium came to an end on 17th Oct...

Department of Information Science for the first time conducted a mega event and has carved an identity with the huge success of this two day fest..

We initially expected 50 odd external participancts but to our surprise we received 194 external participants from 15 engineering colleges across Karnataka..

The real credit for the success of this fest goes to students of Information Science and Engineering, NMAMIT, Nitte for working tirelessly to ensure that things went smoothly...

Personally it was a great experience for me coordinating the event. It also gave our students good exposure in developing their organizational skills..

Hope this fest becomes a annual feature and attracts more students in the coming years....

CAMPUS PLACEMENT SCENARIO ( AUG 2008 )

The campus interview process has begun. We were apprehensive about the placement scenario and it has been proved right with TCS recruiting only 15 as against 115 previos year.

Lets be clear about this - Things are not loking good and there exists uncertainty among software firms for the future on the backdrop of US recession. So whoever comes for campus will recruit in small numbers

I just wanted to share a few words after what happened with TCS..

Those who didnt make it to second round or into the final selections dont be disheartened.. I know its easier to say this but u need to accept certain facts. Earlier after aptitude round there used to be huge numbers for final interview where as now it very low. Companies have raised the bar. Earlier if it was 60 percent cut-off for next round now its going to be above that.. may be even 75 plus.. It implies u need to work even harder to get into second round. Things cannot be taken for granted. Need to put in more effort into aptitide as well as technical interview.

It doesnt mean that those who have not been selected are not good. There wil be different panels interviewing students. It might be the case where in one person expects in depth knowledge about a particular concept and another interviewer might be bit liberal in this aspect. So dont be disheartened that u did the interview well but didnt get shortlisted. Put your best effort all the time and live it to destiny. There are many factors which is beyond your control.

I urge you to work hard on aptitude as well as technical aspects. This dowturn is just a passing phase and things will improve in the coming quarters.

I wish u all the best for the companies who wil be visiting next...

PUT YOUR BEST EFFORT....

Elephant (INDIA) vs Dragon (CHINA) …

There is a lot of debate around the world about how China and India are on their way to become developed countries and many articles throw light on how different is the approach followed by these two countries. I would like to throw some light on this.

Let me tell you the fact first. Chinese are way ahead of Indians in most of the aspects when it comes to figures. Let me list out the numbers

• China exports electronic goods worth $ 180 billion in a year
• Foreign direct Investment (FDI) is at a level of $ 70 billion a year compared to India’s $ 15 billion
• Shanghai alone has 4000 skyscrapers (more than all of India)
• China has 60000 km of expressways which will outstrip the total length of US highway network
• China has around 26 million living below poverty line compared to India’s 260 million.
• China is expected to overtake Germany to become world’s third largest economy behind US and Japan.

All said and done about these numbers, not everything is rosy in China. The growth has taken place at a breath taking pace which has resulted in population displacement, farmers thrown of their lands, pollution level, flooding, rising disparity between rich and the poor, absence of human rights and few checks on governmental abuses.

Among top 25 exporters in China only 4 are Chinese companies. It has been estimated that of the $700 American price of a Chinese laptop, only $15 remains in China. Made in China really means Made by America or Europe in China. There is a dearth of world class managers in China to match Tatas, Reliance, Infy …. China’s Stock and capital markets are weak and banking system not that efficient. China’s legal system is under constant review.

Lets accept that we are growing at a slower pace than China. But democracy sustains in the long run. Indian politics ( though at its lowest ebb) marred with red taped bureaucracy is making a dent in the growth but lets give a thumbs up to the democracy considering how pluralistic our society is. We all know that a Catholic woman made way to a Sikh prime minister sworn in by a Muslim president, in a 81 % Hindu nation. Contrast this with China where political freedom is unknown. Leaders at all levels are handpicked. Though we are moving on a bumpy road, we are making sure that our vehicle doesn’t break down.

Numbers might give us a different picture but the fact remains that we are as a nation are progressing slowly but surely in the right way. The dragon (China) could stumble any moment and the elephant (India) can overtake the dragon in number game too…

Reference: Times of India, 3^rd Aug 208, Why the elephant can dance better by Shashi Taroor

Cricket.... My association with it....

This blog throws light about my association with cricket since childhood.... Recently played the role of a selector to choose colege cricket team and would be playing hard ball matches in the coming month as part of staff team. This was the motivation for writing the blog....

I am a right hand middle order and medium fast bowler and also a wicket keeper... Can bat left handed as well... Multidimensional cricketer :-):-)

Cricket... It would be ideal to term it as GULLY cricket during childhood... Started playing it since 3rd std... We used to play at Madhu anna's house - our neighbour... Umesha, Kiran, Lokey, Pancha, Sudi, Seena... used to play from 5 to 6.30... It was great fun... New rules made the game more interesting... if u loft the ball above the house height batsman gets out and to hit a six within that height was a challenge indeed... We had a big coconut tree in the playing area and when the ball strucks the tree and goes out of the compound two runs were alloted to the batsman.... In my 5th std when i had a fractured leg, i used to keep wickets and did a terrific job inspite of having a big plaster on my left ankle....

Cricket at High school was very exciting... We had exciting matches with other section of our class... Sudi, atma, patel were our opponents.. We had mahendra, bharatwaj, mahadev swamy, satish in our team... Organized one cricket tournament with Mahendra during 10th std...

During 2nd PUC after the exams we all had joined for CET coaching for a month or so... It was only for name sake.. During that one month we used to play matches with other teams regularly... Hardly attended 2 or 3 classes... Parents believed that we were attending classes regularly... :-)

Then next step was engineering... Bunk classes and play matches with other department teams was the order of the day.. But made sure that i had 75 % attendance all the time... Our goal was to win the competition organized by mechanical dept.. We reached finals once and in my final year we lost it in the semis... In my final year we were the favorites to win the cup. First 3 matches we struggled to win... Used to bat first and in no time we were 3 or 4 down... Then myself with support from Umesh, Arun used to steady the innings and took the team to good total... We bowled well to win matches in this knock out tournament... I couldnt bowl as few months back i had a minor back surgery.... In the semifinal we Batted first and scored around 98 runs in 12 overs... This time our openers sudi and vachan gave a terrific start and in 3 overs of in-field restrictions we had scored 40 runs.... The match went down to the last ball with one run needed but they scored and we lost it... We were disappointed and our goal of winning the cup remain unfulfilled... But as a consolation was awarded batsman of the tournament...

We organized one big cricket tournament in 2000... 14 teams from in and around mandya participated in it.. We also took part in it ... We went to finals but lost it... Had to be contend with runner up title... I was good at playing left handed also... But organizing the cup was a great experience which i will never forget... Immediately after the cup we went to Ooty and enjoyed a lot...

Then joined Nitte in 2002..

In 2003 when India entered finals of the world cup... I went to my home town from Nitte to watch the finals together... Morning we went around the town in a car and few bikes with banners, posters and Indian tri colour flag... Had arranged for watching the match in our neighbours compound.. Unfortunately India lost the match nevertheless it was a treasurable moment..

At nitte, suddenly found myself selecting college team from being a player... Different experience altogether... Went with the college team to Shimoga where we lost it in the quarters... This year our team lost it in the semis... We have a staff team.. April we will be playing in a hard ball tournament at NITK, Suratkal..... We have some good players... Hoping that we can win the cup this time...

Rahul Dravid and Anil Kumble are my favorite cricketers. Critics were labelling Dravid as a fit for only test cricket but he proved everyone wrong... He modified his style for one day cricket and went on to score runs stunning his critics... Anil was criticised for not spinning the ball enough... Today he is the captain of the test team and has 600 wickets... Just shows what hard work can do...

Cricket as they say is a passion in India... Its true in my case as well... Hoping to continue my long association with cricket in the coming years...

If US sneezes, whole world catches cold....

22000 job cuts in January, 63000 in February in US... What lies ahead.... Surely we are skidded into Recession... Worst fears are coming true...

"The question appears no longer to be are we going into a recession but how long and deep it will be," said economist Joel Naroff of Naroff Economic Advisors Inc in Holland, Pennsylvania.

It all started with Subprime lending hitting the US banks hard..
Subprime lending is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history or the inability to prove that they have enough income to support the monthly payment on the loan for which they are applying. The word Subprime refers to the credit-worthiness of the borrower (being less than ideal) and does not refer to the interest rate of the loan. Subprime loans or mortgages are risky for both creditors and debtors because of the combination of high interest rates, bad credit history, and murky personal financial situations often associated with subprime applicants. A subprime loan is one that is offered at an interest rate higher than A-paper loans due to the increased risk.

Many banks, mortgage lenders, real estate investment trusts (REIT), and hedge funds suffered significant losses as a result of mortgage payment defaults or mortgage asset devaluation. As of March 3, 2008 financial institutions had recognized subprime-related losses or write-downs exceeding U.S. $170 billion.

This crisis hit the stock markets worldwide resulting in huge losses to investors... This crisis has started affecting all sectors.. Oil crossing 100 $ per barrel has added to the woes of countries especially developing countries like India and China...

US is a big consumer market for Asian countries.. When it skids into recession it will have a obvious impact on the revenues of Asian firms who are more exposed to US than other countries. Most of the IT companies in India are dependent on US market. Some major firms have started diversifying into Europe and South America but one cannot ignore the impact of a US recession on these IT firms.

Inflation has crossed psychological barrier of 5 % . Stock market sentiments are at an all time low. Central banks are trying to increase consuming power by reducing interest rates on bank deposits. It is one way of boosting consumption. Banks should look to reduce interest rates on housing and auto loans as well so that it boosts these sectors.

US Recession is here to stay and will definitely leave its impact worldwide.

Efforts without direction are worthless...

Following article is an Internet forward....

Ever heard the story of the giant ship engine that failed? The ship's owners tried one expert after another, but none of them could figure how to fix the engine problem. Then they brought in an old man who had been fixing ships since he was a youngster. He carried a large bag of tools with him, and when he arrived, he immediately went to work. He inspected the engine very carefully, top to bottom.

Two of the ship's owners were there, watching this man, hoping he would know what to do. After looking things over, the old man reached into his bag and pulled out a small hammer. He gently tapped something. Instantly, the engine lurched into life. He carefully put his hammer away. The engine was fixed! A week later, the owners received a bill from the old man for ten thousand dollars.

"What?!" the owners exclaimed. "He hardly did anything!"
So they wrote the old man a note saying, "Please send us an itemized bill."

The man sent a bill that read:
Tapping with a hammer ........................ $ 2.00

Knowing where to tap ............................ $ 9998.00

Effort is important, but knowing where to make an effort in your life makes all the difference. Efforts without direction are worthless.

Mumbai violence.... Plight of migrants.. Time to act tough...

MNS headed by Raj Thackrey and his followers have assaulted north indians for taking away local jobs. Raj Thackrey after breaking away from Shivasena wants to gain a foothold in state politics. He has conveniently raked up the issue of Maratha pride or Me mumbaikar. It was on the same plank that Bal Thackrey under shivasena gained foothold in the state. Bal and Udhav intially criticised Raj but did a U turn fearing loss of votes. A clear cut case of Vote bank politics.

Few days back Kannada Rakshana Vedike protested aganst Inidan railway recruitment drive citing that people from karnataka are not getting preference for Group D workers. Raj thackrey followers targetted Cab drivers from North India. 10000 North indian migrants left Nasik fearing their lives.

India is a Union of States and its ones prerogative to work anywhere he wishes to. In this era of Globalisation, it is unrealistic to expect that people from one state cannot work in another state.

Centre cannot just sit back and watch these developments. They have to assure migrants and provide them adequate security. Most of the migrants are sole bread winners for their family. If the centre doesnt do enough to supress this petty brawl, it will get repeated in other states and migrants will become a victim of politics. Tomorrow it might be Karnataka vs Andhra, Karnataka Vs Tamilnadu for taking away IT jobs in Bangalore. If this trend continues intense Regionalism will prove a spoiler for the progress of our country.

Sony wins HD DVD war

The battle for the next-generation high-definition DVD standard is over. Electronics giant Toshiba has decided to abandon its HD-DVD format in favour of Sony's BLU-RAY.
Toshiba will reduce shipments of HD DVD players and recorders and aims to end the business by the end of next month.
It is a good news for the end consumers who no longer have to choose between rival formats.
The standardization will also help accelerate the shift to the new technology in the $24 billion home DVD market.

The fallen Tomato Cart

THIS ARTICLE IS WRITTEN BY Subroto Bagchi who is the co-founder & COO of MindTree Consulting. Its a very thought provoking article which matters a lot in todays fact paced world.....

I pass through this very intersection every morning with so much ease. Today, the pace is skewed. There is a sense of disarray as motorists try to push past each other through the traffic light. The light here always tests their agility because if you miss the green, you have to wait for another three minutes before it lets you go past again. Those three minutes become eternity for an otherwise time-insensitive nation on the move. Today, there is a sense of chaos here. People are honking, skirting each other and rushing past. I look out of my window to seek the reason. It is not difficult to find because it is lying strewn all over the place.

A tomato seller’s cart has overturned. There are tomatoes everywhere and the rushing motorists are making pulp of it. The man is trying to get his cart back on its four rickety wheels and a few passersby are picking up what they can in an attempt to save him total loss. Though symbolic in the larger scheme of things, it is not a substantive gesture. His business for the day is over.

The way this man’s economics works is very simple. There is a money lender who lends him money for just one day, at an interest rate of Rs 10 per day per Rs 100 lent. With the money, he wakes up at 4 am to go to the wholesale market for vegetables. He returns, pushing his cart a good five miles, and by 7 am when the locality wakes up, he is ready to sell his day’s merchandise. By the end of the morning, some of it remains unsold. This, his wife sells by the afternoon and takes home the remainder, which becomes part of his meal. With the day’s proceeds, he returns the interest to the money lender and goes back to the routine the next day.

If he does not sell for a day, his chain breaks. Where does he go from here? He goes back to the money lender, raises capital at an even more penal interest and gets back on his feet. This is not the only time that destiny has upset his tomato cart. This happens to him at least six times every year. Once he returned with a loaded cart of ripe tomatoes and it rained heavily for the next three days. No one came to the market and his stock rotted in front of his own eyes. Another time, instead of the weather, it was a political rally that snowballed into a confrontation between two rival groups and the locality closed down. And he is not alone in this game of extraneous factors that seize not only his business but also his life. He sees this happen to the “gol-gappa” seller, the peanut seller and the “vada pao” seller all the time. When their product does not sell, it just turns soggy.

Sometimes they eat some of it. But how much of that stuff can you eat by yourself? So, they just give away some and there is always that one time when they have to simply throw it away.

Away from the street-vendor selling perishable commodity with little or no life support system, the corporate world is an altogether different place. Here we have some of the most educated people in the country. We don the best garbs. We do not have to push carts; our carts push us. We have our salary, perquisites, bonuses, stock options, gratuities, pensions and our medical insurance and the group accident benefit schemes. Yet, all the while, we worry about our risks and think about our professional insecurity. We wonder, what would happen if the company shifted offices to another city? What would happen if the department closed down? What would happen if you were to take maternity leave and the temporary substitute delivered better work than you did? What would happen if the product line you are dealing with simply failed? In any of those eventualities, the worst that could happen would still be a lot less than having to see your cartful of tomatoes getting pulped under the screeching wheels of absolute strangers who have nothing personal against you.

All too often we exaggerate our risks. We keep justifying our professional concerns till they trap us in their vicious downward spiral. Devoid of education, sophisticated reasoning and any financial safety net, the man with the cart is often able to deal with life much better than many of us. Is it time to look out of the window, into the eyes of that man to ask him, where does he get it from?

In his simple stoicism, is probably, our lost resilience.