Subramoney

To provide liquidity to the markets, the FED, the European authorities, along with their Asian counterparts have decided to swamp the banks with money. However, this is likely to come with strings (ropes?) attached.

No money comes free - immaterial of whether it is called Debt or Equity. The authorities have put a lot of conditions - no cash dividend, limits on executive pay, no throwing out people out of homes, et al. All these are “visibly” good for the authorities who want to feel good (”God” perhaps?) about what they are doing.

All this brings us to a big question - like all subsidy will it actually bring good or bad to the system?

If you believe in a free market should you throw a life boat for the people who are sinking? Surely when Lehman went down, in India, Nomura Securities took over the business, all the people were gainfully employed - at comparable salaries. So what is the downside of a bankruptcy? Really difficult to say.

When you believe in free markets you do not interfere in any of the “market” discoverd figures - be it salary, interest, price-earning ratio, rent, or IPO pricing. Similarly when GM says it is facing bankruptcy what it means is the sum total of its assets is LESS than the sum total of its liabilities. However there is value in each of the assets. So if out of say the plants of GM if Honda, Toyota, Mercedes, Tata Motors, …each one decides to take some part of the assets AND use it more efficiently, the market benefits. However if a life boat is thrown at GM, they will keep coming back. Next time it will be in 2015, if not earlier!

4 kids from a business school and wanted a summer placement. Of course at summers pricing is not much of a question. I just asked those students “What salary do you think you guys (and gals) will start at?” They were quite unanimous - they all said Rs. 1 million. As I have been with students for a long time in my life, I was not shocked. Nor am I here to pass a value judgement. At a given price, I can only decide whether to be a buyer or a seller - the trader in me takes over. I know a few people in the financial services industry. I decided to do a small, unscientific poll.

So I named the institution (based in Mumbai, well recognised, well branded) and said “they expect a starting salary of a million”. Comment. This is what I got:

CEO, HR Consultancy:   Wait for a while, they will join @ 10k a month!

Director insurance company : Tell me who is paying, will send my sales head there to sell life insurance!

Sr. VP Technology Co. : Great optimism and ???

V P Life insur Co. : I swear….

Head Wealth Business: “Are they getting it? And for whose benefit?”

Head Wealth Business: Wait for 2 months and get back to me, with actual figures, not projections!

Editor, Financial Website: Ha ha ha Mind over matter

Head, Planning, Life insur co.: In the mind, sir!

Journalist: Slowdown only in the real economy, not in the unproductive sector!!

AVP, Consulting Company: We are getting a lil greedy, are we not ?

CEO, Market research company: Get them to get real!

Head, PMS: ha ha ha….can cut prices!

CEO, Financial Planning company: Can I go back to campus and get re-recruited?

Retd. Consultant (age 60 years, IIM, ’60s): Our batch got that totally, perhaps!!

I thought it was interesting reading…so i put it here…

So, What are the Ten Roads? More importantly, what will work for you?

1. Start a successful business—the richest road! Sure you can become a Bill Gates or a Azim Premji. However even if you do not become so successful you may still be able to make a couple of crores – not bad. This route is not for all – there are many people who do not consider giving up their jobs will not find this appealing.

2. Become the CEO of an existing firm and juice it—a very mechanical function. Jack Welch did it. In the Indian context the name that comes to mind is Naik at L&T. There are many others who are in this boat, see whether you are academically inclined to do this is what you have to see. May not be easy for every one.

3. Hitch to a successful visionary’s wagon and ride along—it’s high value-added. If you partner a great idea – the entrepreneur needs support, operations, HR, etc. and all the support at the start up stage. You need not be the visionary, you need to ride along.

4. Turn celebrity into wealth—or wealth into celebrity and then more wealth! Again you need to get parents who push you hard enough to become a celebrity and you should have enough motivation to become a celebrity. Sachin Tendulkar, Anand Viswanathan are names which come to mind. However, not really easy.

5. Marry well—really, really well. Well for those of you who are not married this is a good option. Though of course with divorce available, re-consider your options. However, not an easy option. This is an option available to both men and women – but it may be easier for very beautiful women than for ordinary looking men.

6. Steal it, legally—no guns necessary! One qualification that helps in this is the law degree in the USA. However, we all know of another professional who tried doing it, unsuccessfully. He died before he could use the money!!

7. Capitalize on other people’s money (OPM)—where most of the mega-rich are. There are more money managers in the Forbes list than the people whose money they manage. The kind of money people throw at fund managers chasing a rainbow of “index beating” returns is not funny.

8. Invent an endless future revenue stream—even if you’re not an inventor! Well Bill Gates did it, maybe you can do it.

9. Trump the land barons by monetizing unrealized real estate wealth! A very good idea if your surname is Hiranandani, Raheja, Parekh, etc. however if your surname is Patil, Athalye, Subramaniam, Ramakrishnan, do not try this. It may not work.

10. Go down the Road More Traveled—save hard, invest well—forever! To me this seems to be the only option available to you and me. Just go through the grind. Work hard, invest well – choose a large (say 100+ scrips) index and do a SIP – assuming the amc charges are 0.5% p.a. Over a 20 year period treat it like a savings bank account. When you have money, you should invest. When you need money you should sell, simple.

To me only step 10 seems to be sensible…God bless you if you can do any of the others. If you do not do step 10, even the earlier steps may not help!!

Yesterday, I did an unscientific, one question poll with a bunch of people I know. My question to them was “In capital market training (debt, equity, etc.) largely a trainer led training, what is the ideal class size - for it to be effective. The average no. that i have got is about 24. Here is the detailed break up. Funnily the guys who pay for the training have suggested a much, much smaller number (as low as 10) whereas the trainers have suggested higher figures! However, when sales guys (with modest budgets) try to talk to trainers, the questions can be “why cannot 100 people attend?”…or something as stupid as that. So here it is for you to read:

Most business people pay lip service to education and training. If you are a business man and know your business well you still need to learn about money. You need to be updated about HR. What about logistics? – really the works.

Ask a group of business people if they’d be willing to attend a seminar on learning business finance and personal finance at least half of the people in the room say yes. Give them a specific date and time, and only a handful will actually sign up! And surely I have found that it is not about price. I have done finance seminars priced from Rs. 30000 per person per day down to ZERO – and found the response pretty similar!

It used to surprise me when I heard that 50% of all businesses fail in their first three years. Now that I teach finance – personal and business, I am surprised that the rate is so low! Many people I have met have no clue as to why they are earning, what will they do with money, how to save / invest or oh I could just go on and on! Many business men have very poor grip on marginal costing, budgeting, opportunity costs, break even, pricing, - too much of it is “intutive” - and that hurts.

One thing I’ve learned is that most successful professionals embrace a “culture of learning.” This is especially true during difficult financial times.

Personal and professional self-development is a journey which has to be enjoyed —not a destination which can be reached. The most amazing learning person I have met is Jagadguru Shankaracharya of Kanchi. When a journalist asked him “how can you call yourself a Jagadguru when all you do is lead a small bunch of people in South India, he said “You interpret Jagad(world) guru(teacher) differently from me. You think I am the guru of the world, my interpretation is “the Jagad(world) is my guru”.

Benjamin Franklin once said, “If a man empties his purse into his head, no one can take it from him. An investment in knowledge always pays the highest return.”

With that in mind, here’s an action item for this week. Look at your financials (e.g. cheque book, credit card statements) for the last year. Have you spent anything on some type of on-going business education? Worse still is all your financials well organized (if not visit www.myirisplus.com and buy the software NOW). If you do not know how to organize – see the top of this page, I am doing seminars – some priced, some free. Please take time to attend them.

If you aren’t “emptying some of your purse into your head,” take a few minutes to think about what you want to learn to help you build your business—and sign up for something this week! Don’t put it off any longer.

If you want to earn more, you need to learn more! Oh, and reading these articles from time to time won’t hurt either.

Many people know that Saraswathi (Saraswati) is the Goddess of Learning. Learning of course is important. On google you will find a lot of articles which say “what i learnt from Warren Buffet”, “what I learnt from Peter Lynch” or what I learnt from Rakesh Jhunjhunwala” or “what I learnt from Charles Munger” or “What I learnt from Vallabh Bhansali”. Good learning is always a nice thing, but is it enough?

Many people know that Hanuman is the Guru according to Hindu mythology (for the very philosophically minded, Hanuman caused the Atma (Sita) to join the Parmatma (Ram) - and that is the essence of Ramayana. So you need a Guru to teach you from the learnings of all the great people mentioned above. However is that enough?

Many people know - and many others may not know - that Parvati (Uma) is the Hindu Goddess of Wisdom. Wisdom is about doing what you know. This is the crucial link. Training, Learning is all fine - but for it to translate into action, you need wisdom. That is the crux.

So knowing that compounding creates wealth, living a simple life gives peace, tobacco free, alcohol free, stress free living gives peace is not enough.

Seeking a simple life, doing a simple sip (and sitting tight during turbulent times), having a term insurance, one credit card, IS ABOUT DOING all that you know. That will give you nirvana. So as Nike says, Just Do it.

For attending these in your town please send a mail to: manpreet.kaur@irisindia.net

Places already done: Mumbai, Hyderabad, Bangalore, Chennai, Pune, Delhi and Indore. Forthcoming dates and locations are:

1) Mumbai 15th October 2008

2) Bangalore 12th November 2008

3) Kochi 26th November 2008

4) Ahmedabad 7th January 2009

5) Chandigarh 11th February 2009

6) Pune 25th February 2009

Only online registration. Limited seats, and your invitation will have the details of venue, timing, etc.

Once upon a time a King was walking through his kingdom and he found a farmer. He asked the farmer what he does for a living. The farmer told him about his crops. Then the King asked him about his earning and saving habits.

The farmer said out of a rupee I earn I consume a quarter, repay a loan with a quarter, invest for my old age with a quarter and give away a quarter. The King did not understand so asked for some more explanation. The farmer said - one quarter is for my consumption, with one quarter I look after my parents - that is a repayment of a loan, with one quarter I feed my children - which is an investment for my future. One quarter is given to charity - so I give it away.

The king was amazed by the explanation by the farmer.

I am convinced this is what we do with our money - see how YOU are using your money. It helps to go to a website called www.myirisplus.com - first learn how much money you are earning, how much you are spending, how much you are investing for YOUR future, how much are you spending on your PARENTS, how much you are investing for YOUR CHILDREN. Learning about all this is not just necessary but absolutely essential for survival. That is the challenge.

Is the United States of America a capiatlist state, a communist state or a socialist country? The answer is obvious is it not? It is a capitalist country…well er so you thought.

When Lehman, AIG, Merrill, etc. were distributing high salaries all of them looked like they believed in capitalism. Surely they would have said “there should be no government oversight” - thank God for the English language! Surely for FED it was oversight. All that happened was over its sight!!

Now that Lehman has gone under, and AIG was almost there, there is a clamour for government help - Fred and Mac got help, but Lehman did not. Now AIG has got protection. Will somebody get up and say how does the FED behave? Please? What logic?

Anyway if I sound like a commie, please excuse me. Does it not sound like the profits are in the private sector, the risk on the government, and failure on the tax payer? To me this sounds bizarre.