1. Suddenly many jobs are being lost: Remember slowing down, closing down are not words that happen only to somebody else! It happens to the best. Only your salary is certain, the variable salary is really variable. I now know of several people who are EARNING about 60% of their claimed CTC. The variable is just not happening.

Learning: when you commit to a life style, emi, etc. IGNORE a big portion of your salary. Assume only 50%, it helps.

2. Sorry kids, I got it wrong: Many kids in the age group under 26-7 who have done their SIP in equity funds may have to hear taunts from their parents! All SIPs started in the past 1-2 years are under water. If their parents are saying ‘see I told you, keep your money in the bank’ – frankly I do not know what to say. Equities will do what it does. Keep your cool. You have to do what you have to do!!

Remember the returns from 1979 to 2011 was about 18% p.a. – if you add dividends reinvested the returns should be better. However no ONE year may have got you 18% – there have been years of -46% as well as super years like 242%. Be ready for volatility. A terrible 2008 (-40%) was followed by a fantastic 2009 (90%)….so BELIEVE in equity. Accept that volatile assets will not give you linear returns. Have patience it is a test match, not a T 20 match.

3. Debt market is attractive ONLY in the short run: If you think SBI bonds at 9.95% p.a. is attractive, remember money should grow in REAL terms, not just NOMINAL terms. Nominal returns in SBI is 9.95%, but inflation is say 11.95% – in such a case YOUR money is not growing in real terms. It is SHRINKING….so you need to be in equities. Being in debt funds (I am in debt funds too) is a good tactical move for 12-14 months, at the end of that period you will have to come back to EQUITIES.

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The company – I mean the ‘HO’ people LOVE the cheques they bring, but hate the sales guys – and this manifests itself in many ways..let us look at some of them:

1. You know our sales guys have fun travelling – look at their travel bills.

Statement made by the head of accounts. My take: I travel in reasonable luxury – some times in sheer luxury, but believe me travel, business or leisure is no great fun. The head of sales is answerable for sales profitability too, right? Just a jealousy statement – accountants do not get incentives, but they make the cheques!

2. Our sales guys have fun – they need not report to the office at 10am:

Statement made by head of HR.

My take: A genuinely filled in sales call sheet is good enough for me. Even better if he is getting the cheques, I care a damn what he is doing during the day or night.

There are many such millions of statements that the ‘HO’ guys make about the sales guys. In one case there was a sales guy on a salary of Rs. 3 lakhs – and he had earned about Rs. 19 lakhs as incentive. When he fell ill for a month, and spent about Rs. 1.5L the COO refused to clear any medical reimbursement (the HR was reporting to the COO) – saying he has earned ‘enough’ to pay for his medical expenses. I asked him if the head of accounts and finance (earning about Rs. 27L) had fallen ill, would he have paid, he said yes – afterall ‘he deserves his salary’ he added. LOL.

The worst thing of course is tinkering with the incentive structure – or bluntly lie about the eligibility. I know of companies who first bring a straight forward incentive scheme – if you bring money for the company, you will be rewarded. However as the incentive amount increases, some HO guy will tinker with the incentive system – and tinker bad. I have seen incentives come down from 19 lakhs to Rs. 3 lakhs in the next year JUST BECAUSE THE RULES were changed.

Reminds me of Ayn Rand’s John Galt as the sales guys…so you know who is the villian, do you not?

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No. Only Economics will work.

Let us take a different example – if suppose a legislation was passed that women should be paid 1.25 times the salary for a man, you think women will benefit? No.

Lesser jobs will go to women. People will make job offers only to men. Or women will be recruited at a particular salary and will be forced to pay back in cash. Or men will be paid ‘extra late sitting allowance for sitting beyond 8pm’ and women will not be paid that allowance. If a stupid bureaucrat with a compliant politician (or the reverse!) pass a law, it does not work. I have no clue how many lawyers are looking for loopholes, but surely something will be found.

Let me give you an example from an old provision in the Income Tax Act, 1961.

There was a provision which said if you sold a property below the market price, the government would acquire it at that stated price. Simple, it should have brought down the black money, correct?

Well I know how a brilliant lawyer used it. Mumbai has many properties where the landlord could not vacate the clients – dramatically reducing the resale value. Let us say as a landlord with a 50,000 sq ft of rental property thought his property was worth Rs. 5 crores -but the tenants were paying only say Rs. 4 psf rent, he was getting only Rs. 200,000 as rent. The Mumbai rent control had (not sure if it is still true) that you could buy it from your landlord at 100 times the rent. So he could have sold it to his tenants at Rs. 2 crores.

This act came as a blessing! They would make an agreement between A and B that the property was being sold for Rs. 4.8 crores…..the Commissioner would pay (I think) a 15% premium…and acquire it…then find that they could do NOTHING with the property!! So suddenly the government was saddled with expensive property – which could not be sold. L O L.

Also there is a provision which says ‘If a Scheduled Caste employee is removed and he complains to the police, it is a NONBAILABLE COGNISABLE OFFENCE! So what to do?

I know one big employer who does not employ a candidate if he is a SC….so sometimes the good intention of the legislation is lost in the ingenuity of the bureaucrat. Markets help making a mockery of the law. So this Act will also become a joke soon.

By the way did you think this act is meant to help the small guy? NO. This is just to spite Maya’s work at UP…meri Sonia mahan!!

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Subramoney: Yes, of course.

R: Good i bought it at Rs. 240.

S: Hmm good. What is the price of the share now?

R: Such a good company sir, I thought you would know the price! It is Rs. 174 now…(not sure about the date – a few days ago)

S: Oh! so you are at a loss….

R: No sir I further averaged at Rs.180…so my cost has gone down…and this time I bought 200 shares.

S: What is the price now?

R: Sir the price is Rs. 147, I bought another 200 out of my last 2 months salary and by selling some Reliance Industries shares..I have bought some more at 124…now my average cost has come down quite dramatically.

S: so you at least made money on Reliance?

R: Sir you must be joking. I bought Reliance Industries at 1243…and sold it now at 834 Rs.

S: OMG….why did you sell Reliance?

R: Sir it is not increasing at all.

S: what is your time frame for Hindalco?

R: Sir long term sir…I will be invested for 2 years sir. My first purchase I am already holding for one year. I am sure in 3 more years at least, I will be able to sell on a no profit no loss basis.

R: Sir I listened to all that you said – a) bought a good company with good management.

b) As you have been recommending averaging (SIP) I have averaged also.

c) I do have a long term horizon – more than one year. (My CA and my broker told me that < 1 year is short term and > 1year is long term).

Still I am losing money……………what to do sir?

Readers willing to answer are welcome….I will share my reply after a few days..

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Well if you wish to measure your success and are still using money as the medium to measure it, think again. What your kids think of you, what your spouse, friends, parents…think of you is just as important.

How do we measure success? here is a brilliant link …

When a person who reported to me for sometime said ‘Can I just sit on the chair next to you….damn the salary…’ I felt vindicated.

link

http://hbr.org/2010/07/how-will-you-measure-your-life/ar/1

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I mean do we have the time to convert all our companies, accurately, and file it with MCA – if we do it on our own?

This is a question that every CFO / Co. secretary should be asking.

Is it easy to buy the tool? Yes of course…write a cheque and the software will be yours. Simple, is it not?

Not so fast…you will have to learn how to tag. Ask somebody who has done it…it is boring, and time consuming. So there is a good chance that you will try to delegate…and that is tough.

The ICAI says it takes 90 hours to do one company. That means about 15 days – so you can do 2 companies a month – Sep, Oct, Nov you can do 6 companies! What about the 15 days salary of a CA or inter CA? Let us say that will be Rs. 25000? So if you CANNOT CHARGE Rs. 25k + 25k+ margin FOR ONE Company…think hard, real hard.

Next year – the taxonomy may change dramatically – so the tool may have to be upgraded paying a nice amount – so again think hard.

While outsourcing, please visit the team that is going to do the outsourcing – and be doubly sure BEFORE – you choose your o/sourcing partner. Frankly you do not have the luxury of going with a wrong guy and then retracing and finding the right guy – 30th November is too closeby!

When talking to the team check for some knowledge of taxonomy, tagging and technology support – just in case something goes wrong.

Well these can only be guidelines…all the best.

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Let me enumerate (Ripley’s should not use it in their Believe it or Not, please)

1. Money invested for 80C benefit, but not mentioned in the Return of Income.

2. Money kept in a company fixed deposit, interest stopped coming (FD matured) not claimed FOR 3 YEARS. Of course company made no attempt for 2 and a half years, then sent one letter…so effectively after 32 months!!

3. Rs. 3 lakhs lying in the current account, Rs. 1500 credit card bill not paid for 2 years. Same bank. Obviously bank did not inform (accounts are connected, but current account is operated jointly and credit card is in the husband’s name )

4. Salary not credited to bank account for 3 months. DID NOT REALISE THAT SALARY WAS NOT CREDITED.

5. Bought life insurance paid 2 years premium, did not pay 3rd premium EVEN THOUGH SHE HAD ENOUGH MONEY in the bank, because she heard ULIPs are bad. Premium already paid Rs. 150,000.

6. Did business with brothers, invested with them, bought insurance with brother as nominee. Died at age 36. Wife and daughter penniless, being supported by HER father. Some chance that brothers will pay her something, but NOTHING BY RIGHT….maybe a pittance as a FAVOR….

can go on and on…

I have been stunned. If they get a financial planner who charged them Rs. 55,000/- p.a. but SAVED Rs. 300,000 in some simple mistakes being AVOIDED…should the client crib about 55K paid or be thrilled that he saved Rs. 245,000? L O L

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Nice to see the old values (how funny we are happy to PAY to see the good man win, because in real life we are not sure what happens in the end!). So a good guy who works with a reasonable margin, has good HR practices, has good ideas can succeed in a big bad world.

I know my friends who are not in sales will not like my writing -  thanks to the equity markets and a fantastic portfolio manager I may not care about what they think – but they too should watch this movie!

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For whatever reasons – voluntary retirement offers are now quite common and most people do not have a choice. However, if you do have a choice, see how to make the best of it. If you are given a VRS offer at age 45 and you have a transferable skill you could start a second career. If you join a small family run business you could even continue there till you are 65 or more – and thus it may actually be a good idea to take the VRS. Normally VRS will have the following implication:

1.    Loss of salary: the most obvious implication is the loss of salary, so there is no pay cheque.
2.    Loss of group benefits – medical insurance, accident and life insurance, discounted rates in housing (from an outside agency), etc.
3.    Loss of something worthwhile to do from 9a.m to 5 p.m.
4.    Loss of a social circle
5.    Loss of status at home as the ‘bread earner’ and ‘bread bringer’

If the company is going through a tough time and are making a VRS offer it is better to take it without much fuss. In a tough competitive environment the company may go out of business and may have nothing to offer. So taking the offer makes sense.

However, if the company has enough cash and is making a VRS offer they are likely to offer half the salary for the next 10 years (basic no allowances) and some other facilities. Here there is scope to negotiate – if not the money benefits like insurance, accidental death benefit, some group buying discounts, etc. Most companies who offer a VRS to reduce the age group will bend and give way. If you are enterprising you can offer outsourcing some of the functions that you have been doing / overseeing. Opportunities like vendor co-ordination, salary processing outsourcing, recruitment screening, recruitment back ground checking, are all functions which companies will happily outsource to retired employees with energy rather than outsource to outsiders. A few years back Tata Motors gave a free truck to its VRS employees as an incentive for taking the offer quickly – like an early bird offer. Thus being prepared for a VRS helps you take the early bird offer – and that may be substantial.

You need to evaluate your income after VRS, the chances of retaining some group insurance or a company paid medical coverage for life, chances of getting a similar job in a place of your choice, tax implications (some companies continue to pay a salary rather than a lump-sum), letting you attend some skill building programs run for employees – negotiation skills, computer skills, etc.

Based on all this you should take your decision to take the VRS. Normally it is worth it. A friend who took a VRS showed me his bald plate and said can you see the hair coming back? That is the fun of financial freedom – no boss to chew my brain!

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Once upon a time there used to be a ‘ring’ in The Stock Exchange (you dummy it had to be just called this, because the other ones did not exist). The Stock Exchange, Mumbai became the BSE – the Bombay Stock Exchange. The people with the ‘sauda’ book went into the ring and executed the transactions. Quotes were given by jobbers (called taravaniwalas). The daily turnover used to be around Rs. 200 crores – anything higher was considered great. There were 100,000 graduates / undergraduates who worked as jobbers, clerks going into the ring, sub-brokers, share transfer clerks, etc.

Then came technology – and the peopl who brought it said ‘now there is tranparency’ – after all the tech people, ‘educated’ people, etc. had to create new terminology. So out went badla, and in came F&O….and many such changes. Jobs changed hands. Frankly do not know whether the benefits went to the investor or the people who created a big army of financial service sector jobs. It would be intersting to see the ‘wealth created’, the ‘salary paid’ , the turnover tax paid…velocity benefits everybody except the investor (assuming he is still alive!).

Then came the mutual fund industry – ‘wealth management’ they said it was. Again distribution was required, professionals were required – so ‘charges’ were imposed. Some people made an attempt to understand the charges – the super big guys understood and negotiated it. The smaller guys do not understand the charges though there are some who pretend that they do. The amount of expenses that an amc can charge is decided by the amount of money that they can charge as expenses and its own fees. These were fixed when the aum of the biggest amc was under Rs. 1000 crores. Now it is Rs. 100,000 crores. Mr. C B Bhave has an advisory committee which is supposed to benefit the end investor. I have not seen any MD of any company of any industry say “Regulator please reduce my charges so that the end customer can benefit”. Well bureaucrats have some simple illussions in life, do they not.

For a customer who invests Rs. 100,000 a year for 30 years the load that he pays would be Rs. 2000 * 30 = Rs. 60,000. However even if the fund puts in a mediocre performance, the amc charges he pays would be Rs. 250,000 in THE THIRTIETH YEAR ALONE!

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