Prolongating the illness???

Is the “lender of last resort” enough to change the expectations of the financial markets?

The recent rescue plan can be considered the solution of the current crisis or a different approach is needed also in terms of “real” economy in the long term

My answer:

It would be a short term solution,what’s the point of investing the taxpayers money with no returns??what is going to be your budget for planned expenditure in terms of real economy?,If you keep bailing out it will just prolongate the illness as Drew Sygit has already mentioned about the things more to come.It would be better of allow the Free markets forces to play their roles which is “FREE ENTRY AND EXIT MARKET”.It would have served a lesson to all,but by bailing them out it sends out a wrong signal not only to companies but also to common man who will not mind taking another loan and defaulting on it. 

My suggestion would be to let the markets play according to its will as they are the real forces of economy.Perfect Market is only in theory and you cannot achieve in practice.Instead start regulating your system so you don’t commit these mistakes,it was utter foolishness on the the part of lenders without ascertaining the creditworthiness, I just a heard a fact that all that one was required is self certification of his income,of the 100 application received 60 of them were Inflated Income. 

Creation and Sustainability of wealth is one of the key aspects for the economy to keep running,so what the authorities should do is look into the future(the next 3 years) of how are we going to keep the economy running.Agreed the economy is going to slowdown for a couple of years but what after that???So there should be a different approach.


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Fall of LEHMAN BROS!!!!!!!!!!

I had a discussion with Vignesh the other day(Student,XLRI) with respect to the “WALL STREET CRISIS” and our discussion was as follows:

me:the next crisis is Credit default swap crisis and Credit Card crisis,American assholes wanna party on others money.

VїĢŋËŠħ: haha, the entire world has to save america man, else we all fucked, royally

me:but they shld have had a gud regulation system,dude lending to poor credit guys was a dumb thing,and tht too huge sums of money.

VїĢŋËŠħ: that’s the point man, these fuckers have made the whole operation so goddamn complex, bundled in fuck all shit and sold them to other countries, quite the bastards they are

me: some of the accounting and valuation practices are pretty strange Vick

VїĢŋËŠħ: yea man, they give it to fucking fresh outta college b school grads who are all high on                    hormones, they do a lot of random shit, and it ended up like this, supervision and control is the                key, the fucking regulators were sucking ont thses guys dicks till it caved in

me: hahaha, infact the Federal did encourage of lending to sub prime guys so tht there is economic activity

VїĢŋËŠħ: alan fucking greenspan(former federal reserve chairman), bastard ought to be strung up by his balls

me: one of the things in India is people feel ashamed if they default,thts got to do with out moral values

VїĢŋËŠħ: mm… the problem with america is the root of capitalism is the idea of directed greed working towards profits, so the system is pretty much built on greed, combine that with no or little regulation, perfect recipe for disaster

me: all the top B-school grads will look forward for a domestic job,it will a lot of pressure on other B-school guyswith respect to placements

VїĢŋËŠħ: yea

but for the most part, indian b school grads pretty much always stay in india, so it might not really impact their placements greatly, i mean, all the big companies from abroad might not offer the same huge salaries, but lesser

me: the Psychology of human being is they will look for a safe haven,so I doubt they will join MNC’s ,at least for the next 2 years,so all demand will be for domestic placements which will offer them a financial security

VїĢŋËŠħ: yea i guess

So did a research on why did Lehman Brothers fail???some of the facts are follows(Courtesy :Economic times of India and some added Inputs from me),

How can a bank like Lehman go down so fast?

Financial markets can be punishing and reversal of fortunes can be dramatic. More so, if an institution is overleveraged — when loan and investment books are much, much bigger than its capital.
What compounds problems are strange accounting practice and high-risk nature of the loans and investments.There are also disclosure issues: Lehman, in its last conference call with investors, gave no clue that it was actually on the brink.

How did the crisis build up?

An investment bank uses its proprietary book (own money) to lend others and invest. It started with the subprime crisis. Banks like Lehman, buy mortgage loans from other banks, and then package them to sell bonds against the loan pool. Often they add cash to make the loan pool more attractive, so that the bonds can be sold at a higher price.

Suppose mortgage was earning 6%, these bonds are sold at 4%. The difference is the spread which the investment bank earns. By selling these structured bonds, it raises money and frees capital. But when homebuyers started defaulting, these bonds lost their value. It all began like this, and then the virus spreads across markets.

How does the domino effect play out?

Suppose Lehman faces a redemption and has to repay another bank it has borrowed from.
If it sells the mortgage-backed bonds, whose prices have fallen, it will not raise as much as was earlier expected.So, it sells some of the other good assets or bonds which may have nothing to do with mortgages.But since the bank starts dumping these assets, prices of these bonds also dip.
This is when the crisis spreads from subprime to prime.

How does it impact the balance-sheet?

Herein lies the strange accounting of bonds and derivatives like mortgage-backed securities. All banks are required to mark-to-market (MTM) their investments.So, if the price of an instrument falls, the difference between the price at which it was bought and the current market price has to be provided — meaning, it has to be deducted from the earnings.So, a drop in price leads to the MTM loss. But there’s a bigger problem which really has deepened the crisis.An MTM loss can be provided only if there’s a ‘market’. How do you provide when there is no market?

But aren’t these instruments traded? How can the market suddenly vanish?

Remember, it’s very different from checking the price of a stock from a stock exchange website. Many of the instruments are over-the-counter derivatives, which are struck on a one-to-one basis between two parties.Suppose, a derivative is linked to variables like the yen-dollar rate, and may be prices of other actively-traded assets, say gold price and US Treasury bill.What the bank does is construct a model, feeds the available market price of these variables in the computer, to arrive at what the market price of the derivatives could or should be.This is an artificial model-generated price. This is called the mark-to-model against mark-to-market.

So, what’s wrong in that?

The trouble is when the bank actually goes out to sell the derivatives, it discovers that there are no takers. And, even if there are buyers, they are willing to pay just a fraction.In other words, there is a sea of difference between the price that is being offered in the market and the high artificially-generated price thrown up by the model.So, when the bank ends up selling the instrument or unwinding derivatives, the loss suffered is far in excess of the mark-to-model loss.Such extra losses on thousands of securities and multiple portfolios can wipe out the capital of the bank.

What is the nature of the instruments?

There are collateralised debt obligation (CDOs), credit default swaps (CDSs) and all kinds of derivatives. CDOs are asset (or loan)-backed securities, while CDSs are like a guarantee.Say Bank A lends to a corporate but is unwilling to take the full credit risk. So, Bank A enters into a CDS deal with Bank B; under this, Bank B promises to pay Bank A if the corporate defaults. The money that Bank B earns for this is the CDS premium, which is similar to an insurance premium.Now, if markets turn choppy, risks go up and so does the CDS premium. So, Bank B, which is earning a lower premium has to promote a mark-to-market loss against the CDS position.

How does one minimise such turmoil?

Maybe, some of the accounting norms need to be changed, so that the definition of MTM gets narrowed down.Besides, to stop banks from going overboard, capital requirement may have to be raised for derivatives position.
But all this may be easier said than done.

In my next post I would be reporting on “THE EFFECT OF WALL STREET CRISIS  ON INDIA”…………………..WHAT’S THE ROAD AHEAD FOR DALAL STREET…..

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Breaking News:Terrorists Strike Once Again

Breaking News:Bomb Blasts rocks another city -Delhi.Are we Immunized to this statement every three months on the news channels????I would say yes,its just another day at the bomb office,life has to move on.I was shocked for one reason,when people where hit by the bomb,I saw all the channels trying to increase their “TRP’s” by showing the victims lying around instead of showing some kindness to Humanity,Would it be the same if any one of their relatives were lying around???.I need an answer from “NBA”, and there should be some guidelines laid by the I&B ministry,I do agree you need to cover the news,but to what extent,at the cost of many lives????Come on Guys show some respect to fellow beings.Whenever a blast happens the media tries to squeeze in at the spot which hampers the investigation process,Everyone needs to play their part,so it needs a lot of cooperation from people of all walks of life.

The other aspect which I would like to address here is the challenge by terrorist organization,I think all that matters is people helping out,like the e.g of providing water which brought tears down my eyes,These type of small acts should be our response.

Coming to the political aspect,my memory goes back to Gujarat & Bangalore blasts where we had a discussion on our channel,one of the finest points raised by Ram(Historian) who said that we need to have Central Autonomy with respect to the Department of Police,but the sad part is every Government wants have a grip of things.It doesn’t serve any purpose by changing the commissioner,with the technology advancing and terrorists becoming more tech friendly,we need Cyber experts,why can’t we have private experts??we can hire people from Infosys,Wipro ,etc who will work very secretly with the Govt or an Autonomous Institution.These are the small things which will advance our security system.

But all our netas can do is Immediately condemn the attack which our Media will highlight it in bold!!!Constitute a committee tomorrow to look into the attacks,and submit a report by within 15 days,unfortunately that will taken somewhere between 2-3 month.Call for an all party meeting wasting my money(I have paid tax) in the form refreshments.All the changes which are expressed will happen after 10 years,Am looking forward to the next generation netas (youth)who will address all the Issues.

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“Its all over,Please move on….?”

Introspection for the past two months reveals the following of I ,where I am part of the most ever expanding organization in India,i.e,“Unemployed educated youth of India”.Its been really tough for the past 2 months,especially the month of July ,where I was still in the trauma of all the Incidents that took place in my ex-organization.I couldn’t get over it.It took a huge toll on my mental abilities,every night it used to kill my mind.I just wanted to get over it somehow by just listening to my conscience,sometimes I was successful,where I couldn’t get control I used to have a verbal brawl with one of family members(which consists of 4 excluding me).Even now I get angered when I think of what happened with me for the past 1 year with respect to work life.Everyone suggests me “Its all over ,Please move on…..”

It’s very easy to voice out the above statement,but getting over it is really difficult.The feeling I should have taken revenge, but my conscience keeps telling me “hold on man,that’s not what you should do to others,speak to them politely.Polite speaking ???,people take advantage of that in today’s world,I was fighting it out with my mind in the month of July,couldn’t concentrate on my preparations,managed only 3 hrs of study during the entire month of July,Now I have reached 5 hrs a day on an average with exceptions to some cricket days.I real thank God for giving me the strength to come of the after work trauma.The past one month has been good with respect to my preparations but not up to my expectations.In fact I deleted all my colleagues from my list of friends on Facebook,but added back a few of them.Tears roll down my cheek when I think of my hard work,I wouldn’t have put even 1/3rd of the efforts towards my student life which I did with respect to my work life.Those slogging hours to help the team from 6am to 9pm,but eventually was branded the “BAD BOY”.Sometimes I do feel the past 1 year of work has been the most bad phase of my life.

Now I have come to terms with respect to all my goals,need to start slogging out more for all the entrance exams.I have kept the option of working with a different organization moving till I get into a reputed B-School,surely planning my way into a B-school by next year.Iam expecting my friend Vignesh within a couple of weeks,who is slogging it out in XLRI,Jamshedpur.So planning for a getogether!!!.I really miss all the fun that we had in our hostel life ans those friends who were very straight forward.This post should have been in my blog in the beginning of August ,but I decided to hold it on till today(reasons personnel).I have something big coming up guys,that is ……………………“CAAAAAAAAAAAAAAAAAAAAAAAAT”.


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What’s next in store???

Am I going to acheive my goals???What I dreamt of being within the next 3 years looks very jeoparadised. People around me demoralise me with respect to my goals,My mom keeps teeling me ,quote”You have wasted 2 years in your life”,my ego is hurt but she has every right to voice it out for she is the person who got me to this world.I wouldn’t blame her either for she is concernced about my fututre and the other  reason why she comes up with such statements is because of the gossip of her beloved FAMILY MEMBERS.People of the yesteryear generation still feel that all the education should be compelted by the age of 22 and you become an earning member of the family.In today’s world unless you have your career vision set right you wouldn’t make something big in your life.Its really difficult to convince them why I have taken the decision of working for a year and preparing for the most toughest exams to land up in a good B-School.It’s what I want to be in the next 3years that matters,If I follow their advice I wouldn’t be satisfied with my life and would end cribbing all throughout my life for the decision I have taken and which will drive me insane.

All that mattters to me right now is how Iam going to achieve the set goals.I have drafted a blueprint of how Iam going to go about with the preparations for the entrance exams which I hope will get the best out of me.I need a little bit of help from God as wellfor he should give me the courage to stand tall against all the odds.So keeping my fingers crossed for what’s next in store for me?????

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25-06-07 to 25-06-08

19th April 2007,There was I pondering over what next in my life as It was my last day in Sri Sathya Sai Institute of higher learning officially as a student.I did speak to a lot of my friends about what to do next??? all of them uniformly echoed work for a year with simultaneous preparations for the entrance exams (for joining India’s top B-Schools).I was kind of skeptical whether to settle down in BANGALORE as I know I would be haunted by the bad company(school friends) after 5 years of peace full life,so decided to move to the most inhospitable city of India —CHENNAI(the only multinational company which succeeded in setting up an office during the License Raj days was OFFICE TIGER).I concluded that CHENNAI is the still old conservative city after 2 days of exploration.I decided to come back to BANGALORE(I’m proud to be a BANGALOREAN) for I felt it wasn’t going to be easy in Chennai.

With the help of my friends(few of my seniors in college),I got a call from one of the leading organisations around the globe with respect to providing news and Financial data  Services.ECONOMIC TIMES(India’s leading newspaper with respect to Business and Finance) had an article in International Business segment which caught my attention,the headline went like this:”TWO PIONEERS IN THE SEGMENT OF NEWS AND FINANCIAL DATA SERVICES DECIDE TO MERGE”.On the very same day I had an Interview with one of the PIONEER‘s representative,Initially I was kind of skeptic whether to join or not (as I read about the amalgamation),but went ahead and attended the Interview which was kind of tough,I thought its going to challenging work If I did make it through.I was asked to report on the 25th of June 2007 to the organization as they felt I was up-to their expectations.

The D-Day arrived ,It was around 18:15IST,we were requested to hold back as the respective TEAM LEADERS would be visiting us ,A voice addressed me hello and enquired whether I was N.Nandi Varman,I said firmly YES.Then she Introduced that I’m Rashmi Rao,Team Leader,RTFI.I was like “what”? ,am I going under a woman,its the last thing I wanted to start my corporate life with,(as the Interviewer who Interviewed me was a charismatic man,but after working under her for the past 1year ,I concluded that she is a born leader).The next three weeks was all about training ,getting to know the fundas on which I’m going to work on.The first three months I was kind of real dumb as I couldn’t appreciate anything with respect to my work,but later on picked up gradually.Slogging for the next three months with the help of my teammates as we tried to make the workplace a little more workaholic.I found people were not committed to work ,its just that they come in ,sit there for 8hrs for a huge sum of money.I felt I’m not doing justice to my salary at work,that’s the reason I slogged out for the remaining of my stay.My father who is an ardent Government Servant(Advocate) made me realise this,quote”-MONEY SHOULDN’T COME SO EASILY,FOR EVERY SINGLE PENNY YOU SHOULD SWEAT IT OUT”I did realise that this is a valid point,dedication and commitment should be there in whatever you do.I was initially shocked looking at the way people worked for the first 1Month ,I was almost Influenced by them.Then a thought occurred to me ,start making inroads into the process with the help of teammates so that the workaholic culture will build up.( all the kudos should go to the T/L ).Never did I let my individual ego to takeover my commitment to work.Never did the thought occur to me of satisfying my ego.

A boat cannot have a smooth sail till it reaches its destination,will face strong winds,waves,etc.My mind took control of me during the month of December,In spite of learning how to tame the mind for the past 5 years(hostel life).This was the period of strong winds,waves were soaring,not until one day when I thought.”hang on what the hell am I doing?”.I was going through my emotions everyday for I felt ,I committed a big sin in my life,was away from my goals and my mission.It was a period where everything was going bad for me(that’s the reason everyone tells don’t be so WORKAHOLIC).I then decided to call it a quit during January.for I felt I’m not going to do justice to my job.Then I was asked to reconsider my decision,I had promised my T/L to stick around minimum at least for an year,so didn’t want to break it.This was a period where the planets started moving against me.It was a day when I was a made a victim of BLAME GAME in my team.Time had arrived for me to pull up some of my colleagues for they were trying to play safe,not because of my anger,but wanted to convey them the trait HONESTY.After three weeks of contemplation I decided on the 25th April 2008(19:15 approx) to put down my papers serving a two month notice period so that I complete my 1 year of stay with organization.Even after putting down my papers I was kind of affected my many happenings which was really getting to my head everyday and made me to start the countdown the remaining number of hours that I’m going to stay with the organization.If not for two(Lack and Syed) of my colleagues who helped me a lot to overcome the happenings ,would have taken many people to task and again being a victim.Many thanks to them for helping me to overcome these adversities.

The past one year has been a good learning experience as I have a picked a lot of positives from my colleagues and have been trying to imbibe them.The other conclusion being “WOMAN ARE WEIRD WITH FEW EXCEPTIONS”.Iam kind of surprised to see today’s behaviour of women(especially the Urbanites),today’s women are very bold(daring than a man),stubborn and real sensitive .I dobut in future whether the next generation of girls or woman would possess all the traditional qualities of an Indian women.I wouldn’t be surprsied in future if girl or women asks who is SEETHA?? but they would know who was the most beautiful women in India??(partly it should be blamed on our EDUCATION system). Mr Sanjay Sahani Sir(Principal ,Sri Sathya Sai Institue of Higer Learning) always used to tell one thing,which I laughed it off when I was in the college,but now accept that,quote“THE WORLD OUTSIDE IS REAL CRAZY,MAN IS BECOMING GREEDY DAY BY DAY”.Its really sad to see this state of affairs,I was like really shocked(for the intial few months).The other things which we were taught in our college was never ever bow down to your “PRINCIPLES” for POWER and MONEY.PRINCIPLES (its upto an Individual of how they would like to define it) should be present in everyone’s life.I would advise everyone to never compromise on your principles because would always remember your as ” A MAN OF PRINCIPLES” and not for Money or Power.One of my so called colleagues advice was,quote-“YOUR COLLEAGUES CAN NEVER BECOME FRIENDS”.It was wrong conclusion for I did get a good friend who will fall in my list of all time great friends.HE/SHE has helped me a lot with respect to how tackle today’s corporate world and human beings.At the end of the day ,I would like to thank to GOD for showing me this path so that I have some experiences with respect to the WORLD BEHAVIOUR.

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Mistakes——“The Secret of Sucess”

“It is the highest form of self-respect to admit our errors and mistakes and make amends for them. To make a mistake is only an error in judgment, but to adhere to it when it is discovered shows infirmity of character.”—-Dale E Turner.

“Boys” a well known Tamil has a famous song “Saregamae”,which highlights the Importance of Mistakes,as they are the “MEDICINE” for Success.We are all human beings who do commit some mistakes,but do we accept our mistakes????,some people don’t accept their mistakes as they feel people would loose trust in them and gossip around it.But its a wrong misinterpretation by today’s working generation who refuse to render an apology ,where’s the virtue “HONESTY” ?????Is it only found in books and preached only by spiritual gurus in their speeches???I wouldn’t suggest anyone to Implement strict rules and regulations,its all upto an Individual to accept their mistakes.Corporate people should understand when an apology is made it uplifts their character,trust and belief will come from your peers,T/L’s & T/M’s.

But when you refuse to accept your mistake ,credibility is lost,people around you will start gossiping about your character .Many people try to coverup their mistakes and end up commiting more,what is the reason for not accepting??1)the team may not accept your views,2)EGO—-this is the biggest factor.

Trust will come only when you accept and most Importantly it will create awareness among others that this person can be banked upon.In today’s corporate world people play a game and that’s called “BLAMEGAME”,people just pass on the blame .It’s heartning to see educated men and women refuse to accept their mistakes,was not everyone taught at school about HONESTY???,what happened to all the moral classes which they had???? was it just namkewaste moral class????we should have these sessions as part of the Organizations Induction or a workshop (mandatory) which will help them in the development of character resulting in good future leaders.

EGO–I refuse to  accept ,I have been working for the past so many years and I know what is right or wrong????you cannot point out mistakes against me(that’s what a person will be thinking to himself).A sucessfull person will always not try to satisfy his EGO,instead he will be ready to apologise so that he will continue to be admired ,respected among his colleagues,friends and which will make the top level hierarchy take a note of this person.Iam not ambassador for the word APOLOGY.Imagine a situation where a person’s career is ruined (although he did not commit his mistake) , was victim of the so called “BLAMEGAME”.Sometimes people even go to extremes (Its not a high percentage) but promise you it will be start happening frequently if we don’t make a small apology for a mistake.

Iam not 100% perfect ,a learning human being in the process of life,the reason for advocating is because faced a lot of similar situations during my college life and have been taught a lesson in the “HARD WAY”.Humans have a peculiar quality in them,when people advise them through soft way,they don’t heed to it,but when you have learnt it through the hard way you will remember throughout your life.

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