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बैठ जाइये: Takeaways from Parliament’s Lokpal Debate

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‘All of humanity’s problems stem from man’s inability to sit quietly in a room alone’ – said Blaise Pascal.

On those lines, there might be some truth in extending it a bit – ‘All of a nation’s problems perhaps stem from their parliamentarians’ inability to sit quietly and agree in a room together.’ If only more of our parliamentarians could agree on solutions to more of our nation’s problems more frequently, a lot of our problems would perhaps be non-existent, or definitely solved faster.

At the very least, the problem that our speaker faces daily of having to repeatedly keep saying “बैठ जाइये” so often would definitely go away. Pity the speaker of the house trying to control the proceedings of the house – specially on days like Friday of last week, which is, perhaps, more like a normal working day for Parliament. It was evident that whenever someone would stand up to ‘make a respectful submission’ or a ‘humble point’, all it would result in would be noise from some section of the house, followed by a different version of “बैठ जाइये” from the speaker. Honestly, how many different ways can you say “बैठ जाइये” after all? It seems that there is an inverse relation between the number of “बैठ जाइये” pleas made by the speaker and the quality of output from the house. One could see that on Friday, after all the constant “बैठ जाइये” pleas, finally the house was adjourned, and on Saturday, with only a few intermittent “बैठ जाइये” pleas, the house achieved some meaningful debate and reasonable output. How I wish we had more such occasions where parliamentarians could sit in peace and agree more!

For the past two weeks, common citizens – led by an uncommon man – have found it much easier to follow “बैठ जाइये” instructions. They have all been ‘sitting in peace’, in protest silently, non-violently – all agreeing on the common need to root out corruption at all levels in the country. Somehow, they have also presented a solution to the problem in the form of a bill, that some agreed on, some did not, but everyone felt was on the right lines at least. And if a whole country, well almost, but a significant part of it could do so, it was high time that a set of 540-odd elected representatives could find a way of sitting quietly and agreeing in a room.

Well – it looks like they did achieve a way of doing that on Saturday. But the people outside are still not convinced that this is real. “यह तो कमाल कर दिया” – said my broker friend Jigneshbhai, also a supporter of the India against Corruption movement, just returning yesterday from one of the rallies. May be it was a one-time miracle, may be it was not. Perhaps the ones outside the house will agree, sit and protest again, maybe when they realise that the ones inside are not able to sit and agree again.

And then, unfortunately, the problems for the speaker are sure to start again. She will have to find new ways of saying “बैठ जाइये”. I have a suggestion. May be she should change it, and say “बैठ जाइये नहीं तो अन्ना हजारे को बोलूंगी”! Who knows – maybe that will work and we will have miracles like Saturday again!

The Government on Lokpal: Giving Precedence to Form over Substance

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A few observations I made over the past few days, since Anna Hazare went on a fast for a strong anti-corruption law.

That the government’s recent responses to Team Anna and the public demand for a strong anti-corruption law seems to be like that of someone asking a dying man to fill a form at the hospital.

That someone needs to ask the government, similar to the way Munnabhai asked Dr Asthana in the movie “Woh casualty ke bahar aadmi mar raha hota hai, to usko form bharna zaroori hai kya?”

That the government still does not get it that it must give precedence to substance over form, intent over procedure, at least for something as important as setting up a strong Lokpal.

That saying that ‘the Delhi Police is following procedures to maintain order’ and ‘Parliament should be allowed to make laws’ look like giving more priority to procedure over intent.

And responses like ‘present your views to the standing committee for consideration’, or ‘a private member bill cannot be introduced when there is already a government bill introduced’, or ‘the legislative procedure will not allow the bill to be passed in this session of parliament’ – all of these are akin to asking people who are already desperate for change and action – ‘to fill forms’.

Like the government is looking more and more like Dr Asthana from the movie, bashing its head over how to handle the non-violent rebellion from a group of  ‘common citizens’ who have garnered the support of thousands more.

That the government still does not understand that decent, law-abiding, normal citizens of society generally do not join protests spontaneously on roads. That despite fully knowing that it is not the ‘proper’ thing to do, there must a strong reason for their doing so, which the government needs to fix.

That it is a clear problem of giving precedence to form rather than substance, and procedure rather than intent.

And that the more the government focuses on procedure, the more its intent will be doubted.

That this is not the time to think about vote banks, urban versus rural, communal versus secular for the government. The people who are fasting, joining the protests and supporting the movement do not seem to be thinking about it.

That while some people may think Anna’s procedure is not right, most people are not questioning his intent.

That while some people may think the government’s procedure is right, most people are questioning their intent. Which is not good news.

When It Rains, It Pours: What to do when things go wrong in a heap

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My South Indian friend Swami had a new reason to complain since this morning – the rains. “I really got caught in the rains today – it was really bad, the weather, roads and traffic” , he told me as I met him today.

Monsoon in Bangalore is, at best, mild, so a steady bout of rain in the past 48 hours or so was enough to set the tone for a sad, wet morning for him, apparently. Unlike in places like Mumbai or Chennai, no one carries an umbrella in Bangalore. So the people with two wheelers stop in underpasses or under the remaining trees when it rains, and people with four wheelers crib about the two wheelers, and their own hardly replaced wipers when it rains. Every one else who is not on the roads and in some IT office complains about the roads and the traffic. And every one else who is not on a two-wheeler, four-wheeler or an office complains about how Bangalore is no longer what it used to be, and how it got spoiled due to the people with two wheelers, four wheelers and offices.

In Mumbai I have not seen people complain so much about the rain. The rain is heavier, the traffic is perhaps worse, and the distances definitely longer. And when it rains it really pours. So the Mumbai person resigns himself to the reality of losing a few more minutes of his daily life to his commute. Hence, people complain about the trains every year, and how they either stop or run a few minutes late when it rains. The intensity of rains in Mumbai is progressively captured when the Harbour line first gets closed, then the Central line, and finally when the Western line closes. That is when it must have really poured. Once in a while, you have really bad days when every one stays at home, or those who left early, walk back home in knee-deep water.

I may be wrong here, but like the rains, sometimes I see the same thing in the happenings around us too. When it rains, it really pours. Sometimes you get caught in the downpour unexpectedly.

So when you have Dhoni and his cricket team clicking well, you thrive on seeing them beat Australia in the quarterfinals, Pakistan in the semifinals and Sri Lanka in the finals to become World Champions. And then three months later, you have them losing Test matches badly; first by 196 runs, then by 319 runs and then by an innings and 242 runs. So when it rains, it really pours – on both sides perhaps. Looks like the world thrives on extremes.

So when you have an honest, educated, distinguished person, almost a non-politician returning to power as Prime Minister, it seems to everyone like the return of the dream team for Indian politics and economics to take us on the path of prosperity where India ‘lived happily ever after’. And then, two years later, with the economy facing problems and corruption on his back, he seems like a civics teacher with no voice, telling everyone how parliament makes laws, or an economics professor who knows the theory, but cannot quite put it to practice.

Any my broker friend says the same happens in the markets too. “When it goes up, it just keeps going up, and when it goes down it just keeps going down”, he says. But then I reminded him, “But it hasn’t gone anywhere for a while”. “Well”, he said, “when it does not go anywhere, it just does not go anywhere. Everyone is waiting for the flood or drought.” Hmm, may be, I thought.

So I told my south Indian friend Swami not to complain about rains – because it does look like when it rains, it really pours. “So I got it” said Swami – “so what’s the big deal, I still don’t like it that way. With all of us getting sticky and wet and slippery. Got to find a way out to deal with these rains!” “Do what people in Mumbai do”, said Jigneshbhai. “Carry an umbrella. Or like the ones where they don’t get enough municipal water – get your buckets out. Or better still, do this. Take a break and go to Khandala or Lonavala. At least you will enjoy the rains.”

What does the US Economy suffer from? Diabetes or Heart Disease

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I often wonder what is a worse condition to have, diabetes or heart disease. And what is easier to live or die with.

Like the wife says it is easy to fix heart disease if it is only that. You may be able to detect it before you get a heart attack, and do something by quickly having an open heart (by-pass) surgery. At least for a while, that’s enough.

And the wife also says a diabetic may not seem very ill, but must realize he is suffering from a chronic condition that has no cure. The only cure is to get out of that condition. And it is only possible to get out of that condition, if he eats and exercises well, and also takes the insulin and medicines.

And it is tough being a diabetic, specially if you are unable to manage it. The first step is to accept that it will be a chronic condition that you can live with and manage. But that does not mean it is not serious, and will not affect you eventually, if you do nothing about it.

Like I sometimes feel that the US Economy got a heart attack 3 years back, and the doctors of the economy thought this needs quick fixing. So they did something like a quick and urgent by-pass surgery, so that the world does not go into a seizure. That it was required at that time to save the patient, and it actually did.

Like it worked for a while, but seems like there are blocks in the heart that keep coming up every now and then in the US and other Western economies. And every time you do an angioplasty or a by-pass surgery here and there, you seem to have fixed the problem.

But it seems that the real cause of the heart disease is a chronic spell of diabetes over the past 3-4 decades. When people and governments gorged and gorged, despite high levels of sugar, and now are unable to understand why the heart disease is not getting fixed.

Like every time they go on a diet and insulin for a while, they seem to be getting back into shape, but some part gives up as it is not used to it, and asks for more food. And it seems life threatening every time, or does it?

Like the doctors and patients need to realize that it is diabetes. And diabetes is not something that can be fixed overnight. In fact it cannot be fixed at all. It can only be lived with and managed. It needs a change in habits and lifestyle. But if you do not do anything about it for 30 years, don’t be surprised if your eyesight becomes bleary.

The only cure is to manage your diet, build an exercise discipline, and pray to God that everything gets better. It eventually will, but that’s the only way – time and discipline.

And you may still need to keep checking your heart to look for impending heart attacks.

As Buffett said in one of his letters, “No sooner is one problem solved than another surfaces—never is there just one cockroach in the kitchen.”

Diabetes is the lurking cause, heart disease is the effect.

And so I met my broker friend and told him about my theory excitedly that the Western Economies seem to suffer from diabetes, and the doctors of that economy are giving them medicine for heart disease. And how it won’t cure the economy and it is the wrong medicine due to a wrong diagnosis.  He just flashed a wry smile at me, as if I was the last person in the world to come to that conclusion.

In a worried tone, he said, “That is fine. Just hope and pray that it is not Cancer.”

डर के आगे जीत है: Why Long Term Investors should not fear Market Crashes

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canwepanicnow“Can we panic now?” asked Ron Weasley to Harry Potter in “The Chamber of Secrets” when they suddenly find themselves surrounded by giant spiders in the Forbidden Forest. That is how a lot of us feel in the current market situation, perhaps. It is one of those times when everyone seems to ask everyone else this question. Is it time to panic?

Like so many things in finance, this is the wrong question with many answers that seem right. The reality is everyone may have a view, but no one can claim to know the answer for sure. The fact is that it is the wrong question to ask.

There is no doubt that in stomach churning times of volatility, the first thought that strikes you may be – sell everything and run. Sometimes, the second thought may be – buy everything quick, because things have gotten cheaper. Both the views are wrong because they depend on timing activities based on market events, rather than based on a plan.

Mr Market can get into manic-depressive moods as well as exuberant moods at the drop of a hat. If it forces one to get either too happy or too sad, one is turning one’s basic advantage into a disadvantage. Think of stocks as a crate of coke or a basket of potato chips that you buy for weekend parties. If you bought something on Wednesday, and your neighborhood supermarket announced a 10% off sale on Friday, will you think – Oh no! I think I should sell the coke and chips I have, and conserve some cash! At best you may think, let me buy more as the prices are great, and I am going to need them next weekend anyway. If you are a rational consumer, you are likely to weigh your decision – based on whether you need more coke and chips, whether you think it is worth stocking up, and whether you think the sale is genuine or is it on old stock. Unfortunately, a lot of individual investors do not think about stocks like that, and hence the fear associated with market falls. Therefore, headlines read ‘Global Bloodbath’ instead of ‘Sale, Sale Sale!’

Take this quiz that Buffett wrote in his 1997 letter to his shareholders – “If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.

But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the “hamburgers” they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices. ”

And finally he adds: “So smile when you read a headline that says “Investors lose as market falls.” Edit it in your mind to “Disinvestors lose as market falls — but investors gain.” Though writers often forget this truism, there is a buyer for every seller and what hurts one necessarily helps the other.”

darrkeaagejeethaiThe really good long-term returns from equity come not despite the falls, but because of the falls. For someone who invested in US equity 10 years back and forgot it, he may look at his portfolio today and say – this has gone nowhere. Similarly, for some one who invested in Indian equity 4-5 years back, again the scenario is similar – broader market levels in August 2011 are more or less where they were in August 2007. But for someone who rode the falls, and invested at that time to whatever small degree, even partially in the right stocks or funds, the returns have come. So it is not that the long-term returns from equity have come despite the fall. The long-term returns from equity come because of the fall. The problem is no one can say for sure whether a fall is the end of the falls, or the beginning of another set of falls. Life has to be lived in forward mode, and can only be analyzed in reverse mode later.

But one thing is clear. It is during the times of sudden, big falls that fear is at its highest. It is in such times where it is most important for an investor – firstly not to sell, secondly do nothing, and thirdly buy something. Because truly, in such times, the risk of permanent loss of capital gets lower. If one manages to neglect the value of investments already made (and hence notional losses or reduction in profits), buy the right things in large proportions during times of ‘darr’, and can withstand, or better still, buy more during further falls if they happen, he is sure to be on his way to ‘jeet’  – may be not in a few weeks or months, but surely in a matter of many years. As long as one is committed for the really long haul, and makes rational choices, there is no doubt that there is truth in the saying – डर के आगे जीत है.

5 Star Rated Advice: Deciphering the S&P US Downgrade

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“Who is this S&P?” asked my South Indian friend Swami to my broker over a cup of coffee.

Swami, who generally spends time with his family over weekends, suddenly called me on Sunday afternoon, and said he wanted to meet my broker friend Jignesh who knew a thing or two about investing. I was not quite sure what it was about, but being a close friend, I arranged for the meeting. Swami seemed quite perturbed when he came home. “Arre – they are saying Indian market will fall because some S&P downgraded US. I want to understand why”, he explained as the reason for this sudden meeting, while we were leaving my house. So at around 6 pm, we met over coffee.

“Arre, it is a rating company”, responded Jigneshbhai. “Means?” queried Swami, not quite sure what a rating company does. “They provide ratings for different things, like companies, governments, anybody or anything that has a financial instrument or offer.” “Why?” – continued Swami, still not sure why something like that is needed by anybody.

Now Jigneshbhai thought it was time to really explain things properly. “Dekho – how you read reviews of movies in Times of India sometimes, and then decide whether or not to watch the movie. If it gets 5 star, it is a hit, so you go and watch it, if it is 1 star, it is a flop, and you don’t watch it. Like that, S&P provides star ratings to anyone who wants money – like companies, countries or anyone else. If it is AAA rating, people who have money, give them money easily, if it is lower, then they will think more, or charge more interest. Like that – understood?”

Finally, some spark dawned on my south Indian friend, who was otherwise quite a bright chap. But not fully lit up, he continued, “So that S&P is saying US has lesser money than earlier? So their economy is in trouble” “Something like that” responded Jigneshbhai, not quite wanting to get into detailed arguments about fiscal deficits, interest rates and recession, I assumed. He thought this was the end of the discussion, hoping he does not have to explain more, and quickly started asking me how are things at home and work in general.

But his hope was short-lived. After a few sips of coffee, Swami came back. “Arre Jigneshbhai – but sometimes I have seen that the same movie gets different ratings in different papers. Also, Times of India ratings are wrong also sometimes. They give 5 star and I watch the movie, it is rubbish. And they give 3 star, and movie becomes a big hit.” I could sense a mix of curiosity and optimism in Swami’s eyes as he asked this.

Now that the question was asked, my broker friend decided to go the whole distance and provide solace to Swami’s unsettled mind once and for all. “Yeah, sometimes, they can give 5 star to stuff that is rubbish, and low rating for good stuff too. Sometimes it matters, sometimes it doesn’t. Sometimes it also depends on who the producer or star actor is – isn’t it? If the season is bad, sometimes all movies flop for the time being.” I could see that this confused my south Indian friend a tad bit more, as he lost keeping track of the metaphors.

Continuing, my broker friend said, “But why do you worry about it? If a good movie gets a 2 or 3 star rating, its opening may suffer, but if it is good, people will decide for themselves, and go and watch it later anyway, no? So – if companies continue to increase profits, they will become hits, people will buy their shares and markets will go up, else they will become flop shows. So, you just focus on selecting good movies to watch and good companies to put money on” laughed Jigneshbhai, giving my south Indian friend 5 star advice.

Finally as we finished our coffee and left, he added, “The world is worried because the US went from AAA to AA+. Rather than worry about the US getting downgraded, I wish someone in our country worried about how we will upgrade from our BBB rating.”

The Good, The Bad and The Ugly: Observations in a World of Divergent and Opportunistic Opinions

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good-bad-ugly“Are you a vegetarian or non-vegetarian?” asked the waiter at the hotel to my South Indian colleague Swami. This question always confuses him. “I am a vegetarian mostly, but I can eat chicken, except on Tuesday and Friday. So it depends on what everyone else is ordering”, he replied. Such responses always confuse waiters in hotels, who have a simple way of classifying people. According to them, there are two types of people in the world – vegetarian and non-vegetarian. Alas if only it was so simple – my South Indian colleague Swami being a case in point.

“There are two kinds of people in the world, those with loaded guns, and those who dig. You dig.” Clint Eastwood made this dialogue immortal in the movie “The Good, The Bad and The Ugly”.

It seems to me that there are two types of people in the country, or maybe the cricketing world, at least for now. Those who think that MS Dhoni was right in calling Ian Bell back (in the Trent Bridge test), and those who feel he was stupid to show such generosity on the English team.

Among those who think he was right, again there are two groups – those who think he was a true statesman of the game, doing it to uphold the spirit of the game; and those who think he was just a pragmatist, and hence did it to ensure that the Indian cricket team’s brand value (and hence the money they earn) does not go down.

And then there are those type of people (mostly media commentators!) who change their views according to the situation. Those who initially started justifying the morals of how Dhoni was right in appealing for the run out, and how the spirit of the game itself has changed in today’s world of cut-throat professional cricket; and later changed to applauding Dhoni for his generous act on realising that Ian Bell was walking out to bat again.

There are some other ‘two types of people’ in the world today too.

Those that think Breivik, the person who fired at and killed 70 odd people in Norway, was an example of emerging, right-wing, ethnic extremism in Europe, and those who think it was not that – that it was just the delirium of a madman.

Among those who feel he was an extremist, again there are two groups – those who are shocked by the scale and brutality of the murders irrespective of who did it, and those who are shocked because the killer was not an Islamic terrorist, but a Christian Westerner who hated the tolerance of multiculturalism.

And then, there are those type of people (mostly Western politicians!) who change their views according to the situation. Those who started condemning the killing as another example of ‘acts of terror’, and then called it a madman’s act after realising that the killer was not an Islamic terrorist.

There are two types of people in the markets too.

Those who think long-term fundamentals-driven investing is the right way of making money in the markets, and those who think there is nothing like long-term, as all of us are dead in the long-term – so short-term technicals-driven trading is the way to go. Those who invest for wealth creation, and those who trade for income generation.

And then there are those type of people (mostly Brokers and people on business channels!) who change their views according to the situation. Those who say investing is the way initially, and then, when the markets go up tell us to become traders. Or those who tell us to make money as traders initially, and then, when the markets go down, ask us to become long-term investors.

So it seems the world is made up of two types of people with two sets of clear but divergent views. And then, there is a third type who change their views depending on what suits them; but who somehow seem to matter and drive their worlds.

And finally, there is a fourth category. That is the type of people who have no view as such, perhaps the majority, depending on the arguments between the first three types to form an opinion. If you are neutral and have no view, your individual view probably does not matter much, and is there for the taking to be influenced. You are probably the common man with no voice, and in the markets, you are probably the retail guy with no choice. Like my South Indian colleague Swami, you are dead meat even before placing the order!

Liquid Oxygen Syndrome: A Modern Day Illness of a High Paying Job and a Higher EMI

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Human motivations are complex to understand, and sometimes funny when experienced.

Yesterday a colleague of mine relentlessly kept on enlightening me on the so many bad things about his job. He started with how things were getting from bad to worse, and how they could get even worse going forward. On how he was never given the position and respect he deserves, the raises he was entitled to, and the applause that he was always ready to stand up for (but which never came). How in the big bad corporate world, everyone was a liar, and how his boss also has no real power. On How he was not offered what was promised, and how everyone was being conned. How he used to have a cabin (sic!) and now can’t find a seat, and how he used to manage people and now has to search for work himself.

I gave him a silent hearing (!) – neither quite sympathizing with him, nor taking a risk in antagonizing him, but almost staying indifferent. Finally, interjecting after a short pause he took during a long ramble, I opportunistically suggested to him – why not leave your job then, specially if it was so bad? His mood suddenly got more aggravated – oscillating between being angry and getting calm. I was not quite able to understand the state of that emotion. Suddenly he confided in me – boss, where else will I get this kind of money? In my previous job, salary was not that good. Who will now pay the EMI for my house and car?

At this point, I wasn’t quite sure whether he was cribbing about the job problems, or boasting about his new increased salary, house, car, et al. Well, hardly an occasion to poke someone I felt – specially when you are not sure whether he is happy or sad. Capitalism does things to people I felt, specially when accompanied by globalization. Not quite the time to say anything, I thought. And hence I quietly walked away as the conversation ended.

ajitFunny what thought strikes you when. But I remembered an old ‘Ajit’ joke then, and now remember it every time I see this colleague after that conversation.  He seemed to me a victim of what is a modern day disease that I have now started calling “Liquid Oxygen Syndrome”. It strikes young people who cannot live in the present because they have borrowed heavily from the future. Generally victims cannot enjoy the ‘oxygen’ of their good life because of the unending ‘liquid’ of their large EMI and other, mostly unending, lifestyle liabilities. It generally occurs in urban educated young men with reasonably decent incomes, who decide to make their life indecent by going for things they want, but don’t necessarily need. This syndrome was invented (or discovered?) by Ajit, the popular comico-villain of yesteryears in Indian cinema, when he said to his sidekick (in a joke, though): “Raabert, Isko Liquid Oxygen Me Daal Do. Liquid Ise Jeene Nahi Dega, Oxygen Ise Marne Nahi Dega”.

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