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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: Jigneshbhai and Swami

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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.”

We have met the enemy, and he is us: Are you being your own enemy?

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April 22 is Earth Day – and this was the slogan used on a cartoon poster on the first Earth Day in 1970, with the character Pogo saying – “We have met the enemy, and he is us.” While it still holds true in the context of mankind being the earth’s biggest enemy due to multiple reasons, I think the statement is strikingly true even when it comes to investors.

In market crashes, there is this unending search for who is to blame for it, and multiple theories abound on whose actions led to it. Every time the reasons for the crash are different in terms of the context of the economy, from Harshad Mehta to Technology Dot-com boom to Sub-prime crisis, but the culprits blamed are many, and the enemy is still not to be found. Investors lose money, get out of the market thinking that I cannot find the enemy here, I do not understand this game, and I am not playing it – in most cases, not quite realizing that the enemy can often be found within themselves.

The biggest enemy of an investor is the investor himself. And that has got to do with the emotions of fear or greed, and a lack of a plan (or if it exists, a lack of discipline to adhere to it). The reality is that investment is less about which stocks will rise or which funds to buy, and more about what is your plan and whether you are willing to stick to it. If the investor focuses his attention away from the markets and more towards what his plan is, with respect to his goals, he is making every effort to ensure that he stops being his own enemy. A simple plan that is not dependent on market movements charted out to meet his goals, and the discipline to adhere to it through thick and thin are his best friends.

We all play games like cricket or monopoly – and most players or teams will increase their chances of winning if they have a plan and stick to it. Some times one will have to make slight changes when unexpected things happen and your ability to withstand pressure will matter then, but the importance of a plan and sticking to it cannot be undermined and is paramount. For example, for a game of cricket, you may have a plan to go for the slog in the first 15 overs and then consolidate your position for the next 25 with wickets in hand, and then go for the kill in the last 10 overs. You may lose a few wickets more than expected, and have to modify the plan a bit, but if you still manage to hold on to the plan, you are more likely to reach your target. Or in monopoly, the plan is simply to buy sites, houses, exchange them for hotels, and wait for people to land there and keep paying you rent or buying it from you – so that you get rich. You may get unlucky, and someone else might get the prized sites sometimes, but there is a clear plan to take if you want to win.

In the investment markets, the reason most people are their own enemies is because they do not have a clear plan. So the answer is simple – figure out what strategy or strategies work best for you given your goals, make a plan around them, and have the discipline to stick to that plan. Market prediction becomes irrelevant when an investor has a plan prepared. Market movements help him then only to the extent of assessing if any actions are needed in the context of his plan when the movements happen – and in most cases, irrespective of whether they are up or down – they are likely to be more than welcome for the investor. The search for an enemy will then reduce, as he is likely to see none!

Attention Surplus Disorder: Are you paying for paying too much attention?

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We have all heard of Attention Deficit Disorder – which refers to the lack of an ability to concentrate on an activity or task – something on the lines of low attention span. I have often been (and I guess a lot of individual investors will also identify with it) a victim of what I will call here as Attention Surplus Disorder when it comes to investments.

This is the state in which you pay so much attention to your investments (than is necessary) that it leads you to take actions that you should not or would not ordinarily take – if you were not paying surplus attention. With all the business newspapers, television channels, stock tickers, online portfolio statements, websites and email, there is a high likelihood that a lot of investors (and I refer to people who honestly start with an intention of long term investing, and not traders or speculators) are victims of attention surplus disorder.

A majority of the financial services industry and its revenue is essentially based on two sources: One is the size of your assets, and Two is the amount of your transactions. A third source, in a few cases, is a percentage of your profits. Most constituents that ordinary investors deal with make money based on a percentage of either of the first two. It is in their interest, therefore, that you either suffer from or are made to suffer from Attention Surplus Disorder – in the hope that you will then be motivated to do something that leads to either newer assets or newer transactions.

So all the clutter (a.ka. analysis, views, news or similar) to get your attention to your portfolio and to the markets – with new technical and fundamental analysis everyday, how which stock is best to sell now or buy now, or how some mutual fund beats the index this month, quarter or year versus some other last year, month or quarter; or how you should add new asset classes to or change your asset allocation of your portfolio – and much more – are all essentially noise that gets your attention, and leads you to become a sureshot victim of attention surplus disorder. It is likely to take an ordinary investor a lot of education first, and then a lot of will power and discipline next, to get himself into a position where he escapes becoming a temporary or permanent victim of attention surplus disorder.

Value Investing in Mutual Funds

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It is structurally not possible for mutual funds to implement value investing, in its completeness. Structural Constraints Mutual funds are essentially slaves of their investors and their temperament. Simply because of the structure of mutual funds and the need to beat an index on a monthly, quarterly, annual basis, it is almost impossible for mutual funds … Read more

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