"Everybody dies twice. Once when their childhood ends."

"Everybody dies twice. Once when their childhood ends."

"Once choosing the colour of a sketch pen was a tough task.

Occupying the window seat in the school bus was called obsession.

Getting a toffee as a birthday treat from a friend made our day.

Being the first one to finish copying from the blackboard was the ultimate moment of pride.

Hiding the answers from a bench partner during exams was not called selfishness.

When homework was the only torture & finished it soon,so could get some extra time to play.

Early to bed, early to rise was life's mantra, but how we loved sleeping late and having some extra TV time!

Owning a cycle was like owning everything.

To look good was only to use a neat comb.

We didn't need FB or a phone to keep in touch!

We thought all elders are ideal, when Daddy was the only hero and Mom was the only Best friend."

So what they say is right.
"Everybody dies twice. Once when their childhood ends."

The A to Z of Indian Bureaucracy

The A to Z of Indian Bureaucracy [ Twenty six ways in which Indian babus are making a mockery of governance, ethics and public service ]

Arrogance For months, the media in Delhi screamed hoarse that the planned ‘BRT corridor’ scheme dreamt up by a few babus of the transport department is a disaster. The bureaucrats blithely went about imposing this nightmare on citizens ofDelhi with traffic jams becoming the norm. Now the babus arrogantly blame citizens of Delhi for choosing cars over murderous buses for commuting to office! A babu without arrogance would be like a dodo... Extinct Bullying Like all bullies, the babu rides roughshod over those below him and fawns obsequiously on his masters. You only have to watch the rude and callous manner in which a bureaucrat behaves with a citizen who has gone to his office for some work. And then compare his behaviour in front of a politician in power. The ‘public servant’ is actually the ‘master’ of the public and the ‘servant of the ‘master’ – usually a minister, and sometimes a mafia don!Corruption This is synonymous with Indian babudom. Whether you are the aam aadmi or a billionaire, your file won’t move an inch unless cash changes hands under the table. In the 1980s, the Octroi department in then Bombay went on a strike & army officials manned the check posts. The strike was withdrawn after the media reported that Octroi collections had gone up by more than 500%.

Delay & denial Perhaps except the Konkan Railway and the Delhi Metro, no project ever undertaken by an Indian babu ever finishes on time. There are some irrigation projects that are in the process of completion for the last 30 years! Delays are always deliberate because they throw open more opportunities for ‘money on the side’. And of course, whenever the media or the judiciary highlights the delay, the Pavlovian reflex of the Indian bureaucrat is to deny, and then deny some more. Enquiry & extension If corruption and sordid acts are the dirt, the omnipresent ‘Enquiry Committee’ is the proverbial carpet under which the dirt has been carefully hidden.The principal purpose of the Enquiry committee is to delay, and then deny in the hope that the media and the public will eventually forget about the case. In English, enquiry rhymes with another interesting word called bury! Bureaucrats never ever retire; they just keep getting those ‘extensions’! Failure That one word can neatly sum up the history of the Indian bureaucracy after independence in 1947. Worse, babus find it difficult to digest the fact that entrepreneurs can usually do a better job. So you will see bureaucrats banning ‘private’ bus operators and forcing citizens to take state run buses that don’t run. So you will see envious bureaucrats ‘de-recognising’ or not recognising world class centres of higher education. Perhaps their biggest failure till date has been their total inability to kill the great Indian spirit!   Gutless  There is a saying about the Emergency: they crawled when they were asked to bend. That can neatly sum up the behaviour and attitude of most bureaucrats in independent India. It is virtually impossible for a minister to get a babu sacked; and yet bureaucrats crawl before netas and justify their behaviour by whining that they are otherwise harassed.  Hustling  You would associate this term usually with dealers in a casino. But Indian babus have become masters of the game. Just look at how Sudhir Goswami hustled his way into the cover of Time Magazine as one of the Indian heroes. It is only much later that dumb struck Indians found out that Goswami was lining his pockets and bank accounts with money meant for flood relief! And does any one remember Ashok Agarwal, the Enforcement Directorate official who turned black mailing into a fine art!  Impose inefficiently  When corruption, delays, denials and hustling don’t work, the Indian babu resorts to ‘imposing’ rules and regulations. It is a different matter that the bureaucrat performs even this destructive act very inefficiently!Impose price controls if inflation hurts people so that they are hurt even more. Impose quotas at the behest of political masters. Impose rules which entrepreneurs have to break if they want to run a successful business. Justify The Indian bureaucrat has acquired and mastered the legendary act of justifying anything and everything. File a request under the Right to Information Act and the babu will deny access to it. He will then justify his cussed behaviour because it involves something termed as ‘national security’. Ask a bureaucrat about delays in construction of national highways and you will get simply no response, He will justify his stonewalling in the name of ‘public interest’! Kafkaesque If Franz Kafka had encountered Indian babus, his novels would have been even more depressing and disturbing. Analysts are sadly mistaken when they call Kafka’s writings surreal; they perhaps meant the Indian bureaucracy. A Kafkaesque bureaucracy is “marked by a senseless, disorienting, often menacing complexity”. B&E challenges entrepreneurs and citizens to say confidently that they understand the frighteningly complex jargon that is used by babus. Lies Arguably the third most favourite sport of the bureaucrats after corruption and delays. When denials and stone walling don’t work, just resort to outright lies. The Indian babu will lie about files, projects, public interest, national security, corruption, delays, hustling and any other act that might embarrass the bureaucrat individually or the bureaucracy collectively. Thanks to judicial activism and some bureaucrats being sent behind bars for contempt of court, babus are now wary of using this weapon!   Mismanagement If Jack Welch would watch an Indian babu ‘manage’ something, he might just end up committing suicide.With extremely rare and honourable exceptions, almost every thing that a bureaucrat touches turns into dust. When babus announce a grand new plan to increase electricity and water supply to citizens, the taps dry up and the lights go out. When they announce a plan to tackle monsoon in Bombay, even Dalal Street virtually shuts down because no one can reach office! And of course, they then justify it in public interest! Nepotism Like the courtiers of the Mughal era, Indian babus-thanks to their access to the new kings and queens ofIndia (Ministers, MPs and MLAs)-are perpetually trying to curry a favour or two for themselves and their family members. The best overseas scholarships are thus ‘reserved’ for children of bureaucrats. Some of the best jobs in the private sector are thus ‘reserved’ for the children of bureaucrats. And some of the best college seats in India are thus ‘reserved’ for the blessed progeny of these new age courtiers! Oblivious Quite mysteriously, the ‘If they don’t have bread, let them eat cake’ persona of the French Revolution has been transplanted into Indian bureaucracy. Cocooned in their bungalows and VIP areas, the Indian babu is utterly oblivious to what is happening in the rest of the country. The babu is oblivious of the fact that 300 million Indians are starving; that roads don’t exist in much of India, that water and electricity are mirages for the aam aadmi, that…The only thing they are not oblivious to is their ‘status’. Proliferate Like bacteria and termites, Indian babus have proliferated and invaded virtually every sphere of activity in the country. No wonder businessmen and citizens say that our system is rotten to the core. Indian babus run companies, they manage climate control, they run the Railways, they operate fleets of buses and aircraft, they run duty free shops, they run anti-poverty programs, they run schools and colleges and hospitals… They might start running modelling agencies and spas too. In short, proliferating bureaucrats have run India to the ground! Queue When the first bureaucrat in the history of mankind had a fantasy, he saw a long and winding queue of forlorn, dejected and frustrated people. That day, God was perhaps in a bad mood and condemned mankind to a life time of queuing up. For Indian babus, the ultimate high is making citizens stand in never ending queues-for money, for ration, for tickets, for liquor, for passports and even for death certificates. Of course, queues are meant only for the public, not for ‘public servants’! Red tape The ubiquitous file tied up in red thread is the ultimate symbol of the corrosive and destructive powers of Indian bureaucracy. It is as dangerous as the Swastika of Nazis; as devastating as the Red Star of Stalin and Mao and as vainglorious as the Eagle of the United States. The Indian babu starts getting withdrawal symptoms if he is not surrounded by musty files; many of which have perhaps not been opened for decades. Red Tape is the Bramhastra that is used by babus to systematically throttle India Inc.   Sycophancy Many at B&E suggested socialism & sadistic as a better option than sycophancy. Eventually, the consensus was that arrogance coupled with sycophancy is the Yin & Yang of Indian bureaucracy. The sycophancy is reserved only for the powers that be-for the criminal turned neta who has become a minister, for superiors who can gift plum postings and assignments and for very rich entrepreneurs who lavish money on the bureaucrats. Tragedy Indian bureaucrats are always feverishly praying for natural and man made tragedies and disasters to strike India. A minor flood is welcome; a drought is even better and a disaster like an earthquake or a super cyclone is heaven sent. A tragedy means ‘relief’ money from government coffers and an opportunity to make enough to build another house or two. Now you know why sincere and dedicated babus fight to have their districts declared ‘drought prone’! Utopian Hare brained ideas and schemes have become the monopoly of Indian bureaucracy. One day, you will have the Lt. Governor of Delhi thinking aloud that I-cards for people from U.P. and Bihar might be a good idea. The other day, you will have another babu stipulate that a homeless destitute must provide proof of residence before he gets free food. Soon, expect a bunch of sycophantic babus kowtowing to a neta and drawing up legislation for reservations in the private sector. Verbose This term just about pipped the word vindictive to the post. Whether it is the annual function of a school or college or a gathering of India’s top businessmen, the Indian bureaucrat is in his element when he gets a chance to deliver a ‘lecture’. Hypocritical words tumble out of his mouth like honey laced with arsenic. Children & businessmen have no choice but to suffer in silence for a vindictive bureaucrat is worse than a verbose one!  Wanton Four synonyms for the term wanton are-uncalled for, needless, meaningless and reckless. But wait, the wanton behaviour of the Indian babu is on display on selective occasions. Over cautious bureaucrats suddenly turn decisively over zealous when it comes to squandering tax payers’ money on fancy schemes that only line up their pockets and that of politicians. Xenophobia  When all else – including corruption, delays, denials, hustling, nepotism, red tapism and sycophancy – fails, the Indian babu resorts to the good old pass the buck game and starts blaming ‘foreign powers’ for all the ills that bedevil India. The foreign power could be the CIA, it could be terrorists from Pakistan, it could be illegal immigrants from Bangladesh, it could be the insidious designs of China and it could be a conspiracy of developed countries to deny prosperity to India.    Yes minister Most readers of B&E must be familiar with this hilarious and yet poignant book and British TV series. Just in case you are not, it is a series of episodes where bumbling but clubby bureaucrats make fools out of vainglorious politicians in the U.K. In India, it is difficult to say who is making a fool of whom. But one thing is for sure, both bureaucrats and ministers are sure making fools of Indian citizens. Not just some of the people some of the time. But all the people, all the time! Zero sum game  In this game, one of the two participants has to necessarily lose. More importantly, the quantum of gains that are made by the winner is exactly the same as the quantum of losses. In India, the bureaucrat and the citizen have been playing a zero sum game right since 1947; perhaps even before that, when the British had ruled India through a civil service stucture. No prizes for guessing who the decisive winner is when the opponents are the citizen and the bureaucrat. Unlike those classic zero sum games, the politician is the joker in the pack in this case!

http://www.businessandeconomy.org/15052008/storyd.asp?sid=3232&pageno=1

If these are economic reforms, I’m Amitabh Bachchan - by R Jagannathan

If these are economic reforms, I’m Amitabh Bachchan

by R Jagannathan Sep 21, 2012





Anyone who's never tasted butter will be glad to accept margarine as the real thing. This is the case with reforms and the UPA government. Having never seen real reforms for more than eight years, everyone has forgotten what real reforms are all about - changing the game, not the player uniforms. The recent burst of “reforms” are actually little more than palliatives - however welcome they are as a signal of change.

Ask yourself:

How is raising diesel prices to prevent bankrupting the oil companies reform? This is like saying sending a heart patient to the ICU is a sign of rude good health.

How is the sale of public sector shares - without any impact on the management - economic reform? Is selling your silver to feed your family a sign of terrific intelligence? It is a mere survival tactic.

 Have they missed the reform bus? Reuters

How is permitting FDI in aviation and big retail reform? Investment was always open to domestic investors; even foreign investors could invest in both sectors with conditions. What has really changed is that foreign airlines can now invest in aviation (earlier, only non-airline companies could). This change is thus about eliminating a stupid rule imposed by crony capitalism earlier.

As for retailing, foreign companies were permitted to invest in the back-end even earlier. They were barred only from the front end. If the main benefits of big retail are supposed to come from back-end ops (cold chains, wholesale trade, reduction of middlemen, etc), but this option was always available to the Wal-Marts of the world. So putting a Wal-Mart board on the storefront is reform? Of course, this will make them invest more, but one can only call this incremental reform, not Big Bang Reform.

Now consider what the pink press considers “more” reforms. This morning's Business Standard  informs us breathlessly that there are “no signs of reforms abating”, and adds that “the government is set to go ahead with its reform agenda - be it restructuring of loans to state electricity boards or a hike in the cap on FDI in the insurance sector…”.

So rescuing bankrupt power distribution companies (losses: more than Rs 2,00,000 crore) with even more grants and loans is reform? And allowing foreign insurance companies to invest more is big reform. The first step is unavoidable, since you can't allow the power sector to collapse. The second measure is again incrementalism is at work. Both are needed, but hardly anything to throw a party over.

The Economic Times runs a reforms story under the ecstatic headline: “Govt's only Answer to Bandh: More Reforms.” The paper says: “PM Manmohan Singh is expected to underscore the return to muscular governance when he addresses the nation on Friday to explain the economic rationale behind the government's decisions to hike fuel prices and allow foreign supermarkets into the country.”

The reforms ET talks about are raising the price of sugar for below-poverty line (BPL) families by Rs 3 a kg and allowing FDI in pharmaceuticals. So raising sugar prices from Rs 13.50 to Rs 16.50 a kg when the factory price is Rs 39 is reform. The word is incrementalism again.

“Muscular governance” is not a phrase that anyone would associate with the UPA for the last eight years, and if the PM wants to explain the “economic rationale” of his recent decisions, the most obvious question to ask will be: who ran the economy into the ditch that we need all these “reforms” now?

Pratap Bhanu Mehta is trenchant in his criticism of the Congress' new-found enthusiasm for reform and the trap it has set for itself. Writing in The Indian Express, he says:

The fact that these reforms are coming after four years of colossal mismanagement is making the reform narrative problematic. Admittedly, there was a global financial crisis that required a different policy response. But politically it is not easy for the government, after running all fiscal responsibility into the ground for four years, and after stoking structural inflation, to turn back and accuse opponents of being populist. The crisis narrative is a double-edged sword: it makes the case for reform compelling. But it also exposes the complicity and opportunism of government.

Moreover, the reforms now being thought of have little to do with the kind of things India nearly needs. A reform can be defined as something that will fundamentally change the game, improving economic efficiencies, improving governance and the delivery of government services, enhancing the autonomy of economic agents (companies, job-seekers), and reducing wastage in administration - among many other things.

Loosening up FDI in this sector or that will also contribute to such efficiencies, but they are simply not game-changers.

The real game-changing reforms sometimes need even greater political will than the kinds of things announced on Big Bang Friday. Consider these reforms, some political, and others economic.

Deregulation and freedom to produce and prosper: India has simply too many regulations for business, and these are badly implemented. Whether it is starting a business or running it, there are simply too many clearances needed, and even after that there are the cohorts of corrupt officials to feed - from factory inspectors to labour inspectors to environment safety regulators to every other kind of regulator. Not to speak of excise officials and tax collectors of every kind.

Abolishing and simplifying most of these regulations and reining in the rent-seekers of the licence-permit raj will free Indian companies to compete, including the badly strangulated small and medium enterprises that create all the jobs. It is not the Tatas and Birlas and Ambanis who create lots of jobs, but the little guys setting up shop in places called industrial estates.

Creation of a single national market: In many agricultural commodities, states place their own restrictions on the movement of agri-produce by creating intermediaries like the Agricultural Produce Marketing Committees - where farmers are forced to sell their produce. This forces all sellers to compete on the same platform and reduces their bargaining power vis-à-vis middlemen. The APMCs also inhibit inter-state movement of agri-produce, and increase the prices for end-consumers. It is time to abolish them.

The goods and services tax (GST) - which will combine excise, service tax and state value-added taxes into one combined levy - will also create a single market, but it is the Centre that holds the key. The states, which will lose their revenue autonomy once GST comes into being, are holding out for assurances that their revenues won't fall once it happens. The Centre claims revenues will rise - but is not willing to bankroll states if it turns out to be wrong.

This reform is doable if the Centre merely promises to make good any state's projected revenue losses for, say, the next three years.

Labour reforms: The biggest barrier to the creation of more jobs in manufacturing and in the organised sector is India's labour law - which makes retrenchment very difficult. However, the net result is not that companies are not laying off employees, but they are not recruiting them in the numbers they can.

Big companies are simply substituting automation for labour (this is why the Tatas and Birlas create fewer jobs than the little guys in small factories and construction sites), and jobs growth is slowing. Most political parties, and especially the Left, are opposing labour reform on the assumption that easy retrenchment will be labour-unfriendly, but this is wrong. There is nothing which prevents the government from legislating good compensation and retraining for labour that needs to be retrenched.

The point is this: without the right to fire, with humane conditions attached, few employers would want to hire when business cycle conditions can improve or worsen in a volatile marketplace.

Bankruptcy law: India has a bankruptcy board - the Board for Industrial and Financial Reconstruction - but it is simply not as easy and effective as America's Chapter 11 bankruptcy law.

What applies to labour applies to capital too. If you cannot exit a company, few people would want to set up one too. India needs a dynamic bankruptcy law that allows failing companies to quickly seek protection from creditors, rework its loans and obligations, and then either emerge from bankruptcy or be sold to the highest bidder or closed down for good.

A good bankruptcy law is the key to creative destruction under capitalism.

Welfare reform: Governments - both at Centre and state - spends thousands of crores on welfare schemes and subsidies. Whether it is make-work schemes like NREGA, subsidised gas cylinders or cheap grain sold through the public distribution system, at least half the money spent goes into the wrong hands.

A proposal to give the poor cash subsidies, instead of subsidised food or kerosene, is the key to welfare reform. It will enable the state to ensure that money goes only to the poor (since they will be identified), ensure financial inclusion (since the poor will now have free banks accounts) and make the product markets function efficiently (Currently the government pays high prices for foodgrain, then sells it at subsidised prices to the alleged poor, and half the grain is sold in the market for profits to middlemen and shop owners. None of this can create a clean market for rice or wheat.

Subsidised kerosene is used to adulterate diesel, and subsidised cooking gas is sold to canteens and restaurants, and even taxis and steel welders. There are illegal profits to be had. Subsidised fertiliser is being overused, and farmland is being ruined - necessitating even more use of subsidised fertiliser to obtain the same output. A vicious circle is ever there was one.

Instead, if a poor farmer gets his fertiliser subsidy paid in his account he will use fertiliser more efficiently (since he now has to pay the market price for it), and the fertiliser market itself will become more competitive as companies woo farmers to buy their brands.

Paying cash subsidies creates a consumer out of a welfare recipient - making him less of a supplicant for the state's favours.

The Unique ID Scheme would have been the perfect vehicle to identify and route cash subsidies to the deserving, but internal wrangling between the home ministry (over the creation of the National Population Register) and Nandan Nilekani's UID Authority of India over who will collect and issue unique IDs ended up with a split mandate - and needless delays in the creation of a unified national ID database.

This reform has been begging to be implemented ever since the UPA decided to make welfare its themesong.

Expenditure reforms: The Centre clearly needs to shift expenses away from consumption to capital spending. But in a situation of fiscal stress, even spending cuts end up chopping the wrong expenditures. This is because consumption expenditures (salaries, overheads, etc) are on autopilot, and capital spending (on machinery, fixed assets) is the only thing that is easy to cut. Net result: investment in capital goods suffers, while money is wasted on unproductive heads.

There are three ways to prevent this. One is to treat all spending as project spending where the administrative and capital costs are allocated upfront. Limits can also be set for administrative expenses as a share of project costs to keep them lean. Secondly, the finance ministry can stipulate that every new spending proposal from any ministry should be accompanied by its own means of financing. (Read our earlier post here).

For example, if the food ministry, under directions from Sonia Gandhi, wants to implement a Rs 1,30,000 crore Food Security Bill, it should ask for a specific food security cess on excise to fund that. Also, spending ministries have the option of funding a part of the social spends through voluntary contributions, too. The job of government is to enable worthwhile social spending, not do all of it itself.

The third expenditure reform is zero-base budgeting. Currently, a project started five years ago will continue to bleed the exchequer indefinitely merely because it remains unfinished, and even though it may no longer be needed. With zero-base budgeting, every project will be re-evaluated every year so that if its utility is gone, the government can cut its losses. As unneeded projects are scrapped, the budget deficit will get smaller.

Electoral reforms: State-funding of elections will reduce substantially the political need for slush funds and corruption. It can easily be funded by abolishing the MP Local Area Development Scheme (MPLADS), which gives each Member of Parliament Rs 5 crore every year to spend on his constituency.

But the big parties want to retain their financial advantage, by not reforming election funding. Congress, BJP, and the big regional parties have no interest in electoral reform since it will start closing out their ability to raise big money privately by doing secret deals with businessmen in areas which need government clearances - like allocation of coal blocks, spectrum, land or even environment.

The MPLADS scheme is also a way for party bosses to keep their own MPs in line by giving them a budget to spend on their constituencies. The MPs can use the money to favour themselves with construction contracts, among other things.

Public sector reform: Politicians like to use public sector companies under their ministries for private ends - fiddling with contracts, using their resources for private purposes, and misusing surpluses for bankrolling political subsidies (as ONGC subsidises the oil marketing companies), et al.

This is how Air India, the public sector oil companies, and the two telecom companies (BSNL and MTNL), among others, have been run into the ground. Dayanidhi Maran, when he was Communications Minister in UPA-1, is said to have used a private BSNL exchange to benefit his brother's company, Sun TV.

The key reform needed is to take public sector management out of the reach of ministers - something no coalition partner will currently allow - unless the lead party in the coalition sets an example and moves the public sector shareholdings to a separate holding trust or company or otherwise insulates public sector managements from political interference.

If the government wants to fix end-prices or  subsidise them, it should indicate what subsidy it will pay to public sector companies (for, say, diesel or cooking gas or even power) and then allow them to decide whether it is worth it or not.

There can be many more such true reform ideas. This is what reform really ought to be about. Opening a FDI tap here or raising a diesel price there is not Reform with a capital “R'.

If these are Reforms, I'm Amitabh Bachchan.

http://www.firstpost.com/economy/if-these-are-economic-reforms-im-amitabh-bachchan-463613.html 

HOLLYWOOD MOVIES WITH STOCK MARKET AND BUSINESS AS TOPICS

Those who love to watch biz movies.....here is list which is must watch....
HOLLYWOOD MOVIES WITH STOCK MARKET AND BUSINESS AS TOPICS

1. TWO FOR MONEY (STORY ON SPORTS BETTING)
2. WALL STREET 1
3. WALL STREET 2
4. OTHER PEOPLE’S MONEY
5. GODFATHER PART 3
6. GLENGARRY GLEN ROSS (STORY OF REAL ESTATE MARKETING FIRM)
7. BOILER ROOM
8. INSIDE STORY (2008 SUBPRIME CRISIS DOCUMENTARY)
9. THE ROGUE TRADER

10. THE SMARTEST GUY IN THE ROOM (ENRON STORY)
11.  THE CORPORATION (DOCUMENTARY)
12.  CASINO JACK AND THE UNITED STATES OF MONEY (BASED ON TRUE STORY)
13. THE COMPANY MAN (STORY OF LAYOFFS AFTER 2008 CRISIS)
14. THE BARBARIANS AT THE GATES (BASED ON TRUE TAKE OVER STORY)
15. THE SOCIAL NETWORK (STORY ON FACE BOOK
16. THE START UP
17. THE DUPLICITY (STORY ON CORPORATE ESPIONAGE)
18. THE HUDSUCKER PROXY
19. UP IN THE AIR (STORY OF A PERSON HAVING JOB OF FIRING PEOPLE)
20. THE INSIDER (STORY ON CORPORATE WHISTLE BLOWER)

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Fund managers must break their silence - By John C. Bogle

Fund managers must break their silence

By John C. Bogle

While it has been little remarked on and even less analysed, the
nature of stock ownership has experienced a sea change since the
second world war. Ownership of US stocks by financial institutions has
leapt from 8 per cent to 70 per cent. A similar trend has prevailed
globally.

US financial institutions – mutual funds, pension funds, endowment
funds, and bank trustees – hold more than two-thirds of the shares of
virtually every publicly held US corporation, giving them total voting
control.

The ownership is concentrated among a few giant money managers. Of the
$9tn of stocks held by the 300 largest US money managers, some $6tn
are held by the 25 largest managers. The five largest firms alone –
Vanguard, BlackRock, State Street Global, Fidelity, and American Funds
– hold almost $3tn, or fully a third of that total.

Remarkably, these giant firms have been conspicuous by their absence
from exerting significant influence on the companies that they
collectively own. “The silence of the funds” has been, well,
deafening. In the proxy process, these managers overwhelmingly support
existing boards of directors and management pay plans, rarely giving
strong support to shareholder proposals on remuneration. I know of not
one of these big managers that has submitted a proxy proposal in the
face of management opposition.

In 2003, when the Securities and Exchange Commission proposed to
facilitate more access to the then essentially closed participation in
the proxy process, no large fund manager called for greater access. In
fact, several managers actually argued for more stringent limitations.

Part of the reason for this “hands-off” attitude is that the stock
market is dominated by short-term speculators. These “renters” of
stocks don’t give a hoot about governance. But how does one explain
the hands-off attitude of long-term investors, “owners”, and
especially index funds with essentially infinite time horizons?

The answer has to do with three factors. First, a profession that
focused on stewardship and investment management has become a business
focused on salesmanship. Governance activism attracts attention and
controversy and has no marketing value. It probably has negative
value, impeding the asset-gathering goals that money managers hold
pre-eminent.

Second, the ownership of these large money managers has become
dominated by groups that are publicly held. Such fund managers are
duty-bound to serve the fund shareholders and pension beneficiaries by
optimising the return on their capital. They also have a duty to serve
their public shareholders, largely giant conglomerates in business to
earn maximum returns on their own capital – a clear conflict of
interest and a violation of the Biblical warning “no man can serve two
masters”.

Third, the money managers owe their profitability largely to the giant
corporations whose retirement plans they manage. There seems little
interest in “biting the hand that feeds you”. As it is said, there are
only two kinds of clients money managers do not want to offend: actual
and potential.

Today, the silence of the funds is particularly troubling. For both of
the major issues that confront our corporations are slanted in favour
of managers rather than owners. One issue is executive remuneration.
This deeply flawed approach results, in part, from a system that
focuses on peer remuneration rather than corporate performance,
producing “a ratchet effect” year after year. Management remuneration
is based on raising the short-term price of the stock, labelled
“increasing shareholder value”, rather than building intrinsic
corporate value over the long term. What’s more, corporate executives
get away with murder, figuratively, with pay plans that kick in
without requiring a certain return on capital.

The second issue is corporate political contributions. While the
demand for full disclosure of political contributions is growing, mere
disclosure doesn’t go nearly far enough. Corporate shareholders should
have the right to decide if their corporations can make any
contributions. But our corporate managers have no interest in
facilitating corporate democracy and our institutional owners even
less interest in exercising their voting rights.

It is time for fund managers to honour the rights of, and assume the
responsibilities for, corporate governance. Institutional investors
must break their long silence and make their own proposals for
inclusion in corporate proxies. These steps toward greater activism in
corporate governance by our giant investor/agents, who are fiduciaries
for their shareholder/principals, are essential to sound long-term
investing, to our system of modern capitalism, and to the national
interest. The mutual fund industry should be in the vanguard of this
movement.

John C. Bogle is founder of US fund manager Vanguard and author of The
Clash of the Cultures: Investment vs. Speculation

7 Investing sins......

Since these common errors are self-imposed handicaps, identifying them
would result in a superior investment process.

Years ago, even before the financial crisis was spotted on the
horizon, James Montier of Dresdner Kleinwort Wasserstein came out with
a white paper titled “Seven Sins of Fund Management”. This holds true
even today and we reproduce them here as the common mistakes your
investors (or asset managers) make. If you find your investors
committing one of these “sins”, it’s time to reform their ways.

Sin 1: Forecast

Forecasting is an integral part of our lives, investment or not. Even
the weather cannot escape it. But a heavy dependence on it is sheer
folly because evidence indicates that your investors are bad at
forecasting. The core root of this inability seems to lie in the fact
that we all seem to be over-optimistic and over-confident. The answer
probably lies in a trait known asanchoring which means that in the
face of uncertainty, we will cling to any irrelevant number as
support.

Sin 2: The illusion of knowledge
The desire for more information stems from the efficient market
theory: if markets are efficient, then the only way they can be beaten
is by knowing something that no one else does. Your investors believe
that they need to know more than everyone else in order to outperform.

But we seem to make the same decision regardless of the amount of
information we have at our disposal. Beyond pretty low amounts of
information, anything we gather generally seems to increase our
confidence rather than improve our accuracy. So more information isn’t
better information, it is what you do with it, rather than how much
you collect that matters.

Sin 3: Company interactions
Why do company meetings hold such an important place in the investment
process of many fund managers? The whitepaper gives at least five
psychological hurdles that must be overcome if meeting companies is to
add value to an investment process.

1.More information isn’t better information, so why join the futile
quest for an informational edge that probably doesn’t exist?
2.The views of corporate managers are likely to be highly biased.
3.We all tend to suffer from confirmatory bias – the habit of looking
for information that agrees with us. So rather than ask lots of hard
questions that test our base case, we tend to ask leading questions
that generate the answers we want to hear.
4.We have an innate tendency to obey figures of authority. Since
company managers have generally reached the pinnacle of their
profession, it is easy to envisage situations where analysts and fund
managers find themselves effectively awed.
5.We are lousy at telling truth from deception. We like to think
otherwise but we generally perform in line with pure chance. So even
when you meet companies, you won’t be able to tell whether they are
telling the truth or not.

Sin 4: Think you can out-smart everyone else
Keynes likened professional investment to a newspaper beauty contest
in which the aim was to pick the face that the average respondent
would deem to be the prettiest. We played a version of this game with
our clients to try to illustrate how hard it was to be just one step
ahead of everyone else. The results illustrate just what a tall order
such a strategy actually is. Only three out of 1,000 managed to pick
the correct answer!

The most common behavioural traits of over-optimism and
over-confidence are what lead money managers to believe that they can
out-smart everyone else. Everyone thinks they can get in at the bottom
and out at the top. However, this seems to be remarkably hubristic.

Sin 5: Short time horizons and overtrading
Because so many investors end up confusing noise with news, and trying
to out-smart each other, they end up with ridiculously short time
horizons and overtrade as a consequence. This has nothing to do with
investment; it is speculation, pure and simple. Over very short
periods, the return is just a function of price changes. It has
nothing to do with intrinsic value or discounted cash flow.

Sin 6: Believing everything you read
We appear to be hard-wired to accept stories at face value. Stock
brokers spin stories which act like sirens drawing investors onto the
rocks. More often than not these stories hold out the hope of growth,
and investors find the allure of growth almost irresistible. The only
snag is that all too often that growth fails to materialise.

In fact, evidence suggests that in order to understand something we
have to believe it first. Then, if we are lucky, we might engage in an
evaluative process. Even the most ridiculous of excuses/stories is
enough to get results.  We need to be skeptical of the stories we are
presented with. Your investors would be better served by looking at
the facts, rather than getting sucked into a great (but often hollow)
tale.

Sin 7: Group-based decisions
Many of the decisions taken by your investors are the result of group
interaction.

The generally held belief is that groups are better at making
decisions than individuals. The dream model of a group is that it
meets, exchanges ideas and reaches sensible conclusions. The idea
seems to be that group members will offset each other’s biases.

Unfortunately, social psychologists have spent most of the last 30
years showing that groups’ decisions are amongst the worst decisions
ever made. Far from offsetting each other’s biases, groups usually end
up amplifying them! Groups tend to reduce the variance of opinions,
and lead members to have more confidence in their decisions after
group discussions (without improving accuracy). They also tend to be
very bad at uncovering hidden information. Members of groups
frequently enjoy enhanced competency and credibility in the eyes of
their peers if they provide information that is consistent with the
group view.

Aswath Damodaran on QE3 - good read

Inspiration or Insanity? Fed action and Market Reaction

Posted: 17 Sep 2012 03:39 PM PDT

The big news of last week was the Federal Reserve's announcement of QE3, i.e.,  that it would buy $40 billion worth of bonds each month until the economy was back on its feet again. The fact that the commitment was open ended (unlike  QE2 and Operation Twist, the two prior big moves by the Fed during the last three years) and directly tied to stronger employment/economy was viewed as positive by the stock market, which jumped about 2% in the two days after.  I am sure that I am missing some significant piece of the puzzle, but as I watch the news coverage and market reaction, I am reminded of one of my favorite movies, "Groundhog Day".

While we can debate the intent behind the Fed move and whether it would succeed at awakening the economy, I would posit three points (all of which I am sure are debatable):

1. The Fed does not set market interest rates: Much as I would like to buy into the notion that the Fed sets mortgage rates, corporate bond rates and treasury rates, the only interest rate that the Fed actually sets is the Fed Funds rate, the rate at which banks trade balances at the Federal reserve. In fact, if the Fed has as much power over interest rates as we think it has, the US would not have had double digit treasury bond rates in the 1970s.
2. The Fed’s influence on market rates is greater at the short end than at the long end of the spectrum: It is true that the Fed can influence market interest rates through its actions on the Fed Funds rate, with interest rates falling (rising) on signals of a looser (tighter) monetary policy", but that fall or rise is greatest for short term rates. It is also true, in Operation Twist and continuing into QE3, the Fed is pumping billions into the bond market with the intent of keeping longer term rates low. The bottom line though is that influence does not equate control, and the bond market is far too large for even the Fed to turn the tide (if the tide is running against what the Fed would like to do).
3. What the Fed wants to do and what it seeks to accomplish with that action seem at war with each other: If I understand what the Fed is doing, its intent is to keep interest rates low to induce higher real growth (and lower unemployment) in the economy. There is an inherent contradiction between the Fed's action and its objective. If the economy starts growing faster, market interest rates cannot and will not stay low, no matter what the Fed does. Thus, the only way the Fed can keep interest rates low for an extended period is if low interest rates do not translate into a stronger economy.   I would argue that the the Fed's earlier moves in this recession (QE1, QE2 and Operation Twist) make this point for me. Interest rates have stayed low, with mortgage rates and corporate bond rates at historical lows, but they have done so, because the economy has stagnated. 

To address the question of whether the Fed action is good for stock prices/values, I would list three “macro” variables that underlie the valuation of all equities:

1. The risk free rate: The first corner of the triangle is of course the risk free rate, i.e, the rate you would earn as an investor on a guaranteed investment. Holding all else constant, a lower risk free rate should translate into higher equity values. 
2. Equity risk premium: The second corner is the equity risk premium, which is the premium that investors demand for investing in stocks as compensation for exposure to macroeconomic risk, i.e., uncertainty about real economic growth and inflation. Holding all else constant, a lower equity risk premium should translate into higher equity values. 
3. Real Growth: The third corner is real economic growth, with higher real growth, all else held constant, translating into higher equity values.

If you hold real growth and equity risk premiums fixed, and lower interest rate, the values of all financial assets should rise. But “holding all else constant” is easier said than done.  If the risk free rate is low because real growth is expected to be low and/or because investors are fleeing to safe harbors in the face of crisis, whatever you gain from having the lower risk free rate will be overwhelmed by the increase in the equity risk premium and the lower real growth. Thus, as I noted in an earlier post, a lower risk free rate does not always translate into higher equity values. The most charitable assessment I have of the market's optimistic reaction to the Fed’s action is that the market buys, at least for the moment, into the Fed’s juggling act: that they can keep interest rates low, without increasing macroeconomic risk, while spurring real growth in the economy. I think you could point to a more likely scenario where QE3 does not do much for real growth, while leading to more uncertainty about expected inflation (and higher equity risk premiums) and the net effect on stocks is negative.

Given high unemployment and an economy stuck in neutral, you may feel that the Fed had no choice. After all, doing something is better than doing nothing, right? That would be true, if QE3 were costless, but it does carry three costs:

1. The inflation factor: The biggest cost of an expansionary monetary policy is the potential for inflation that comes with it. I know that the low inflation over the last few years has led some analysts to conclude that the inflation dragon has been slain forever.  However, history tells us that inflation is like a deadly virus, harmless as long as we can keep it trapped, but hard to control, once it escapes. Put differently, if the Fed has miscalculated and high inflation does return, the cure will be both long drawn out and extremely painful.
2. Artificially "low" interest rates create winners and losers: If the Fed's bond buying is keeping interest rates at "artificially" low levels, not everyone wins. Among individuals, spenders are rewarded and savers are punished, a perverse consequence in a nation that already saves too little for the future. Among businesses, you reward those businesses that have to raise fresh capital, and especially those who are more dependent upon debt, and punish more mature and/or equity-focused businesses. Among sectors, you help out those that are more dependent upon debt-funded consumption (housing, durable goods) and do less for service businesses. Thus, keeping interest rates "abnormally" low may create bubbles in some sectors and encourage people to act in ways that are not good for the economy's long term health.
3. Credibility effect: The powers of a central bank stem less from its capacity to print money (any central bank can do that) and more from its perceived independence and credibility, and I think the Fed has hurt itself on both counts. While I am willing to believe that the Fed acted without political considerations, any major action two months ahead of a presidential election will viewed through political lens, and it is natural for people to be suspicious. In addition, each time the Fed takes a shot at the "real growth" pinata and nothing happens, it damages it's credibility. Much as the market (and some economists) may welcome and justify QE3, but the ultimate test is in whether it will give a boost to real economic growth and if that does not occur, what's next? 

I was a skeptic on the efficacy of QE2 and Operation Twist and I remain unpersuaded on QE3. If the definition of insanity is that you keep trying to do the same thing over and over, expecting a different outcome, then we seem to be fast approaching that point with the Fed.

You Have to Go Where It Hurts: Boris Becker - Forbes MUST READ.............

You Have to Go Where It Hurts: Boris Becker

by Rani Singh | Sep 13, 2012

Tennis star-turned businessman Boris Becker tells Rani Singh that to become the very best in your chosen profession, you have to cross your own limit

Boris Becker is a former World Number One professional tennis player. In 1985, he was the first German, and the youngest man, at 17, to win a Wimbledon championship. His record remains unbroken. He is a six-time Grand Slam singles champion and won another 49 singles titles over 14 years. They include two more Wimbledons, two Australian Open titles, a US Open, and an Olympic gold medal in the men’s doubles competition.

Becker began building a successful business during his championship years. He has a sports marketing company in Switzerland that bears the intellectual property rights to his name and handles his sponsorship deals. There are Boris Becker tennis racquets, tennis bags and accessories, and a Boris Becker men’s fragrance. He owns a real estate company, and has three Mercedes Benz dealerships through Autohaus Boris Becker GMBH & Co KG. He is an ambassador for Mercedes Benz and Visit Britain. Forbes India met with Becker at his private office in London.

Growing up, what separated you from your peers; is it inherited or can it be taught?
My strong desire was always to give my best, to win. I was not satisfied with second place. It is part of my DNA; it’s not something you can teach. It comes from within. I was successful quite young.

You have to love what you are doing, or you won’t do it so often or so well! The motivation and inspiration had to be so much higher because when you’re the best at 17 or 18, where do you go next? You need determination to survive and have a successful career. It’s not something my parents or my sister or my mentor gave me. I’m grateful to my parents for giving me wonderful possibilities for the first 10-15 years of my life, but you make the difference by using the possibilities given to you the right way. Many kids from wealthy backgrounds are in the clubs until 4 am. I wasn’t one of them. Very few people are successful at 17.

How did you start your second career in business?
Sport is unique in that you retire at an early age, while you’re still young and not experienced. Most sports champions don’t do too much after that. When I retired from professional tennis in 1999, I felt it was important to take a break and take a good look at myself. I was too mentally involved with tennis. I thought I was still good enough to play the game. I wanted to try new things—and possibly fail at a few!

How would you compare an entrepreneur facing a challenge and a tennis player being a set down?
Nothing comes easy. It’s rare for a business to grow quickly or to hit a ball straight down the line. Most business deals and big tournament wins come through heartache and difficult moments that you have to overcome. You shouldn’t lose the focus of why you started in the first place. Unfortunately, most people, in tennis and in business—they give up at the first hurdle. That’s why you don’t have so many successful people. A very few find a way to overcome the problem, find a solution. That’s where you make a difference.

How did you structure your tennis and business development?
I’m a team player and a family man. Throughout my life, I’ve had very good mentors and very good people around me. They were all 25-30 years older than me. They helped me to get to where I wanted to go. My father, Karl-Heinz, was my first mentor. My first tennis mentor was the Romanian, Ion Tiriac. I was 15 when I met him. I was with him for 10 years. He started as a tennis manager. I opened up Germany for him. My third mentor was the late Dr Axel Meyer-Wölden.

After my retirement, I moved to Switzerland and surrounded myself with experienced, usually older men who may not have known much about tennis; but they knew a lot more than I did about business. One of my most important business mentors was Dr Hans-Dieter Cleven. He was the CFO of the Metro group, a Germany-based department store chain. With him, I started Völkl Tennis—part of the Völkl Ski company. He approached me about going in for this joint venture.

How did you build the Becker brand?
It started because I managed to do a few things in tennis that nobody had done before. By the time I turned 26, 27, I understood what brands were. I felt that in sport, I was able to become a brand. Playing for so many years in front of millions of people, they have a certain expectation when they meet Boris Becker. That quickly becomes a reality. If you’re smart and surround yourself with the right people, you quickly become a brand.

What does the Becker brand stand for?
I’d like to think it stands for sport, breaking records, being very multicultural, very international, nothing is impossible.



How did you go about the transition from being a sports champion to being a businessman?
In order to become the very best in your chosen profession, you have to work a little bit more. We have a terminology in sport; you have to go where it’s painful, where it hurts. The difference between winning and losing a Wimbledon match is not so much at the beginning, or in the second set, it’s usually when you have to go over your own limit. That may be in practice, that may be in quarter finals. There’s always a moment when you can’t go on any longer, and then your instincts take over. You need to succeed. You have to jump over your own shadow. That was important in my tennis career and is important in my business too. The bigger the challenge, the better I get.

What skills have you transferred from sport to business?
The reason you get into a business conversation is because you want to make a good deal. There were many tennis tournaments and matches I didn’t want to play. But I knew that the reason I went to—I don’t know where—to play, was to win the match. So I transferred that mindset and motivation to my business life today. If I didn’t have it, I might as well stay home.

What’s the biggest lesson you’ve learnt in business?
You can’t do it on your own. I’ve mentioned four mentors. You have to surround yourself with people who are maybe just a little better than you are at what you do. You learn from them. Yes men are sometimes easier, more fun. But it’s not productive to be with them.

What are your business values?
A code of conduct is very important. The older you get, the smaller the world you move in becomes. Your morals have to be right. If you’re not honest, they eventually catch you.

Which countries do you invest in?
I try to stay with countries where I understand the language and the culture. So my main investments have been in Germany and England; and though I don’t understand the language, I have an investment in Spain as well.

What would you say to an entrepreneur who is in a no-win situation?
There’s a poker saying: “No shame in folding.” There’s no shame in saying stop, or losing a business deal—because you cannot make them all. Sometimes it isn’t actually your fault. Sometimes you’ve just got to throw your hand away.

What is your business plan?
I have a good setup in London. I’m proud of my Becker private office and I have a sports marketing agency in Switzerland. I have other businesses in Germany. Now, I have to follow through, develop and continue the journey.

As a businessman, how do you cope with negativity and criticism?
The more successful you are, the more you are criticised. Life gets very thin once you grow. Your family and your close friends are important. They tell you honestly whether today, last week, or last month was terrible because they mean it; they say it out of love and respect.

Newspapers and magazines don’t care; whatever story they can create about you is to sell more newspapers. It doesn’t mean it’s true.

How do you feel about risk?
A successful tennis player plays the right percentage at the right times. The same metaphor can be used for business. If you have success with a certain way of dealing, you continue until the percentage goes down—then you change.

What kind of business people would you like your sons and daughter to be when they grow up?
They should be independent, civilised human beings. They have to find out what’s right and wrong. I want them to understand the value of money, that everything has a price. If you make your own money, you become more independent.

This article appeared in Forbes India Magazine of 14 September, 2012

http://forbesindia.com/article/special/you-have-to-go-where-it-hurts-boris-becker/33701/0

Why We Say Yes When We'd Rather Say No!!

Why We Say Yes When We'd Rather Say No!!- Hemant Kale

http://zestcapital.blogspot.in/2012/09/why-we-say-yes-when-wed-rather-say-no.html

Friday, 14 September 2012

Why We Say Yes When We'd Rather Say No!!

As a coach when I look back on trades of my students, most of the losses are caused by fear of missing out. You may have traded for any length of time; the fear of missing out is something we've all experienced. Fear of missing out causes us to chase stocks, trade heavier than we should and maybe even trade scenarios that aren't part of our game plan.

This phenomenon often occurs after a sharp price rise. Portfolio managers are often measured on relative basis either against the indices or against a universe of their peers. If they are underinvested as a sharp rally begins, the perception of missing out on the price move and of subsequent underperformance is so great that the fear of missing the boat forces them to get in.

This form of fear also affects individual traders. A trader may be left out of a move for some reason maybe because he is waiting for lower prices or he may be clouded by some bad news. Regardless of the reason the “left out bull” suddenly feels compelled to get back into the market. The strong belief of continuation of move coupled with the toxicity of seeing the prices explode results in the feeling of being left out.

When you find yourself in this kind of a situation it will always be wise to stand aside. Remember there is always another train. What I mean here that even if you miss the current opportunity, however wonderful it may appear, patience and discipline will always reward you with another. Look for the next train.

So how do we deal with the fear of missing out? What works for me is to simply follow a trading methodology and have the discipline to stay with it. Another way to avoid the fear of missing out is to condition your mind into believing that it is more painful to lose money than it is to miss out on a trade that is not part of your game plan. This kind of thinking has been the biggest help for me and could be of help to you too. None of us wants to lose money.

The next time you get the urge to chase a stock, or enter a trade because your connect said it will make a lot of money or you felt left out, you should take a deep breath and remind yourself how hard it is to build your account. Remind yourself how dreadful you're going to feel if you were to lose on this trade which most likely will be the end result.

If you do this often enough, the fear of losing money will become greater than the fear of missing out and once that happens, you've used fear in a positive way to help your trading.