The American

Even before my train had left the platform, I knew it would be a long journey. Sitting next to an oversized American I read- “Sensex reaches a new low.” In long journeys I use books and magazines to avoid the awkward silences with complete strangers. So I continued my pretence of reading India Today- “Sensex reaches a new low”.

Every time I read something like this, I die a little bit inside. When I joined my MBA in a particular year, I was forced to time the market. Some might call it luck (or rather the lack of it) and some might call it destiny but the bears have freaked up my returns (placements). But today I had someone to blame it on. The American smiled at me. To my convenience I speculated he was interested in what I was reading.

I read out aloud- “Sensex reaches a new low”
He responded jokingly- “What should I say, I am sorry”

I felt a sense of guilt for making him apologize and shifted a bit to make more room for him to spread his legs. He did. We got talking. He was a strong supporter of The Republicans (although he never voted). I enquired if he had purchased land recently. He had. Rented it out but pretended my question had nothing to do with sub-prime crisis.

And then it happened. My semi-spiritual experience. An IRTC official tried to sell him coffee. To the ordinary coffee seller, the dollar was surely worth less. But his hundred rupee note was also rejected.

The man demanded- “Change?”
I explained- “You need change”

The American needed change. He couldn’t obviously get rupee of his required denomination out of thin air. It was too late. The coffee vendor would not wait long. I guess it was too much for him to bear. Amidst the confusion, a coin fell from his pocket. His words were like poetry to me-

“Rupee has fallen”

Fed Bank’s theory of eternity

Albert Einstein once said- “I have just got a new theory of eternity”. People at Fed bank could not agree more. At the edge of every such perceived eternity is a bubble burst. Just like we witnessed in the sub prime crisis where everyone expected the real estate boom to go on forever. Now we need to be careful- what else does the Fed Bank think would go on forever? Have we seen it all in the sub prime crisis or is it just the tip of an iceberg?

US never runs out of solutions. Bank of America has acquired Merill Lynch. Just another smart move by Americans- one bankrupt company acquiring another bankrupt company. As if they were not doing badly enough by themselves. Its like both companies have huge number of defaulters and are using each other as a guarantee. I am sure the US Government is smarter than this. But there is more. What did you use in the deal? A worthless peace of paper which they call dollars. The Central Bank of US is trying to save Fannie Mae and Freddie Mac which I think is a greater matter of concern than the fallout of Fannie Mae and Freddie Mac itself. Let me explain how.

Long back, a fed bank spokesman said- “dollar is my currency but your problem”. He just might have a point there. US dollars have this special position in the world as it is most commonly used across the globe as a medium of exchange, even between two currencies. We see central banks of many countries keeping dollar as reserves. Why? Is it because it is considered the safest, even safer than the gold? The US has been long importing goods by printing more and more dollars. If the central bank of a country has enough dollars, it sells it treasury only to pay it back in dollars with interest. All any country is left with is more dollars.

So we have here a country in the middle of its biggest regulatory failure printing dollars with sky as its limit. How else could it save AIG or others? Would you call it a smart move? Doesn’t US have anything to loose if its floods the already flooded market with more dollars?

Now either they can print dollars till eternity or there will come a day when people will stand up and say- “we have had enough of dollars, now what about some real money?”

Don’t eat the yellow snow

On 15th April, 1987, there was panic in USA. 7 million children went missing overnight. 7 million amounted to 1 in every 10 dependent children in the country. It was something unheard of. What could possibly be the reason? Steven D Levitt points out that this was because a new law which was enforced where every child eligible for deduction from taxes should have a social security number. So all the fictitious dependent children existing only in papers for tax deduction (connected to some 1040 form) vanished overnight.

Now days we see that everyone is talking about Chinese goods being so cheap so much that they have a new term for this- Chinese price (which means cheap price). Is their production so efficient that no country can beat it? The truth is that they have artificially devalued their currency against dollars and so whatever they export is cheap thus also causing a global imbalance. To add to this US has been printing dollars like there is no tomorrow. (For them, that just might be the case.)

Mr. Bush (how does he sleep at night) justifies his action affirming all the time- 9/11 CHANGED EVERYTHING. Whatever happened on 9th of November! (they are the only country who dates things this way). Meanwhile across Atlantic Ocean, UK doesn’t go public with their M1, M2 or M3 data (I am not sure what they are, but apparently they are very important).

Coming to India CITI Bank was busy selling its office furniture and I read a statement made by a senior CITI Banker. He claimed that the sub-prime crisis was not effecting its operations in India. I am also in the opinion that it makes sense that in India the Government employees do not pay service tax- they hardly provide any service.

Okay, now here was a list of non connected information. Now what should we infer from that? I would like this opportunity to quote the greatest letter ever written which I feel is somewhat ignored my mankind. It’s a letter from Mahatma Gandhi to a non- German- Hitler (he was an Austrian).

“It is quite clear that you are today the one person in the world who can prevent a war which may reduce humanity to savage state. Must you pay that price for an object however worthy it may appear to you to be? Will you listen to the appeal of one who has deliberately shamed the methods of war not without considerable success? Anyway I anticipate your forgiveness, if I have erred in writing to you.

I remain,

Your Sincere friend

M. K. Gandhi”

Master Frank Zappa explains all this with a beautiful story. Its about the naughty Eskimo who ate the yellow snow. A stranger from the commercial world took a cone of yellow snow (from where the dogs go) and rubbed it in his eyes. And since then the Eskimo cannot see, temporarily. The commercial world has stripped us of our sight. If we sell our soul and earned money, is it actually smart business? Reaching for glory we have to also see the price we are paying for it cause any castle built on lies is but temporary. You can ask the president of United States (or Uma Bharti for that matter).

In words of Homer Simpsons- “Money cant buy everything, for example dinosaurs”

Do monkeys eat bananas?

With a little embarrassment I borrowed a book from the LIBA library. A yellow book named- “stock market for dummies”. Why? Because looking at the stock market from a dummy’s perspective just might not be that bad an idea. Here’s how. Every second person you meet who invests happens to be a market expert (of course it would reflect differently if you check their portfolio profits). I was looking for a different approach.

What am I trying to imply? We are all looking for patterns in technical and fundamental analysis using our logical reasoning. (I won’t even mention the number of trading that goes on based on market tips and rumors, dhoh!!!). They think they know it all. And why shouldn’t they? There is pattern everywhere. Or is there? There are other people who believe that stock market follows no pattern. Its fluctuations are random with no logic. So this brings us to the debate- are stock market movements random or it follows some logic. I looked for answers in one of the greatest conversations ever-

”Einstein: One tries to understand in the higher plane how the order is. The order is there, where the big elements combine and guide existence, but in the minute elements this order is not perceptible.
Tagore: Thus duality is in the depths of existence, the contradiction of free impulse and the directive will which works upon it and evolves an orderly scheme of things.

Einstein: Even the red flower I see before me on your table may not be the same to you and me.
Tagore: And yet there is always going on the process of reconciliation between them, the individual taste conforming to the universal standard.”

And it brought me to the next question- Why did the chicken cross the road? Was there an underlying reason or was it something as random as a chicken actually crossing the road? Is there a higher pattern in all these uncoordinated activities or these higher patterns are by itself something uncoordinated? I was simply left with more questions.

I know what you are thinking of right now- where does a monkey eating a banana come in? Is it something random or does it have a meaning? Lets ask ourselves- why are monkeys universally associated with bananas? Lets think clearly. Their diet includes fruits, berries, seeds, leaves, grass, herbs, shrubs, crops, insects, eggs, birds and rodents. They love to eat flowers. So does a monkey eat bananas all that much? Then why is everybody mindlessly making such association?

What I do not know must be true, or else I would be super rich.