Wednesday, December 19, 2012

The epitaph of a giant

Just read the news that Eastman Kodak sold all its imaging patents to 12 companies for $525 Million. Let's take a minute to digest this news.

Eastman Kodak became the household name nearly a century ago by ushering the art of -popular photography. Kodak was a behemoth, a veritable giant. It kept innovating with film: from black and white to color photography to photo printers, to instant photo developing shops available in your local grocery store. It obsoleted portrait makers and painters. It forced art to evolve and become more modern, impressionist and abstract. The camera's unflinching fidelity enabled motion pictures, and Kodak's technology brought forth live motion in color.

Kodak had its years under the sun. It stayed, however, blind to the changing world:  the Internet and the digital camera flummoxed it. Kodak never managed to change its business model to adapt itself to the changing world. Not fast enough.

The following Yahoo news article reported the auctioning of Kodak's family heirlooms succinctly enough:

STEPPING STONE: Eastman Kodak is selling its digital imaging patents for about $525 million, money the struggling photo pioneer says will help it emerge from bankruptcy protection in the first half of 2013.

GROUP OF 12: Apple Inc., Google Inc., Samsung Electronics Co., Research In Motion Ltd., Microsoft Corp., China's Huawei Technologies and Facebook Inc. are among the 12 companies paying to license the 1,100 patents, according to court filings. 

HISTORY: Founded in 1880, Kodak filed for Chapter 11 bankruptcy protection in January after a long struggle to stay relevant. First came competition from Japanese companies, then the shift from film to digital photography. Kodak failed to keep up. 

The brief article highlights Kodak's insuperable, if feckless, descent into oblivion. The younger, fitter, nimbler, better adapted carrion carvers of Google, Apple, Microsoft, RIMM, Facebook, Huawei and Samsung feast on the cadaver of the fallen dinosaur. But it is the last line of the article above that serves as the moral of the story; a chilling reminder to all of our own mortality.

"Kodak failed to keep up"

Intel founder Andy Grove always said, "Only the paranoid survive". I guess Kodak wasn't paranoid enough. Interestingly, both Yahoo and Intel these days are on the ropes, and didn't seem to be part of the companies participating the patent feast. Wonder if we'll be lamenting their passing soon. Perhaps only Darwin knows.

For all the giants' accomplishments, this is what the fossils remind us about the giants:

"Failed to keep up"

Wednesday, November 21, 2012

Justice is served

Qasab is dead.

NEW DELHI — India on Wednesday hanged the lone surviving gunman from the deadly terror attack in Mumbai four years ago that left 166 people dead, including six Americans.

Ajmal Amir Kasab, a Pakistani citizen, was one of 10 heavily-armed terrorists who sailed into India’s financial hub of Mumbai and launched a series of attacks on two five-star hotels, the city’s main train station, a restaurant and a Jewish prayer center

Tuesday, July 31, 2012

India's continuing infrastructure nightmare

Sometimes, I hate being right.

image source:

600 million people in India are without electricity. In my response to another blog, I had insisted that India's infrastructure situation is precarious and can only get worse with time. Today's headlines and the past weeks' suffering from nearly 33% of India's population (60+% by today's headlines) clearly point to the worsening situation.

my thoughts on this issue and the original blog that precipitated my article can be found via:
India's infrastructure nightmare

more on today's happenings from the Economic Times:

Power grid failure: world's biggest blackout points at years of power sector neglect

Power grid failure: World's biggest blackout points at years of neglect of power sector

NEW DELHI: Electricity supply crashed across a vast swathe of India for the second time in 36 hours, disrupting lives of over 600 million people and presenting an unflattering picture of an aspiring superpower struggling to provide even basic power. 


People are literally dying. What more will it take to set an apathetic government and populace into motion? This incident is tantamount to an act of war on the country of India; not due to any external entity, but due to the reprehensible dereliction of duty by the populace and the media. Yes, I blame the people of India. The politicians, the IAS and other bureaucracies might be more directly responsible, but it is essentially the populace that has failed themselves by regularly choosing to be governed by a cabal of nitwits. This is the government the country has not because of some celestial misfortune, but because of its actions. This is the government the country deserves. This is karma in action, and as the wise philosopher said, "karma is a bitch".

Thursday, July 05, 2012

Investing in Indian mutual funds does not inspire confidence

Investment pundits, gurus, speculators, and charlatans long touted the BRIC sector. These days, the Indian hot-market story seems dated and out of vogue: probably because the Indian market's recent decline has besmirched some of its luster.

However, there still remains a case for prudent investment. In any market. Especially a down one.

And one of the easiest ways to start investing in any market is perhaps through mutual funds.

To buttress the motivation behind this blog, a minor sojourn follows.

The basic idea of a mutual fund is captured fairly in its name: it is a fund mutually owned by all the fund investors. Consider the case where 3 individuals with limited financial resources want to invest in the equity market. Sane equity investment requires that investment risk be mitigated through diversification. In simpler terms, the individuals should NOT plunk down all their money into just one company because then they'd have all their eggs in one basket. Instead, they should consider spreading out their risk by investing in a diverse set of companies. However, that can take a lot of capital (e.g. brokers might sell only in slabs of 100 shares), and this restriction can (rightly) keep out a lot of low net-worth individual investors.

Instead of individually trying to diversify their company specific risk, what if the investors got together, pooled their money and bought shares of 3 companies with their combined resources? that would spread the risk over 3 egg baskets, instead of 1 risky basket for each individual. What if they decided to take this good idea further and involved their in-laws, neighbors, friends and other communities? With a 1000 individuals, they could buy shares of every strong company on the market, almost totally diversifying away company risk!

In its simplest terms, this is what a mutual fund is: an investment company capitalized by several individuals for the express purpose of investing in an underlying asset class. The management of this special company (henceforth referred to as the "mutual fund") has one clear role: investing peoples' money for them. To ensure that the company can attract investors, the management has to show that it has scruples and that it is competent. Attention to detail, openness and presentation then become benchmarks by which managements try to demonstrate, and potential investors evaluate, managements' worthiness. Of course, these are in addition to the actual fund performance. But, as managements are obligated (morally AND legally) to often remind us: "past performance does not guarantee future results". Which essentially places a lot of emphasis on the foregoing exhibition and evaluation.

In light of above, I find the lack of attention to detail in the Indian mutual fund industry utterly dismaying. In reading through prospectus' and official website descriptions of several mutual funds (and of governing bodies!) I routinely find spelling errors and grammatical blunders. This horrifies me: the management that does not care to look at automated spell checkers (or rather know enough to employ people who would care about such simple, low hanging fruit) are being entrusted with hundreds of millions of peoples' hard-earned money!

Exhibit A: Page 2 on Goldman Sachs' BeeS Benchmark S&P CNX 500 fund

There can be no assurance or guarantee that the investment objective of the respective Schemes will be achieved. However, the performance of Benchmark S&P CNX 500 Fund may differ from that of the respective underling index due to Tracking Error.

Exhibit B: HDFC Mutual fund

Entry Load
(For Lumpsum Purchases and investments through SIP/STP) NIL 

Unfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors' assessment of various factors including the service rendered by the ARN Holder.

I actually googled "unfront" to see if this was some new jargon in the Indian markets. I concluded it is a typo for "Upfront". Also, I actually had to fight my auto-correct to type "Unfront".

Exhibit C: AMFI

The Information provided on the AMFI website is based on the information provided by the members. As such AMFI does not take any responsibility for its accuracy, completeness and timeliness.

The AMFI Disclaimer above is by far my favorite. It is tantamount to blanket recanting of everything posted on the website of an association formed, by the mutual fund companies themselves, with the explicit mission of spreading trust and awareness of mutual funds in India. I wonder what information  AMFI actually is responsible for on its own website.

I'd be happy if these were the only instances of head-slapping reading I have as yet encountered. Sadly, that isn't the case. I don't list them here since I have long since lost context on where and how I encountered these errors. I'll add to these as and when I run across more.

Till then, share my agony and ecstasy.

Tuesday, June 26, 2012

Here I go again on my own

With an obvious homage to Whitesnake, I do certainly feel that I was meant to walk alone. Only this time I dare prognosticate a financial twister: the next real estate bubble.

Recently I have been reading several articles on the "inter webs" about how great a time it is to invest in real estate. Especially, the rental market. One pundit after another has been extolling the upsides to investing for renting.

Exhibit A:

Here is my rebuttal of all the reasons mentioned in the article

Lowered Asking Prices

"The way real estate works it's either a buyer's market or a seller's market. Right now most of the U.S. is definitely in a buyer's market."

That is unless you actually step out to purchase a house. Then you realize that it is a market for everyone else other than the individual buyers and sellers. There are frictional and intermediary and hidden and unexpected costs all over the place. There's a buyer's agent, a sellers agent, an escrow company, an appraiser, an under writer, insurance agent, the home owner's association, just to name a few (I'm sure I'm missing several such as lawyers to draft your purchase / sale agreements, tax consultants etc.). If you are not paying outright cash, then there is of course the lender, a loan officer and a small army of nearly robotic paper pushers. OH and then there's the government city, county, state and federal, who all want a piece of the tax pie. ALL of these hardworking people and their families must be supported by the actual two parties transacting: the buyer AND the seller. This MUST mean that, for all these middle entities to get paid, on average, the buyer must bear the burden of a higher selling price than the "natural price", while the seller must suffer the depletion of wealth as the shylocks secure their pound of flesh.

What this means is it is typically a "buyers' market" for the seller, and a "sellers' market" for the buyer. In reality it is a feast for the parasitic elements in the transaction.

Never, in any investment, should a "lower price" be the motivation to buy. I'll elaborate my thoughts on this a little further down since it hits at all the points mentioned in the offending article.

More Renters

"More foreclosures means more renters. When homeowner's lose their homes, they often turn to renting from private landlords, so you'll have a large customer base."

Grant Programs

"If you're willing to fix up and rent a blighted property, you can receive grant money. The amount you'll get varies by program, but it will help cover the cost of purchasing and repairing a rental home."

Higher Rent

"Another advantage to having more renters is an increase in demand. Real estate works much like any commodity. When there is a higher demand than there is a supply, prices increase. As a future landlord, that is great news for you."

Let's get this straight: the author is saying that people who just lost their houses are going to be forced into the renters market, and because of this, the demand shall increase leading to lofty rental rates. Consequently, in expectance of large future cash-flows (rents), it is a smart move to purchase properties to let, even at increasing prices, so that some of this rental money may come your way.

Do you see the fallacy in her argument? Yes, demand and supply do influence prices. HOWEVER, the range of conditions where the relationship is predictable is fairly narrow. The author is talking about a market full of people who probably lost all their savings during the foreclosure of their property. This population then has very little means to pay lofty rents, even if they are forced to sign agreements: they are in the market because they violated the covenants of their mortgage agreement!

Expecting a steady monetary supply from a bankrupt leasee is tantamount to foolishness. Since the underlying conditions of the market are changing, the corresponding price equilibrium price points must change too.

Furthermore, such a population would also be in no position to be high value consumers. Since economies, and particularly the US and developed economies, are largely consumer driven, a financially hurting population implies shrinking markets, which would in general, imply large scale layoffs.

The only folks who benefit from a frenzied buying of properties to rent to population too bankrupt to support a roof over their heads are the mortgage lenders and the parasitic middle men.

Currently, the large banks and lenders hold several trillion dollars of "under water" illiquid foreclosed assets on their balance sheets. These would ideally take at least a few years to clear, even at the peak bubble rates of 2005.

(Sidebar: Note that "value" is different from "price". "Price" is what fetches in the market, while "value" is what something is truly worth. If Price is below value, then the buyer got a bargain. When price is above value, then the buyer got a raw deal. It is the exact opposite for the seller.

Truth be told, the true worth of anything is subjective. Think "beauty is in the eyes of the beholder". In normal circumstances, market prices typically track or approximate the average notion of worth exhibited by all market participants. In Adam Smith's parlance, the "intrinsic value" or "true worth" of some good - at a given time and place- is how much "manual effort" the commodity can command in that moment and at that location. 

For the following discussion, it is taken as an axiom that the "value" of property remains fairly constant over long periods of time (assuming underlying fundamentals remain the same), and that an estimate of this "value" may be derived through a long term average of its market price)

Also, the Fed MUST at some point raise the rates OR cause inflation by pumping in more money into the system. If they raise interest rates, house prices MUST correspondingly fall: Since if values are to remain relatively constant, the total value of principal and interest that an investor can pay must remain constant. So if the rates increase, the increase in interest payments must be offset by a corresponding diminishing of the down payment. Typically down payments settle to a fixed proportion of the home price, implying the market price of real estate must fall.

The alternative is more inflation via "quantitative easing". This would essentially mean that the interest payments would be worth less. E.g. If $3 today buys a bottle of beer at a restaurant, in a period of double inflation, the same $3 would either buy half a bottle of the same beer, or equivalently, the full bottle would cost $6. This means in real terms, the value of each interest payment would be less, so the down payment needed would be higher, meaning the property price must tend to increase so that the value remains constant.

While the inflation scenario seems to be profitable, it isn't. In some ways it is a gradual wealth erosion. Here's how: suppose the buyer had $100k in their bank prior to inflation, to be used as the down payment on a $300k house. If double inflation kicks in prior to the down payment being paid, the home price will tend to rise to $600k, which means to achieve the same level of down payment 30%), the buyer would now have to pay $180k. Consequently, the home price increase is no longer sustainable.

High inflation also means that potential renters' savings will dwindle and they will find it harder to make their rents, and will also impact consumption. This will lead to the same downward spiral as in the increasing interest rate scenario.

This all spells trouble for the fool hardy "investor" who plunks down premium prices in expectation of rosy rental returns because the "prices are lower."

I do NOT mean to say that The Savvy Investors cannot make money in this endeavor or this economy. They can, but only if they are savvy or know something that the rest of the market does not. A real estate investment is still a good choice for those wealthy folks who wish to diversify, provided their combined investment bears no more risk to reward ratio than can be achieved through other means or channels (e.g. Stocks, bonds, commodities, cash).

Do thy homework, and not listen to any prognosticator (yours truly included!), lest ye fall prey to the taxicab indicator.

Sunday, June 24, 2012

Positive technology surprise

I have been toying with an idea: I need to jot down all instances of when a product design has been completely satisfactory and exceeded my expectations.

 Humanity, and by definition yours truly included, has been spending a disproportionately large measure of time in complaining about tech and products that do not live up to expectations, and in this endeavor one can loose sight of their technological blessings.

 It can be argued that the true aim of a well designed product is to not only enable a user to accomplish their desired task, but to be as unobtrusive as possible: ideally the user's focus must remain on the task and not be distracted by the tool itself. E.g. When using a pen to jot down the next breakthrough patent idea, one would rather focus on the inspiration rather than struggle with using the pen.

 Today, I had the good fortune of experiencing a small, pleasant surprise.

 When using a PC as a media server, a typical configuration would have the server hibernate on extended inactivity to conserve power. Typically, this means having to first wake it and only then start streaming. Understandably, this can be a little inconvenient, and the process of turning on streaming, can often become a mini project in of itself, and tends to dampen the mood.

 As a commendable design decision, DLNA requires that the renderer (media client) send wake-on-LAN packets to the server when initiating a request. This totally obviates the need to manually wake the server and simplifies the viewing experience tremendously.

 THANKS DLNA standards committee, and THANK YOU SONY for implementing this part of the standard correctly in your 46EX620 TV! Kudos and cheers! The EX620 does this very well.

Friday, March 23, 2012

A good writer is like a Super Hero

A good writer is like a Super Hero. Only, for some reason, they aren’t celebrated or cherished as highly. I have always wondered why. 

Maybe it is the bravado of bearing their tighty-whities over their trousers that separates the Super Hero from the Writer. You laugh and say “Dude, you must be joking!” (Well, I hope you’re laughing, ok at least thinking about smiling. I’m trying hard here!).

But good writers are like super-heroes! It is true! Once you realize this, the similarities can hit you on multiple levels; akin to the shock of realizing how much your little one’s dream of owning that Super Hero costume for Halloween is going to cost you. Still, I bet, you’ll prefer it to the realization that one day, your child, will in time, give you as much pain and joy, if not more, as you’ve given your parents. Like running away with the girl or boy you don’t approve of. And that you will still love them to death for it.

Back to the Super Hero analogy: take Spider Man for example. He was merely a teenager when he was bitten by a bug, a spider, which gave him his powers. A good writer too starts out young when he or she’s bitten by the bug, the Writer’s Bug.

Still not buying it? What about Spider Man’s powers? He spins yarn! So does a Writer!

“Spider Man could scale walls and jump over buildings”, you say? A good Writer can help all of humanity scale the barricades of social rigidity and dogma.

“Spider Man can lift 40 times his body weight?” you counter. Mahatma Gandhi lifted an entire nation to Freedom with his Writing and his Ideas.

Spider Man helps bring criminals and corrupt politicians to justice. So can Good Journalists and Writers! And that’s also why we need more of them. I mean Good Conscientious Journalists and Writers, not corrupt politicians. God knows we have enough of them already!

And finally, who created Spider Man? Stan Lee, the comic book Writer who also created several other Super Heroes of the comic pantheon such as the Hulk, the X-Men, Iron Man, Fantastic Four, Thor and the Avengers!

Writers ARE Super Heroes. Help your children become both.

Only don’t let them pretend to be a Super Hero with their underwear over their pants. Leave that to fictional Super Heroes. Trust me. I embarrassed my parents doing so once. Didn’t go very well. For them. I still laugh about it, sheepishly.

Tuesday, March 20, 2012

The story of Kahaani

I am a movie buff. That means I like watching good movies. Only good movies. If it's an awful waste of time, I end up in a foul mood. I can feel like I lost IQ faster than my natural, physiologically-ordained rate of degradation. And since I don't have much of it to start with, I'm naturally a little guarded.

Having been burned enough in the past by the pabulum Bollywood often pedals as entertainment, and then having been hit on the head with recycled trash of late from Hollywood, I have been wary of watching garbage on the big screen. The fact that I have to shell out hard earned dollars for it, only adds insult to torture. In short, it hurts. If I had to enshrine my feeling in a movie character, I suspect the emaciated food critic from Ratatouille would perhaps come closest.

However, I was pleasantly surprised on watching the latest Vidya Balan thriller Kahaani("Story"). I don't want to reveal too much, but then I will talk about it because I don't think too many netizens stumble on-to my blog, so I guess I'm, ironically, safe.

Kahaani starts with a very fragile, and very pregnant Vidya Balakrishnan Bagchi (played by Vidya Balan) arriving at Calcutta airport. Her portrayal of an NRI (non-resident Indian) from the UK landing in the hot, humid, congested Calcutta is spot on. One look at her, and anyone who's become habituated to more temperate climes than the sub-tropical weather of the Indian sub-continent can immediately empathize with her plight. Her relief at encountering the air conditioned environment of the National Data Center after days of shuffling around in the dusty, thick, steamy summer heat of a foreign but friendly Calcutta is eminently natural and refreshing. The fact that she has to labor to keep moving from place to place, while bearing a child who seems ready to force its way in to the world, only adds to the concern the audience feels for Mrs. Bagchi.

Much as Vidya deserves accolades for her portrayal of a hapless pregnant South Indian NRI floundering in Calcutta in search of her missing Bengali husband, kudos are due to the crisp editing and engaging direction. Each scene and every gesture has a well defined purpose and only adds to the narrative. While the fact that a despondent Mrs. Bagchi is desperately searching for her husband who seems to fallen off the face of the planet is clear from the start, the reason for his disappearance only seems more mysterious and intriguing as the story plods forward on Mrs. Bagachi's ponderous steps. The supporting cast is well composed as is every scene. You even get to see Calcutta and India in their natural colors: neither Yash Chopra-ization nor City of Joy-ization here.

The characterization in the movie is smart, if not shrewd. A terrorist attack is depicted as shattering a nation... but it is not an Islamic radical element who perpetrates it. Nor is it a fanatic Hindu oppressing any minorities. The little known Information Bureau (as opposed to the more popular CBI and RAW) provides a rich backdrop of intrigue. There is a token Christian person too... Fortunately, the secularization instinct is not carried too far. Sikh, Buddhist and people of other religions are thankfully absent since the story does not need them.

The narrative and plot twists do have weaknesses. One notable instance is when an assassin is chased by an unarmed cop. Why the Glock-wielding assassin doesn't simply stand his ground and deal with his pursuer is, simply, puzzling (no, he didn't fire enough bullets to be empty). The other laughable element is the depiction of software and computer technology. While, to their credit, the creative team does try to depict extant interfaces, the depicted screens couldn't trouble a wandering fly, let alone allow someone to accomplish daring hacks into the bowels of heavily fortified websites and encrypted data networks. A Windows console showing ping results does NOT equal a hack. At best, it is equivalent to phoning your friend for a cup of coffee. A Windows Notepad window showing 10 characters, or a syntax highlighted page of HTML represents as much hacking cred as a glass of orange juice. But such is the depiction of technology even in Hollywood. If you don't believe me, watch Swordfish or the Angelina Jolie starrer Hackers. Oh and there is also a Team America worthy montage.

These peccadilloes, fortunately, are limited and do not derail the story (which incidentally starts with a terrorist attack in the Calcutta Metro subway).

With tense drama, crisp narration and solid characterization the movie delivers on all levels. So much so, that it brings the ignominious enquiry "which foreign movie is this inspired from?" My friends mentioned that the plot is similar to the Andie McDowell starrer Ruby Cairo. I certainly hope not. I haven't felt such admiration for Bollywood fare very often (Swades, Peepli Live, Rang de Basanti do have my respect).

I want to give this movie 9/10, which in my book is rather high (not that it matters), but given the pall of suspicion that hangs on Bollywood (with good reason), I will give this a 7/10. If I do find that this is an "inspired" work, I will still give it 5/10 for amazing assimilation in to the Indian context. If it isn't I'll happily give it 9. In any case, this is another notch on the yard stick against which other Bollywood movies will be stacked.

Saturday, January 21, 2012

The Internet is a wonderful thing part 2

In continuation to my previous post I just saw an ad on tv about a southern sounding Asian gentleman claiming to be Eric Lee and enjoying the pleasures of life by booking early. He sounded and looked way too familiar and The name "Henry Cho" sprang to mind. So, checked the net again, and sure enough, it was Henry "what's that clicking noise" Cho. Proof here: