May 2006

I am on vacation (following the Seine and the Rhine)  and hence blogging will be light till this weekend.

 Until then, keep contemplating on the below 😉

You are what you believe.
  – Anton Chekhov

You are what the deep faith of your heart is. If you believe that money is going to make you happy, then you will go after money. If you believe that pleasure will make you happy, you will go after pleasure. Because, “as a man thinketh in his heart, so is he,” not as he thinketh in his head. There is a vast distance from the head to the heart. In the Greek and Russian Orthodox traditions, they say that whatever spiritual knowledge you have in your head must be brought down into your heart. This takes many, many years

I wonder if we realise that rise in money supply of around 15% YOY in India.  Rashmi Bansal sure does and is very worried….

Those were the days when a single rupee had its value.My mom recalls a time

when desi ghee cost Rs 5 a kg. Her wedding saree – a Benaras silk – cost a princely Rs 210.I remember, most vividly, the price of Modern bread. My mom would give me a 2 rupee note to fetch it. The bread cost one rupee and eighty paise. From the change, I would buy 4 mints for 5 paise each.

Less than a decade ago, the 500 rupee hundred rupee – or Gandhi note – was a rare and precious thing to have in your purse. For a while, they were even 'dangerous' to have because forged notes were making the rounds. Shopkeepers would glare at the watermark and the silver strip, just to make sure.

Then came the ATM era, with machines casually spewing out 500 rupee notes to whomsoever desired them. Soon you had the retail monsters which would willingly swallow up these notes whole.

This morning I took daughter to see Ice Age 2 at Inox. We had a great time. That time (barely 1.5 hours) saw one 500 rupee note vanish into thin air. The tickets cost Rs 180 each. Two popcorns and a Coke cost Rs 120. Poof!

Later, we checked out some of the shops on the ground floor of the multiplex. There was a clothing store called 'Aftershock' with strappy little tops and tight shiny shoes. The kind Vjs get to wear for free on television and rarely look good on anyone else. The price tag for a skirt – Rs 3495.

Poverty is a relative thing. Today, I felt relatively poor. But it's not about money per se, it's about values.

The irony is that Gandhiji, whose picture is printed on that currency note, once observed,"Earth provides enough to satisfy every man's need, but not every man's greed."

 Perma link of her post

We all know about, Kaavya Viswanathan, the Harvard undergraduate who signed a cool half-million book deal during her freshman year, stands accused of plagiarizing.

I was kinda interested on the level of "copying". Here it is,

From page 7 of McCafferty’s first novel: “Bridget is my age and lives across the street. For the first twelve years of my life, these qualifications were all I needed in a best friend. But that was before Bridget’s braces came off and her boyfriend Burke got on, before Hope and I met in our seventh-grade honors classes.

From page 14 of Viswanathan’s novel: “Priscilla was my age and lived two blocks away. For the first fifteen years of my life, those were the only qualifications I needed in a best friend. We had first bonded over our mutual fascination with the abacus in a playgroup for gifted kids. But that was before freshman year, when Priscilla’s glasses came off, and the first in a long string of boyfriends got on.”

Wow ! Here are more examples of the passages she lifted

Even more embarrasingly, Viswanathan tells the Harvard Crimson that any similarities were completely unintentional and unconscious.

A fascinating (if not troubling) piece from the Providence Journal. Excerpt:

Kaavya Viswanathan is the daughter of two New Jersey doctors who sent her to a competitive private high school. She was a good student, and apparently a good young writer. But was she good enough to get into Harvard on her own? To get a book published on her own?

Perhaps. But in each case, she had a whole lot of help. She had help from a new phenomenon that might be referred to as "packaging agencies."…

Her parents hired an outfit called IvyWise to help get their daughter into a top college. It's headed by Katherine Cohen, who graduated from Brown University in 1989, and is one of the most successful college consultants out there. The New York Times says she charges $33,000 for two years of consulting … The agency does far more than help kids with applications. It structures their whole lives — for years — to enhance their chances … I checked the IvyWise Web site, and learned they … even offer help for nursery-school applicants.

So Kaavya wasn't just another "student" applying to Harvard. She was an elaborately packaged "pitch."

One of her former instructors has surfaced at Metafilter to offer some perspective:

Kaavya was my student last spring (in a section where I was a TA). I was surprised to learn she had written a book, as her writing was awful– I had given her low grades on her papers.I feel bad for her, even though she was always falling asleep in section (as if you don’t notice a snoozing person sitting at a conference table for ten). Plagiarizing from chick lit has to be some kind of double whammy against artistic integrity.

Another trivia here is , Kaavya is born in Chennai !! 😉

I heard from a friend that Goldman Sachs recently put 100 PhDs in a single hall and challenged them to come up with high performing derivatives. Its clear that these folks are going to rip off the common investor. After all trading is a Zero Sum game. A buy and a sell. 

Here is a FT artcile on  Derivatives activity linked to share falls

"The recent sharp falls in stock markets appear to have been exacerbated by an unusual wave of derivatives activity on the part of hedge funds and big banks, traders yesterday indicated.

In particular, some banks and big investors appear to have been forced into selling large amounts of equity futures because they have been acting as counter-parties to large, leveraged bets on the direction of stock market volatility in recent months – and these bets are now unravelling because volatility has increased sharply.

This forced selling has hurt equity futures index prices on markets such as the London International Futures Exchange – and depressed the value of cash equities as well, some observers suggest."

Derivatives which these guys come up with can be mind blowingly complex. Look at the complexity involved in the below OPTIONs transactions

When a dealer sells a put or a call to you, he's gotta go out and sell stock (if he sells a put) or buy stock (if he sells a call). When he does that, he's only hedged in delta-space so long as the spot price does not move.

Now, let's assume the dealer is short a put and sells stock. When the stock price goes down, he's gotta sell more stock to stay hedged (the put delta goes up as stock goes down, therefore I gotta sell more delta against that put you bot). On the other hand, when the stock price goes up, he's gotta buy stock back to stay hedged (the put delta is going down – getting closer to zero – as spot moves up, so he needs to hold less short stock against the put). Either way, when the stock moves, he's gotta sell as the market goes lower and buy as the market goes higher to stay delta neutral (flat). That sort of position is a short gamma position. So you can be short gamma and short delta by being short options (puts or calls, it does not matter, it is all chicken) and having spot move up, and you can be short gamma and long delta by being short options and having spot move down.

Now, what's interesting is that as vol moves up the dealers are getting shorter vega. That means their vega position has 'gamma.' And, as vol moves down, they are getting longer vega. It may make sense to think of a dealer being short a strip of options. And, as strike prices move lower away from spot, that dealer get short more and more options the further you go down. That sort of position would get you shorter more vol and vega as vol goes up and prices move down.

Yes, its sometimes better to invest elsewhere 😉 

I didnot know that Jim is the co-founder of Quantum Fund with George Soros but what I did know is, Jim is one of the straight speaking, smart investor. Here is a sample from his latest interview to CNBC.

Q: So you are not buying India only because of the government or is it because of valuations?

A: The market has gone through the roof and I missed the move in India. It is like copper going straight up. I am bullish on copper but I am not buying copper. India is going straight up but I am not buying India right now.

Other thing is that there is a huge number of foreigners flocking into the Indian market. The foreigners are always wrong, when they flock into a market. I have been investing for 40 years. When the Australians started buying Spain or the Japanese started buying Argentina or the Americans started buying Germany, it was the end of the move. Right now, foreigners are pouring into India and it is always a very bad sign.

Q: What is the call on the dollar?

A: Sell it. Do not own US dollar, it is a terribly flawed currency. We are going to see the demise of the US dollar currency in the next decade or so.

Finally Da Vinci code is set for release in India. The Indian censor board cleared the movie without any cuts, but required a disclaimer and insisted that it be shown to adults only. (yeah, the A certificate ;-))

On second thought, Why did India not ban the book ? Oh yeah, not many Indians can read english. Sorry, I may sound too cynical, but I am annoyed at the banning of the film in India and other stuff.  I wonder if we want to go forward as a country or not !!

Atanu  has a wonderful post on the same topic. He is even more caustic on this one…

For centuries, the people of India have endured foreign rule. The lack of freedom—especially that of free speech—has fundamentally altered the character of the average Indian leader. Out of sheer disuse, he (or she) has forgotten how essential a freedom it is. Cowering before authority has become part of their nature. Sometimes they stoop lower than they have been ordered to. Some in India wish to be more Catholic than the Pope…

Banning books and movies is a hoary tradition in India when it comes to the sentiments of the so-called “religious minorities.” Dhimmitude apparently is a part of the DNA of some Indians.

Ignorance is synonymous with India.

U.S. Stocks Drop the Most Since January

UK's FTSE suffers biggest one-day loss since 2002

European Indexes End Lower

Asian Stocks Snap Longest Retreat in Seven Months

This is one of the dullest time in Global markets we have witnessed for a long time now. Volatility is huge and risks are rising.

I hope to write more about Emerging markets in my next post.

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