Muses of Murari

It’s been roller coaster ride since mid January, when I made a blunder of my-life proportions.

From then on, I was searching many financial blogs looking for answers why markets were tanking. I was told Obama’s tough talk, Greece debt were culprits. Few technical experts on indicators like Elliott waves, GANN charts, Fibonacci levels were adding gloomy projections day in and day out. To add fuel to the fire, some experts came on TV and gave predictions that Indian markets tank further 20% down. When you invest your hard earned money at the peak and if you get this kinda of statements, rest assured you will have many sleepless nights.

Now, fast forward to India’s budget day. Perceptions are changed. Now the so called experts seeing markets 21% upside from here. Isn’t it crazy that perceptions are changed so fast. How a small individual (like me) can successfully wade through this complex financial jungle?

Initially I thought, capital gains in stock market is kinda gamble. Later I realized, in life, if one looks though higher lens, everything we do is a gamble. Some are high risk gamble (investing in stock markets) and some are low risk ones (thinking that your company pays you and give hikes forever or for that matter your company stays afloat for next many years).

What is the work-reward equation in investment world? Well, personally I would say (with my limited experience), one gets rewarded/stripped based on his/her luck and hard work one puts through in the investing process. More hard work, finding out good companies at bargain prices (fundamentals) or reading charts religiously (technical) and setting targets with good money management, means less luck needed to succeed.

For example, I made another blunder after getting a buy call on a particular sugar scrip few weeks before. Previously, I never heard about that company and I took the call just because some one (reliable) gave a buy call, with no due diligence on my side. I lost 35% of my investment in that single scrip, in the recent slump. See where it took me with no hard work and just dependency on luck. Fantasizing like James Cameroon (like in Avatar movie) is good, but fantasizing the stock you bought to move up like crazy is very very bad. Bad to your wealth and as well as to your health. Lessons learned hard way goes life long!! Hopefully.

Much of the content in this book is not radically new. It’s much been in ether of the current business environment. What it is interesting is, this book was first released in 90’s and one could easily appreciate the time and at when the bold concepts were explained.

The author explains the concept behind “Intellectual Capital” under three broad categories :

• Structural Capital
• Human Capital (Employees)
• Customer Capital

The categories’ titles give enough clues what they are all about. Structural Capital has scope of a company’s own effective knowledge utilization. The author mentions Customer capital is most important among the three and also says that it is least managed. And on Human capital, author gives a valid point that not all employees are equally important in aspects of adding value to the company’s output. Only the resources responsible for customers and the greater part of company’s output are valuable. Company has to make efforts as much as possible, to make many of its employees in the above mentioned scope. Well, that’s hard on certain section of employees, but looks like it is bitter truth.

Author gives various examples to explain his insights on Intellectual capital. Overall, it is Good to read book.

Now my rants -

Coming to the point about human capital and the current situation exist in most of the software companies in India. When a company thinks only a certain section adds value to the company’s output and many others are needed to support this elite section, then I think, there’s an issue. Imagine, what will be the attitude among executives if this is the case. The company will prosper, if the higher level employees do well. Employees do get their expected salaries. Top level employees get the recognition and the same run-of-the-mill story is repeated. What happens to the collective intelligence? Can management tap the crowd intelligence and make better output out of it and not just stick with fewer minds at the top of hierarchy?

The same thing is happening in many of Indian software companies. In giant Indian IT services companies, employees swamp in thousands everyday to their cubical farms and happy to earn their companies millions of dollars and yet not get significant fodder to their thinking minds. Companies are also happy. Because their needs are met. Safest way of making money without risking owning a product and bring smiles to their investors.  Worst part, in my view, is wasting away the brains in washing the sins of legacy products/solutions of foreign companies.

I remember, when I first joined an Indian IT giant as a fresher, I was told in a introductory speech by a training faculty that the company is least interested in owning products. Because, that person says, it is risky to develop products and sell them rather there’s an easy way out there to make money – to show the head counts!!

What about Indian IT product companies? It is lesser evil than its brethren….

I want to stop my rants here. By now, one could imagine why I wrote this little-add-on-value post.

Today is a big day for me.

I am writing this for my own reference. As well as I want to share with the world.

I’m a stock market learner. I’m very much in learning mode and I’ve started investing in good fundamental companies for long term capital appreciation and of course for dividend money. I am very disciplined in my approach until this morning. I lost quite a good amount of money in my first Intra-day trading. I’d no idea  that I’d do intra-day trading, until this morning. But, my greenish impulse just took control of me and did buy shares of a good company, which supposed to announce excellent result today. To my expectation, the company’s quarterly result is excellent but thanks to Mr. Market, my trading decision went exactly opposite. Mr. Market started to slide and the stock I bought too did. Catastrophe.

I did put stop-loss to my buy. But I did it not based on market moods but on my conviction of the company’s business. This is my first mistake. Mr. Market, when on roll, doesn’t bother about fundamentals. He can be ruthless. I understood that by what he did to me today.

I kept reducing my wide-margin stop-loss trigger, as the stock price was coming down. After the company announced very good results, I thought that Mr. Operator can stop his accumulation and start jacking up prices. This is my second mistake. Mr. Operator continued to rake in shares at lower prices.

Stop-trigger did executed. After this, my green impulse motivated me to buy again, even without an after-thought, expecting Mr. Market will rise from ashes. But, Mr. Market is no mood. This is my third mistake.

At EoD, leading indices corrected 2.5%. The stock I bought corrected 7.25%.

One good thing I did, at the end, I took delivery of the finally bought shares. And I was complete aware, from the start, how big I’d lose. A big lesson learnt. I read lot of blogs, books saying that a newbie to stock market, should never try intra-day until he learns basics thoroughly. I accepted it as fact. But, what I did today though I knew that I’m not well equipped for the job, is simply unacceptable. This deepens my conviction on the fact that experience is the true learning  tool.

I was in control till yesterday. Today, I succumbed to my emotions. This is my first big lesson to me. Blame it on ill-luck, I learned it on a wrong day. Ironically, I was reading a book by Swami Vivekananda and in that there is a section where Vivekananda talks on emotions/thoughts taking over human intellect. I appreciated the truth. But, when it came to practice, I consider myself very much flunked.

Well, after this experience, I become more clearer in this area. This means I am learning. So I’m happy to accept this mistake and move ahead. I cannot change what had happened today to me. Thanks to the experience, I came to know how unchecked human emotions can make a person weak.

Well, tomorrow is another day.

After watching Devdutt’s talk on “East Vs. West” on TED online, many old thoughts came to my memory. We are told (in our country) from our childhood about Indian mythology stories and concept of karma, rebirth based on karmic fruits and so on. I’m sure most of us don’t take this belief very seriously and over the time our beliefs are more shaped by myriad outside influences. And many of us not have given enough thought to this ancient idea of karma and rebirths. At least, I’d not had any serious thinking in this area so far.

In fact, I had glimpses of questioning thoughts on the validity of rebirths and any proofs for it. In all those moments, I dismissed that it’s not worth pursuing. One fine day, I happened to listen to Devdutt on a podcast and later on TED video. His talk interested me. Especially his refreshing thought that traditional East believes life is stretched over rebirths and West believes in single birth. His example (check out video) of a meet between a saint and Alexander is simple and delivers the point. Though I thoroughly enjoyed his talk, I somehow was not convinced until, I happened to read the book : Many Lives, Many Masters.

This book is about a real life experience of diagnosing a disturbed young woman patient by a psychiatrist Dr. Brain Weiss.  Dr. Weiss explained his strange experience while hypnotizing his patient. He came to know, during hypnosis, about the patient’s multiple births over centuries and how few of her present day acquaintances has had connected to her in many of her previous births.

When I read the blurb of the book, I instantly took it and when I started to read that evening, I couldn’t keep the book down. I remember, I hurriedly had my dinner and read the book overnight! Very fascinating conversation between the doctor and his hypnotized patient.

In one instance, the patient, in her hypnotized state, describes consistently the same state how she felt whenever she moves from one birth to another, i.e. the state between after her death and before her next birth. And the masters, she describes, guides her through. Masters are some kind of astral bodies, the term very much confused me when I was reading another book written by a Yogi. Interestingly, these masters spoke through her (the patient) to the doctor. Initially, the doctor was confused whether the masters are real or the patient herself acting but when he was told about his very personal incidents that happened years ago, he was convinced that this special experience is for him. In later stage of treatment, in one of the hypnosis, masters indeed told the doctor that this special experience is for him and the patient is just an arrangement to pass on the message. This is one simple incident and the book has many more incidents which can be spiritually interpreted and be cherished.

If one (not mind or body, lets say soul) has no death and continually takes rebirths in this world to perform or fulfill some karmic debts, why the heck we are living as if there is no tomorrow. All the ills on this world created because we live as though its our only life and we need achieve so much in this small period. But if we, for a moment, think that we (inner self ) are eternal and are again and again coming to this world (out of our nature) to finish our karmic debts, then our focus would turn towards inner self and we will spare our planet from the ills we are causing now. That is just a thought. May be I picked up somewhere. It doesn’t matter what the source is.

Whether one buys in this argument (rebirths) or not, one can easily accept that our ancient wisdom is abyss of knowledge of inner science. More we dig into it, more we get to understand ourselves and our place in this universe.

It looks like IPO craze is back, but this time, the pattern suggests that more informed people are jumping into it, coupled with smartly set IPO price bands.

Recent IPOs – JSW Energy and DB Corp – are interesting case studies. When I read JSW IPO analysis report, I was somewhat impressed given that clear roadmap towards various projects and the details of them for next 5 years or so. According to the report, there’s some risk involved in executing projects and long waiting periods before the promised revenues kicks-in. Healthy net margins and India power shortage story should have spiced up the IPO subscription rates. But it got poor response. For a long term investment, JSW is a good bet in my opinion.

Fast forward few days. I read DB Corp IPO analysis online. DB Corp is in newspaper business, mainly non-english print circulation in heartlands and has good advertising revenue model. When I heard newspaper IPO, I’d my doubts whether newspaper business could be a great bet in the future, given that increasingly more number of people, especially younger people, access news online. Next moment, it hit me that we are talking about India and it shall take ages before the internet shift actually happens here.

DB Corp IPO is smartly priced. Good advertising model (in my opinion not a long term growth story), bigger rural audience, cheaper than other existing newspaper scrips and circulations in regional languages. This did the trick – over-subscription of whopping 39.5%!! This is the highest rate of subscription since the infamous Reliance Power IPO. Now, the experts are sharing whys and hows of successful IPO story. As usual, only after the gamble pays off, strategies let out to the people.

I am no expert in business analysis, but as a learner I can sense that there is no great future for newspaper business in the current form, though you may have odd opportunities like DB Corp – many regional languages, lack of serious internet penetration, still a generation left who has die-hard habits of reading news offline! Who cares if the business is viable or not in long term? Who cares to wait till that long period? For majority of us, the stock price does not represent a particular business but a fluctuating meter available to make quick bucks.

In continuation of last post on Smart Energy, I’ll add up couple of more points here.

Recently I read about the deal, between Vodafone Germany and Alcatel-Lucent over implementing utility metering solutions of the latter. In simple words, the electric meter at your home will no longer be a dumb device recording your energy expenditure. With Alcatel-Lucent’s solution, it can communicate to utilities back offices’ computers in real time via service providers’ network – DSL or wireless GPRS or LTE. That means you can see in real time, how much your home appliance eating up energy and thus helps you to reduce the energy consumption or schedule you consumption on low load period of day. So, with little planning, you can postpone or plan your washing machines chores at nights, where utilities can charge you for lesser amount. You may also be able to checkout your energy consumption pattern real time on utilities’ portal.

A win win situation for all. For you and me, it is reduction of energy bills as well doing our bit to conserve energy. For utilities, more modernization, reduced stress on their networks and more incentives from government for effective energy usage. Wait a minute, there is some other section that is getting excited -  Telecom players. They are actively engaging with utilities to get some pie in this perceptibly bigger smart energy market. In my previous post I mentioned about AT&T deal with a power meter company. Now,  Alcatel-Lucent partners up with Verizon Germany for smart meter services. It looks like, the Telcos are started gearing up to venture into non-traditional route to offer their services. The developments in this area is going to big in coming days and the ride it offers will be interesting too.

Smart Grid -  AT&T ties up with a smart grid player, Silver Spring to use former’s network to transfer information from latter’s equipments. In short, lets say smart meter installed at certain locations and it transfers data, for example, load factor to utility’s center through IP services over telco’s wireless network. That is one simple example.

The kind of research and products done by companies like Silver Spring is interesting. The companies working on smart energy trying to reinvent the age old electricity generation, transmission and distribution with latest technologies and reduce the energy wastes. One particular scenario is being envisioned is distributed generation. New smart meters learns patterns of electricity usage from industries to public places to homes across day & night and shares data to the common grid which controls the loads on different generation units including clean energy units like wind power stations. For the home customers, utility companies can send reports about former energy usage real time or non-real time. By this way, individuals gets a chance to do his part in reducing energy consumption and of course, his utility bill.

More interesting story is in lines of Google Power meter. A theory how utilities can enter broadband business with Google Power meter. I already shared this in one of my earlier posts. Read it here.

Let me bring the scope in Indian context with my little knowledge. In recent times, especially after stock market started to surge, one can observe so many power/energy related IPOs has entered the Indian stock market. Government programmes like this one will surely drive more energy companies to participate in. The carbon credits market is driving many companies to go green. Few acquired renewable energy generators like Wind power, few brought in techniques to use the waste (heat) energy from industrial output to generate power and supply to local grids. When I was studying few years back, I studied that transmission loss alone was 40% of the total energy produced! That is whopping amount. Our country is in desperate mode to do something before we get hit badly down the years. And government is doing it by encouraging private companies to pitch in generation, distribution areas. The point I want to make here is, since we are in amidst of  power reform to meet our future demands, it will be more prudent to pave way to the latest technologies like, smart grids, in our reform actions now. And clearly we need leadership in political capacities to do this or we need strong power lobby (from energy companies) to drive it.

That’s my two cents.

It’s been a while I shared links. Here are few interesting articles I read recently :

• On western indologists and their flawed perceptions on India’s culture. Interesting to see western Indologists interpreting their Sanskrit scholarship as sufficient qualification to comment on literature as vast as India’s scriptures. Interestingly, the Sanskrit schools, Indology studies initiated during British Raj to help British to  learn Indian customs for better managing the country! Excellent read pointing out the holes in the work of a western Indologist.
• Sachin – a middle class icon – Shobhaa De recommends Bharat Ratna for Sachin. Same as my opinion.
• China vs India on entrepreneurship – Great article abouth myths of India’s English advantage over China’s. How India is left far far behind in the area of entrepreneurship. Must must read.
• The Netbook man – The man who took the world by storm with his Netbook idea. When I first heard about Asus Net top, I’d gut feeling that this is going to be a game changer. And it has been so far. Apparently, Apple is not buying this generally accepted idea.
• Huawei vs the rest – I’ve been reading a bit on telecom stories, as I am working in that vertical. Believe me, no story is complete without mention of Huawei, a Chinese telecom equipment manufacturer. You talk on DSLAMs, they are world leaders with their cheapest and good quality devices. You talk future technology like LTE, they are already leading the pack in sales.  Man, if I were in top management in my company, I would recommend to make partnership with Huawei and focus more developing customized software to work with its devices.

I had this repeated experience. I go to Landmark, Forum Mall, Bangalore. Browse through books. Some one turns up. Quotes some book name and ask me if I’d read it. Negative answer and then starts introductions and continues with questions on work, family etc.,. After some 10 mins of speaking, gets visiting card and leaves. After a day or two, I pick up the call from that fella. He tells me thatas there’s interesting business he’s doing and he wants to share with me. He asks for an appointment.

This happened four times. First fella visited my house and explained his MLM business. He took very long time, beating around the bush and finally said that he is marketing Amway products. Wah! get off! I had bitter experience with a MLM company. After much struggle, I came out of it. And then in short time, I met this fella who started all those motivational stories. I got irritated but I waited patiently to let him complete. At the end I told him my bitter experiences and my lost interest in MLM models. After listening my story, he again started to convince me and I showed him the door.

Same way other three set up conversation in the same Landmark store and later called me up. I showed them my outright rejection to their scheme. I could see only one thing positive from my personal experience and dealing with these Amway fellas. That is, one can pick up networking skills with these MLM models & its strategies! If any one wants to learn art of networking, may be joining MLM business is a good idea!

I am not sure whether anyone else had gone through this. But the fact that rare visitors like me, have gone through this four times at the same place, suggests me that a network of people are running this in more organized manner. I cannot guess how many people had fallen for this trap. Let this post be piece of warning bell. Be aware of these strategies and save your time and money.

One thing that surely going to happen when you complete reading this book – you will get inspired.

This auto biography of world’s greatest investor Warren Buffett, blows you away how with simple nuggets one can make money. This books peeks in to intriguing and yet extra-ordinary life of Warren Buffett.

This book covers life of Buffett, his unusual burning desire to make money from his childhood, his education, his personal life, his encounter with his master Ben Graham and his growth from $ 105,000 initial investment partnership fund to gargantuan $ 45 billion wealth. And more awing, I found is, his very amazing simple life and approach towards investments. This book also details on the deals Buffett made and his involvement in other business encounters. Inspiring!

Those of you have interests on stock markets, investments or anything related to business, this book is must read.