Muses of Murari

In one of my earlier posts, I mentioned :

In our country, only 1.5% of total population has demat accounts and far less than that figure are active. We have been told that our country men are one of the highest savers of money in the world. If so few demat accounts (few investments) and then where the hell bulk of honest money goes in to saving? Where else? Low return FDs. We like to make our Banks rich and not ourselves. So who has the great opportunity and the complex challenge in the market – Stock broker firms & Financial Institutions.

That figure is so misleading. The actual picture is pretty worse. MoneyLife posted an article on investor participation here. Read if you care to. Startling is a kind word to describe the situation.

Some qoutes.

According to Mr Meena (minister of state for finance), only 30.90 lakh investors traded on the NSE’s cash market in the April-June quarter. Of these 52% were retail, High Networth Individuals (HNIs) and corporate customers. Institutional investors and proprietary traders accounted for 48% of all trading (24% each).

….90% of trading in the April-June 2010 period came from just 192,200 investors, says the Minister. Break it down further and the Minister says 80% of turnover came from just 41,654 investors. In other words, 1,50,546 investors (78%) accounted for just 10% of trading turnover.

Cut it further and it gets worse. Just 8,727 investors accounted for 70% of turnover among which 413 were proprietary traders, mainly brokerage houses. The Minister goes on to say that 60% of trading came from a mere 1,563 traders and half the trading turnover (50%) came from a shockingly low 451 of which 156 were proprietary traders!

According to Mr Meena, only 5.75 lakh clients traded in derivatives in the three-month period. Of these, 90% of trading came from just 18,035 (including 520 proprietary traders). This means that 5.57 lakh clients (97%) accounted for only 10% of total trading while only 3% of clients accounted for 90% of the trading!

Split it further and the number drops dramatically. Only 2,188 investors accounted for 80% of derivatives turnover in the three-month period. Just 537 investors account for 70% of trading, 223 investors accounted for 60% of trading, of which over half were proprietary brokerage firms. And a massive 50% of trading NSE’s derivatives trading turnover, the main pillar of the Indian stock market system, comes from just 106 investors of which 58 are proprietary traders!

I follow Elliot waves and especially Tony Caldaro’s Objective Elliot Wave (check his blog). Not for trading purpose but for the fascination I’ve for the subject. And also because he is bullish on US markets, which psychologically sides my investment emotions .

Every day Tony updates Objective Elliot counts of US markets based on his derived version of Elliot wave theory. The wave counts (present and past) augments well to the theory and it shows wide market participation (mass psychology). To have behavioral theory (Elliot theory) working in reality perfectly (almost perfectly), one basic expectation is a wide section of society participation in the markets. His coverage shows US markets are more mature in terms of participants and their investment psyche.

Look at Indian markets. With my limited experience, I feel the stock prices are not discovered as efficiently as one would expect in reality rather following some patterns, influenced by promoters’ actions, skewed by privileged news, government policies, monsoon, insider information, promoter-operator axis etc.,. We need more people to participate in markets. Not to create bubble sorts. But to create wealth. This way markets would be more efficient.

One small note on my personal experience, before I end. I was told by my parents, since my childhood that stock  markets are for  gamblers and its almost a sin to buy & sell stocks. Of course they lost their shirts in the market and so goes the advice. As a kid, I would buy that argument. And I did. And it resulted in wastage of 10 post-school years before I started realizing. And to my bad luck, Indian markets moved the world in this 10 years.

I visited Casa Loma, Toronto, least expecting that I am going to know about a colorful character, the man behind the castle and his roller coaster life. Meet Sir Henry Pellat

• An athlete who created a 1 mile American record in his late teens.
• A stock market investor who went against the crowd and invested heavily in a company that was involved in infrastructure development of western Canada. And earned very handsomely in his bet.
• Brought electric lamps to Toronto streets.
• Built hydro-electric power plant near the mighty Niagara falls and electrified Toronto city. Later, the local government took over the plant and not settled his electric company the dues. This resulted heavy loses to him.
• Built probably the first Canadian regiment and took his men to Britain for military exercise on his own money.
• Did lot of philanthropy.
• Built a beautiful castle (incomplete) – Casa Loma at astronomical costs of his age. His palace build & filled with the costliest and grandest items of his period
• His investments in few banks failed, as banks went bankrupt.
• His ventures like oil drilling failed miserably and lost lot of money.
• He was forced to auction some of the expensive items in the house and moved to a smaller house.
• He was widower twice.
• During the great depression, the local government laid heavy tax on properties and this prompted the government to take over Casa Loma due to unpaid tax dues.
• Henry kept moving to smaller houses and became lonely for nearly a decade.
• He was penniless and poverty stricken him.

It’s story of riches to rags.

His greatness was recognized much later. At end of his life. On his 80th birthday, he was recognized for his work and praised by his own army men. And two months later he passed away. He was given military respects.

One can see the full circle in his life. He became super rich and over the years he suffered poverty, wifeless and at his end, he was celebrated by his own people.

Very humbling life story.

Casa Loma

To all my friends (& future friends) out there. Books are one of the important things I cherish. Because for the reasons we all know. Though I am not a voracious reader, I do keep track the read-list and wish-list. I am no ego-booster. So dont want to talk on first category. I wish you know the second category.

Here we go :

Moolah is becoming more important these days. It dominates the mindspace of both men & women alike. How much money sufficient for the future? How much money to be saved with our current salaries? Buy house or property. Children’s studies and so on…

And we see raising salaries (read disposable income) and raising cost of living too. This is exactly the breeding ground for many IFA (independent Financial Advisors) or Personal finance advisors to flourish. They can convince common men and draw out financial goals including retirement planning and come up with a beautiful financial costs/saving analysis of future. Like this one.

The above sample is prepared by, perhaps the latest entrant in personal finance space – InvestmentYogi. Their site is impressive and educative too. They’ll make a space for themselves in PF pie. But we are not talking about them. We are talking about countless IFAs working without any face on internet and making a living. Of course, many of us growing in internet age, where click of Google button, you get free information. In the same lines, we would think why we need to pay for financial advice, if I get it online for free.

Add to this, one of the veterans in PF space says in his blog :

I frankly do not think this is a great profession (IFA) to be in. The retail customer will not pay anywhere near what will be a living wage for an independent planner. So most of the planners will come under some roof or brand – and again the customer will lose because of sales pressures. Of course the customer who wants services free, will have to pay the price for it, let him pay.

These are exactly the problems for IFAs. Coupled with poor awareness among public regarding financial planning. Only the high earning couples are worried about their incompetence of doing their own financial planning. Others are either in oblivion to this fact or think they can do it themselves.

Look at other half of half-filled glass. What we have is double delight. Poor awareness among mass of high earning people and no major organized market. So with continuous education among people, you can make a nice business out of it over the period. This is exactly why we see lot of smart people entering now in to this business.

I’d an interesting discussion with one of my senior. He advised me to do retirement planning which he considers many neglect. He told me that he used to advice and help his team members regarding this. Nice. His statements might look ‘duh’ ‘duh’. But simple things hard to follow. I asked him that inspite of all this planning, there will be instances in life when one cannot even plan for and they might wipe out major part/whole of saving. Life will not be a simple equation. People do face complexities and hardships. Then how these financial statements going to work out? He said than we need replan things and revisit things regularly and make changes and so on. See where we are getting. Financial planners if we start to subscribe, we’ll have life long partners, apart from our spouses, unless the planners do outright wrong to us. They’ll be milking money from us in some form or other regularly. Good business huh!

From the same above PF veteran in his blog says

The contrary view to the above is – It will make a great business after 8-10 years by which time all the people who rebate, people who do not understand and their likes would be all wiped out / have retired. This will mean there will be a huge demand for decent IFAs – and the demand can only go up.

I also shared a personal experience with my mutual fund adviser (he’s also a PF adviser), who was fired during recent slump and started his own agency and now he is earning well. I do like to conclude PF/IFA is going to be an interesting space to watch.

One more thought

In our country, only 1.5% of total population has demat accounts and far less than that figure are active. We have been told that our country men are one of the highest savers of money in the world. If so few demat accounts (few investments) and then where the hell bulk of honest money goes in to saving? Where else? Low return FDs. We like to make our Banks rich and not ourselves. So who has the great opportunity and the complex challenge in the market – Stock broker firms & Financial Institutions.

Update :

Just after publishing this post, I read a good article – Ignore Generic Financial Advice

Here is the concluding part that says it all.

The reason is simple: planning for your financial future is personal. It has to be. A good plan will be unique to your situation, and what is right for your situation may be a disaster for your neighbor. So read as much as you want, but then make sure you spend the time to figure out how it applies to you before you make important decisions about your life savings.

This is not new for many but for me. I think I was hibernating all these years without knowing the Tiananmen Square incident. Thanks to the recent visit to ROM museum, where Chinese terracotta warriors and the relevant First Emperor artifacts are in display, the China interests are kindled in me and drove me to know more about China. Then, I came across this marvelous human feat – The Tank Man act. Watch this video that happened during the Tiananmen Square incident

No wonder, this still unknown man is listed in “Top 100 most influential persons of 20th century” by Time magazine. And few political analysts think that this unknown man had influence on communism break down and the ultimate demise of Soviet union.

Forget all politics. Think about his act of rebellion. It’s absolutely unselfish, brave and inspiring act, to say the least. He’s really a true hero.

Interesting video for the parents.

This is TED video. Speech delivered by Cameron Herold.

Kadhalil Sodhappuvadhu Yeppadi

I’d unpleasant time with ZnetIndia, my domain host, for last few days. I tried upgrading my blog to latest WP version. I’d file permission problems. I tried changing with ftp client. Some how it din’t work. So I raised a ticket with them to help. They started with something and suggested something and it went nowhere. Worst part is, each time I send a response, a different support guy attends to it. And this is obvious pain. Why can’t they have one single person to attend a ticket till its closure.

These support guys couldn’t understand my simple problem. They gave un-simple solution, like go to this dashboard and change this setting blah blah blah. I informed them this is just file permission problem and they can do it from their end since they know the complete domain/host user account details. And then they rounded on problems like db wrong connection info. I tried that suggestion too, changing db credential info and you know what, it lead to wrong configuration of db connection. To add to the confusion, website was down for more than two days (with previously working db credentials) and they have no say on it. Finally, after several email exchanges, it started working. I don’t know what went at background. I’d several downtimes in the past. Every time, I gotto ping them and inform them to correct it.

ZnetIndia, your customer service is going down. I can see this not only in my case but also with few of my friends too. Hope you read this and correct it.

I think nobody is creating more awesome  interpretations of Indian mythology and spreading his discovery than Devdutt Patnaik. Listen to his interview below and his beautiful interpretations at his blog – http://devdutt.com/

His recent CNBC TV 18′s Business Sutra, is more awesome. – http://devdutt.com/topic/video

The 3G post continues.

The mammoth 67 k odd crore rupees (approx $15 billion) exceeded A Raja’s expected figure. Although it is good news for the government, but not for for telcos. Really, its tremendous stress on telcos. They had honeymoon days with 2G auctions earlier and now as they are in post-honey moon phase, things do go bitter.

Recently, TRAI came up with its recommendations on 2G license fee and they are all against telcos. Of course, telcos came out in public and blasted the recos. I thought when they got cheapest licenses at Rs. 16oo odd crore rupees, no complains from them. Now, you say something that put more stress on them, they go ballistic in defending.

Let’s wait and watch how telcos use 3G spectrum and make monies and at same time give meaningful services to the public.