tag:blogger.com,1999:blog-130464922024-03-05T23:27:17.347-08:00Free Science Fictiona creature who has walked the mountains of Smokies and round boated in galibore, leaving my footsteps in the wet riverbank sand.
There are coracles in galibore and rubber tubes in smokie mountains, both got me WET!!
I studied in St pauls barauni,st xaviers haldia ,Grems baroda , REC surathkal , IIM K.surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.comBlogger70125tag:blogger.com,1999:blog-13046492.post-90042926320017397862012-08-18T23:21:00.005-07:002012-08-18T23:25:20.780-07:00<b>Purchasing Power Parity</b><div dir="ltr" style="text-align: left;" trbidi="on">
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A concept which I want to throw out is value added PPP e.g. Wheat cost might converge across geographies due to subsidies but the price of derived end product such as bread would diverge. This is a hypothesis, when I get time, I will work on statistical rigor and 'p' values. For now there are shortcuts which the mind takes and enables lucidity of prose.
I am prone to jumps of thought, but let me give a structure, PPP would primarily be food, shelter, transport and entertainment (alcohol included in entertainment!). Moving on to transport, something dear to me are the railways and I still remember the siren sound of Black Diamond express which would transport us from Barauni on the banks of Ganga at Mokama to Howrah. Taking a leap, so much so for convergence, the cost of things in India is still cheap, even compared to China. The transportation cost of India would be cheaper than China and one-fifth of that in the US. In case of Metro the ratio would be more skewed.
The point I want to make is that Governments should invest in massive infrastructure and subsidize power so that the output is competitive in price. It could sound anti-competitive but giving free power to farmers and not charging taxes actually keeps India free of hunger. I will revisit this argument as I personally have swung across both sides of the argument, but just see the impact of Hoover Dam or Panama Canal from a cost structure perspective.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-83094277405975944422010-02-25T18:54:00.000-08:002010-02-25T18:56:54.777-08:00Air conditioner with anti mosquito technologyConvergence is the buzz word. To monetize convergence, air conditioner with anti mosquito technology could do well in India. The problem with split AC's is that they are mounted high in the air. A replacable liquid anti mosquito canister alongwith electronic anti mosquito frequency is the idea.<br />To execute, a few visits to china might be needed to look at the AC OEM components. <br />Thoughts my friends?<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-90483620979591792122009-12-27T22:14:00.000-08:002009-12-27T22:53:54.702-08:00KRI, KPI and PIRemember the Balanced score card and the strategy map? In the strategy map the drivers are the trained and motivated employees who work as per well defined internal and external processes to deliver products or services which result in performance which can be measured by financial metrics like ROCE or ROE. <br />As per an article I read today, Key Performance Indicators(KPI) cannot be a financial metric and need to be something which management keeps a tab on every day and every hour. Every employee is in some way responsible for the KPI. Example KPIs are late arrival of flight, customer satisfaction etc. Is it possible to monitor financial metrics every hour and is the investment in such a system economical?<br /><br />An example Key Results Indicators (KRI) can be the Dupont formula or ROE which can be subsequently decomposed into net profit margin, asset turnover and degree of financial leverage( asset/Equity). Performance indicators can be number of employee suggestions etc. The article also downplayed the causality angle or lead (driver)-> lag (result) analysis method and used the metric late arrival of flight to prove the point. Is this metric a lead or lag indicator?<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-36915662321786084472009-12-26T23:28:00.001-08:002009-12-27T22:57:57.085-08:00Outliers reviewI just finished reading Outliers by Malcolm Gladwell. It is a good read, what struck me was the lack of any reference to east Indians in the book! Only the korean, chinese .. rice growing chinese from pearl valley delta are taken. This makes me wonder if the author has a selection bias in the data.<br />One of the organizational behaviour inputs was the importance of autonomy and expectancy in a job, yes the Vrooms expectancy model where the motivation is determined by ones perceived chances of achieving valued outcomes. effort->performance expectancies and performance-> outcome instrumentalities influence the degree of effort, which is almost like P(A/B) is a factor of P(B/C) chaining. Also note that during my MBA I could not discriminate between performance and outcome :P, its only in a job that you start realizing the asymmetry of performance and outcome. I started thinking of my wife, who as a doctor certainly has a higher degree of autonomy. One of the advantages of my consulting profession is a high score on the autonomy axis.<br />Well the core idea of the book is that raising children by middle class is more like cultivation due to time sequencing of learning activities and also making use of the vacation time to build additional skills. I still remember my father giving me algebra homework from Hall & Knight during summer vacations, and all I wanted to do was to devour the next Issac Asimov novel from Haldia IndianOil officers club library. Well I did read the steamy passages from Eric Van Lustbaders novels too :P<br /> <br />The other concept is usage of mitigated speech in a hierarchical setting when speaking to superiors. An example given was the disastrous consequences in a cockpit where the listener does not have the luxury of time to interpret the fine nuance. I started wondering if inter team communication during a short high burn client strategy engagement require mitigated or direct communication? Mitigation of speech and nuances in sentences would be important for global firms which operate in advisory space. Overall a good read 4/5.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-75322086481361960772009-09-24T21:49:00.000-07:002009-09-27T06:19:32.222-07:00Investment value chain by looking downstreamIn the last post, I had mentioned about the importance of cash flows. One shouldnt however follow it blindly as I was almost about to sell BEML stock based on <br /><strong>negative operating cash flow </strong>of Rs 411 crores(Rs 4.11 Billion). However it was the inventory which increased from Rs 2 Bn to nearly Rs 6.9 Bn. With an inventory turnover ratio slightly greater than one. The gearing has also increased due to increase in working capital and other capex.<br /><br />Looking at the downstream value chain becomes important as one analyzes as to where are BEML's products being used: for building roads and metro coaches primarily. The Medium term drivers are following:<br />1. The National highway development plan is going to receive a boost, however I saw mostly kobelco earth moving equipment in Hyderabad while travelling to the airport. So is this a valid correlation cov xy/ sigma x. sigma y<br />2. Metro is going to come up in Bangalore, DMRC is in for a massive expansion, so rolling stocks requirement is going to increase. That could be a reason for the significant increase in inventory other than a desire to build up inventory when the raw materials are in a negative cycle<br /><br />In terms of long term drivers: <br />- Public transport could receive a boost with increasing urbanization and spending power in developing countries while the lobbying power of automakers decreases witht the Detroit bankruptcies. <br />- Mechanization in building roads is going to increase in India.<br />- Real estate prices in Bangalore are going to increase and BEML's real estate assets are significantly undervalued.<br />To end the post let me be a bit humorous, history does repeat itself like I read in russian science fiction in a story where a physicist is about to cross an unmanned railway crossing. BEML price has yo-yoed between 500 and 1700 in the past, so buying opportunities might be there sub Rs 750. Credit Suisse has a target of nearly Rs 1200.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-17040437881999197812009-07-22T21:41:00.000-07:002009-07-22T21:45:53.557-07:00Non recurring items and other incomeHDFC Bank: Out of a total income of $1040 Million, other income was nearly 20%, up from 14% in Q1 of 2008. What does this other income constitute of ; unconsolidated subsidiary earnings?<br />BHEL also had a higher income due to non-recurring item. These are important as analysts are primarily using recurring income from continuing operations to gauge the valuation of company. Will this impact DCF valuations, yes ! as one needs to make sure that the future cash flows are not incremented based on a current bloated cash flow due to one time infrequent /unusual/extra-ordinary item.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-64046116482368672872009-06-28T00:25:00.000-07:002009-06-28T00:59:59.363-07:00Praj Industries foreign investments and numbersLet me be honest, I invested in Praj after seeing a news item that one of the Menlo Park investors had invested in it. Venture capitalists are more focussed on the business model than on just the numbers which means that they look at cost structure, core capabilities, value configuration, opportunity cost, value proposition, customer relationship, distribution channel, target customer and revenue streams. Let me take a peek at revenue and cost.<br /> <br />To get an appreciation of the magnitude of Praj industries overseas investments and their performance, lets look at their annual report. Revenue was 7719 Mn in FY 2009 up 10% YOY. The Profit after tax was Rs 1297 Mn, down 15.5%. Site expenses and labour charges have increased to Rs 1907 Mn from a base of Rs 496 Mn. <br />The breakdown of revenue has been almost half and half in rest of world and India.<br /><br />The subsidiary financials have been consolidated with Praj industries financials based on AS-21.With these figures in perspective, Praj industries has invested Rs 218 Mn in Praj Schneider. Praj owns 60% equity in Bioenergy Europa which has revenues of Rs 705 Mn in FY 09. Unrealized forex gain is Rs 240 Mn. <br /><br />Beers sales are only expected to rise with the increasing pricing power of fermenting industry in India. Praj is working on both ethanol and bio-diesel technologies. If we take a 10 year horizon, Oil is definitely going to spike again resulting in super normal profits for the alternatives. Governments may further the alternative investments to protect the domestic economies. Clean technologies has been a theme with lot of emotional attractiveness and makes financial sense.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-15385460347104404692009-04-23T04:48:00.000-07:002009-04-23T04:52:27.567-07:00Americans think in months and British plan in daysLook at the date format mm/dd/yy. Annual planning is much easier :). While typing 4/23, the first letter occupied my sphere of concentration and I was able to immediately discriminate with another meeting on 5/7. Hence I conclude that the American date format helps to plan for longer time horizons w.r.t the dd/mm/yy format.<br /><br />Look at the distance in miles, it is numerically less but actually equal to kilometers.Let me think abou it ..abhi bahut door jaana hai servo extra mile bharo<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-17165856765371620882009-02-24T08:52:00.000-08:002009-02-24T18:43:26.237-08:00EMI Demystified and relationship with PVIFA<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMtfqtCkPi7i0JLtBTp1BA1EH47GZoWVJeiJU7oEzIlZOn_3wkZU6QEPjB0LoehuR42RieuRjdh5d-w1n98ilIYEazupOWthh4ykzvDqJ6qXLysN4ZKSo6PHINsyXqgxX-y-6izg/s1600-h/Comparison_Cash_Synthetic_Structure.jpg"><img id="BLOGGER_PHOTO_ID_5306411053862338482" style="DISPLAY: block; MARGIN: 0px auto 10px; WIDTH: 400px; CURSOR: hand; HEIGHT: 372px; TEXT-ALIGN: center" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgMtfqtCkPi7i0JLtBTp1BA1EH47GZoWVJeiJU7oEzIlZOn_3wkZU6QEPjB0LoehuR42RieuRjdh5d-w1n98ilIYEazupOWthh4ykzvDqJ6qXLysN4ZKSo6PHINsyXqgxX-y-6izg/s400/Comparison_Cash_Synthetic_Structure.jpg" border="0" /></a><br /><div> Excel simply will not scale like code ! So here is the derivation from the fundamentals; Enjoy:<br />Geometric series 1+x+x^2+x^3+...= 1/1-X if X<1<br />PVn = A/R - A/[(1+R)^n.R]<br />e.g. PV3 = PV(infinity) - A/[(1+R)^3.R] where PV(Infinity) = A/R; remember D1/Ke-g<br />FV=PV(1+R)^N + PMT[(1+R)^N -1]/(1+R)^N*R)<br />pvn =" A/i" N=" Periods," R="Rate," A =" PMT"<br /><br />FV="O"<br /><span style="color:#000099;"><Strong>- PMT = PV*R(1+R)^N/((1+R)^N -1)<br /></span></strong><br />disc = (1 + coupon) ^ N</div><br /><div>payment= Bal * coupon * disc / (disc - 1)</div><br /><div>InterestCashFlow(period) = Balance(period - 1) * Coupon / Frequency<br />PrincipalCashFlow(period) = payment - InterestCashFlow(period)<br />Balance(period) = Balance(period - 1) - PrincipalCashFlow(period)</div><br /><br />The diagrams are simplified and do not denote the complexity of Net Interest Margins of different assets e.g. Senior Notes<br /><div></div>Assets are valued by Sellers/Securitizers based on:<br />1. Interest<br />2. Default<br />3. Recovery rates<br />4. Credit spreads<br />5. Prepayment rate<br /><br /><div></div><div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-26782759026397495172009-02-22T08:03:00.000-08:002009-02-22T08:19:37.704-08:00Entrepreneurship motivationThe thoughts on top of most peoples minds is the global recession. Similary the driver for most people contemplating self owned business is money! I was thinking if giving employment to tens of people is a valid motivation. The right wing economists will start puking as they believe that profit should be the only motive and corporate social responsibility is not good for corporate health. The owner of business is an extension of the company, so this logic should hold for owner's motivation or driver as well.<br />The good thing was this thought chain helped clarify the dichotomy between trends and drivers. Trend would be the recession and driver would be something which affects the company postively or negatively like changes in interest rate , currency rate volatility, commodity price change. The visualization I had in mind was a person driving a vehicle, so what would be the primary driver for a company ? People and their intent!! So are drivers more likely to be internal than external like trends? This is like looking behind using the rear view mirror or the side view mirror. Most strategy maps have people as the point of primary focus to drive internal and external scorecards culminating with the financial scorecard.<br /><br />I had these thoughts speeding through my mind after having a fast drive. There is delicious fatigue in the bones which prevented me from posting as soon as some insights crossed my mind. Now I am struggling hard to recall those nuggets, and hence this build-up.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-86985400437567475612009-02-09T07:09:00.000-08:002009-02-09T07:16:29.699-08:00Economics focus| looking good by doing goodThe incentives covered as an introduction to Freakonomics were financial, social and moral. The article examines if the so called moral incentive from contributing to charity is actually a social incentive. The article also examines if it’s possible to give creative financial incentives to boost charity.<br />Some of the questions which arose as I pored through the article were:<br />a) Does Individual responsibility have to be publicized? How much of charity is publicized. Statistics from a particular case in point can be misleading e.g. just taking Boston’s Institute of contemporary art(ICA) as a single data point prove that less than 1% of private gifts to charity are anonymous might be erroneous.<br />b) Is charity increasing in terms of volume figures and actual revenue? A 2001 survey that 89% of Americans gave to charity does point towards charity becoming more broad-based. Actual charity revenue might be totally opposite. Taking inflation into account, the tripling of charity to $306 Billion from a base of $100 Billion in 1965 is no wonder. In real Dollar terms, charity today should be approximately $719.47 Billion to have the same effect it had in 1965. Take a look at the table below. The table below also illustrates the effects of compounding. If there is 7% inflation, then money doubles in 10 years. Coming back to the crux of the article, if the author of the article intended to point out that charity has increased due to associated social incentives; it is not the case at least in real dollar terms. The data points to charity in real dollar terms being half of what it was in the year 1965.<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiV_uSWkZKXoZmISzeJL5L1wdu2oKP1sDlroZAXgcMJG6op4ApkiIV6SN12kIAEB4rzZX63iZOAYm-caFmJzTzkmTX5vn6XsQ7tq2fhLYGgZVF17LpimWWinI80v7u_N-3SjykWIQ/s1600-h/Inflation_US.jpg"><img id="BLOGGER_PHOTO_ID_5300816205782648130" style="FLOAT: left; MARGIN: 0px 10px 10px 0px; WIDTH: 400px; CURSOR: hand; HEIGHT: 75px" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiV_uSWkZKXoZmISzeJL5L1wdu2oKP1sDlroZAXgcMJG6op4ApkiIV6SN12kIAEB4rzZX63iZOAYm-caFmJzTzkmTX5vn6XsQ7tq2fhLYGgZVF17LpimWWinI80v7u_N-3SjykWIQ/s400/Inflation_US.jpg" border="0" /></a><br /><div><br /></div><div> </div><div> </div><div> </div><div> </div><div>c) Are financial incentives in charity inversely correlated to looking good in the eyes of those whose opinion charity givers really care about (Image motivation)? According to the article behavioral economics might provide the answer, but going by the recent boom bust and catastrophe in the global economy, it seems highly unlikely. In case of blood donation, the hypothesis might be true, but it cannot be expanded to cover all charity and all financial incentives to charity. Tax breaks are a very strong incentive to charity.<br />In some parts of the world, Charity is a method to launder money from black to white. Educational institutions and religious institutions play a role in this business.<br /><br />Right wing Economists who have a belief that self interest governs most actions of man are intrigued by charity. They will take solace in the fact that charity has in fact fallen to half of what it was five decades back in real dollar terms. They might miss out the fact that today charity is international wherein aid workers and religious workers reach out to remote places to be noble. The cynic would say that the well-off are reaching out to exorcise the demons within them. If we are less cynical then we would simply look at the good which is resulting from charity.</div><div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-27520445823921635482009-01-19T04:10:00.000-08:002009-01-19T04:12:24.352-08:00Incentives that mold behavior in the workplace<div align="justify"><br /><em>Take some time to think about the incentives that mold behavior in the workplace. <br /></em>The author has defined three types of incentives economic, social and moral. We can approach the workplace incentives from two perspectives. The first perspective is from Frederick Herzberg’s Hygiene factors point of view. Herzberg rationalized that the factors causing satisfaction are different from those causing dissatisfaction. The determination of causality is based on employee interviews.<br />Following are the Hygiene factors causing dissatisfaction:<br />1. Salary<br />2. Work conditions(Cafeteria)<br />3. Company policy<br />4. Relations with Boss(Expats)<br />5. Peer relationships<br />6. Transport<br />7. Air conditioning<br />The following Motivator factors cause satisfaction è<br />1. Achievement<br />2. Recognition (WOW you work at xxyy firm)<br />3. Work (BPO, Coding, Consulting, Client facing work)<br />4. Responsibility (compared to other Indian firms)<br />5. Growth(Manager, Sr. Manager, Partner)<br />Economic Incentives that mold behavior in the workplace are more similar to hygiene factors, the absence of which causes dissatisfaction, but the factors themselves do not provide satisfaction:<br />1. Salary<br />2. Bonus<br />3. Perks<br />Social Incentives and Moral incentives on the other hand provide psychological gratification and are called motivators in Herzberg’s language. Following are the social incentives:<br />1. Recognition<br />2. Dinner with the boss<br />3. Important assignments<br />4. Interesting work<br /><br />The second perspective or Maslow’s Hierarchy of human needs is evolutionary and involves redefinition of most important needs and wants of an employee as the basic needs like food, security and sex get satisfied at different salary thresholds. Somebody introduced purchasing power parity and wrecked the whole thing. The cost of milk is same in United States as in India. India is the land of low cost, so apartments with basic necessities are much cheaper. Electricity is subsidized by the government and so does not add up to the GDP. Even with subsidized electricity, the weather is so good that air conditioning is not a hygiene factor at home, but is a hygiene factor at work. Jumping to an interesting topic, of course the thresholds for sex are different for better looking employees. The threshold for sex is different in closed cultures like India where arranged marriage is the norm.<br />Moral Incentives like community work allow the employee to claim higher ground and is a win-win for the employer and the employee.<br />Moral Incentives can be considered to be on the peak of Maslow’s Pyramid:<br />1. Community work<br />2. Good Audit leading to greater transparency<br />3. Helping Clients and Economy do better<br />4. Recognition of Honesty<br />5. Evidence of no Dishonesty ( Borrowed from Nassim Taleb’s N.E.D)<br /><br />It’s a pity that knowledge is not able to root out corruption. Erudite people in the middle belly of India are lacking the workplace incentives to deliver governance. By falsification, the absence of dishonesty or no evidence of dishonesty does not mean Evidence of no dishonesty. It is the lack of a measure or mitigating influence like cameras in public offices which lead to no evidence of dishonesty. The presence of a camera might lead to shifting of graft from office premises and employment of more middlemen.<br />In a perverse sort of way, the gratification from community work is much more in India, where there is so much work to do, so much poverty to alleviate by primary education and improving governance.</div><div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-6646814780773462212009-01-02T01:04:00.000-08:002009-01-02T01:25:12.977-08:00Ratio of R&D to SG&A > 1I read Nassim Taleb on the first day of 2009 and wondered about the events which will happen. From a risk management perspective one needs to look at how one can bounce back from a multitude of events which are not neccesarily coincident. The investment in risk avoidance can map to 'n' number of events. Nassim is critical of Risk managment( cant have a risk specialist because of the breadth and possibility of a bend/wrap in the fabric of Risk space :P) .<br />While mapping the risk of companies, one metric I noticed was the <span style="color:#009900;"><strong>ratio of R&D to SG&A</strong></span> expenses. For the more successful companies, the ratio seems to be <span style="color:#009900;"><strong>greater than <span style="font-size:180%;">1(OH CAUSALITY!)</span></strong></span>. Investing heavily in R&D with an emphasis on the fat tail and serendipity can (<strong>Hypothesis</strong>) co-relate to risk reduction in areas like economic slowdown, change in industry structure and change in consumer preference. What investment in R&D cannot protect(<strong>Again a Hypothesis but of the falsification type</strong> / For eminent Catter's "scoring by elimination :D" ) against are risks like Litigation, Employee retention and Accurate Financial reporting.<br />('N'Assimilated from Nassim's Black swan)<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-68049149877889878252008-11-17T02:41:00.000-08:002008-11-23T09:53:07.600-08:00Does a CAT have 9 lives?Apparently not as per a CAT expert excerpt in Economic times :<br />“Over the years, there have been candidates who make repeated attempts at CAT and even get right percentile for admission to one of the IIMs. However, such candidates lack the right attitude and IIMs in fact don’t like them. And this year’s pattern reflects this very well,” said a CAT expert.<br />I wrote CAT twice, the first time I was better prepared but I did not clear it, the second time I got a center at Jyoti nivas college and cracked CAT in a happy go lucky manner. The key thing is to be relaxed. Why did'nt I clear it the first time..Among the reasons which I thought:<br />1. I was not relaxed<br />2. I reached the center too early and lost my potential by whiling about in the garden<br />Blogging on CAT is an Annual ritual :D<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-76742841214722655772008-11-13T21:29:00.000-08:002008-11-13T21:35:56.450-08:00saw toothed stock marketThe fluctuation of the NSE Nifty today reminded me of saw toothed waveforms which I would look to clip in my electrical engineering days at surathkal. IMO This volatility is a result of uncertain policy measures as US is changing course seeing China's fiscal stimulus move. Today in the hindu columnist patnaik essentially advocated fiscal stimulus versus just doing increasing the M3 money supply. Will the long term cash flows of cashcow companies get effected unless of course the cashcow is not the sacred cow we thought but just a ponzi scheme of routing money from financial services into aircraft turbine and power generation biz? Making the customer leveraged by having a financial arm might be a good idea in good times, but in bad times it can make you sink faster.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-61844036866989587052008-11-11T21:30:00.001-08:002008-11-11T21:40:53.948-08:00Saravanaa bhavan and free movement of peopleI am almost scared of posting for fear of horsing around. I had a shock of my life seeing the owner of saravanaa bhavan in chains. Is it a plot by McDonalds to stump the future of fast food from Madras. Saravanaa bhavan is an Oasis in Chennai station with fresh cool and clean air to breathe. Its so miles apart from the smelly station air!!<br />Saravanaa Bhavan near Mount road is where I would go with my parents on saturday nights to down the delicious Dosas followed by coffee and walk down to our house in Lloyds road. Walking a bit further and turning to left comes the US consulate who filed a complaint for traficking on Saravana Bhavan. Corporate governance becomes important for even SME's! Software companies would be well advised to look at the repurcussions of Visa abuse. It goes against my sense of liberty that the movement of humans should be restricted so that there can be certain oasis which reminds me of Babylon AD. In the movie Babylon AD , the rest of world is shown to be in Chaos while North America enjoys unprecedented peace and prosperity. Shall I accept the view that Visa is not a right and rebel against Darwinism and survival of the fittest. Why should a person who is not a diligent worker be sheltered against a hardworking person from another part of the world?<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com1tag:blogger.com,1999:blog-13046492.post-13591137549740620352008-10-31T00:46:00.000-07:002008-10-31T00:55:07.958-07:00case studies for business process fraud analysisAfter doing a training on business processes for 4 days, I realized that the case study was most insightful. Factoring receivables opens up the same can of worms as CDO's. Lets look at the point of similarity, both of them essentially sell future cash flows at todays prices. Just as asset prices can be inflated or loans foreclosed, how can Accounts Receivable be manipulated?<br />1. Channel stuffing<br />2. Changing the credit terms<br />More ideas from readers?<br />The other important thing I gleaned from the training was keeping your vendor and customer files clean and excel pivot table definitely helps :><div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com24tag:blogger.com,1999:blog-13046492.post-78039102410192205852008-10-12T22:44:00.000-07:002008-10-13T03:09:50.019-07:00Economy on steroids(Tax payers money)<div align="justify">The infusion of liquidity by monetary policy is pushing up the price of gold and pulling down the price of oil.<br />Some interesting conjectures:<br />1. Gold is a not a luxury/vebelen good based on current trend where the demand has tapered off as price has increased.<br />2. Commodity prices are cooling off in effect equating liquidity pressures to cooling-off of demand side. By the same logic, easing liquidity should lead to easier lending thereby enabling capital expenditure.<br />I have been reading a lot on behavioural economics and Moral Hazard pops up everywhere, AIG management has gone on a vacation after bailout. Infusion of public equity(Tax payers money for bailout) into private sector will lead to inefficient allocation of capital. Regulation is a more efficient framework if <strong>Regulators listens to leading lights </strong>like Nassim Taleb who had criticised VAR methodology in the book fooled by Randomness . Can regulators listen to hedge fund managers like David Einhorn, however diligent they may be?<br />Risk taking =f(utility, weighing) , Tversky and Kahneman, 1992, suggest that individuals are risk seekers for small-probability gains and large-probability losses, and risk averse for large-probability gains and small-probability losses. The only issue here is whether the traders are cognizant of the large-probability losses!</div><div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com1tag:blogger.com,1999:blog-13046492.post-33001176389108637022008-10-03T01:10:00.001-07:002008-10-03T01:17:34.655-07:00wikinomics audiocastListening to the wikinomics audiocast has opened my eyes to a trend which I used to view as insignificant. Listening to the audiocast was mindblowing enabling me to see myraid opportunities in the web 2.0 space . I see it as an opportunity to build consulting eminence. The example is of a Gold prospecting company which uploaded its geological data to public competition into a 40MB file and thereby increased revenue from $30 million to $9 Billion. Respondents used non traditional techniques from mathematics and operations research to search for new drilling prospects. The prize money has had a reinforcing behaviour on respondents and enabled multi-discipliniary approach.<br />The advantage of investing time in web 2.0 is to study how collaborative system interacts with the traditional control assurance behaviour of enterprises to bring forth new blueprints of more efficient people and business processes.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-54923227034382130022008-08-19T04:51:00.000-07:002008-08-19T05:03:04.333-07:00Rainfall driving and keeping coolRoads have been washed away by the rains in Hyderabad. I am faced with two options<br /><br />1. Inch along for half an hour before reaching the tunnel where four lanes merge into one<br />Distance = 5 km, Time = 30 min - 2 Hrs Accident risk =Low<br />2. Drive through a different route where I tend to almost knock over motorcyclists who are overtaking on the left side.<br />Distance = 14 km, Time = 30-45 minutes Accident risk = Medium<br /><br />Lets travel to uncle Sam's place. In Texas, I was amazed to learn about road rage. Who would imagine getting shot at by a shotgun for rowdy driving. It is so important to keep cool during driving and not deal with it like its CAT or JEE exam where you have to get ahead of the others. Parents have been drilling this message. Why am I so competitive that I try to stop others from overtaking me?<br />The solution has been :<br />1. Not have a target time to reach office<br />2. Drive in a straight line<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com1tag:blogger.com,1999:blog-13046492.post-69090468326768107092008-03-26T19:12:00.000-07:002008-08-19T05:05:13.075-07:00convocation<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvMzmnnjx-WUDSoQmX5jNdec5c88YHzqyx6mjX1SmouHxpwcmST2wKPQ-ACuxTNIniR2GtrJKTfKr2aQBetbVX6NgN9iMVknKZg3G3O3xEqS0zaQ1cCxjZjtOY3lUqwg2FptGfSg/s1600-h/DSCN2259.JPG"><img id="BLOGGER_PHOTO_ID_5182245303811269698" style="FLOAT: left; MARGIN: 0pt 10px 10px 0pt; CURSOR: pointer" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvMzmnnjx-WUDSoQmX5jNdec5c88YHzqyx6mjX1SmouHxpwcmST2wKPQ-ACuxTNIniR2GtrJKTfKr2aQBetbVX6NgN9iMVknKZg3G3O3xEqS0zaQ1cCxjZjtOY3lUqwg2FptGfSg/s400/DSCN2259.JPG" border="0" /></a><br /><br /><br /><p align="center"><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjajcfFnuT54gFh0iQVAu2aCsD4QUtKf5SirFhwM30o5T6ho_aeYSAJsmjXZAqRn5PTegpxrA07AX2htFjroxwYqxHgJ2sgVtmx2Ew4Ke0-C1Sv_Od-LEkttnxn4BdWMDpxbAhCLA/s1600-h/DSCN2241.JPG"><img id="BLOGGER_PHOTO_ID_5182245316696171602" style="FLOAT: left; MARGIN: 0pt 10px 10px 0pt; CURSOR: pointer" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjajcfFnuT54gFh0iQVAu2aCsD4QUtKf5SirFhwM30o5T6ho_aeYSAJsmjXZAqRn5PTegpxrA07AX2htFjroxwYqxHgJ2sgVtmx2Ew4Ke0-C1Sv_Od-LEkttnxn4BdWMDpxbAhCLA/s400/DSCN2241.JPG" border="0" /></a></p><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br /><br />Finally a dream comes to an end. Convocation ran like a well oiled machine and my face was puffed up with pride. There was a lingering sadness in the back of my mind about leaving my K'omrades. It is still ennui before work resumes. When the mind remains idle it makes fantastic conjectures and this is leaning more towards synthesis rather than analysis. I am training my mind to place things in the concrete and abstract quadrants too. Few of my thoughts while lazing on a houseboat in the backwaters<br /><br />1. Pension schemes should be taken on the wifes name as women live longer. This eliminates the need to take life insurance. The caveat is that this does not cover children.<br /><br />2. There needs to be incentives for cleanliness in public places. The backwaters are so neat inspite of so many visitors. Kozhikode was not so neat a few years back. It took a sustained grass roots campaign by the district administration to make Kozhikode one of the neatest places. Its important not to throw around plastic. It will be such a lame post if I buy an SUV :(!<br /><br />3. A short article on Warren Buffet @ Dalal street was enlightening. I liked the part about not spending on brands but on buying what one wants ( shades of no logo) and doing what one really wants to do. Remember its only one life and time in finite. I like watching national geographic and discovery channel if I am not able to travel :).<br />Why doesnt Dalal street provide FCFF and FCFE? The beta shown in also not complete as without mention of the period, the beta is useless. Dalal street online http://www.dalalstreetjournal.com/ONLINEPREVIEW/tabid/146/Default.aspx<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com2tag:blogger.com,1999:blog-13046492.post-88690526739916857572008-02-20T10:51:00.000-08:002008-02-25T07:48:42.701-08:00Contagion<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiy-51s9O_Uof_0czUtQhHiGrGg2dX_CyeT6AHGnSEpRlBnyksIE_f_yUrF9LA8TeRDbAqfRRin9au68PKOj5Vj-oUWiiA9UhZq2Be_rGhPEsOOOyhi_O7f_QC606C3weU6ZxlpXQ/s1600-h/Image(101).jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiy-51s9O_Uof_0czUtQhHiGrGg2dX_CyeT6AHGnSEpRlBnyksIE_f_yUrF9LA8TeRDbAqfRRin9au68PKOj5Vj-oUWiiA9UhZq2Be_rGhPEsOOOyhi_O7f_QC606C3weU6ZxlpXQ/s400/Image(101).jpg" alt="" id="BLOGGER_PHOTO_ID_5169144135267948722" border="0" /></a><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvOlVd9mm6wOJD7byvMkDRZf6Y2A8J9H1TUfrBHqFGWlRdtGETHf20cszvb_ArzNN3wePh2mgTfbI-eVjmUxH0JsNDv6DYgJzlMXEkVFfiZQ6f91eUPRq4T6wNGPFZKudAIxR9Ow/s1600-h/Image(98).jpg"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjvOlVd9mm6wOJD7byvMkDRZf6Y2A8J9H1TUfrBHqFGWlRdtGETHf20cszvb_ArzNN3wePh2mgTfbI-eVjmUxH0JsNDv6DYgJzlMXEkVFfiZQ6f91eUPRq4T6wNGPFZKudAIxR9Ow/s400/Image(98).jpg" alt="" id="BLOGGER_PHOTO_ID_5169144203987425474" border="0" /></a><br /><br /><span style="font-weight: bold;">Stevia<br /><br /></span>The other thing I did today was to meet CEO of medicinal herbs company who connects the suppliers to the demand. I had queries on stevia and the response was that bid ask yield has reduced from 90/150 to 60/90 in 2 years. Currently there are no farmers who are cultivating stevia in wayanad. The climatic conditions are cold which cause flowering. Flowering a decreases the yield of stevia leaf. He was able to spare some time for me and showed me a sample of <span style="font-weight: bold;">stevia powder of puritan brand </span>imported from US. The label reads nutritional supplement. A very pertinent point as there are political implications to stevia from companies which have poured billion dollar investments into sugar substitutes. The other political problem is the sugarcane lobby.<br />The insight which he gave me was that the very Institutional voids which we criticize in India can help make stevia a success here. Now the challenge is generating demand. I thought the package might be a problem. If stevia is properly packaged in smaller packets, it can be a hit with juice wallahs. Coke uses Stevia in Japan, so another big market. The biggest market is households as stevia stays stable at high temperatures, even 400 degree centigrade.<br />To find farmers in wayanad who are cultivating stevia in wayanad, I got the suggestion to contact nurseries in and around kalpetta as growing stevia seedlings requires careful supervision. Good irrigation and hot sun are good enough for stevia to grow.<br /><br />It has been quite a day for me. Recounting the details might take the juice out of readers who love one genre more than the others.<br />Among one of the ten magazines I picked up today two things struck me<br />1. US has a 14 trillion dollar economy , China has about 3.5 trillion dollar economy and India has a 1.1 Trillion dollar economy , looking at the magnitude of difference in size of economies, the decoupling theory does not hold.<br />2. An article on <span style="font-weight: bold;">SIV </span>Structured Investment vehicles , which are nothing but a <span style="font-weight: bold;">synthetic of banks , borrow short and invest long. </span>similarly Banks lend long. Now these long investments have to be liquid i.e. tradeable and offer an arbitrage opportunity. SIV are in a spot because liquidity has dried up as subprime CDO's are not generating cash flows.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-83681400500807960242007-12-10T08:52:00.000-08:002007-12-10T09:17:08.811-08:00Fooled by randomnessIt was a 7 hour flight from Zurich to Delhi. I met a Gujarati accountant who had survived the stock market for 20 years while waiting at Delhi airport. His wife didnt like him talking to a stranger about investments. Still we had time to pass and so he spoke. I would rather that he spoke because he took a paternal liking to me! One of the pearls was to exit at 20-30% profit and try to profit recursively and diversify risk. It vindicated me as I took lower risk. I didnt make 5 times the money but twice the invested money in the boom time between 2004-2007. I sold my 2000 shares of ICICI @ Rs 74 booking a profit of Rs 24. Today ICICI trades somewhere near Rs 900. Sometimes I look back and wonder if took the right decision by selling. Reading Nassim Taleb doesnt make me feel better. The subject matter of the book is on profiting from increased uncertainity and volatility (The black swan). Make small losses and a huge infrequent profit. The mirror image is making small gains and a huge infrequent loss. Are there zones which are in between ?<br /><br />Fooled by randomness is a non-fiction book on probability in markets and profiting from uncertainity and volatility. Nassim Taleb gives illustrations of the boom and bust cycles(wrong choice of word) to illustrate that the past is not neccesarily a predictor of the future. Its a must read for those who want to preserve capital . It is also for those who are watching agog as the newspapers extoll readers that sensex will reach 25,000.<br /><br />I was amazed at the insights presented by Nassim Nicholas Taleb. These were illustrated in class at IIM like birthday coincidences and non symmetric distributions. Some concepts were beyond my understanding in class :(. In his book Nassim brings probability concepts to life.<br />I decided to order the book on exotic derivatives by Nassim from Amazon.com. The irony is that the publisher is charging $110 for a book in India which costs $70 in the US!<br /><br />Back to Nassim, there is intellectual arrogance in the book which makes me confront my own subconscious thoughts on knowing it all which results in rigidity of thought. I had frequent arguments with my father where I would ask him to back up loose statements with intellectual rigour. Reflecting at myself, I realized that seldom had I subject my ideas to internal censure before blurting them out from the tip of my tongue.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com2tag:blogger.com,1999:blog-13046492.post-85166960838205170012007-07-30T07:21:00.000-07:002007-07-30T07:45:40.536-07:00Why do FII's and MF's prefer GAIL & Bharti<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixKKgFjDBk2DR-8BVM87YeC2qGr8zTP9xx1olm45vGeSU39ULt6UxHXlykVYaxz05-mPrtoiV4SO-8Abj4X52wVH38A6G5_coxY6yQBlXYMmhZqrAwcSc8eR5Ua3gmu5btU6xH4g/s1600-h/BhartiHot.JPG"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixKKgFjDBk2DR-8BVM87YeC2qGr8zTP9xx1olm45vGeSU39ULt6UxHXlykVYaxz05-mPrtoiV4SO-8Abj4X52wVH38A6G5_coxY6yQBlXYMmhZqrAwcSc8eR5Ua3gmu5btU6xH4g/s400/BhartiHot.JPG" alt="" id="BLOGGER_PHOTO_ID_5092998861476429042" border="0" /></a>Based on the last 5 year monthly returns for GAIL and Bharti, We see that these stocks lie very close to the Efficient frontier as per Capital market line theory. No wonder FII's and MF's are stocking on this low risk high returns stock of Bharti Airtel which is the yellow triangle bounded by red in the graph shown above.<br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhV4Po29kwoqdpr_klW0GEwEFRircS0nVmoGsnniGNW3CjlslYuGrHzmQ7iGDQWBlxs0F3uDcseJoUSd-v9xZ0vmeul1ijgodub0egXuUb-46rEZ461LDfBfS-Hz_a1C78OnjGvlg/s1600-h/BhartiReturns.JPG"><img style="margin: 0px auto 10px; display: block; text-align: center; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhV4Po29kwoqdpr_klW0GEwEFRircS0nVmoGsnniGNW3CjlslYuGrHzmQ7iGDQWBlxs0F3uDcseJoUSd-v9xZ0vmeul1ijgodub0egXuUb-46rEZ461LDfBfS-Hz_a1C78OnjGvlg/s400/BhartiReturns.JPG" alt="" id="BLOGGER_PHOTO_ID_5092999608800738562" border="0" /></a><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOomRRq0koGV-uxhLRJ5klGD5FFawSbtJM7259oCGS116vZPccLRru_4VJWoWevmNGaPwCTiB6mbA57zhyphenhyphenfj6DLfjxy-JnhTlgwFn5dvqJc3uJUXDRx2KiVUS9PtC7KyEB9R-JWg/s1600-h/KurtosisAndSkewness.JPG"><img style="margin: 0pt 10px 10px 0pt; float: left; cursor: pointer;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjOomRRq0koGV-uxhLRJ5klGD5FFawSbtJM7259oCGS116vZPccLRru_4VJWoWevmNGaPwCTiB6mbA57zhyphenhyphenfj6DLfjxy-JnhTlgwFn5dvqJc3uJUXDRx2KiVUS9PtC7KyEB9R-JWg/s400/KurtosisAndSkewness.JPG" alt="" id="BLOGGER_PHOTO_ID_5092999973872958738" border="0" /></a><br />The distribution of returns over the last 5 years are shown in the RED graph above<br /><br /><br />Kurtosis and skewness adjustments will have to be done for Standard deviation (Risk) of Bharti.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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<!-- SiteSearch Google --></div>surya prashant raohttp://www.blogger.com/profile/07046676037417259259noreply@blogger.com0tag:blogger.com,1999:blog-13046492.post-21760065088181536592007-06-30T01:32:00.001-07:002007-06-30T01:37:43.856-07:00Covered call versus Protective putCovered call is selling a call option ie. you are obligated to sell your stock to the buyer of the call option. Covered it is because u have the underlying security in your portfolio or a cross hedge. Covered call would need repeated skimming of premiums. Hence I opted for the protective put on the NIFTY july futures. It all boils down to probability that how many options get exercised and who gets to be on the receiving end.<br /><br />A covered call would be adopted in cases where the market is moving listlessly and you have to make your margins. For the long term investor, the protective cross hedge put looks better as continuous monitoring is not required.<br /> That is the advantage of European options and in India, the Indice based options are european options which are exercisable only on expiry. The share based options are American options which can be exercised anytime before expiry. Hence an option pricing model would have to profile the investors.<div class="blogger-post-footer"><!-- SiteSearch Google -->
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