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Wednesday, 10 December 2008

Some Interesting Facts

VERY INTERESTING STUFF

 

In the 1400's a law was set forth in England that a man was allowed to beat his wife with a stick no thicker than his thumb. Hence we have 'the rule of thumb'

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Many years ago in Scotland , a new game was invented. It was ruled 'Gentlemen Only...Ladies Forbidden'....and thus the word GOLF entered into the English language.

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Every day more money is printed for Monopoly than the U.S. Treasury. 

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Men can read smaller print than women can; women can hear better. 

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Coca-Cola was originally green. 

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It is impossible to lick your elbow. 

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Intelligent people have more zinc and copper in their hair.

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The first novel ever written on a typewriter: Tom Sawyer. 

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The San Francisco Cable cars are the only mobile National Monuments. 

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Each king in a deck of playing cards represents a great king from history: 

Spades - King David Hearts - Charlemagne Clubs -Alexander, the Great Diamonds - Julius Caesar

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111,111,111 x 111,111,111 = 12,345,678,987, 654,321 

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If a statue in the park of a person on a horse has both front legs in the air, the person died in battle. If the horse has one front leg in the air the person died as a result of wounds received in battle. If the horse has all four legs on the ground, the person died of natural causes. 

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Q. Most boat owners name their boats. What is the most popular boat name requested? 

A. Obsession

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Q. If you were to spell out numbers, how far would you have to go until you would find the letter 'A'?

A. One thousand 

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Q. What do bulletproof vests, fire escapes, windshield wipers, and laser printers all have in common? 

A. All were invented by women.

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Q. What is the only food that doesn't spoil? 

A. Honey

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In Shakespeare's time, mattresses were secured on bed frames by ropes.

When you pulled on the ropes the mattress tightened, making the bed firmer to sleep on. Hence the phrase...... ... 'goodnight, sleep tight.' 

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It was the accepted practice in Babylon 4,000 years ago that for a month after the wedding, the bride's father would supply his son-in-law with all the mead he could drink. Mead is a honey beer and because their calendar was lunar based, this period was called the honey month, which we know today as the honeymoon. 

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In English pubs, ale is ordered by pints and quarts... So in old England , when customers got unruly, the bartender would yell at them 'Mind your pints and quarts, and settle down.' 

It's where we get the phrase 'mind your P's and Q's'

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Many years ago in England , pub frequenters had a whistle baked into the rim, or handle, of their ceramic cups. When they needed a refill, they used the whistle to get some service. 'Wet your whistle' is the phrase inspired by this practice. 

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At least 75% of people who read this will try to lick their elbow! 

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- Now....

Don't delete this just because it looks weird. Believe it or not, you can read it. 

I cdnuolt blveiee that I cluod aulaclty uesdnatnrd what I was rdanieg. The phaonmneal pweor of the hmuan mnid Aoccdrnig to rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer in what oredr the ltteers in a word are, the olny iprmoatnt tihng is that the first and last ltteer be in the rghit pclae. The rset can be a taotl mses and you can still raed it wouthit a porbelm. This is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the word as a wlohe. Amzanig huh?  

Monday, 8 December 2008

Does GOD Exist...

God doesn't exist.

 



Tell me, if God exists,would there be so many sick people? Would there be abandoned children? If God existed, there would be neither suffering nor pain. I can't imagine loving a God who would allow all of these things."


The customer thought for a moment, but didn't respond because he didn't want to start an argument.


The barber finished his job and the customer left the shop. Just after he left the barbershop, he saw a man in the street with long, stringy, dirty hair and an untrimmed beard. He looked dirty and un-kept.


The customer turned back and entered the barber shop again and he said to the barber: "You know what? Barbers do not exist."


"
How can you say that?"asked the surprised barber. "I am here, and I am a barber.And I just worked on you!"


"No!" the customer exclaimed. "Barbers don't exist because if they did, there would be no people with dirty long hair and untrimmed beards, like that man outside."


"Ah, but barbers DO exist! What happens is, people do not come to me."


"
Exactly !"- affirmed the customer. "That's the point! God, too, DOES exist! What happens, is, people don't go to Him and do not look for Him. That's why there's so much pain and suffering in the world."



Thursday, 4 December 2008

LETTER TO PRIME MINISTER

 I am not sure of the author of this letter. But he speaks the mind of common man

 

 

LETTER TO PRIME MINISTER

Dear Mr. Prime minister

I am a typical mouse from Mumbai. In the local train compartment which has capacity of 100 persons, I travel with 500 more mouse. Mouse at least squeak but we don't even do that.

Today I heard your speech. In which you said 'NO BODY WOULD BE SPARED'. I would like to remind you that fourteen years has passed since serial bomb blast in Mumbai took place. Dawood was the main conspirator. Till today he is not caught. All our bolywood actors, our builders, our Gutka king meets him but your Government can not catch him. Reason is simple; all your ministers are hand in glove with him. If any attempt is made to catch him everybody will be exposed. Your statement 'NOBODY WOULD BE SPARED' is nothing but a cruel joke on this unfortunate people of India.

Enough is enough. As such after seeing terrorist attack carried out by about a dozen young boys I realize that if same thing continues days are not away when terrorist will attack by air, destroy our nuclear reactor and there will be one more Hiroshima.

We the people are left with only one mantra. Womb to Bomb to Tomb. You promised Mumbaikar Shanghai what you have given us is Jalianwala Baug.

Today only your home minister resigned. What took you so long to kick out this joker? Only reason was that he was loyal to Gandhi family. Loyalty to Gandhi family is more important than blood of innocent people, isn't it?

I am born and bought up in Mumbai for last fifty eight years. Believe me corruption in Maharashtra is worse than that in Bihar. Look at all the politician, Sharad Pawar, Chagan Bhujbal, Narayan Rane, Bal Thackray , Gopinath Munde, Raj Thackray, Vilasrao Deshmukh all are rolling in money.  Vilasrao Deshmukh is one of the worst Chief minister I have seen. His only business is to increase the FSI every other day, make money and send it to Delhi so Congress can fight next election. Now the clown has found new way and will increase FSI for fisherman so they can build concrete house right on sea shore. Next time terrorist can comfortably live in those house , enjoy the beauty of sea and then attack the Mumbai at their will.

Recently I had to purchase house in Mumbai. I met about two dozen builders. Everybody wanted about 30% in black. A common person like me knows this and with all your intelligent agency & CBI you and your finance minister are not aware of it. Where all the black money goes? To the underworld isn't it? Our politicians take help of these goondas to vacate people by force. I myself was victim of it. If you have time please come to me, I will tell you everything.

If this has been land of fools, idiots then I would not have ever cared to write you this letter. Just see the tragedy, on one side we are reaching moon, people are so intelligent and on other side you politician has converted nectar into deadly poison. I am everything Hindu, Muslim, Christian, Schedule caste, OBC, Muslim OBC, Christian Schedule caste, Creamy Schedule caste only what I am not is INDIAN. You politician have raped every part of mother India by your policy of divide and rule. Some elements of society are trying to divide Mumbai with north and south India. These elements were comfortably hiding last week in their holes like a rat does. Their activities month back were not less than terrorists, the only difference was no bullet.

Take example of former president Abdul Kalam. Such a intelligent person, such a fine human being. You politician didn't even spare him.  Your party along with opposition joined the hands, because politician feels they are supreme and there is no place for good person.

Dear Mr Prime minister you are one of the most intelligent person, most learned person. Just wake up, be a real SARDAR. First and foremost expose all selfish politician. Ask Swiss bank to give name of all Indian account holder. Give reins of CBI to independent agency. Let them find wolf among us There will be political upheaval but that will better than dance of death which we are witnessing every day.  Just give us ambient where we can work honestly and without fear. Let there be rule of law. Everything else will be taken care of.

Choice is yours Mr. Prime Minister. Do you want to be lead by one person or you want to lead the nation of 100 Crore people?

  

 

Friday, 28 November 2008

Mumbai Attacks Geopolitical Implications

Geopolitical Analysis of the terrorist attacks in Mumbai on 26 - 27 Nov, and my comments on them

Summary

If the Nov. 26 attacks in Mumbai were carried out by Islamist militants as it appears, the Indian government will have little choice, politically speaking, but to blame them on Pakistan. That will in turn spark a crisis between the two nuclear rivals that will draw the United States into the fray.

Analysis

At this point the situation on the ground in Mumbai remains unclear following the militant attacks of Nov. 26. But in order to understand the geopolitical significance of what is going on, it is necessary to begin looking beyond this event at what will follow. Though the situation is still in motion, the likely consequences of the attack are less murky.

We will begin by assuming that the attackers are Islamist militant groups operating in India, possibly with some level of outside support from Pakistan. We can also see quite clearly that this was a carefully planned, well-executed attack.

Given this, the Indian government has two choices. First, it can simply say that the perpetrators are a domestic group. In that case, it will be held accountable for a failure of enormous proportions in security and law enforcement. It will be charged with being unable to protect the public. On the other hand, it can link the attack to an outside power: Pakistan. In that case it can hold a nation-state responsible for the attack, and can use the crisis atmosphere to strengthen the government's internal position by invoking nationalism. Politically this is a much preferable outcome for the Indian government, and so it is the most likely course of action. This is not to say that there are no outside powers involved — simply that, regardless of the ground truth, the Indian government will claim there were.

That, in turn, will plunge India and Pakistan into the worst crisis they have had since 2002. If the Pakistanis are understood to be responsible for the attack, then the Indians must hold them responsible, and that means they will have to take action in retaliation — otherwise, the Indian government's domestic credibility will plunge. The shape of the crisis, then, will consist of demands that the Pakistanis take immediate steps to suppress Islamist radicals across the board, but particularly in Kashmir. New Delhi will demand that this action be immediate and public. This demand will come parallel to U.S. demands for the same actions, and threats by incoming U.S. President Barack Obama to force greater cooperation from Pakistan.

If that happens, Pakistan will find itself in a nutcracker. On the one side, the Indians will be threatening action — deliberately vague but menacing — along with the Americans. This will be even more intense if it turns out, as currently seems likely, that Americans and Europeans were being held hostage (or worse) in the two hotels that were attacked. If the attacks are traced to Pakistan, American demands will escalate well in advance of inauguration day.

There is a precedent for this. In 2002 there was an attack on the Indian parliament in Mumbai by Islamist militants linked to Pakistan. A near-nuclear confrontation took place between India and Pakistan, in which the United States brokered a stand-down in return for intensified Pakistani pressure on the Islamists. The crisis helped redefine the Pakistani position on Islamist radicals in Pakistan.

In the current iteration, the demands will be even more intense. The Indians and Americans will have a joint interest in forcing the Pakistani government to act decisively and immediately. The Pakistani government has warned that such pressure could destabilize Pakistan. The Indians will not be in a position to moderate their position, and the Americans will see the situation as an opportunity to extract major concessions. Thus the crisis will directly intersect U.S. and NATO operations in Afghanistan.

It is not clear the degree to which the Pakistani government can control the situation. But the Indians will have no choice but to be assertive, and the United States will move along the same line. Whether it is the current government in India that reacts, or one that succeeds doesn't matter. Either way, India is under enormous pressure to respond. Therefore the events point to a serious crisis not simply between Pakistan and India, but within Pakistan as well, with the government caught between foreign powers and domestic realities.. Given the circumstances, massive destabilization is possible — never a good thing with a nuclear power.

This is thinking far ahead of the curve, and is based on an assumption of the truth of something we don't know for certain yet, which is that the attackers were Muslims and that the Pakistanis will not be able to demonstrate categorically that they weren't involved. Since we suspect they were Muslims, and since we doubt the Pakistanis can be categorical and convincing enough to thwart Indian demands, we suspect that we will be deep into a crisis within the next few days, very shortly after the situation on the ground clarifies itself.



My Comments:-


Well, theoretically all this sounds quite plausible. But when viewed in the perspective of precedence, the possible scenario that emerges is quite different from the doomsday predictions of this analyst.

Firstly, this is one more in an unending series of such attacks, which have been escalating in scale and audacity. One more media tamasha, accompanied by the usual platitudes mouthed by politicians of all hues, as has already been witnessed. Given the size of this one, and the fact that it is still going on, they have so far restrained from finger pointing and scoring political brownie points. But once it is over, the blame game will start. Both the major political alignments will spew venom at each other, while claiming to be the sole saviours of civilization as we know it. And yes, collectively Pakistan will be blamed (and as I am sure all of us are convinced, not without reason or substance). It is another matter that WHICH ENTITY in Pakistan is actually to blame is anybody's guess. In all probability, their government is as helpless and clueless, or maybe just a degree less so, than ours. The genie is out of the bottle, and having granted three wishes, refuses to go back. It is now tormenting its masters and everyone else.

So, while Pakistan will be blamed, and the usual statements and denials will follow, each side pandering to its domestic audience. But it will remain at a slanging match, as both sides know they can not afford to escalate the situation. A very optimistic view is that it might even prompt the Pakistani government to overtly or covertly attempt to tighten the screws on the forces of terrorism (to what effect is anybody's guess).

USA will also make all the right noises, and do everything short of acting against Pakistan. After all, Mumbai is not New York, and the Taj is not the WTC.

Both India and USA are heading for a change of government in the near future, with the same preceded by elections in the case of India. Under such circumstances, it would be foolish to expect decisive, precipitative action by either of them. So, we will declare war on terrorism (yet again!), vow to hunt down the perpetrators (they are dead) and the one's behind them (you have a hope coming!) 'irrespective of their religion'. We will call endless meetings, probably initiate actions to raise new agencies or forces (thereby providing more avenues for babus and policemen to rise in life). That the existing agencies are numerous enough to cause considerable confusion and afford leeway for blame shifting doesn't matter.

Then, life will go on. Till the next time there is another attack and we once again dedicate ourselves to eradicating terrorism from its roots, no matter what the cost.

Sorry for sounding so cynical – maybe optimism will return with normalcy in Mumbai.

Monday, 10 November 2008

The Last Straw?

Involvement of a serving officer in terrorist activities has generated a lot of consteration within the services as well as amongst the people at large. Is it the begining of the end? The last straw? Crumbling of the citadel? While these are extreme views, the fact is that there is need for introspection.

The British had a policy, right or wrong, of keeping the armed forces insulated from the populace, at the same time treating them well enough in terms of emolutments and 'izzat'. Over the years, the insulation has vanished, and the armed forces no longer enjoy the pre-eminence in the society it once did. These, I feel are the two major contributing factors to the radical changes that are coming about in the thinking. Of course, the present incident is very obviously an aberration - a one in a lakh case I would put it. But I would also view is as a magnification of the changes that are coming about microscopically.

Management of change is a key command responsibility, which I am afraid has not got due credence as of now. When change is a fact of life, there is a need to firstly acknowledge that it is occuring, secondly to analyse it in all its dimensions, and lastly to take appropriate steps to mould the system and organisation to ensure that it continues to function optimally after due corrections to cater for the change. Change may be good or bad - either ways, the system has to make allowances to either benefit from it, or to restrict its impact. Our approach to either deny that a change is taking place at all, or to castigate it and persist with a rigid system promoting status quoism, is self defeating.

The Story of Four Wives

There was a rich merchant who had 4 wives. He loved the 4th wife the most and adorned her with rich robes and treated her to delicacies. He took great care of her and gave her nothing but the best.

He also loved the 3rd wife very much. He's very proud of her and always wanted to show off her to his friends. However, the merchant is always in great fear that she might run away with some other men.


He too, loved his 2nd wife. She is a very considerate person, always patient and in fact is the merchant's confidante. Whenever the merchant faced some problems, he always turned to his 2nd wife and she would always help him out and tide him through difficult times.

Now, the merchant's 1st wife is a very loyal partner and has made great contributions in maintaining his wealth and business as well as taking care of the household. However, the merchant did not love the first wife and although she loved him deeply, he hardly took notice of her.

One day, the merchant fell ill. Before long, he knew that he was going to die soon. He thought of his luxurious life and told himself, "Now I have 4 wives with me. But when I die, I'll be alone. How lonely I'll be!"

Thus, he asked the 4th wife, "I loved you most, endowed you with the finest clothing and showered great care over you. Now that I'm dying, will you follow me and keep me company?" "No way!" replied the 4th wife and she walked away without another word.

The answer cut like a sharp knife right into the merchant's heart. The sad merchant then asked the 3rd wife, "I have loved you so much for all my life. Now that I'm dying, will you follow me and keep me company?" "No!" replied the 3rd wife. "Life is so good over here! I'm going to remarry when you die!" The merchant's heart sank and turned cold.

He then asked the 2nd wife, "I always turned to you for help and you've always helped me out. Now I need your help again. When I die, will you follow me and keep me company?" "I'm sorry, I can't help you out this time!" replied the 2nd wife. "At the very most, I can only send you to your grave." The answer came like a bolt of thunder and the merchant was devastated.

Then a voice called out : "I'll leave with you. I'll follow you no matter where you go." The merchant looked up and there was his first wife. She was so skinny, almost like she suffered from malnutrition. Greatly grieved, the merchant said, "I should have taken much better care of you while I could have !"



Moral :

Actually, we all have 4 wives in our lives


A. The 4th wife is our body. No matter how much time and effort we lavish in making it look good, it'll leave us when we die.

B. Our 3rd wife ? Our possessions, status and wealth. When we die, they all go to others.

C. The 2nd wife is our family and friends. No matter how close they had been there for us when we're alive, the furthest they can stay by us is up to the grave.

D. The 1st wife is in fact our soul, often neglected in our pursuit of material, wealth and sensual pleasure.

Guess what? It is actually the only thing that follows us wherever we go. Perhaps it's a good idea to cultivate and strengthen it now rather than to wait until we're on our deathbed to lament



Sunday, 26 October 2008

Constitutional Crisis - Threat Vs Reality

The recent actions by the service chiefs, wherein the implementation of the pay commission recommendations were put on hold till a final decision on the anomalies is taken by the governemnt, has drawn considerable comment and flak from a section of the media. Similarly, the Naval and Army Chiefs' communication to their respective commands, informing them of this delay, has been criticized. The critics have termed their actions as 'defiance' and 'insubordination'. Fears have been expressed that such an unprecedented move, if left unchallenged and unpunished, would embolden future chiefs. It may the constitutional order .... maybe even the dreaded C word!

The voices, apparently inspired by motivated interests, are crying wolf about something which may happen in the future . What about what is already happening for the past so many years - isn't the bureacracy already undermining the system for their personal gains every day?

A simple exercise will tell you the difference between the military and the bureaucrats. Go down to NOIDA. First visit Sector 15A - the abode of babus (old babus never retire - they just step into other roles to continue receiving government patronage). Notice the houses, the parks, the cars. Now drive on further to Sector 28 where the retired faujis are fading away. Notice anything? Any differences? These are not the palatial bungalows like you saw a little while back. Why? aren't the two services supposed to be paid similarly? Where does the difference lie?

The fact is that the bureaucrats are eating their way into a plush lifestyle - at the cost of the nation. Where is the sacntity of the constitution that these people keep beating their collective breasts about?




Thursday, 23 October 2008

FW: 40 Tips for Better Life

40 Tips for Better Life


1. Take a 10-30 minutes walk every day. And while you walk, smile.

2. Sit in silence for at least 10 minutes each day.

3. Sleep for at least 7 hours.

4. Live with the 3 E's -- Energy, Enthusiasm, and Empathy.

5. Play more games.

6. Read more books than you did last year.

7. Make time to practice meditation, yoga, and prayer. They provide us with daily fuel for our busy lives.

8. Spend time with people over the age of 70 & under the age of 6.

9. Dream more while you are awake.

10. Eat more foods that grow on trees and plants and eat less food that is manufactured in plants.

11. Drink plenty of water.

12. Try to make at least three people smile each day.

13. Don't waste your precious energy on gossip.

14. Forget issues of the past. Don't remind your partner with his / her mistakes of the past. That will ruin your present happiness.

15. Don't have negative thoughts or things you cannot control. Instead invest your energy in the positive present moment.

16. Realize that life is a school and you are here to learn. Problems are simply part of the curriculum that appear and fade away like algebra class but the lessons you learn will last a lifetime.

17. Eat breakfast like a king, lunch like a prince and dinner like a beggar.

18. Smile and laugh more.

19. Life is too short to waste time hating anyone. Don't hate others.

20. Don't take yourself so seriously. No one else does.

21. You don't have to win every argument. Agree to disagree.

22. Make peace with your past so it won't spoil the present.

23. Don't compare your life to others'. You have no idea what their journey is all about. Don't compare your partner with others'.

24. No one is in charge of your happiness except you.

25. Forgive every one for every thing.

26. What other people think of you is none of your business.

27. GOD heals everything.

28. However good or bad a situation is -- it will change.

29. Your job won't take care of you when you are sick. Friends will. Stay in touch. . .

30. Get rid of anything that isn't useful, beautiful or joyful.

31. Envy is a waste of time. You already have all you need.

32. The best is yet to come.

33. No matter how you feel, get up, dress up and show up.

34. Do the right thing !

35. Call your family often.

36. Your Inner most is always happy. So, be happy.

37. Each day give something good to others.

38. Don't over do. Keep your limits.

39. When you awake alive in the morning, thank GOD for it.

40. Please Forward this to everyone you care about.


TAKE CARE...... LOVE YOURSELF.... ....

Thursday, 9 October 2008

Building blocks of Crisis (Article)


Was forwarded this article – it explains the current financial crisis succinctly.

While some blame the greed of Wall Street investment bankers and the dangers of a totally unregulated system for the current financial crisis, what can't be denied is that lives, and lifestyles, have been suddenly changed across the social spectrum and careers built up over a lifetime have vanished in an instant. Apart from the revised $700 billion bailout plan, can the U.S. government do enough to restore confidence and assuage the trauma?

The real question is: Who is going to compensate the common investors across the world who have lost their wealth in the resultant market meltdown?

The bursting of the speculative bubble in the U.S. housing market has destroyed billions of dollars in investor wealth across the world, crippled the banking system, expunged close to a million jobs…and India has not been spared either. With banks failing by the day, definitely, these are uncertain times for the financial services industry. While many people who have lost their jobs are faced with permanent shrinkage of their lifestyle, others in the industry are going through the trauma of not knowing if and when their turn would come. Who is to blame?

Flashback to year 2003:

Rohit (name changed to protect identity), a good friend of mine and someone who was officially considered to be a genius with an IQ of 150+, graduated from one of the leading IIMs. Rohit managed to make it into the New York Headquarters of the most sought after firm that had arrived on campus for the first time Lehman Brothers a top U.S. Investment Bank (then). On joining, he was assigned to Lehman's mortgage securities desk that dealt with Collateralized Debt obligations (or CDOs).

Following is an extracted transcript of a chat session I had with Rohit back in 2004:

Me: So man, you must feel like you are on top of the world.

Rohit: Yes dude, the job here is amazing, I get to interact with people around the world, investment managers who want to invest millions of dollars

Me: Great…so tell me something interesting. What's your job all about?

Rohit: You know there is a great demand for American home loans, which we buy from the U.S. banks. We then convert these into what is called as CDOs (Collateralized Debt Obligations). In plain English, this refers to buying home loans that banks had already issued to customers, cutting them into smaller pieces, packaging the pieces based on return (interest rate), value, tenure (duration of the loans) and selling them to investors across the world after giving it a fancy name, such as "High Grade Structured Credit Enhanced Leverage Fund".

Me: Wow! I would've never guessed that boring home loans could transform into something that sounds so cool!

Rohit: Hahaha…actually we create multiple funds categorized based on the nature of the CDO packages they contain and investors can buy shares in any of these funds (almost like mutual funds…but called Structured Investment Vehicles or SIVs)

Me: Dude, you make your job sound like a meat shop…chopping and packaging. So, in effect when an investor purchases the CDOs (or the fund containing the CDOs), he is expected to receive a share of the monthly EMI paid by the actual guys who have taken the underlying home loans?

Rohit: Exactly, the banks from whom we purchased these home loans send us a monthly cheque, which we in turn distribute to the investors in our funds

Me: Why do the banks sell these home loans to you guys?

Rohit: Because we allow them to keep a significant portion of the interest rate charged on the home loans and we pay them upfront cash, which they can use to issue more home loans. Otherwise home loans go on for 20-30 years and it would take a long time for the bank to recover its money.

Me: And, why does Lehman buy these loans?

Rohit: Because we get a fat commission when we convert the loans into CDOs and sell it to investors.

Me: Who are these investors?

Rohit: They include everyone from pension funds in Japan to Life Insurance companies in Finland.

Me: But tell me, why are these funds so interested in purchasing American home loans?

Rohit: Well, these guys are typically interested in U.S. Govt. bonds (considered to be the safest in the world). But unfortunately, Mr. Alan Greenspan (head of Federal Reserve Bank, similar to RBI in India) has reduced the interest rate to nearly 1 per cent to perk up the economy after the dotcom crash 9/11attacks. This has left many funds looking for alternative investments that can give them higher returns. Home loans are ideal because they offer 4-6 per cent interest rate.

Me: Wait, aren't home loans more risky than U.S Bonds?

Rohit: We have made home loans less risky now. In fact they have become as safe as U.S Govt. bonds.

Me: What are you saying, man? What if the people who have taken these underlying home loans default? Then the investors would stop getting the EMIs, and their returns would take a hit. Wouldn't it?

Rohit: Boss, may be some will default, but not definitely more than 2-3 per cent. Moreover, we have convinced AIG (a leading insurance company) to insure our CDOs. This means that even if there were big defaults, the insurance company would compensate the investors.

Me: that's amazing. What are these insurances called?

Rohit: Credit Default Swaps.

Me: Definitely you guys are the most creative when it comes to naming.

Rohit: Thanks.

Me: And why has this AIG guy insured millions of home loans?

Rohit: See man, the logic is simple. Home prices in the U.S always go up. In fact over the last three years alone they have doubled. So even if someone defaults paying the EMI, the home can be seized and sold for a much higher price. So there is no risk. Insurance companies are actually competing to insure this, because they can earn risk-free premiums.

Me: No wonder investment managers from all over the world want to put money in your CDOs.

A global financial cobweb started getting built around the American dream of purchasing a home and it rested on the assumption that "home prices will keep rising". As demand for the CDOs started growing across the global investment community, the investment bankers (like Lehman) who were meant to sell these instruments also started investing a significant portion of their own capital in these. I guess after selling the story to the whole world, they themselves got sold on the seemingly foolproof concept. Gradually the markets for CDOs and Credit Default Swaps started expanding with traders and investors buying and selling these as if they were shares of a company, happily forgetting the underlying people behind these products who took the home loans in the first place and on whose capacity to repay the loans, the safety of these products depended.

As Wall Street firms like Lehman were churning more and more home loans into CDOs and selling them or investing their own money, there was a pressure on the banks to issue more loans so that they can be sold to the Wall Street firms in return for a commission. Slowly banks started lowering the credit quality (qualification criteria) for availing a home loan and aggressively used agents to source new loans. This slippery slope went to such an extent that in 2005, almost anyone in the U.S could buy a home worth $100,000 (45 lakhs INR) or more without income proof, without other assets, without credit history, sometimes even without a proper job. These loans were called NINA "no income no assets".

The U.S. housing market went into a classic speculative bubble. Home loans were easy to get, so more and more people were buying houses. The increased demand for houses caused the price to increase. The rising prices created even more demand, as people started to look at homes as investments investments that never went down in value.

When I touched base with my friend Rohit in late 2005, he was on cloud nine. During the previous one year, he managed to buy a home in Long Island (a posh area near New York City) worth almost a million dollars, and got himself a Mercedes. All this was interesting to hear, but what shocked me was that although he was earning close to $20,000 a month (that is what CEOs in India make) he was not able to save anything because his lifestyle expenses where growing faster than his salary.

Unheeded signals

In late 2006, Mortgage lenders noticed something that they'd almost never seen before. People would choose a house, sign all the mortgage papers, and then default on their very first payment. Although no one could really hear it, that was probably the moment when one of the biggest speculative bubbles in American history popped. Another factor that lead to the burst of the housing bubble was the rise in interest rates from 2004-2006. Many people had taken variable rate home loans that started getting reset to higher rates, which in turn meant higher EMIs that borrowers had not planned for.

The problem was that once property values starting going down, it set off a reverse chain reaction, the opposite of what had been happening in the bubble. As more people defaulted, more houses came on the market. With no buyers, prices went even further down.

In early 2007, as prices began their plunge, alarm bells started going off across mortgage-backed securities desks all over Wall Street. The people on Wall Street, like Rohit, started getting calls from investors about not getting their interest payments that were due.. Wall Street firms stopped buying home loans from the local banks. This had a devastating effect on particularly the small banks and finance companies, which had borrowed money from larger banks to issue more home loans thinking they could sell these loans to Wall Street firms like Lehman and make money.

Everyone got into a mad scramble to seize and sell the homes in order to get back at least some of the money. But there were just not enough buyers. The guys who had insured these loans thinking they had near zero risk (e.g. AIG) could not fulfill the unexpectedly huge number of claims. The best part was that since these insurance policies (credit default swaps) could themselves be traded, multiple people had bought and sold them, and it became so tough to even trace who was supposed to compensate for the loss.

The global financial cobweb built around mortgages is on the brink of collapse. Firms, large and small, some young some as old as a 100 years have crumbled as a result of suing each other over the dwindling asset values. Lehman's India operations, that employed over a thousand staff, is up for sale and many of the employees have been asked to leave. The Indian stock market has crashed almost 50 per cent from its high (and so have markets around the world) as the Wall Street giants sold their investments in the country in an effort to salvage whatever is good in order to make up for the mortgage related loss. Hedge funds, pension funds, insurance companies all over the world have lost billions in investor's money. Many Indian B-School graduates with PPOs (pre-placement offers) in the financial sector (India and abroad) have either received an annulment or indefinite postponement of joining dates. IT firms that built and maintained software for the U.S. mortgage industry or the related Investment Banks, have shut down their business units, laid-off people or transferred them to other verticals.

Fragile system

For all the hoopla over the sharp and sophisticated people on Wall Street, the current financial crisis has exposed the fragility of the system. Wall Street is blaming the entire episode on people who could not repay their home loans. But the reality seems to point towards the stupidity of people who lent all this money, financial institutions that built fancy derivative packages and in effect facilitated billions in trading and investments in these fragile low quality loans.

The U.S. Govt is planning to grant 700 billion dollars to the Wall Street firms to compensate the financial speculators for the money that they have lost. Isn't this like rewarding greed and stupidity? The head of a leading Investment Bank has stated, "This is necessary to sustain financial ingenuity. We don't want to spend this money on ourselves. We just want this money to go into the market so that we can carry on trading complex securities, borrowing and lending money." (Yeah…right, so that one can act as if nothing had happened without analysing too much into it). The real question is: Who is going to compensate the common investors across the world who have lost their wealth in the resultant market meltdown? (either directly or through pension funds).

After being unreachable for a month now, finally I heard back from my pal, Rohit, saying he is back in India to take a break from the roller coaster ride that he had lived through. After Lehman's collapse he has lost his job and probably the house that he had bought by taking a hefty loan. I really don't know whether to feel happy for him, for getting an opportunity to learn a lesson or two from the experience or to feel sad for him for losing his job. May be I'll get a better sense of things once I meet him next week

Wednesday, 1 October 2008

Chief's Actions - Inspired by Loyalty

The action (actually, inaction) of the service chiefs with regards to implementation of the Sixth Pay Commission recommendations has drawn flak from several quarters. It is being viewed by the critics as insubordination, indiscipline. Fingers are also being raised on the propriety of sending out signals to all ranks informing them of the delay.

The fact of the matter is that the politicians and the bureaucrats have been caught in flagrante delicto in their attempt to rush through the implementation, warts and all. This, despite that it has been pointed out that the final recommendations have glaring discrepancies as regards the armed forces. The inexplicable down gradation of Lt Cols and Lt Gens, and the reduction in pension of the jawans, defy logic and cannot stand scrutiny. Interestingly, these discrepancies were not part of the original pay commission report, but were introduced by the Committee of Secretaries during review.

Attempts to browbeat the services into accepting the award along with discrepancies, with the unconvincing assurance of looking into the issues post implementation, did not work. The principled stance of the chiefs, uncharacteristic of the incumbents in recent years, took them by surprise. The chiefs probably realized that once implemented, the urgency in rectifying the discrepancies would no longer exist, and the issue would get mired in typical bureaucratic delaying tactics. It is notable that the anomalies of the fourth and fifth pay commissions have still not been removed. The lowered status and pensions of the armed forces would have similarly become fait accompli.

Ethos of the armed forces is centred around loyalty – a concept difficult to understand for outsiders in today’s self serving opportunistic environment. Loyalty in the forces has many dimensions – loyalty towards the country, towards the services, towards one’s unit or ship, your superiors – and most importantly, towards the men under your command. The ‘Chetwoode Motto’ is deeply ingrained in the psyche of every officer :-

"The safety, honour and welfare of your country come first, always and every time.

The honour, welfare and comfort of the men you command come next.

Your own ease, comfort and safety come last, always and every time."

The stance taken by the service chiefs is in pursuit of these ideals. Individually, the chiefs have no personal stake in the removal of the anomalies. They have been well compensated in the pay commission report. On the contrary, in taking a strong stance, they have possibly staked their personal self interests such as post retirement appointments. It is only their strong sense of loyalty to their subordinates that prompted this action.

Unlike all other services affected by the pay commission, the armed forces have no unions, no associations. The jawans and officers have absolutely no mechanism of expressing their dissatisfaction with the pay commission discrepancies. They would have no option but to ‘lump it’. Life would carry on, the soldiers and officers would continue to spill their blood securing this nation. But, as the chiefs are well aware, it would be yet another blow to the already beleaguered edifice of the morale of the services, another threat to its basic fabric.

The move to withhold the implementation till a final decision on the anomalies was the only way the import and urgency of the issue could have been highlighted, since all other quarters had only drawn assurances. It also made administrative sense, since it would avoid having to do the salary calculations of more than 15 Lakh people twice in (hopefully) a month or so.

As regards the signal informing their command of the delay in implementation, it was perfectly in order to keep all ranks of the services informed about an issue that every one of them is obviously monitoring closely and is affected by. This is as per the best practices of command, to avoid rumour mongering and ensuring the correct picture is known to all.

The chiefs were sanguine that loyalty to the nation lay in being loyal to their services and their subordinates, and acted accordingly, even at potentially grave personal costs. It is probably for the first time, after the late Field Marshal Manekshaw insisted on delaying the commencement of operations in 1971 till the army was fully ready, that such a principled and selfless stance has been taken by any service chief. They have lived up to the line in the NDA Prayer – “Help me to choose the harder right instead of the easier wrong.”The nation, media and the government must view their actions in this light, and not now go on a witch hunt, lest they cause irreparable damage to the morale of the armed forces.