Sep 20, 2008

FINANCIAL TERRORISM - " Lehman Brothers crisis"

Any one who leads to such panic in the market should be termed as “ Financial terrorist”. Reason for using the term “ Financial terrorism “ is that even the good assets are being badly hit because of negative sentiments and many small investor like me lose .

Ask the best brain about the problem with Lehman and they will confuse you by using terms like “ Institution being over leveraged “.

That's truly CONSULTING - “Simple things being made Complex “

I am not saying its wrong but the common man will never understand the real problem.
Always Credit Crisis occurs when loan and investment books are much bigger than its capital.

I will attempt to simplify it further …

An Investment bank uses its own money to lend other and invest. Banks like Lehman, buy mortgage loans (like housing loan etc ) from other banks and then package them to sell bonds against the loan pool. If mortgage earns 5%, than investment banks sells bonds at 3.5 % . The difference between 5% and 3.5% (i.e. 1.5%) called as spread is the earning of investment bank. They also add cash to make loan pool look attractive so that the bonds are sold at higher prices. These banks sell these structured bonds to raise money and frees the capital . BUT WHEN THE HOME BUYERS START DEFAULTING THESE BONDS LOSE ITS VALUE.

Banks like Lehman face redemption when these bond start losing its value. Also Lehman has to repay another bank it has borrowed from. Under such situation it sells mortgage –backed bonds whose prices have fallen . Since this selling will not raise funds as expected ,so investment banks sell some of the good assets or bonds which has nothing to do with mortgages. As a result situation in the markets dips prices of these good assets /bonds . This crisis spreads which termed as DOMINO EFFECT .

This impacts balance sheet as all the banks are required to mark –to- market their investments. So , if the price of an instrument falls , the difference between the price at which the instrument was brought and the current prices is to be provided by deduction from the earning . But the bigger problem which has deepened crises is “ How to provide when there is NO MARKET “ ie when bank actually goes to sell the derivative , it discovers that there are no takers . This is due to derivatives being marked –to –model than being marked –to- market.

Huge Loses are suffered with difference between the prices thrown by these artificially constructed financial models by best brains and prices that buyers are willing to pay in the market . Problem compounds further due to strange accounting practice and also disclosure issues.

Such Crisis shows banks /financial services industry should employ not just the best brains from IIT/IIM but also those who are best on ethics & can relate to comman man.

Sep 6, 2008

TEACH INDIA how to LEAD INDIA with millions doing filthy jobs like “Night Soil workers” ,”Rat catchers","Mortician"&"conservancy worker"

I guarantee you that reading this article will educate you for sure on unique JOB Openings .It will also make you feel ugly and sorry on the state of affair of thousands of workers who take-up filthy assignment.

Jobs are really hard come by in Mumbai . Reason to believe this was when I heard political interference in the recruitment of “ Rat Catchers “. Yes you read it right …..

1)RAT CATCHERS : Job description of this profile is to kill a minimum of 30 rats a night, anything above that gets them a bonus of Rs. 5 per rat. If they kill less than the required number, they get just three days to fill the backlog. Salary offered is Rs 8,000 a month plus incentives. Also one needs to perform consistently for three years for the corporation to confirms them . Recently , the municipal corporation (Mumbai ) in the first round of recruitment hired 13 rat catchers out of close to 400 who had applied for the job. Only 39 of the 400 cleared the written test and only 13 of the 39 aced the practicals.

It seems that the corporation needs 30 more to keep the city’s rat population in the check and recruitment advertisements for the same would be out soon.

Few more openings that I read recently are:

2)NIGHT SOIL WORKERS – Job describes the daily work of manually cleaning and removing human excreta from dry (non-flush) toilets across India. If dignity is denied to people without toilets, what is left for people who clean up human excrement?

3)MORTICIAN – Morgue is where dead people are stored until they go to the funeral home for burial or cremation. A mortician is someone who works at a funeral home and prepares the body for burial, cremation and prepares for the funeral. In Hospitals, Although medical officers are supposed to carry out post mortem examinations, in actual fact it is the doms, a sub-caste of the Dalits (untouchables), who are usually completely uneducated and often drunk on the job, simply cut the bodies and open them using crude tools while the doctors are simply observers and sign the necessary documents.

4)CONSERVANCY WORKERS: Job requires to keep the roads and lanes clean .The Brihanmumbai Municipal Corporation (BMC) planning to appoint 6,000 workers to keep the roads and lanes in the suburbs clean. BMC already has almost 34,000 conservancy workers to clean the city.

I hope “Guaranteed Rojgar Ujna “ initiative is not opening us such Jobs.

Reading these JD , my maid and car cleaner will feel lucky and good at the Jobs they are doing .

Last Diwali I gave the Rs 5000 /- to initiate micro finance . This time I plan to give gloves to the BMC workers who come with the van to collect the waste.

Join me in this initiative by providing safety kits to people who are doing thankless CRITICAL jobs in our society