Saturday, January 17, 2009

India Blinding

This blog entry would be more about economics, corporate and financial order in India, with little reference to Internet. To make things interesting I will use the quotes of the famous film “Wall Street”

The lack of reduction in prices, the falling demand and the falling inflation, the Satyam downfall and the political, corporate and banking corruption is order of the day. The politicians, corporate and media are out to protect India’s Image in terms of pretending to have no impact of meltdown, complete control over economic variables and Satyam being just one bad apple. I am shocked to see how nowhere real facts are getting discussed.

Fact 1: The Economy is clearly getting effected, the credit crunch is high, the demand is low and inflation is falling(and it is not the best sign). We lost close to trillion dollar of market cap within an year. Look around, there is a clear credit crunch, money is getting tighter, and no parallel economy and black money is going to make it better, which is the theory of some people. The credit crunch is bigger within trading circles, please check with your trader friends. The money is stuck in the speculative markets, everyone waiting to make his profits, even the people who are already in profits are looking for more and more, why?? Simple as it was worth more 12 months back. A friend of mine wants a sell a flat in Delhi, he bought it for 15 Lakhs, he is getting 45, he needs the money, but 8 months back he was getting 60, he waiting, and hanging on hand to mouth but not selling. There are hundred such theories on stocks and real estates. The problems with others, some people rather than doing anything productive, made shares and property their business, and now are holding on to barren plots(which was to become flats), under construction properties and entries in DMAT accounts.

“Stop going for the easy buck and start producing something with your life. Create, instead of living off the buying and selling of others”

Fact 2: The government packages to push the economy are great, but there are hardly any takers. The government opened up over 50 K crores to be released in the Economy. To every street economy expert, that is something to be pumped up about and make a story upon. But get a grip of it guys, this money is to be taken as debt by systems, YES DEBT, the banks take debt, they give debt, Debt is the way money flows. Banks are highly levered already with NPAs right on limits. ICICI is highly levered, and is India’s largest private bank, and as per RBI, they hold more liquidity by 3-4% than actually required. So why is RBI opening more liquidity if India’s largest private bank is so well placed? Why are there no takers for it? Because you need to buy something to take Debt, to push buying, there needs to be a price stimulus, which finance minister is begging for, but the greedy corporate India, has decided not to give that. The auto price cuts are just a sham, the auto firms have already decided to cut down production, which means they will produce less and sell less, but would not compromise with the profitability.

“Ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right. Greed works. Greed captures the essence of the evolutionary spirit”

Fact 3: The falling inflation is coming from steep fall in demand, and here is where a lot of people would disagree with me, but I think the lowering of inflation clearly a bad sign. For once, we need to see that government efforts to reduce inflation were not working, but as the stock market has fallen and real estate transactions have lowered, with US dollar business dropping, the inflation has come down, as a result of these factors creating a major drop in demand. This means government is not controlling the economy, it is highly market lead, Oh yes I know some people might be think, what’s new about it, we operate in a free market economy, no my friend In India, we don’t, we have a complex half baked system going towards a free economy, but far from there. The second bad part of this is corporate, media and banking taken positive meaning out of it, and supporting to push more liquidity in the system, in turn asking more loans to be taken, taking us to the mistakes US made, with entire population living in Debt and speculation. With Hindi news channels busy covering bollywood releases in prime time, the English newspapers and news channels are busy promoting utopian positive shit. The talk shows are pre programmed, the guests are taught and selected in a pre-decided manner, the print media is worse, have to fill some pages, so write whatever is new and not written about, has to be new, can be anything, but new, today criticism, tomorrow sympathy. Everyone is here to sell news, not to guide you, I hope you all know that…..

“If something’s worth doing it's worth doing for money.”

Fact 4: The Satyam case is a true case of how India is going blind and loosing all direction. First the guy does it for years, acknowledges it and quotes “Riding Tiger, Getting Eaten”, sounds like an Ang Lee film title. Second, what corporate India does, get on big time defensive and image correction, I mean like no discussion on corporate governance, no accountability taken by SEBI or any government institution, no accountability of the banks where Satyam money was claimed, PWC missing all over, all-for-one and one-for-all, Narayanmurti to premji to finance minister to TV show hosts, “India is a clean place, we have no corruption, no fraud, we haven’t even heard about any bribing in here”. Oops, DDA scam, Noida housing Scan, fodder scam, wipro banned by world bank, local cops, government babus, only 3% of country paying tax, hardly any corporate governance(you be my director, I will be yours with no liability and SEBI sleeps) and on and on. But we are Indians, we are clean. As businessweek and WSJ questions India’s corporate governance, SEBI’s control and corruption levels, we are worried getting some sympathy on front page of newspapers for Mr. Raju. Government bailing out the fraud firm in interest of 53 K employees, amazing!!!! Let me get your attention, You got LIC policy I guess yes, they commit you bonus and loyalty and stuff, that’s not guaranteed, that is as per LIC’s investments performance, which was a good 5 % of Satyam, so your return will be lower now, still worried about the employees of Satyam….whose going to worry about the investors???

My point is that media, politicians and corporate are taking us away from the facts. In the age of bailouts, do not accept the Satyam bailout, the corrupt should not be bailed out in a free economy, US fed, although being far from perfect itself has bailed out bad decision making, not fraud. AIG, Freddie mac and company did not commit fraud, Enron was not bailed out, worldcom was allowed to collapse, and Xerox took their hit in their scandal. In the current US meltdown, only the madoff scandal is there, and his victims are not bailed out. But our news coverage and word on street says, bailout is bailout, it is happening everywhere…who knows…..who cares….we are gathering sympathy for Rajuji, we have taken zero action on PWC, which is preposterous, and what about SEBI and Indian Accounting Standards, nothing, no action. I think most of people know, how after enron and worldcom scandals, the US GAP became very tough. But we are not even thinking about it why? Because we are busy claiming that we are clean….

“A man looks in the abyss, there is nothing staring back at him. At that moment he discovers his character. That keeps the man out of the abyss.”