Sub Prime woes

For the past few weeks the stock markets around the world have been highly volatile due to what is known as "Sub prime mortgage crisis".

I remember BusinessWeek broke the story on subprime mortgages some last year and since then one by one a lot of sub prime mortgage lenders in the US have gone bust. Here is a explanation of the issue.

What is a sub-prime mortgage: Unlike India or other developing countries the United States has a very structured credit reporting mechanism, Nearly every US resident having any economic activity has a credit history based on the his/her past record in paying the past loans. This credit history is assigned a score known as a credit score (also known as FICO score). A good credit history and score is seen as a sign of financial responsibility and gives lender a good idea of how risky a borrower is.

People having good credit histories and scores are clubbed into a category known as Prime borrowers, whereas those having a poor track record are in sub-prime category.

Obviously Prime borrowers command the best interest rates and terms from lenders for their mortgage/auto or any other kind of loans, sub prime borrowers on the other have to contend with much higher interest rates and terms, Many reputed lenders lend to only Prime market.

For the past few years the US has seen a robust real estate market, During this phase, some lenders started what is called “Predatory lending” practices to the sub prime borrowers, new exotic varieties of mortgage products like Option ARMs were cooked by these lenders. To illustrate in one variety of these mortgage products the lender would offer a introductory 1% interest to the borrower in the first year of the loan, or for the first year the borrower would have to pay only the interest part of the mortgage that too only partially, as a result unsophisticated sub prime borrowers made costly mistakes and took decisions to take mortgage loans they could have never afforded, after the initial year or so when the loan installment started going up sharply (2,3,4 times in many cases) the borrowers started defaulting on the loans, and hence this whole mess.

In the US the mortgage lenders sell their mortgages as securities on wall street and US being the financial superpower financial institutions from across the world puts money in these securities. Nobody realized that the assets behind those mortgage backed securities were such risky mortgages and this is how the whole chaos spread across the world. Even now we don’t know exactly which banks and FIs are affected.

Related articles on Bullish Indian blog:

What is sub prime lending
How does global markets gets affected

US Presidential elections 2008

In the past few weeks, There have been a series of controversies related to comments made by Presidential hopeful Barack Obama. In the earlier days of his campaign I liked the guy but his recent comments increasingly shows that even with all the right and honest intentions he lacks maturity to fit into Presidential shoes.

Hillary Clinton on the other hand is presidential, smart, sensible and gives the impression of being far above the pettiness of the issues her democratic rivals are raising against her. She is emerging as the front runner in the race for the white house.

Overall its fascinating to watch the American democratic system unveiled in the form of Democratic and Republican Debates. The candidates might be good at spin but are still made to answer pretty tough questions.

I hope that some day India also adopt this kind of transparent election campaign system in some form. What we have currently is a system which lacks this kind of transparency and honestly.
I think this is due to the Indian electorate, a majority of which remain illiterate or semi-literate and are oblivious of the real issues country faces, they just vote on cast line or some petty issues created by our politicians, and these are perhaps the only people who go to vote, the educated middle and upper class remain away from voting

But that too some extent is due to the arcane system of electoral set up as well, Myself for example have never voted, I don't know where should I vote as my place of residence keeps changing every 2-3 yrs or so and I don't know when the electoral lists are prepared and how to get my name added/deleted to those, Perhaps a ration card will be required or proof of residence at the new place, The point is that the sheer idea of going to a government office to get something done puts me off, and I know I am not alone.

Mush in trouble

Past few months have brought what looks like a heap of troubles for Pak President Musharraf.

It all started in march of this year when in all his wisdom he decided to suspend the CJ of the country and the rest is history. The whole country stood up in CJ Choudhary's support and turned him into a instant hero.

Obviously, Mush didn't expect the kind of uprising across the country against this decision, added to it was the whole case of Lal Masjid terror crisis, uprising in NW frontier province (with the collapse of nearly a year long agreement with tribal elders) and recent strains in the relationship with US with the United States increasingly getting impatient over Pakistan's inability to do "enough" towards its promises - fight against Taliban and Al Qaeda on its soil.

Musharraf game plan was to get elected for another term as president while also retaining his army uniform, few would have called it improbable before march but now the situation has changed entirely, to the extent that even the option of imposing emergency was considered but given up due to US pressure and domestic resistance.

US finds that Musharraf is the only option left for it in Pakistan, and if his regime topples the country might fall in the hands of extremists. This is the prime reason Mushrraf is exploiting to get US backing and remain in power.

This reasoning is nothing new to Pakistan, even Nawaz Sharif used the same reasoning for demanding help from US during the Kargil war.


In his book "Engaging India: Diplomacy, Democracy, And the Bomb" Strobe Talbott describes the whole sequence of diplomatic exchanges between Sharif and the US administration led by President Clinton.

Talbott points out that whether it was the issue of Nuclear Tests or Kargil war the moment US tried to push Pakistan, Sharif used to come up with this "Suicidal" argument that if his government is pushed too much by US, Pakistan will be in chaos and will collapse.

According to My Talbott, India on other hand tackled US as an "equal".

Coming back to Pakistan, as things stands now options are very limited for President Musharraf; Chances of him getting elected by the present assemblies are remote, even though he has enough votes but any such move will result in a huge uprising against him; he is negotiating with Benezir Bhutto for her return and an electoral arrangement for power sharing but Bhutto insists on Musharraf quitting the army uniform and dilution of presidential powers (particularly the one by which a president on his whims and fancy can fire an elected prime minister and his cabinet)

If the deal with Benezir Bhutto doesn't work out for Musharraf, to remain in power he will have to impose emergency and get elected, or he will have to quit and go into exile, both the options are pretty depressing for Pakistan.

On the other hand if the deal with Bhutto works out, situation seems slightly brighter but Musharraf will have lesser powers and another power center of a new Army chief may emerge.

Even after 60 years of independence Democracy remains a distant dream in Pakistan, I was shocked when I came to know of the fact that no elected government or assembly (either at a state or national level) has ever completed a full five year term in that country.

On a lighter side I find the main headline on Pakistan TV website really amusing. It never changes, it always remain either "President General Pervez Musharraf" or occasionally "Prime Minister Shaukat Aziz" with the story below highlighting what the president/PM said or did that day :-). This is the face of government owned media.

Mercifully India's Doordarshan is still not so bad.

Madam President

Pratibha Patil is the new President of India, As I watched the debate on CNN-IBN I could not help but notice a larger issue we Indians have missed in this whole election drama.

The issue is, in this election we have put an end to an admirable convention of electing a non-partisan,non-political president.

The convention started with Kalam who turned out to be a fantastic "People's president", I think credit for starting this convention should have gone to NDA who made his presidency possible.

Sadly the Congress party and their left allies were in no such mood and decided to elect a political rubber stamp like Ms Patil.

Amit Verma of livemint has written a very humorous sarcastic article, Even though some of the comments seems to be below the belt, Amit Verma represents the desperate feelings of a growing educated class who have been left with very little say in the political system of the country.

Of "Passport Baba" and "VISA Balaji"

Among the day's idiotic stories, there was this story in ET about one "Passport Baba", where hundreds of people come and tie their passports to the old pipal tree in the hopes of hitting foreign shores!

When I told of this to a friend, he told me about "VISA Balaji" where people converge for divine intervention into their VISA approval process... and it is supposed to work!

I guess India doesn't need its own parody newspaper like "The Onion", since the regular stories and events themselves are so much amusing and resemble parody :-)

Charlie Rose

Charlie Rose is a popular american journalist, recently he has put up thousand of hours of his one-to-one interviews on his website (http://charlierose.com) for free viewing.

This is a great source of watching online interviews with people from so many diverse backgrounds.

I have watched the following interviews till now:

With Warren Buffett:



With Susan Buffett:


With Geroge Bush:

Food for thought - President Clinton

A fantastic interview with president Clinton at the Aspen idea festival, here is the link.

In the hour long interview Clinton throws some interesting and amazing facts in a very eloquent way, a few of them here:

1. Interdependence: Today we are more interdependent on each other than any time in the past, Interdependence as compared to globalisation, covers the a far wide spectrum than just economics.

2. The issue of identity and the roots of terrorism: Clinton gives the example of the recent bombing attempts in London to argue that real root of terrorism is actually the issue of identity, among people who seem to have lost it and don't feel part of the mainstream even after living for many years in an alien land. For this he says the world needs to be far more open to other cultures and people.

3. The new "IT boom": Clinton attributes the huge growth in average American incomes of the 90s to the Information technology boom, he goes on to say that a developed country like US needs a new wave like IT every 6-8 yrs to sustain the income growth and to keep the wide economic inequality in check.
He suggests wide and far reaching investments and initiatives in controlling green house gases across America, This he suggests will serve to create millions of new jobs and strengthening of middle class.
Now this is some innovative thinking, but then the new jobs this proposed wave can generate will be low end jobs as compared to the IT boom. This will help the lower middle class Americans but its hard to conceive of it as the panacea of all ills.

4. On the Israel-Palestine conflict Clinton views are that if this issue is resolved half the problem of islamic terrorism will be solved and the region can emerge into new powerhouse of the middle east.

Unfortunately, given the recent developments in the Palestine, this seems highly unlikely anytime soon.

Nehru - A man of letters

A new book of Nehru's writings has come out: 'The Oxford India Nehru'.

I just read its review on livemint.com and decided to include it in my "To be read" list of books.

Like zillions of Indians I have always admired Nehru for his great vision and leadership of the country, true he also made some mistakes but then who doesn't!

His books, 'Discovery of India', 'Glimpses of world history' are masterpieces written from jail.

and these lines are just wonderful:

“A moment comes, which comes but rarely in history, when we step out from the old to the new, when an age ends, and when the soul of a nation, long suppressed, finds utterance.”

from his historical speech "Tryst with destiny".

Musharraf interview

Over the past few weeks, Stories coming in from pakistan have been pretty significant. I've been following them closely with dawn.

Just watching this 'family' interview of Mush, the interview opens with Mush saying:

The biggest quality of us (he and his family) is our humility

How humble of him :-)

Below is the interview, Mush stumbles and stammers as usual, still pretty interesting, gives some peep into the lives of him and his family.

Incredible India - not so incredible response :-)

The ministry of tourism, Govt of India has launched a wonderful website for the Incredible India campaign.

Even though this might sound like a crazy idea to most Indians, I thought of giving them feedback. Here is the email I tried to send them:

From: Abhinav Bhatnagar <masked masked >
Date: Jul 7, 2007 8:50 PM
Subject: Feedback on incredibleindia.org
To: contactus@incredibleindia.org

Dear Sir/Madam,

At the onset, let me take the opportunity to congratulate Ministry of Tourism, India for the wonderful "Incredible India" campaign.

The website http://www.incredibleindia.org provides a wealth of information and is beautifully designed. Being an Indian currently residing abroad I felt proud of this website.

I was impressed by the fact that the website is available in four languages. Hindi, Chinese, French and Japanese. I am sure efforts would be underway from your end to provide the site in other languages (particularly european ones) as well.

Being from IT background and having experience in website designing, I could not help but notice a few areas of improvement, I have listed them below:

1. Out of curiosity, when I selected the chinese option on the website, I was presented with a warning message from the Google desktop search program which I have on my machine. Please see the screen shot in attachment.















2. Broken links:

• On the information page for sikkim the following two links are broken:

http://sikkim.nic.ind
http://www.sikkimtourism.org

• On the information page for Uttaranchal the following link is broken: http://www.ua.nic.in/uttaranchaltourism
  

• Mizorum information page: http://mizotourism.nic.in/
  

3. The home page have some irrelevant links from the point of view of a tourist for example "Entrance test for guide training course etc" these links can be instead moved to a separate section; something like a new section for Administrative matters etc.

These are just some of the improvements which can be made to make the website more user friendly. Ideas can be taken from certain other websites.

There are many other creative things which can be done, for example the TV ad campaign videos can be made available on the website, they can also posted on popular video sharing sites such as Youtube.com, video publicity over Internet can provide huge viral marketing gains at a very nominal costs.

Excuse me for the long email, I will conclude this here congratulating you once again.

Thanks and Regards,
Abhinav

Obviously I was trying to help them here, however when the email bounced from their servers with the message "User mailbox exceeds allowed size: contactus@incredibleindia.org"

Perplexed, I looked up another email address from the site but same result:

"User mailbox exceeds allowed size: webmaster@incredibleindia.org"

anybody reading this has any idea what could be done? , I feel that I justed wasted half an hour typing that mail.

After a year break - "The Stock market"

I again took a long break on this blog.

The past few months, I've had so much free time that I started spending time on the indian stock market. I have been investing (or sometimes trading) since 2002-03 but never had this much time at my disposal.

I have reviewed all my past investments, made a portfolio tracker excel, which draws real time quote from BSE, to track them and pruned some of the non-perfoming stocks.

Also I have invested in some new growth areas.

I plan to write on this blog about those.