Is AAP a threat to BJP for 2014 election

Since the win in Delhi elections, media has been projecting AAP as a third choice for national elections due in India in 2014.  I am doubtful about that because of:

1. AAP was well entrenched in Delhi but it does not even had a presence outside Delhi till Dec 2013.

2. AAP got 1.5 years to prepare for Delhi Assembly elections.  For national elections, they have only 3.5 months.  Delhi is a city state with approx 1% of India's population.

3. AAP does not have a prime ministerial candidate.

4. AAP is playing secular + pro poor card.  The vote bank for this framework typically belongs to Congress.

5. AAP does not have the ideology for the nation.  Recent remarks by one of their party leaders on J&K back fired in a big way

6.  AAP is yet to prove itself in Delhi.  I hear that power cuts have already started in Delhi, thanks to 50% cut in electricity rates there.  I hope and pray that it does not happen to water.

7. Some people have started putting AAP with Congress.  If this is successful and BJP is able to effectively convey this message to electorate that voting for AAP  could mean Congress coming back at the centre, it may not be good for AAP

However, urban places where middle class voter is disillusioned with BJP and Congress and in such places, if AAP has an effective candidate, it could win.

Friendship changing over time

I am now almost 34 and have seen relationships changing over a period of time, especially with with friends. I have been thinking for the last few years and a few observations.

I grew up in a small town and had to go out for studies from 11th class as there was no facility in my town. i maintained close relationships with my school friends for the next 3 -4 years. however, once i got into IIT and into IIT culture, i could not relate to them much. i realised my thinking process was very different from their's. e.g. like a typical north indian, they will boast of their achievement out of proportion while IIT culture supresses this boastment (as there is always somebody better than you in IIT in something).

I was very close to many of my IIT friends. Most of them went to jobs in diferent cities and different countries. So distance restricted the relationships. Many of them went to ivy league business schools and started believing that some of them are superior. So, this feeling of a better mba degree put strains in the relationship. Today some of them earn more than me and they think they are better off . again this brought differences in relationship.

Then comes the MBA. I had thought that people also make friends in mba. these are actually acquitances and no more than that. many reasons for that. Post mba, once settled in profession, people get married and start families. so focus shifts to family. many times, people dont value relationships e.g. not turning up for functions despite repeated invitations. many you provide professional help / introduce to opportunities, but they never appreciate the help.. and so on.

heart to heart, i think friends remain friends, some way or other. and the friendship remains.

why certain organisations succeed

I have been working for asset management companies for the last 7 years and I saw many small companies becoming big while others languishing. why is that the case?

Do AMCs know what business they are in. Are they in the business of managing people's savings? Are they in the business of channel management? Are they in the business of manufacturing investment products? etc etc.

On top of this, there is a confusion on who the customer is? is it the investor who cuts a cheque, allows the investment manager to charge a fee or is it the distributor who gets them the cheque?

Looking from outside, it is very clear that the asset management companies are in the business of manufacturing investment products, sold through a distributor, to the end investor. So, they manufacture a investment product wherein an individual can put his savings.

i think many companies dont understand this. they believe that an inferior investment product can be sold through a good distribution product. i frankly dont think so. i am yet to see an AMC making big, which has not delivered on performance. The reverse may not hold where a good performance means large business. so, in my view, good performance is a necessary condition but not sufficient.

coming to the second question, who is the customer. i firmly believe it is the end investor who is the customer as he cuts the cheque, pays the fee and takes risk on savings that the fund manager will deliver. Distributor is just an enabler to get through to the end customer.

Is getting fired bad...

The company I work for has gone through two downsizing in the last 1.5 years. First one was done in Dec 08 and other one in Dec 09. Each person who got fired got 3 months of salary, leave encashment, 15 days for every year worked etc. On an overall basis, an individual got 6 months - 1 year salary for getting fired... some even got their stock options encashed..

is this a bad deal... i dont think so at all..

i believe it is a fantastic deal. one individual in my team who got fired got 9 months of salary and found a job within a week with 30% hike...

looking otherway, he got 9 month salary equivalent bonus (i get lesser than 3 month) with a pay hike of 30%. I am ignoring the mental trauma that one goes through getting fired..

I had volunteered to be part of the list in Dec 09, but the company refused to accept.. they believed that I add value and should remain... so i have to live with a compensation that is lower than what i would have got, if i got fired...

Every time i hear that there could be new restructuring list, my eyes open up and i wish i get fired with the same deal...

may be i have to wait for long before this happens...

House hunting in Mumbai

I have been trying to buy a house in Mumbai sub urbs since June and has not been able to find the right one. Unfortunately, apart from one house, we did not find anything livable.

The one we liked, the owner asked for 30% in cash. I am a salaried individual and i can no way pay in cash, especially when most of the money is going to come from a loan.

I sometime wonder how people in Mumbai pay vulgar price for a shitty houses.

One house i saw was a duplex and had all walls broken, including the front . The broker was trying to sell me the concept of rebuilding the way I want to. There were about 10 flats in the building with 8 being empty.

One house I saw was a 2BHK with 3rd being optional. The builder did not build the 3rd bed room, but kept provisions for the 3rd bed room. In this way, he had to pay lesser tax but wanted to charge the market rate to me if I wanted to buy.

The best had yet to come. I saw one under construction building, hoping to be ready by Mar 2010. When I went to see the flat, I was told that builder is in distress and I could buy any flat. However, when i went to see the buuilding 2nd time with my wife and liked one, broker told me that everything is sold. I could buy a flat at 40% higher rate than what was originally told 2 days back.

It is crazy and I dont know people like me, who come from outside, would ever be able to buy a livable house, which costs same as that in Singapore, however, in a shitty location with very poor construction.

Why equity markets are not falling??

Equity markets are not falling at all. The move has been one way up since Mar 09. I remember one of my cousins calling me on 9th March asking whether he should buy Index futures and I told him not to do so. He lost a fortune because of this. In hindsight, he was bang on target as the market had started rising from 9th Mar 09.

I, in my fund manager wisdom, thought that 2500 might not be the bottom for Nifty. But I, because of my limited experience, ignored one very powerful thing. The power of various goverments and central banks and when both decide that asset prices should not fall and should go up, no body in the world can do anything. Money is available, is cheap and credit is not happening. So where is that money going? Buying assets and increasing their prices. Practically, the flow and availability of money could make every price possible for an asset and could make everything bad economic data look good (imagine historic unemployment in the US, increasing every month and stock market being equally strong).

Last bubble also started on the same line - cheap and easy money prompting consumers to leverage.

Will we see the same what we saw in 2008? I dont know and the chances are that we will not see another Lehman. Governments have learnt the cost of systemic risk.

So will the markets and asset prices continue to become expensive. Answer is yes till Federal Reserve tightens its belts.

Whent this could reverse? High inflation? Rising interest rate environment? or something else? I have really no idea. But whenever it happens, there is a high chance that it would be bad.

Equity valuations in India

On last 12 month numbers, Nifty valuation is as follows:
P/E = 21.59, E/P = 4.63%
P/B = 3.77
Div yield = 1.06%

10 yr G Sec yield = 7.38%

The earning gap between 10 yr and index is 2.75%. This means in a secured asset, 10 yr G Sec paper, the investor could get 2.75% more than equities. Clearly, the risk reward is not in favor of equities. So, equities could fall by 15 - 25% and investors may need to reduce allocation to equities.