Marketing Fear| A stitch in time saves nine

Repost from the original

We live in a world where the car mechanics only talk about the number of frivolous upgrades that the car owners buy. No of unnecessary repairs/replacements they are able to push it through the client’s wallets. The hospitals evaluate doctors based on number of pricy diagnostics they refer, no of specialist consults and expensive branded medication (that are pushed by sales reps) they prescribe. Lawyers are no different, they are like psychiatrists. Once they get a hang of the patients inner-most fear, they leverage it to their maximum advantage. Infact sometimes I feel that the whole world is out to get you and exploit your vulnerability.

Is it healthy, is it ideal? I don’t know, but I know for sure that sometimes we build up mechanisms which do more harm than good. Most people procrastinate visiting their doctors esp. dentist till it is absolutely necessary. Yes there is naturotherapy, body does heal itself, but over the years what I have realized esp. the poor sometimes wait till they are inches away from death before they make their first doctor’s call. As a result the chances of recovery becomes remote. What could be a cured by a couple of pills and some bed rest requires a complex surgical procedure. A car is no different, we wait till a breakdown, or red check engine light or repeated reminders from the service company for annual checkup before we turn our cars in. For our property, there are so many steps if taken timely could help us limit our exposure. However we often wait till a notice is served before we react.

Sometimes the fear of getting cheated, taken advantage off makes things worse. All we need is a trustworthy source that rather than exploit our vulnerability help us cover our tracks and limit our exposure. Is it too tough to ask?

Renault Duster: Petrol vs Diesel.

How do you choose between different fuel variants of the same model of the car?

  1. Driving experience:
    1. Just check if you are doing apples to apples comparison. Some times in order to price it economically for taxi segments, some companies come up with an underpowered diesel base variant. Like Renault has a 85PS diesel, 100 PS petrol and 110 PS Diesel (sports variant). Higher power means better acceleration and riding experience.
    2. Turbo-Charger: Some diesel engine has a turbo booster that kicks in at 2000 RPM which greatly improves the car pick-up. Also the torque rating of a diesel engine is inherently superior.

Just because they have replaced one make of the engine with another, does not mean that it is the same. Please test-drive the car and make your own judgment about the real worth and driving experience for the vehicle variant.

  1. Ability to pay
    1. Check your financing options. If you believe that the base version itself is a stretch for you, the more expensive diesel version will only compound to your problems. There is a saying in India “Jis bageeche kea am nahi khana, uske ped ginee ka kya fayeda.” There is no merit in counting the trees of the orchid whose fruits you can never taste.
    2. Car is a depreciating asset, so no point in spending too much today if you are going to replace it every 5-7 years. Buy one that suits your needs, helps you maintain your prestige in the community and is easy on your pocket.
    3. Company financing options. Typically sometimes they have special promotional scheme for one variant (but not for another). Interest free loans or low interest installment options.
  2. Cost of ownership:
    1. Assuming the on the above four criteria, you are OK or ambivalent, then you should put the cost of ownership on a serious excel file and compute for yourself
    2. I have taken 2.4 L as the premium (inclusive of road tax and exercise duty) between the two variants. Don’t forget the taxes as they difference between ex-showroom price and on road price is significantly different.
    3. The insurance cost is typically linked to a % of asset value. Hence diesel would have a higher insurance outflow. Similarly the Upkeep/service/maintenance cost of the diesel vehicle would be higher.
    4. Then you should compensate these additional expenses with the higher resale value of the diesel variant. For same amount of miles & age of the vehicle, the people prefer the diesel vehicle as the operating cost is low and the difference between the petrol and diesel variant is minuscule.
    5. Then based on your expected driving behavior you need to compute the miles that you are going to put on the vehicle. The difference in the mileage between the two engines & the difference in the fuel prices could lead to a substantial saving.
    6. Finally you should sum up the yearly cash flow. (please add any more parameters that I might have skipped)
    7. Compute the IRR of the 7 year (longer based on your forecast).
    8. Finally if you get a IRR that is higher than your cost of funds (interest on bank loan + own capital) then you should go for the diesel variant, else petrol variant is suited for you.
    9. Add the financing charges/sops/dealer discounts to the computation to make it more wholesome.
Year 0 Year 1 year 2 year 3 year 4 year 5 year 6 Year 7
Asset price   (240,000)      70,000
Insurance cost        (1,000)          (800)          (600)          (600)          (600)          (600)          (600)          (600)
Maintenance cost      (1,000)      (2,000)      (2,000)      (2,000)      (3,000)      (3,000)      (3,000)
Higher mileage of Diesel      15,000      15,000      15,000      15,000      15,000      15,000      15,000
Less expensive then petrol      30,000      30,000      30,000      30,000      30,000      30,000      30,000
Net cash flow   (241,000)      43,200      42,400      42,400      42,400      41,400      41,400    111,400
irr 10.0%
  1. Other considerations:

As a rule of thumb, if you are using for more than 1,000km per month, then diesel makes more sense. Also 12% should be the cost for your own capital and SBI gives car loan at 10.50%. So for a 70% financing your cost of capital is 30% * 12% + 10.5% * 70% = 11%

Bangalore there is a difference of 20/- between petrol and diesel prices, in Goa the difference is much lower. Plus government has publically announced that they will reduce the price

Indian Aircraft Carrier| Need?

Did you know that India has second largest fleet of aircraft carriers in the world? Next only to USA’s navy. Countries like Britain which once had as many as 40 aircraft carriers have all disbanded them down and currently own none. Even Russia has decommissioned or sold all of its aircraft carriers and currently own only one (maintained primarily for prestige reasons and not for tactical). What is worse that India is buying these aging decommissioned assets and taking great pride in retrofitting them.

Why does India need 2 aircraft carriers? Why is it building a third? Aircraft carriers are a purely offensive military asset meant for creating a mobile airstrip far away from the nation’s borders. So any country that is not planning to cross the seven seas to bomb or air raid should not own one.

Secondly: basic but stupid question: Where on earth are we going to have enough trained pilots & aircraft to actually man the aircraft carrier? Indian air force has been complaining for decades that its pilots get only Flying Coffins (MIGS that were designed and made in the 70s, yes 35 years ago)

Thirdly: The two biggest threats Indian Navy is facing today are: How to prevent 2008 like amphibious raid and pirates that threaten to hijack cargo. Should not any wise country focus on these problems? How does an aircraft carrier solve them?

Fourth, if you have seen India on a map, you would realize that the biggest threat comes from the long borders in the North West that we share with Pakistan. Most of our aircrafts are committed there. Incidentally India did a very successful naval blockade in 1971 and even raided the port of Karachi (Operation Trident & Operation Python). Surprisingly our aircraft carrier was not used. It was deemed too expensive to risk.

Aircraft carrier is a huge liability. Its weight & size makes evasive maneuverer almost next to impossible. No wonder whenever this behemoth leaves for the high seas, half the fleet (ships, submarines, patrol boats, helicopters etc.) need to accompany it. For a country like India, which actually has a very small naval fleet, this means that security elsewhere needs to be compromised. There is a common saying in India, “If you want to bankrupt someone, gift them a white elephant.”

This is the reason why China, in spite of its aggressive & military intentions does not rely on aircraft carriers. It leases ports from friendly countries like Myanmar to achieve the same results. Also it has huge dredging operations in South China Sea to convert small islands into a stable & large air force cum navy base. Simple logic, it is much cheaper to build, does not require special aircrafts to operate because of the large landing strip & sufficient hanger space. Also you cannot sink an island, nor you need to replace them periodically.

If India believes that it might be targeted though a large naval assault in the near future, why does it not develop its military bases in Andaman & Lakshadweep further? They are aptly suited to guard our left & right flanks. If it has developed them to the full capacity & still India needs three aircraft carrier, then I think we are overspending on military.

The worst thing any country can do is commit huge funds for ornate demonstrations. Indian basic military infrastructure is what major needs revamp, not these white elephants which will never leave the port.

Is Property verification guarantee for real?

Repost from the original

Did you know that Khatoni property verification guarantee is the next best thing to Title insurance that you get in USA?

At we have a simple promise; we treat your property as our own. This means:
1. We will verify the ownership claims of the seller
2. We will verify if the property is DC converted properly
3. We will check for any claims/notification/pending litigation
4. We will check if the certifications /permits are in order
5. We will check if the construction is as per the master plan (the seller has not encroached or constructed illegally or the neighbors have not encroached on your property.
After the verification, we will provide you will a detailed report on the defects. Help you mitigate your risks; even negotiate better with the seller to compensate you for the deficiencies. However if our services were not performed properly and you suffered from a loss because of it, WE WILL INDEMNIFY YOU. We will not only cover your loss (capped to the transaction value) but also associated legal fees (lawyer & court fees included). After-all derelict of duty should be harshly penalized and our risk should not be capped to the verification fees paid.
Why don’t you give us a call to understand our services better?

House vs Car: Resale price

Repost from the original

Did you know that the re-sale value of a car goes down by 15% by the time you take your first ride home? I thought property is forever, but recently I have discovered that apartment prices are different when the seller is a builder vs. seller being an owner. The difference in price could be 10-15% on per square feet basis.

Furthermore, anybody who has sold/bought a second-hand car would agree that optional features like alloy wheel, music system with woofer, Stanley seat covers get a fraction of the value when we sell. In a house second car park, vitrified tiles, modular kitchen, bathroom fittings are given away for free with the property. WHY?

George Akerlof in his paper “Market for Lemons” contributed it to price asymmetry. Unlike the builder, the owner does not have all the documentation & permits in proper order. Most owners list their property just to understand what it is worth and do not have any serious intention/pressing need to make the transaction. This makes the resale property transaction messy, long drawn and prone to last minute surprises. As a result nobody buys the houses unless they are priced cheaper than prevailing market price.

We at are there to bridge this gap. We help buyers offload all their headaches of document verification to us. We even guarantee the quality, meticulousness and completeness of our property document verification with doorstep pickup and drop. This allows you to pick your chosen home at the cheapest possible price.

This post is in continuation of my previous post on the same topic

Oil: Saudi & US

Last year when oil prices were falling and threatened to reach lowest in the decade, everybody was blaming Saudi. Saudi officials went on the record asserting that “Stone age did not come to an end because we ran out of stones. Same is the case for Oil Age.” Fancy words to say Saudi is going to continue to pump oil and flood the market irrespective of the prices. Since new oil rigs had primarily opened up in America, they projected themselves as victims.

However this latest deal with Iran has raised some interesting questions:

  1. The deal primarily allows Iran to sell oil in the open market. In the short term the oil prices fell by $1.5-2 per barrel and are expected to go down even further. By adding a new oil producer, they essentially are sealing the fate of the new oil rigs that opened up in America.
  2. Most Middle East oil sells at Brent, but Americans sell at WTI price, which trades at $5-7 discount. The reason for this discount was American policy which prohibits export of unprocessed crude oil.
  3. Cheaper energy usually benefits mass production and long distance freight. So it benefits Chinese industry much more than it does to American economy.

Everybody at that time believed that new oil rigs, fracking, sand oils had caused a glut in the market. US from being an importer of crude has become an exporter of crude. What is worse that this transition happened in the winter season where the oil requirement for heating/furnace goes up substantially.

But if this was the case and oil lobby is really as strong as they are projected to be, then how did this treaty got ratified? Iran has a history of reneging from its promises, so I doubt if this has a long term benefits. However in the short term issues 1 and 3 got worse and issue 2 did not get resolved. I am sure there is a logical & strategic reason behind all this, but I know for sure that the reasons that were citied 6 months ago were all farce.

Cost of working Saturday

A friend of mine was offered a job offer, where the total annual compensation remained the same, but the working hours were reduced drastically (from 60 to 40 hours a week). Normally such an offer is attractive only for someone is on the threshold of being burned-out, or as a last ditch attempt to save the marriage or a female/male who is guilt ridden for not being able to meet social/family commitments/obligations. Unfortunately he is neither of the three, yet should he seriously consider the offer. What is more important your annual salary or what you make per hour?

On the face of it seems like a career suicide. Being busy, frequent international travel and long distance telephonic meeting are considered as telltale signs of a power executive. Power executives are destined to stock-options, early promotions and insane salaries that we read only in the papers. In today’s world where even colleagues don’t understand what the other team does, working longer hours is the only conclusive quantitative metric to evaluate the most valuable employee. So trading all this for a quieter life, means giving up on the race to success.

Tele-commuters or part time employees often are last to get promoted, first to be fired and receive the smallest increments in the team. Many employees work long hours to get job security, a signal that it will take two guys to replace them and so rather than replacing them with a younger and cheaper talent the management will have to shell out two salaries. No wonder so many people sacrifice their evenings & weekends to professional life even though they get no overtime or incentives.

My friend understands that any job switch comes with a transition cost. Inflation correction/annual increment clock is rest (loss of ~5%), plus another 10-15% of the loss in bonus/performance (existing employer often does not pay up for the existing part of the financial year and new employer will pay pro-rata/reduced pay out), add to it the relocation and other transition related expenses. So even with a matching pay, for this financial year, savings will take a major hit.

Most people still will look at annual salary rather than how much they are compensated for every hour they work. There is no doubt that Indians, Chinese & Asians in general work longer hours than their counterparts in Europe, America & rest of the developed worlds. Add to it the longer commute time due to congestion, meetings at odd hours and travel, the work-life balance is heavily skewed towards work. WHY is it we attach no value to our weekends, spending time with our family, pursuit of hobbies?