Why Delhi? Why Agra?

Ganges is called the bloodline of the North India, yet the 2 capitals of India has been on the banks of Yamuna. Historically capitals were located based on 2 strategic consideration:
1. Securing the state’s economy (agriculture, trade-routes land/sea, mining etc.)
2. Gain tactical advantage by making it easier to dispatch soldiers/couriers, receive reinforcements, making it difficult for invaders to lay a siege or run a campaign
The first cities were in the middle of some of the most fertile land (which paid for military in return of the protection). Cities like London, Paris, Alexandria (Egypt) and Calcutta were ports designed to control the sea route.
Rome was in the middle of peninsula which made it accessible by sea from 3 directions (and call reinforcements). While it’s cold weather and rocky terrain would demoralize any army marching. Carthaginian General Hannibal Barca lost almost half of its troops in the march to Rome. Atilla the Hun did march up to the gates of Rome, but did not lay a siege. However Rome had to heavily invest in the road infrastructure (All roads lead to Rome) to ensure that in spite of being inaccessible the city serves its purpose of securing the economy and ensures mobility of troops.
Only when the empire became weak ( 410 AD, Alaric the I, (Visigoths) and 43 years later, Geiseric King (Vandals) did invade Rome) the capital was shifted to the marshy lagoons of Venice. Venice then continued to rule the Mediterranean till 15th century. The port provided connectivity and ability to control the economy, while the marshes made it impossible to lay a siege. Charlemagne’s army (including the son) was ravaged by the 6 month long siege that they laid on Venice. (not to mention the expense of a combined naval blockage and siege).
Now back to the question, why Delhi and Agra were centers of India? The north India is often called as Ganges Basin highlighting the importance of Ganga in the economy. Like the Nile, the water from this perennial river and the silt from its banks made this as the most fertile lands. No wonder almost all major Indian cities were on its banks. Lahore, with its ability to control the Indus River would have been a better choice. But the distance between Pakistan’s Punjab and Delhi is considerable. Delhi can also not be called center of the 2 river systems as relatively less economic activity happened in Madhya Pradesh. Hence it being the center of Mughal empire is questionable.
Yamuna in comparison is a much smaller river. Also the terrain is quite flat negating the possibility of a tactical advantage. Rivers are natural roads allowing navigation, but again Yamuna was never used as inland waterways.
The terrain provided no advantage. Delhi was ransacked and rebuild 7 times (maybe more). Agra/Fatehpur Sikri was abandoned. Hence the question why is Yamuna river the political capital of India?

Aarushi & The Siege

Have you noticed what is common between the 2? The victims were people whom we could relate to.

The mumbai attack was targeted to the rich (upper middle class as most people will like to project) at some of the most expensive restaurants in South Mumbai. Aarushi was a daughter of 2 influential dentist from Noida, Delhi.

Net result is that even through they were not be after several years, these incidents continue to crowd the headlines.

Filicide and honor killing of girls is quite common in India. Yet the urban educated Indian (to which the media caters to) always believe that “voh sab to gao meigh hota hai.. hamare yaha par nahi” (it happens in the villages no in the cities) People are shocked to even believe that well educated professionals could also practice in India.

After an extended trial that lasted for more than half a decade, the court finally sentenced the parents Rajesh and Nupur Talwar guilty of murdering their child and the domestic help. However the media seems to have difficulty in accepting this verdict and is flooding the media with sympathy towards accepting the fact that “Educated parents could kill their own children.”

Firstly, Indian justice system might be accused of slow and lenient, but this is probably one of the rare example where it is being accused of punishing the innocent. Esp. when the accused had all the financial and political muscle to hire the best lawyers, and sway the media/public opinion. (innocent poor do get locked away for years without a trial…. but rich influential… never)

Secondly, why would I care if the convicted (not accused) does not admit their guilt, or blame that they are victims of the system or they are not eating their food. Criminals are send behind bars so that they can spend time to repent and understand the repercussions of their actions.  I cannot understand why the media always sympathizes with the rich when they are put behind bars esp. for violent crimes.

Recently an political family tortured their maid to death, but she was a 7 day wonder. the media was hot for a couple of days and now they are completely mum.


the elusive terminal value

“Zinda hathi lakh ka mara hua hathi sawa lakh la” (the terminal value of a dead elephant is worth more than a live one because of the ivory)

In real life there might not be many examples but financial jugglery is filled with examples where investors are lured by promises of unimaginable riches if they hold the asset for perpetuity. Terminal value, as the term would suggest is the value of your assets beyond the visible horizon/useful life.

When I started using computers, WinAmp was the best music player, Real was the best movie player, Netscape was the best internet browser, hotmail, yahoo & Aol were the default mailboxes etc. I wonder if the owners of these products were able to realize any terminal value. If you believe technology firms are different then go to typewriter manufacturers. A decade ago MG road, Bangalore was the commercial hub, now most of its buildings are either derelict or vacant.

The dividend yield of nifty is paltry 1.46% indicating that most people don’t invest for the dividend income but believe that their wealth will be generated due to the ability of the portfolio stocks doubling its price every 2-4 years. One can argue that companies are going-concerns and have perpetual existence (although I am sure <10% of the companies incorporated 100 years ago are still functional), But apartments or any concrete structure will crumble and deteriorate over time.

The rental of a residential apartment/house is roughly 0.25% of the property value. which means that without discounting for time value of money, it will take roughly 400 months (33 years) to recover your initial investment (annual rental hike is typically less than the interest rate so a proper DCF would be even more unfavorable). Yet people believe that that value of 100sq feet of land (1000 sq feet equally shared between 10 floors) would be worth more than the whole apartment that they have bought today.

It is said that in the long-run everybody is dead, but looks like the MBAs from Finance have discovered the elusive elixir of immortality.

toe-ring, sindhoor, managalsutra

Married women cover their heads with a ghoonghat… out of sight, out of mind. If you happen to catch them without one, you would see a bright red mark (sindhoor made from lead oxide) to warn you to look away. For those who like to check out the torso before looking at someone’s face… there will be a mangalsoothra hanging. If you observe from the side, there will be chuda (6-8 inches of bangles.. white red). For those with foot fetish, there are silver toe-rings worn only by married women.

All this makes me wonder why would anybody go to such lengths to make sure that their marital status is rightly advertised? Irrespective of from which angle you observe, whether its a shadow or a partial glimpse… there is no excuse for a a guy to confuse a married woman with a bachelorette.

On the other hand there are no corresponding marks worn by men. Due to Christian/Western influence some men do wear rings/bands, but this is more out of fashion and not due to cultural/religious beliefs.

In my earlier post, I wrote about how some woman make sure that their presence if felt (even when they are away). But except human beings, no other animal mark their body or wear signs to show their relationship status. But again man is an aberration as no other creature on this planet practices anything remotely close to a marriage.

As many feminist argue, marriage is a remnant of patriarchal institutions that existed for millenniums. Through a public ceremony, the whole society was notified that the women is in a relationship. This allowed men to travel for war & trade for extended periods without the fear of returning to an empty nest. (finding that their wives have eloped elsewhere). Even today’s Indian laws on adultery highlight the same perception… men are punished for having sex with someone else’s wife and not the adulterous wives. (even though, in the true sense its the wife who broke the contract not the outsider)

Although humans developed a concept of kinship & family early on, the early hunter gatherers developed marriage only around the time of extended military campaigns. Yes, you would blame me for linking wars & military history with everything.

A nice article on how the institution of marriage has evolved in the past 2 decades

Place of stock in personal portfolio

Most people debate whether they want to be a passive investor or active investor, but I have a more fundamental question: is stock market just a hobby or an economically viable investment avenue for the common man?

Indian stock market is clearly not a passive investment tool. The quantum of money that can be made by timing the market right (even blue chip or Sensex/Nifty) exceeds the returns made by a 1-3 year buy & hold strategy/monthly SIP in a diversified portfolio (not speculative penny stocks). Hence it is not surprising that most investors and part-time traders spend at least 5 hours a week in reading financial news, analyzing the results/analyst reports or even exchanging tips. Even the mutual funds (passive investors) are profitable when the individual is able to time the market and pick the right sector/type of fund.

So let me rephrase the original question and add 2 dimensions to it:

Firstly, most (sane) humans work 40-50 hours a week. Sacrificing an additional 5 hours a leisure time for stock market will be economical only if I can derive 10% of my salary from stock market (in addition to the cost of capital).

Let me elucidate:

Assume your salary is 10Lakhs and you have 15Lakhs invested in the stock market. This portfolio will be economically viable ONLY IF you are able to generate: 2.5Lakhs annually as stock market profit (1 Lakh for the 5 hours/week, and 1.5Lakhs for the lost interest rate & risk premium (CAPM)).

To be really professional, you should also apportion cost of your TV, internet & newspaper subscription.

The second dimension is on the size of the stock market portfolio:

If the asset allocation <10% then my base is too low to improve my financial situation. (i.e. even if I achieve a fabulous 100% return in the stock market, my net-worth would only marginally improve by 10%)

How many seasoned investors have you met, whose stock market exposure is more than their exposure in real-estate or gold or business (as sleeping partner)? Esp. if you consider that this Diwali stock market reached its all-time high. “If I believe that money attracts money” then most people would have not only ploughed back their profits into their portfolio, but also allocated a major chunk of the savings.

For me a hobby is an economically non-profitable pursuit undertaken as part of the leisure time available. And somehow, I have not met many *part-time* stock market investors/speculators/traders who earn economic profits.  If stock market is unable to compensate me for the time devoted or is the transformational lever that will enable me to retire rich… then it’s just a hobby.

PS: Please read this humorous dialogue elaborating that not many common men made money.

The perfect employee

A shepherd’s dog manages his entire business for him. As dawn, it pushes the sheep out of their cozy pen and takes them for grazing. It ensures that none of them go astray during the long march, even tracks down ones who get lost and ensures that every sheep is accounted for by dusk. You get midnight oil to burn, but it will stand guard all night without asking for any warmth or illumination. If a wolf attacks the herd, it will even fight it till death so that you could eat, drink & merry without interruption. As per Jack Welch, its difficult for a supervisor to manage 5 reportees, but this creature manages a herd of 100+ without any tools or help… and never complains. Toss him an extra bone (that is anyways of no use to you), label it as a hike and it will bow down and wag its tail in eternal gratitude.

Shepherds get all the glory (some of them even get the credit of leading refugees across the desert & storms and have paintings all over the world)… Yet this perfect employee receives scrapes in return, no credit no acknowledgement no laurels for the hard work. If it gets burned-out/old or even perceived as a threat, it is replaced without any compassion… this is the truth of a dog’s life

Every dog has his day, but this perfect employee is still waiting for his.

Did he choose this?

The poor thing had no choice when it was chosen for the job as a puppy & groomed for the role & knows no better than to do its job loyally expecting nothing but scraps of food in return.

“But you see Mr.Anderson, as Morpheus believes you are the chosen one. You are the one to deliver them unto freedom from this world & hence me .“

 So what is it going to be Neo? The red pill or the blue pill? 


EOQ and ATM withdrawl

Ever tried applying MBA to your daily life? I tried to apply theory of Economic Order Quantity on the amount of cash I should withdraw and I am inclined to not follow its results.

  1. D:  monthly consumption of cash = 15,000/- (to cover for maid salary, newspaper/milk/grocery bills, fuel/auto/transport costs, cafeteria & petty cash)
  2. K: cost to order: 50/- to cover bank fees, fuel (to drive to ATM), cost of time (it takes me 15-20 to retrieve cash)
  3. H: holding cost = foregone interest “4%/12”

When I tie all this together I get a value of Q = INR 21,213/-

However I have rarely seen anybody carrying that kind of cash around in their wallets. Most people tend to withdraw cash between 1-5k during the middle of the middle and 5-10k immediately after salary is credited. (but that is spend immediately to pay monthly bills)

Also a lot of ATMs limit the cash dispensed of 10,000/- forcing me to withdraw a sub-optimal amount. Is it because I have under-estimated the inventory holding cost (increased propensity to spend when you have cash in hand & risk of theft/mugging)

Please share other examples where popular wisdom over-rides the well researched theory.