Is it our tryst with destiny?

The financial crisis bothers me. Why should it?

I have been asking myself that over the past few days. Is it the paucity of jobs once I graduate? Or is it hurting me financially? Or is it a very intelligent concern that I have for the world around me? Not really.

I think I figured it out.

Amidst rising oil prices during the Gulf War in 1991, India found itself in a balance-of-payments crisis and the prospect of defaulting on its loans. The IMF mandated a liberalization of the Indian economy; a coming out of sorts for what was a closed and to a certain extent, an unproductive economy.

I was two then.

Today, a liberalized India with fewer and fairer taxes, less regulation, a relatively smaller government is the second fastest growing economy in the world.

A liberalized India is all I ever knew.

After a couple of hundred years of British Imperialism, India in 1947, in its first Prime Minister’s words, “had made a tryst with destiny” and had won independence.

Instead it saw a post-war Europe and Japan reemerge from the debris. United States was well, the United States. They were calling it the boomer years. Even a lot of Asia followed.

India wasn’t communist. Nor was it comfortable enough with itself to embrace the free market. But give the Government a li’l leeway, it will kick open the door. Government grew bigger, corruption got endemic in its system and epidemic in proportions. As the world took the next leap forward, we found ourselves tucked in an ugly li’l corner that we had carved out for ourselves stagnating.

It was still waiting for its tryst with destiny.

In 1989, the wall finally fell. Literally.

Post-liberalization, it was India itself that India needed to conquer. Three hundred years stuck in an abyss, India was in the waiting room for so long that it had almost forgotten what it was waiting for.

Yes, India could build tall buildings, write the next generation of software, have its own breed privatized financial institutions and multinationals, raise money in Bombay like they did in New York and London, show long lingering kisses in movies, have jobs so that we could graduate out of college and not take the first flight out. And of course, beat Australia in cricket.

Never was private wealth and enterprise celebrated with such ferocity. It mattered that an Indian ran the biggest steel conglomerate in the world, and an Indian publicly- held company would one day drive home Jaguar from Ford.

They say we are in global financial meltdown.

The Bombay Sensitive Index, India’s equivalent to the Dow Industrial Average, has plummeted to 9,975 from a 52Wk High of 21,206.77. The Foreign Institutional Investors (FII’s), who happened to be more often than not the big banks that find themselves in a spot, have liquidated $ 9 billion worth holdings in India.

It is apparent that India will get hurt too.

World over, there is a growing call for more regulated markets and bigger government intervention.

Wasn’t Regulation what got India there in 1991? Wasn’t it the all-encompassing evil that kept India back as the world moved forward? Now they tell us to learn otherwise.

It is like getting up one morning and realizing that your neighbor is your actual father.

But a funny thing has happened. The years post-liberalization, even if kicked off by creative investors who couldn’t make returns big enough and the excessive liquidity that characterized all these years, India has somewhere realized that if a billion people get up every morning, brush their teeth and go to work, the economy would prevail.

But this financial crisis, unlike 1991, the IMF and the ‘ostensible’ free markets needn’t dictate anything. India has $300 Billion worth of foreign exchange lying around, and an economy that even by the most conservative estimate, will continue to grow at 6.5 %.

Things will get ugly. But wasn’t this where India wanted to be all along? The era of easy foreign liquidity might be over, but it is an India that finally could do without it. This is our tryst with destiny. And now that we have almost made it, let us not let it slip away.

The credit crisis hits India, but it may profit [The Economist- 10/14/2008]

The cost of indecision

Cost of the Proposed Bailout to the taxpayer= - $ 700 Billion

Bailout rejection by Congressional Republicans=- 777 points on the Dow= - $ 1.2 Trillion

Cost of inaction today= - $ 700 Billion + (- $ 1.2 Trillion)
= - $ 500 Billion

I did the Math. You say God bless America.

House rejects bailout package, 228- 205; Stocks plunge [New York Times]
Talent Flight Feared by City Firms [New York Sun]
Why did the rescue bill fail [NYMag- Daily Intel]
Lehmann's demise triggered Cash Crunch Around Globe [WSJ Online]
Why Main Street needs to support the bailout [Accrued Interest]

Lehman: Another Enron in the making?

It is easy to forget with the American media that there about 5, 000 people in Lehman's overseas operations. Easy to forget that there is a world outside New York, and one that is more profitable.

People in Lehman New York did not.

[Picture Courtesy: www.mirror.co.uk]


Apparently, $ 8.07 Billion was transferred from Lehman's European operations at Canary Wharf in London to Lehman's UK operation hours before Lehman filed Chapter 11. Times Online (UK) quotes Tony Lomas of Price Waterhouse Coopers (PWC), the administrator of Lehman's European operations, as he makes parallels with Enron:

"Both in terms of the impact of the loss of confidence and the complexity of the trading transactions, the interdependencies of the group companies, and the sweeping of cash into a holding company account, leaving subsidiary companies empty of cash at the point of collapse"

New York employees have been called for work, and about $2.5 Billion in bonuses has been ring-fenced as part of the Barclays deal. Bonuses? Well, for the first nine months when Lehman reported profits. Times Online further quotes a London- based Lehman employee:

“It’s an absolute scandal. I will never work for an American firm again. It looks like they are prepared to cut you off at the knees. Nobody from America has been in touch since we went into administration on Monday.”

Sources:
Lehman: You are on your own, London [Times Online, UK]
Fury at $2.5 bn Lehman bonus [Times Online, UK]
The "betrayal" of London [Evening Standard, UK]
My week of hell at Canary Wharf [Times Online, UK]

Bank of America: The next Sarah Palin?

Floyd Norris did live blogging today on his New York Times financial blog Notions on High and Low Finance.

At 1115 AM, he blogged:
Merrill is trading, as I write this, at $21.47 per share. That is a 14 percent discount to the value of the Bank of America stock that is being offered. Each Merrill share will be exchanged for 0.8595 shares of B of A, now trading at $29.01 and putting the value of the offer at $24.93 per share.

Merrill Lynch closed at $ 17.01. Why would you agree to pay 24.93 for something that is by the dumps and available at 17.01.

Expect that story to flare up. I don't understand much of the financial world, but I am definitely curious about Bank of America doing that. Or has it decided that Sarah Palin has too long been the headlines.



Lew from UK on the website commented:

"Forgive me for being a bit slow on this (I’m an engineer rather than an accountant), but - I read somewhere in all the stuff published today, that the Merril Lynch deal (I can already see the headline “Lynch mobbed”) would mean that BoA would would wind up “technically” under-capitalised. Is this true ? And if so, doesn’t that mean that either (a) they will need to embark on some sort of fire-sale / fundraising enterprise to bring things back into balance, or (b) that they’d be risking (and they’d need government complicity to achieve this) a new, bigger game of chicken where BoA tests the limits of “too big to fail” ?"

Something is clearly happening. And as I am writing this Nikkei just opened. Eight minutes ago. And it is 344.92 points down, or 2.82 %.

With the failing U.S economy and Wall Street banks, finally are we seeing the end of our fling with Sarah Palin? Call it the upside of the downside in the economy!
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Update- 09/16/2008 - Pictures really are worth a million words. Here is what sums up Lehmann Monday. Click on the sideshow. Courtesy The Wall Street Journal. See it. Come on, for once let us love our bankers.

Sport and the heady days of Childhood; who needs Politics?

I just got back after seeing Ano em Que Meus Pais Saíram de Férias (International: The Year My Parents went on Vacation). The movie happens to be the Brazilian selection for the Academy Best Foreign film, charts the events of Brazilian history 1970 through a 12-year-old kid’s eyes. I don’t have a movie review here, but as I saw the movie, I could not help but reflect on an India I grew up in.

I grew up in India of the nineties. Fresh of about half a century of socialism, I grew up in that inert period between those times and the blatant consumerism that defines times today, when politics was defined by confusion everywhere. Damn, I still remember those embarrassing Third Front Governments that were around between the Narsimha Rao’s Congress Government and the National Democratic Alliance years between 1999 and 2004 characterized by the charismatic leadership of Atal Behari Vajpyee. We did not have the brashness of today’s Urban India, none of the French Connection’s and Sex and the City lifestyles, or any of the swagger a weak Dollar and a Strong Rupee has brought.

But from nothing, during the course of my lifetime, somewhere the script changed. The Bombay Sensitive Index went from 2800 to 20,000 in the last ten years, property prices went an average 500% in the National Capital Region. Bottomline being that India was swash with liquidity, Bentleys rolled in, Bollywood made better movies and it became an interesting place to live in.

Now, as a Politics Major, I look back at that period, but I have no recollection of all that churn my childhood should have been. I live in a city that did not exist ten years ago in a map. I grew up in India of the nineties. A McDonald’s opening was news, and I have driven across the city to eat a Cheeseburger. On the day of the fiftieth year of Indian independence in 1997, a McDonalds came in my neighborhood. Nothing ever really happened. Television was either cricket games that India invariably lost or government broadcasting stations that had no programming after 2200 hours. Then, late nineties we had Cartoon Network. Bollywood films were always romance with the stars in GAP, complete with kitsch song and dances shot in the Swiss Alps, and had happy endings. Yes, a GAP fleece hoodie was what we wanted. Boys read Hardy Boys. Girls read Sweet Valley. Enid Blyton reached a unisex audience. Till the triumvirate of Nike, Adidas and Reebok came in the latter half, our concept of a sports shoe was no frills white canvas. Till 1996, India had three cars you could choose from. The bestseller was the Ambassador, Indian for the 1966 Morris.

Today, my Study back home is a veritable museum of Apple. I don’t think New York of any different than New Delhi, and young people in both places have more of the same lifestyles than different. Somewhere I should have felt the pinch of a skyline that did not exist coming up and an unprecedented economic growth only superseded in human history by Modern China.

But my answers lay in that kid, the protagonist of the Brazilian movie, and not in any politics textbook. History might remember that era as something else, maybe they might call it the roaring 90's, but for me that is childhood. It was more Cricket than anything else. And we were darn excited about live streaming of cricket games. I still remember Sachin Tendulkar walking out in the Semi- Finals and a 120, 000 disappointed fans at the Eden Gardens in Calcutta, as India lost the 1996 Edition of the Cricket World Cup to the eventual winners, Sri Lanka. Just like with Pele, Tostao and Rivelino, it was easy to ignore everything, even politics, but Soccer.

Sport and the heady days of Childhood; who needs Politics?