"ICICI Venture is lying"

Just finished reading this BS report – “PE firms to rethink India strategy”. I say, “they had better” !

The report quotes Vikram Uttam Singh, Head, PE advisory group of KPMG “The Subhiksha incident will make PE firms more cautious on how much of a free hand they allow to a promoter. Some PE funds are concerned that promoters have a wide range of authority in their companies and could look to establish structures that limit some of this authority”.

Here are my observations.

KPMG may have compulsions to take sides with PE firms as their survival depends on such clients. But why does it credit PE firms with so much of naiveté? ICICI Venture had an exposure of 33% in Subhiksha of which it off-loaded 10% to Azim Premji’s PE arm (Zash Investments) for Rs.230 crore – apparently without discussing with Subhiksha itself that was badly in need of cash.

If the same money (Rs.230 crore) was introduced directly into Subhiksha, (instead of buying out ICICI Ventures stake), the company could have been saved to an extent. But I-Ventures wanted to lighten its holding and thought otherwise.

While it’s ok for PE firms to cash out, they need not profess their ability to have long term relationship with their portfolio companies and the “strategic managerial edge” their presence in the Board offers to such companies. When that is the case, what was Ms.Renuka Ramnath (one of I-Ventures nominees on Subhiksha Board and CEO of I-Ventures) doing when she approved the proposal for massive scale up by Subhiksha? Now is she telling us she was not aware of it, even as I-Ventures had the rights to appoint majority of Subhiksha Board? Or does it mean she was too busy to attend Subhiksha Board meeting where such a critical decision was made? Or is she admitting I-Ventures had no monitoring mechanism over its portfolio companies? That’s a bit too much. If I were a LP investor in I-Ventures, I would have taken it to task and would proceed against them for dereliction of duty. A bit too naïve. She certainly can do with some education on sophisticated lying.

Just as in the case of Subhiksha, the first thing PE firms do when they sense trouble is (a) to quietly off-load their stake to an unsuspecting investor and (b) withdraw its nominees from the Board so that they need not defend lawsuits filed against them by unpaid creditors/ bankers / statutory authorities like EPFO in this case.

In simple terms, PE firms are pure fair-weather friends. All talk of strategic advisory services and expertise all are pure bunkum. They have none and they are here just to skim the profits. At the slightest sense of trouble, they chicken out – like the proverbial rats from the sinking ship.

Nothing wrong absolutely. Buy why not say it upfront? Why the façade of management expertise when you know you have none? Why not tell the portfolio investors - “Take the money and pay us back 10 x returns. In case if you goof up, you’re on your own” !

And lastly about KPMG and its ilk of PE advisory groups. How come all those transactions advised by these so-called whizkids yield a negative return soon after the transaction? Are they whizkids or half-baked, mother fucking scumbags that shamelessly face the media and talk ill of the companies they ran a due diligence on and arrived at a "fair market value"? If after all their “expert” due diligence, their projections go haywire, should they not re-examine their processes and find out what’s going wrong? How long should the investing community put up with such sobs that are ready to even chomp client carrots if there is the word "fee" at the other end?

Why would they? They have mastered the art of orifice-licking and carrot-chomping. That should keep them in good stead besides the standard disclaimers that insulate them :-)
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Tweaks and twaddles - is that enough?

As I see the government coming out with serial reform tweaks (FDI norms, Preferential allotments) and bureaucratic twaddles, I worry that we’re operating far beyond our economic knowledge. Every time the administration releases an initiative, I read different reports with diverse opinions. I worry that we lack the political structures to regain fiscal control. Deficits are exploding, and the government clearly wants to restrain them. But there’s no evidence that the UPA / NDA or the non-aligned rest have the courage or the mutual trust required to share the blame when tough decisions are to be taken.

All in all, I can see why the markets are nervous and dropping. And it’s also clear that we’re on the cusp of the biggest political experiment of our lifetimes. If Obama is mostly successful, then the global skepticism natural to conservatives will have been discredited. We will know that highly trained government experts are capable of quickly designing and executing top-down transformational change. If they mostly fail, then liberalism will suffer a grievous blow, and conservatives will be called upon to restore order and sanity.

It’ll be interesting to see who’s right. But I can’t even root for my own vindication. The costs are too high. I have to go to the keyboard each morning hoping Barack Obama is going to prove me wrong.

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Was ICICI Venture CEO Ms.Renuka Ramnath dozing at Subhiksha Board meets?

India’s premier PE firm ICICI venture (I-Venture) with more than $2 billion fund size can’t be so naïve.

I-Venture CEO & MD, Renuka Ramnath says the management of flagging retail chain Subhiksha (in which the firm has a 23% stake and has the power to appoint majority directors in its Board) kept it in the dark regarding the goings on. (She was one of the Board members then). She goes on to add "As a responsible investor, despite being minority shareholders and not having management control, we are talking to all players concerned and trying to seek a possible solution which will be in the best interest of all, including the employees”.

Here is the punch line "We didn’t know what to trust and what was the real intention of the merger” (with a listed NBFC Blue Green Constructions with which Subhiksha sought to reverse merge for widening its shareholder base).

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Oh, really? A firm in which a leading PE firm has a 23% stake and the firm knows "nothing" about decisions as critical as a reverse merger? It was all over the media back in June, 2008 when Subhiksha acquired 40% stake in the little known listed entity Blue Green Constructions. The Board (in which I-Venture has majority) Meeting in which the acquisition was to be ratified was reportedly held on June 30, 2008 and then Ms.Ramnath didn’t seem to object.

The fact is, had the back door listing strategy worked well, I-Venture would have exited the firm lock, stock and barrel thro divesting its stake either in the open market or thro a secondary exit to other PE firms. The manner in which it “quietly divested” 10% stake for Rs.230 crore to Azim Premji’s PE arm Premji Invest back in September 2008. While I-Venture could dupe Azim Premji, it couldn't dupe the public investors since the merger didn't go thro.

Now why would a PE firm exits in a hurry if it wasn’t in control of the company and wasn’t aware of the murky goings on? Normally if there is a listing possibility, PE investors would rather wait for the market to discover the price. Even if one were to buy Ms.Ramnath’s argument – that Subhiksha did not submit audited accounts beyond March, 2007, it should have disclosed the fact to Mr.Premji which it clearly did not. I-Venture looked after its own interests, to hell with the company, co-investors or employees. But no one would blame the PE firm for that because it just cashed out on an opportunity. But you can’t excuse it if it says it was kept in the dark by the investee company management, despite wielding majority control of its board and in a company where it has a substantial 23% stake.

It’s a little too naïve – to expect the world to believe Ms.Ramnath. It’s ok if she chickened out fearing prosecution when legal notices (from unpaid vendors, employees, EPFO) started flying in. That's when she along with her colleague exited the Board of Subhiksha. But then it also means she wasn't exactly awake all the while at those Board Meetings leaving Subhiksha MD Mr.R.Subramonian to run the business as he did.

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"You need their money, honey"

So long as they were part of the ruling coalition led by Congress party, the Left played spoilsport and scotched every effort to relax FDI norms in specific sectors. They were vociferous against relaxing FDI in retail, telecom and insurance sectors. Now that they were out and recession is in, the government made the best use of the opportunity to throw FDI floodgates open. Now they say equity investments routed through companies in which majority ownership and control is in the hands of Indians would be treated as fully domestic equity.

Till now, the norm was that foreigners would be deemed to have an indirect stake in any investment made by the JV company in proportion to the stake held by them in the JV. In the revised norms, now there is no concept of any indirect holding, so long as the parent JV has a majority Indian holding.

Now, it’s not as if eyebrows aren’t raised.

The principal criticism is that now FDI will be linked to ‘control’ and ‘legal ownership’, completely divorced from “economic ownership”. But I can safely vouch - from my own experience while undertaking due diligence in several JVs that I'd been involved - the fact that FDI norms were easily got around even earlier by inserting specific clauses that vested control with the minority foreign partner, especially in strategic JVs. It just boiled down to who needs who more. If the business needed the strategic expertise that a foreign partner had but the stupid laws don’t let them have control, the majority Indian partners have little or no option to cede `control' discreetly to the minority than not to have access to the expertise at all. Shareholder agreements have vested in the minority foreign shareholder executive authority, super minority provisions to vote against a resolution, demand consent, right of first refusal, etc. Sectoral FDI caps in telecom, insurance and media have given birth to creative holding (thro preference shares / stock warehousing by domestic HNIs on behalf of foreigners) structures. Sometimes even lenders have better rights than majority shareholders in highly leveraged situations.

Laws should certainly regulate, not thwart opportunities. Sooner they realize it the better. But now the economic reality has given our government and its regulators a much clearer vision that they badly needed.

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Stimulus ain't free nor funny

It’s a busy season for stimulus packages that run into billions of dollars and sometimes even a trillion or two. (Suddenly `a million' sounds like small change!) For the announcers perhaps it gives them a few fleeting moments at the grandstand, but the global economies and its constituents including the stock markets are hardly pleased. The doubts don’t just linger around the quantum and quality of diligence behind these initiatives, it harp more on its viability – because they know their governments just don’t have so much money.

We thought Tim Geithner will be an improvement over Hank Paulson, at least in terms of practicality as he began by distancing himself from the `tentative steps’ of his predecessor even though he had been consulted upon. Anyway, the first vibes fail to soothe. For all the tough talk, however, the new plan, which will deploy the second half of the $700 billion Troubled Asset Relief Programme (TARP), was frustratingly light on detail.

Cut to home. Yesterday, the Government of India announced fresh borrowing program. As against Rs.2,22,154 crore raised in the ten months to January 2009, it intends to raise further Rs 46,000 crore (almost 21% of debt to date) between February 20 and March 20. Predictably, bond market reacted, sending yields higher (the additional supply will depress prices and push up yields). Though the RBI, the government’s debt manager, made haste to say the additional borrowing would be conducted in a non-disruptive manner, markets are not convinced.

So why do I say it’s not boding well for the economy? Government borrowing being seen as risk free, the rate at which it borrows gets set as the floor rate for all commercial lending. As such, borrowings by all other entities are seen as risky and so the mark up on interest rates go up. That drives the cost of funds up and hence the government cannot push banks to keep lending rates low to stimulate the economy.

Yet they call it stimuls. Now, isn’t that funny?

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"Enough of draw down"

say the Limted Partners (investors) in PE funds to the Fund Managers that let them down.

When I titled this blog as “General Partners V. Limited Partners” , it was pretty much apt for the situation then. General Partners that make the most critical investment decisions in their PE funds were held accountable for its outcome by the Limited Partners that funnel those funds. When investments don't yield desired returns, it's time for GP's to brace up for an LP interrogation, often that ended in LP deserting the funds and GP's earning a bad reputation. In the PE small world, word is out fast and that means near death for the GPs. They can't hop jobs so easily.

Now the situation has been upended. The new flip is that the Limited Partners are advising the General Partners not to press draw downs. May be, it's the liquidity crunch and absence of leverage that chokes many a LP funnel. But I like that in one way because somewhere the indiscretion has to end. The choice of investments they make is abysmal. Worse is the follow up supervision and near absence of timely strategic interventions. It’s not buy and hold anymore, buy and sleep seems to be the strategy for some.

"Outrageous"

Sometimes you get to read funny combination of headline news. Today I had one such - on Wall Street bonuses and another on PE firms unlikely to invest now.

Even as the whole world reels under recession triggered by Wall Street excesses, they have no qualms in collectively showering upon themselves billion $ bonuses as usual. Barack Obama felt it’s “outrageous”. Indeed.

Another is not so retchy, yet funny. Now that valuations are at their near lowest, PE firms are unlikely to invest. May be they are waiting for hyper valuations to return so that they can stir in right earnest burning bigger holes in their investors’ pockets!

What they teach only at B-schools ?

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After thoughts governments

Placing a fielder after the ball gets struck

This is my favorite cricket metaphor. It typifies a late riser, usually a fielding team captain that moves around his fielders to spots after the ball gets hit and not before. Smart batsmen will sense this and occasionally mislead the fielding team by offering unorthodox strokes to spots where they are not so good at stroking (say, a right hand batsman playing a risky shot to the gully or extra cover on the off-side) – it’s just a ruse to rattle the field so that he can freely score at his favorite spots where there shall be no fielders. Smart captains normally set a field and make sure his bowlers bowl to the field, not letting the batsmen settle down.

Our administrators are of the former variety - of late risers. When our real estate market was red hot, global strategic and financial investors including PE were making the major mistake of investing large amounts of money in overvalued assets, our government came down with a slew of regulations – P-Note bans, setting high water marks for FDI, classifying convertible debentures as equity etc. They made sure that they punctured the swell until there was nothing but flat tires. Now after the investors are gone, the globe in a recession, real estate developers are broke, sense prevails.

The government is tweaking FDI regulations to exempt mixed development projects from the $10 million capitalization requirement, reduce the project size to 10 acres (from 25 acres) and cut the minimum built up area to 10,000 (from 50,000) square feet. The lock-in of three years after the date of completion of the project shall continue. The only condition is that 50% of the area will be kept open for hotels / tourism activities, shall be subject authority supervision and residential buildings shall not be put to use otherwise.

It was pretty much the same thing that RE developers earlier clamored for. Now after they are long broke or even dead and gone, the government is waking up to the idea. Anyway, I will stock up on some real estate stocks - expecting a rally :-)

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Tax cuts or higher public spending - which is better recession remedy?

This is often a confounding question that baffles governments and right thinking citizen alike. Arguments fly back and forth – tax cuts generate higher disposable income that goes to buy stuff and keeps demand buoyant. The opponents figure saved tax money just stays locked in. It doesn’t create jobs because businesses have put on hold large capex spends.

But then economic stimulus has its own detractors as well. Increased public spending on infrastructure, healthcare and education have long gestation periods. Committing the tax payer’s money to long term projects especially in recessionary times is not exactly sensible because there is no guarantee that businesses will continue to make profits in future years on which the government can expect to collect more taxes and keep those jobs in tact.

Here’s how to think about this argument: it implies that we should shut down the air traffic control system. After all, that system is paid for with fees on air tickets — and surely it would be better to let the flying public keep its money rather than hand it over to government bureaucrats. If that would mean lots of midair collisions, hey, stuff happens.

The common knowledge is that tax cuts are not always better than public spending. Tax cuts work when a particular industry is marred by business cycle or has been subjected to excessive levies or if it contributes to larger public good, like say clean tech. In general otherwise, public spending provides much more bang for the buck than tax cuts — and therefore costs less per job created — because a large fraction of any tax cut will simply be saved.

This suggests that public spending rather than tax cuts should be the core of any stimulus plan. But rather than accept that implication, conservatives take refuge in a nonsensical argument against public spending in general.

But I would rather weigh it on case to case, time to time than offer a sweeping solution.

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L&T had no other option

As more than active observer of stock markets, I was just wondering what would I do if I were heading Larsen & Toubro, that bought 4% of Satyam stock at Rs.170 apiece earlier this month, after which the stock just collapsed to Rs.20 levels...?

I would have just bought up more. Not just for averaging, since L&T has an infotech arm that isn't going anywhere, this is the best opportunity to hire a company that has some marquee customers like GE.

And they seem to have done exactly that... I, like anyone else was stunned by the volume of over 300 million shares that got traded in NSE and BSE tody. First I thought it was the interest because of new suitors (iGate). Later I get to know L&T was buying up. But it certainly didn't hurt... I exited my positions when the stock touched 39.25 and made a neat profit...

Will re-enter tomorrow between Rs.35 - 40 levels, if I get it.... I feel L&T should still be bying up until its 15% with them and then proceed to make an open offer for further 20% and as usual I wouldn't wait to tender, will just exit during the melee in the market and retreat to the sidelines...

IIP numbers, a mirage?

Oil price is down, inflation is down, Rupee is down, Exports don’t look up. Still Banks don’t cut lending rates enough in proportion to cut in repo and CRR nor do they start some serious lending. This has created a sort of optical illusion in our IIP numbers that got released yesterday. The index showed an increase of 2.4 per cent over November 2007, which is not a great performance but apparently different from the 1.4 per cent decline in the previous month. However, the base effect seems to be largely responsible for both numbers. The October base was relatively high, with the index having grown by about 12 per cent in October 2007, while the November base was just the opposite, with the index having increased by a mere 4.9 per cent over the previous year. Stripped of the base effect, the optical improvement disappears and there is little question that the industrial sector is in a virtually no-growth period. On the face of it, this is likely to persist for some time. Even if the successive interest rate cuts and the various other measures that have been taken by the Reserve Bank of India and the government are enough to reverse the slowdown, the effects are unlikely to be visible until later in the year.

If the slowdown in manufacturing, gems & jewellery and other sectors is largely attributable to high interest rates, then the recent rate cuts must favor a turnaround in these sectors, though the cuts have not gone far enough. The missing link, of course, is the apparent reluctance of banks to lend money to people who might want to buy houses, cars or appliances. Until this flow of credit begins, a turnaround is not in prospect. However, the conditions, in terms of liquidity, are hopefully being put into place.
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ASATYAM COMPUTERS books weren't cooked; that was 3D virtual reality

Here, I suspected it's no longer SATYAM.... Now I stand vindicated...

Speculations glaore. I go it's all worthless. May be it's worth the value of some pricey real estate that it occupies in India's southern city of Hyderabad provided its overcooked balance sheet has truth enough in its declaration of the company's debt-free status. Otherwise, one would assume that even the properties may have been pledged or worse, being that of a software company, it's created out of 3D virtual reality. Something as in Second Life.

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I begin to doubt the Indiaworld acquisition that Sify (Satyam Infoway, sister concern of Satyam then) did for a mind boggling Rs.499 crore ($115 million in 1999 $). Did money really changed hands to that nondescript entrepreneur Rajesh Jain, CEO of Indiaworld? If so, why is he still stuck with some never-to-start startup? People with $100 million certainly will have a lot more options that the world would be curious to track. I have this feeling the price that Sify paid would have been far less, far far less and bulk of the money would have been stashed away by Rajus in some secret tax haven accounts.

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But then they also say the liabilities are underfunded to the extent of Rs.1230 crore (about $24 million) that Raju has arranged by pledging his shares. Anyway, too bad that Raju used a wildlife metaphor while attempting to clear his conscience in his letter to the Board- "it was like riding the tiger and not knowing how to get off without being eaten" - and disgrace the animal.

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It sure is a murky mess and it's only getting murkier. But there are some bravehearts too... And I sure can't stop envying the folks that were short on the stock yesterday...!
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After SATYAM-MAYTAS, it's HIRCO-HIRANANDANI

It's the scam season, no doubt... First came MADOFF that made-off with billions of $ of investor funds, then closer home it was SATYAM COMPUTERS being sought to be shortchanged by its founders currently holding 5.3% minority stake by exchanging their loss making businesses in lieu of huge cash in Satyam balance sheet. To hell with valuations, due diligence or even corporate governance.

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After SATYAM-MAYTAS fiasco, here's another; Hiranandani (Builders) attempts to take co-investors for a ride by opting for a merger with loss making family business HIRCO Developments with its AIM listed outfit HIRCO. The investors are irked because the decision is taken without undertaking appropriate valuation of the target, eerily similar to the Satyam deal that fell through because of shareholder revolt. In the Satyam deal, the promoters of SATYAM COMPUTERS (later found to be holding less than 6% stake) had decided to buyout their family concern MAYTAS infrastructure and MAYTAS properties both real estate businesses heavily in debt by using $1.6 billion cash in SATYAM's balance sheet. Later all the independent directors in its Board had to tender resignations owning up moral responsibility for their tacit concurrence by remaining passive during the Board meeting at which the issue was hush hushed.

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Why does the expression chutzpah come to my mind...?

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Should they junk SATYAM management?

The (A)SATYAM saga is getting messier by the day.

The issue has meandered around a lot of flaky bends. First it was the bid to diversify into real estate defying all norms of corporate governance by disregarding the need for shareholder approval before making a strategic business shift. Then came the relevance of independent directors on its Board, that remained passive to promoter Ramalinga Raju’s initiative to buy grossly overvalued family concerns. Almost all of them have since resigned. What followed was yet another rant on Raju’s wiliness – how could he pull off all this while his stake has dwindled close to nothing (all of his 8.6 % in SATYAM was pledged to institutions to raise funds to finance MAYTAS venture that lost almost 80% of its value in the recent real estate meltdown – the institutions have recalled the loans that Raju could not meet and they sold his entire stake in the open market last week as the story broke).

And the latest is, HP training its guns on SATYAM. Gartner studies say IBM leads the global IT services market with around 7.2% of the market, followed by HP-EDS with around 5.3% of the market. HP overtook second-placed Accenture after it acquired EDS earlier this year. The global market for computer services is estimated to be around $748 billion. Even after the EDS acquisition, through which HP gained over 20,000 employees of MphasiS, it trails both IBM and Accenture in terms of offshore strength. IBM has over 73,000 professionals in India and Accenture some 37,000.

And now a fresh debate. Should the existing management be allowed to continue given their track record of delivering consistent business growth? I too believe that a change could be harmful and are willing to give the existing operational team a chance. Had the management clearly realized its mistake and makes amends on the governance front, it’s better to run with the same bunch that ensures customer comfort and affirms durable relationships. It’s not easy to let go off clients GE, Qantas and regain their confidence in the short term for any new management.

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SATYAM is up for grabs, pal

Ok. Enough is said about SATYAM COMPUTERS in the last one week. I come straight to the point. Dice begins to roll on who gets to buy SATYAM now that it is a sitting duck for a strategic investor / a PE raider. Want proof? Check out the huge volume of 90 million shares changing hands in the Indian stock exchanges (NSE and BSE) even as we still have a good 2 hours of trading left!!

I stuck my neck out and wanted a piece of action. Bought some SATYAM stock today. Here is some perspective on the India Offshoring scenario that I checked out before buying it. Feels good, buddy... the stock is already up by 5% from the price I bought...

So....I am already in-the-money :-) on my SATYAM buy of this morning. Aren't you too?

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Art of getting independent directors to act

Why do independent directors discard independence? Protecting minority investors yield them nothing. That’s why.

If they dance with the founders/incumbent management, they get generous sitting fees, commissions, occasional foreign junkets, vacation homes and transport free for them and family. For ex-B School faculty and bureaucrats that deck up as independent directors (just to check the columns in the compliance sheets) these freeloads are incentive enough not to disturb the peace and quiet at Board Meetings.

Few have the courage to transcend political correctness (at Board level, read "Promoter Correctness") and strive for human righteousness. Character is doing the right thing when nobody's looking. There are too many people who think that the only thing that's right is to get by, and the only thing that's wrong is to get caught – like the independent directors in (A)SATYAM COMPUTERS recently realized. In the end, if you have integrity nothing else matters and if you don’t have it, nothing else matters as well. So why load up excess baggage?

To the regulators, I would say please don’t slap more laws. We have enough. Laws control the lesser man. Right conduct controls the greater one. Have the courage to blacklist independent directors when they fail. Deprive them of all their Board seats and disqualify them straightaway. Companies Act has provisions for disqualification of directors already. Go enforce them.

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Or better still, let the minority shareholders pool in and give them freebies :-)

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It's time SIEMENS relocate to India

Poor SIEMENS. It just got unlucky.

Too much is made out of a bribery scandal. What did it do after all? It ran a cash desk for its managers to draw money at will and offer kickbacks to get deals. Over time, they say it added up to $800 million or so. So what? Didn’t late Dhirubhai Ambani (and now his sons) build the Reliance empire by bribes? The Ministers do its bidding in the Parliament. They fight its war. Even as RIL (led by Mukesh Ambani) backtracks on its earlier agreement to sell gas to RNRL (led by feuding brother Anil Ambani) at concessional rates, Murli Deora, the Minister for Petroleum and Natural gas will force his bureaucrats to file an affidavit to help beef up the RIL case. The bureaucrats in the government where Reliance had something to do get two pay checks every month. A smaller one from the government and another one much larger from Ambani’s cronies. In return, they let Reliance import capital equipments at `NIL’ rate of duty by accepting its classification as `gift’ – yes, gift of an entire plant by an overseas supplier and more.

But that’s in India. In Europe and America they look down upon corruption. They won’t let companies get away with bribed deals. They are grilling SIEMENS and imposing massive penalties. But a Bernard Madoff type $50 billion ponzi schemes are allowed. Their investment banks are allowed to issue junk bonds that have little or no underlying asset that have the power to bring down their economies. [Hell the serial collapse of Wall Street banks looked like some Communist government issuing a “shutdown-or-else” diktat to free up pricey real estate – like they do in China pushing the poor people into hinterlands to make room for Olymipic stadium and other urban infrastructure. They let their auditors, credit rating agencies and regulators get away scot-free. Even Governors can sell senate seats and the courts don’t allow their removal.

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Hypocrisy? Well, ok for lack of a better word.

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I have some advice for beleaguered SIEMENS management – Relocate to India. You have all the right qualifications :-)

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ASATYAM COMPUTERS ?

“Satyam” in Sanskrit and a host of Hindu Dravidian languages like (Tamil, Telugu, Kannada and Malayalam) means Truth / Honesty.

“Asatyam” means just the opposite.

With the investor backlash over the attempted skullduggery by its management (with just 8% stake) to bailout the slumping Raju family group (Satyam founders) concerns MAYTAS Infrastructure and MAYTAS Properties (MAYTAS incidentally is SATYAM spelt reverse) for $1.6 billion (that's all the cash in its balance sheet!) and the subsequent calling off, there seems to be a good case for renaming the company as ASATYAM Computers. It’s not its first attempt by the minority management to oppress other minority shareholders. The group is known for its several dubious pursuits committed with impunity earlier.

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Mortgage crisis, Madoff madness - so what comes next?

Agreed. Mortgage crisis was because of a complex web of sliced and diced mortgages that escaped instant scrutiny. But how about a ponzi scheme run by an ex-Nasdaq broker dealer?

As a broker-dealer, Mr. Madoff's firm was already heavily regulated, and news reports say the Securities and Exchange Commission investigated him in 1992 without finding anything wrong. The SEC said in a statement Friday that its New York staff also conducted inquiries into Mr. Madoff's firm in 2005 and 2007. Mr. Madoff's separate investment company registered with the SEC in 2006, which is all that hedge funds would have had to do under the SEC's proposed (but failed) hedge-fund rule of a few years back.

The recent spate of scams from the US has made this once famous financial innovation powerhouse a den of con artists and shoddy regulators. Alright how about foreigners that invested so much money?

Without this flow of easy money into the U.S., globalization in its current form would not have been possible. The U.S. was the consumer of last resort, absorbing cars from Germany and Japan, electronics from Taiwan and Korea, and clothes and furniture from China. The earth was flat, and why not? Pluck a laptop from Taiwan and pay for it with a home equity loan, which—if you trace back the connections—was at least partly funded with foreign money, too.

The big unanswered question, for years, was why this money flow persisted. Why the heck were foreign investors willing to lend the U.S. such large amounts of money on such good terms? Economists and journalists spun out hypothesis after hypothesis (we'll see more below), but there was no agreement on why.

What comes next? The fallacy is punctured. Globalization will be seen as what it is—a game with risks that can't be wished away. And U.S. prosperity will depend on the success or failure of its ability to innovate—not its ability to tell an implausible story to foreign investors.

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Breaking the back of Indian Realty

Readers of this blog may be wondering why there is a sudden slowdown in posts. Well the truth is there is not much worthy of finding a place here and I don’t post something that I don’t feel seriously about. Moreover, volatility in the stock market has given me little time to waste and make use of every available opportunity to make a quick buck. After all, it’s time we make some money now that the market has occasional rallies – bear market or not.

Now I find this. Realty prices in India could correct by over 30% - now this is it. This is when reality dawns on realty. How long could they hold back? Stock markets have given a thumb down to the sector, there is a credit crunch and bankers are loath to lend to real estate players. But these scums wouldn’t budge. Now it seems their back is breaking.

I am normally not a saddist. But as far as unreasonable realty sector is concerned, I’d gladly be one.

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