Investment Rules for All Seasons.
During the Tech frenzy of late nineties four portfolios under my administration suffered significant losses. It was particularly disappointing because they had consistently done better than indices for previous twenty years. To determine what went wrong I analyzed every transaction for previous five years and formulated some rules to be followed scrupulously. Admittedly, they did not protect the portfolios from recent meltdown but the losses were not as severe as the indices.
Rule 1. Do not put most of your eggs in one basket.
An oft repeated mistake is to over weight stocks that look good on analysis, even to the extent of a quarter to a third of the portfolio. The damage suffered by such portfolio when the stock collapses due to unforeseen events offsets the gains when such stocks do well. Therefore, a cap on investment, say 10% of total portfolio value in any one stock, is desirable no matter how good it looks. If the price goes up sell some to stay within the cap, but if it drops, do not add to it beyond the cap set by cost, not current market value.
Rule 2. Do not have too many baskets.
Without regular pruning a portfolio can accumulate so many shares that some stocks constitute less than 1% of the portfolio. There is a limit to the number of stocks an investor reasonably track. The desirable number depends on the available time and the aptitude. I set the number at 30, about half of what it was in 1999, and sold off the rest. Some of the discarded stocks went up later but overall it did not make a significant difference either way. From time to time new stock(s) need to be added and some old one(s) retired but there should be no addition without deletion.
Rule 3. Do not have too few eggs in a basket.
If a stock drops to a very small percentage of the portfolio, either because it has lost value or others have gained, it is not worth the trouble to persevere with it. If the cost is below the cap the prospects should be evaluated and further purchase considered; otherwise it should be sold and the proceeds used to build some other position. This brings me to the favourite topic in some circles: cost averaging. In general, it does not work out for one of the two reasons: either the circumstances have changed or the original evaluation was not as comprehensive as it should have been. In any event, cost averaging is not to be contemplated if it will take the total cost above the cap.
Rule 4. Do not buy just because “it is going up.”
Do your analysis before buying regardless of what is going on in the market. What goes up often comes down. Jump in price in itself is not a good reason to jump in. If it is a good company there is time for a thorough analysis. If there are good reasons for the rise in price in terms of improved prospects some relative deadwood may be replaced with it. Otherwise why take the risk?
Converse is true as well. Do not sell because the price has a sudden drop. Evaluate the possible reasons and their impact on company’s prospects before taking action. Often the drop is more than events warrant and there is a modest recovery in the following days. The analysis should indicate the appropriate point to get off if it is desirable to do so.
Rule 5. Balance the portfolio with goals and risk tolerance in mind.
The goal of every investor is to maximize the portfolio. But it must be balanced against risk. My question for impatient investors is “If you are in a rush to double your money, are you prepared to lose it too?”
Rule 6. Balance the portfolio for types of stocks.
There are three types of investments:
1. Conservative; large companies that pay a reasonable dividend, 3% or higher. These also include preferred shares and corporate and government bonds.
2. Speculative; small and medium size companies focus on growth and any gains are through enhancement in share price.
3. Real Estate Investment Trusts (REIT) and other Investment Trust units; distribute a large proportion of the income to unit holders.
Conservative investments perform the best over long haul, speculative type in ‘growth’ periods and Investment Units in rough times. In general, Investment Units do better than preferred shares and bonds, but they are riskier. When the interest rates drop corporations redeem old bonds and preferred and replace them by cheaper new ones. Thus there is usually little capital gain in these investments. Investment Units can not be redeemed and there is no limit to potential capital gains. However, when the business turns bad, Trusts cut the payout and unit price suffers.
Allocation among these types depends on goals and risk to be assumed. In normal times the portfolio of an average investor can be divided roughly equally among them. For those approaching retirement speculation is to be avoided. In uncertain times like now Investments units tend to perform better, particularly when the income is counted in.
Other elements to factor in the allocation of dollars are the type of business e.g. manufacturing, resource development or service, and country where a business is located. There are times when a particular segment is emphasized and other times when it is avoided; there is no general rule. As for geography, unless the investor has means to investigate businesses located abroad, leave alone tax and business environment there, it is safer to focus on Canadian companies.
Last word in investment in troubled times: return on investment is important but not as important as the return of investment.
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Sunday, April 26, 2009
Sunday, April 19, 2009
A cabin in the Forest
After their youngest daughter flew the coop, Saraswati and Ravi felt rather lonely, particularly at the weekends. This problem never arose for their parents in the home country; there were any number of cousins, nephews, nieces who would visit at all hours of the day with their problems, sometimes job related at other times romantic which could not be discussed with the parents. But they were here in Canada where no one visits unless invited with great ceremony weeks in advance. One Saturday Ravi was feeling particularly downhearted. He asked his mate of a quarter century, “Do you know what the locals in our situation do to keep depression at bay?” It was indeed a sixty four thousand dollar question because that is what the answer cost them. Saraswati, named after the Hindu goddess of wisdom, had already looked into the matter and had the answer ready, “Younger ones go to the mall, older ones go to the cabin. They have plenty of odd jobs to occupy them there and they don’t miss the company. If we don’t want to die of boredom before our time, a cabin is what we need.”
Well, Ravi did not want to die then any more than he does now. May be of old age a hundred years from now, but not of boredom; not then, not ever. So the hunt began. They wanted the cabin to be within easy driving distance, as different in character as possible from their comfortable home in the heart of the city and with minimum maintenance requirement in money, if not effort. The search took them to the lakes, mountains, prairies and creeks. It is not that they did not find any decent cabin; it is just that it would have cost all their savings and then some to acquire any of them. They were ready to give up and look for something else to occupy themselves when a sign, “For sale, one acre of forest, price reduced” popped up on their way back from yet another fruitless search for the elusive cabin. They followed the directions and came to the sign “Summer Village of Wayforus, No Facilities.” They turned right on a narrow road and arrived at what was indeed a forest of spruce and aspen that had been divided into one acre lots. The lot on sale sloped to the west and from the eastern end one could glimpse the mountains through the trees. A creek could be heard if you cupped your ears and listened intently. There were several stacks of wood which were probably too old to give much heat indicating that the place had not been used for a while. Several dead trees of both varieties were leaning dangerously waiting for a strong wind to uproot them. There was a clearing in the centre of the lot. In the clearing stood what Ravi said was a log house. “Log cabin, not log house” corrected Saraswati. It was about 25 feet across and 20 feet deep and seemed to be in a reasonable condition.
A call to the phone number on the sale sign set the time for the second visit. The realtor was a short, stout man with black hair and carried a search light. “I am Sam Yokomoto. It is my great pleasure to meet such a fine couple,” he introduced himself in the hearty voice of a successful realtor while vigorously shaking their hands. They told him their names which he noted down in a diary. “You know that there is no electricity, water, gas or telephone line here,” he told them nonchalantly as if it was an irrelevant detail. He opened the door, not much bigger than most windows, switched on the search light and stooped to enter the cabin. They followed him in to what felt like a dark dungeon. The host opened three wooden windows, one on each side in front of them and they saw a room about twice the length and width of a normal room. They had to walk carefully, the supporting beams were the height of their foreheads and they soon discovered that bumping into the hard wood was not a pleasant experience. There was nothing in the cabin except the dust accumulated over a long period on every surface. Sam told them that the owner was an old lady who had built it with her own hands fifty years ago for her use. She was short, barely five feet in her high heels, and saw no advantage in incurring the cost of placing beams a little higher than what would allow the clearance of a fraction of an inch over her hair. That also explained the shortness of the handcrafted door. She was now living in a retirement home and needed to sell the property to pay her upkeep.
It did not take long to negotiate the final price and Ravi and Saraswati were the owners of the cabin and a thousand alive and dead spruce and aspen trees before the month was over. Saraswati hired a young man to clean the cabin, install a woodstove, do some essential repairs, build an outdoor fire pit and fix the outdoor toilets and the clearing for the car to the cabin. Ravi took over the responsibility to clear the dead trees. It needed just one failed attempt to cut off a branch by hand saw for him to realize that the job needed a chain saw. All he knew about chain saws was that they were dangerous and needed great care in handling. He undertook a careful search on the internet, noted recommendations of the bloggers, inspected several models and grilled the salesmen about their safety and maintenance needs. By the end of the week the most expensive chain saw ever built was in the trunk of the car along with safety gloves, apron, goggles and the right fuel. As soon as they got to the lot, Ravi poured the gasoline in the tank, donned the safety gear, found a tree needing to be chopped and started the chain saw. The noise from the machine almost deafened Saraswati and scared the birds for several miles. But it did not worry him. He steadied his feet and put the metal to the wood. Sparks flew as the chain saw bounced a little out of control. As luck would have it Saraswati was watching intently from a safe distance the progress, or the lack of it. The bouncing saw and the sparks scared her out of her wits. “Stop, stop” she screamed. Ravi followed her orders as any novice trying to learn a dangerous job would. But a few seconds of observing her husband was enough for his good wife to make up her mind. She ordered him to put the saw away and never touch it again. Like any loving husband, he took her words to his heart and never thought of using it even in his wildest dream.
The couple spent many afternoons and a few odd nights in the cabin before the winter arrived. Ravi’s friend from school days and his wife insisted on spending a week there. They fixed two water barrels, hung two hammocks outside and suspended hummingbird feeders from the lower branches of Aspen trees. Ravi and Saraswati became more daring with each visit. So much so that on their last night of the year there, they dragged the bed out and watched the stars twinkle in a bright blue sky from a comfortable horizontal position till exhaustion won over the excitement. The swarm of mosquitoes did not bother them but the sleep was interrupted nonetheless. A downpour had them rushing inside the dark cabin. How they managed it in pitch dark without getting drenched and their heads still in one piece will always remain a mystery.
In spite of the ever-present fear of banging her head, Saraswati enjoyed the cabin and furnished it such that it was comfortable without being cluttered. Ravi could not suppress the urge to show it off and persuaded his better three quarter to invite some friends for a winter barbecue to inaugurate the fire pit. Dame Fortune smile on them, as she does on the novices, and on the appointed day sky was blue, sun bright, gentle breeze not unpleasant and temperature not high enough to melt the three inch thick layer of snow on the ground. It turned out to be a fun afternoon even though some cars skidded into the ditch and had to be pushed out by younger and muscular members of the party. The success of the event reached their daughters’ ears and prompted them to visit the cabin on the New Year’s Day for a picnic lunch. It was a miserable cold day, made worse when they looked at the thermometer on the wall – the level of mercury below heavy zero Fahrenheit line sent shivers down their young and sturdy spines. The wood stove was lighted and the fire was roaring within a few minutes. However, the frozen heart of mercury was not moved by all the shivering around it. After an hour of cursing the cold and sipping tea or coffee from the flasks they noted that it was indeed warmer - by five degrees. Young people these days are not as patient as their parents' generation, nor as hardy. They decided to call it a day and had their picnic in the car on the way home. Ravi knows their hands were not all that steady; cleaning the crumbs from the seats of his car was a tough job.
Saraswati met a young man in her Yoga class who had just moved to the city from a small village in the foothills and was feeling homesick. She told him about the cabin and invited him to use it if he wanted to. He jumped at the chance and visited it regularly. Although six feet tall, he did not seem to mind the low beams but he did look after the fallen trees, improved the toilets, fixed the fence and vastly improved the appearance of the property. Then he met a young lady who also loved rustic outdoors. They took to visiting the cabin and did whatever young people of different genders do these days when they are together. Before long they married; bought a property nearby and settled down to a life of pastoral bliss. Saraswati now has her eyes open for another homesick young man from the boonies; there are several trees that need attention.
Other than the low beams, dusty floor was another problem, particularly because Ravi banged his head harder when sweeping the floor. But it turned out to have an easy solution – two generous coats of paint carefully applied by Saraswati with a thick brush. Not only did the floor become dust free, it was easier to clean and the cabin became a little brighter. One improvement led to others. An architect friend devised a way to raise the beams. He also put two skylights on the roof, added a porch and replaced the old door by a new one of standard height. The cabin still kept it old charm but it became so much more inviting. Porch became the living room, with cooking facility, i.e. a propane camp stove, along the wall and a large table with comfortable chairs around it. They are so pleased with their cabin in the forest that plans are afoot to spend next New Year’s Day there. Ravi somehow doubts that the daughters will join them even if offered substantial bribes.
It took them ten years to get their cabin in shape. The journey was long and hard, not to mention expensive. But it was worth it for it helped them get over the empty net syndrome and was a major step towards integration with the host culture.
Please tell your literate friends if you enjoyed the story. They may like it too.
After their youngest daughter flew the coop, Saraswati and Ravi felt rather lonely, particularly at the weekends. This problem never arose for their parents in the home country; there were any number of cousins, nephews, nieces who would visit at all hours of the day with their problems, sometimes job related at other times romantic which could not be discussed with the parents. But they were here in Canada where no one visits unless invited with great ceremony weeks in advance. One Saturday Ravi was feeling particularly downhearted. He asked his mate of a quarter century, “Do you know what the locals in our situation do to keep depression at bay?” It was indeed a sixty four thousand dollar question because that is what the answer cost them. Saraswati, named after the Hindu goddess of wisdom, had already looked into the matter and had the answer ready, “Younger ones go to the mall, older ones go to the cabin. They have plenty of odd jobs to occupy them there and they don’t miss the company. If we don’t want to die of boredom before our time, a cabin is what we need.”
Well, Ravi did not want to die then any more than he does now. May be of old age a hundred years from now, but not of boredom; not then, not ever. So the hunt began. They wanted the cabin to be within easy driving distance, as different in character as possible from their comfortable home in the heart of the city and with minimum maintenance requirement in money, if not effort. The search took them to the lakes, mountains, prairies and creeks. It is not that they did not find any decent cabin; it is just that it would have cost all their savings and then some to acquire any of them. They were ready to give up and look for something else to occupy themselves when a sign, “For sale, one acre of forest, price reduced” popped up on their way back from yet another fruitless search for the elusive cabin. They followed the directions and came to the sign “Summer Village of Wayforus, No Facilities.” They turned right on a narrow road and arrived at what was indeed a forest of spruce and aspen that had been divided into one acre lots. The lot on sale sloped to the west and from the eastern end one could glimpse the mountains through the trees. A creek could be heard if you cupped your ears and listened intently. There were several stacks of wood which were probably too old to give much heat indicating that the place had not been used for a while. Several dead trees of both varieties were leaning dangerously waiting for a strong wind to uproot them. There was a clearing in the centre of the lot. In the clearing stood what Ravi said was a log house. “Log cabin, not log house” corrected Saraswati. It was about 25 feet across and 20 feet deep and seemed to be in a reasonable condition.
A call to the phone number on the sale sign set the time for the second visit. The realtor was a short, stout man with black hair and carried a search light. “I am Sam Yokomoto. It is my great pleasure to meet such a fine couple,” he introduced himself in the hearty voice of a successful realtor while vigorously shaking their hands. They told him their names which he noted down in a diary. “You know that there is no electricity, water, gas or telephone line here,” he told them nonchalantly as if it was an irrelevant detail. He opened the door, not much bigger than most windows, switched on the search light and stooped to enter the cabin. They followed him in to what felt like a dark dungeon. The host opened three wooden windows, one on each side in front of them and they saw a room about twice the length and width of a normal room. They had to walk carefully, the supporting beams were the height of their foreheads and they soon discovered that bumping into the hard wood was not a pleasant experience. There was nothing in the cabin except the dust accumulated over a long period on every surface. Sam told them that the owner was an old lady who had built it with her own hands fifty years ago for her use. She was short, barely five feet in her high heels, and saw no advantage in incurring the cost of placing beams a little higher than what would allow the clearance of a fraction of an inch over her hair. That also explained the shortness of the handcrafted door. She was now living in a retirement home and needed to sell the property to pay her upkeep.
It did not take long to negotiate the final price and Ravi and Saraswati were the owners of the cabin and a thousand alive and dead spruce and aspen trees before the month was over. Saraswati hired a young man to clean the cabin, install a woodstove, do some essential repairs, build an outdoor fire pit and fix the outdoor toilets and the clearing for the car to the cabin. Ravi took over the responsibility to clear the dead trees. It needed just one failed attempt to cut off a branch by hand saw for him to realize that the job needed a chain saw. All he knew about chain saws was that they were dangerous and needed great care in handling. He undertook a careful search on the internet, noted recommendations of the bloggers, inspected several models and grilled the salesmen about their safety and maintenance needs. By the end of the week the most expensive chain saw ever built was in the trunk of the car along with safety gloves, apron, goggles and the right fuel. As soon as they got to the lot, Ravi poured the gasoline in the tank, donned the safety gear, found a tree needing to be chopped and started the chain saw. The noise from the machine almost deafened Saraswati and scared the birds for several miles. But it did not worry him. He steadied his feet and put the metal to the wood. Sparks flew as the chain saw bounced a little out of control. As luck would have it Saraswati was watching intently from a safe distance the progress, or the lack of it. The bouncing saw and the sparks scared her out of her wits. “Stop, stop” she screamed. Ravi followed her orders as any novice trying to learn a dangerous job would. But a few seconds of observing her husband was enough for his good wife to make up her mind. She ordered him to put the saw away and never touch it again. Like any loving husband, he took her words to his heart and never thought of using it even in his wildest dream.
The couple spent many afternoons and a few odd nights in the cabin before the winter arrived. Ravi’s friend from school days and his wife insisted on spending a week there. They fixed two water barrels, hung two hammocks outside and suspended hummingbird feeders from the lower branches of Aspen trees. Ravi and Saraswati became more daring with each visit. So much so that on their last night of the year there, they dragged the bed out and watched the stars twinkle in a bright blue sky from a comfortable horizontal position till exhaustion won over the excitement. The swarm of mosquitoes did not bother them but the sleep was interrupted nonetheless. A downpour had them rushing inside the dark cabin. How they managed it in pitch dark without getting drenched and their heads still in one piece will always remain a mystery.
In spite of the ever-present fear of banging her head, Saraswati enjoyed the cabin and furnished it such that it was comfortable without being cluttered. Ravi could not suppress the urge to show it off and persuaded his better three quarter to invite some friends for a winter barbecue to inaugurate the fire pit. Dame Fortune smile on them, as she does on the novices, and on the appointed day sky was blue, sun bright, gentle breeze not unpleasant and temperature not high enough to melt the three inch thick layer of snow on the ground. It turned out to be a fun afternoon even though some cars skidded into the ditch and had to be pushed out by younger and muscular members of the party. The success of the event reached their daughters’ ears and prompted them to visit the cabin on the New Year’s Day for a picnic lunch. It was a miserable cold day, made worse when they looked at the thermometer on the wall – the level of mercury below heavy zero Fahrenheit line sent shivers down their young and sturdy spines. The wood stove was lighted and the fire was roaring within a few minutes. However, the frozen heart of mercury was not moved by all the shivering around it. After an hour of cursing the cold and sipping tea or coffee from the flasks they noted that it was indeed warmer - by five degrees. Young people these days are not as patient as their parents' generation, nor as hardy. They decided to call it a day and had their picnic in the car on the way home. Ravi knows their hands were not all that steady; cleaning the crumbs from the seats of his car was a tough job.
Saraswati met a young man in her Yoga class who had just moved to the city from a small village in the foothills and was feeling homesick. She told him about the cabin and invited him to use it if he wanted to. He jumped at the chance and visited it regularly. Although six feet tall, he did not seem to mind the low beams but he did look after the fallen trees, improved the toilets, fixed the fence and vastly improved the appearance of the property. Then he met a young lady who also loved rustic outdoors. They took to visiting the cabin and did whatever young people of different genders do these days when they are together. Before long they married; bought a property nearby and settled down to a life of pastoral bliss. Saraswati now has her eyes open for another homesick young man from the boonies; there are several trees that need attention.
Other than the low beams, dusty floor was another problem, particularly because Ravi banged his head harder when sweeping the floor. But it turned out to have an easy solution – two generous coats of paint carefully applied by Saraswati with a thick brush. Not only did the floor become dust free, it was easier to clean and the cabin became a little brighter. One improvement led to others. An architect friend devised a way to raise the beams. He also put two skylights on the roof, added a porch and replaced the old door by a new one of standard height. The cabin still kept it old charm but it became so much more inviting. Porch became the living room, with cooking facility, i.e. a propane camp stove, along the wall and a large table with comfortable chairs around it. They are so pleased with their cabin in the forest that plans are afoot to spend next New Year’s Day there. Ravi somehow doubts that the daughters will join them even if offered substantial bribes.
It took them ten years to get their cabin in shape. The journey was long and hard, not to mention expensive. But it was worth it for it helped them get over the empty net syndrome and was a major step towards integration with the host culture.
Please tell your literate friends if you enjoyed the story. They may like it too.
Wednesday, April 15, 2009
Is Big Ugly?
The precipitous year-on-year decline in value, be it real estate, stock market evaluations and worst of all morale of the populace, has been called ‘meltdown’ by economists and has created mortal fear among our leaders. Trillions of dollars have been poured in financial institutions to save them from bankruptcy and the nations from financial collapse. While this may have been necessary to save the global financial system, it has been done in a hurry without any conditions imposed on the distressed businesses and without any serious study of the causes and the future implications.
There are two important considerations while looking at the root cause of the meltdown. First, the biggest fall was in the assets which had the biggest rise in preceding years and the current evaluations of these assets, with some sorry exceptions, reached where they were a few years ago. It is not difficult to understand this although understanding does not reduce the pain of recent investors. Ever since the advent of Reagan era, controls on business have been relaxed and growth has been the mantra of governments led by short sighted economic advisors. This growth led to inflation in valuations which grew at exponential rate. This encouraged ever more risky lending for consumption and to irresponsible businesses. Financial ‘instruments’ of immense complexity were developed to hide the risks, which in turn led to higher growth. Many long time investors understood that such growth in valuations was unsustainable and had to correct some day. That happened in 2008. With this correction the values of real estate and most businesses declined to what they were a few years ago, arguably what they would have been if growth rate had not been inflated artificially by reckless lending and consumption. This decline exposed the worthlessness of the ‘instruments’, risky loans became unmanageable burdens and the financial system threatened to collapse.
Second vital consideration is that the industries which needed desperate measures to save them, and whose values were demolished, are the ones with biggest concentration in very few hands, financial institutions and auto manufacturers. The size of these corporations allowed them to indulge in megalomania. They could bypass regulations with impunity; obtain unreasonable conceissions from smaller governments under the threat of moving their plants elsewhere and from their home countries so they could ‘compete in global economy’. Canadians can count themselves fortunate that successive governments resisted bank mergers and they never became so big as to threaten the economy by their collapse. Moreover, they could be regulated into relatively sensible lending practices and therefore they are not the basket cases like most giant American and European institutions. The industries where ownership is widely scattered are also suffering the decline, media and forestry for example, but finance ministers are not offering them a cent because they know that any failures would not be critical and the mess would be mopped up by other businesses any way. This consideration should lead to the belief that wide spread ownership is critical to future stability of capitalist economy; in fact this is what makes capitalist system better than other systems. To achieve true competition and sustainability, capitalist system needs to have many companies of reasonably comparable size in the same arena. To ensure this, governments need to have regulations with teeth that reduce monopoly on national scale wherever practical.
The two considerations lead to an idea which is anathema to many. The ‘meltdown’ is a long overdue correction to the excesses of the past two decades and if properly handled could lead to growth at a smaller but sustainable rate. In order to achieve this we must ensure true competition by ensuring that no business is, or becomes, so big as to eliminate competition and, more important, threaten the system when it fails for whatever reason. Small may not always be beautiful but the big is sure ugly when it is lying helplessly on its back.
If you enjoyed this essay, please tell your friends about the blog.
The precipitous year-on-year decline in value, be it real estate, stock market evaluations and worst of all morale of the populace, has been called ‘meltdown’ by economists and has created mortal fear among our leaders. Trillions of dollars have been poured in financial institutions to save them from bankruptcy and the nations from financial collapse. While this may have been necessary to save the global financial system, it has been done in a hurry without any conditions imposed on the distressed businesses and without any serious study of the causes and the future implications.
There are two important considerations while looking at the root cause of the meltdown. First, the biggest fall was in the assets which had the biggest rise in preceding years and the current evaluations of these assets, with some sorry exceptions, reached where they were a few years ago. It is not difficult to understand this although understanding does not reduce the pain of recent investors. Ever since the advent of Reagan era, controls on business have been relaxed and growth has been the mantra of governments led by short sighted economic advisors. This growth led to inflation in valuations which grew at exponential rate. This encouraged ever more risky lending for consumption and to irresponsible businesses. Financial ‘instruments’ of immense complexity were developed to hide the risks, which in turn led to higher growth. Many long time investors understood that such growth in valuations was unsustainable and had to correct some day. That happened in 2008. With this correction the values of real estate and most businesses declined to what they were a few years ago, arguably what they would have been if growth rate had not been inflated artificially by reckless lending and consumption. This decline exposed the worthlessness of the ‘instruments’, risky loans became unmanageable burdens and the financial system threatened to collapse.
Second vital consideration is that the industries which needed desperate measures to save them, and whose values were demolished, are the ones with biggest concentration in very few hands, financial institutions and auto manufacturers. The size of these corporations allowed them to indulge in megalomania. They could bypass regulations with impunity; obtain unreasonable conceissions from smaller governments under the threat of moving their plants elsewhere and from their home countries so they could ‘compete in global economy’. Canadians can count themselves fortunate that successive governments resisted bank mergers and they never became so big as to threaten the economy by their collapse. Moreover, they could be regulated into relatively sensible lending practices and therefore they are not the basket cases like most giant American and European institutions. The industries where ownership is widely scattered are also suffering the decline, media and forestry for example, but finance ministers are not offering them a cent because they know that any failures would not be critical and the mess would be mopped up by other businesses any way. This consideration should lead to the belief that wide spread ownership is critical to future stability of capitalist economy; in fact this is what makes capitalist system better than other systems. To achieve true competition and sustainability, capitalist system needs to have many companies of reasonably comparable size in the same arena. To ensure this, governments need to have regulations with teeth that reduce monopoly on national scale wherever practical.
The two considerations lead to an idea which is anathema to many. The ‘meltdown’ is a long overdue correction to the excesses of the past two decades and if properly handled could lead to growth at a smaller but sustainable rate. In order to achieve this we must ensure true competition by ensuring that no business is, or becomes, so big as to eliminate competition and, more important, threaten the system when it fails for whatever reason. Small may not always be beautiful but the big is sure ugly when it is lying helplessly on its back.
If you enjoyed this essay, please tell your friends about the blog.
Saturday, April 4, 2009
Kiss
1.
Ravi was shocked. If you were in his place you would be too. After spending most of the morning working to save a major contract, he was now looking at the picture of Natasha, his wife, dressed to kill in a low cut gown, in the tight embrace of his best friend Vijay with their lips in firm contact. The picture had not arrived surreptitiously in the mail as such pictures do. It was presented to him, in person, by David on the cover of a folder with HAPPY ANNIVERSARY in bold letters across the picture. Ravi’s mind was in a whirl. Anniversary of what? Natasha’s illicit affair with her husband’s best friend? How can it be? What is there to be happy about it? Why is David presenting it to him with such ceremony?
Perplexity writ large on Ravi’s face confused David. He could not understand it. Ravi had engaged him to take pictures at his tenth wedding anniversary party. He had worked hard taking hundreds of pictures while others were enjoying delectable dishes and vintage wines in the company of interesting members of opposite sex. His long time assistant had worked overtime to select the best thirty shots and to prepare this folder. There was a long pause before he blurted, “What is the problem?”
“The problem you ask. My wife is kissing my best friend on the cover of the album and you ask what is the problem? Where did you get this picture and why would you show this to me any way?”
“Oh God. How could I be so blind? I am so sorry for the blunder.” With that apology, if one can call it that, David whisked away the folder and rushed out of the door.
2.
Vijay cuts a dashing figure although he is short, balding on the top; a little paunchy and of a patchy brown complexion. He is always immaculately dressed in a freshly ironed pale blue or white shirt, dark suit and a red tie with every strand of jet black hair plastered in its proper place, a confident smile on his lips, the faint perfume of after shave in the air and black shoes he had polished till they shone to match his hair. He is single but never without a ravishing blonde by his side in any social event. Unlike most men in his fortunate position, he is reticent about his love life even after he has had a few drinks too many. However, he did share with Ravi and Natasha an unfortunate incident at his company’s Christmas party. He was waiting near the entrance of the dining room for Roma, his girl this evening, to return after ‘freshening up’ when a friend of one of his former girl friends, “a heavily made up woman long past her prime” as he described her, walked towards him. He extended his right hand to greet her but she held both her arms out for a hug. As his cheek accidentally brushed hers she whispered, “Mouth, not cheek.” When their lips separated Roma was staring strangely at them. To Vijay’s utter dismay, normally voluble Roma was quiet for the whole evening, declined his invitation to visit his apartment after the party to see his collection of rare miniature art from Maldives Islands and curtly refused to see him again.
3.
To clear the air between them Ravi mentioned the incident with David to his wife over dry sherry before dinner. Natasha burst out laughing, “When I greeted Vijay at the anniversary party he said - mouth, not cheek - quoting from the incident with his former girl friend and I played my part in the jest. David must have snapped us and his assistant put the picture on the cover thinking Vijay was you.” The mystery solved, Ravi now wondered what Natasha found so funny in the incident. But he was too tactful to ask.
Natasha relates this tale of mistaken identity with great gusto in every gathering and the listeners enjoy its every telling. As for Ravi, the initial shock has worn off but attentive in the party can’t fail to notice a touch of unnatural in his laughter.
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1.
Ravi was shocked. If you were in his place you would be too. After spending most of the morning working to save a major contract, he was now looking at the picture of Natasha, his wife, dressed to kill in a low cut gown, in the tight embrace of his best friend Vijay with their lips in firm contact. The picture had not arrived surreptitiously in the mail as such pictures do. It was presented to him, in person, by David on the cover of a folder with HAPPY ANNIVERSARY in bold letters across the picture. Ravi’s mind was in a whirl. Anniversary of what? Natasha’s illicit affair with her husband’s best friend? How can it be? What is there to be happy about it? Why is David presenting it to him with such ceremony?
Perplexity writ large on Ravi’s face confused David. He could not understand it. Ravi had engaged him to take pictures at his tenth wedding anniversary party. He had worked hard taking hundreds of pictures while others were enjoying delectable dishes and vintage wines in the company of interesting members of opposite sex. His long time assistant had worked overtime to select the best thirty shots and to prepare this folder. There was a long pause before he blurted, “What is the problem?”
“The problem you ask. My wife is kissing my best friend on the cover of the album and you ask what is the problem? Where did you get this picture and why would you show this to me any way?”
“Oh God. How could I be so blind? I am so sorry for the blunder.” With that apology, if one can call it that, David whisked away the folder and rushed out of the door.
2.
Vijay cuts a dashing figure although he is short, balding on the top; a little paunchy and of a patchy brown complexion. He is always immaculately dressed in a freshly ironed pale blue or white shirt, dark suit and a red tie with every strand of jet black hair plastered in its proper place, a confident smile on his lips, the faint perfume of after shave in the air and black shoes he had polished till they shone to match his hair. He is single but never without a ravishing blonde by his side in any social event. Unlike most men in his fortunate position, he is reticent about his love life even after he has had a few drinks too many. However, he did share with Ravi and Natasha an unfortunate incident at his company’s Christmas party. He was waiting near the entrance of the dining room for Roma, his girl this evening, to return after ‘freshening up’ when a friend of one of his former girl friends, “a heavily made up woman long past her prime” as he described her, walked towards him. He extended his right hand to greet her but she held both her arms out for a hug. As his cheek accidentally brushed hers she whispered, “Mouth, not cheek.” When their lips separated Roma was staring strangely at them. To Vijay’s utter dismay, normally voluble Roma was quiet for the whole evening, declined his invitation to visit his apartment after the party to see his collection of rare miniature art from Maldives Islands and curtly refused to see him again.
3.
To clear the air between them Ravi mentioned the incident with David to his wife over dry sherry before dinner. Natasha burst out laughing, “When I greeted Vijay at the anniversary party he said - mouth, not cheek - quoting from the incident with his former girl friend and I played my part in the jest. David must have snapped us and his assistant put the picture on the cover thinking Vijay was you.” The mystery solved, Ravi now wondered what Natasha found so funny in the incident. But he was too tactful to ask.
Natasha relates this tale of mistaken identity with great gusto in every gathering and the listeners enjoy its every telling. As for Ravi, the initial shock has worn off but attentive in the party can’t fail to notice a touch of unnatural in his laughter.
If you enjoyed the post, please tell your friends about it. They may enjoy it too.
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