Is Money Market Fund safe? That is the big question. And no one has right answer. Login to your brokerage account and check the 7-day yield of swaping money market account . Do not surprise if it is over 4%. I am talking about CA Tax Free money market account, so taxable yield is over 6%. Any point over 3.5% is consider risky this days.
So what is going on? The bank are looking for your money - to raise the capital. So this is the way they are attracting investor. The money market fund usually buy Commerical short term papers and other short term securities. This securities are too many in the market and fewer buyer, hence its prices has gone down and yield going up. So your brokerage is passing this high yield to you. Very unusal, I have never imaging this could happen. This does not mean underlying security is very risky. If this underlying securities are risky then you will see the value of your $1 money market fund will be $0.97 or even lower after some time. People says that it never happend, but it happend last week. Since August, Wamu was offering 5% FDIC insured CD for 1 year and 4% in saving account. (It is still available Sep 24, 2008) Fed overnight rate is 2% and treasury yield is less than 1%, however they are offering 4.5%, something is cooking which is beyond our imaginations. I think they want to raise the capital. I just found the news that Wamu is taken control by FDIC through JPM or in other word 12th bank failed this year. Here is the list of all failed banks since 2000.
This high yield investmet securities will be available at lower price until the market stabilizes and find the buyer for this securities. At this point, international buyer are going away from US, we have record outflow of investment dollor in July. So here is the question again, where to put the money?
My mother used to tell me if you have money, do not put in the bank - Buy Gold.
Thursday, September 25, 2008
Sunday, September 14, 2008
Armageddon Has Arrived ...
Finally, Lehman will file bankruptcy, or at least it looks like this way.
Greenspan said more firms will fails, the crisis is once in a century. He should get some credit for this crisis.
AIG, the biggest insurer is in trouble, that means most of the retiree, who has annuity they are in trouble.
The rating agency in trouble, so no one know what is the value of Bond.
Merill Lynch cannot survived by its own, they are in talk to merge with Bank of America.
Wamu is next one, if need bailout it need 24B tax payer money.
So what will happen tomorrow ? a) Market will down 5%, black monday, b) Fed will reduce 1 point, c) Market will close in memory of Lehman :-
....will know more later.
Greenspan said more firms will fails, the crisis is once in a century. He should get some credit for this crisis.
AIG, the biggest insurer is in trouble, that means most of the retiree, who has annuity they are in trouble.
The rating agency in trouble, so no one know what is the value of Bond.
Merill Lynch cannot survived by its own, they are in talk to merge with Bank of America.
Wamu is next one, if need bailout it need 24B tax payer money.
So what will happen tomorrow ? a) Market will down 5%, black monday, b) Fed will reduce 1 point, c) Market will close in memory of Lehman :-
....will know more later.
Saturday, September 13, 2008
Alt-A Loan problem still to come
The mess of sub-prime mortgage is almost over but there is another problem that financial companies need to worry about i.e. Alt-A loan. Alt-A (Alternate Document) loan is the loan given to the people who has good credit but does not want to show the document related to asset and income such as W2/1040/Bank Statement and so forth. Going forward, you will hear the news of Alt-A loan problem. About 3 million U.S. borrowers have Alt-A mortgages totaling $1 trillion, compared with $855 billion of subprime loans outstanding. 70% of them has exaggerated their income by 50% or more. $400 billion of that was sold in 2006. Almost 16% of Alt-A loans issued since January 2006 are at least 60 days late. Many of these loans (around $270 billion) were interest-only, and the resets were at 3- and 5-year lengths. That means starting next year we are going to see a wave of mortgages resetting to new rates hence it will increase the foreclosure rate.
Fannie own 340B, Freddie own 190B, Wachovia own 122B and Washington Mutual own 53B of Alt-A loan. If you look at their stock its already built into it. But if it go worst, this companies has no future. And due to this, housing is not near bottom, according to the Schiller. Housing went 20% down and it will down further more 10%. Housing fell 30% in great depression. This is the time nothing less than Great Depression as 164 years old company, Lehman brothers, is struggling to survive. This company survived Civil War, Panic of 1907, World Wars, Great Depression, and many deep recessions. But as of now, they are looking for buyer. You can imagine how bad it is.
There is one more problem apart from this I will cover later.
Fannie own 340B, Freddie own 190B, Wachovia own 122B and Washington Mutual own 53B of Alt-A loan. If you look at their stock its already built into it. But if it go worst, this companies has no future. And due to this, housing is not near bottom, according to the Schiller. Housing went 20% down and it will down further more 10%. Housing fell 30% in great depression. This is the time nothing less than Great Depression as 164 years old company, Lehman brothers, is struggling to survive. This company survived Civil War, Panic of 1907, World Wars, Great Depression, and many deep recessions. But as of now, they are looking for buyer. You can imagine how bad it is.
There is one more problem apart from this I will cover later.
Saturday, September 06, 2008
Financial Crisis Continues
While Fed Chief, Treasury Sec, and Top Management of Fennie and Freedie are working on right now for Fannie and Freddie future; lets take a look at what crisis going on. We keep reading the news about Banks has trouble raising the capital. Why this is important?
The crisis are started by leveraging the money 30 to 50 times and investing in the risky assets. This is same analogy when people sold their gold and buy stocks, back in 2000. But this time Bank and Brokerage are caught up.
Let's do some mathematics here. Usually, banks (FDIC insured) on average has about 8% of capital for their assets, and loans are 60% of assets. It means they have leverage the money approximately 12 times (60 divide by 8) . What does this leverage means? For example, if you have 100k in your bank in CD (i.e your Capital), then you (if not you than bank) can borrow and lend 1.2M (100k X 12). You have done 12 time leverage of your capital. So if you paying 2% (Current Fed Rate) for your money you borrow and charge 6% to other for the loan. The loan could be for Car, Mortgage, Home Remodel or may be to take vacations. So you can make profit of 4% (6%-2%) on 1.2M i.e 48k. You just made profit of 42k on 100k. This is 42% gross profit on your invested capital. Amazing, isn't it? This is why you see small banks are started.
Now, let's take a look at risk factor. Out of 1.2 M you lend, let says 10% if it (i.e. 120k) is bad loan. The person you lend forclose the home, or they have no money to pay for whatever the reason. So all of your profit i.e 42k gone and on top of that it dipped on your capital. So 1.2M + 42k (Profit) - 120k (loss) = 1.122 M. So you need to raise 78k. (1.2M - 1.122M) or you have to reduce your loan porfolio and have a write down the loss.
This is why you see the news about raising the capital and write down the loss. In this example above, I have just used 12 time leverage and 10% bad loan, the brokerage firm like Bear Stern made 44 times leverage. Fannie and Freddie made 50 times of leverage. Fannie and Freddie combined has a loan of 6 Trillion, half of the whole mortgage market which is 12 Trillion. Considering house price went down 20% so far; and delinquency rate is still high more than 4.5%. If you apply this number with above formula it is no brainier Fed has to bail out Fannie and Freddie. Not only that, one more top tier bank has to go out of business.
Merill Lynch are selling the asset to raise the capital and so what Fannie do, but there is not enough demand in the market to buy this assets. Couple of weeks back, Merill sold all of the mortgage portfolio for 22c for the $1 value (They sold 30.6B asset for 6.7B.), on top of that they give buyer (Loan Star) a financing of 75% of it. So basically that means they may get 5 cents for the face value of one dollar. Additionally, they will sell 8.5B in stock, so it will dilute the value of share by 38%. This is how the bad it can go, and this is the reason why Goldman rates Merill stock to Sell.
And not only US bank is on this mess, country like Singapore, Kuwait, UAE all has invested on this brokerages and banks (Merill, Morgan Stanley, Citigroup, Barclays, UBS ) as a part of raising the capital in 2007 and 2008. They are all down more than 40%. So far Banks and Brokerage Firms across the world has write down 500B, more to come.
I am not saying it is the end of the world; the market will find the solution. But there is some more short-term pain for many investors like me, and we need to be aware of the problems and see if we can avoid them for ourselves.
Update as of 9/7/2008: US Govt has undertake Fannie and Freddie under Conservatorship for indefinite time, they will get a credit line of upto 20B/month from treasury, to save 2B they are going to cut 100% dividend on Stock and Preferred Stock, but they will pay the debt, common stock will be last on the line, so it won't wipe 100%. Most of the detail can be found below:
The crisis are started by leveraging the money 30 to 50 times and investing in the risky assets. This is same analogy when people sold their gold and buy stocks, back in 2000. But this time Bank and Brokerage are caught up.
Let's do some mathematics here. Usually, banks (FDIC insured) on average has about 8% of capital for their assets, and loans are 60% of assets. It means they have leverage the money approximately 12 times (60 divide by 8) . What does this leverage means? For example, if you have 100k in your bank in CD (i.e your Capital), then you (if not you than bank) can borrow and lend 1.2M (100k X 12). You have done 12 time leverage of your capital. So if you paying 2% (Current Fed Rate) for your money you borrow and charge 6% to other for the loan. The loan could be for Car, Mortgage, Home Remodel or may be to take vacations. So you can make profit of 4% (6%-2%) on 1.2M i.e 48k. You just made profit of 42k on 100k. This is 42% gross profit on your invested capital. Amazing, isn't it? This is why you see small banks are started.
Now, let's take a look at risk factor. Out of 1.2 M you lend, let says 10% if it (i.e. 120k) is bad loan. The person you lend forclose the home, or they have no money to pay for whatever the reason. So all of your profit i.e 42k gone and on top of that it dipped on your capital. So 1.2M + 42k (Profit) - 120k (loss) = 1.122 M. So you need to raise 78k. (1.2M - 1.122M) or you have to reduce your loan porfolio and have a write down the loss.
This is why you see the news about raising the capital and write down the loss. In this example above, I have just used 12 time leverage and 10% bad loan, the brokerage firm like Bear Stern made 44 times leverage. Fannie and Freddie made 50 times of leverage. Fannie and Freddie combined has a loan of 6 Trillion, half of the whole mortgage market which is 12 Trillion. Considering house price went down 20% so far; and delinquency rate is still high more than 4.5%. If you apply this number with above formula it is no brainier Fed has to bail out Fannie and Freddie. Not only that, one more top tier bank has to go out of business.
Merill Lynch are selling the asset to raise the capital and so what Fannie do, but there is not enough demand in the market to buy this assets. Couple of weeks back, Merill sold all of the mortgage portfolio for 22c for the $1 value (They sold 30.6B asset for 6.7B.), on top of that they give buyer (Loan Star) a financing of 75% of it. So basically that means they may get 5 cents for the face value of one dollar. Additionally, they will sell 8.5B in stock, so it will dilute the value of share by 38%. This is how the bad it can go, and this is the reason why Goldman rates Merill stock to Sell.
And not only US bank is on this mess, country like Singapore, Kuwait, UAE all has invested on this brokerages and banks (Merill, Morgan Stanley, Citigroup, Barclays, UBS ) as a part of raising the capital in 2007 and 2008. They are all down more than 40%. So far Banks and Brokerage Firms across the world has write down 500B, more to come.
I am not saying it is the end of the world; the market will find the solution. But there is some more short-term pain for many investors like me, and we need to be aware of the problems and see if we can avoid them for ourselves.
Update as of 9/7/2008: US Govt has undertake Fannie and Freddie under Conservatorship for indefinite time, they will get a credit line of upto 20B/month from treasury, to save 2B they are going to cut 100% dividend on Stock and Preferred Stock, but they will pay the debt, common stock will be last on the line, so it won't wipe 100%. Most of the detail can be found below:
LINKS
Monday, September 01, 2008
Yet another browser
We have one more browser available to consumer, most probably starting Sep 2, 2008. This one is from Internet Giant Google, the project Chrome was going on for a long time and it has several rumors in the past about it. But this time it is official.
They have introduced it with the comic book, an easily book to read by anyone. Here is the book if you want to see. Chrome has a lot of features better than Internet Explorer 8 Beta, which Microsoft is working on. I love the innovation and competition. One can expect the browser could be very fast, easy to use, easy enough for grandpa, so they click on Google Ad. One feature about privacy is "incognito window", allows user to browse but nothing in this window will be logged into the computer. This feature will help tremendously in Library and public computer.
Reading this comic book about Google Chrome make me exciting about this new browser. First, big kudos to Scott McCloud, a cartoonist, who done a fantastic job of illustrating the concepts around modern browser design and engineering.
Final verdict will be tomorrow.
They have introduced it with the comic book, an easily book to read by anyone. Here is the book if you want to see. Chrome has a lot of features better than Internet Explorer 8 Beta, which Microsoft is working on. I love the innovation and competition. One can expect the browser could be very fast, easy to use, easy enough for grandpa, so they click on Google Ad. One feature about privacy is "incognito window", allows user to browse but nothing in this window will be logged into the computer. This feature will help tremendously in Library and public computer.
Reading this comic book about Google Chrome make me exciting about this new browser. First, big kudos to Scott McCloud, a cartoonist, who done a fantastic job of illustrating the concepts around modern browser design and engineering.
Final verdict will be tomorrow.
Friday, August 29, 2008
My Best Vacation ever - Alaska Cruise
We went to Alaska from San Francisco Alaska
Pre-Cruise Preparation:
We book the cruise through travel agent. I spend some time on cruisecritics.com to learn more about the cruise since this is my first time. We had a list of thing to pack. We book our offshore excursion for
Embarkment: We got a ride from one of our friend to Pier 35. We were there by 10:30 and check in. The porter were ready to pickup over baggage. The check in process was smooth. 
We were on the ship by the lunch time and had lunch on board. We explore the cruise and gathered all the information. Our baggage was arrived little later. The cruise was little late for Embarkment. We passed the
Rooms and Facilities: The ship in general was good. The room is spacious than I thought. There was a enough space in the closet. The TV size was small and selection of the channel was horrible. No CNBC or major News channel except CNN Headlines, few movie channels and some channels for kids. On the ship, they had a decent library, computer center, four heated swimming pool, 5 hot tubs, fitness center, two theaters, casino, art gallery, shopping stores, 24 Hour Buffet, Grill, Ice Cream Center, Pizzeria, various bars and lounge to relax and couple of fine dining rooms. The internet connection was slow and expensive (75c/min). Fitness room and 24 Hour Buffet was in very good location with a view of the ocean. Theaters were nice too, they used it for the show and movie and the seats are very good. They also had a kid’s center divided by the age; one with 3-7 and other with 8-18. They have a big area on the top deck to tan your skin under the sun. They also have a Spa, nearby there was a Sauna and Steam Room. On Deck 7, they have a walking/jogging trail around the ship; three laps makes one mile. They had a night club for dance as well.
People and Program: You always get a warm welcome wherever you go. The staff was highly professional. The steward was very nice and can do whatever you ask him to do. They always want to make you happy. They have a variety of programs in various places going on. We had a five days on the sea and never felt “what do I do now?”. There is always something going on. There is free as well as paid seminar in the fitness center about your health. They have a exciting programs for the kids, one day kids has a dissection of the fish. Every night they have entertainment on Princess Theater, it could be song, dance, comedy show, bingo, magic, information, seminars, knowledge session and movie. There were two formal nights where they take the pictures; you have to buy to get it though. They have 3-4 Art Auctions where they draw for free art, and give drink and appetizer free. The entertainment show, comedy show and magic show was best, they are very talented in what they do to entertain you. Most of the staff are Canadian, Indian, Philippians and East European. I guess they pay less to them in terms of salary, so they highly rely on the tip. Princess charges the tip everyday 10.50pp/day. If you do not want that way, you can tell them and give the cash to the people who served you most. We have 75% of passengers were 60year and old. So lot of programs, food and facilities were based on that age group.
Food: In general I was not impressed with the food, but the other people was praising. The food is more American rather than continental.
They have a Japanese, Mexican, Alaskan day to make the food based on theme. Pizzeria has one of the best Pizza I had. Fin
e Dining food is same as Buffet. We use first seating most of the time. In the fine dining, they have a choice of Indian and
Shore Excursions:
The only difference was the bus, we got school-bus and they had a hi-fi bus. But we enjoyed very well. The guide took us to the important places to see in the town. We saw Eagles, their 100 year old nest, lot of Salmons, sea lion. The Eagle is a truly represents Unites States. We had on of the best lunch there, Burger Queen, very old restaurant with fresh food. If you want to do shopping this is the town to do so.
we saw bears. To see the bears sometimes you have to wait for 2-3 hours. We were lucky we saw two times one on the creek and second they were on the Road! In the afternoon, it was raining, so our tour to Mendenhall Glacier was cancelled. It was disappointing. There is also skyline you can go. We eat lunch on the ship and dinner in the local restaurant. The ship stops at very close by to everything. We didn’t bother to see the Governor House (Now he is contending for Vice President with McCain!). Some other folks took a tour for Whale Watching and Wildlife Quest and they saw lot of wild life.
Tracy Arm: Before the cruise I had no idea what it is. They had a information session couple of day before we go to Tracy Arm. That session excite me most. We wake up 5am in the morning to see 
this beautiful place and it was the absolutely blast. The captain took all the way to the North Glacier, if you see the route you would think how he is going to turn around. But he did a fantastic job handling ice-berg and cursing. We saw glacier from about 500 feet distance. This is the first time in 15 year some big ship like Dawn Princess went there; according to them. We saw both North and South Glacier. The valley was amazing, it is the most beautiful place in the earth, or at least I think that way. We went to 11th deck to see this. This is a best place to see, not many people knew about this place. The 5 hour experience you get in Tracy Arm was mind blowing. After couple of hour, we were in the hot tub on the top deck and we saw these beautiful mountains from the hot tub. While returning from Tracy Arm, we saw lot of Whale doing their show, the one you see it in the Sea World.
Disembarkment: They give enough information about this.
They divided the people into batch, we were on the last batch, we request to go on first batch and they honor it. Since we were the first it was each to find the porter to take our baggage out.
Conclusion:
The ship ride overall was good, lot of shaking first 2-3 days. This vacation was the best one so far. If you love Mother Nature, wild life you should go to
PS: More Pictures
Sunday, August 10, 2008
Can you believe this?
India won Gold medal in shooting. As far as I remember this is the first one other than Hockey; which India won in Russia in 1984. When I saw the opening ceremony, I saw around 25 participant in the country of the 1B population. My hope immediately went down as usual. India needs to invest into the people and their talent. In 1984 China does not know about Olympic. And at this time they are expecting to win highest gold medals.
Go Team India.
8/11 Update.. an unbelievable competition 4X100 Relay.. Bravo Michael Phelps
http://www.nbcolympics.com/video/player.html?assetid=0811_hd_swb_hl_l0194
Do you think eating make difference in maintaing the body? Think Again.
This is the daily menu of Michael Phelps, all items every day. And still he maintain his
By eating all this, he still can maintain this body.
Go Team India.
8/11 Update.. an unbelievable competition 4X100 Relay.. Bravo Michael Phelps
http://www.nbcolympics.com/video/player.html?assetid=0811_hd_swb_hl_l0194
Do you think eating make difference in maintaing the body? Think Again.
This is the daily menu of Michael Phelps, all items every day. And still he maintain his
Breakfast: Three fried-egg sandwiches loaded with cheese, lettuce, tomatoes, fried onions and mayonnaise. Two cups of coffee. One five-egg omelet. One bowl of grits. Three slices of French toast topped with powdered sugar. Three chocolate-chip pancakes.
Lunch: One pound of enriched pasta. Two large ham and cheese sandwiches with mayo on white bread. Energy drinks packing 1,000 calories.
Dinner: One pound of pasta. An entire pizza. More energy drinksBy eating all this, he still can maintain this body.
Saturday, August 09, 2008
China flex their muscles
Most of us has watched the best ever Opening Ceremony in Beijing Olympic. The Pyrotechnics was one of the best. Now I know when we do shopping, where does money really goes. I think Brits will be the only one who are sad as they have to show something better in the next Olympic.
This event does not comes free; there were lot of sacrifice or human right violation occurs . Media are not focusing on underlying facts of the events. 2 Million people became home less as they move them to capture the land to build stadiums, parks etc. All the factories and road are closed because of pollution.
They said worker will be compensated but corruption is the biggest challenge to get those money. There are lot of buzz going around in China but truth will never comes out. Soon we will see independence of Taiwan will go away. Couple of US resident who display the Taiwan flag are deported immediately. Taiwan will no more independent country. Pollution is the biggest threat to all the athletes. Its amazing to know that people in Beijing do not see the blue sky. Thousands of premature babies are dieing because of this pollution.
There were lot of reason that USA should avoid the Beijing Olympic just like Russia. But politically or economically it was not feasible. And that is the problem going forward. The Opening Ceremony was important to them as they wanted to show the world what China is, they are flexing their muscles.
This event does not comes free; there were lot of sacrifice or human right violation occurs . Media are not focusing on underlying facts of the events. 2 Million people became home less as they move them to capture the land to build stadiums, parks etc. All the factories and road are closed because of pollution.
They said worker will be compensated but corruption is the biggest challenge to get those money. There are lot of buzz going around in China but truth will never comes out. Soon we will see independence of Taiwan will go away. Couple of US resident who display the Taiwan flag are deported immediately. Taiwan will no more independent country. Pollution is the biggest threat to all the athletes. Its amazing to know that people in Beijing do not see the blue sky. Thousands of premature babies are dieing because of this pollution.There were lot of reason that USA should avoid the Beijing Olympic just like Russia. But politically or economically it was not feasible. And that is the problem going forward. The Opening Ceremony was important to them as they wanted to show the world what China is, they are flexing their muscles.
Wednesday, July 30, 2008
When dream comes true
I had a dream in my 80s to see Amitabh live performing. That dream comes true when we went to see "The Unforgettable Show" at Oakland Arena. I checked one check box from my Goal List. But this is more than check box. We saw Amitabh and all the actors with the distance of feet, which I did not expect. It was mind blowing experience. It really make diffrence what you see live and what you see on TV. Its most fun event that I remember.
When you see and know how Amitabh Bachchan keep in contact with his fans through blog, I was truely amazed. I saw his blog for this show at Oakland Arena. I express my openion in his blog, I wrote following as a comment in his blog (click the above link and see the comment#362. )
"It was my dream since 80s to see the Amitabh performing in real and that is the reason we went to the Show in Oakland Arena. Let me tell you. It was fabulous. This if the first time ever my money worth something. Absolutely amazing. Click here if anyone want to see the glymps of the show. The Amitabh Dialouge of Deewar was outstanding as usual. Abi has a lot of energy just like Amitabh had in 70s. He is stylish just like his dad. We were on the left of the stage near stage and Abi is absolutely with us in dancing he loves us. Madhuri/Preeti was great too. Its glad to see Jaya there but it would be awesome if she would in “Shaba Shaba ” dance. I think she can do that. I also like her vision on Go Green. "
Bang. Next day, he mention this comment in his blog, check this blog
http://blogs.bigadda.com/ab/2008/07/30/day-97/#more-327
and he wrote this
"Many responses talk of the emotion connected to the show, the efforts made to travel to the venue from distances not traversed normally. They talk of being moved to tears to see us in person and to be fulfilling long-standing dreams. It is to us too equally emotional. We shed tears of joy at seeing your appreciation. It may not look very evident but I can tell you that inside all of us there are similarities."
It is true pleasure to see that kind of person on stage and this is something Unforgettable.
When you see and know how Amitabh Bachchan keep in contact with his fans through blog, I was truely amazed. I saw his blog for this show at Oakland Arena. I express my openion in his blog, I wrote following as a comment in his blog (click the above link and see the comment#362. )
"It was my dream since 80s to see the Amitabh performing in real and that is the reason we went to the Show in Oakland Arena. Let me tell you. It was fabulous. This if the first time ever my money worth something. Absolutely amazing. Click here if anyone want to see the glymps of the show. The Amitabh Dialouge of Deewar was outstanding as usual. Abi has a lot of energy just like Amitabh had in 70s. He is stylish just like his dad. We were on the left of the stage near stage and Abi is absolutely with us in dancing he loves us. Madhuri/Preeti was great too. Its glad to see Jaya there but it would be awesome if she would in “Shaba Shaba ” dance. I think she can do that. I also like her vision on Go Green. "
Bang. Next day, he mention this comment in his blog, check this blog
http://blogs.bigadda.com/ab/2008/07/30/day-97/#more-327
and he wrote this
"Many responses talk of the emotion connected to the show, the efforts made to travel to the venue from distances not traversed normally. They talk of being moved to tears to see us in person and to be fulfilling long-standing dreams. It is to us too equally emotional. We shed tears of joy at seeing your appreciation. It may not look very evident but I can tell you that inside all of us there are similarities."
It is true pleasure to see that kind of person on stage and this is something Unforgettable.
Friday, July 25, 2008
You won sir.
Randy Pausch, the Carnegie Mellon University computer science professor whose final lecture inspired millions, has died of pancreatic cancer. Dr. Pausch, 47, who turned the lecture into a book, said that no one would have been interested in his words of wisdom were he not a man in his 40s with a terminal illness. Expect movie from Hollywood in couple of year.
http://www.chicagotribune.com/entertainment/reviews/critics/la-me-pausch26-2008jul26,0,5191339.story
"But we don't beat the Reaper by living longer. We beat the Reaper by living well," said Dr. Pausch
Check my previous post here.
http://www.chicagotribune.com/entertainment/reviews/critics/la-me-pausch26-2008jul26,0,5191339.story
"But we don't beat the Reaper by living longer. We beat the Reaper by living well," said Dr. Pausch
Check my previous post here.
Sunday, July 20, 2008
Men and Women Explained
The picture pretty much explain the difference between man and woman.
- Man is simple, woman is complex to operate.
- Men can operate women and women can operate man.
- Man is digital, woman is analog.
- Men on top!
- Men and women are different.
- More button more fun.
- Machine need both men and women.
anything else missing?
Thursday, July 10, 2008
Fannie/Freddie in trouble
Bear Stern, 85 year old company, does not exists any more. Fed shovels in the hand of JP Morgan. Now it time for Fannie and Freddie going out of business or rescued by the US Government/tax payer.
Both the companies are insolvent and they badly need cash as Housing Foreclosure increases and at all time high.
If government is undertaking this company then there is no or very low value for the share holder. They already have problem raising the money. They have to give 75basis point higher than the treasury bond. They recently raise 7.5B but they probably need 29B. How the company will operate if they need such kind of money. Both company together has 6 Trillion of loan portfolio. (United States total debt is around 8 Trillion) If price goes down they have to write down significant loss. If US government does not help then they cannot buy the commercial mortgage and hence consumer will not able to get loan which further bring down the housing market.
I don't think that this companies has the future nor US Dollar. Be careful.
Both the companies are insolvent and they badly need cash as Housing Foreclosure increases and at all time high.
If government is undertaking this company then there is no or very low value for the share holder. They already have problem raising the money. They have to give 75basis point higher than the treasury bond. They recently raise 7.5B but they probably need 29B. How the company will operate if they need such kind of money. Both company together has 6 Trillion of loan portfolio. (United States total debt is around 8 Trillion) If price goes down they have to write down significant loss. If US government does not help then they cannot buy the commercial mortgage and hence consumer will not able to get loan which further bring down the housing market.
I don't think that this companies has the future nor US Dollar. Be careful.
Sunday, June 29, 2008
My Hats Off for Bill Gates!!
One of the goal of Bill Gates in his early years was to see a computer on every desk and in every home, presumably running Microsoft software. 
That sort of vision, put forth in a time when very few people knew about computer. But by the year 2000, just 25 years after its founding, Microsoft had achieved that improbable goal, at least in the developed world.
What would you do if you defined the most ambitious goal you could imagine, and then achieved it at age 42? And what if you had done so while still relatively young? That's the position Gates found himself in just a decade ago. Most people when they find they achieved the goal they set another and never stop. And so did Bill Gates. But wait.... different goal and in different world.
How about curing AIDS? Or ending the spread of malaria? What about improving life expectancy and quality of life for the poorest people in the world? I have to point out that sense of thinking "Okay, we won -- what next?" is extremely unusual.
And here is Bill Gates answered that question with Philanthropy. Every person in the poor world should have option to treat their disease. He is going to dedicate the rest of life in achieving this new goal.
My hats off for Bill Gates for his new impossible Goal. Goodbye and Welcome.
Here is the nice article which explains "What money can buy?
That sort of vision, put forth in a time when very few people knew about computer. But by the year 2000, just 25 years after its founding, Microsoft had achieved that improbable goal, at least in the developed world.What would you do if you defined the most ambitious goal you could imagine, and then achieved it at age 42? And what if you had done so while still relatively young? That's the position Gates found himself in just a decade ago. Most people when they find they achieved the goal they set another and never stop. And so did Bill Gates. But wait.... different goal and in different world.
How about curing AIDS? Or ending the spread of malaria? What about improving life expectancy and quality of life for the poorest people in the world? I have to point out that sense of thinking "Okay, we won -- what next?" is extremely unusual.
And here is Bill Gates answered that question with Philanthropy. Every person in the poor world should have option to treat their disease. He is going to dedicate the rest of life in achieving this new goal.
My hats off for Bill Gates for his new impossible Goal. Goodbye and Welcome.
Here is the nice article which explains "What money can buy?
Where do you keep your money?
When the stock market, housing market, bond market, real estate market goes down. One question that everyone's mind is, what to do with the money I saved and where should I keep?
Here is the possible ways people do it with outcome:
Hard cash, stuff it under your mattress: If nobody steals it, over the long haul inflation will destroy the value of your money.
You could buy CDs or invest in a money market fund: After inflation you will do just a little better than hiding the money in your mattress.
You could buy bonds: You stay just ahead of inflation, with very little capital appreciation potential.
You could buy real estate: You subject yourself to the unpredictable situation of the real estate market and take a huge risk for a very uncertain return.
You could give it to a hedge fund operator or invest in an actively managed mutual fund:
80% chance you will lag the performance of most good passive strategies.
You could buy individual stocks: You subject yourself to uncompensated risk, which probably results in under performance.
You could attempt to time the market: You will fail like all the other poor saps that think they can do it.
You could stay the course: Eventually your perseverance will most likely be rewarded by returns that exceed those of all other commonly known investment strategies.
The problem with all the other potential strategies is that none have been demonstrated to be superior to your strategy. So, hang in there, time is on your side and you will succeed.
Also, stop listening to the market reports, they aren't providing you with any useful decision making information; they are just fueling your angst.
Here is the possible ways people do it with outcome:
Hard cash, stuff it under your mattress: If nobody steals it, over the long haul inflation will destroy the value of your money.
You could buy CDs or invest in a money market fund: After inflation you will do just a little better than hiding the money in your mattress.
You could buy bonds: You stay just ahead of inflation, with very little capital appreciation potential.
You could buy real estate: You subject yourself to the unpredictable situation of the real estate market and take a huge risk for a very uncertain return.
You could give it to a hedge fund operator or invest in an actively managed mutual fund:
80% chance you will lag the performance of most good passive strategies.
You could buy individual stocks: You subject yourself to uncompensated risk, which probably results in under performance.
You could attempt to time the market: You will fail like all the other poor saps that think they can do it.
You could stay the course: Eventually your perseverance will most likely be rewarded by returns that exceed those of all other commonly known investment strategies.
The problem with all the other potential strategies is that none have been demonstrated to be superior to your strategy. So, hang in there, time is on your side and you will succeed.
Also, stop listening to the market reports, they aren't providing you with any useful decision making information; they are just fueling your angst.
Saturday, June 21, 2008
Merger and Acquistion
Since 2001, when Alan Greenspan lowered the interest rate, Merger & Acquisition increased significantly compared to last decade. The main reason is the borrowing cost is very low which makes Corporate America to achieve high Return on Equity. At the same time, Leverage Buyout also increased; there are many companies than before which become private by LBO. It makes sense because raising capital was very easy.
There are many reasons for a Company to go for M&A. Here are the few:
Oracle has acquired nearly 50 companies in last 4 years. Lately they acquired BEA System for all of the above reason. Pfizer acquired Pharmacia for adding more products. P&G got Gillette for Brand. Cisco has acquired more than 100 companies so far to show the growth. eBay acquired European company iBazar to enter in European Market. Symantec acquired Veritas to enter in corporate market. There are many more examples to list here.
Most recently, Microsoft attempted to buy Yahoo because they want their brand and nothing else. Microsoft has everything what Yahoo has to offer, but the users do not recognize Microsoft. However, the user do recognizes Microsoft in the desktop platform but not in the internet platform. So Microsoft is struggling to get into the internet platform. They realize this too late and that is the reason they have to pay the premium.
In technology sector, if company does not have new products and services that competitor has to offer or they do not increase their footprint to other market then the future of that company is not good. Many companies in the technology sector could not survive because of this.
For an investor this is something not to ignore.
There are many reasons for a Company to go for M&A. Here are the few:
- To increase the Revenue: When they see there is not much growth left with the existing product line, for a company, it makes sense to buy company that adds the revenue and profit to show the growth. It shows value to the investors and Wall Street.
- To gain the competitive edge: Companies often does not have the products and services that are different than competitors. They want to distinguish from their competitors by adding more offering on the shelf.
- To eliminate the competitors: Competitors are tough; sometimes it makes sense to buy the competitor rather than competing against them.
- To increase the market share: Market share are very important for a company to show the credibility. They use the new customer base to up-sell and cross sells other products.
- Market Cap and Cash on hand: Some companies have lot of cash on their balance sheet and what to show more growth. It makes sense to utilize those cash to find the companies whose market cap is lower than other company.
- Brand: Company often lacking the brand; even though they have better products than Branded Company, it is very difficult to create the brand. So the buy the company to take that brand. Often times they have to pay the premium to do that.
- To increase the footprint into the other market: Some company focus on a region for their products and they want to increase their footprint to other market such as other countries.
Oracle has acquired nearly 50 companies in last 4 years. Lately they acquired BEA System for all of the above reason. Pfizer acquired Pharmacia for adding more products. P&G got Gillette for Brand. Cisco has acquired more than 100 companies so far to show the growth. eBay acquired European company iBazar to enter in European Market. Symantec acquired Veritas to enter in corporate market. There are many more examples to list here.
Most recently, Microsoft attempted to buy Yahoo because they want their brand and nothing else. Microsoft has everything what Yahoo has to offer, but the users do not recognize Microsoft. However, the user do recognizes Microsoft in the desktop platform but not in the internet platform. So Microsoft is struggling to get into the internet platform. They realize this too late and that is the reason they have to pay the premium.
In technology sector, if company does not have new products and services that competitor has to offer or they do not increase their footprint to other market then the future of that company is not good. Many companies in the technology sector could not survive because of this.
For an investor this is something not to ignore.
Monday, June 09, 2008
Why inflation is bad?
Inflation is caused when demand increases relative to the supply of goods. In United States, Inflation is usually coming from the Geopolitics and Lower Currency (dollar).
Let's take an examplie of inflation in Oil; it usually comes through Geopolitical risks of the commodity, which control the supply. For instnace, Mr Chavez does not want to supply and tighten the grip on foreign partner, a likelyness of Israel strike on Iran. So the supply shortage from this event shrink and Saudi Arabia or Russian cannot make it up, as a result price go higher and hence inflation.
The weak dollar also contributes to the Inflation. Commodities such as Gold, Grain, goes up when dollar falls and you sill see the price increase (inflation) in related products. Why weak dollar is a sperate topic to talk later.
Both of the above examples (largely oil) will eventually make price of other goods and services higher. Oil has significant impact on Transportation (and Travel) industry, which is backbone of the American Economy. In short time you may not see the impact, but gradually you will see the prices will go up everywhere due the rise in oil price.
So why is inflation matters? Inflation has a certainly more effect on your investments. If more inflation means higher interest rate, and that make borrowing cost more, which turn less profit for company. It certainly freaks old people who are retired or near the retirement, because they have a fixed income. It will kill them.
Inflation reduces the purchasing power of money. If inflation is 4% then in 7 years the purchasing power of 100k can reduce to 81k. So if you cannot make 19k more in 7 year (after tax) then you forced to reduce your lifestyle. If the inflation rate is higher in the future, a higher investment return will be required to maintain or increase the purchasing power of a portfolio.
The only benefit with the high
er inflation is when you have larger mortgage with lower interest rate. You pay the same amount with cheaper dollar. That is the reason why you should not pay off the mortgage.
Tuesday, June 03, 2008
Historic Election in 21st Century
Let’s be clear: Barack Obama may indeed be different from most politicians. Not only will he be the first African-American nominee of a major U.S. political party, but also he is truly gifted with rare communications skills and charisma. Obama brought out millions of new voters — most black, white liberals and young — attracted by his persona, his calls for change and rated as the most liberal in the U.S. Senate for 2007.
I think the new voters he inspired in the primaries will go to the polls in November, and will offset any weakness among the white working class. Historically Black never come this far, but I think that history does not always predict the future. The other reason possible he could win is -- Bush’s legacy may be that he turned so many against voting Republican. I think most folks realize our county cannot handle four more years of Bush policies.
He is a unique figure in U.S. history, who–win or lose– will be a reference point for how America evolved in the early 21st century.
I think the new voters he inspired in the primaries will go to the polls in November, and will offset any weakness among the white working class. Historically Black never come this far, but I think that history does not always predict the future. The other reason possible he could win is -- Bush’s legacy may be that he turned so many against voting Republican. I think most folks realize our county cannot handle four more years of Bush policies.
He is a unique figure in U.S. history, who–win or lose– will be a reference point for how America evolved in the early 21st century.
Sunday, April 20, 2008
Speculation in the market
This is not something new, but its worth to mention.
If we go back in 2000, there was a speculation in the Stock Market, and bubble were created what we called dot com bubble. The market capital of the companies, which did not make profit was in billions. NASDAQ stock index soar from 1500 to 5000 in 2 years. When the market crashed, Fed Reserve rescued companies by cutting the borrowing cost and reduce the interest rate to 1% (retiree get hurt oouch). Now NASDAQ is half way to that top.
There was a another bubble during the same time, energy bubble, where the prices of the electric city and gas was artificially inflated by Enron. Which eventually burst.
Because the interest rate was too low in 2003-4, that enable housing boom, and house price start to soar, many houses increase its value to 70-80% in this years. Lot of speculator (Banks, Loan Agents, etc) jumped into market. Consumer use their equity as credit card and use the money to spend. Now we see the housing prices are going down as much as 30% and that created another problem called Credit Crunch in the financial industry. Many hedge fund and mortgage company are bankrupt.
In late 2006, when housing price goes down, it create another bubble. This bubble is in the commodity market.
In this bubble,
Crude oil soar from $50/barrel in Jan 2007 to now $118, whopping 150%
Wheat prices jumped 130% since March 2007.
Rice prices jumped 140% since Jan 2008
Soy prices jumped 80% since 2007.
Coal price is almost double since 2005.
Gold price rose 90% in a year.
Not to mention the speculation in the currency market, as US Dollar drop 20% in last 18 months. It never happened before.
The number one reason for each of this bubble in past decade is Speculation. The speculation is easy to implement, especially when the trading market is computerized. (Thanks to Enron who found the idea of selling the contract through electronic exchange).
Other reason is Media, they too much spread the negative news. Like house prices going down, rice price going up and so forth.
I personally believe the reason is Globalization, Open Market and De-regulated System in the United States. The country like China (Totally Regulated and Close Market) get benefit out of this.
Even though we go through this bubble and burst, the S&P 500, which is US broad based index, has return just 1% in last 10 years. So if you have put the money in S&P 500 in 1998, than you just get 1%. Check this WSJ article.
If we go back in 2000, there was a speculation in the Stock Market, and bubble were created what we called dot com bubble. The market capital of the companies, which did not make profit was in billions. NASDAQ stock index soar from 1500 to 5000 in 2 years. When the market crashed, Fed Reserve rescued companies by cutting the borrowing cost and reduce the interest rate to 1% (retiree get hurt oouch). Now NASDAQ is half way to that top.
There was a another bubble during the same time, energy bubble, where the prices of the electric city and gas was artificially inflated by Enron. Which eventually burst.
Because the interest rate was too low in 2003-4, that enable housing boom, and house price start to soar, many houses increase its value to 70-80% in this years. Lot of speculator (Banks, Loan Agents, etc) jumped into market. Consumer use their equity as credit card and use the money to spend. Now we see the housing prices are going down as much as 30% and that created another problem called Credit Crunch in the financial industry. Many hedge fund and mortgage company are bankrupt.
In late 2006, when housing price goes down, it create another bubble. This bubble is in the commodity market.
In this bubble,
Crude oil soar from $50/barrel in Jan 2007 to now $118, whopping 150%
Wheat prices jumped 130% since March 2007.
Rice prices jumped 140% since Jan 2008
Soy prices jumped 80% since 2007.
Coal price is almost double since 2005.
Gold price rose 90% in a year.
Not to mention the speculation in the currency market, as US Dollar drop 20% in last 18 months. It never happened before.
The number one reason for each of this bubble in past decade is Speculation. The speculation is easy to implement, especially when the trading market is computerized. (Thanks to Enron who found the idea of selling the contract through electronic exchange).
Other reason is Media, they too much spread the negative news. Like house prices going down, rice price going up and so forth.
I personally believe the reason is Globalization, Open Market and De-regulated System in the United States. The country like China (Totally Regulated and Close Market) get benefit out of this.
Even though we go through this bubble and burst, the S&P 500, which is US broad based index, has return just 1% in last 10 years. So if you have put the money in S&P 500 in 1998, than you just get 1%. Check this WSJ article.
Friday, April 04, 2008
One more monster to worry about
In silicon valley, the big labor market is from the pre-IPO/Startup, that market is been HOT since M&A started back in 2002-03. VC put lots of money in the valley to find one company like Google, Youtube, Facebook, VMWare and so forth.
With the problem in the Financial Industry, it spill little bit over to the Startup in the bay area. One of the oldest startup Red Envelop shut its door today laying off all of its 200 employee according to Valleywag. Is this a beginning? Its a monster question.
If it continue like this people will forget the Financial Market in terms of how bad it was. Being said that, it make two prominent economy of US i.e Bay Area and New York, will struggle in the near future. The consequences will be much worst, as there is no remedy for this. Back in 2001 at least Fed has a room to lower tje interest rate. And now, there is not much Fed can do today.
Lets hope startup market won't fall.
With the problem in the Financial Industry, it spill little bit over to the Startup in the bay area. One of the oldest startup Red Envelop shut its door today laying off all of its 200 employee according to Valleywag. Is this a beginning? Its a monster question.
If it continue like this people will forget the Financial Market in terms of how bad it was. Being said that, it make two prominent economy of US i.e Bay Area and New York, will struggle in the near future. The consequences will be much worst, as there is no remedy for this. Back in 2001 at least Fed has a room to lower tje interest rate. And now, there is not much Fed can do today.
Lets hope startup market won't fall.
Monday, March 31, 2008
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