Wednesday, December 23, 2009

The case for India by Will Durant



Very interesting book. The author, Will Durant , by all accounts was the greatest historian . Author of magnum opus, The Story of Civilisation, supposed to be the most comprehensive rendering of world history was written over a period of 50 years by the author.

There is great amount of humility ,which comes out . The author , like a true historian, has the humility and greatness to understand that there have been civilisations that had surpassed the western ones at some time in the past and has great sympathy and admiration for the India civilisation, its spirituality etc.

Understand ,that this book was published ( the author was an American) outside India and was not available for years in India. Strand book, founder, Shanbhag and his daughter Vidya Varkar managed to get it from Infosys them CFO, Mohandas Pai and got a local edition published.

The author makes out a case , how the Britishers for a very selfish reason of getting access to markets and also access to cheap labour abd land and resources, came in first in the form of Join stock Company and later got subsumed as part of British Government.

Systematically the locals were exploited, heavily taxed, goods from England ( finished goods) broughtin to India, raw materials taken out of India , got labour at very low wages.
England exploited the diverisity of India in terms of varying languages, religions and multiple small states ruled by princes. Divide and rule is the theme that runs across in the management of India by British and very successfully adopted.

The author talks glowingly of Gandhi and his Satygaraha and ahimsa. He brings to the fore, issues raised by many of Gandhi’s adversaries of the moral and ethical relevance and significance of Non violence in the face of maraudering British who just do not respond to Non violence. They take it as weakness rather than as a reflection of spiritual strength . In fact the adversaries of Gandhi raise the point that , even Bhagwad Gita , of which Mahatma Gandhi was a great admirer, advocates policy of use of force to achieve a larger and greater cause of good for the people.

The author also brings out the , view held by Gandhi in being completely against Industrialisation , how , per Gandhi this completely eats in to the spiritual make up of people and how Industrilaisation dehumanises people.
The controverises besides, the author is in great admiration and praise of Gandhi’s preachings and practise of coutering violence and prejudice with Non violent Non coperation movement. In the author’s view, this is more Christian than any Christian including the Britishers acould aspire .

Being an Amercian, the author , in the time honoured practise of the great democracy that Amercia is, does reproduce views leading British leaders and Intellectuals (?). Their view . clearly is that, by ruling India, The British have done the locasl a favour. The locals were clearly a undernourished race and had no education and were split on caste, language basis and needed a nation like Brotain to bring orderliness and sense in to their society . They also justify , that if they had not come in, India would have got taken over by French or Spanish or Portuguese.

The author has the last word which obviously in an indictment of the British and appreciation and admiraion for India and emphasis the need for freedom . He mentions in various parts of the book, how deeply prejudiced the British ruleres were . how different set of rules ( not literally but in practice ) applied for English and the Indians.

Representation in Governance was very lopsided in terms of the number of Britishers Vis a Vis Indians.

The book was written in 1930 and considering various aspects including the splintered Provinces etc , the author recommended at that point of time that India should become part of a British Commonwealth of nations with enough autonomy to develop on its own but part of Britain just about enough association to prevent chaos and defense from other countries.

Very well written , I am sure the author’s Story if Civilisation would be great read, but reading 11 Volumes , something written over 50 years would be big challenge.Let me hope that someday, I will get down to reading that also and will have time to write a synopsis or to put it more practically, a precise of the magnum opus.

Thursday, December 17, 2009

Three more Novels of RK Narayan, Swami & Friends, Bachelor of Arts and Vendor of sweets

Swami & Friends, one understand was the first novel of RK Narayan. This was taken as a television serial and was a huge favourite of mine and of many others. Very gentle, very perceptive and flows smoothly. Again the setting is simple, in Malgudi and problems very minor but viewed through a small boy's eyes , are quite significant.Friendship with school mates, one on the academic front and one on the sports front, hate for school , hate for maths and the person who teaches the same all mirrored excellently.


I think the novel makes even better reading if one had seen the TV version. For once, I think, the TV serial was as good as the book.

Bachelor of Arts , is literally , a bit later in life, that is college life of Chandran, his falling in love, his friendship with Ramu. Mohan a poet and acquaintence with veerasami, a rebel. Set in pre British period .


It also takes one through the relationships that one builds at college and how one loses touch once one gets caught up in a new environment and setting. Chandran concludes that friendships and love are formed are more a coincidence and people coming together due to circumstances that bring them together rather than any life long lasting bonding.


Good read, both . Just started reading Vendor of sweets. Rememeber distinctly the TV serial of the same featuring Anant Nag as Jagan the main character. Again one of those TV serials that did justice to the novel.
Huge chasm between father and son , mother having passed away when the boy was young. Father steeped in old values , a gandhian . He is a successful businessman in his own way, running a sweetmeat shop and making decent money. Son , not interested in studies goes to US , after initial promise of taking up a writing career. Goes to US with an avowed purpose of learning the art of writing.
Jagan keeps bragging about his son in US and lasts till the son returns to India with a Korean american girl in tow.
Son wants to manufacture machines to write novels/stories. Tries to wangle money out of father and fails. Gets jailed for the offence of possessing alcohol ...
Beautifully woven around Malgudi and excellent descriptions of the millieu then. One can easily relate to them , especially if yiu have had one foot in the earlier generation.
Author's description of Jagan going to see the bride, the eatables given there and the strict code of trying to maintain dignity by just nibling at the eatables, sining by the future bride, the whole process of communication between the bride's side and the groom's side etc are all great
There is mention of how, correspondence in the form of post cards are all inserted ( harpooned ) in to a steel wire( very similar to the ones which used to kept at Hotels to keep the Bills in place at a Udipi restaurant.
Good read, tinge of sadness right through, of any generation to keep pace with the new one and the new one to understand the earlier one. It is almost as if it is inevtibale and the sadness which accompanies the same is inevitable.
Have to get Guide and English Teacher.

Wednesday, December 9, 2009

Novels of RK Narayan

Read the following novels of RK Narayan.
Mr Sampath
Financial Expert
Painter of signs
The fourth one was Tiger of Malgudi , gave it a skip for now
In Mr Sampath, the narrator is one Srinivas , who shifts to Malgudi with his small family from his village to come out with a local newspaper, Banner. He goes through several challenges.
Gets to meet Mr Sampath who happens to be the local printer.Sampath is one of the typical busybodies who has time for everybody and who is all over the place. Kind of an adventerous gentleman who tries his hand out at film making . Pulls srinivas in as the story writer. Banner has to be given a temporary rest .
As one would expect, Sampath gets sucked a bit in by the glamour etc of film making, hobnobs with the lead lady, verge of deserting his family, loses his way and tries to go in to hiding once he finds that he is unable to keep up his part of the Financial committment. In between you have myriad characters including the landlord of Srinivas. In between the author brings out the travails of Srinivas who is making honest attempts at bringing out the paper. I distinctly remember Cho acting as Mr Sampath in a Tamil movie. Not sure whether this novel was made in to a movie or was it just that this character bore a strong resemblance to the one in Novel
Financial expert ,the main character , Margayya starts off as a person who helps villagers avail of loans etc from the local coopertative Bank, later befriends one Journalist Dr Pal. This Dr Pal , in a strange kind of deal, hands over the manuscript of a book on Sex authored by him , euphemistically renamed Domestic Harmony to make it sound less revolting. Margayya gets a book published , makes huge money ,uses this money to further increase money through moneylending.
There is also Margayya's son, uninterested in studies , rebels against his father , runs away to Madras , assumed to have died, refound by Margayya ...
The story comes full circle when Margayya starts becoming a kind of mini banker , taking deposits at high interest rate, his son gets misdirected after marriage by Dr Pal, Margayya trying to save his son and take him away from Dr Pal, in a fit of anger beats up Dr Pal. The latter spreading a canarad amongst the depositing publich about doubtfulness on Margayya's ability to retunr deposits sets off a run on his mini banking system
Margayya is forced to decalare insolvency but at the end gets back his son and is back to where he started.
The third one is Painter of signs . An educated youth , takes up to painting of signboards, befriends a yound lady by name Daisy who comes to Malgudi as a Government worker , being part of the Family planning program. Fall in love, and finally she gets away to pursue her interest in service etc.
Quite rebellious , love and kind of live in relationship several decades back and that too in a small town.
The books are typical RK Narayan's one, simple, nice description of the surroundings, few characters.
Have started reading a bunch of short stories " Malgudi days.

Wednesday, November 18, 2009

The Grand old man of Malgudi- Nice piece in Tribune Oct 7 2000

I have just copied this piece from Tribune , a tribute to RK Narayan. Very nice piece.
May come in handly later
M A I N F E A T U R E
One of the greatest story-tellers of the 20th century, R.K. Narayan, turns 94 on October 10. The hallmark of his writing is that he has successfully fused his own personal philosophy with his literary endeavour. In fact, if sincerity is the touchstone of all great literature, then this quality in Narayan, uncompromising, gently ironic, sympathetic and humanistic, shines through all his work. It will ensure that Malgudi will live on. Rajnish Wattas delves into the world of RKN, and also talks to his biographer N. Ram, to unravel the magic of Malgudi and its creator.

MALGUDI must have been farthest from Le Corbusier’s mind when he planned the modern city of Chandigarh. Yet, one comes across people, places nooks and corners and characters — straight from the famous, fictional town of R.K. Narayan. Such is the universal appeal of this timeless ‘mini-cosmos’ with its quaint geography. Its place on the world map of literary landscapes is as prominent as that of its creator, who turns 94 on October 10.
Perchance, if Narayan was to read this, he would most likely reply with his characteristic puckish humour, "You can also reach 94 if you live long enough," as he remarked to curious well wishers on turning 90. "R (asipuram) K (rishnaswami lyer) Narayan Swami hides a long name behind his innocuous initials, with Rasipuram denoting his ancestral village, which he has never visited. ‘Henceforth call him M.K. Narayan, with M for Malgudi’, suggests Anthony Spaeth. And with ample justification as nearly 15 novels and 200 short stories written by Narayan are set in this fictional town.
Narayan rated as one of the finest English language writers in the world — and a perennial candidate for the Nobel Prize — was born in Madras in 1906. He spent most of his early childhood in his grandmother’s house, amidst the company of peacocks and monkeys as pets; and granny’s narratives of epics and fables to feed his imagination. On joining his large family of brothers and sisters, headed by the stern headmaster-father in Mysore; he had easy access to books and journals in English form the school library, to satiate his passion for reading. Ironically though, he flunked his high school exams — and that too in the subject of English!
On graduation, much against the advice of elders, he stubbornly chose to take up writing as a career, spurning all attempts by his desperate father to fix up jobs for him as a teacher. After varied forays into poorly-paid freelance journalism, he published his first novel Swami and Friends in 1935. The manuscript, rejected by numerous publishers, finally broke into print on the recommendation of Graham Greene to whom it had been passed on by a sympathetic friend of Narayan — who, though, had been asked to throw it in the Thames by its now frustrated author. And, thereby, began the famous literary friendship between Greene and Narayan, the former also helping him in the publication of his next two novels. While all his books got him high critical acclaim, none sold well; keeping the struggling — though resolute — writer still dependent on the benevolence of his joint family.
Recalling his early struggles as a writer, Narayan now jokes, "I had the unique experience of having a new publisher for each book. One book, one publisher — and then perhaps he said to himself, ‘Hands off this writer.’
His real breakthrough as a writer came with the publication of The English Teacher rated by most critics as his best work. Based on the traumatic experience of the tragic death of his wife, the novel is very autobiographical. In fact, so were his previous two books. If Swami and Friends was a delightful insight into the world of a small boy and his travails with apathetic adults; The Bachelor of Arts that followed was inspired by Narayan’s own easy-paced college life. R.K. Laxman — Narayan’s famous cartoonist younger brother, remembers their childhood days, "He forbade me from playing cricket inside our compound...but his sense of pathos was so delicate that he saw in his own injunction a theme for a story and wrote The Regal Cricket Club."
While recognition, international fame and badly-needed money began to come Narayan’s way with more books; central to all has writings was Malgudi, where all the stories were based. How was Malgudi invented? Narayan recalls about the writing of Swami and Friends, "I had an idea of a railway station, a very small railway station, a wayside station. You’ve seen that kind of thing, with a platform, trees and a stationmaster...Malgudi just seemed to hurl into view. It has no meaning. There is a place called Lalgudi and a place called Mangudi — but Malgudi is nowhere." He further adds, "I wanted to be able to put in whatever I liked, and wherever I liked — a street, a despot, a school or a temple at any spot in a little world...with the result that I am unable to escape Malgudi."
With the success of the English Teacher Narayan was in full flow, churning out novels, short stories and sketches regularly. He had found his literary genre of comic genius and gentle-irony — running like a silent subterranean stream through his deceptively simple style. And then came Mr Sampath (translated into numerous foreign languages, ranging from Hebrew to Japanese), The Financial Expert and The Guide, considered by many as his most popular novel, also turned into a film. These were followed prominently by: The Man-eater of Malgudi, The Vendor of Sweets, A Tiger for Malgudi, Talkative Man, Painter of signs and The world Of Nagaraj. His last work till date is the Grandmother’s Tale (1993).
Malgudi, happily remained the permanent address for all these writings, making John Updike describe Narayan as, "a writer immersed in his materials" and his town "as sharply chiselled as a temple frieze, and as endless, with always, more characters around the corner." An intrepid academic even drew out a detailed map of the imaginary town. A further fillip to the visualisation for the literary town was provided by the genius of Laxman, who brilliantly illustrated all Malgudi books and their dust-jackets, inspiring a group of international scholars to descend on Mysore to hold a seminar on: "Malgudisation of reality." The town delights academics round the world so much that ‘Narayan Studies’ have almost become an international industry, observes Spaeth.
One of the the most enduring charms of reading Narayan is to encounter his endearing characters described as, "small people, big talk, small doings," by V.S. Naipaul. My own favourite is Nagaraj from The World of Nagaraj — for I also, spend a lot of my time lounging in the verandah (if not the South-Indian pyol) of the house daydreaming of big projects — that never get off the ground. Just as Nagaraj is always preparing to write an epic, I too, am always in the throes of writing an all time best-seller; but haven’t gone much beyond the act of intense ‘contemplation’! Another memorable ‘Narayanesque’ character is the obnoxious, taxidermist Vasu from The Man-eater of Malgudiwho disturbs the sedate, laid-back rhythm of Natraj and his cronies’ lives, with his bullying ways. Who doesn’t confront such a tormentor in everyday life?
However, most of the time Narayan in Pico Iyer’s words is, "engagingly amused and indulgent," towards his characters. "The typical hero is a luckless, but affable conman who inspires confidence and finally, to his surprise, deserves it." Narayan himself explains his characters: "I try to write from the inside of a villain, and then see his point of view, that’s all."
Though Narayan’s canvas appears ‘provincial,’ inhabited by small men confronting demands larger than themselves; he commands an unfading universal appeal. The Malgudi magic makes writers like Greene call him the greatest prose writer since Evelyn Waugh, and Updike likening him to Dickens! For less exalted admirers like me, his perennial pull as a classic writer lies in the fact that it’s to him, I turn to, for a comforting re-reading. As I pull out an old volume of one of his Malgudi tales from my bookshelf before turning in for the night; familiar figures come alive gentle from a misty memory; an experience even more delightful than the delicious first encounter.
Narayan may well be in the autumn of his life now. Yet, he is mentally agile and goes for a walk in the garden; even if with the help of a cane, which he flippantly describes, "as more reliable than a brother." Even more reliable is his old-fashioned pen, squiggling out masterpieces. May it never run dry.

Narayan ‘will be read even a hundred years from now’
N. Ram, Editor, Frontline, is co-author of the most comprehensive and insightful biography of R. K. Narayan: The Early Years 1906 — 1945. He also has the privilege of being a long-time close friend of the legendary, reclusive writer. Rajnish Wattas spoke to N. Ram about the life and times of the doyen of Indian writing in English.Excerpts.
What inspired you and Susan Ram to undertake such an exhaustive biography of RKN?
R.K. Narayan is, in my view, India’s greatest writer in English of the past century. He is probably the first modern Indian writer to have made a full-time career out of literature. And he did it with dedication, modesty, independence, integrity – and, eventually, solid literary success, which will surely endure.
It was a real struggle for the first 20 years, but Narayan never wavered or deviated from the decision he had made early on that the only life for him was that of a writer. Recalling that decision made around 1929-30, he once remarked to me: ``I wonder how I had the foolhardiness to take such a crazy decision! I don’t think I could do it again if I had to make a choice.’’ This part-joking, part-serious remark seemed to capture the essence of Narayan’s early life as a writer. He summed it up for his biographers as only Narayan can: ``Good reviews, poor sales, and a family to support.’’
Therefore, this writer’s origins and early years attracted us greatly. First, it was Susan Ram’s research project. I had avoided direct involvement in it on the reasoning that my closeness to Narayan would obstruct objectivity.
For me, there was also a special connection. Narayan’s writing association with The Hindu, with which my family is associated, began in the 1930s. He had many friends in the newspaper. I met him, for the first time, when he came to Madras in the late 1970s to participate in a discussion on publishing in India, organised by The Hindu. Then, visiting him in his home in Mysore, I was charmed by his openness, his informality and absence of airs, his sense of humour, his clear, unspoken offer of friendship – and, above all, his very special ‘writerly’ qualities.
However interesting a person might be, it would make no sense to write a biography unless there were these special qualities in some chosen — and interesting — field. In other words, there would have been no biography were Narayan not such a wonderfully creative writer; no one would be interested in reading a biography of a mediocre writer or artist. Narayan, the most accessible of writers, is also a writer’s writer. I will predict that his fiction will continue to be read 50 years from now, a hundred years from now, after that too.
The Early Years, our biography, is essentially an attempt, undertaken over many years, to explore the indirect links, the subtle connections, the delicately suggested hints, between the `two worlds’ of Narayan – that is, the world of his fiction and his external as well as internal real life circumstances.
How was the experience – as RKN is considered to be averse to giving interviews and very reticent to talk about his literary craft?
Actually, over the years, Narayan has been interviewed a good deal. And I must add in all the streams of the media — print, radio, and television, Indian as well as international. In fact, such a major writer, who has been writing for 70 years now, cannot avoid being interviewed, can he? His work is available in most of the world’s major languages, he has been nominated more than once for the Nobel Prize, he has won many literary honours, he has long been represented by literary agents in England and the United States, who make their reasonable demands – and, above all, he continues to be extensively read in India and abroad. Narayan has said to me, on more than one occasion while facing some pressure to do an interview: ``Don’t you think I have done enough interviews for a lifetime?’’ Now he feels there is no need to do any further formal interviews, and that there must be a well-earned break from the stress of being interviewed.
But this does not, at all, mean that Narayan is inaccessible even today. Friendship is a significant theme in his fiction and it means a great deal to the man. In fact, even as he approaches 94, he is visited by a surprising number and range of people. Some of them are always welcome – he calls them his ``constant friends’’ — but quite a few of the visitors manage to get themselves invited or simply drop in. As a friend and biographer, my tendency, when I have anything to do with it, is to protect Narayan from anything like insensitive media pressure. Not that he cannot protect himself. He may be soft-spoken, but he is very firm and unyielding on the subject of unwanted interviews and meetings!
Quite a few people, especially foreign journalists and scholars, have approached me in recent years with the expectation that I can help them wangle an interview with Narayan. Sometimes, when I have thought it worthwhile, I have done my bit to persuade the writer to meet the journalist or scholar. Would-be interviewers I have taken to see Narayan have had varying degrees of success. Some of them, good writers, follow the conversational route, the indirect method, and come up with a good feature. Others, who can’t resist the temptation to interrogate, to ask direct or contrived or stiff questions, have their sessions terminated, politely but firmly by Narayan, who is a master at avoiding stiff, artificial situations.
If you were Narayan, with a very substantial literary corpus and a serious literary reputation, how would you react if you were asked by a journalistic or even scholarly interviewer to lay bare the ‘inner meaning’ of your work or asked to map the `development of your writing’ over the decades?
How would you like it, if you were Narayan, to explain your writing, its allegoric and symbolic meanings, its philosophical messages? Or asked some involved question in terms of discourse theory? Or asked to explain why you had not written about such and such theme or in a particular way?
‘Why can’t they leave me and my work alone?’ he has remarked to me. ‘There’s no message. I write because I love to write. Why can’t they just read and figure it out for themselves?’
Narayan is the most unselfconscious of writers. He has himself explained _ in his autobiography, My Days, and elsewhere — how as a writer he let things run their course, allowing characters to surface or ideas to develop and configure without deliberation of any kind.
As for our biography, Narayan was good enough to submit himself to several tape-recorded interview sessions in the 1980s, especially by Susan. We interviewed persons who knew him well, starting with daughter Hema. We were privileged to have access to the Graham Greene-R.K. Narayan correspondence from 1935-1990, other letters, and a great deal of written material, including Narayan’s ‘psychic journal’, a vitally important source for finding out about his inner being as well as about the new literary direction his life took after the death of his wife in 1939.
Then, on April 10, 1994,came the most devastating blow since 1939: Hema died of cancer, aged only 57. After that, I would drop in, virtually every night, around 9 or 10 p.m. and Narayan, his son-in-law Chandru and I would spend some hours chatting away the night. Later, the writer would refer to this as our ‘night club.’ As we chatted, I allowed myself to ask in each session one or, at most, two questions that might feed into the biography. Narayan, who surely knew why these questions were being asked, cooperated wonderfully, it seems without too much effort.
And it worked. Because I would come back home and make notes – often after midnight — of what I had learnt about a distant experience or incident in the writer’s life, or a delicate connection between lived experience and his fiction.
When will the long-awaited Volume II of the biography come out?
No schedule yet. There’s no hurry. It will come when enough material is collected. For Narayan, the later years, especially the period from the second half of the 1950s, were strikingly different from the early years. I quoted him as saying about the early years: ``Good reviews, poor sales, and a family to support.’’ During the 1950s, Narayan’s star rose steadily. That decade saw the appearance of three novels, The Financial Expert, Waiting for the Mahatma, and The Guide, the best known and most successful of all of Narayan’s novels, and a new collection of short stories. Narayan now had a real following, in India and abroad.
In 1956, for the first time in his life, he travelled beyond South India. En route for the United States on a Rockefeller Foundation grant, he stopped off in London and had his first sight of Greene, his friend of two decades. The outline of The Guide was in his mind and he consulted Greene on the denouement, specifically whether the hero should live or die. Greene was unequivocal and, as a consequence, Narayan has these magical lines in My Days: how he had on his hands ``the life of a man condemned to death before he was born and grown.’’
It is surely a comment on this writer’s literary powers that he was able, sitting in a hotel room in Berkeley thousands of miles from his South Indian roots, to write The Guide at the `word-rate’ of two thousand words a day within a span of three months. And what a world traveller, he who had never until his fiftieth year set foot outside South India, became!
But I will stop here. I have given you the general idea, perhaps something of the flavour of the later years. Narayan has, at times, suggested that his life as an established and successful writer is far less interesting than the early years of struggle. But we need not necessarily accept that judgment. Researching the later years, the post-1945 writing life of R.K. Narayan, is a completely different kind of challenge. The fiction — all set in a changing, yet familiar and well-rooted fictional town — provides a linking thread. But there is substantial development in Malgudi, in the writer’s art, in his life, and in the world around him. But the second part of the biography will take time and a great deal of resourcefulness because the source material is almost forbiddingly different from what was available for the early years.
If you were to highlight some of the most significant aspect of RKN’s writings, what would they be?
Think of Narayan’s literary accomplishment, set against the circumstances I mentioned earlier. His fiction, deceptively simple and seemingly innocent of literary technique, is distinctive for its voice, its fusion of the comic with the sad, and its philosophical depth. He is famed for his lightness of touch and a style that is lean, lucid and wonderfully expressive. ``Since the death of Evelyn Waugh,’’ declared Graham Greene, who may be said to be Narayan’s `discoverer’ (in the mid-1930s), ``Narayan is the novelist I most admire in the English language.’’ High praise indeed from one of the truly great writers of the twentieth century. For John Updike, Narayan’s ability to convey the ‘colourful teeming’ of his fictional town, Malgudi, places him in the Dickensian tradition.
Narayan’s view in novel or novel is completely objective; this ``complete freedom from comment,’’ noted Greene in his 1937 introduction to The Bachelor of Arts, ``is the boldest gamble a novelist can take.’’ Greens, followed by various other men and women of letters, saw in the ``underlying sense of beauty and sadness’’ a parallel with Chekhov. But in a real sense, Narayan is in a category all his own.
Much has been written, by scholars and critics, about the philosophic meanings and intimations of Narayan’s major novels. As the literary scholar William Walsh has noted, what interests Narayan is the element of self-delusion in the human condition, the gap that separates real understanding from what is claimed or supposed, and the incomprehension at the root of human relationships. As early as his second novel, he set out the objective pursued by his central characters as ``a life freed from distracting illusions and hysterics.’’ Some succeed, at least in part, others fail. In this respect the writer has successfully fused his own personal philosophy with his literary endeavour. If sincerity is the touchstone of all great literature, then this quality in Narayan, uncompromising, gently ironic, sympathetic and humanistic, shines through all his work. It will ensure that Malgudi lives on.
Then there is his style, lean, undecorated – he was a master of the ‘clear glass’ style before that term of art was invented – but it’s a lovely, grave, inventive style that goes naturally, shall I say unselfconsciously, with the storyline, the themes, and the narrative flow. As for Narayan’s ‘voice’, well, learned essays and treatises have been written on it. `Voice’, perhaps more than anything else, defines this writer, who in his particularity and registration of ordinary life seems to convey something universal. Hence his enduring appeal.
A fascinating chapter in the biography was the birth of Malgudi. Do you feel its invention is the most central aspect of RKN’s literary genius or does it transcend that?
Yes, the birth of Malgudi was the `breakthrough’ creative event, no question about that. What a lucky thing this creation of a small town, in 1930, proved for literature! Quite literally, as we make clear in The Early Years, the Malgudi railway station put our writer on ‘the right track of writing.’ With the invention of Malgudi, the writer found himself in flow. Of Narayan’s 16 novels, all but one (The Grandmother’s Tale) are set in Malgudi, as are many of the short stories. Malgudi obviously is very South Indian, but it can’t be reduced to any one place. Malgudi is not Mysore, not Madras, not Coimbatore. It is an imagined little town where change happens slowly, but surprises abound at every step in the midst of ordinariness that is, if you look beneath the surface, not ordinary.
The writer has provided some fascinating accounts of the birth of Malgudi and also its significance to his fiction. For example, he says: ‘…Malgudi just seemed to hurl into view. It has no meaning. There is a place called Lalgudi near Trichy and a place called Mangudi near Kumbakonam or somewhere. But Malgudi is nowhere. So that was very helpful. It satisfied my requirement.’
Narayan also observed to me once that he was ‘a treacherous writer’ outside the bounds of Malgudi. That must not be taken literally, of course, it’s an exaggeration. But all critics and serious readers will accept that Malgudi is absolutely central to Narayan’s fiction. One of the surprises about the appeal of RKN’s fictional milieu is how well the televised serial in which the Malgudi characters speak Hindi has been received all over India.
A few academics and writers have suggested that Narayan’s Malgudi is a literary cocoon where no real-life turbulence or great conflicts or socio-economic misery are encountered.
I don’t agree at all with this complaint. It seems reductionist, almost banal. There is a place for all kinds of fiction. Who is to say what theme or problem or slice of life or imaginative experience a novelist or poet must deal with? Rabindranath Tagore, Subramania Bharati, Premchand, Ghalib, Mulk Raj Anand, Salman Rushdie, Rohinton Mistry, Amrita Pritam, Thakazhi Sivasankara Pillai, Shivarama Karanth, M.T. Vasudevan Nair, Mahashweta Devi, Arundhati Roy, Jhumpa Lahiri…all of them are of Indian origin and deal with India or Indians, but they deal with different themes in a different way in a different style. Their voices are different too. You take your pick of approach, theme, world-view, style, voice, it’s a free literary world. The fictional world of Narayan is what it is. It rings true and enough numbers of people — in India and abroad — think so. Narayan is accessible and profound and has philosophical depth (incidentally, he detests the word `reader-friendly’, not the idea, of course, but the word-joining and the contrived and fake sound of it). Escapist Malgudi and Narayan’s fiction, is not.
Do you feel the Nobel Prize for Literature has unjustly eluded Narayan?
Yes, I along with many others feel the Nobel should have come to him several years ago. He was nominated twice – and could still get it. Some 40 years ago Graham Greene expressed, in a letter, confidence that Narayan would one day win the Nobel Prize. But, then, what on earth could be the reason for the Nobel not coming to Greene, a truly great writer?
In the final analysis, the literary reputation of Narayan will not depend on any Nobel Prize. What is certain is that his fiction and literary reputation will endure long after works by younger writers have lost their public.

Good to read again, RK Narayan's novels/shortstories

It was good to read RK Narayan's novel and a collection of short stories. Read " The world of Nagaraj " and a collection of short stories " Under the Banyan Tree & Other stories.
The world of Nagaraj is a very simple one. One can see that the author did not have as much an edge as he had in his earlier novels. This was written when he was well over 80 Years, Inspite of that , I would say , it substantially retains his style without quite attaining his earlier ability to beautifully bring out the small details around which he weaves his story. An interesting read. Essentielly , Nagaraj , the younger of the two brothers a simple person , eager to step away from controversy or even a potentiel controversy of any type. Very mild mannered and docile person . All his life, he spends under the shadow of his brother without ever really desiring to or ever attempting to talk back aggressively. It is a staid life and all that he wanted to do was to write a magnum opus on Naradha. Appears to be a case of a man of very average of intelligence trying to pass through life withouy any excitements . The author does make even a dull life sound interesting and okay. As usual the setting is Malgudi with its usual landmarks. One can easily gauge that, Malgudi was an inspiration from Mysore, but is set somewhere close to Trichy . The closest actual place is Lalgudi and that is close to Trichy. Could be a combination of Lalgudi and Mysore.
The other one was a lot more interesting with close to 28 short stories packed in one edition. There is the story of Annamali , who is with the protagonist of the story for 15 years as gardener, a story on a vow by the parents to have the hair shaved of one's progeny in return for God's blessings in answer to a specific illness , the story of a prostitue falling on the feet of a sanyasi to seek his blessings , just to bring out the fact that they too are normal in other walks of life other than the profession they carry on. In this again, on can see several allusions to Trichy and Madras.
Let me get on ( just starting to read ) with four in one book " Malgudi days"
This has the following novels packed in one
1. Mr.Sampath
2. Financial expert
3. A Tiger for Malgudi
4. Painter of signs
The author takes you back the charm of a small place , life is simple and revovles around a few events and not too many people.
Being out of a job has its pluses. Not one of the recession victims. Left for reasons of incompatibility and lack of interest in the job with the real estate firm .Have been toying between looking for a job and setting up advisory services along with a few Ex colleagues. Have not made much progress in either.

Thursday, November 12, 2009

Beware of high current assets-Koutons and the like

One has been seeing retail companies one after another falling. First was Subiksha and now you see huge losses reported by Vishal Retail , a Company which was making or atleast reporting profits quarter after quarter. Losses don't happen overnight especially when you are not in the Commodities market. Almost all the Companies one sees reporting huge and overnight losses are the ones which have been misreporting financials for several quarters /years. Favourite hiding place in the case of retail Companies is Inventory since hiding too much in Debtors is out of the question in retail play.
Had a look at Koutons , the inventory is Rs 743 Crs on a turnover of Rs 1000 Crs. Quarter after quarter the Inventory has been going up. While I am not saying that things would definitely be wrong, but I see a very high possibility.Of course Koutons has some manufacturinh , but no wau they can justify such a large Inventory.
Just keep away. I find it difficult to understand how a closer scrutiny is not being made of Inventory levels.
A big warning, keep as far away as possible from these Companies.
If in Companies in US , off balance sheet items, derivatives exposure etc which has caused trouble in India , it has been Current assets and in Companies with manufacturing base, it could Fixed assets also. Bloated assets are nothing but hidden losses.

Tuesday, November 10, 2009

Why worry about the Index ? Cocentrate on investing in best destinations , Be specific

There is so much talk of various asset classes , which is the best m Gold, Fixed Income, Real estate, metals , shares. In my view, treating shares as one asset class is not quite right. The underlying asset class is more a function of the area in which the Company operates.Investing in Minerals or commodity is always fraught with risks. Invest in Comapnies which are in to significant value addition, manufacturing, marketing, Innovative products etc. These are recssion proof and season proof.Each of the economic activity gets its rewards for the work done then. There is no element of rent. that is just sitting on something and expecting returns based on just ownership. There could be windfall gain or you can lose you shairt , pant and more
Just select large Cap and mid cap shares which are potentiel large cap, select a good management , have a look at the earnings and invest. Good quality management in no rent industries and shares generally outstrip returns in other classes and there is by and large free of asset pricing bias . ( like real estate, metals etc )

Friday, November 6, 2009

Carry trade in USD

This was a new version of a old concept , atleast for me. It appears that this basically means going short ( equivalent to borrowing ) in USD on which interest rates are almost Zero and hoping that the USD will depreciate so that , repayment is less than the borrowed money. Giving an example in USD-INR would make things easier.
This works only because partially the Interest parity theory on currencies is not quite working


We borrow USD 100 at let us say 1% interest and when the USD to INR is 1 USD = INR 50
Ruppe received is Rs 5000

when the INR borrowing rate would be say 10 %

When repayment comes up, may be USD has depreciated to 1 USD = INR 45.Repayment has to be only Rs 4500

This is in anticipation of USD depreciation . There is always a danger that USD appreciates . As long as the appreciation is equivalent the Interest rate difference ( USD being lower than INR in the present case ), overall cost is okay

If the appreciation of USD instead of being around 9 %, gets to be , let us say 15%, the borrower would be doomed.

Something very similar happened when borrowing in FCCB took place


Wednesday, November 4, 2009

Build up of another Bubble and Bonus to the Finance wizards of wall street

Read 3 articles all in Financial express. Nice pieces , all on the Finance crisis , the aftermath , the bailout , the vulgar bonuses , possible build up of another asset bubble and financial crisis, not learning from mistakes and the convoluted logic of the wall street gang on rewards .
First one is on compensation of a top employees of the Banks for which bailout package was extended. Fed Treasury has appointed person, one , Feinberg to oversee the whole thing. There is a move to put the lid possibly and ensure that the structure is designed in such a way that high risk os avoided and employees do not indulge in reckless gambling endangering the entire bank and sometimes the system. This is a good move atleast on the short term . They have to come out with something more permananet and becomes part of the structure.
The second piece is by , Kevin Hassett captioned " Wall street cries "feed me" or world will end.
This is even better. He talks about the fact that crisis or not, the wall street vultures get their extravagant pay and light touch regulation. The general opinion in a poll of traders and analysts and fund managers revealed that they expected 2009 Bonuses to be better than the earlier year. Some greed and some remorse.
When the topic of limit on pay arose, these people come out with arguments that that will be the end of financial innovation. Anyway as the author points out who wants financial innvoation. The experts go further and point out that there will only be plain vannilla products. Surpising thing is NYSE Euronext CEO , one Duncan Niederauer sides with these guys and bemoans the possibility of no innovation without good pay and attracting good talent.
All of us would do better , in fact much better with plain vanilla products on the Finance side rather than all this convoluted logic to show that some credit risk is better than they actually were. Wall street ( so called) wizards just threaten the world. They have the smarts to impress upon others the need to keep feeding them .
Another piece is by MK Venu. He points out how, with all the excessive liquidity pumpmed in to the economy , post crisis, the prices of various asset classes, Equity, Real estate, Gold etc have all started reaching pre crisis period.
So much for learning from past mistakes.

Monday, November 2, 2009

Bonus time for Investment Bankers -Subsidisation of rich by poor

Quite amazing. You had just a year back people all in unison, hollering away at the vulgar bonuses earned by the Investment bankers and Derivatives traders , basically the high finance people. They had built a royal finance bubble and wanted a huge dole from the Government to ensure that the bubble did not explode .US Fed very nobly obliged for the fear that the entire financial system would collpase without a bailout and with consequences much larger and of a wider ramification. Moral of the lesson, you have to be smart not in making the world a better place, you have to be smart enough to make money and in the process create an environment where lack of support or subsidy from outside would risk the entire system so much so that the administrators and the rest of the world , chip in to bail out .
Now that the support has been provided, the vultures are in to the next cycle of boom and bust. One reads from newspapers that the very instituitions which were brough to the brink by these smart finance professionals are about to reward the people with bonuses. For what ? For using the dole money to start the rehabilitaion and get it on even railing, It is a cruel joke.
Privatisation of profits and nationalisation of losses have never sounded truer.
While socialism has failed to drive innovation, efficiency and really had not resulted in benefitting the very people it was supposed to benefit, Capitalism in its present form , obviously is not the most ideal. It requires a lot of checks and balances and in quick time.
One more cycle of this non sense, people will lose complete faith. We can be blaming Maoist violence etc for the rest of our lives .

Very good Options tutorials in CBOE

Very good Options tutorials in CBOE ( Chicago Board Options exchange ). I had been reading up a book on Forex ,options, Futures by Mr AV Rajwade. He is a top class expert without any doubt. He is completely on top of the subject including Options, Futures, swaps etc

Wher CBOE tutorials scores over any thing else including the book (atleast on the options side which I have gone through so far ) I mentioned above is the fact that clarity of communication is very high and it takes one through the basics with tests and quiz thrown in. Their standardisation of terminologies is impeccable. They define the terms very well and stick to the same right through . Only handicap is , it is a online tutorial and one can not be download in to a local disk and for going through at leisure and withou having to "Broadband live".

It is good for beginners . Learning is ramped up gradually.I am still to explore some further aspects of the same. Though I have a basic understanding of Forex, Otions and Futures, I found going through the basic tutorials also very interesting and a delight.

Link to the website

http://www.cboe.com/

Sunday, November 1, 2009

TNPL- May be a good time to buy

TNPL shares have again been coming down. Have come out with Qtr 2 results. Slight decline both in turnover and ner profits for the qtr compared to corresponding qtr last year.
Still EPS of Rs 4 last quarter warrants a much better price. There are two aspects
1. Current Financials warrant a better valuation than the current market price of Rs 74
2. Market has not factored in the expansion on the cards, and the improved estimated financials.
Financially well managed, conservative , good backward integration including development of plantation for wood supply, power generation, cement clinker unit and good land to boot.
There could be a few FMCGs, franchise based business models etc with excellent network etc with better future valuations. Like Airtel was a few years back . I am able to see TNPL as a safe bet with a decent assured gain unlike a consumer based products which could be multiple baggers but assurance is a bit less than this or atleast my ability spot such shares is a lot more limited than this.

Sunday, October 25, 2009

Telecom scandal

There is something wrong with saving of blogs. Everytime I cover the whole material and try to align, the damn thing gets deleted


Not able to undo the damage.


Let me start again


Financial express seems to have done a detailed analysis and have ferretted out very relevant pieces of information and have analysed quite well.

Now comes the news that the Cabinet Secretary to the Minister, Mr Mathur was dead against the process. He had serious reservations about going ahead with the auction without setting in place an equitable and transparent policy. He was for evaluation of the potentiel bidders to ensure that only competent people participate in the bid and not Companies with just Real estate etc background as was the case with Unitech and a few others.


He had made it clear, one understands ,that the advancement of closure date to Sept 25 2007 from the earlier announced date Oct 1 2007 was not legally tenable.

He was so much against the process that he refused to sign the documents till his retirement till the year end. The Minister went ahead soon after the gentleman's retirement and concluded in Jan 08.

The Secretary DOT, Mr Mathru, had also recommended need for formulation of a mechanism of spectrum allocation after the grant of License . The Minsiter instead bundled both and sold part of the nation along with the license.

One understands that the Finance member of the Telecom commission advised auctioning of the license to fetch a much better price as against the proposal of going by the auctioned and established price of 2001 by TRAI.

This scam is of much larger scale and grandeur than anything elase before. This makes Bofors, Submarine, Fairfax ,look like small change.

Only problem in India is , public memory is short and newspapers will keep at it till such time they latch on to the next sensational thing. Things do not get carried to their logical conclusion.

Logical conclusion in India could mean just a few lacs penalty as was the case with Sukh Ram

Tighetening and fetching better pricing for Govt resouces would be a lot better than levying taxes which affects the entire population.Leaks in the system are far larger than the deficit that Indian Government budgets have. Nation can be run with Nil deficit if only 50% of the leaks are plugged.

Saturday, October 24, 2009

Ponni Sugars and Seshasayee Paper & Boards Ltd- Good results, worth buying in even now

Sometime back, I had recommended SPB as well as Ponni sugars. SPB has been progressively driving itself to better performance and better financial results thorugh operational efficeincy rather than just expansion


They went in for captive generation of power to bring down the cost of power , next they went in for installation/expansion of pulp facility as against importation of the same in the past.


These are significant in house value addition activities and at significant lower cost. EPS for half year is Rs 19 and full year is likely to be Rs 40.Pulp capacity and new Mill ( Modernisation ) have added to the Interest and Deprecation but they have led to much better gross margins. Worth investing at Rs 140. If one is lucky, in the medium term say 1 year , it could touch Rs 350-450. I am atleast hoping for it .
Ponni is a pure commodity play on Sugar. EPS of around Rs 17 , in the first half. EPS likely to be around Rs 30 plus ofr the whole year. Sugar prices have shot up and sugar is likely to be shortage commodity for another year per reports. Government is trying to import and isntitute some controls. There has been diversion of sugar cane for ethanol production. Globally also, Sugar is likely to be a shortage commodity for a year atleast.
The share which is priced at Rs 100 can go up by another 50%. Regret is, I have only 500 shares. I had intended to buy more , but as usual in stocks these ifs and buts do not add to the kitty.

Telecom scam "King"

Typed once , messed up and deleted somehow.
Let me try again

This was on the Telecom swindle by our Honourable minister of telecome, Raja.

The Minister conveniently hides behind TRAI directives, he has cherry picked their directions to his convenience.

TRAI had insisted on Multi stage bidding by multiple operators for each circle and " No auction " for Licence. This was specifically for the exercise carried out in 2008. TRAI would have anyway had in mind operators who had experience and capability and not rank newcomers to the field. I don't think they had brokers in mind when they invited bids.

This is precisely what happened. People like SWAN and Unitech who had absolutely no track record bid for the license. The bid which were to be open till Oct 1 2007 was closed by Sept 25 2007, thus depriving some of the bidders

TRAI had recommended some price way back in 2003. The Minister took this since it suited him. DOT had authority to overrule TRAI and apply principles of prudence where it thought the same were required.

Two of the operators took in fresh Capital . SWAN diluted 45 % at $ 900 Mio, a license the full price of which was $ 400 Mio and Unitech diluted 67.5 % to proven operators at around the same kind of pricing , making huge kilings in the bargain .( It was dilutiuon through fersh capital infusion and not sale of stake is all just a cover up )

Subsequent to this the Minister put a stop on resale or dilution for a period of three years after a lot of clamour from the media and opposition.

Now he is trying to defend the earlier decision and process. If the earlier one was right, where was the need to put a moratorium on sale of licenses.

On top of this, DOT had also bundled some spectrum along with the license. Spectrum is considered a resource in short supply . Would have fetched considerable money if proper process had been followed.

Some Telecom experts estimate the loss to be around Rs 60,000 Crs, money large enough to bring down Country's Budegtary Deficit.

This man. Raja was considered tainted and given a second chance. DMK had Cong by its ....

Sad state of affairs.

It is sad that BJP is devoid of decent leaders suddenly and losing its position all over. There is hardly any opposition worth the name for Cong. I am not a great fan of BJP but Cong which was running the Country for over 50 years , most of which with very little opposition has not taken bold measures to improve the economic condition of the Indian lot. If at all some good work was started it was when a Non Gandhi/Nehru was at the helm. You can say that the situation called for desperate meausres ( 1991) when Narasimha Rao formed the Government. That is just an excuse and a cover up for Gandhi/Nehru sycophants.

We are now getting enamoured with the New Gandhi . They come out as decent people with good potentiel, but are we as a nation so intelluctually handicapped that we think that there can not be any alternative. Gandhi/Nehru is a long term compromise (negative) choice and our usual tendency not to let any competent equal to come to power. We are okay with the Dynasty just to prevent others coming through to power.

One can talk of need for Inclusive measures and liberalisation with a heart. All that is fine , but do it. Don't walk around thumping chest on one NREGA ( National Rural Employment Guarantee ) Experts like P. Sainath have established that only a miniscule portion of such welfare schemes reash the intended people. Our delivery systems and mechanisms are poor. Do something about that.


Let us hope that things improve, let us hope that Cong starts delivering more than it talks, let us hope that BJP beefs ( Pun intended ) up its organisation and not just Hindutva and becomes a meaningful opposition.

Friday, October 23, 2009

A better book review of the book "When genuis failed "

I have copied the following piece , picked up through a Google search. The gentleman ( Ian Kaplan )has done an excellent job of summarising the whole thing.

When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger LowensteinRandom House, September 2000, 264 pages Review score: *** out of ***** The classic image of a Wall Street market trader is someone, usually a man, on the trading floor, shouting buy and sell orders, clutching a sheaf of trading tickets. Floor traders must have an instinctive feel for trading and get by on their quick wits. They are now a vanishing species and will soon join Mark Twain's riverboat captains in extinction and myth. Modern trading is now almost entirely paperless and takes place in the cyberspace of computers and computer networks. The instincts of market traders are being augmented and in some cases replaced by mathematical pricing models. Traders are being drawn from schools like MIT, rather than the City College of New York. A feeling for market dynamics and trends will always be important, but along side these skills modern traders have a command of statistics and probability theory. John Meriwether gained a measure of fame in Michael Lewis' book Liar's Poker, where he is described by Lewis as a Salomon Brothers Uber-trader and master of Liar's Poker. Meriwether was one of the top bond traders at Salomon Brothers and later became head of the fixed income securities department (which was responsible for mortgage security and bond trading). Meriwether was one of the first people on Wall Street to recruit mathematicians and physicists from schools like MIT and Cal. Tech and turn them into bond traders. Meriwether was a harbinger of the conjunction between Wall Street and the Ivory Tower. Perhaps to the horror of the old Wall Street operators, academic financial theory provided a framework that allowed markets to function more effectively. One example of this is the Black-Scholes model for pricing stock options. Acceptance of the Black-Scholes model has become so wide spread that Web sites like Yahoo and E*trade that quote stock option prices also list the associated Black-Scholes values. When Genius Failed, by Roger Lowenstein, is the true story of Wall Street traders, academics and hubris. It is the story of the failure of Long-Term Capital Management, a hedge fund founded by John Meriwether. In 1991, when John Meriwether was the head of the Salomon Brothers fixed income security desk, a US Treasury bond trader in Meriwether's department at Salomon falsified a US Treasury bill bid. The scandal that ensued when this came to light put Salomon in danger of losing their status as a Treasury bill broker. The head of Salomon, John Gutfreund was forced out and Meriwether went along with him. This left John Meriwether unemployed and very wealty. But Meriwether, to use Michael Lewis' term, was a Big Swinging Dick, a Master of the Universe, an Uber-Trader. Consignment to the golf course, even a very exclusive golf course, is not as gratifying as being a player in the market. In 1993 Meriwether took the first steps toward founding the Long-Term Capital Management (LTCM) hedge fund. As befits a Big Swinging Dick market trader, LTCM was to be a Big Swinging Dick of a Hedge fund, capitalized with two and a half billion dollars. For the privilege of having their money managed by Masters of the Universe, LTCM would also charge investors over double the usual management fees. A hedge fund is an investment fund for wealthy individuals and institutions like banks and pension funds. The number of investors in a hedge fund is limited and they are restricted, in theory, to only those who can afford the risks which may be associated with the hedge fund. Unlike mutual funds, hedge funds are unregulated. Although the story of the failure of LCTM and its subsequent bail-out, organized by the US Federal Reserve is inherently interesting, it is the stories of the people involved that make When Genius Failed difficult to put down. Lowenstein wrote a best selling biography of Warren Buffet and he excels at telling the stories of the people behind the events. The Genius mentioned in the title refers to Robert Merton and Myron Scholes. Nine months before LTCM failed 1997, Merton and Scholes shared the Nobel prize in economics. Merton, Scholes and Stanford's William Sharp (famous for developing the sharp ratio to measure risk) are some of the founders of modern finance, which attempts to apply quantitative techniques to market analysis. Merton and Scholes jumped at the chance to join LTCM where they could not only apply their theoretical work but make a great deal of money. The trading cachet of the LTCM trading group, headed by Meriwether and the stellar academic reputations of Merton and Scholes was joined by the final pillar of LTCM's power base: David W. Mullins who was vice chairman of the US Federal Reserve before joining LCTM. As a Big Swinging Dick hedge fund with the most stellar partners and a huge capital base, LTCM was able to convince banks to lend them money at rates that were not available to lesser mortals (including investment banks like Salomon Brothers). LTCM used this credit to leverage their capital base by a factor of twenty to thirty times. In the first few years this allowed LCTM to make spectacular profits for themselves and their investors. One of the flaws of When Genius Failed is that Lowenstein sacrifices the details of the investment strategies used by LTCM to tell the story (Nicholas Dunbar's book Inventing Money does a better job explaining the details of the LTCM's financial strategies). Many of the strategies that LTCM used involved derivatives. The term "derivative" has taken on an ominous cast because of the failure of hedge funds like LTCM. Derivatives are more innocent than their sinister reputation. A derivative is a security that derives its value from an underlying asset. A futures contract for corn, for example, derives its value from the underlying market price for corn. A stock option derives its value from the underlying price of a stock or stock index. Derivatives and the strategies traders use to make money on them can be complex and Lowenstein may have felt that these details would make the eyes of many readers glaze over. For example, Lowenstein never fully explains what exactly a "swap" is and incompletely explains LTCM's "volatility" bets. As we will see below, LTCM lost most its money on swaps and volatility bets, so these derivatives play an important part in the story. I've included a footnote here on interest rate swaps and volatility bets. In the epilogue Lowenstein summarizes LTCM's losses: Investment Loss Russia and other emerging markets $430 million Directional trades in developed countries (such as shorting Japanese bonds) $371 million Equity pairs trading $286 million Yield-curve arbitrage $215 million Standard & Poor's 500 stocks $203 million High-yield (junk bond) arbitrage $100 million Interest swaps $1.6 billion Equity volatility bets $1.3 billion This table makes it clear that the last two items, interest swaps and equity volatility bets, account for the majority of the losses. For the first four years, LTCM's trading strategies made huge profits. But no matter how good the trader is and no matter how good the models are, no one wins all the time. There will always be bad market bets. It is impossible to perfectly predict the future. LTCM's losses where large for two reasons: · LTCM used large amounts of leverage. For every dollar of assets in the fund they borrowed twenty to thirty dollars to place their trading bets. In many cases the loans made to LTCM where the equivalent of signature loans. There were not backed by securities and there were no margin calls when the value of LTCM's assets dropped. Leverage greatly magnified LTCM's profits when they bet correctly. It also greatly magnified their losses when the market turned against them. Although LTCM's returns were impressive when they did well, their risk adjusted returns were not nearly as good. · Low liquidity. Or to put it simply, there were few buyers when the market turned against LTCM. Interest rate swaps are contracts between two parties. They do not trade on an open market the way stocks, bonds or exchange traded options do. The options contracts that LTCM traded in their volatility bets were huge customized option contracts: Since long-dated options [LTCM was entering into 5 year options contracts] don't trade on exchanges, Long-Term had to tailor private options contracts, which it sold to big banks such as J.P. Morgan, Salomon Brothers, Morgan Stanley, and Bankers Trust. The market for such arcane contracts was thin, with only a handful of players who traded on a "by appointment" basis. When LTCM wanted to sell these contracts when they started taking losses, they could not get out of their positions at a reasonable price since there were few buyers. And the buyers knew they were in distress. The huge size of LTCM's leveraged capital base forced them into markets with less liquidity. Investment funds must worry about their trades having a market impact, narrowing or obliterating their expected profit margin. The larger the investment fund, the more this becomes a problem. They could trade in only the most liquid markets (e.g., stocks) or via customized contracts for swaps and options. When LTCM crashed they had positions in securities with over a trillion dollars of face value. At the time many investment banks were losing hundreds of millions of dollars on similar market bets. There was concern at the US Federal Reserve that if LTCM defaulted on their contracts it would cause chaos and a market crash. This in turn could place the US economy in danger. So the Fed organized a bail-out. A consortium of banks and trading houses put four billion dollars into LTCM. In return the consortium took possession of LTCM's market positions. The investors that had money in LTCM got ten cents on their invested dollar. The partners were largely wiped out. Once LTCM's market positions were unwound the rescue consortium made money on their investment. LTCM's mistakes were made fatal by massive leverage and lack of liquidity. If not for their huge leverage, LTCM could have survived these mistakes, or at least survived without such breathtaking losses. So while the mistakes themselves did not have to be catastrophic, it is interesting to consider how LTCM's "world view" contributed to their losses. At the heart of LTCM's trading strategies were two core beliefs: 1. The academic view is that the fluctuations (volatility) of a given stock and, in fact, the entire stock market follows a random course. The most articulate expression of this arguments can be found in Professor Burton Malkiel's book A Random Walk Down Wall Street. According to this view, volatility is distributed in a bell curve (a so called "log normal" distribution), just as people's height and weight are distributed in a bell curve. The larger the movement away from the mean (the center of the bell curve), the larger the movement in the stock price and the greater the potential risk. If volatility falls in a bell curve, risk can be estimated. The calculation of volatility assumes that the way a given security or set of securities has acted in the past will reflect the way they will act in the future. Since the past is known, the future can be modeled. 2. Markets are perfectly efficient. The actions of market traders will price securities correctly. A "mispriced" security will be returned to its proper price by the market. This is sometimes referred to as "perfect market theory". Markets may be out of balance at some point in time, but they will always move back toward balance. When markets are stable and no events like the "Asian melt-down" or the Russian bond default perturb them, the assumptions above tend to be true. In fact, during the first three years of LTCM's history, markets were very placid. Efficient markets show linear behavior that can be described with calculus and statistics. Academics like this because it leads to elegant results which make good journal articles, with nice equations. There is, in fact, some reason to believe that markets are efficient. But there should always be a caveat: markets are efficient, on average, over a long period of time. Unfortunately for those who actually trade in the market, short term effects can be anything but "efficient" and perfect. Unlike physics, where theory is eventually tested against experimental results, much of economics seems almost willfully ignorant of the way the market behaves. Those who are active in the market, like George Soros, tend to discount academic theory. Anyone who hears news reports about the stock market will realize that rather than being perfectly efficient, markets are not always placid, but sometimes act like a manic depressive, gripped by wild euphoria one moment and crashes the next. A whole language has grown up to describe market "mood", complete with mascots: the bull and the bear. Markets exhibit avalanche events: a seemingly small trigger can produce a massive wave of change in the market. In the case of LTCM, the avalanche was triggered by the Russian bond default. LTCM was not the only trading firm to lose large amounts of money. Virtually every investment bank lost money when interest rate spreads widened unexpectedly. This was largely because they were using the same kind of trading models. The black-scholes option model and its more sophisticated offspring (binomial trees) are popular with trading firms because they usually provide a good model for pricing stock and bond options. These models work well when the market is "efficient" and orderly. But markets regularly make a transition between order and chaos. The movement from an efficient market to one that is sometimes wildly inefficient, where, in the case of LTCM, there are persistent mispricings of bonds, is not described by statistics or calculus. These events are best described as dynamical (or chaotic) systems. Dynamical systems are systems where action in the system feeds back into the system, producing a complex result. In markets these actions are produced by traders in the grips of panic selling (or in the case of the Internet bubble, euphoric buying). By believing in perfect markets, LTCM left themselves exposed to huge risk when the market changed and became chaotic. One question buried in the saga of LTCM is: would it be possible to recognize the switch in regime, from a market that is relatively efficient, where mispricings are corrected in the short term, to a market which is chaotic, where mispricings can be unexpected and long lived. A number of computer based market models have been proposed that act like real markets. Some of these rely on market models based on a set of dynamical equations. Others rely on a market composed of rule based market actors, which simulate trading in the market. These model produce volatility curves that have "fat tails". That is, bell curves that show extreme events on either side of the center. Although these models act like a real market, they do not necessarily mirror the market. In theory a model could be built that would predict market regime shift. If we had unlimited amounts of computing power and the ability to simulate humans, with their judgment, fear and greed, we could build a simulation that would perfectly model market behavior. When such a synthetic market got certain inputs, like the Russian bond default, the market will become chaotic. The market could then be run forward in time, telling us what the likely result would be. There are obvious problems with this thought experiment. Humans and the interactions between them are vastly too complex to simulate. Market information, like the trading volume or close price of a stock is internal market information. Humans act on information (news) that is external to the market. The interpretation of news depends on past news (the Russian bond default might not have produced such an extreme result if it had not been preceded by the Asian melt-down). Finally, even if such a predictive market simulation could be built, it might not be able to recognize a regime shift in time for the information to do any good. The 1987 stock market crash happened in a very short period of time, for example. Building a market simulation that could predict a regime shift is a daunting task. But it might not be an impossible one. It may be that traders generally act on a limited set of rules, which could be modeled. Instead of trying to interpret news, it might be possible to use the internal characteristic of the market (increased volatility and internal trends) as triggers for the market actors. Black-Scholes and related option pricing models made a great contribution in the past. Dynamical market models may be the next regime. Web based references: · LTCM Speaks, by Joe Kolman, DerivativesStrategy.com · Salon's review of When Genius Failed, by Alan Deutschman Disclaimer I work on software for quantitative finance. This does not make me an authority in this area. Although I would like to think that I am a master software engineer, what I don't know about quantitative finance literally fills bookshelves. Nothing that is written here should be interpreted as reflecting the views of my employer. Nor should it be read as an indication of the kind of work that may be going on at my employer. The speculation about actor based modeling has been influenced by work at the Santa Fe Institute more than any other source. Finally, www.bearcave.com is my domain and these opinions mine alone. Ian Kaplan - October, 2000Revised: Book review table of contents back to home page

When Genius failed- Book by Roger Lowenstein

Read this book " Rise and fall of Long term Capital management ","when genius failed " by Roger Lowenstein. Had read this once earlier , about a year and half back. Had done a fast read that time. Reread now . Lowenstein deals with the human element more than the technical elements of the story, which is good since he is probably trying to get a larger reader in to the fold. He does deal with some basic explanations on swaps, bond trading, volatility, risk aspects as well as the key aspects of Efficient market hypothesis and random course of securities and equities.

The basic storyline is that John Meriwether, an ex Salomon Bond and arbitrage wing leader , puts together a team of brilliant mathematicians and traders including two future nobel laureates Myron Scholes and Merton Miller to take derivatives tradings to a highly mathematical level through complex models. The major characters involved other than the above are Larry Hilibrand , Haghani and Rosenfield, all math geeks with doctorates from MIT etc to boot.
Their models are built with the following assumptions
1. Markets are efficient and prices respond to information and correctly take in to consideration all knwon factors.

2. Fluctuations ( volatility )in market prices or spreads follow a random course ,and such volatility follows a certain pattern ( bell curve)

3. Deviations from this in pricing , if any is a temporary state and the prices have to return to a state of equilibrium , or in other words follow the past pattern of a ell curve.

The Options pricing model of Scholes, Merton and Fischer in fact rely on a basic premise of Efficient markets and the pricing to follow a certain pattern.

It worked well for a the first three years.The major theme was to locate spreads and mispricing which were not quite in line with their theoretical esimation , book trades in such a way that once the pricing return to normalcy or equilibrium, LTCM can come out with profits.They banked on the fact that inequilibrium ( per their models) can only be temporary and at some point it has to be return to normal. Non adherence for a long time (to their models) was an event which could happen once in say 100 years.

They depended a lot on the convergence in cases of wild deviations and bet on such convergence.
Some of the convergence plays are as

1. Discount differentiel between Bonds based on their interest rate and maturity period .

2.Differentiel pricing between Futures and current price of a security. Make use of differentiel by may be buying futures and selling the current stock ( going short or in other words borrowing ). The expectation is that the Futures prices will go up and hence buying now cheaper makes sense and expectation that the price of securities would get lower

They located mispricings in relation to , one country bond to another country bond with reference to their coupon rates , discount at which they were being sold, one country currency to another country currency etc

Major weakness was that they had tried to model human behaviour .The fund was very higly leveraged. In times of stress or periods which in their terminology , the markets staying in a state of disequilibrium for long periods, there is requirement for additional capital to repay lenders.

To quote Keynes " Markets can stay irrational longer than one can remain solvent"


The had huge investments in Russian bonds , various other slightly risky bonds in which they had invested on the premise that the spread between Treasury bonds and other bonds were far greater than the theoretically right one. Apart from this they had made departures from their own credo of dependence on convergence to certain directional trades in the equity markets. This was very risky and to quote the author, this is like picking nickels in front of a bull dozer.


Russia went back on repayment of debt by devalueing its currency , putting a moratorium on total debt etc. Once markets started seeing red, there was propensity to invest only in safe bonds and the spreads widened. Losses arising this had to be made good by additional infusion of Capital. All the banks get together ( Fed's effort ) and inject capital to bail out LTCM. This was done not only to ensure limiting their losses but also to address the larger issue of protecting investor confidence in the system. The consortium put in $ 3.65 Bio and restricted theor losses. In the final analysis . a dollar put in initially was worth 33 cents. Of course at varying points of time, the invetors got out with profits, huge losses.


The partners who had blind faith in their models were left with very little. Of course as the author says, high finace in the late 90 s, had a knack of rewarding high peformance but not punishing losers. While the partners came donw from the lofty heights , they still retained enough money to come relatively unscathed in terms of retaining a dceent life.


To Scholes and Merton Miller, ,it was a huge blow . It was a case of shaking the very foundation of modern finance theories on options and pricing etc that they had come out with .


These people being the smart cats that they are, still defended and continued to belive that with more time, they would have come out winners.They also partially blamed it a strange set of unusual circumstances which conspired to bring their downfall.

There was also the murky aspect of Goldman , picking up information of LTCM trades while doing due diligence, making use of the information and selling out and making LTCM position get worse.

The Partnership made repeated profits in the first three years, banks in the intial period were servile and obsequious and were too willing to do any trade with them on terms dictated by LTCM. Banks considered it as some kind of honour and prestige to deal with the exalted lot of LTCM. Long term Capital management got away with " no margins on trades", not disclosing the full details of the trades, , keeping each of the two legs of the swap trade with tow different banks to ensure secrecy.

After 3 years of profit, it just took less than a year for the firm to run in to heavy weather and lose the everything.

Funny part is , the losses mentioned are nowhere near the ones sufferred by the players in sub prime crisis of 2008. LTCM collapse almost appears like a honeymoon compared to Sub prime. Same Alan Greenspan was at the helm then and later when the sub prime crisis was gathering momentum.

While there is hell a lot of disclosure requirement and regulations on margins, investment etc on strightfroward loans, and anyway these can very much be gleaned form the balance sheets, derivatives are not disclosed and the risk exposure is much larger. If they had tightened in 1998, they would have possibly had a no or muted sub prime crisis and not the full blown one of 2008

Just to give a perspective, LTCM losses were may be around $ 4 Bio, sub prime was close to $ 1000 Billion.

Do we learn from past ? No, we read up history and the knowledge is history.

Friday, October 16, 2009

Equity research circus-Have a look at this sample reports on TN Newsprint by Karvy

This is not to cast aspersions on the equity research house since this kind of volte face ( not a complete volte face , this is partial retraction of their earlier stance ) is not the exclusive domain of Karvy alone. Almost the entire fraternity is guilty of this.

Just about 9 months back, Karvy had mentioned buy on TN Newsprint with a possible price of Rs 96 and just have a look their estimated sales and net profit figures in that report. Now they have substantially gone back on the recommendation.When they recommended earlier actual price was Rs 69.Now the price is Rs 81 . This rise has been quoted as one of the reasons. Does not cut much ice. They have scaled down the net sales figures between Dec 08 and now ,from Rs 1440 Crs in to Rs 1362 Crs and net profit from Rs 166 Crs to Rs 135 Crs and EPS impact of Rs 5.
I don;t thing an EPS of Rs 5 is the concern. I am sure there would be difficulties in exact estimation. Equity analysis and forecast should be more a function of the general direction of sales and net profit and performance of this Company vis a vis others .The forecast can only in a band/range and can not be exact. Trying to make it a highly mathematical and exact science , will only lead to the researchers falling flat on their faces.

I still maintain that this share is an extremely good value buy with a 18-24 months perspective.
Good assets, steady business, good capacity, nicely diversified in related fields and one of the largest paper manufacturers in India. You can expect 20-25% compounded . Of course I can be wrong, but chances are very low. I myself have 3500 shares and have been planning to add a little bit more.

I am just reproducing the pieces on 2 different dates, Dec 23 2008 and again Oct 16 2009 from Karvy for ready reference.

Published on Fri, Oct 16, 2009 at 12:38 , Updated at Fri, Oct 16, 2009 at 12:41 Source : Moneycontrol.com
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Karvy Stock Broking has recommended an underperformer rating on Tamil Nadu Newsprints & Paper with a price target of Rs 78, in its report dated October 15, 2009. At 12:39 pm, the share was quoting at Rs 82.95, up Rs 1.70, or 2.09%.
"We maintain our net sales and net profit estimates for FY10 & FY11 of Rs 11,131 million & Rs 13,612 million and Rs 1,078 million & Rs 1,353 million respectively. Tamil Nadu Newsprints & Paper is currently trading at P/E of 5.2x on FY10E EPS of Rs 15.6 and 4.1x on FY11E EPS of Rs 19.6. We maintain our target price of Rs 78 and downgrade our rating on the stock from 'Market Performer' to 'Underperformer' due to price appreciation," says Karvy Stock Broking's report.



Buy Tamil Newsprint, target of Rs 96: Karvy
Published on Tue, Dec 23, 2008 at 18:00 , Updated at Tue, Dec 23, 2008 at 18:14 Source : Moneycontrol.com
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Karvy Stock Broking has recommended a buy rating on Tamil Nadu Newsprint and Papers with a target of Rs 96 in its December 23, 2008 research report. "The topline and bottom line of TNPL are expected to grow at CAGR of 15.6% and 14% to Rs 14,494 million and Rs 1,663 million in FY11E respectively over FY08. Moving ahead, we expect the capacity expansion in pulp & paper production and favorable industry dynamics will keep the growth momentum of the company. In addition to that, TNPL is better placed than its global as well as domestic peers in terms of gross profit margin and return ratios. We estimate ROCE for FY09, FY10 and FY11 will improve from 14% in FY08 to 15.2%, 16.7% and 18% respectively. The ROE for FY09, FY10 and FY11 is estimated about 17.4%, 18% and 18.5% respectively."
"The stock is currently trading at P/E of 4x on FY09E EPS of Rs 17.2, 3.4x on FY10E EPS of Rs 20.4 and 3x on FY11E EPS of Rs 24. Hence, we believe TNPL deserves better valuation on account of attractive dividend yield and improving fundamentals going ahead. Hence, we recommend a BUY on the stock with a target price of Rs 96 based on 4x on FY11E earnings with one year investment perspective," says Karvy Stock Broking's research report.

Saturday, October 10, 2009

Origin of Finance crisis by George Cooper

Origin of Financial crises by George Cooper.-Synposis

Well structured and well compiled . The book was in response to the credit crisis, to explain why the global economy and the US economy in particular finds itself caught in a seemingly endless procession of asset price bubbles , followed by devastating credit crunches. He describes the processes that generate these cycles and the reasons behind the policy mistakes that have of late tended to excerberate them

The author goes about explaining how the Financial markets are inherently structured in such a way that instability is built in. Credit creation, excesses (boom) and bust appear to be the norm and the author also explains the role and limitations of macroeconomic policy . He clarifies that politicans and voters must recognise the futility of use of fiscal and monetary policy to counteract any and all economic downturns.

The central theme of the book is that markets do not behave according to the laws of efficient market hypotheses. EMT describes our financial system as a docile animal which pushes all aspects , prices of products, factors of production including capital in to a state of equilibrium . It assumes that things will be fine at all stages without any external intervention.
The book argues against such an assumption and in fact the author goes on to prove with examples that not only is Financial instability , a fact of life . but is an inevitability .The fact that there have been several booms and busts prove this inevitability. Financial instability theory was strongly put forward by Minsky. In fact Keynes was the forerunner of the concept. Lord Maynard Keynes had suggested the need for Government’s intervention in the form of pumping money in to the economy to achieve greater economic activity. This by itself is a tacit acceptance of the fact that the financial markets and economy are not self correcting and need intervention from time to time.

The author touches upon the history of trading, creation of gold as a standard exchange for trading,debasement of Gold by chipping sides of the Gold coins , melting and remaking few more coins ( effectively more Gold coins were created than the actual content of Gold and this possibly was the starting point of Inflation). At the next starge was creation of Central bank as the common repository of Gold reserves and issuance of Gold certficates by the Central Bank equivalent to the Gold reserves mentioned theirin. Once this was done, Central Bank almost became a kind of hub, issueing certficates against gold receipts and receiving certificates on redemption of gold.
In actual practice, seldom did the merchants come back for redemption of gold. They continued to keep either the certficates or traded with the certficates.
Next came creation of credit.
Since , it was unlikely that all the potentiel certificate claimants would ask for redemption in terms of gold, Central Bank had a chance of issueing more certifcates than the amount of Gold reserves they had. This possibly was another step in creating credit plus creation of additional money in the system.Central banks started issueing certficates as loan to the merchants and repayment at a later date post the conclusion of trade by the merchants for which they had borrowed the certificates.

Post the second world war, USD was pegged to Gold at around $ 35 to an ounce of gold. Gold and USD were interchangeable. People could exchange USD for Gold and vice versa and all other currencies were fixed with reference to USD based on their Gold reserve.in effect , the entire globe was placed on Gold standard.

Subsequently with increased industrialisation across the globe, and increased buying of goods by US, trade deficit of USA was up so much so that the Gold reserves they had was not enough for redemption of all claims on them. They had effectively bought on credit without backing of Gold. Nixon with one stroke got out of the Gold standard and USD automatically got devalued . Repayment in USD could be made with additional creation of USD treasury certficates etc or repayment by just printing of more USD.

The author with simple examples establishes how , higher savings means lower consumption . means lower production , means lower economic growth. Creation of additional money /credit means , additional growth and profits to the participants.

He talks how Central banks have become the main reason for destabilisation and not the stabilising role that they were supposed to . Central banks had just one goal , that is creation of easy money to spur growth in economy , wait till a credit bubble is created and react by tightening money supply.

The author mentions how, consumption market , that is production and consumption of products could be self correcting through price, supply/demand and allied factors . These are things where people do not maintain an inventory and the pricing and supply-demand mechanism ensures that a large and uncontrollable bubble is not created. In fact the author says, that on such consumer products and pricing , the Central Bank should not even make an attempt to intervene and let the system take care by itself.

This is not the case in Capital/ Financial and asset markets. The utility of assets is quite far in to the future and price is a factor of money availability and the perception of monetary value of the use of such asset in a future date.

Housing bubble was a clear case of hoarding assets at a high price in anticipation of great monetary utility from them at a future date. Anticipation of the price is a hazardous game and the author says that , neither is the Central banker competent to do that nor should he try doing that. He goes further to say , that while asset and credit bubbles are inevitable, there are some ways of ensuring that it is nipped at an early stage . Some factors worth watching are
Credit as a % age of the total GDP or the size of the economy
Extent of credit expansion in Assets

He advocates minor shocks to avoid a huge earthquake at a later date . Minor shock could be in the form of tightening money supply .

One more point was the point on self reinforcing factor. The author talks about how , growth in economy and in a particular sector could drive more money in to that .People do not perceive the tilting point, that is the point when it tilts over to the dangerous side. Conversely , how savings by one section of the population could lead to lower income levels to another section of the popuation which in turn could lead to reduction in savings in the that section of the population also. Overall decline in economic activity .

The author concludes reiteraing the fact that credit excess and bust are inevtibale and suggests minor shocks at regular intervals to avoid a major Tsunami.