A few thoughts following the Bob Woolmer tragedy

Bob Woolmer is no more! The man who was hailed as one of the best in the coaching business has passed away barely 20 hours after his team’s shocking first-round exit from the ICC World Cup 2007. While the reasons for his death is yet to be known, it would be great to spend a few minutes to analyze the lives of high-profile roles in cricket crazy nations like India or Pakistan.

The other day, during the India-Bangladesh match, I saw this interesting placards among the spectators ‘A few things don’t change, Cricket is our religion and Sachin is our God’. Well, that summarizes what cricket is to people in India or Pakistan. The cricketers, support staff and selectors are gods as long as the going is good. bob woolmer But when these people go through lean patches of their careers, the fans literally pounce on them. The readers may recall the plight of Greg Chappell when he was attacked by a mad cricket fan at the airport – the reason was that there were no cricketers selected from his state for the current Indian team. Bob Woolmer himself was allegedly assaulted by one of his players. It’s only a day back when the mad fans spoiled MS Dhoni’s new house that is being constructed, due to his duck and India’s failure in the match against Bangladesh.

High-profile coaching job or captain’s seat in cricket does not come free here. People like Bob Woolmer or Greg Chappell are mentally tough and matured enough to handle the pressure that their task and role demands. But most of the time they have to face the extremities that you see only in the sub-continent. Anywhere in the world there will be sports fans and their crazy behaviours. But in India it is more ‘religious like’ where ‘sports fanatics’ go on to do anything that they want including spoiling public or private properties and attacking individuals that they think are the reasons for the collective failure. It’s more built into the culture and lack of education than anything else. And the worst thing is that the politicians, movie makers, cola makers or law makers – all of them are there to exploit the emotions of the cricket crazy fans.

I am not sure why the fans or the above mentioned people don’t treat other sports (hockey for example) the same way. Indian hockey has been pathetic over the past few years where as we were like kings in the past. Nobody seems to be doing anything about it – regardless of winning or loosing. I can only assume that whatever the colonialism gifted to us in the form of sports is being taken up and treated in extremities and people are over-passionate about the same. Depictions like Lagaan are not influencing the behavioral practices positively but making things worse here.

It’s high time the fans realized that the cricketers and support staff are humanbeings themselves. They too undergo emotions, stress and passion when they play cricket for their nation as well as off the field. If they underperform there is a sports body there to address that issue, there is a selection panel to find new players and groom them. Until then, please leave the individuals alone…

Investment strategy for 2007 and beyond

The jittery that the Indian equity market is offering right now might make one wonder as to what instruments are right for this kind of conditions. A lot of people had hope in the real estate and infrastructure until the middle of 2006. This does not seem to hold good anymore with the financial minister rolling out a very ordinary Union Budget 2007-08. Interest rates are further heading northward and cement sector has been hammered with additional excise duties stamped on them.

The Indian market, unlike the not-so-recent-past, seems to be reading and vigorously reacting to the global cues. Earlier the upcoming economies and bourses were generally driven by one or two major factors such as global crude prices, local agricultural and manufacturing growth predictions, monsoon/rain forecasts etc. Nowadays FII (Foreign Institutional Investors) activities, far eastern market movements, US employment rates, terrorist threats, Greenspan’s untimely statements (and may be even George Bush’s mother-in-law catching a mild cold) etc seems to be taking the Indian market for a roller coaster ride. The volatility is so high that small-time retail investors are the worst suffered in most cases.

(Before trying to analyze what is the best form of investment going forward, let me put forth a disclaimer. Here I am going to talk only from the view point of young – includes middle-aged persons like me – investors. I cannot really talk on behalf of the older and matured lot of investors.)

Equities for long term

I still believe that equities are the best instruments to meet your long term financial needs. This is because of the fact that no other options could yield good enough returns to beat the high inflation rates. With proper planning it is possible that the equities can yield upward of 12% annualized returns in long term. No other instruments can possibly guarantee this kind of returns on investment. So if you are below thirty or thirty five, it may be a good idea to expose 50% of your portfolio to equity market (stocks or equity oriented funds – both with long term horizon in mind). Now I am sure that most of the youngsters out there have already taken care of this aspect. The missing trick could the ‘long term’ factor. Most of the younger lot that I interact with want fast money that matches their fast lifestyle – This does not quite work with equities. Long term investment is preferred (Tip 1) over risky trading. Also, stock or fund picking becomes easier in this case.

The most critical aspect is in picking the right stocks with long term (10-20 years) value in mind. If you look at the past performance of certain blue-chip companies this may not be all that difficult. But any portfolio will get some extra punch (Tip 2) if it has one or two mid-caps that offers greater mid-term growth. Most of the time the difficult part is picking these strap-on boosters that mostly keep changing in your portfolio every other year or so. In this case one might need professional advice (and not rumours) and help from company research reports. One can afford to have one or two such scrips (Max 15% of your equity exposure) in a portfolio of 12-15 pure long-term plays. If you are sure about your long-term picks, don’t let the market fluctuations affect your decisions. Ups and downs are common in the market and you never loose in holding a good long term play that temporarily goes down. In other words, even if the current market price (CMP) is less than your purchase price, it is only notional. i.e. You don’t loose anything unless you sell them. So never sell your shares at loss (Tip 3)!

Mutual Funds

Equity oriented mutual funds are for those who don’t want to take risks on which stocks to pick. If one goes for a mutual fund he/she is basically delegating this management risk to the fund managers those who have better insights and scientific research capabilities and tools to analyze potential companies to invest and their shares better. This is always a wise choice for long term growth.

Picking an equity oriented fund is far easier than picking a stock. Most of the fund performance data (as well as fund manager’s reputation and profile) is published on various portals and is available for your reference. One needs to consider at least past three years’ – preferably more than 5 years – performance of a fund before making a decision. One might want to pick a mix of funds than just one to make sure that the equity exposure is spread across a good blend of large cap stocks of huge companies and mid cap stocks of upcoming companies. One should take care not to invest all the money in mid cap oriented funds

Systematic Investment Plans (SIPs) are very good for those have as steady income and who don’t want take decisions on when to invest. This is indeed a very good mechanism to make sure that investment as a ‘systematic’ habit is built into an individual. But please remember that SIPs are only worth if you have a longer investment horizon. Ideally, one should think of investing in SIPs if you opt of 2-5 years (or even more) of monthly recurring investment. If you don’t want to commit for a systematic plan and you are an adamant investor, you could still invest systematically by entering your selected funds on low market days of every month. But then you should stick to your own resolutions and plans. Go sip is my tip 4 for you.

SIPs can be really good for entering mutual funds. But why not SIP or similar approach for buying stocks? Say, you want to purchase 100 shares of ITC this year. Why not buy 10 each every month at possible dips? It is always better to buy shares in smaller quantities (Tip 5) over a number of times until you acquire as much as you want.

All that glitters is GOLD!

As long as the Indians have their craze for the yellow metal, investing in gold is a very effective mechanism for wealth creation. If you see the way the gold prices have been shooting up for the past six years you will realize that purchasing gold is a lot better option than investments such as bank deposits or post office schemes. So whenever the gold prices are having minor dips or if it is non-wedding seasons in India, make it a habit to buy some gold (Tip 6). One can have as much as 15% (ideally 10%) gold in his portfolio. Also, never buy gold as jewelery but buy them in the form gold bars or coins which is easier to sell and will not have any depreciation or making charge related issues. The purity of the gold should be confirmed before buying the same. A good bet could be purchasing the same from banks like ICICI that offers 99.9% pure gold bars at market rates. Those who travel via gulf countries like UAE may make it a habit to buy gold abroad which is probably 10% cheaper than Indian gold prices. Also purity is guaranteed in that case.

Another excellent way of investing in gold is via the newly launched Gold Exchange Traded Funds (ETF). This option also provides you the protection that comes along with the dematerialized form of investing – you don’t need lockers and strong rooms in this case. Systematically adding a few units every month to the gold scheme may help in the long run.

Plan your Provident Fund

One of the other ways to passively invest for long term is via additional contribution to your provident fund. Why is this important? It is important because it is the only guaranteed mechanism towards your retirement planning unless you opt for some pension funds. Also, I personally believe that it is meant for the times when India becomes a developed nation (20-25 years from now) where interest rates are below 2.5% or 3% and inflation is almost nil. You will realize the value of money that you saved then. However, it is not a good idea to put more than 10% of your monthly income into PF in addition to what the employer contributes. From time to time the government will announce additional interest towards PF contributions. One needs to exploit these grace periods by adding more contribution to his/her PF whenever these offers are valid (Tip 7).

Commodities

Commodity trading is the other form of strap-on boosters that one can experiment to make short term money out of price variations in the commodity market. The commodity market in India is huge now since the government allowed the trading of the same via exchanges since 2004. Earlier only bullion trading was possible. However, I do not have any tips to pass on here as I am yet to experiment trading in commodities. But I am told that it is a very good money making mechanism in India where there are predictable patterns on the price movements as we have hundreds of festivals and seasonal events.

Real estate

25 years from now, having own land on earth may become a luxury. That will be the time when part of the human crowd will be living in other planets or may be living in one of the closets in a 250 storied apartment complex. So investing in real estate (not apartments but land) is a vise choice any day. As an investment, one does not need to be in the look out of prime locations or within city limits. Grab whatever you can (Tip 8) at throw away prices in remote areas or mountains or marshy lands or wherever. The land that comes at Rs 10 per sqft in timbuktu will be fetching you Rs. 5000 per sqft in another 20 years. Also technology will be developed to convert even wastelands into attractive home or business areas. But beware, if you want to lead a very peaceful retirement life, real estate may not be the long term thing for you.

Managing and looking after real estate in itself is a physically tiring and highly demanding activity that might deny you sleep. But it will always remain an ever-appreciating asset. Lastly, if you want to accumulate assets that will appreciate, you should also cut down on your ‘early spending’. The current consumerism and youth’s lifestyle is such that they want to be the first one to buy a new model of mobile phone, mp3 player, plasma TV or a better car as soon as it hits the market. The cost of an early buying could be double compared to differing that decision by six months or an year – especially when it comes to buying electronics. The more you cut such expenses the stronger your wealth creation path is.

Happy investing!

(Personal note: With the above words on investment wisdom one would naturally think that a seasoned investor is sitting at the other end. I should apologize that I am one of the losers on the bourses thought the blame goes to Harshad Mehta, Ketan Parekh, dot com fall or World Trade Centre attack 🙂 But the good news is that I have started thinking long and the bad news, I am yet to put some of these thoughts into practice)

BCCI selection folly

For the past one and half years or so the Sharad Pawar regime has been performing a notch above their predecessors. Even when part of the country and fans were crying ‘foul’ against Greg Chappell’s experiments and exclusion of Saurav Ganguly from the squad, I thought BCCI stood tall and did a professional job. Most of the governance aspects as well as future planning made sense – so did their good acts towards suffering sports bodies and retired sportsmen.

Though experiments were part of the long term plans – even beyond World Cup 2007 – the selection process and the selectors seems to have come under the media/fans pressure yet again. The sending back act of Irfan Pathan (Sehwag somehow missed the flight that day!) during the SA tour made sense – so did their bold decisions to exclude Mohammed Kaif and Suresh Raina from the scheme of things for the WC. What is not convincing though is the final team selection for the World Cup 2007. Since other major cricketing nations have more injury worries, India had their best chances to pick a championship winning team, instead the selectors opted to make couple of unconvincing decisions.

Irfan Pathan and Virender Sehwag were once dropped on the basis of their pathetic form and recent performances. From the domestic performances since then, I have not seen anything so great about the duo that they need to be picked for this World cup. It is true that an allrounder brings a lot of balance to any one-day side but that is when he’s in form and exudes confidence. I personally feel that Pathan should not have figured in the WC squad this year – for the sake of his own career as well as for the present and future of Indian cricket. The last test match that we lost in South Africa earlier this year has to be attributed to the team management decision to make Sehwag open the second innings! We had just discovered an in form and confident stand-in opening batsman in Dinesh Karthick and that advantage was goofed by Sehwag’s inclusion as the opener. India spoilt the chances of winning their first ever test series victory in South Africa with that foolish act. It seemed that Rahul Dravid was behind that decision. According to what our chairman of selectors have just spilled out, the captain is again behind the selection of Virender Sehwag as a dashing opener. This sends wrong signals to the set and condident youngsters like Robin Uthappa.

I thought this is the first time that India is sending 5 specialist seam bowlers to the World Cup. This is again a very stupid decision. One should remember that the current Indian squad has got only two specialist spinners and they are not touring South Africa or Australia but West Indies. The West Indian pitches right now are pancake-flat and cannot do any good to the pacemen. I would have expected Ramesh Powar included in this squad instead of Irfan Pathan. He’s a good offspinner as well as a confident lower order batsman. The argument could be that Sehwag or Yuvaraj may be able to bowl five or six overs along with Sourav Ganguly and Sachin Tendulkar to complete the fifth bowlers role. But in the flat pitches in West Indies, I am sure that they will be hammered all around the park.

Since we have already picked Robin Uthappa, Sourav Ganguly and possibly Sachin Tendulkar as openers, I would have expected the selectors to pick another strong middle order batsman than Sehwag. I still wonder why VVS Laxman cannot figure in this World Cup squad. The only argument against Laxman is his poor ground Fielding but anyhow the current squad is not a great fielding side. It is a shame for India that players like VVS Laxman will never get a chance to play a World Cup match unless some of our batsmen gets injured as the event progresses. If Laxman is not the right choice, I would still rate somebody like Dinesh Mongia higher than Sehwag in his current form. Mongia had an excellent 2006 season during his county stint and I thought he has been treated quite unfairly – not forgetting the fact that he got undeserved berth in the last World Cup.

A lot of people these days talk about Sachin Tendulkar’s assignment as the Vice Captain of the team – that he is being humiliated by this second role etc. I don’t read too much into it. In fact, it is a strong statement from the management that only those who perform and sure to be in the final eleven gets this post. That way Sehwag cannot be the vice captain so cannot be injury prone Yuvaraj Singh. It also emphasizes the fact that Sachin has more of a senior mentor’s role to play in his final World cup appearance. I think this is a very good move.

Lastly, the comments made by our chairman of selectors during his chat with the press was quite bad-timed. It was really stupid of a gentleman like him to talk about internal selection matters in the press – that too when team India was just about to start their World Cup campaign. Probably he was a bit too frustrated with the regional politics or was it an outburst because of his own lads (Powar and Jaffer) not finding a place there?

Microsoft and the handheld market

There are not too many desktop or personal computing related opportunities that Microsoft missed out to capitalize in the past twenty five years. In most cases they were early enough to react to the changing market needs by either innovation or adaptation of other cool technologies. However, Microsoft seems to have missed a trick or two when it comes the voice-centric devices and the related platform requirements.

According to Gartner the handheld devices can be broadly categorized into data-centric devices and voice-centric devices. The PDA devices fall into the first category where as the smart phones represent the second category. There could be PDAs that offer cellular connectivity but they are still ‘data-first and voice-next’ devices. PDAs usually have a higher memory, processing power, bigger form-factor as well as keypad compared to the smart-phones. The other differentiator is the usability – PDAs are supposed to be used by both hands where as smart phones are targeted mostly for one hand keyboard/wheel operation.

Microsoft has been the undisputed leader in the PDA operating system market for a while now. According to the sales statistics for the year 2006, they command 56% of the market share where as their nearest competitor Research In Motion (RIM) have got less than 20% of the PDA O/S market. Palm may be a leader in the Americas but overall they get only 12% of the market share. The story is totally different when it comes to the smartphone O/S market.

Microsoft devised a plan five years back to enter the smartphone market but the ground reality is that they were not successful at all in this war field. The Nokia led Symbian O/S commands 67% of the market share in the smartphone category as far as 2006 sales data goes. Blackberry has been a disruptive innovation (Read: Disruptive Innovation Model by Clayton M. Christensen) that thwarted Microsoft and several other market players and going forward probably even Symbian. Probably the Windows Mobile story didn’t click as much in the smartphone market.

Though a little late, Microsoft seems to be realizing their mistake now. Since 2006 they have been a bit more aggressive on stabilizing and positioning Windows Mobile. Year 2006 saw Microsoft market share growing by 200% but still that figure contributes to less than 10% of the market share. Gartner projects that the PDA market is growing at a much slower pace (CAGR of 5%) compared to the smartphone market that is growing at a CAGR of 47% for the next 4-5 years. If Microsoft is smart enough to do a good job with respect to Windows Mobile for smartphone, it is highly likely that they can rule the market by 2010. After all, the success of smartphones is generally governed by the quality of its O/S, usability and accessibility – and Microsoft is good at all these aspects. It is also interesting to read another research report published by the Diffusion Group. They project that Microsoft will have 29% market share, followed by 26% and 22% respectively for Linux and Symbian in the year 2010. This could be true if they continue to grow at the way they did in 2006!

Personally I believe that the success of smartphones will also be driven by the easy to use Personal Information Manager (PIM) features along with accessibility. Since Microsoft is the undisputed leader in office products, they are the ones who should emerge as leaders in the handheld market as well.

Finally, symbian and RIM may be the leaders in the cellphone (smart or otherwise) market purely based on usage. However, both these platforms are
nowhere near Microsoft Windows Mobile based handhelds and smartphones when it comes to running powerful applications for Mobile Sales, Service, Retail or Logistics business scenarios. For that RIM and Nokia smartphones have to be reborn and have to start supporting pure J2ME than limited device profile frameworks that can be used only for small applets, alerts and basic PIM usage.

The beauty of the Microsoft WM platform is that the same .NET application, without any change, will run on a Smart phone as well as PDA device. This is the
area (on top of PIM) where Microsoft will beat their competitors big time as the question of recoding the business applications several times for device types will not arise in the case of Windows Mobile. So my final take on the handheld market is that Microsoft and Linux will be ruling the enterprise mobile business market (including smartphones) in the mid-term future where as Nokia will continue to be the undisputed leader in the cellphone market.

Colourless Cricket Worldcup in the offing…

Several sub-standard teams, too many injured players, underprepared stadia and pitches, lengthy schedule – Almost every aspect of the game seem to be taking the reputation away from the forthcoming ICC Cricket Worldcup 2007.

The problem started couple of years back when ICC declared that World cup 2007 will have participation from 16 cricket playing countries. Their argument is that unless they do so, the game will not grow. Well, I doubt if that helps the seven or 8 minnows, anyhow. Ideally they should have followed the Soccer World Cup kind of a setup whereby the qualification rounds pick up the best world-cup-west-indies-logo performers from each continent. This means that the top eight test playing nations plus a maximum of two countries should have been given a chance. Instead of proliferating the game the right way, they are reverting to moneymaking and marketing resorts – Well, they wouldn’t mind if the so called prestigious event runs into two months, do they? They need money!!!

The combined problems of injury worries, dope and match-fixing scandals seem to be on their way to diminish the image of the high profile event this time. Almost every good team has couple of their match-winners sitting out. If it is Brett Lee and Andrew Symonds – along with couple of other uncertainties – for Australia, it is Shoaib Akhtar, Mohammed Asif and Abdul Razzaq for Pakistan – I discount Afridi, well he has been a hype anyhow. New Zealand might miss their inform all rounder Jacob Oram where as England is trying to figure out who will be their captain for the Worldcup after a half-fit Kevin Pieterson somehow figured in the scheme of things. Sri Lanka has got their share of problems with their old warhorses. Sanath Jayasuriya and Marvan Attapatu are not in their best physical fitness, nor are they getting any younger. West Indies has got a different issue altogether as their star allrounder Marlon Samuels is under ICC scrutiny on match-fixing allegations. Among the front-line teams India seems to have the least of injury problems but their natural strength – of being the best batting line-up in the world today on paper and books – is marred on ground fielding. We have one of the most immobile fielding side of all times for this Worldcup. It is unfortunate that Mohammed Kaif and Suresh Raina did not live up to expectations after playing a good number of matches for India in the past.

When countries like West Indies host the mega event, there are a few issues that comes along with it. The infrastructure to accommodate and transport the players and officials of ’16 countries’ and their crazy fans will be a bit of a problem for them. Even the capacity of stadia are not along the expectations of typical cricket crazy nations. That is the advantage that the sub-continent nations have. We at least have big stadiums and a good rail network here. The accommodation availabilities as well as air schedules are the other set of problems in the Caribbeans. The Worldcup officials in WI are working really hard but there is every chance that things may not be fully in their control.

The long schedule of the event is mainly contributing to the number of teams appearing. Hope ICC will learn from their mistake and try to organize qualification rounds in the future before electing 10 teams or so for the final event. This would make things shorter, sweeter and more exciting. They indeed need to learn a lesson or two from professional sports bodies like FIFA.

India changing gears

The automobile market in India has been witnessing very rapid changes for the past four or five years. Until the late nineties, for any multinational car-maker, India has been the dump ground for obsolete engine technologies, dated designs, models with design flaws or those vehicles that didn’t comply to safety or emission standards. This notion seems to be changing so fast with new an new car models being introduced in India without too much delay after their international launch in the international markets.

One of the main reasons for this change is the economic reforms that were initiated by a few wise men since the past two decades or so. India is one of the fastest growing and stable developing economies in the world today that is also investment friendly for foreign investors. The outlook of the Indian market has also been changed with industries like Information Technology, IT enabled services and Biotech making India more globally accepted. More international brands – not just in cars – are readily available for the Indian buyer now in India and they have the purchasing power as well. Twenty years back we had exactly three outdated options to choose from when it came to buying a new car. Chevrolets and Hondas appeared only in the ‘high-speed’ car chase scenes of Hindi movies then. Now we have close to twenty or so different manufactures to choose from and they produce more than hundred models.

International travel opportunities and vast information that is available on the Internet, the awareness on safety, technological and design standards also went up. I remember the times – probably 12 years back – when India’s leading car manufacturer then (and even now) in their commercials proudly announcing the introduction of seat belts in their cars as a major luxury and safety feature. Earlier the MNCs used to introduce a new technology or car model 4-5 years after it was launched in the market. Now they know that the educated Indian customer is equally (or even more) demanding than their international customers. Also with more and more car makes available, the car manufacturers are also under pressure to upgrade their models and offer the best for the customers.

One Indian company that has led the changes from the front is Tata Motors. Tatas were not put down by the failures of their initial big car models but they brought in more innovation and collaboration to steal the B-segment market share from Marutis and Hyundais. Without these efforts (along with that of MNCs) I am sure that Maruti would never have changed their models. Hindustan Motors is the only ‘live fossil’ with the kind support from the government and its service sectors. I wish the spoilt brains and unmotivated workforce of HM gets a break as well soon – High time they put some research into their works and come up with a new generation ambassador that offers not only power and safety for Indian roads but features, usability, good looks and drivability. Ambassador still belongs to the generation that believed that buying a car is once-in-a-lifetime thing and that asset has to be maintained and preserved by generations to come.

A recent research study shows that the A-segment growth rates is slowly coming down not just in urban areas but across all types of markets. The growth rate is
very high in the B+ and C segment markets. This may be attributed to the above mentioned aspects and is supported by the stress from the government on infrastructure development and the commitment to improve the national highways and new national road networks.

The new car market is very well complimented by the growing used car market in India. With the average ownership period falling drastically every year the used car market offers alternative buying opportunity. The auto boom also resulted in the emergence of related industries such as auto ancillaries and related job opportunities.

Indian two-wheeler market is catching up with the changing trends as well. The need for power and style is more than it was ever before. Twenty years back, with the exception of the Rajdoot Yamaha 350, one could not have imagined powerful and faster bikes in the Indian market. The changes were initiated by the introduction of lighter, mileage aware and durable Japanese bikes in the mid 80’s. Then slowly they started adding power – though still only 10cc added at a time 🙂 – and newer technologies. The 2000s are about power and style. The manufacturers are concentrating too much on styling as the target users are mostly youngsters. Obviously elderly Indian finds it difficult to pick a motorbike for himself and he is pushed to the scooter using community.

Overall, the outlook is good for the consumers as well as the manufacturers. I wish the government gets a little more proactive in getting the road infrastructure – other than highways – issues addressed. Once the infrastructure is in place, rest of the developments (not just the auto industry) will fall into places.