The Common Man

The common man always suffers,

From a whole bunch of delusions,

He thinks that he really matters,

It is for him that the world runs!

The world runs in order to serve him,

And ensure his health and welfare - 

Man always loved his illusions,

Which the powerful feed and pander!

Bread, and Circuses, are needed,

Realised the Romans  of old,

Add to that now constant feeding,

Through media, and, of course, Fear!

When man is not driven by greed,

To step out and attempt great deeds,

He is by his fear constrained,

To mask himself and shackle his feet!

These two emotions run his life,

And he runs himself ragged to death,

While the ones who cause the strife,

Pander to him, for gains immense!

The Second Wave

It hits those the hardest,

Who were the most afraid;

It spares all of the rest,

Who neither knew nor cared!

In a broad swathe it mows,

Where the defences were built,

Leaving places untouched,

Where people were out and about!

Danger is best encountered,

Frontally, face to face;

Those who seek to run and hide,

Often pay a heavy  price!

Some there are who believed,

In a magic potion,

Boiled up by some druid,

For indomitable strength!

As the second wave gathers,

A crazy momentum,

Everyone tries to hide - 

There are no lessons learnt!

On Debt Investments

Was just going through the category-wise performance of mutual funds over the last five years.

Across all categories of debt funds - short, medium and long durations; or  dynamic bond  \ corporate bond funds, the five year CAGR ( Compounded Annual Growth Rate) is very close to 8 percent. 

In other words, there is no additional return for additional risk.

This is a good validation of what is obvious about the debt market in india, and, to reiterate:

Choose only the lowest risk funds. Additional risk is not worth it.

Lowest risk means any of the following:

1. Short duration, ultra short duration, and liquid funds. The credit risk is lower due the lower tenor, and there is no interest rate risk either since they are such short-maturity instruments.

2. Banking and PSU funds, not because the companies are anything great, but because mai baap sarkaar will not allow them to default. But watch out, these funds also invest in scrips like Yes Bank sometimes.

3. Government Bond funds, where the credit risk is zero (by definition, and not because we trust the sarkaar - never trust the sarkaar is a good motto to follow :-) ). But these funds typically play on duration. In a scenario where interest rates are moving up, you could be exposed to interest-rate risk. 

Always hold debt funds for more than three years. That way, you get the benefit of indexation and of the special rate of 20 percent, making the effective tax rate close to five percent or thereabouts.

Fixed Deposits yield similar returns as debt funds.

Bank FD's are: 

1. Counter intuitively , inherently riskier than debt funds, due to lack of diversification.

2. Wherever you get more rate ( say Cooperative bank) is exactly where you should not invest :-)

3. Banks are the riskiest places on earth as far as parking your money is concerned, but again mai baap sarkaar to the rescue, they will not allow the big  banks (public sector banks, icici, hdfc and a handful of others only) to collapse - the illusion of stability of that piece of Maya called economy requires banks to be kept alive even if in coma.

4. FD's are tax inefficient. Hugely so. It is only fine for someone whose income from other sources is not much. FD's are ok up to an amount of  say seventy to eighty lakhs, since the interest earned annually on that amount will fall  in the zero or lowest tax slab.

PF, PPF and Voluntary PF are always good options in debt too. UHSP's (ultra high salaried people) were taking advantage of mai baap sarkaar by investing huge amounts in VPF. Even without 80C benefit, they were earning 8 plus percent, tax free, with sarkaari guarantee. It was too good to last of course - auntie FM, who cannot tolerate to see anyone happy, plugged that loophole in the last budget. A couple of my UHSP friends went on a drinking binge after the budget (in a star hotel of course), they were so depressed. I commiserated with them in return for free booze.

To summarise: 

In the Indian market, debt is priced such that taking higher risk does not yield higher return. So, stick to safe options, when it comes to Debt Mutual Funds.

When it comes to Bank FD's , stick to public sector banks, and / or the top private sector banks. Also, for tax reasons, if you have other sources of income, avoid FD's altogether.

 

And, unless you are very very sure about the company / promoter group, avoid investing directly in corporate deposits. They also have the additional disadvantage of being tax inefficient, since their tax treatment is the same as that for FD's.

I was about to end  saying  Happy Investing, but there is nothing happy about investing nowadays.

So, park your money, grit your teeth, and hang on. Acche din zaroor aayenge!

Bharatiyar Poem Nenju Porukkuthilaiye

Subramaniya Bharathi, poet laureate of Tamil, wrote this poem a hundred years back.

 

What he said then, remains true even today.

 

Given below is my attempt at translating Bharatjiyar, in verse. Tamil Pundits may please excuse any shortcomings in the translation.

 

Dinesh

 

POEM: Nenju Porukkuthilaiye

On the plight of my countrymen

By: Subramaniya Bharathi,

 

Oh! My heart cannot bear to see,

The state of these misguided people,

They are afraid of everything,

Fear is what every day kills them!

 

There are ghosts staying in the trees,

On top of houses, in the lakes -

These thoughts torment their waking dreams,

Feed the fears that keep them awake!

 

A thousand miseries they fear,

From wizards lurking everywhere,

The threat of witchcraft's always near,

The threat of Black Magic is real!

 

They praise all the rulers of the world,

For the gifts they receive from them,

Knowing well the politics behind,

Their self-seeking munificence!

 

They run at sight of a soldier,

Even a single man with a gun,

Cower in their houses in fear,

They let cowardice rule their lives!

 

They are always subservient,

Obsequious to every passer-by,

Stand with hands folded and backs bent,

Fear, not respect, is what makes them bow!

 

Oh! My heart cannot bear to see,

The state of these misguided people,

Are their divisions few in number?

In thousand ways they divide themselves!

 

A fiction of five-headed snake,

Invents the father to sow discord,

The son rises in righteous rage,

It's six heads, or it's off with yours!

 

Uncaring for the real Wisdom,

Or what the scriptures have to say,

They heed fake priests of a new God,

Attack those with whom they used to stay!

 

The fall prey to their false prayers,

Chanted in order to lure them –

Claim that only their God is real,

Turn upon their brethren, abuse them!

 

This, my heart cannot bear to see,

But I can't turn away in disgust,

They're struggling for their daily bread,

Unknowing, being ground into the dust!

 

Used to their endless privations,

They are starving themselves to death,

Suffering from a myriad ailments,

They refuse to support themselves!

 

Like the blind men who are helpless,

They choose to follow and be led,

Walk into the traps laid for them,

By those who lead with bad intent!

 

In this wealthy country of mine,

Rich in its arts and all its skills,

Is there no way I can help them,

Who live like homeless animals?

 

ON WOMEN"S DAY

Greetings to all the women on this day,

Set aside to fete half of the world,

Enjoy the adulation heaped today,

But pray tell, why is today so special?

You are fully capable of living,

Without the men who only get in your way,

But you may not find that interesting,

When they see you other women don't stand and gape!

What will you do without the men in your life,

Without the attention, flirting, and the like,

You do need someone to carry your bags,

While you go shopping and empty the aisles!

What will you do without them to give chase,

Trying to impress and put on a face,

While you pretend to ignore their existence,

They are needed to brighten your days!

On this day give thought to the  poor men,

Who form the hindrances in all your lives,

And be happy you were born a woman,

For it's much worse to be on the other side!