Saturday, October 29, 2016

A visit to the Jewellery Store

I am just back from a visit to the jewellery store. I accompanied my mother in law who dutifully buys a hefty jewellery item every Diwali. For the rest of the year she is quite abstemious, but Diwali is an occasion for splurging.


I enjoy visiting the jewellery shop when someone else is doing the buying. Chatting up the sales guys provides interesting perspectives on the jewellery market and a few tips on investment as well.


Sri Krishna Diamonds and Jewellers is one of the reputed jewellery outfits in Bangalore, on Commercial Street. It is owned by a Marwari family who originally hail from Pali in Rajasthan. The sales guy who attended to us was quite knowledgeable; I later realised that he could part of the extended family. We headed first to the 'stones' section to look at bangles studded with rubies and emeralds. MIL finally made her choice, a ruby and emerald studded pair of bangles costing 2,05,450. I asked the shopkeeper to provide me the breakup.


Here is what it worked out to:


Gross Weight: 53.5 grams (including stones),

Net Weight: 49 grams (the weight of the gold), 916 KDM (i.e. 22 carat), at 2828 per gram = Rs. 138,572.

Making charges: 21 percent = Rs.29,100

Stone weight: 22.5 carats (five carats equal one gram), at 1500 per carat = 33,750

Total: 201,422 plus tax @1% Rs. 2014

Total price including tax: 205,450.


Jewellery serves two purposes, one of them being investment. The only way to judge how much margin I am sacrificing since I am buying the stuff as ornaments is to ask the shopkeeper how much I would get if I re-sold the bangles to him today. Here is what he replied:


If I 'exchanged' the bangle for something else in the same shop, this is what I would get:

Today's price of 22 carat gold, 2828, less five percent, times 49 grams: Rs.131,643

For the stones: 50 percent of the value, i.e. about Rs. 16,500

Total: Rs. 148,000.

That works out to a margin of Rs.57,450 which is 38 percent. Not too good as an investment!


But wait a minute. A true investment does not depend on the item being sold in the same shop, and nor does it involve 'exchanging' for another item. It involves selling for cash anywhere in the market.


So I asked the next in my standard list of questions: "What if I want cash instead of exchange" – in that case he would deduct ten percent on the price of gold and not five.

"What if the bangle were bought in some other shop" and I sell it here. In that case not only would I get ten percent less on the price of gold, but the stones would carry zero value. Hence what I would get would be:

Today's price of 22 carat gold, 2828, less ten percent, times 49 grams = Rs.124,714.

Now the margin works out to Rs.80,736 which is a decent 65 percent.


And people think these things are also a good investment!


Moral of the story: Stones are a scam. The resale value is always zero. Avoid stone-studded jewellery.


The only stones where you can get some resale value is diamonds, but even diamonds are a scam. The resale value is usually a fraction of today's purchase price for the consumer; and even these values are suspect; one does not know the long term future of diamonds.


MIL somehow got convinced not to buy worthless stones. So we headed to the plain-gold bangles section. The making charges for plain-gold bangles are between 12 percent and 30 percent depending on the intricacy of the work.


Plain gold bangles include bangles with minakari work which actually look prettier than stone studded jewellery, and definitely better than chunky plain gold jewellery; the kind of minakari bangles we liked came with making charges of 15 percent. Finally we bought a pair weighing 57 grams for Rs.187,000; the unromantic investor in me told me that the margin on this worked out to 29 percent. If I sell it back today, I will get Rs.142,000.


Obviously, if one buys merely for investment, it is good to head to the gold coins (a.k.a. biscuits) section. 24 carat gold coins were selling at at a buy-sell margin of about 8 percent.



This is still not good as buying what they call 'bullion' in market parlance – just plain gold. The government has apparently banned sale and purchase of bullion in retail. These large jewellers cannot do it. For that I need to head to my favourite shop on Avenue Road in Bangalore (in Mumbai think Zaveri Bazaar). Only cash. No bill. The buy-sell margin in that market on gold is 0.3 percent.


One more thing, if you pay by card, whether credit or debit card, the jeweller will charge you an extra two percent if you are buying coins or biscuits; for ornaments there is no extra charge.


Since we are on the subject of buying gold as an investment, an added piece of advice. Never buy gold biscuits from a bank. The margins are far higher, in the range of 15 percent. Further, the bank will never buy back your gold; you have to sell in the market.


The sales informed me that if you travel abroad you are allowed to bring back upto 50 grams of gold per person. The price is about 200 to 300 rupees less per gram, which works out to a decent 7 to 10 percent. In case you are a frequent traveller or a Malayalee, you are of course already aware of this.


All this I gleaned from talking to the friendly Marwari sales guy, and I thought it was time well spent. My mother in law got her minakari bangles which she declared her grand-daughter will inherit, which thought makes her very happy. The Marwari was quite happy too to have made is 30 percent margin. 

Friday, October 28, 2016

Why Mistry is right, and why you should buy Indian Hotels today

Why Mistry is right, and why you should buy Indian Hotels today



The Chairman of the most iconic business group in India is sacked unceremoniously. He responds with a letter trashing the very group he was heading, and still holds 18 percent shares in.


The previous Chairman comes back, at 78, as 'interim' chief. He is the person instrumental in sacking the current incumbent, since he holds unquestioned control over all decisions in the group, by virtue exercising the authority of Tata Trusts' 66 percent stake, an absolute majority.


The rest of the directors of Tata Sons are like extras in the movie. They do the bidding of the main actors, and it has always been so. Whoever thinks independent directors are independent is naïve.


Mistry took over about five years back, to helm the group in which he has (along with his family) an 18 percent stake, hence, one would presume, a vested interest in its welfare, going well beyond the fact that he is Chairman.


As any new incumbent would do, he started going over the entire group portfolio and taking some hard decisions. A few write-offs here and there; the decision to cut back dividends in some cases to conserve cash; talking about huge write-downs in Tata Teleservices (everyone knows that company is a cash-guzzling dud, and will never improve) and playing tough with DoCoMo, Tata Power for a project based on projections of world coal prices which came unstuck (presumably no one to blame for this, but then right now it is a drag), Indian Hotels for ill-advised acquisitions abroad and removing its chief executive who was close to Mr. Tata; deciding to brexit Tata Steel, which the ex-Chairman had bought into with much fanfare; horror of horrors, questioning the white-elephant-holy-cow Nano, which due to Mr. Tata's ill-advised comments to start with about being a 'poor man's' car could never position itself properly; and questioning the group's two forays into aviation, a-business-of-carrying-bums-on-seats-don't-know-why-it-is-glamorous, maybe because Tata-fancies himself as an aviator and the family legacy of Air India;  and I am sure sundry other questions on governance practices.


What Mistry perhaps lost sight of was the fact that through the Tata Sons board Mr. Tata controls the company totally. And Mr. Tata certainly was not amused. It is also reported that the old Bawas whose grandfathers bought the Tata shares which they will pass on to their grandsons (if any) raised a stink on reduction of dividends.



Apparently the board members had a chat with the Pallonji scion asking him to step down. Which it appears he refused to do. Being a man of principle, he said Nada, nothing doing.



Now Mr. Tata is also a man of principle. He is reputed to be one who sticks to his guns and keeps his word, in fact there have been instances where he has insisted that the group keep its word and go ahead on commitments made even if not contractually obliged to in order to keep his and the group's word. Mr. Tata's word is bond, and even his rivals in business will readily concede that he plays fair when it comes to business dealings with others. Several of Mistry's decisions seem to have gone against commitments implicitly or explicitly provided in that past.



Mr. Tata can also be extremely adamant. Once he decided that he would not get along with Mistry, it was unlikely that Mistry would stay. At this stage it becomes irrelevant who is right and who is wrong. Principles among highly principled people, also mean not being willing to look at and acknowledge past mistakes and rectify them. Mistry had to go, and he went. Since he was not willing to step down, the group, in classic Tata style goes to a battery of eminent lawyers, the more eminent the better, and takes an opinion on whether it would be possible to sack Mistry. Why not do it in a more dignified manner by giving enough due notice – Mr. Tata still controls the majority and he will be able to do what he wants? But this is where principles comes in, he needed to be sacked on a matter of principle.



What happens to corporate governance in all this? The minority shareholders of all the group companies and the sundry other stakeholders, where are they in the picture? Now we are being naïve if we ask that question. Corporate governance means the Boss governs. The Board has no say, except in acquiescing with what the boss wants; that is the way it has always been, and that is the way it shall continue to be; and this is not just in the Tata Group, it is pretty much a universal truth. You don't really have much to say against a 66 percent owner. That it is the trusts who own the 66 percent and not Mr. Tata in his personal capacity is neither here nor there.



So Mistry goes. Unceremoniously. Creating a flutter. All the news channels and journalists  have a gala time, while the board members and everyone who matters hail the returning emperor. Who was of course the best choice while they look for a successor.



Now our man Mistry also seems to be a man of principle. He could have quietly exited; after all, his family has an empire that he can go back to managing, an empire that is not small by any yardstick. He still holds 18 percent stake in the company; that should be incentive enough for him not to throw any muck around that will damage the group's reputation. The letter that of course was deliberately leaked to all and sundry, that he has written to the Board of Tata Sons and the Trusts, throws enough muck around and some of it will stick. The problem with men of principle is they sometimes act against their own interests.



Meanwhile, some of the group company shares have taken a beating in the markets. Most of the muck that has been raked up is of a nature that should have already been discounted by the markets. No one in the market is naïve about corporate governance; the Indian Hotels acquisitions and their non-performance was already known; the coal price issue, Corus problem, and Nano non-performance are already old hat. So any sudden fall as a result of this incident should correct itself by the time the month is out. It is also likely that Mistry will back off now, he has already made his point, and anyway there is nothing he can do against a 66 percent shareholder; also he has his 18 percent stake to take care of.


Buy Indian Hotels. It looks good as a short term play.

Thursday, October 27, 2016

Some thoughts on passwords, and online security in general

It is increasingly impossible to stay without going online for every requirement of ours, and it is increasingly scary how our life resides online. The key to this whole online life of ours is in our passwords, which reside in various places online, and are vulnerable to cyber attacks. So how do we protect ourselves?


Let us start with our main email account. This may seem innocuous – so what's the big deal if the password is compromised? – but this account, remember, is where all password reset links will be sent to, if you say 'forgot password'. Hackers, once they get access to your main email account, use this to reset all passwords. If your main email account is gmail, then secure it with a two-factor authentication. Every time you access it from a different machine which is not your usual one, it sends a code to your mobile which has to be entered. In fact, there is an app which generates this on your mobile. Also, there are back-up codes which you can note down somewhere for the times when you need to access your gmail and don't have your mobile with you, or the charge on your mobile has drained.


Now on to passwords in general, for all kinds of access on the net. We think we are being very clever when we put in our birthdays or name followed by 99, or some such pnemonic based password. When 9/11 happened, a lot of accounts of the employees who died there were immediately inaccessible since no one knew the passwords, putting the employers in a fix; however it was possible for experts to piece together their passwords through trial and error in most cases.


Birthdays, birth years, children's names, names followed by 99 etc., are strict no-no's for passwords. Dictionary words are to be avoided too, since it is possible to reverse-engineer to find the password in case of dictionary words. The longer the password and the more nonsensical it is, the more difficult it is to crack. Also, most websites insist that the password should have the following: (a) minimum 8 characters (b) maximum 16 or some such characters (c) a mix of small letters, capitals, and at least one 'special' character (d) no space or dot, sometimes (e) you need to change the password every three months or so!


Given that you have at least a dozen websites for which you need to remember passwords, how do you remember them? One of the best ways is to have an algorithm for generating your own password which is derived from a sentence that you can remember. For example you can start with the sentence:

(1)  "My ICICI account is my main account since 2010". You can even note this sentence in your wallet where it is easily accessible.

(2)  Take the first letter each word in the above: miaimmas2

(3)  Make the "third letter" capital: miAimmas2

(4)  After the third letter add a '^': miA^mmas2. Use this as your password.


Use a different password for each of your bank accounts; and don't use these passwords for non-banking sites.


While entering the password, especially if you are not on your own machine, it is good to use the virtual keyboard. This is to prevent a keystroke-reading cookie from getting at it. Talking of machines, it is necessary to have a good anti-virus software loaded on your machine and to keep the licence up-to-date.


All websites have a 'forgot password' option which enables you to reset the password from the backup email id. We have already discussed that this email id needs to have two-factor authentication.  There is also a set of questions along with their answers which is stored for this purpose – things like 'what is your mother's name', or 'which school did you first attend' – in these days of social media where nothing is private anymore, it is good to remember a standard set of fictitious answers to these questions, and to use those answers to these stock questions.


Never access sensitive accounts like bank accounts from machines that are not your own. Also, never through a wifi in a public place like a coffee shop. It is very easy for hackers to intercept all your actions in these places. Also, sites which require high security like bank accounts, always start with an 'htpps' rather than the usual 'http'. Check if this is the case. Never follow a link to access any site. Please type the whole address yourself. You sometimes are fooled by following links to sites with deceptively similar spellings.


Keep changing your passwords every few months at the very least.


Now on to debit cards, credit cards, etc.


All card numbers and their associated codes are at risk of being compromised at any time. Hence the following precautions would be good to take.


Keep a sensible credit limit on your credit card, only to the extent required. It is not a requirement for your status that you have a high credit limit. This naturally limits your liability in case of loss.


Keep a limited amount in your account that you access through your debit card; keep the rest in another account, and keep transferring amounts to the card account as and when required. As for the real account where you keep your real money, tear up the card, resolve only to use online transfers for withdrawing from that account.


Most cards have a daily limit for purchases and withdrawal from atm's. Review the limit; however, if you have followed the previous step, it may not be necessary to do that.


Convert all your cards to chip-based cards which are more difficult to duplicate. Keep an eye on your card while using it for payments, and don't just hand it over like we usually do at restaurants.


While using the card at an atm, especially in a foreign country or in a tourist location, be extra careful. It is always good to cover your hand with the other hand, while entering the pin at the atm.


Keep changing your pin often.


Keep your mobile password-protected, and make sure that sms's that come are not visible as a notification if the phone is locked. A lot of online transactions use two-factor authentication through mobile nowadays.


In India, two-factor authentication is mandatory for online payments; this is not the case abroad. Be very careful while using your card abroad. You can either use a separate card; or keep a limited amount in the account, and keep transferring to the main account as and when the balance goes down.


For online transactions, it is possible to get a temporary limit with a credit card number for one-time use. Your bank should be having this facility. Use this for sites which you are not sure of; it is too impractical to adopt this approach for all normal transactions.


Reduce the number of times you have to enter card details online by shifting to a payment app like Paytm for routine payments. It has the added advantage of added convenience.


Keep changing your cards once in a while. The bank does charge a nominal fee for this, but it is worth it.


And lastly, always be paranoid when it comes to passwords and security. It is not a question of 'if', it is only a question of 'when' your passwords and codes will get compromised.

Friday, October 14, 2016

Fwd: Searching for myself

No experience is whole in itself,
Nothing is hallowed, nothing sacred;
Everything is broken, dissected:
Reassembled into something else.

The work is detached from the home,
The one who does it has to morph;
It is then bundled and transported,
Each piece divorced from the whole.

Play is detached from its pleasure,
For tons of data on the tracker;
Function graphs of each parameter:
We don't really know where we went.

Feelings are divorced from the person,
To be isolated, kept at home;
The person divorced from what he loves,
For bits of silver he sold his soul.

Each part, each thought, each of our feelings,
Every person that we know and love,
Is taken apart, disembowelled,
Assembled into something virtual.

We cut ourselves into pieces,
To something, someone, give each away;
Then spend our lives searching for wholeness,
To fill the emptiness, but in vain!

Saturday, October 8, 2016

Uri and its aftermath

A few soldiers killed at the border,
A Lakshman Rekha, Ram, and Ravan;
Since time immemorial,
The reactions are not just rational!

Sita, the symbol of national pride;
Outraged Ram, villain demonified;
War drums beat to rouse the nation,
and slogans, drumbeats of jingoism!

The soldier is held up and glorified,
In tearjerking melodrama;
Not to salute is vilified,
As the drumbeats rise in crescendo!

You are either for us or against us,
As the demagogue ruler said;
Any debate that eschews nuance,
Is tool of the masters, suspect!

The tribe was aroused to make war,
by rousing slogans, intoxicants;
Modern nations are no different,
They play the Piper's tunes, and we dance.