Should retail investors stick to value equity investing to safeguard careers?

When I refer to 'retail investor', I do not imply any maximum level of knowledge/skill/expertise/experience, but only refer to a person who does not intend to make investing his full time profession. Hence, even a MBA Finance from a top notch college who aced his investing courses/simulation games, would be a retail investor if the main job is anything other than full time investing. Now, there are many investing styles for the lay investor, and in comparison to derivatives, exotic asset classes like art/commodities etc, the slow compounding effect based conservative value investing style may not appeal to many people, atleast not in the short run. But the perils in any other investing style is(especially the last point)

1. Disadvantaged in terms of information recency/execution speed and costs:-Without multiple terminals, access to recent data feeds and cheap trading costs, a retail investor is disadvantaged compared to his institutional counterpart. 
2. Information asymmetry widening:- In equities, the level of analysis is much lesser(DCF etc) as compared to options/FICC wherein pricing models accuracy matters as well. The improvements/refinement in those areas are much more prevalent and frequent, hence someone not having access to those would be at a disadvantageous position.
3. Limited structures/market access/positions:-Institutions by virtue of their market access, lower margin needs and liquidity can access more markets than retail investors, who are therefore better off investing along with them via structured notes/fund of funds etc.
4. Distraction from 'core'/'ongoing' business/career:-My father's friend who has a ball bearings business and who dabbles in stocks, once confessed that if he had focused on his bearings business, he would have been much wealthier than he is today. This is much more true in professions, with an entry of young often better trained blood. If you are not on your toes/upto speed, there is risk of permanently being left behind. And that is an intangible damage which no amount of investing success can compensate for. For day trading, F&O etc, that needs a lot of time commitment/intra day distraction and BP/pulse rate tracking the market. That does take a toll on one's performance at work. 
5. Value investing inherent advantages:- By contrast, value investing needs a one time major time investment, and then not so much effort at monitoring. Also, it is not very time sensitive job, so does not affect your work performance. Plus, the playing field is much more level(in fact retail investors even have an advantage as they do not need to report to someone/less herding risk etc). 

Of course, to 'get rich fast', it either needs a great career with bonuses, or else great trading gains/informed investing. While selecting the path, one would be advised to consider the above points.

My experience at Delhi Airport-well worth the passenger service fee!

Earlier in Jan-12, I had the occasion to wait for a few hours at Delhi Airport-the domestic departure terminal IB. Having done the same at Singapore and Mumbai airports, I was curious to compare the experiences. And surprisingly, once I was inside the airport, things were quite good. For instance

1. Affordable beverages/food inside the airport(like a Haldiram's stall) and even nearby, as opposed to the exorbitantly priced F&B which are a standard fixtures of airports
2. Wifi connectivity free of cost and although for max 1.5hrs or so at a time, that can be renewed free for any duration after that.
3. Laptop charging stations and tables are readily available beyond the security clearance area, and allow passengers to work/be entertained while waiting for departure. 
4. Interestingly, DIAL had a prayer room as well(location could have been better since it was near the toilet!) but that is a very good gesture
5. A shoe polishing roller which allowed the passenger to just rest the shoe on the roller and it would be polished then. A great idea
6. Other standard fixtures like clean loos, metro connectivity(metro station reachable by escalators/nominal priced AC bus service), water jets etc.

Of course, there is a controversy on the proposed hike in the passenger service fee which I'll address on my financeandcapitalmarkets blog, but the experience was quite good.

Immoral/Illegal/Against public policy-yet taxable or tax deductible in India

During my study of both direct tax and indirect tax law, I saw quite a few instances where although the activity in question was illegal or prohibited, that fact was not considered for the purpose of tax law. That does seem a bit strange that tax law does not recognize the constraints imposed by other civil/criminal law, but on closer reflection it does make sense because both laws operate in different spheres, and also because tax does not concern itself with moralities/strict legal form, and therefore even illegal income can be taxed.

1. Physician samples of patent/proprietary medicine is statutorily prohibited from being sold under the Drugs & Cosmetics Act 1940, and therefore a pharma company contended that since those samples were not 'marketable', excise duty could not be charged. But in Medley Pharmaceuticals vs CCE(Daman) 2011SC, the Supreme Court held that despite the statutory prohibition, the samples were capable of being sold, and that restrictions under one law could not result in revenue loss. Therefore, excise duty was held to be chargeable.
2. Under wealth tax however, if a plot of urban land is vacant due to land planning prohibitions, then its value is not considered for purpose of charging wealth tax.
3. Smuggled goods(if detected!) cannot be given benefit of exemption notification:- In CCus(Preventive) v M Ambalal & Co, the Supreme Court held that since the Customs Act had one of the primary objectives as curbing smuggling, it would be contrary to the purpose of exemption notification to accord the benefits of 'imported goods'(entering through legal channels) to those smuggled goods as well. 
4. Under the Indian income tax transfer pricing laws, any revision in transfer price(it will be always upwards IF made) cannot entitle the other party to the transaction to reduce its taxable income. Also, the party affected by transfer price that increases its taxable turnover, cannot claim export benefits/other benefits under law. This provision recognizes the commercial reality that despite the transfer pricing adjustment, the funds have left India(in case of international transactions). In case of domestic transactions under Section 43/80IA-ID, I guess the rationale is not to reward those who cook the books..
5. Under wealth tax law(again!), cash, to the extent recorded in books, is not subject to wealth tax. This means that questionable accounting practice/sloppy accounting of having unrecorded tax, would lead to its being taxed for wealth tax purposes. 
6. Charitable trusts ordinarily enjoy income tax exemption, but in case the tax authorities recompute the business profits and find concealed income, or make other additions to the income due to related party transactions, those additions are not eligible for that favorable tax treatment
7. The tax avoidance provisions under 69A-D subject unexplained expenditure to tax under the presumption that that would have been from undisclosed income(i,e black money). To avoid the claim of net zero income(gross income minus that expenditure), the law expressly debars any tax deduction of those expenses even under business income
8. Payments seemingly contrary to law still deductible-heroin drugs stock-in-trade of an doctor assessee and ransom payments. The loss of heroin drugs was held as tax deductible by the Supreme Court, which reversed the verdicts of the lower courts, stating that moral considerations did not belong to jurisprudence. Hence in 2006, the case Dr. T.A. Quereshi v. Commissioner of Income-tax, Bhopal stated that although the law had barred business expenditure incurred contrary to law, it did not state anything about business losses. In the K.M Jain case, the MP High Court held that where a company had paid a ransom money of Rs 5.5 lakh to the dacoits and secured the release of their director(who had spent 20days in captivity), the payment was deductible because the law did not expressly prohibit payment of ransom. Hence, this is seemingly contrary to the intent of the explanation to Section 37(1) that no allowance shall be made in respect of expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law. But technicalities and deep legal interpretation allowed tax deduction in the above cases. 

The point of the above examples is that sometimes tax law works in interesting ways.

The Abilene paradox proves Silence is not golden-and its implications

The Abilene Paradox was first described by Professor Jerry Harvey, from the George Washington University. He described a leisure trip which he and his wife and parents made in Texas in July, in his parents’ un-airconditioned old Buick to a town called Abilene. It was a trip they had all agreed to – or at least not disagreed with – but, as it later turned out, none of them had wanted to go on. “Here we were, four reasonably sensible people who, of our own volition, had just taken a 106-mile trip across a godforsaken desert in a furnace-like temperature through a cloud-like dust storm to eat unpalatable food at a hole-in-the-wall cafeteria in Abilene, when none of us had really wanted to go”.

Hence, the Abilene Paradox describes the situation where everyone goes along with something, mistakenly assuming that others’ people’s silence implies that they agree. And the (erroneous) feeling to be the only one who disagrees makes a person shut up as well, all the way to Abilene. In short, silence is not golden, and does not always imply assent. Some practical implications of this

1. Teachers often stress that no question is a dumb question. This is partly to avoid the Abilene paradox where students often have a common doubt but the silence of other students stops them from asking, as they mistakenly think that they are the odd man out. 
2. In a contract(unless by tacit actions), silence does not imply acceptance. That is an old maxim of English contract law(and I think in other juridictions also), subject to certain carveouts to cover assenting to deception etc. 
3. Many decisions often need a certain affirmative vote-for example in the World Trade Organization(WTO), rejecting an expert panel discussion needs a majority General body vote. And corporate law(often needing charter etc) often imposes a quorum for making certain important decisions, be it at the Board level or the shareholder meeting level, to ensure that those who are silent are also made to attend(atleast in part)
4. Great investors and managers often make their team speakup, to ensure that contrary opinions are not sidelined due to groupthink/awe.
5. Good communicators often restate for understanding, to ensure that understanding gaps are ironed out and not hidden behind the wall of silence. In fact, lack of response/questioning often indicates communication gap/disinterest. 

I could go on and on, but I think that principle needs more attention and application.

ICICI and Uninor-the tale of 2 contrasting customer service organizations

Below is the email I sent to my mobile service operator Uninor last Sunday on why I would be shifting from them after Mar-12.

1. Customer calls getting transferred repeatedly to Hindi speaking operators although I select the right option 'English'
2. VAS being wrongly charged to my account in May, and reversed after lots of hassle
3. Website among the worst in the industry-details of add on/top ups not available online
4. IVRS very unfriendly, almost impossible to get thorough to customer care executive
5. And to top it all, tariffs among the highest-local/SMS now 60paise for me without any intimation-even Vodafone(best quality network) is much cheaper and user friendly.

Even after a week, I did not get any response(not that I was expecting one after the hassle I had in getting a Rs 30 VAS charge reverse). Contrast that to ICICI's customer service. They are impeccable in the call centre wait times/service, have a great site, awesome technology and polite personnel. And when I blogged day before yesterday(http://andy161.blogspot.in/2012/02/icicis-incredible-customer-analytics.html) about their incredible analytics, imagine my surprise when the Blogger Dashboard showed 4 visits from ICICI Social media console, within a period of 24hrs. Obviously, someone is tracking the mention of ICICI on a third party social media forum like this blog!

In the era of customer choice, the person who is most attuned to customers wins. While ICICI is no saint(sometimes accused of sharp practices/not having the benevolent image of PSU banks), it is living its motto 'khayal aapka' by keeping its ear to the ground and being responsive to customer issues/feedback not only that given directly but also elsewhere. It is such organizations which would win in the long run.

Learning about the real facts of life online

A side effect of surfing online is that you stumble across plenty of interesting stuff. But thanks to the surfeit of PR material masquerading as content, it is sometimes difficult to get the true picture. Below are some useful resources I found in that regard.

1. IIM tips/NIT tips/ CA tips-a new fad has sprung up on Facebook where groups are made ending with 'tips' that give tongue in cheek one liners about anything under the sun, right from IIMs to Gujjus. This community is growing by the day, and chances are you will get information on any profession/aspect of life on that soon
2. Memes:- Many sites have memes which are again one liners, mostly on communities but often on other things as well. Sites like tumblr are a classic example of this.
3. Jokes: They say there is no smoke without fire. Hence, even the 'racy' jokes have a factum of truth, and can be very illuminating on the profession
4. Glassdoor:-This is often more reliable than Vault Guides in my view, because people can safely state even negative aspects online, which is not possible always in standard publications.
5. Quotable Quotes:-Sites like brainyquotes have a very rich collection of quotes online, and most are quite insightful
6. Classics:- Thanks to Project Gutenburg and other sites, one can read classics online for free(even the Kindle Store has free classics for Kindle). They say that the past repeats itself, so reading classic novels can give deja-vu when those situations are unfolding around you.
7. Anonymous blogs:-For example, a famous finance blog-the Eipcurean Dealmaker has an anonymous writer who frankly writes about the industry, unafraid of the consequences on his day-job. This is a luxury which only anonymity confers.  (http://epicureandealmaker.blogspot.com/)
8. Comment section on certain sites:-Often, the comments section is entire spam as in Rediff and TOI, but on more reputed forums like Economist/HBR/FT, the quality is comments is great and often surpasses the result of the post itself. And many commentors supplement their views with real life examples.
   

The end of 'free' digital content looms nearer than thought

The one day Wikipedia blackout made the otherwise obscure SOPA and PIPA bills of the USA Congress get global limelight. Those bills aimed at ensuring that sites which hosted pirated content, would have to comply with content owner's take down notices, and risk being stripped of their payment gateways/advertising networks if found to be 'persistent defaulters'. This lead to a Silicon Valley vs Hollywood media battle, which Silicon Valley seemed to have won due to the deferral of the bills. But that win was a Pyrrhic victory as the post below would show. In my Apr11 post(  http://financeandcapitalmarkets.blogspot.in/2011/04/why-end-of-free-content-looms-aheadand.html), I had predicted that downloading pirated content would be more difficult. But recent events have accelerated the rate of change

1. After the megaupload owner was arrested without bail in New Zealand, websites like filesonic panicked and have restricted the download facility to only the person who posted the links! In essence, they changed the business model from filesharing to file storage. While sites like mediafire etc are bravely going on, it is tougher to access pirated content, especially the legacy ones.
2. Content owners are shifting towards the idea of a central content repository, against which filehosting/sharing sites can ensure that uploaded content can be screened to check for piracy. If that materializes,most advertising dependent sites will find it difficult to avoid compliance with that. 
3. Youtube now screens uploaded content for digital footprint of copyrighted content, and then gives the rights owner the choice of profiting from that(by showing ads before/during viewing those videos) and explictly tags who owns the content. That makes the content piracy more difficult. 
4. Thanks to the telecom scam in India, hard landing fears in China and other emerging economies, capex on telecom/broadband is reducing and therefore the ease of piracy(always on high speed broadbands DO make it faster to access that content) falls.

 As I'd suggested in that post, free content seems the only way out, and to ensure Wikipedia like commons grow, we should prime the well by giving back to those commons.

ICICI's incredible customer analytics even on single non ICICI ATM usage!

Yesterday evening, I used a non ICICI ATM near IIM Ahmedabad. Imagine my surprise when I received an email from ICICI(mass mailer) with the attention grabbing header 'We have missed you'! I thought this related to my demat account but on probing further, realized that related to my use of the ATM card! Below is an extract from that mailer.I must say that this is remarkable customer analytics and does show why ICICI is still the technology leader among Indian banks. I have routinely used non ICICI ATMs and never received such emails till yesterday, so maybe this is a new feature on their part.Whatever the reason, such prompt response deserves credit. If it was toll free SMS,  then maybe I would use it but otherwise given that I do not exhaust the 5 free transactions/month, this is perhaps a failed effort on me.
Dear Customer,

We’ve missed you! We understand that you felt the need to use a Non-ICICI Bank ATM recently.

We would like to inform you that transacting at your ICICI Bank ATM is not only safe and fast, but it also comes along with various benefits...To locate your nearest ICICI Bank ATM, simply SMS ATM to 5676766.

Why is your ICICI Bank ATM safe and fast?

	Dip Card facility: Most ICICI Bank ATMs are equipped with a Dip Card Reader - a feature that enables you to transact safely while the card stays in your hand.
	Ultra Fast Cash facility: This feature, available at all ICICI Bank ATMs helps you complete the transaction in less than half-a-minute.
	Feel at home : Any disputes for queries will be taken care of by ICICI Bank. No need to deal with other banks to resolve your disputes.