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The much talked about Olive opened up it’s newest location in South Bombay – at the Mahalaxmi Race Course to be exact. Getting to Olive is something of an adventure once you enter the Race Course property, its tucked into the northeast corner and the area is not paved but the upside is it has AMPLE parking. There is no awning at the entrance so during the monsoons you’ll get soaked entering the place and get to experience that again when you leave. Lastly, since it’s located near horse stables you get a slight smell from the horses. That’s the extent of the negatives the rest is all positive.

Once you are inside Olive it really is “charming” as the menu describes itself, great execution of minimalism. The food which is mainly mediterranean/italian cuisine was excellent and the restaurant staff was polite but a bit too pushy as they wanted to clear every plate every 5 minutes. People may come for the food but they stay for the people watching. I’m guessing the outdoor bar/dining area is going to be the place to be seen for quite sometime.  The crowd had a mix of urban professionals, family money, players and posers. All in all a great addition to South Bombay.

Overall: Great food, good location (for some), ample parking, the new “it” place, average meal around Rs 2000.

Many of you have probably read “When Genius Failed: The Rise and Fall of Long Term Capital Management” (LTCM) which chronicles the collapse of LTCM in 1998. LTCM was a hedge fund that was over-leveraged and when liquidity dried up worldwide in 1998, LTCM got crushed when it couldn’t unload its positions.

From the ashes of LTCM rose a new company – GlobeOp.  4 out of the 5 founders of GlobeOp came from LTCM. GlobeOp is a middle and back-office for financial firms such as hedge funds and asset management companies.

A buddy of mine just forward me a copy of the Stanford case study on them and it’s a great peek into how the company came to be and how they got some lucky breaks. But, more then anything it shows they went through some tough times and made it to where they are today.  Had some of the same issues as any startup – sellout early and make some coin or roll the dice for a better offer and make bank – hopefully.

One of the people mentioned in the case study is Nandini Sankar, she runs the India operations for GlobeOp.  I had a chance to meet her a year back and can say she has done an amazing job of getting the India operations humming. For all the press about LTCM it’s rarely mentioned that some good actually came out of the LTCM collapse.

GlobeOp case study from Stanford

Experts on emerging markets are far and few between. One of the big guns is Mark Mobius of Templeton.  Mobius has spent over 40 years working in emerging markets and picking stocks while most others were still picking their noses in school. I had a chance to hear him speak in Oct 2007 in Bombay with 500 of his closest friends. Back in October the Sensex was on a major roller coaster ride of its own and it made his visit all the more interesting. He didn’t speak about P/E ratios, dividends, outstanding float, etc…It was more about his experiences in emerging markets and how volatile they can be. 

The best story he had was about meeting a new client who had just put money into his fund right before the 1997 Malaysian meltdown. The client was trying to reach him and asked the receptionist “where is this Mr. Dubious.”

Anyways, this week he had some comments on India that were very insightful.

What are the most exciting emerging markets?
No. 1 would be Brazil, by far. I mean, Brazil has been doing everything right. They’re really in a sweet spot because President Lula [Luiz Inácio da Silva] has made the right moves in terms of ensuring the currency is in good shape and the fiscal situation is good. And then they’re a tremendous exporter of minerals and producer and exporter of food products. The second is Russia. Commodity prices, particularly for oil and gas, have Russia flying high. As for India, we’re not rushing in because there could be more downsides.

So true…The Indian government might have survived but they haven’t done much in the area of large scale reforms.

I finally got around to upgrading my iPhone to the new 2.0 release and it is worth every penny…oh wait it was free. Since I have a hacked iPhone I wasn’t able to use iTunes and just upgrade the iPhone, I used Pwnage Tool to upgrade the software.  The software is so easy to use, it took a total of 10 minutes to crack and another 15-20 minutes to copy all my data back onto the phone.  

So what’s so great about 2.0, the biggest thing is the App Store. Which has 100′s of programs and will grow to1000′s.  The 5 apps that I’m using right now:
- Remote – control iTunes from the iPhone
- Shazam – listens to music and tells you the name of the song
- Facebook –  great interface for facebook
- WordPress – write posts to your WordPress blog
- Bloomberg – access news from the Bloomberg site

The downside is you lose all your apps from the Installer.app program and the ability to turn off EDGE. Overall the improvements in 2.0 are worth the minimal effort to upgrade to it.

Club 272 is not some new club in India, but it’s the number of MP’s that the UPA government needs to keep the existing government going. The last 48 hours have been great watching all the political stuff happening around the trust vote.  I had no idea Kamal Nath and Snoop Dogg were long lost brothers since it seems they both like to throw up gang signs.  I believe the sign being thrown up by Kamal Nath (in the pic) means – back the fu!# up and don’t touch my Cristal.

The latest incident being shown on TV is that 3 MP’s were bribed for their vote and the bag full of money was brought to the chambers of the Lok Sabha were the vote will take place later today.  All they need is a DJ and some go-go dancers for Club 272 to be complete.

The current financial meltdown may not be the best time to talk about asset allocation since most people don’t want to open their monthly statements to see how bad the carnage is.  But, at some point you have to open them up and figure out where the damage is and potentially re-allocate. So how should you allocate your assets? The one report that sheds some light on this is the annual World Wealth Report from Merrill and CapGemini.  It decribes how Merrill advices their clients and how they have allocated their billions. Page 15 of the PDF is the money page, below is the summary: (click on the image to download the full report)

33% – Equities
27% – Fixed Income
18% – Cash (preferably NOT dollars!)
11% – Real Estate
11% – Alternative Investments (such as hedge funds, commodities, pe/vc or even lame art work)

Another good resource is David Swensen, who runs the highly successful Yale endowment fund which has about USD 22.5 billion and author of Unconventional Success. He recommends using ETF’s and index funds in the following allocation:

30% – US Equities
15% – Foreign Equities
5% – Emerging Equities
20% – Real Estate
15% – Treasury Bonds
15% – TIPS

Which is right? I believe it’s up to you, but it gives you an ideas of what others are doing. Which may not always wise since some of these clients invested in hedge funds that invested heavily in toxic CDO’s. As they say your mileage may vary.

Someone emailed me yesterday and asked “why does your blog have such a negative angle on India?”  Part of me wanted to just tell the person to read the headlines and tell me what they see.  Americans always get blamed for not knowing anything about anything outside of the United States. Many Indian’s suffer the same fate, they don’t care what’s happening in the world financial markets – wrong attitude if you invest in Indian stocks you better give a damn about global macro events.

Let me run through some headlines over the last 48 hours:

- IndyMac 2nd largest bank failure in history
- Lehman down 75% for the year
- Fannie Mae and Freddic Mac down 80% for the year 
- Oil hits $147, highest recorded price EVER 
- Dow drops below 11,000 – first time since Aug 2006 

And some Indian headlines:
- Infosys down 7% after announcing flat revenues (this is India’s tech bellwether stock similar to Cisco) 
- S&P might cut India’s investment grade rating
- June air traffic down 15% (GoAir down the most at -33%)
- Industrial growth dipped to 3.84% lowest in six years (it was 10.59% last May)
- Inflation at 11.89%
- Sensex dives 456 points on Friday
- HCL Technologies suffer forex losses of $65-75 million (the dreaded yen carry trade?)

Ridham Desai, MD of Morgan Stanley India, has been appearing on the financial networks lately talking about the Sensex correcting by 50% form their peak levels of 21000.  If that is true we still have another 30% to go…ouch.  Over the past 4 months he is one of the few guys setting realistic expectations for the equity markets and his candor is surprising since he’s from a bulge bracket investment bank.

However in the past two weeks more and more people are saying the same thing – “sell into the rally.”  Not good to hear but the reality is the financial markets are going through a painful re-rating and re-pricing exercise.

The bright side is Indian stocks are still doing well when compared to the US which is experiencing multi year lows for many stocks: GE, Countrywide, Fannie Mae, GM, etc…or complete destruction like Bear Sterns.

It’s official we are heading back to the mainframe model, with a dumb terminal (now called a web browser) and the mainframe machine (now called cloud computing). It’s hard to believe the computer wonks at IBM had it right the first time around. It seems as my laptop gets more powerful, I’m pushing more of my applications to the cloud.  The biggest one so far has been Gmail, I was a die-hard fan of Outlook/Entourage but gave into the Googleplex.  

Recently, I was looking for an online content collaboration tool. I looked at a couple open source apps but stumbled upon a company offering an online tool that was surprisingly based out of Bombay. 

It’s similar to BaseCamp but way better, if you have remote teams working on different projects or need a way to track your work within the office this works way better then trying to share an Excel sheet. And of course since it’s online the data is always backed up.

I’m convinced in another year I won’t have any use for my laptop and will use my iPhone since everything will be in the cloud.

Reliance Mutual Fund (part of Anil Ambani’s empire) had recently converted a couple index funds (Sensex and Nifty trackers) into a single “quant fund.”  Since I’m a hugh believer in Index funds, it’s a disappoint to see Reliance shutdown that investment strategy…but its business.

The new strategy has been running since mid April and to make any judgements on it’s performance is a bit pre mature. Their basic model as taken from the offer document is: “will invest at least 90 per cent of the assets in an actively managed portfolio of 15 to 20 stocks from S&P CNX Nifty index on the basis of a mathematical model. The model will shortlist stocks on the basis of stock price movement and a variety of financial valuation aspects. The fund is managed by Krishna Daga who has been in the Indian equity markets for over 10 years with companies such as: HSBC, JP Morgan, Brics, B&K and Deutsche.

Since the product is a mutual fund the options it can deploy are limited to long only equities.  As the Agile Fund from Lotus it cannot go short, go to cash, hedge, leverage, etc…techniques that most international quant funds use.