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If you are a fan of watching financial markets as a sport then the past 4 days have been action packed with all sorts of hail marys. As of now 3 of the 5 investment banks are gone - Bear, Merrill and Lehman.  That leaves only Morgan Stanley and Goldman Sachs as the last of the true independent broker/dealer/investment banks.  I’m guessing in short order they will be folded into a bank, although I bet Goldman buys a bank. What we are seeing in the financial markets is the equivalent of the dot com implosion.  Stock prices almost going to zero, back in March 2007 Lehman (LEH) traded as high as USD 85 with a market cap of USD 46 billion, today it’s trading at 21 cents with a market cap of USD 145 million - DOWN 99.75%.

Locally in India, Lehman who recently moved into arguably the most expensive office building in India, Ceejay House, has already shut down part of their operations. The broker/dealer arm is still going, but most people will not trade with them and that’s the death knell for a broker.

One of Merrill’s top guys Andrew Holland has jumped ship to Ambit Capital to head institutional equities and run their prop book. DSP Merrill Lynch Mutual Fund will now be renamed DSP BlackRock Mutual Fund.

The biggest winner from all this carnage is probably Hemendra Kothari who sold out a major chunk to Merrill back in December 2005 for USD 500 million.

For some retarded reason my new internet service provider (MTNL) requires me to reboot my router at midnight and 8am to qualify for free unmetered service. Sadly, it makes sense to comply since you can easily download 2-3GB of content a night.  However, there has to be a better way then physically turning off the router and rebooting it every damn night. There had to be a technology angle to getting this going automatically every night. There are a couple utilities for the Mac, however I didn’t want to rely on 3rd party hacks but wanted to use the native tools via OS X. My solution is a bit convoluted but once you implement it, it takes only a couple clicks a night. The apps I used were AppleScript, iCal and the Energy Saver preferences on the Mac.

1. Create 2 scripts: app_start.scpt and router_reboot.scpt (you can download mine: app_start.scpt and router_reboot.scpt).
app_start.scpt
will start Terminal and telnet to your router
enters a username/pass
issues a reboot command (this assumes a D-Link router)
Starts my favorite BitTorrent client Transmission
Issues a command to update all my podcasts in iTunes

router_reboot.scpt
will start Terminal and telnet to your router
enters a username/pass
issues a reboot command 

2. Use iCal to execute the scripts at the time you want them to occur, to do this create an appointment with an alarm and select “run script.” I have the app_start script kickoff at 12:05am and the router_reboot script starts at 7:55am (image below). You can further automate this by creating a repeating event every day.

3. In the System Preference Pane for Energy Saver. I have my Mac awake at 12:05am. (image below)

Finally, before you goto bed put your Mac to sleep. And at 12:05am your Mac will awake and execute the app_start script.  Then at 7:55am, the router_reboot script is executed.

Back in October 2003 a report from Goldman Sachs highlighted the four countries of Brazil, Russia, India and China termed the BRICs would be a hugh force in the world economy.  5 years later the term has stuck and the 4 countries have made some big progress as predicted in the report which can be downloaded here.

However, the equity markets in all 4 countries are getting slammed.  You talk to people in India and they are wondering how it could happen to them.  The reality is EVERY equity investor worldwide is getting killed and India ain’t so bad when compared to most other countries, as I call it “the cream of the crap.” Let’s take a look at each BRIC:

Brazil (Bovespa)
52 week high - 73,920
52 week low - 47,606
Sept 12, 2008 - 52,392.86
DOWN 29.1%

Russia (Traded Index)
52 week high - 3717.03
52 week low - 1858.89
Sept 12, 2008 - 1991.10
DOWN 46.4%

India (Sensex)
52 week high - 21206.80
52 week low - 12515
Sept 12, 2008 - 14000.81
DOWN 33.9%

China (Shanghai SE Composite)
52 week high - 6,124.04
52 week low - 2,199.36
Sept 12, 2008 - 2,079.67
DOWN 66%

After having switched ISP’s, I’m finally back on the grid and it feels damn good!! I went from a 512k connection to a 2MB connection…welcome to the third world of internet connectivity. My connection was down for 10 days and during that time Om Malik was complaining about Comcast introducing metered internet service and the death of the internet.  Well, it’s already happened in India…Comcast is talking about a cap of around 250GB a month, my current internet provider is going to provide me with 1.25GB (yes, 1250MB) a month and the great luxury of unmetered service from midnight to 8am every day as long as I turn my router on/off every day at midnight and 8am…man where is FIOS!!

When it takes a foreign newspaper to highlight an Indian issue, that’s a clear indication that things are not going well. This time around it was the WSJ that reported on the Indian retail revolution is not happening as expected. I’ll admit when I first came to India 3 years back, I thought the retail revolution was gonna be hugh. I believe my quote from back then was…

If you have any concerns whether there really is a retail revolution occuring in India, I suggest you checkout Big Bazaar.

Ouch…so what happened? I think Indian consumers will be Indian no matter where they live, be it India or America. If you take a look at the average Indian living in the US, they are not going into Gucci or Bloomingdale’s to shop they are value shoppers, looking for the best deals. Some of the retail build up has been around so called luxury brands in the Tier 1 metros, which I believe is a HUGH mistake. If you can afford to blow USD 2000 on a hand bag, why not go somewhere like HK or Dubai and shop in style and also turn it into a vacation.

However, talking about Tier 1 markets are sexy and investors love to hear about it. You start talking about cities like Shujalpur in Madhya Pradesh and people kinda scratch their heads. But it’s cities like Shujalpur where ALL the retail action should be taking place.

The best quote from the article came from Thomas Varghese of the Aditya Birla retail unit:

The Indian consumer is a damn tough customer.

Ain’t that the truth!

The past week was filled with iPhone related news in the Indian press as the launch neared.  The actual launch was a joke, the phone was stupidly priced at USD 824 for the 16GB iPhone 3G. 3G the biggest features was missing, why? Because India does not have 3G running on it’s network, and to me that’s the bigger story. For all the talk about the “mobile revolution” it’s pathetic to think India has no 3G due to political reasons. For quite some time The Department of Telecommunications (DoT) and Telecom Regulatory Authority of India (TRAI) have been playing politics and delaying the auction for the licenses which some estimate could be as high as Rs. 40,000 CR (USD 10 billion).  That’s some serious coin and much needed since the gov’t just bailed out farmers and gave all gov’t employees a pay raise. 

The other telecom news is the recurring rumor of an IPO for the state owned telephone provider BSNL.

“The company is valued at well over $100 billion. We are looking at offloading up to 10% stake, subject to government approval,” BSNL finance director S K Saxena told reporters. When asked about the development, telecom minister A Raja said: “The government is considering it (an IPO). The department of telecom (DoT) will discuss the issue and take a final decision soon”. 

Yup, another USD 10 billion to the government if everything goes as planned. Personally, I would not invest in BSNL since it’s a typical state owned entity that is fast losing customers to the wireless companies. And more importantly BSNL does not service Bombay or Delhi - the two biggest metros in India and where product innovation occurs first. But, hey if they pull it off and retire some of the government debt I’m all for it.

Quiz time: What does BSNL stand for? Bharat Sanchar Nigam Limited (translation: lame customer service and pathetic product set).

Spotting a Lamborghini LP640 in India is about as common as seeing Halley’s Comet. The LP640 is the big bull in the Lamborghini stable, in India the car goes for about Rs. 3 CR (about USD 750,000).  So imagine how I felt when I heard one of these beauties got into a major accident in Bombay sometime in May 2008.  

The funny part is that NO ONE seems to know anything about it.  This is surprising in a country where the press likes to describe in excrutiating detail the movements of anybody with money. So I find it hard to believe that an LP640 gets demolished on a public road and everyone seems to be clueless on who owns the car or what really happened. 

UPDATE: Aug 19, 2008 - The car was owned by Hitesh Bhagat, his grandfather Kalyanji brought matka gambling to Bombay in 1962 and was referred to as the “Matka King.” Matka is a form of gambling that he popularized. Hitesh’s father Suresh was killed last month in an apparent move to take over the family business, Hitesh is a suspect in the killing as is his mother…drama!

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.