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Monthly Archives: October 2010

How to invest in a red hot market

Posted on October 29, 2010 by monikahalan
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Expense Account, Mint

Endnote: Those that attempt to manage news do so in a manner that creates impressions. The one impression in the minds of the average consumer of media is this: The Securities and Exchange Board of India (Sebi) chairman is pushing business towards his former place of work—the National Securities Depository Ltd (NSDL)—and for some reason is partial to one of the promoters of NSDL—the National Stock Exchange (NSE). One question that has remained unasked is this: Why he is doing this? Is he the owner of NSDL that he will personally benefit from greater business and profits? No, NSDL is promoted by a mix of public, private and foreign institutions (http://bit.ly/dlV9Nx). So may be he has a stake in NSE with family and associates on the board. Um…, no. NSE is promoted by government-owned institutions and private banks (http://bit.ly/9oQpVW). Is there anyway in which he will personally benefit by doing this? The answer remains: no. So, it could be that he is not pushing business towards anybody. May be he is just doing his job and in that not allowing those who bend the system to function. The other strange story is about the compensation of the NSE chief. It seems he rewards himself very well. But isn’t there a board that decides on issues such as top management salaries? May be the board comprises his family and close associates. Nix again. Names (http://bit.ly/aKRXQb) that most people would agree are still clean in a country where fewer and fewer in positions of power remain in that group make up this list. The hounding out of two good men is on and is already partly successful. But readers must remember in the next few years of chaos that these are the guys who gave us safe and clean markets.

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Posted in Expense Account | Tagged board, NSE, Personal Finance, salary, Sebi | Leave a reply

Cool. So we are not alone

Posted on October 27, 2010 by monikahalan
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Expense Account, Mint

India is not alone in blindly staggering around for a solution to the problem of getting the last mile correct in retail financial products. I’m back after a week in Seoul (pronounced to rhyme with Yowl), South Korea, as a spousal add-on to a global financial planning congress. Spouses, luckily, were invited to the gala dinners and other evening events and I used the time effectively to wrangle information out of different parts of the world. Some of the information was alcohol-soaked, but is still worth consuming. The brief upshot is this: retail financial products have always been sold with commissions and charges embedded in them. This has led to an information asymmetry with the person facing the consumer having more information and knowledge than the buyer. This has led to sales of products carrying higher loads to be sold more rather than those that are actually good for the buyer. Paradoxically (and in a beautiful ode to behavioural economists), consumers are wonderfully irrational: as long as charges are embedded into the products, they are fine with paying even very high costs. But take costs out of the product and charge the consumer separately, the hand signing the fee cheque freezes. The consumer of financial products, globally, finds it very difficult to pay for advice. But if embedded, is happy in ignorance—as long as the final amount in whole numbers looks larger than what is put in. Consumers are oblivious of the effects of inflation, taxes and costs; they compare one whole number (what I put in) to another whole number (what I get out).

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Posted in Expense Account | Tagged #investing, adviser regulation, agents, banks, Expense Account, financial planning, Personal Finance | Leave a reply

Moving from ‘Have you eaten?’ to ‘Hi! how are you?’

Posted on October 6, 2010 by monikahalan
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When I was studying about 20 years ago in the UK, I had two Taiwanese flatmates. We all traded some common must-know phrases over the year that I was there—the favourite being trying to learn “I Love You”. While they tied themselves in knots trying to say that in Hindi, I practised saying hello in Chinese, grappling with“Chifanle meiyou” that, loosely translated, means “Have you eaten?” Sui Mei said that this was their common form of greeting in Taiwan. Fast forward to 2010 and when earlier this year I visited Taipei, the swish malls and shops had ushers calling out what sounded like “Ni hao”, or “Hi! how’re you?” What wealth did to citizens in Taiwan, however, went beyond just a changed greeting. After a certain level of fullness of stomach, the middle-class Taiwanese could not digest their smoke-filled, congested, filthy capital with its putrid river adding to the mess. They demanded change and got the government to turn around a ghetto into one of the smartest cities in Asia.

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Posted in Expense Account | Tagged Expense Account, Mint, Taipei 101, Taiwan | Leave a reply

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