DhuDDu

I came across this essay titled “Democracy in Corporate America” by John Bogle while blog hopping. In this essay, Bogle puts across the following points:

1. Shareholder interests are rarely served by companies these days.
2. Boards are not independent but loyal to managers.
3. Managers have become all-powerful and are misusing their power by fudging earnings and rewarding themselves disproportionately large bonuses.
4. Managerial thinking is more short-term.
5. States and the federal goverment have not come out with rules to help this situation.

And this is the state in one of the most developed countries in the world !!

This got me thinking about the situation in India, especially about the big soap opera that the Reliance split was. For the uninitiated, Reliance industries is a Fortune 500 company and is also India’s largest private sector company. It was started by Dhirubhai Ambani and his two sons, Mukesh and Anil, inherited it. Sibling rivalry led to the split of the company into two in 2005 and this deal was brokered by their mother, Kokilaben.

And the best thing about this - everyone, and I mean EVERYONE, went along with this. There was no noise from shareholders about this issue. The split ended up giving all energy related businesses to Mukesh and financial/telecom businesses to Anil. 

The problem: Mukesh was the telecom visionary but his long term strategies were now lost to that business.

Since this was a huge conglomerate and had been split into two, there was a major unlocking of value and the stock price shot up for both companies. That made the average stock holder who preferred short term gains over long term strength happy. And it sickened long term investors like me who now have to study two separate companies while making investment decisions :(

I have now realized that making companies accountable is a problem everywhere in the world and it also tough to get governments to help out with this issue. Being a shareholder in both India and USA, hopefully I can help educate investors in both countries about this problem.

Tags: Indian stock market, Investing by zzz
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For the uninitiated, NRI is a Non Resident Indian. 

There is your dollar, sitting in

• checking accounts with no interest, 
• savings accounts earning less than 1%, or 
• money market / high yield savings accounts earning around 5%.

As you track the consistent fall in the greenback’s value and wonder whether something can be done, look no further than the home country.

The simple math: Savings accounts in the US are currently yielding around 5% annually. In India, you can get 6.5% for the same money.

Consider this scenario - you want to buy a home and would like to save around 10 lakhs in two years. If you send the money to your recurring deposit account in an Indian bank @ 1000 dollars a month, you will have 996,688 rupees after year 2. Holding the amount in dollars will net you 26,290. At the current exchange rate of 39$, you will fall short by 15000 rupees.

Of course, this assumes that the exchange rate will stay closer to 40.

Here’s a probably stupid and I hope to be proved wrong prediction: I think the rate will go down all the way to 35 Rs for each dollar. This would mean converting at the end of year 2 leaves you with a shortfall of 115,181 rupees. 

My 2 cents - if you plan to use the money in India within the next 2 years, it is better to have your savings in rupees.

Tags: Indian Banks, NRI by zzz
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Yes, this is yet another personal finance blog. So why should you include this in your reading list?

A few reasons why this blog may help you:

•  You are not in debt upto your eyeballs on credit cards and pay day loans. Paying your balance off each month comes naturally and any further debt you take on will only be for “good” things like buying a house or student loans. I will be discussing strategies and issues surrounding these loans as I am currently evaluating going for an MBA and also have plans to buy a house in the next five years.
• A portion of your finances is tied to India. This could be because you are an India, will be living in India for some time, plan to retire there or would like to know more about investing in India.
• You deal with dollars. I am currently a resident alien in USA and will be for the next few years. I have learnt a lot about spending, saving and investing in this country and would like to share that with you.
• You are a nerd and are interested in a systematic approach to your personal finances. I have used difference financial software and will be reviewing them. I also have elaborate systems constructed to invest and save and will be blogging about them too.
• You are a woman and are sick and tired of every financial guru talking down to you, not giving you facts in plain English but attacking your emotions/feelings on money.

Mostly, with this blog, I will not be addressing issues like “ohmigod, i have credit card debt because i spent and spent and do not know what to do”. I hold “Spending less than you make” and “Pay yourself first” as self-evident truths and will try to go beyond them.

Here’s hoping you have as much fun as I am going to :)

Cheers,

zzz

Tags: dhuddu.com by zzz
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