Death Bonds: Praying for people to Die

Move over Hedge Funds...Here comes the Death Bond!!!

Just when you thought you had seen the most analytical, complex, high-risk alternative investment vehicles from Wall Street, they have yet again come up with a new way to make money. Its called the 'Death Bond' and believe it or not, it involves making money when people die. Mmmm.. I thought something was fishy when I heard that Germany unveiled a 24 hour death channel.

How does a Death Bond work?

Death Bonds (or life settlement-backed security) is created in the following way:

1. A person who wants to cash out of a life insurance policy hires a "life settlement" broker to find prospective buyers to sell his insurance policy.
2. The broker seeks bids from specialty finance firms called life settlement providers, which are often financed by hedge funds and investment banks.
3. The life settlement provider resells the insurance policy to a hedge fund or investment bank, which warehouses it in order to build a big pool of policies.
4. After an investment bank/hedge fund collects a sufficient number of policies (around 200-250), it turns them into asset-backed securities called death bonds to sells them to investors.
5. The The buyers keep paying the premiums until the seller dies, and then they collect. The up-front payout to the seller varies widely, from 20% of the death benefit to 40%.

The mechanics in theory seem quite straightforward: Asset Classes are pooled together and then sold off in the form of bonds or pieces of bonds. When people die, the banks collect. When people die quicker, investors get richer. It is estimated that there are 90 million people in the US with Insurance and this is certainly a temptation for Wall Street. Another big attraction for these types of "Asset Classes" are that they are uncorrelated assets (i.e. they aren't correlated with stocks, bonds, commodities, or other investments) and they are also immune to market risks (interest rates, currency risks etc.) which make the portfolios less volatile.

Well the truth is, at this early stage, there's no way of knowing how popular death bonds might become. I for one do not want anyone profiting from my death. But hey, that does not stop me from watching EoS TV.

Wonders Of The World - The New 7

The New7Wonders recently announced the 7 wonders of the world. The following wonders have been elected to represent global heritage throughout history. While a lot of people think that one wonder is better than the other, the listing was issued in random order. All the New 7 Wonders are equal and are presented as a group without any ranking. An honarary award was presented to another wonder for being the only original ancient 7 wonders of the world to be still standing.

The Taj Mahal, India

The Roman Colloseum, Italy

Petra, Jordan

Machu Picchu, Peru

The Great Wall, China

Christ Redeemer, Brazil

Chichén Itzá, Mexico

And the honarary award goes to.........

Pyramids of Giza, Egypt

Infosys: Ready To Play With The Big Boys

Infosys is ready to shop and the markets are ripe with rumors that they want Capgemini. Really? Agreed, Infosys has accumulated billions over the years, but can it afford to buy a company which is 3 times bigger…mmmm....

Lets look at some hard facts:

1. For 2007-08 Infosys has projected a 28-30% revenue growth and Capgemini has projected around 8%


2. Capgemini has a market value of 7.86 billion euros or $10.6 billion. Infosys has a market value of about 1.1 trillion rupees, or $27 billion


3. Capgemini has about 68,000 employees worldwide, including 12,000 in India, Most of Infosys's 72000 employees are in India, where wages are as low as one-eighth that of U.S. salaries


4. Infosys reported revenue of $3.1 billion for the fiscal year ended March 31 this year, and has forecast revenue of about $4 billion in its current fiscal year ending March 31 next year. Capgemini is 3 times bigger with revenue of $10 billion for its fiscal year ended December 31


5. Infosys’ operating margin stood at approximately 31% in the end of 2007, Capgemini's was 5.8%

"Lets take 'em boyz, there's only 70,000 of them and each one is paid more cheaply than the other"

In my opinion, this deal is highly unlikely to go through. With the weakening of the dollar, granted that all the big Indian players have to do something and take the next step, but let’s be realistic. Other than Capgemini's consulting arm (which is obviously stronger), they both seem to share the same strengths...So the question is what "real" value will buying Capgemini bring to Infosys? Infosys may be looking for access to the European markets, where it doesn't have a strong presence, but the cultural incompatibilities between the two companies are very high, and I for one don’t believe Infosys will be successful in bringing 70,000 employees under their wing who are culturally on the opposite end of the spectrum.

One thing is for sure. This rumor has certainly generated enough buzz to move the stocks (Capgemini is up 4.5%) and Indian outsourcing companies have shown they are “coming of age” and catching up with their European counterparts. But the question is will Infosys go above and beyond its reach at any cost. My answer again will be no as Infosys does not have such an aggressive mentality. They have downplayed the news not wanting to shoot themselves in the foot that one wonders why they are being so defensive. The CEO of Infosys himself came out and said he has not ruled out an acquisition in Europe, but said any target would have to meet Infosys' criteria (which no one knows incidentally!!!). Consider this approach to the one Rupert Murdoch took to acquire Dow Jones. Coming back to the point, another complication is the lack of M&A expertise for a deal of such a magnitude in India. Even if it goes through, can they truly integrate as one firm? Maybe I am being skeptical, but again, I highly doubt it.

Finally, Infosys is/has always been a debt-free company and a deal of this size will for the first time put them in a position where they will acquire a lot of debt and move away from organic growth. Though raising capital won’t be difficult, the real question is "Is Infosys ready to play like the big boys?"

Who are you???

WHO ARE YOU???

1. You work very odd hours.
2. You are paid a lot of money to keep your client happy.
3. You are paid well, but your pimp gets most of the money.
4. You spend a majority of your time in an air-conditioned room.
5. You charge by the hour but your time can be extended for the right price.
6. You are not proud of what you do.
7. Creating fantasies for your clients is rewarded.
8. It's difficult to have a family.
9. You have no job satisfaction.
10. You are embarrassed to tell people what you do for a living.
11. People ask you, "What do you do?" and you can't explain it.
12. Your family hardly recognizes you at reunions (at least the reunions you attend.)
13. Your friends have distanced themselves from you and you're left hanging with other "professionals."
14. Your client pays for your hotel room plus your hourly rate.
15. Your client always wants to know how much you charge and what they get for the money.
16. When you leave to go see a client, you look great, but return looking like hell (compare your appearance on Monday AM to Friday PM)
17. You are rated on your "performance" in an excruciating ordeal.
18. Even though you get paid the big bucks, it's the client who walks away smiling.
19. The client always thinks your "cut" of your billing rate is higher than it actually is, and in turn, expects miracles from you.
20. When you deduct your "take" from your billing rate, you constantly wonder if you could get a better deal with another pimp.
21. Everyday you wake up and tell yourself, "I'm not going to be doing this stuff the rest of my life."

Oh Wait, You are a Software Programmer. OK. (Now, Now, What were you thinking??)

Big Trouble in Little China

China is booming. Every investment turns to gold. The country seems to have unlimited cheap labor at its disposal. GDP growth seems to be 10+% year after year. Chinese stocks trade at insane multiples and a record number of investors seem to get into the market every passing day. Beijing and Shanghai seem to be building more skyscrapers than New York. Lo and Behold,
China has started shaking the world with its prowess in manufacturing, On paper, everything looks great and it looks like China is all set to take over the world.

Not so soon my friend. China's problems are just beginning. It has certainly made the world take notice, no doubt. But just as people are starting to look at China, they are realizing the enormous problems that come in dealing with a country whose government is as mysterious as its culture. Not all is rosy. China has serious problems with its environmental resources, severe pollution, and institutionalized corruption within the government, the legal system, the police force, and the media.

The Chinese culture maybe 3000 years old, but the Country has opened up only in the last 30 years. China has gone on a mass industrialization rampage and the unfortunate side effect has been the startling revelations of the food scandals (among others) and how China cuts all corners with obvious disregard to quality and human life.

Shoddy products being manufactured in china has emerged as a global concern, with many countries increasingly worried by the dangers of importing products from China. As more and more embarrassing stories come out, the country is scrambling to (or at least claiming) show the world that it was serious about improving the safety of Chinese products and is a responsible player. So they did something interesting this week.

China executed its former top food and drug regulator on Tuesday for taking bribes.

It is a bit extreme, or is it??? China carries out more court-ordered executions than the rest of the world combined, according to human rights groups.

However, what has come as a bigger shock is, while the country is answering its buyers, news that their own high-speed maglev train, running between Wuhan and Guangzhou ...well, seems to have a few problems has sent the bells ringing. So relax, they are screwing themselves too.

And me worry?? Nah, we have just seen the tip of the iceberg. There is still a long way to go!!!

Indian Presidential Race

The Left's are Wimps, The Right's are Crazy

Left: Shivraj Patil??
Kalam: I will continue….I will continue….
Right: Sherkhawat??
Kalam: Can I continue for god’s sake??
Left: Laloooo??
Kalam: I will continue The presidents office needs a good statesman
Right: What about Amitabh or Rajini??
Kalam: Ok, I am quitting the race now
Left: Ah, Pratibha Patil then?
Right: Perfect choice. She is old, cluesless, talks to spirits and is totally under the control of “The Madam”.

It is interesting to see that the one person who cannot be at the helm of the country (henceforth "The Madam"), still undoubtedly wields the power that no Indian has. I am actually not surprised that the presidential candidate is someone whom the madam has personally recommended and there is just really one reason she has been picked - She is a staunch Gandhi/Nehru family loyalist and thereby has proved her worth to the highest office of the nation. WHAT!!!!!!

As sad as it may sound, all the numbers look good for Pratibha Patil and she is well on her way to create history (on paper) to become the first woman to hold the country's highest office (does not matter she will do nothing while in office).

Neither is she a political heavyweight nor have Indians heard of her before her name started doing the rounds. Sure, her credentials include her brother being accused of murder, she has defaulted more than 17 crores loan out of a bank, she is a defendant is a class action lawsuit and has swindled 5 crores from a trust she was responsible for. But come on, what are her real qualifications? What has she accomplished in Indian politics? Has she shaped or framed any policies which have been implemented? What has she done for Indian politics apart from being a do nothing cabinet minister?? Does she have any influence over other political heavyweights? Has she driven economic or other development in her state?? Can she accomplish anything at all in the 5 years she willl be in office?

Sadly, the answers seems to elude everyone and I for one am shocked how all the parties are engaging in dirty politics to ensure their candidate wins at any cost. Considering the fact that it is Abdul Kalam's shoes that she is going to fill, it almost makes me cringe that while Kalam has openly said he is ready to take on another term, he surprisingly has won very few friends supporting him (Go Jayalalitha!!). While the people of the country overwhelmingly want him to continue (polls indicate he has 80+% support of the country), it means nothing.

Here is a fact which is known to very few people. The President of India is elected by the ruling party. Not the people of india, not the educated man, not the masses, not the people who help elect the government. Just a few people in the ruling party, in this case the madam, single-handedly, has the power to select the president of the country to represent more than a billion people. Ridiculous huh??

Just when India is entering the most important economic phase in history, just when the entire world is turning its eyes towards India, it is indeed sad to see the so called largest democracy showing the world how the political games are played and in a strange way proving that the people's opinion (actually a billion opinions) dont really count. This presidential election will no doubt go down as one of the murkiest in history and very few indians are genuinely going to be able to respect their president for the next 5 years.

Heck, it is public knowledge that Pratibha Patil was not even Congress' first choice as a candidate, but I guess the only qualification that one requires in order to rise to political prominence in India is keep sucking up to the Ghandhi family all your life and maybe, just maybe when you are turn 70+, you can become the President or even the Prime Minister of India.