American Diary: 10 Days To Go-A Matter of perspective

It is day two of my US trip and 10 days to go before the election. “America is hurting” is what I see

I decide to meet up with the novelist Nayana Currimbhoy (Ms Timmins school For Girls) at her pretty loft in Lower Manhattan where her workspace and residence are cheek-by-jowl and get her perspective on issues. I ask her about the state of the economy. She runs an architecture firm along with her husband. Her view is that things are reasonably good but not like the boom years when everything was, so to speak, flying of the shelves. The job market is quite soft. “If you were to advertise for the post of an architect, it would probably get you hundreds of applications”, she says. The economic cycle is also a tad slow; payments for work done are a little late so work also gets somewhat delayed and it all adds up to a distinct perception of a slowdown. But Nayana doesn’t blame President Obama for this situation – “he inherited a terrible economy and Indians generally vote democratic-its an old tradition”, she says.
“How will the next four years under President Obama be any different?” I ask, “the Republicans in Congress blocked every democrat initiative, how will that change?” She
has no answer. Indians, who have a minority status as far as government jobs go, have benefitted from the President’s policy of reserving government contracts for minorities. That is bound to change if Mitt Romney comes to power. Also, since Indians are one of the richest communities in America, the tax policy should have its own implications on their wealth. Yet, Currimbhoy is confident that Indians will stick with the President this time around.
Our conversation veers around to the conservative stand against abortion and the landmark Roe vs. Wade case. This gets Nayana really animated at what she considers needless dabbling by the Republicans in social policy and issues such as abortion, or who should marry whom. It is a personal matter and the Tea party, which believes in individual freedom, should just keep of she thinks. But then, she also concedes that abortion and gay marriage may not be top-of-the mind issues for women this time – they are more keen on getting the economy back on track, which explains why the ratings show that Mitt Romney’s is closing the gender gap in the traditional Republican support base.
From meeting Ms Currimbhoy, I head off to take the Amtrack train to Washington DC. I am sitting next to a smart man who is using several devices to stay connected to the world. He works in health care communication and is from outside the Philadelphia area. I rib him a bit about the high cost of medicines and get him talking about President Obama’s health care plan. He thinks it is good in parts but needs some reworking to make it more acceptable to all. I also find out that he is definitely going to vote and he says a Republican. My new train friend is a father of two college-educated boys -- 26 and 28. Both have lost their jobs in the economic slowdown and are getting very frustrated at the slow pace of change. One son is into movie production and the other is an architect. Having lost his job, one now works as a cook and supplements his income by doing odd jobs. I opine that Mitt Romney as president will gut the economy. Amtrak here could go. So he says, “Should we become like Greece? Should we become like Spain? If Amtrak does not make money it should be privatized. That is the American way.” Crossing the lovely Delaware river, I ask my neighbour an executive with a Fortune 500 company “Isn’t that where Joe Biden comes from, and she says, they probably want to forget it”… Guys America is hurting.

(Harsh Desai has done his BA in Political Science from St Xavier's College & Elphinstone College, Bombay and has done his Master's in Law from Columbia University in the city of New York. He is a practicing advocate at the Bombay High Court.)


Will the Zee Group get away this time too?

Zee and Subhash Chandra have always managed to escape from punishments in the past even when irregularities have been proven. However, this time they are facing a Congress MP and a powerful corporate who has right connections in place. Can Zee and Subhash Chandra escape this time?

Subhash Chandra and his Zee group have always got away lightly from all kind of troubles so far possibly due to the “right connections” in the government. In fact, it is easy to forget that the Zee group was one of the three or four that were closest to scamster Ketan Parekh of the stock market scam of 2000. The Zee stock was among the K-10. The ten scrips—Zee Telefilms, Himachal Futuristic, Satyam Computers, Global Telesystems, DSQ Software, Ranbaxy, Silverline, SSI, Aftek Infosys, and Pentamedia—were openly ramped up by Ketan Parekh, while the regulator, and the finance minister (Yashwant Sinha) watched indulgently. 
When the investigation into the scam started, it was found that Global Trust Bank (GTB) had rapidly routed money through a couple of Zee accounts in a single day in an unsuccessful bid to bail out Ketan Parekh. All this was documented by the Securities & Exchange Board of India (SEBI) and was on record with the Joint Parliamentary Committee (JPC). Even those days, the group and its media empire hit back at anyone who dared to write about the issue. A lackadaisical investigation was conducted by SEBI, which dragged for years and was to have been settled through a consent order. But suddenly, in the first week after CB Bhave was appointed chairman, in 2008, a whole-time member of SEBI passed a strange order allowing the group to get away with a mere warning. Not a single rupee was paid was as a fine. 
This time around, things are different. The Congress itself is under pressure over innumerable corruption scandals and the victim of alleged extortion by the Zee group is a powerful industrialist and Congress Member of Parliament (MP) Naveen Jindal. The chairman of Jindal Steel & Power is one of the most aggressive players in the steel sector and has hit back with a sting operation that has led to a couple of investigations. Jindal has alleged that Zee News and its senior journalists (who also double up as business heads) demanded Rs100 crore in advertising to suppress negative reports about his involvement in the coal mining scam. Although the charges made by Naveen Jindal are of a serious nature, it is not clear if he would take his legal action to its logical conclusion—after all he is a businessman and needs the media. However, a suo moto investigation has been ordered by justice JR Verma, chairman of the News Broadcasting Standards Authority (NBSA) and this will not be as easy to manage as a pliant and easy to pressure SEBI. 
It is worth going back in time to Zee’s involvement with Ketan Parekh. The share price of Zee Telefilms’ was ramped up almost 25 times from just Rs21 in March 1999 to around Rs490 in February 2000.  The Essel group (promoters of Zee) even gave an advance of Rs706.4 crore to Parekh, a part of which was later returned. Doesn’t this unexplained advance sound familiar to what several politician-‘entrepreneurs’ and famous sons-in-law have received in recent times?  
SEBI dragged on the investigation ordered by the JPC for eight long years after the scam. Then, to the shock of market observers, SEBI, under CB Bhave, allowed the company to walk away with a mere warning, after concluding that if found no nexus between the company and Ketan Parekh! 
The whole-time member, TC Nair, who passed on the order, concluded that “the promoters of Zee Telefilms had by their conduct and actions given an impression that they aided and abetted Ketan Parekh (KP) entities in large-scale market manipulation of various scrips, including Zee, during 1999-2001 period.” There was copious evidence of Zee Telefilms’ extraordinary fund transfers through accounts in GTB. 
This same member, was also guilty of earning a rent for hiring his flat to the Stock Holding Corporation of India (SHCIL)—a regulated entity—at Coimbatore where SHCIL had absolutely no business or operations. There was no action against Mr Nair, who in fact was expecting an extension when he passed the Zee Telefilms order. What was more shocking was that Zee Telefilms had been negotiating a consent penalty of Rs5 crore when Mr Nair let it get away with a warning.
Coming back to Jindal-Zee episode, earlier the Congress MP filed a first information report (FIR) against Subhash Chandra, chairman of Zee group, Punit Goenka, managing director of Zee, Sameer Ahluwalia and Sudhir Chaudhary, both editors and business heads of Zee Business channel.
The complaint also blames Zee group’s head Subhash Chandra. It says, “Aforesaid Sameer and Sudhir further informed us that a vilification campaign against our company is under instruction, consent and full knowledge of aforesaid Subhash Chandra and other officials of their top management. They further informed that Subhash Chandra Goyal was fully aware of this. In fact this whole thing was his plan and each step had his concurrence”.
The Zee group, however, denied the allegations made by Jindal. According to a PTI report, Punit Goenka, managing director and chief executive, Zee Entertainment Enterprises has said, “This kind of allegation has happened in the past and may happen in the future. It doesn’t make any difference to us and we will stick to the truth. These are all pressure tactics.”
Coming back to Global Trust Bank, it played the role of a ‘buddy’ lender to Ketan Parekh. However, after the exposure of its role in the Ketan Parekh scam, GTB was about to collapse before the Reserve Bank of India (RBI) arranged its shotgun marriage with Oriental Bank of Commerce (OBC). At that time OBC was among the best banks in India with the lowest percentage of bad loans or non-performing assets (NPAs). After GTB’s merger, OBC declared a loss during the fourth quarter ending March 2008 and 39% fall in net profit because of crippling Rs242 crore write-offs for amortisation of losses due to the merger. OBC’s total loss due to GTB was estimated to be around Rs1,220 crore.
OBC reported a net profit of Rs302 crore during the second quarter ended September 2012 mainly due to strong recovery of assets that had gone bad in the past. During the second quarter, OBC’s total recovery was Rs449 crore compared with Rs303 crore in the year-ago period.
So far, Subhash Chandra and Zee have escaped from any punishment. This underlines one simple fact—no matter what regulations the government puts in place, powerful corporates with excellent media and political connections are never punished. Instead, their mess is distributed across a few million small and tiny shareholders or depositors.
It would be interesting to see if Jindal, the powerful corporate and Congress MP would take this case to its right conclusion or Subhash Chandra and Zee again manage to get away. 



240p FLV

5 years ago

Excellent angle about the sordid Zee group and very relevant in today's context

Ravi Saboo

5 years ago

The article is bizzare, I could not understand what was the actual meaning of the T C Nair episode. What does it imply?

I presume that moneylife will have all the details regarding Mr.Naveen Jindal also about how he without the environment clearance still managed to erect the structure of the factory and win around 25% of the total coal blocks.

It would be better if you stick to the current scam then rather bring out the year 2000 scam as this will only raise and create doubts about your intention.


Sucheta Dalal

In Reply to Ravi Saboo 5 years ago

Dear Mr Saboo... do read moneylife regularly. You will see that we cover everybody. No regular reader has any doubts about our intention.
And please believe that our readers are quite happy with ALL the scams that we cover... not just Zee, or Jindal, or Essar, or Ispat, or Reliance, or MLM schemes, or insurance shenanigans or regulatory lapses or banking quality issues.
Many thanks for discovering Moneylife. We hope you will be a regular.

Ravi Saboo

In Reply to Sucheta Dalal 5 years ago

Thank you for replying so promptly. I have been following your stories regularly, I am one of your followers on twitter.

Anyhow the main story about Zee being involved in a scam earlier was very confusing to say the least. The comment about T C Nair, about OBC merger and the fall in net profit were totally out of context.

Moreover I hope you will agree that it takes a lot of guts for anyone to take on Naveen Jindal who is in the central government in which all the top people are involved.

Please do not rake up old issues and mix it up with this.


240p FLV

In Reply to Ravi Saboo 5 years ago

Take on Jindal? Hello, are living in a different planet or working for Zee? Look up the word extortion in dictionary since you don't seem to know what it means


5 years ago

Excellent with Full Details Exposing , for all of us.

Generic solutions don’t work well in financial planning

In order to be precise, the financial planning process needs to be more investigative. Generic solutions are easy to offer and implement but do not serve the purpose of long-term planning

Financial planning is gradually emerging as one of the most important and talked about professions in the Indian finance space. Financial planners are mushrooming left, right and centre and with them different concepts of financial planning are also emerging. Some extremely innovating, some very stale and most of them looking like “cut, copy, paste”, which makes you surprised at the homogeneity of these concepts. Talk to financial planners across India or read their thoughts in various newspapers and magazines, you will come across some standard answers in different types of personal financial planning prepared by the financial planners.  Sample of these standard prescriptions in financial planning  are as follows: “Equity is a must in the portfolio”, “mutual funds help in sustainable wealth creation”, “keep cash in bank or liquid funds up to three months’ expenditure”, “gold is a good hedge against price rise but the exposure in gold should not exceed 10%”, etc.

Why is it that there is so much homogeneity in the recommendations made by financial planners? Are these indicators of bankruptcy of ideas or these recommendations are the need of hour? A closer investigation of issues in financial planning reveal that some questions are so difficult to answer that most of the financial planners try to avoid the real answer and adopt a rather conservative approach in order to be safe. The lack of ability to offer quality suggestions to their clients comes from two aspects: 1) Some issues are too hot to handle, and 2) Being extremely rational in the approach may reveal chinks in the armour and expose the limitations of the financial planning as an approach.

Read other articles on financial planning.

Let us look at some of the intriguing issues that the financial planning process involves which can be described as follows:

Portfolio return must beat inflation, but which inflation and how?  The fact that portfolio return must beat inflation sounds very noble as an idea and logical at the face of it. If portfolio return does not beat inflation, the effective wealth creation does not happen. But this is easier said than done. Is it easy to identify the inflation that you want to beat? Is the inflation number measured by WPI (wholesale price index) or CPI (consumer price index) or is it some other number? Is the inflation having same impact for person having small income vis-à-vis a person having a fat source of income? Just dig deep into this aspect of financial planning. What are the assumptions considered by the financial planner in considering rate of inflation for a long period of twenty years when he recommends retirement planning to you? Also is the financial planner unnecessarily increasing risk exposure of your portfolio to beat inflation? Last but not the least, if the financial planning fails to beat inflation, what happens? What are the exigencies built into the process of financial planning to handle inflation?

Generally financial planners assume a rate of inflation and blindly apply it in the process of financial planning. But the complex question of inflation needs deeper analysis of the economy and economy-related events. Since very few financial planners have adequate knowledge about it, they try to be an escapist.

Read Financial planning: Choose carefully

Equities give return in long run which is better than all asset classes, but how long is long run? There is no doubt that one should invest in equities. Also, there is no doubt on the fact that equities generally outperform many asset classes by providing better returns. But some of the questions that remain unanswered are—what is long run in equity investment and what happens when equity fails to provide returns even during long run that we have seen post 2008 global recession? Since mutual funds are a recommended route of investment in equity for a retail investors, the obvious question that an individual needs to know is how to handle failed investments in mutual funds. Is blind reliance on mutual funds for investment requirements fine or there is a need for periodic review of the investments? The basic question that remains unanswered is how will an investor handle a mutual fund scheme which has failed to perform?  Also what is long run in the investment indicating as to how long one should wait for mutual funds to perform? If JM Keynes is to be believed, we are all dead in the long run.

The experience of the last five years in the Indian equity market has shattered what was assumed during the 2003-2007 period. Debt has outperformed equity substantially barring some good mutual fund schemes and selected stocks. What should an investor do in such a scenario if it again happens in future? This again shows that blind reliance on equities in all scenarios can be fatal for sustainable wealth creation. Portfolio churning should be designed in such a way so that it is able to handle the dynamics of market. Also, there should be due consideration given to the co-relation factor before investment decisions are made and executed.

Read Financial Planning: Simplicity works best

Exposure to an asset classes depends on risk appetite or age: How much exposure an investor should take in an asset class? Should a 25-year old person with a low savings go for equity exposure or a person, in his early fifties, with a substantial income have more equity exposure? The question that remains unanswered is what decides my exposure—my risk appetite or my age?  Ideally for a person who has lower income levels, exposure to equity should be restricted because he has not yet built a foundation for long-term wealth creation. While a person in his fifties with a healthy disposable income has a higher risk appetite and can go for equities in spite of the disadvantage of time on his side.

This shows that while deciding on exposure to any asset class, risk appetite of an investor cannot be ignored in spite of his age. So a generic prescription cannot be given for all categories of investors. Also, whether an investor should invest 10% of total corpus in gold or more cannot be standardized and will be decided based on ability to take risks.

In order to be precise in character the financial planning process needs to be more investigative. Generic solutions are easy to offer and implement but do not serve the purpose of long-term planning. In order to build a robust financial planning process, detailed homework is needed to be done these riddles.

(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)




5 years ago

More than anything else Financial Planning is just a selling tool.

Meticulous Financial Planning cannot guarantee end results, nothing can - because we simply do not know what the future holds. Investment results (whether from debt or equity) vary way too much from the estimates / expectations at the time of undertaking investments.

Allocating money to gold has caught fancy currently because of the way gold prices have been appreciating in the past decade. 10% allocation to gold may sound intelligent; whether it is wise to allocate 10% to gold only time will tell, especially given the prevailing high prices. An average investor has no business to dabble (speculate) in gold

Returns from equity: It is a mistake to believe that ‘under all conditions‘, equities give better returns in the longer term.
Irrespective of the investor’s risk appetite, it is recommended to have reduced exposure to equities (not more than 25%).
a) in the higher ranges (peak) of the bull market. (There can never be case for zero exposure to equity as the markets could keep on rising till the euphoria lasts.)
b) And when low risk debt instruments offer 10% per annum or more.
Even the world’s best and most successful investors do not know how their investments will behave in the future. Successful investing is about controlling the controllable. You can't control what the market does, but you can control what you do in response. In the long run, your returns depend less on whether you pick good investments than on whether you are a good investor.
Thus, when it comes to financial planning, even specific solutions may not work well or may work only as well as generic solutions.

A generic solution of investing only for the long term (5 years or more), asset allocation and periodic re-balancing may work as well or better than a specific financial planning solution.


240p FLV

In Reply to Nilesh KAMERKAR 5 years ago

Sound points, as usual from Mr Kamerkar

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