Events that made headlines in 2009

As we say good bye to 2009, here is a look at the events that made headlines around the world.  

2009 undoubtedly belongs to Barack Obama who was sworn in as the 44th, and first African American, President of the United States. He received Nobel prize for peace for no apparent reasons raising many eye brows. Perhaps his order to close within a year the Guantánamo Bay detention camp in Cuba, where the US had held non-citizens whom it accused of terrorism, did the trick?

In February, the deadliest bush fires in Australian history began; killing 173, injured many, and left 7,500 homeless. The fires came after Melbourne recorded the highest-ever temperature (46.4°C, 115°F) of any capital city in Australia. The heat was so unbearable the Aussies turned to poor Indian students and beat the hell out of them.

Tiger woods became the first sports person in history to admit transgressions. He decided to take time off from golf to concentrate on adult movies.

The death of American entertainer Michael Jackson in June triggered an outpouring of worldwide grief. Online, reactions to the event crippled several major websites, as the abundance of people accessing the web pushed internet traffic to unprecedented levels. It turned out that most of the people were searching the internet to figure out if he was Black or White.

Swine Flu is deemed a global pandemic and even terrorists are looking at ways to take it to their advantage.

Dubai sneezes and the world catches a flu. In November, Dubai requested a debt deferment following its massive building projects, as well as the late 2000s economic crisis. The announcement caused global stock markets to drop.

Copenhagen climate meeting began with a bang but ended up with the world leaders banging up each other. Leading Bollywood actresses threatened to drop their clothes potentially pushing up global warming if a resolution is not made at the summit.

2009 also witnessed earth quakes, Tsunami, plane crashes, solar eclipse, terrorist attacks and a Hollywood movie telling us that the world will end in the year 2012. Finally, James Cameron the director who gave us the movie Titanic returning after 12 years with the mother of all movies Avatar with a $400 million budget. The movie is receiving rave reviews and the initial sign is that it is going to be a mega block buster.

That said, my personal favorite event is the rise of an unexpected star. YouTube announced that its 2009 star was Susan Boyle, the frumpy Scottish woman who mesmerized the world with a heartwarming rendition of "I Dreamed A Dream" on a British talent show in April.

Boyle, now 48, ended up taking second place in that competition, but no one came close to outshining her on YouTube. Her "Britain's Got Talent" videos attracted more than 300 million views worldwide.

Entertainment weekly said that Boyle's performance was a victory for talent and artistry in a culture obsessed with physical attractiveness and presentation. New York's Daily News said that an underdog being ridiculed or humiliated but then enjoying an unexpected triumph is a common trope in literature, and the stark contrast between the audience's low expectations and the quality of her singing made Boyle's performance such an engaging piece of television.

Boyle's first album, I Dreamed a Dream, was released on 23 November 2009. The album made it to No. 1 spot in UK, Ireland, US, Australia, Canada, New Zealand and Switzerland. 

As we embark ourselves to say good bye to 2009 and welcome a more exciting 2010, enjoy Susan Boyle's performance at Britain's Got Talent and be inspired.

Mobile tariff war to hit revenues

With the entry of mobile operator Uninor in Dec 2009  into India's crowded mobile market, the competition takes a new turn in an already heated market. Uninor launched their operation with an unprecedented 29 paise per minute for local calls and 49 paise per minute for STD calls. Uninor is a collaboration of Unitech wireless and Telenor Norway in which Telenor holds 67.25% stake. 

The tariff war by new telecom entrants in India and the likely retaliation by incumbent operators, will have a significant impact on industry revenues and profitability. The reduced tariffs will lower the average revenue per user (ARPUs) and operating margins for all industry players. The latest figures indicate average revenue per user (ARPU) remains below Rs 200. Keep in mind that this is a significant decline comparing to figures early in 2005 when the operators enjoyed an arpu of Rs 400. Despite the significant drop in arpu, operators still enjoy a margin due to continuous addition of new subscribers. 

As per rating agency Fitch, the Indian telecom industry is witnessing price wars with the entry of the new telecom operators, which were allotted universal access service licenses (UASLs) in February 2008 by the Department of Telecommunication (DOT). The new entrants (Aircel, Sistema Shyam Teleservices Ltd (SSTL) and Tata Docomo (GSM)) have launched aggressive tariff plans in an effort to garner subscriber market share. These new entrants have launched per second billing, either selectively or throughout their networks forcing incumbent operators to follow suit, while Tata CDMA has launched tariffs on a per call basis, irrespective of duration (Re 1 and Re 3 per call on local and STD, respectively). Following this trend, Reliance communication has reduced the tariff to 50 paise per minute for local, STD, roaming and SMS, for both off-net and on-net calls.

However, Fitch expects new entrants to face increasing difficulties in garnering any meaningful market share, with already low tariffs leading to lower ARPUs, a lack of adequate spectrum quality and restrictions on spectrum sharing. Fitch believes that the reduced industry profitability will likely expedite industry consolidation in the medium to long term reducing the number of players in the market.

As of end Oct 2009, mobile subscriber base in India stood at 482 million with Airtel leading the pack with 23.45% market share.

Here is how the picture looks like in terms of market share as of 31 Oct 2009.

Rajesh Kumar

Dubai Crisis: Who will have the last laugh?

What do you get when you get a pile of borrowed money, cheap labors from South Asia and a desert with limitless ambition? You get the modern Dubai. Call it Capitalism with a capital “C”.

Dubai's boasts of "biggest, tallest, richest" have lost their allure. Yet the Dubai local media is all praises for the “sons of the desert” who transformed the desert into a dream city.

To recap the turn of events, on the eve of the Eid religious festival, the Dubai government announced that one of its main investment vehicles, Dubai World, could not pay its bills. Like many over-leveraged companies that are being exposed by the recession, Dubai had borrowed beyond its means to fund its building boom that went bust. The British banks and investors that have poured many Billions into funding the Dubai dream now face an uncertain future over how much of their money could be lost.

With borrowed money, the smart Sheikhs not only built the biggest and tallest buildings back home but also went on an overseas spending spree snapping up many plum assets. They bought the Golf courses in England, paid $82m for the QE2 liner, bought luxury hotels like the Mandarin Oriental in New York, and took a 22% stake in the London Stock Exchange.

Dubai Holding, Dubai government's flagship company after launching its own private-equity firm, Dubai International Capital (DIC), paid $1 billion for a stake in Daimler Chrysler, the car maker, followed that by acquiring Tussauds Group, owner of the famous waxworks museum and a string of theme parks. DIC also has an undisclosed sum invested in Sony Corporation as well as a 2.87% stake in India's ICICI bank.

In Britain, DIC bought Doncasters, the engineering firm, and Travelodge, the budget-hotel chain.

In 2006, with borrowed money, DP World a subsidiary of Dubai World acquired P&O, a terminal operating company that operates marine terminal facilities worldwide, for $6.8 billion. 

When the going gets tough, the tough goes partying. Amidst the global financial crisis, Dubai splurged $20 million back in 2008 for the inauguration of the Atlantis, a garish $1.5bn hotel complex with 1,539 rooms boasting $35,000 a night suite. It was reported that at the time of the launch the Atlantis had a long waiting list for its highly priced suits. Among those who showed up for what the local press described as the "party of the decade" were Hollywood stars Robert de Niro, Charlize Theron, Mischa Barton and Wesley Snipes.

Who finally spoiled the party? Can you blame the Sheikhs alone? An elite group of expatriates head some of the biggest firms in Dubai. To name a few, David Eldon, a Scot is the Chairman of Dubai International Financial Centre (DIFC).Gerald Lawless, an Irish is the Executive Chairman of Jumeirah Group, Maurice Flanagan, Executive Vice-chairman of Emirates, and Rick Pudner, Chief executive of Emirates NBD (merged entity of Emirates Bank and National Bank of Dubai) are British.

In addition, an army of expatriate advisors might be surrounding the over ambitious Sheikhs imparting wisdom. Don't forget that these affluent expatriates were paid quite handsomely too. Little did they realize that they were splurging on their own country's money borrowed by the Sheikhs.

There is an old adage about the UAE: "Emirates stands for English-Managed, Indian-Run, Arabs Taking Enormous Salaries." Going forward, at some point, Dubai will emerge from its current crisis but not without some collateral damage. The current Sheikhdom crisis, some term as minuscule comparing to the global financial crisis will become history. 

With borrowed money, splurging big time on construction and acquisitions, the Sheikhs had the time of their lives living their dreams. Who knows, they probably will accomplish even more going forward. Now you could very well guess who will have the last laugh.

Rajesh Kumar

 

Dubai Debt Crisis

Following my recent posting about the crisis in Dubai, it was not at all surprising to hear about Dubai World wanting to delay its debt payments of nearly $80 Billion. The crisis will have far reaching repercussions no matter how much one tries to play down. The initial knee-jerk reaction saw the stock markets across the world taking a plunge.

Dubai World’s largest creditors are domestic banks in Dubai and Abu Dhabi. 

Worst hit by the Dubai crisis is Britain. UK banks account for nearly $50 Billion of global loans to United Arab Emirates. Royal Bank of Scotland (RBS) leads the pack. HSBC, Standard Chartered and Barclays are next in the pack. In addition to UK banks, UK firms have invested nearly $7.5 Billion in Dubai. 

Dubai holds nearly $10 Billion of investments in Britain. Some of the big investments include, 21% stake in London Stock Exchange, 100% stake in QE2 cruise liner, 80% ownership in Travelodge and so on.

As far as India is concerned, initial estimate shows that Indian banks' exposure to Dubai is nearly 6500 Crores. RBI has already requested the banks to submit their actual exposure to Dubai. Property developers in India have confirmed that their  exposure to Dubai is negligible. The biggest worry for India is the impact on remittance from Dubai.  

What is next for Dubai in terms of servicing the enormous debt?

One possibility is, Dubai's deeper pocketed neighbor Abu Dhabi coming to the rescue with some conditions attached. Abu Dhabi has already bailed out Dubai with $10 billion in Feb this year. However a total bail out is unlikely to happen. The early indication is that Abu Dhabi may attempt to bail out Dubai on a case by case basis.  

The worst case scenario is Dubai asking for write off of its debt. It will be suicidal for the emirate. If this occurs, it will have serious ramification on fund flows into emerging economies. However this scenario is quite unlikely to happen.

Holders of the Islamic bonds of Nakheel, the developer owned by Dubai World that is known for the palm-themed islands it built is most in pain. On Dec. 14, 2009, $3.52 billion in Nakheel bonds come due. Next course of developments will be based on whether Dubai will be able to make this payment on time.

Rajesh Kumar

The traits of a great politician

Who would make an ideal politician? While there may be differing views, I am sure we could all agree on some common traits that make up a great politician.
 

Winston Churchill said that a politician needs the ability to foretell what is going to happen tomorrow, next week, next month, and next year: and to have the ability afterwards to explain why it didn't happen.

Good politicians should work for the nation. The nation's interest must be kept paramount while taking decisions and not for promoting self or party image. Politicians must not indulge in appeasement policies for influencing the electorates to cast their votes in exchange for favors. Nepotism and favoritism must be banished and he/she should shed fundamentalism in religious practices.

Politicians should adopt human religion. They should visit their constituency regularly and spread the message of tolerance towards believers of other religions.

Politicians should work hard for improving the system of governance. 

Successful politicians everywhere know that getting results does not depend on managing the process. Success depends on leading the people who elect them to be their leader. Good politicians will not just learn these principles but actually apply them by practicing these principles. They should know what makes their electorate tick, and how to use human behavior techniques to inspire, motivate and be their leader by setting and achieving goals.

A good politician needs humility. The politician with a monstrous ego is an offensive and objectionable creature. The egotist tends to forget that they are elected to act on behalf of the public.

Charismatic: A very rare trait that we see in today's politicians. The inclusion of charisma on this list is not intended to suggest that someone who lacks charisma is incapable of being a good politician. We have all experienced or encountered an individual who insists upon certain "rules" being followed no matter how silly, absurd or nonsensical they may be. The practical politician looks for solutions and isn't beholden to tradition or "rules" that defy common sense.

Strong/Tough/Fearless: A politician should not be afraid to stand up for what is right even though it may be unpopular. A reputation for weakness will not serve the public well. Sometimes you just have to be willing to fight.

The picture that emerges for our model politician sounds reassuring. Today the electorates are confused and often misled. Along the lines of religion, caste or language, divide and rule has become the norm.  Our politicians are well aware of this and don't fail to take advantage of that.

At the end of the day what the common man expect from their politicians is an assurance that they would make sincere efforts to become good and deliver what they have promised. 

A Look at the fall of Dubai

A six-year boom that turned sand dunes into a glittering metropolis, creating the world’s tallest building, its biggest shopping mall and, some say, a shrine to unbridled capitalism, has grinding to a halt. Dubai, one of seven states that make up the United Arab Emirates (UAE), is in crisis. So, too, are the western expatriates. Many came here expecting to make millions in property and to soak up a lavish lifestyle living alongside footballers, actors and supermodels.

But the real estate bubble that propelled the frenetic expansion of Dubai on the back of borrowed cash and speculative investment has burst. Many westerners are being made redundant, or absconding before the Sharia legal system catches up with them. Half of all the UAE’s construction projects have either been put on hold or cancelled, leaving a trail of half-built towers on the outskirts of the city stretching into the desert.

Deserts have a way of reclaiming whatever is built upon them. In the case of Dubai, the global financial implosion has sent that process into overdrive. After six years of frenzied expansion, and nearly $600 billion went into construction, reality has come rushing into view. After the party was over, Dubai, the second-largest member of the U.A.E., is struggling under $80 billion of debt amassed during the expansion.

Dubai's expansion was as ambitious as it was improbable. Dubailand, a $64 billion mixed-use development initially planned at 107 square miles, was to be the world's largest collection of theme parks, shops, residences, and hotels. For now, though, its roller coasters, life-size dinosaurs, snowy mountainscape, and polar bears will remain a fantasy, one of the gaudier casualties of the economic downturn. While formal cancellations are rare in Dubai, a number of other projects have been delayed or scuttled, including an underwater hotel; a Tiger Woods golf course; a residential community set among full-scale replicas of the Seven Wonders of the World; a rotating skyscraper; and a beach designed by Versace, complete with chilled sand.

Dubai was a modest trading settlement until the 1980s. Fueled by cheap credit, tax-free living, and limitless ambition, the city-state pushed into the desert and up to the sky, culminating in the frenetic growth of the past six years. Now, with cash scarce and many of Dubai's expats moving away, the cranes (a quarter of the world's supply) have quieted and the streets are all but empty.

Once Dubai's most valuable import, foreign laborers have become a liability to their former employers. Hundreds of thousands of them, mostly from South Asia, were drawn by the promise of plentiful work and money to send home to their families. Now that much of Dubai's construction has ground to a halt, many are being sent home; the number of migrant workers here has reportedly fallen by a third. Of those who remain, many are locked in labor disputes: They can't work, but can't leave. These jobless Bangladeshi men can't return home because, as frequently happens, their employers confiscated their visas, effectively leaving them shackled. Living four to a room in a labor camp, they haven't been paid in months. They say they live as "ghosts" in a "prison," unacknowledged and unknown.

Construction of the much-hyped project, an archipelago of 300 man-made islands designed to resemble a world map, helped extend Dubai's 45 miles of natural coastline to 467 miles, enough for everyone to have waterfront property -- or so the brochures promised. The site used more than 34 million tons of rock and 320 million cubic meters of sand (making Dubai, oddly, a sand importer). State-owned mega developer Nakheel promotes the islands as "a blank canvas for orchestrating your own version of paradise, and where you'll discover that the World really can revolve around you." To some, however, the project represents Dubai's fundamental flaws: overbuilding and poor planning. Despite prices ranging from $20 million to $50 million, the islands are without power or sewer systems. And while 70% of them have already been sold, development has begun on only one.

As expats take flight, indebted and disillusioned, they leave behind relics of their former lives: new cars, left to accumulate dust and the comments of passersby. The government will not release numbers, but it's estimated that more than 3,000 abandoned cars have been found in 2009, many with keys in the ignition, an apology note on the windshield, or maxed-out credit cards in the glove compartment.  

Damage control is already underway. Dubai ruler Sheikh Mohammed Bin Rashid Al Maktoum has consolidated his hold on the debt-laden emirate, downgrading powerful figures behind the city-state’s  boom that turned to a bust. The ruler has sacked the governor of the Dubai International Financial center (DIFC). He has also removed three members from the board of Dubai’s main holding company, the Investment Corporation of Dubai. The three were at the forefront of a construction drive that began in 2002 and collapsed last year.

Dubai has been cranking up efforts to tackle its $80 billion debt pile with senior officials heading to Asia to meet potential investors amid reports that one of its most indebted companies has repaid a $1.2 billion bond ahead of schedule.

Top officials from Dubai’s Department of Finance is reported to have met fixed income and Islamic investors in Hong Kong, Singapore, London, Dubai and Frankfurt ahead of possibly selling more debt this year.  

Sheikh Mohammed is trying to salvage his business empire by merging assets, said Christopher Davidson, a professor at Durham University in the U.K. “The ruler’s main government-backed companies are on the verge of bankruptcy and rapid centralization of these bits and pieces is needed to hold them above water,”

Abu Dhabi, which has 90% of oil in the UAE, holder of the world’s sixth-largest crude reserves, bailed out its fellow emirate in February with a $10 billion Dubai bond issue subscribed entirely by the UAE central bank. Dubai is seeking to raise another $10 billion, a significant portion from the federal government in Abu Dhabi.

Perhaps Dubai has taken its ambition to be the the best in everything they do a bit too far too fast. The crisis has firmly placed its foot on the ground. How is it going to pay back the massive debt? Will it ever come back to its former glory? Let us wait and watch.

Courtesy: Fast Company

Recession explained

The recent recession has taken a huge toll on people across the world. Everyone in the planet is affected by it in some way or the other. During a recession all sort of bad things happen. Millions loose jobs. Real estate values plunge. Companies go bankrupt. Stock markets crash. Air travel is significantly reduced. Bank lending will come to a standstill. People spend less. Everyone associate all bad things happening to them to the recession.

The best part about recession is that, when it happens, economists scream from their roof tops about the impending danger. It is the subject of discussion and debate in every nook and corner. Unless you are staying in a cave and is totally cut off from the rest of the world, you are unlikely to miss this. However once we recover from the recession, no one tells you about that. You can't blame them because the recovery is a gradual process.  

So how does one determine we are out of the woods? Well, some of the signs are recovery in the stock market, companies resume hiring in masses, banks start lending money, real estate values start picking up and so on. Until the arrival of the next recession everything looks rosy.

Where do we stand now? Experts state that we are on a road to recovery. Only time can tell.

It is a vicious cycle. The recovery does not mean it is the beginning of eternal glory for world economy. The cycle will continue. World economies will rise and fall. Today's renewed hope will be the beginning of another bubble in the making which will get burst eventually.  

How did the recent crisis begin? You may have heard terms like Credit crisis, Sub-prime mortgages, Collateralized Debt Obligation or CDO and so on. Here is an attempt to put all the pieces together. Courtesy Jonathan Jarvis.

The credit crisis brings two group of people together. The home owners and investors. Home owners represent their mortgages and investor represents their money. These mortgages represent houses and investors represent large institutions like pension fund, insurance companies, sovereign fund, mutual funds etc. These groups are brought together through the financial system by a bunch of banks and brokers commonly known as Wall Street. These banks on Wall Street are closely connected to these houses on main street. To understand how let us look a little further.  

Years ago the investors were sitting on a pile of money looking for their good investment to turn into more money. Traditionally they go to federal reserve (the US central bank) or they turn to treasury bill believed to be the safest investment. Due to lower interest rates offered by fed, investors said no thanks to fed and treasury bill. On the flip side, Banks on wall street could borrow money easily from fed at lower interest rates. Add to that general surpluses from Japan, China and the Middle East and there is an abundance of cheap credit. This makes borrowing money easier for banks and causes them to go crazy with leverage. Leverage is borrowing money to amplify the outcome of a deal. Leverage makes good deals into great deals. This is a major way Banks make their money. So Wall street takes out tons of credit, makes great deals and grows tremendously rich and then pays it back. So far so good.

The investors (the large institutions mentioned above) sitting with a pile of cash see this and wants a piece of the action and this gives wall street an idea. They can connect the investors to the home owners through mortgages. Here is how it works. A family wants a house. So they save for a down payment and contact a mortgage broker. The mortgage broker connects the family to a lender who gives them a mortgage. The broker makes a nice commission. The family buys the house and becomes home owners. This is great for them because housing price have been rising practically forever. Everything works out nicely. One day the lender gets a call from the investment banker who wants to buy the mortgage. The lender sells it to him for a very nice fee. The investment banker then borrows millions of dollars and buys thousands more mortgages and puts them into a nice little box. This means every month he gets the payment from the home owners for all the mortgages in the box. He then cuts the box into three slices and name them 'safe', 'okay' and 'risky'. Then packs the slices back up in the box and call it a collateralized debt obligation or CDO.  

A CDO works like 3 cascading trays. As money comes in, the top tray (namely 'safe') fills in first and spills over into the middle (okay) and whatever is left into the bottom(risky). The money comes from home owners paying off their mortgages. If some owners don't pay and default on their mortgage, less money comes in and the bottom tray may not get filled. This makes the bottom tray riskier and the top tray safer. To compensate for the higher risks the bottom tray receives high rate of return and the top tray receives lower but still a nice return. The credit rating agencies stamp the top trays a AAA rating making it the safest. The okay tray gets a rating BBB still pretty good and they don't bother to rate the risky slice. Because of the AAA rating the investment banker can sell the safe slice to the investors who only want safe investments. He sells the okay slice to other bankers and the risky slices to the hedge funds and other risk takers. The investment banker makes millions. He then repays his loans. Finally the investors have found a good investment for their money much better than the 1% treasury bills. They are so pleased they want more CDO slices. So the investment banker calls up the lender wanting more mortgages. The lender calls up the broker for more home owners but the broker can't find anyone. Everyone that qualifies for a mortgage already has one.  

But they have an idea. When home owners default on their mortgage the lender gets their house and houses are already increasing in value. Since they are covered if the home owners default, lenders can start adding risk to new mortgages, not requiring down payments, no proof of income, no documents at all. That is exactly what they did. So instead of lending to responsible home owners, called prime mortgages, they started to get some that were less responsible. These are sub-prime mortgages. This is the turning point. So just like always, the mortgage broker connects the family with the lender and a mortgage making his commission, the family buys a big house, the lender sells the mortgage to the investment banker. He turns it into a CDO and sells slices to the investors and others. This actually works out nicely to everyone and makes them all rich. No one was worried because as soon as they sold the mortgage to the next guy it was his problem. If the home owners were to default, they didn't care. They were selling off the risk to the next guy and making millions like playing hot potato with a time bomb.  

Not surprisingly the home owners default on their mortgage which at this moment is owned by the banker. This means he forecloses and one of his monthly payments turns into a house. No big deal. He puts it up for sale. But more and more of his monthly payments turn into houses. Now there are so many houses for sale on the market, creating more supply than there is demand and housing prices aren't rising anymore. In fact they plummet.

This creates and interesting problem for home owners still paying their mortgages. As all the houses in their neighborhood go up for sale the value of their house goes down and they start to wonder why they are paying back their $300,000 mortgage when their house is now worth only $90,000. They decide that it doesn't make sense to continue paying even though they can afford to and they walk away from their houses. Default rates sweep the country and prices plummet. Now the investment banker is basically holding a box full of worthless houses. Because of his buddy the investor to sell his CDO. But the investor is not stupid and says no thanks. He knows the stream of money isn't even a dribble anymore. The banker tries to sell to everyone but no body wants to buy his bomb. He is freaking out as he borrowed millions of dollars to buy these bombs and he can't pay it back and can't get rid of it. 

But he is not the only one. The investors have already bought thousands of these bombs. The lender calls up trying to sell his mortgage but the banker won't buy it and the broker is out of work. The whole financial system is frozen and things get dark. Every body starts going bankrupt. But that's not all. The investor calls up the home owner and tells him that his investments are worthless and you can begin to see how the crisis flows in a vicious cycle. Welcome to the crisis of credit.

Rajesh Kumar

Bollywood's losses double in 2009

1000 crores! That is what Bollywood lost in year 2009 with a string of flops. Last year's losses amounted to 500 crores. By doubling the losses, Bollywood breaks record this year. 

Bollywood, a US$ 2 Billion (Rs 9300 Crores) industry is going through rough patches. Despite the poor performance of the movies in box office, leading actors continue to command outrageous renumeration. Some even charging up to a cool 33 crores a movie. Even the new kids on the block charge in the range of 8 to 10 crores per movie.  

UTV managed by Ronnie Screwvala is regarded as the smartest player in the industry. Two back-to- back movies (What is your Rashee, Main Aur Mrs Khanna) of this production house flopped big time in the box office.  

Who should be held accountable for the losses? Ultimately the producer and the distributors remain at the loosing end for trusting the script and the director. What about the so called stars? Should they be blamed? Perhaps not. The enthusiasm and the euphoria created by the film makers about a script can be overwhelming and the temptation to accept is irresistible. Upon narration of the story, and given the big money involved, the star is already dreaming of a potential hit and thinking of his increased star power on the success of another hit.  

However should stars be held accountable for the flop of a movie? Should their renumeration be tied up to the performance of the movie at the box office? In the south, some stars' renumeration is tied to the performance of the movie. In addition to their pay, they are given distribution rights to certain areas or a certain percentage of the earnings is shared with them. Some are even known to compensate the distributors for flops. I think this trend should be brought forward to Bollywood allowing stars to share some of the losses.

Analyzing the flops in 2009, Dil Bole Hadippa but the audience bole bhago (run). Blue turned the audience's face red. London Dreams remained as a dream that never took off. What is your Rashee had its rashee already sealed. Chandni Chowk to China made people wonder whether the star was made a chef or chef was made a star. 8 X 10 tasveer is framed in the hall of flops for film students to study classic flops. The monkey man's inexplicable antics had the audience tearing its hair on watching Delhi 6. Aladin will remain as one of Amitabh Bachchan's worst nightmares.

All is not lost. At least some are rejoicing the Bollywood extravaganza. Countries like Switzerland, Australia, New Zealand, Bahamas, UK, US and South Africa clap and cheer the Bollywood industry for enhancing their economy. Bollywood spends millions to shoot on their exotic locations. These countries will continue to remain beneficiaries no matter what happens to the fate of a Bollywood movie.

Rajesh Kumar

Making sense of the rise of Gold

Gold price has been rising at a staggering rate these days and shows no sign of stopping. As of beginning of November 2009, gold price has touched $1090 per ounce(31.1 gm) or Rs 1650 per gm. In terms of Indian Rupees it rose by 45% over one year period, 167% over 5 years period and a whopping 306% over 10 years period. If you had invested 1 lac in this precious metal back in year 2000, you would have been able to sell it today for 3 lacs assuming your investment was in pure gold or some alternate form of gold investment such as exchange traded funds (ETF).  

If you think that that was a smart investment then consider this. If you were a real smart investor and you had invested the same 1 lac in the Indian stock market over the same 10 year period, you would be sitting with a handsome profit of over 6 lacs! This assumes that you timed your entry and exit really well and had invested when Sensex (Indian stock market index) was the lowest at 2600 in Sep 2001 and had exited the market when it hit the highest at 19080 in Dec 2007. Quite a Himalayan task for even a seasoned investor. However those who can not stomach the roller coaster ride in the stock market, besides being a liquid asset, Gold remains as a safer bet.

Will gold price continue to rise? What is causing this precious metal to continue its bull run? Let us look a little deeper into the bull run of this fascinating yellow metal.  

Gold is purchased by the world for three reasons. Firstly for consumption as jewelery, secondly for industrial purpose and thirdly for investment. The world consumption of gold is about 3200 tonnes out of which India consumes 25% or 800 tonnes a year. Over recent months analysts have started to speculate about the potential for China to overtake India as the world's largest gold consumer. In terms of the cultural affinity towards gold, it is fair to say that India tops the list globally and this is unlikely to change.  

Historically there is a correlation between the price of gold and strength of U.S Dollar. Now to understand the rise in price of gold we have to look at the performance of the U.S Dollar against other world currencies. The US Dollar has hit a rough ride as evidenced by a 30% decline since 2001 in the U.S. dollar index (The USD Index measures the performance of the US Dollar against a basket of currencies: EUR, JPY, GBP, CAD, CHF and SEK) . Analysts see room for further decline in the dollar.  

According to data provided by World Gold Council, there is a decline in consumption of jewelery on a quarter on quarter basis comparison between 2008 and 2009. So it is clear that what drives the gold demand is the investment aspect of gold. During a time of uncertainty in the stock market coupled with weakness in the dollar, investors turn to commodities as safe haven and gold tops the list. 

Having said that, here are a few reasons why gold is going to outperform in the near term. 

Despite the recent rally, the gold price is still 110% below its inflation-adjusted 1980 high of $2,300 per ounce. So it certainly has more leg to continue this bull run.

The Stimulus side effect: According to Bloomberg, the stimulus plan will pump $9.7 trillion into the economy. Experts believe that the monetary stimulus efforts will cause a rise in inflation, which in turn will drive gold higher. 

China joining the party! China just revealed that it has doubled its gold holdings to 1,054 tons. Yet that still only equals 1.6% of its overall reserves. As China moves out of U.S. Treasuries and into gold, this will help fuel the next leg of the run-up. 

The greenback's 30% Drop: Since 2001, the U.S. Dollar Index has tanked 30%, while gold has risen 300%. With all the downward pressure on the dollar, and inflation on the way, this trend is about to pick up steam. 

Riding the “Commodity Super Cycle”: Commodity expert Jim Rogers expects the Commodity Super Cycle to drive commodity prices higher for another eight years  including gold. And he’s stockpiling the yellow metal by the day. Rogers says, every pullback is another buying opportunity. Considering he’s been dead right on every major trend of the past 40 years, one can't help but pay attention to him. 

Rajesh Kumar

What makes films great?

What is the winning formula of a movie? Well, if the people behind the movies knew the answer, there will be no dearth of box office hits. The fact of the matter is, today 9 out of 10 movies fail at the box office. Even for those movies that get a decent opening, eventually the audience stay away when the word is spread out there as to how the movie sucked big time.

While we are looking for an answer to what clicks with the audience, I think we know answers to some of the other questions on the nature of the box office. Can a movie written off by critics be a success at the box office? The answer is an 'Yes'. Can a movie that fared better with critics be a failure at the box office and the answer is again a resounding 'Yes'.

Well to begin with, it is only reasonable to think that a good movie requires a great plot or story line, a good screen play, good dialogues, great acting (the more eye candy the actors, the better), good visuals, great sounds and to top it all off with great direction. Does the list end here? What about some hype? That is some clever marketing. Would that help? Indeed it does.

The stupendous success of Ghajini, a hindi movie is largely attributed to some clever marketing hype by none other than its lead actorAamir Khan. The promo highlighted the film's physicality and Khan's new look. More than 1500 people who work at various multiplexes around India received the Ghajini Hair cut. The first thing that people noticed while they entered the movieplex was a statue of Aamir Khan with his fab abs and greetings from theatre staff sporting the Ghajini look. Total marketing cost 7.5 crore. Global gross box office take: Rs 278 crore. Not bad for a movie made at a budget of 45 crore!

Well, Ghajini did well not due to marketing alone. It indeed had a good script albeit inspired by a hollywood flick. A movie without substance can not be saved by marketing alone. A good dose of all the above mentioned ingredients will be required to save it from sinking.

It goes without saying that script is the backbone of any great movie.

Best films are lasting works of art. They contain moments of brilliance, elegance and emotional truth that make us want to return to them time and time again. Despite the continuation of the outrageous convention that the director is the sole-author of a film, a director does not make a great film artistic by themselves. They do it because they are working with a beautiful, artistic script.

It was Alan Ball, the writer of American Beauty (1999), not Sam Mendes the director, who filled the film with the symbolism of red roses and made an otherwise ordinary family melodrama evolve into something extraordinary and beautiful.

Why is it that we return to our favorite films time and time again despite knowing the ending of the story; what happens to the characters and all the carefully plotted surprises? Clearly, the emotional satisfaction gained from watching certain films more than once is more important than the intellectual satisfaction of ‘knowing' what happens.

Basic emotional satisfaction is often determined by the genre in which the film has been written. For example, an emotionally satisfying horror film is achieved when the audience is genuinely scared, or a romantic comedy is emotionally satisfying when the comic interactions of the lead characters result in a romantically uplifting conclusion.

The best films make your heart race with excitement and your heart swell with pride. You want to cheer them on. Then there are the classic comedies which make you laugh every time you watch them even though you know the punch lines.

The ultimate expression of emotional interaction is when the audience cries. There can be no coincidence that it is only the great films that make us reach for the tissue box. I bet everyone who has ever watched E.T. had a tear in their eye when E.T. appears to die (and the plant wilts) and then comes back to life (and the plant recovers). We are emotionally moved by a story about a small, brown, ugly alien being not because we can relate to an alien, but because the alien being is effectively a lost child in a strange world and we all know how that feels.

We often go to films hoping that the characters will be so good that they will live with us for the rest of our lives, acting as friends, mentors, surrogate lovers or parents. We carry them around in our hearts, wishing we were them, turning to them when we feel vulnerable and in need of inspiration.

Though the morality and social conventions of cinema vary from country to country, it is surprising to see how similar the great protagonists are.

Not every protagonist is a person we would want to be. There are numerous examples of anti-heroes or heroes so flawed we actively enjoy not being them.

Then there are those great films in which the lead protagonist is overshadowed by a supporting character. One the best example is Star Wars in which it is clear from the moment we meet him in the bar that for many the best character is Han Solo. He's cool, devious and charming; he has the best spaceship ever built, a best friend who will always stick up for him, and he ends up with fame, fortune and the love of the Princess. There isn't a man alive who doesn't dream of that.

For every effective protagonist there is an equally effective, sometimes superior, antagonist. The characters like Don Vito Carleone in The Godfather make us wish we were like them, enjoying the hedonistic lives they lead and taking the rewards from life without any work.

Great films are filled with lines that we remember and use, sometimes in private looking at the mirror. Of course, memorable lines, songs and moments in film scripts do not come in the first or even fifteenth draft. They take months of hard graft, criticism and rewriting. But the mark of a great film script is as much about the work the writer has put in it as it is the skill of the people who have created a film from the script. There was never a great film made by the writer rushing, being lazy, avoiding changes and making-do.

In the hands of the best scriptwriters, the setting takes on a life of its own with a personality that complements that of the human characters. When this happens it becomes irrelevant where the setting actually is for it has taken on an emotional, thematic quality that will allow it to be translated into any language. This was why in The Full Monty the setting of Sheffield – depicted as a run-down, working-class town filled with unemployed men – could be recognized as a symbol for every such town in the world.

The writers behind the best children's movies understand this as they often animate the setting, giving it a voice and a point of view to heighten the emotions for the younger audience.

Behind every great story there stands great structure. Structure is one of those serious craft issues which is argued over incessantly by scriptwriters, teachers and commentators. Without wishing to embark on a debate about the subject, I would point out that every great film script I have looked at possesses the same basic, highly effective structural patterns. They are essentially a means of expressing a journey that a character undergoes in pursuit of whatever it is they want: love, fame, to kill the monster, etc.

A great film is like Life itself: it possesses a sense of its characters being born new, young and naive, and then over the course of the ‘life' of the film, the characters grow up, face decisions and responsibilities, learn hard lessons and then confront death. Some defeat it for a temporary period, others become a victim but not before they save other people. This is why with the great films we derive a sense of a circle being completed, of the journey mirroring life in a satisfying manner.

Happy ending or the ‘right’ ending? There is a reason most films end happily: people want to walk away from a cinematic experience feeling better about themselves, the world and their future. Reality is hard and depressing enough as it is, so why make hard and depressing films? Yet clearly not every film has a happy ending.

This is because the best film script has the ending which is appropriate for that story, which best encapsulates the themes, drama, characters and emotions.

So there you go.

Rajesh Kumar

US budget deficit at $1.4 trillion. So What?

It was recently reported that the US Government spent a record $1.4 trillion more than it collected in the fiscal year ended Sep 30. The deficit for fiscal 2008 was $459 Billion. More than 3 fold jump from 2008 to 2009. 

So what caused such big jump in deficit? Bank bail-outs (Freddie Mac, Fannie May), stimulus spending and declining tax revenues due to a deep recession led the government to post such huge deficit.

The accumulated US debt stands around $11.5 trillion which account for about 82% of the US $14 trillion economy. It is projected that the debt will hit a whopping $17.2 trillion by 2019. This figure is the largest in the world in absolute terms but as a percentage of GDP it is less than Japan's $9 Billion debt (189% of Japan's $5 trillion economy) which is the highest in the world in terms of debt to GDP ratio.

Who holds majority of the US debt? Much of the debt is in foreign hands. Interestingly China holds the most - The latest US department of treasury data reports that China holds $797 Billion in US treasury debt. Overall China holds an estimated $1.2 trillion worth of US dollar assets. No wonder Obama calls US-China ties most important of the century. Japan closely follows China by holding $731 Billion of US Debt. The United Kingdom holds about $225 Billion.

Should US worry about the steep rise in deficit? 10-year deficit projections already have raised alarms among big investors such as the Chinese. If those investors started dumping their holdings, or even buying fewer U.S. Treasurys, the dollar's value could drop. The government would have to start paying higher interest rates to try to attract investors and bolster the dollar.

A lower dollar would cause prices of imported goods to rise. Inflation would surge. And higher interest rates would force consumers and companies to pay more to borrow to buy a house or a car or expand their business.

On the brighter side, the US government’s interest payments on its debt actually decreased 23 per cent to $199bn thanks to lower interest rates.

So what does $1.4 trillion represent? It is more than the entire economy of India ($1.2 trillion).

Rajesh Kumar

Creativity

We live in a world full of creativity. Creative individuals work round the clock to satisfy our senses or well being. Be it in terms of what we touch and feel (such as a book, a movie, a piece of music or an engineering wonder) or be it by means of a life saving drug. The greatest companies are founded by creative minds with a vision. The greatest products are invented by individuals who sensed a compelling requirement. The wright brothers, Thomas Edison, Henry Ford, Marie Curie, Alexander Bell etc are all credited for their great inventions.

So what is creativity? Creativity is simply the act of making something new. It is fueled by the process of either conscious or unconscious insight. Some say it is a trait we are born with; others say it can be taught with the application of simple techniques.

I often think; Aren't we blessed with so much creative stuff which keeps us going on an otherwise monotonous life. 

So for all those creative folks out there keep inventing great stuff... and for the rest less inclined, admire, appreciate and enjoy life.

Indian Mobile Market picture

India is the second fastest growing mobile market after China. Here is some quick facts;

- 450 million subscribers. Expected to grow to 750 million subscribers by 2012.

- Projected to exceed revenue of $30 billion by 2013. CAGR of 12.5%

- Pre-paid users accounted for 93% of all mobile connections.

- Players include Bharti-Airtel, Reliance, Tata, BSNL, Idea (Birla), MTS, Vodafone, Aircel etc.

- As per Aug 2009 statistics, BhartiAirtel  leads with about 24% market share followed by Reliance with 18.56%. Vodafone is closely behind with about 18% share followed by BSNL and Idea with 11% each. 

-  New players entering the market include Datacom (JV between Videocon and Mahendra Nahata), Telenor, Swan Telecom etc.

- Both CDMA and GSM services are offered (predominantly GSM).

- Call rates are as low as 30 Paisa per minute (One has to pay 1 Rs per day for this offer)

Call rates continue to drop due to stiff competition. Massive 3G roll-outs will be begin in 2010.

Foreign investors include Etisalat (45% stake in Swan), Russian player Sistema JSFC (74% in Shyam), NTT Docomo (12% in Tata), Batelco (12% in Stel), and Telenor (67% in Unitech)

Rajesh Kumar

Beheaded cop's son vows revenge on Maoists

We all watched in horror the news about the beheading of a police officer by Maoists a naxalite group. The cop was executed by maoists as their demand to release some of their detained people were not met with by the police.

If this news is not bad enough, a popular Indian TV channel broadcast another more shocking scene to the news hungry viewers. The slained cop's son Abhishek Induwar appeared on TV and said “You have killed my father, I will join the police and will kill you people--I will kill you people (Maoists)”. What is shocking was that he was only 9 years old. While some may find this absolutely normal expression of  a boy who lost his father, to me it was really disturbing. To air such words by a 9 year old on TV needs real guts or should I say ignorance?

What do we want our children to learn from such reports? Blood for blood? I will not be surprised if another channel broadcast a video this time by a maoist members son responding to the cop's son. It could be some thing along the line "Since my father will be old by the time you become a cop, I will be waiting for you dear Abhishek. Let us see who kills whom".  Or should we take this to another level. Why not line up these boys in a reality show and see how they are groomed to take revenge by showing every step of their preparations for a show down.

I feel really sorry for the state of our TV channels. 

Rajesh Kumar

The correct code for Television News channels

The other day I was watching a popular Indian TV news channel. I could not help noticing the way they sensationalized a report claiming the 'end of the world' in year 2012 based on some unsubstantiated evidence or studies. The report suggested that on 21 December 2012 there will be an apocalypse which will totally wipe out the earth's population. The TV report was supported by clippings from some of the Hollywood block busters like 'The Day after Tomorrow' (A movie that depicts destruction caused by ice age) and the upcoming movie '2012' which supports the 21 Dec 2012 end of the world theory.

The end of the world theory is based on some ancient calenders and has absolutely no scientific base. So what is it that the TV channel was trying to pull? Increase the TV viewer ratings? Or trying to promote the upcoming movie 2012? Which ever is the case, I thought that was not broadcast in good taste.

In a time of stiff competition between TV channels, these days anything goes on air, I guess.

Update on 6th Nov 2009.

Nasa has just come forward and put the rumors to rest.

Rajesh Kumar

Reality Shows

No, it is not a sign board in the jungle. It is the Indian version of the British reality show 'I am a celebrity.. Get me out of here!'. Around the world, like wild fire, TV viewers are now a days inundated with a host of reality shows. These shows, particularly the talent shows do give a number of people opportunities to show case their talents. However the down side is that this is done at the expense of the viewers through whom these shows generate tremendous amount of revenue. There is no escape from the reality shows. They are everywhere; even in movies. Thanks to movies like Slum Dog Millionaire, Hollywood flicks 'Ed TV', and 'The Truman Show'.

Reality shows are not new to the world. Live fights were organized in ancient times in which participants were slaves. The slaves either fight with animals or fight with each other to entertain the audience. So how does that differ from the modern day reality shows. In ancient times the slaves were not paid. The winners became the most expensive slaves. But in modern day shows, the participants, who I call them the 'modern day slaves' get paid or get famous. The modern day slaves are not slaves to people but slaves to fame and money.

Like them or hate them. But you can not ignore them.

Rajesh Kumar