Monday, February 18, 2013

Notes from New York

    A colourful message outside a restaurant in New York reads “Life is too short to drink bad wine”. It's the last day of my trip to the US and I reckon this short sentence perfectly describes this amazing city and its people.
The City of New York from Empire State
     I reach New York just when winter seemed ready to settle in and stay at the famous Broadway Millennium Hotel, a stone’s throw away from Times Square. That very evening, a few of my relatives join me at the hotel and we set out to explore the bright neon lights of Times Square. The first thing I notice, apart from the blinding lights, is folks wearing costumes of every major Hollywood comic movie posing with tourists for a dollar or two. Batman's main gadget seems to be his red adidas bag to carry dollar bills. Woody is a big hit with tourists and Lady Liberty looks smug with a strained expression on her face. Surprisingly there is a guy in his underwear carrying an old stereo and braving the chilly winds; not sure which character he is though!

    Every time I visit Times Square, there is a token guy with the sign - “Need money for weed”. I imagine serious men working in shifts carrying the same withered board around and secretly winking at each other during the change-over. I wonder if the Mayor is responsible; somehow conspiring to show tourists how “free” the country really is. In India, such a person would have been hounded by the local cops and branded a drug addict. The irony is that there are plenty of beggars in India streets who are drug addicts but never come out openly and ask for “Money for Ganja” to avoid hurting sentiments of the conservative middle class that coughs up their moolah.
Times Square
    The area beside the statue of Father Duffy in Times Square doubles up as “Protester’s square”. Palestinians holding placards against atrocities in Gaza rub shoulders with Israelis protesting against them. If the statue were to magically come alive, it would know what to do for world peace. Tourists willing to shell out five dollars to street artists and sit still for a long time are rewarded with a caricature that looks remarkably close to their long dead grandfather. At times, there are mob dances that give the entire street the look of a never ending Roman carnival. A few street food vendors greet me with a “salam alaikum” as I pass by. Thanks to countless “Alif Laila” shows I watched in my childhood, I promptly respond with a “wa-alaikum-salaam”. They immediately smile and respond with a long sentence in Arabic that I don’t even pretend to understand!

    Times Square is chaotic but expect to be pleasantly surprised once in a while. But the charm of Times Square wears off pretty quickly, especially when you have to wade through the traffic there on a daily basis. After a few days, like the average New Yorker, I avoid it as much as possible.


    The Museums of the city are on top of my to-see list and thanks to my employer, I get a free entrance pass to all of them. The Museum of Modern Art (MOMA) or ‘The Modern’ is nearest to office and the first place I visit. Whether it is Van Gogh’s “Scream”, Edvard Munch’s “Melancholy” or Pablo Picasso’s “Les Demoiselles D’Avignon”, the collection of the works of modern greats is unmatched. Thanks to the audio guide, I learn about cubism and abstraction allowing me to understand and appreciate the paintings better. The Friday evening crowd is such that it's easier to get a lunch token at Saravana Bhavan than take a decent picture of the Van Gogh's paintings.
MOMA: Edvard Munch's Melancholy"

MOMA: Pablo Picasso’s “Les Demoiselles D’Avignon"

MOMA: Van Gogh's "Scream"
    The metropolitan museum is the undoubtedly the best museum I have ever visited. The sheer weight of history in that place is overwhelming and unfortunately I rush through with only an hour to spend there. The museum is a treasure trove of relics from different eras of China, Egypt, Persia, India, Rome and Mayan civilizations. Visiting this museum definitely stoked my perpetual desire to travel around the world more to understand ancient cultures and their history.
The Metropolitan Museum
    The Natural History museum boasts of an amazing collection of fossils of dinosaurs and other prehistoric animals and a four story tall planetarium sphere! Visitors are transformed to a time when terrifying lizards and giant sharks ruled the world and our ancestors were just tea time snacks. I jostle for space with loud kids and their tired looking parents at the best exhibits. As someone very interested in evolution, I find the fossil of the pterodactyl( the flying reptile which is the missing link in the evolution of the flying dinosaurs) fascinating.

    The folks at work arrange a live tour of the Universe at the Hayden Planetarium of the Natural History museum. The tour starts humbly from the blue planet to the edge of the known Universe where even light has not travelled to in all these billion years. No better way to understand the pointless lives of a hominid ape species in an insignificant planet with a dying sun at the edge of a rather unimportant galaxy is to the grand universe where millions of stars are born and die daily.

    Whether it is the museums or the planetariums, importance is given to the young in this country. America has an amazing public educational system (compared to India) and some say that the quality of the public school indirectly determines the real estate price in a locality. At the museums, I notice mothers explaining the works of greats to their children and the first question at the planetarium is from a five year old. An appreciation of fine arts, history and science is drilled into them at an early age and I find this heartening because my exploration of India’s rich history and cultural heritage started only after I moved out of the formal educational system!
Tyrannosaurus at National History Museum
    Like most Indians, my first visit to America is on work. Working with people of a country gives more perspective and understanding than visiting all their tourist sites. If there's one thing that my co-workers were better at than us, it is at asking the question "why?" It doesn’t matter who it is addressed to or how many times they ask it; but they ask it until their curiosity is sated and concerns addressed. The educational institutions in America encourage questions and students carry forward this curiosity for the rest of their lives. In India, speaking up against elders openly, be it managers or professors or elders is discouraged. And this attitude, I believe, is the bane of our educational system – not substandard teachers and professors or the lack of quality research in our country. Perhaps I am being didactic, but in my opinion, we will never become a world power until we allow our students to ask stupid questions.


    One thing I absolutely love about New York is the food. My trip is three weeks long and I decide to eat anything but Indian food for that duration. The food in New York is probably the freshest I have ever eaten – clearly the benefit of local produce and cold storage. The taste of the soft Pizzas, the extra cheesy cheesecakes, the Mexican burritos and croissants that serve as breakfast are hard to describe for someone who has been smothered with spices since childhood. The competition among restaurants is fierce and every restaurant tries to outdo the other with better quality and service. The worst thing I ate at New York - the one dollar-per-slice pizza, is still better than the ones I buy in India.

    A lot of New Yorkers eat food from carts on the street, right from the investment banker to the homeless guy on the street. The street food in New York is mostly safe due to regulation and frequent checks; back home after eating in the wrong street or at the wrong cart, food poisoning and typhoid are the least of consequences one would have to worry about.

    New Yorkers as a group of people hate to wait and are generally impatient, especially when forced to wait for food. One gentleman stormed out of a restaurant, after a refund of course, when the food did not arrive in the promised time. “I don’t like being lied to”, he thundered and probably headed to his favorite street cart! Everybody wants to eat at once, pay at once and get out at once.


    Even though many friends recommend watching a Broadway show, I am not sure considering the prohibitive cost of tickets. For the same money, I could watch 30 movies in IMAX or 50 plays in Hyderabad. So when one of my aunts suggested Broadway show as weekend activity, I immediately acquiesce knowing that she would never ask her young nephew to cough up!

    Two of my aunts and I watch ‘Dead Accounts’, a dark comedy that is not the typical “dance and song” Broadway show. Katie Holmes, the star attraction, can act well unlike her performances in Batman would have you believe. The protagonist, brilliantly portrayed by Norbert Leo Butz, is a new age bank robber returning to hide in his conservative house from New York after stealing loads of money from dead peoples' accounts. He is quickly followed home by his ‘almost divorced’ wife who wants a share of the booty. His loser sister (played by Katie Holmes) and mother are shocked to learn about him and the family tries to come to terms with this ‘surprise’ reunion. Overall it is a great show and I love the sudden silences, the passionate monologues and Leo’s portrayal of a man who is more interested in his wife’s love than the money he stole.

    There are plenty of fashion wear stores around Broadway. New Yorkers are definitely the most fashionable people I have ever seen. When you roam around a city with observant aunts, you overhear enough conversation about fashionable boots and handbags that you eventually observe things you'd otherwise miss!


    When I was around 13, my 10 year old cousin from America visited Coimbatore and I think absolutely loathed the country of her forefathers. She asked me “Why do people in India spit so much?” Having grown up in a city where chewing beetal leaves after lunch, sucking out the juices and spitting the reminder on the street was more like a fundamental right, I responded naively “Doesn’t anybody spit in America?”

    So imagine my surprise when I come over to the promised phlegm-less land and find folks spitting on the roads and throwing plastic and paper bags just like the good folks back home! The New Yorkers, of course, blame tourists for this and vice versa.  But New York is a city that works. The garbage is cleaned up in time and the cigars that folks throw vanish by the next day.


    In New York, travel is mostly by the metro or by walk. The metro is a New Yorker’s favorite whipping boy. Often you hear statements like “Oh it’s too crowded”, “There’s no connectivity between avenues and I have to walk” or “When Sandy struck, the trains didn’t run for two full weeks!” Clearly such complaints can only come from somebody who has never traveled in the crowded buses of Chennai or local trains of Mumbai. And all this in spite of ferrying about a million people from the suburbs to the city on a daily basis. Whatever the complaints, I think many New Yorkers fail to appreciate the vision of people who built the most extensive public transportation system in the world more than 100 years ago.

    For my weekend shopping at New Jersey, my aunt drives me around. I want to get my hands around the wheels of my aunt’s BMW and give her not-so-subtle hints which she catches on early and flatly refuses. Apparently the traffic violation fines are prohibitive, especially for those without driver’s license. During my stay at their house in New Jersey, I am surprised to note that there are no walls or boundaries between houses. The suburbs are pretty sedate and boring and I get the impression that nothing ever happens there.

    There are a lot of rules when it comes to driving in America and what surprises me, pleasantly of course, is that people see benefit in and follow them! In the suburbs, the middle lane is reserved for essential services like ambulances and fire trucks. I am sure such a thing will never happen in India  and definitely not in Hyderabad!

    On the roads, most cars are huge and probably voracious fuel guzzlers; only one in a hundred cars I see is a hatchback. The limousines are monstrously long; roughly enough to fit in four Maruti altos and carry the same number of people as one Maruti alto.

    The first time I switch on cable TV, it takes 15 minutes just to browse through all the channels. There are plenty of “lose 20 pounds in 20 days” and “special tea” ads. Just like in TV back home, smartly dressed actors tell you what to do with your life and how to feel good about yourself by buying their product. Nevertheless the overdose of “Call Lawyers if you fall in the mall” and “home foreclosure schemes” tells an interesting tale about American society – the story of corporate greed and easy loans that cannot be repaid.
Rockefeller Center
    The craze for American Football or rugby mirrors our country’s love for cricket and Sunday mornings are inevitably spent in front of television. In American Football, organization of offense and defense lines takes long, timeouts are longer and 'advertisements' is the name of the game. Actual action, if at all it happens, occurs in short bursts and the players get back to forming a huddle and wasting time allowing more ads. The game is tailor-made for television and long advertisements! I learn never to expect the last five minutes of a typical football game to get over in five minutes.


    Perhaps I am romanticizing a bit but people here smile more and seem happier than most other places I have visited. This begs the question – “Does money equal happiness?” Frankly, if there’s one lesson in my New York trip, it is that even though money doesn't buy happiness, the experiences that money can pay for can definitely lead to happiness. A few Americans warn me about the pitfalls of chasing money and unbridled ambition, otherwise known as the American dream.


    There are a few parks in this concrete jungle called New York City. At Central Park, the fattest squirrels I have ever seen prepare for winter, runners go about their weekend long runs and anachronistic horse carriages and rickshaws give the impression of a bygone Victorian age. At Bryant Park, I learn ice skating; perhaps ‘learn’ is too strong a word. I mostly fall on my rear with kids zipping past and impersonating my falls like I were an over-sized egg with small feet. Nevertheless, it is the best fun I had for a while. On the last day of my trip, I visit the observatory at the Empire State building and get to see the city in its entire splendor from the top of the world.
Skating at Central Park
    A friend of mine once said that a great city encourages you to get out of your home and explore. As soon as I finished my work at office every evening, I got out walking around avenues and shops, discovering new places to eat and gawk at. Though I didn’t buy any “I love New York” mementos, I can declare that the three most interesting weeks of my life were spent in the greatest city of the world.

Saturday, February 16, 2013

Loans, Banks and Damn Lies

I recently attended a talk on “Financial Planning”, mostly about loans, insurance and retirement plans. Prior to this session, I believed I knew enough about managing my own money. Ah the folly!

For the benefit of those who did not or cannot attend the session, here are a few notes. Hopefully you will learn a thing or two. And to all those with an MBA degree – Please go easy if you don’t find the blog technical enough and resist the urge to throw jargon and formulae at laymen. Comments and corrections are of course welcome.

After months of research, you have finally decided to go with that shiny black beauty and turn up at your bank to process the loan for your new car. The bank claims to have a lesser interest rate than its peers and once the necessary processing is done, you sign on the dotted line convinced that you walked away with a great deal. But did you? The primary components of a loan are Principal and EMI (Equated Monthly Installment). Let’s forget these two (as most will already know) and discuss something a bit more complicated that bankers generally don’t talk about – “Reducing Balance”.

Reducing Balance:
During loan processing, the agent requests you for the monthly EMI payment date. Assuming, or rather hoping, that your salary gets credited on the first of every month, you agree to pay the bank the monthly EMI on the second of every month. Here’s where things get interesting. Even though the EMI is promptly credited on the second, some banks will reduce principal amount only on the 30th of every month. Meaning for around 28 days, the bank gets an interest free loan on your EMI amount. The extra money is called “float” and the golden rule is “DO NOT give float to the bank”.
Some banks used to have half yearly reducing balance tenure- the new age daylight robbery. Ah those evil bankers intent of seven figure bonuses… Thankfully those days are gone and most banks have a monthly reducing balance nowadays. Some banks like SBI have a daily reducing balance, so it does not matter which date you pay your EMI. But if your bank has a monthly reducing balance, ask for the reducing balance cycle period and pay one day before the balance is reduced.
Pages 3-5 of any loan document generally have important details like reducing balance etc. And of course nobody ever reads them.

There is nothing standard in the world of loans. So always negotiate, whether it is processing cost or prepayment terms.

Flexi Accounts:
A "flexi" account is a savings account linked to your home loan. When you transfer money to it, your principal is reduced by the transferred amount. When money is withdrawn from the flexi account, the interest is now calculated on the original principal. When taking a loan, always enquire if your bank has a flexi account. And remember that as per SEBI, banks cannot charge prepayment amount for closure of housing loan.

Flat Rate:
A sweet sounding female tele-agent calls up and offers a 10% personal loan. You’d immediately jump for it right, knowing that many banks charge as much as 15% for a personal loan? Wrong... Your first question should be whether the interest is a flat rate or not? If yes, your 10% rate is interest is actually around 20% in reality.

Simply put, flat interest rate is based on simple interest rate (calculation based on PNR/100) for the entire amount and a general thumb rule is flat rate * 2 = reducing rate. So when an agent uses the word “flat rate”’, run like your life depends on it; at least you‘ll lose weight.

The best retirement scheme in the market currently is - NPS or New Pension Scheme. Nobody wants to sell an NPS because the margins are very low. If you go to banks and enquire about NPS, they try to sell their own ULIPs to which you should respond with a resounding “No”.

In NPS, the choice of Pension Fund Manager and the investment option rests with the subscriber. In plain English, it means the subscriber can choose who manages the money(LIC, SBI, UTI etc.) among seven competitors and also whether the money goes into equity, debt or balanced. Younger people should have a better appetite for risk, invest more in equity initially and move the yearly interest earned to ‘debt’ section. This way, if the stock markets are down during retirement, a substantial portion of the money remains in ‘debt’ funds which is not subject to market fluctuations. This sort of planning is called STP or Systematic Transfer Plan. 

            Start your retirement plan before you hit thirty. But remember that it’s never too late. Read more about and invest in NPS here:

We all know the joke about equity. We invest in the stock market with gusto and when the markets go down – we call it a technical correction. When it falls further, we call it a deeper correction. And when the shares hit rock bottom, we are resigned to calling those shares family property and praying that the market would rise again... So be very careful when investing a lot of money in equity markets. 
Life Insurance is term insurance. PERIOD. With insurance, never talk returns, instead talk risk cover. A thumb rule is that your insured amount should be 7 to 10 times your annual pay.

            When buying term insurance from any company check the CSR (claim settlement record) for that scheme. A CSR of 40% means only 40 people out of 100 who claim insurance are actually handed over the money. LIC of course has 100% but you will end up paying a lot more premium because of this. There are some schemes with around 99% CSR and cost a lot less. But if your term insurance scheme has a CSR of 40%, chances are your dependents will never get the money after you die.

There is an innocuous option in term insurance called MWP or Married Woman Protection. If the MWP option is chosen, the insurer's wife is guaranteed to get that money even if debtors attach all his remaining property or assets. The biggest beneficiary of “MWP” option is scamster Harshad Mehta’s wife. Even though Mehta lost all his property and assets after his infamous fraud, his wife got 5 crores after he died due to “MWP” protection and the debtors could never claim that money. Sadly, there's no MMP.
Use to compare insurance prices. Always go online for most investments since it cuts out the middle agents.

You’d assume that after you pass away, your insurance nominee would get the money, Right? Wrong. A nominee is not the beneficiary of insurance. He or she is just a trustee in charge of distribution of the insurance amount.

The legal will determines who will get your insurance amount. A Will is an absolute must because if you die without leaving a will and have a house in Raisina Hills beside Lutyens, chances are some evil insurance agency guy is going to file a claim to your property claiming to be a long lost relative. The insurance amount will not be disbursed until this claim is settled in the civil court. In India, that can easily take more than a couple of decades and chances are all your descendants will be dead by the time the verdict arrives...

If you have a lot of money in the bank savings account, you are doing it wrong. DON'T LET money rot in the banks; rather invest in liquid mutual funds. Money invested can be withdrawn with just a day’s notice and investments are safe as they invest in govt. treasury. More importantly they give 8 % interest, better than any savings account returns out there.

Also some banks like Yes and Kotak give around 7-6% returns on their savings account, a lot more than the usual 3-4% of other banks. So yes; open a “Yes” Bank account. Remember that Savings account interest up to 10000 Rs is not taxable (thanks to Pranab da).

To conclude, I would once like to thank the trainer for an enlightening lecture about things I should have known a decade ago. Please be advised that very little of the above financial advice is actually coming from me; so you should be safe!! And finally the usual disclaimer – “If you use the above and screw up, you can’t sue me. Promise…"