Lesson # 44 : BMW's and Bubbles

A few weeks ago my friend was taking a driving lesson and the instructor went about telling him how ten years ago when a man used to buy an Accord the children and others from the neighbourhood would gather around and praise the person for his choice and admire him for the car he had just bought. They would then feel envy and would walk away though their eyes wouldn't stop glancing that wonderful Accord.

Today however, that same person could put a Ferrari on his porch and no one would give the backside of a rat. The point being that it isn't out of the reach of any person to buy anything. With cheap credit available in the form of nearly interest free loans, credit cards and gold loans things have taken a turn for the worse.

Imagine a scenario where a person has the capacity to buy a mid segment sedan. Let's say a Honda City. That would set him back a cool ten lakhs probably. But this dude(Being the dude he is) goes all out and chooses to buy a BMW. The idea is that people are spending on things that are irrelevant. Apart from relatively higher maintenance, higher emis and lower efficiency the BMW isn't really going to add value to this person.

He could have chosen to go in for a Honda. Their cars are engineered for effeciency and performance. Or he could have gone in for a Suzuki. The fundamental flaw in choosing a BMW over a Honda is that firstly the person cannot afford it and yet he's buying it simply because it is a question of prestige and his desires. Tripling his budget and along with it his emi this not so awesome dude could have chosen to do a zillion things with his money apart from buying two thirds of a car with it.

Finally, coming to the conclusion of this entire article we need to understand that by doing such actions, by choosing to overspend, by taking loans we do not need, by spending money we do not have, by full filling desires we have and buying things because of prestige we are all doing our share of creating a bubble in the economy.And obviously when the bubble gets to big it's going to burst and it's going to be bigger than the Sovereign Debt crisis and The Internet Bubble. Worse than the Great Depression and more deadlier than The Black Friday.

So the next time think twice about buying that BMW.

Lesson # 43 : Why the world loves Temple Run

Imangi Studios made a fortune with Temple Run and while Rovio along with Angry Birds competes with Temple Run for the number one spot across platforms be it the android or the istore this is one battle that we'll just have to wait and watch. Angry Birds recently came out with Star Wars and as good and cool as it may look I more often than not choose to play Temple Run whenever I choose to game on my tablet.

The reason Temple Run actually succeeds is on multiple levels. But there are two which I thought are worth mentioning and therefore I am focussing on only those two points through the course of the remainder of this article.

Firstly, imagine this scenario. What are we all doing currently in our life? We are trying to get out of the rat race and we are trying our level best to do it. Now draw a parallel with the game.Ideally what are we trying to do. We are running across an endless maze collecting money and trying to get out of the rat race. So we are basically playing the game on a whole different level. The person running is actually a virtual impression of the person playing and he/she is going to try his/her level best to score the maximum points. And that is another insightful reason into the addiction of this game.

Secondly, what do most of us want? A million dollars, right? And that's what happens when people start out and start playing temple run. Imagine a scenario where you make it to say 20,000 points then you go on and on and on till the time you make your first million. And from there on you go on indefinitely breaking one million after the other. The same is the case with life. Lakshmi Mittal in an interview once stated that earning his first million was the hardest. It was a breeze after that. The creators of the game played with our psychology rather well and triggered the right brain cells.

All said and done is Temple Run a brilliant game? Probably not. Then why does it get downloaded so many times. The answer is as stated above. Imangi has hit upon a goldmine whether they did it by mistake I cannot comment upon that. But what they have managed to create is a wonderful game which plays mindfuck with out brains on multiple levels.

On behalf of Doodle inc
Udit Sabharwal

Lesson # 42 : How the little kid called Samsung made it big and why he's not gonna suvive

A few years ago and I refer to India in general when a consumer wanted to go buy a mobile phone his first preference was to buy a nokia. If perhaps it didn’t suit his style a Motorola and in the worst case scenario perhaps a sony ericsson. Not even in his wildest imagination or craziest nightmare would he have considered buying an LG or a Samsung.

Fast forward a decade and you see this crazy influx of consumers who flock the malls, retail stores and online shopping portals to lay their hands on the latest Samsung phone out there. Lg’s also there giving Samsung tough competition but Samsung has literally blown the consumer off his feet.

So the question is  how did this exactly happen?

Well for one Samsung decided to make consumer friendly phones. Phones with features Nokia didn’t deem necessary till Samsung started including them.

Samsung then went on to rope in Aamir Khan a few years ago to increase it’s brand image and create a balance between it’s rural and urban market share.

Samsung also delved into markets that Nokia had deemed unfit and started to market the phones like crazy in rural areas.

Apart from this Samsung was working side by side with Apple and Google. For apple it was developing the internal units for it’s Iphones whereas for Google it was developing the Nexus range of smartphones. Thereby striking a balance which would help improve it’s hardware considerably.

Samsung’s big break however, came with the release of the Android operating system and when Nokia decided to steer clear away from it. Samsung having worked previously on the Nexus phones managed to crack the market with its offerings.

Apart from this cool advertisements and extravagant offers with mobile phone operators such as three months free internet on airtel helped it get some extra brownie points.

However, now Samsung has a tough task ahead. With one battle lost the legitimacy of the android operating system and an entire Samsung range is in jeopardy. So the question is can Samsung flick it’s magic wand once again and come out on top?

It's going to be rough with Microsoft coming up with the Surface, Google will also try to develop phones using Motorola and Blackberry all set to launch the 10 operating system the very future of Samsung is in peril. We know what happens when Samsung tries to invent operating systems as was the case with the Bada. So unless they change real fast the little kid on the block is soon going to be going to heaven.

-Doodle

Lesson # 41: Does Demand Create Supply Or Does Supply Create Demand?

The last article on The Blog was written by a guest editor and he did a fantastic job of explaining the law of demand. In case you missed it click here. This article primarily focusses on the multi zillion dollar question that the previous article sort of raises.

What came first The Demand or The Supply?

Theoretically speaking all those thick books on economic theory state that only when there is a demand for a product will there be a supply. And to some extent I guess that those guys are right. However, let's consider two examples.

The first is that of the Iphone. Steve jobs put it rather bluntly when he said, "The consumer doesn't know what he wants". And that's exactly the case. You and I didn't feel the need for an iphone till it was launched. Obviously it doesn't apply to everyone but it is pretty evident from the sales of the iphone that the consumers have been loving it. Clearly there wasn't a demand for an iphone but Apple still went ahead and came up with it.

Now let's look at another example. Let's take the example of PVR Cinemas in India. There was a clear demand for good quality Hollywood films in India and that is exactly from where PVR as a brand developed. They started out by bringing some films and eventually developed into a full fledged multiplex chain on the basis of meeting the consumers demand.

Based on the two examples it becomes increasingly difficult to decide what came first. The demand or The supply.

And hence lies the unanswered question

Who came first Demand or Supply?

-Doodle

Lesson # 40 : 'The law of Demand' Decoded

The Law of Demand states that there is an inverse relationship between the price of a commodity and its quantity demanded. Demand is a function of various variables, such as price of the commodity, income of the consumer, composition of the population, tastes & preferences of the consumers and so on. However, all the factors are kept constant (ceteres paribus) in the short time span except the price of the commodity. In fact, even in the long run, the factors remain more or less constant, but price may fluctuate. Hence it is reasonable to take only price as a variable factor.

Now, we must understand as to why there is an inverse relation between the function and its variable. A logical explanation can be that if a thing is cheap, we will naturally buy more of it. But such kind of explanations do not satisfy economists.

Why is it that we tend to buy more of things that are cheap? To explain this, i must first introduce the concept of Utility. Utility, as the word goes, means the amount of satisfaction we derive when we consume a unit of a commodity. You may say that satisfaction is a very subjective term. And yes it is. That is why we have two approaches: (1) Marshallian Approach of Cardinal Utility (which states that utility can be calculated mathematically for the sake of convenience); and (2) Hicks and Alan Approach of Ordinal Utility (which states that we can merely rank the satisfaction levels of different commodities as satisfaction is a very subjective thing, i.e., for eg, i prefer an egg over bacon strip because i feel that the egg can give me more satisfaction)

Hence the Ordinal Approach is more practical for assumption purposes.

Now, we know that commodities have an inherent trait of fulfilling our desires, and these desires are fulfilled when they are satisfied. Hence, the commodity provided us with a certain utility.

Money is a representative of the value of commodities. It is means of exchange. Since money represents our tendency to buy a commodity which would in future give us satisfaction, money, hence also represents satisfaction...that is money also has a certain amount of subjective utility. And this is precisely the reason for an inverse relation between price of a commodity and its quantity demanded. If we feel that the money we hold in hand can give us more satisfaction if we buy something else, rather than the good currently at hand, we say that the commodity is over-priced and hence consume less, or no quantity, of that commodity. And if we feel that the utility we derive from the consumption of the good at hand is more than what we have forgone in terms of money, we buy more of the commodity, as it is then under-priced. Hence the inverse relationship between price and the quantity demanded.

                                                            


Although Price is the variable here, when we construct the graph, it is represented on the Y-Axis and the Quantity Demanded on the X-Axis. It is a convention that we follow in Economics. But for other Function Graphs, the mathematical conventions hold true,i.e., variable on the X and function output on Y.

-Srijan Butola

The following article is written by a guest editor for doodle. Srijan is a first year student of Delhi University studying Economics Honours from Kirori Mal College.

Lesson # 39 : Yin and Yang and why the markets can never keep going up

The Chinese believe that Yin and Yang which literally means shadow and light connects seemingly extreme phenomenon. It is used to describe how seemingly contrary and opposite forces are interconnected and interdependent in the natural world.

Basically, they aren't opposites and neither are they advocates of good or bad. They simply represent two extreme forces and show that there is indeed a common or complementary point between them.

Hence, Ying and Yang advocates that for every right there is a wrong.

Looking at the Laws of Motion. Newton puts it rather simply

'For every action there is an equal and opposite reaction'

A lot of people question the working of the markets and ask why the markets can never stay on top. Or why can't they just keep going higher and higher? Or why after every rise there is bound to be a fall in the market.

There's  a lot of factors involved which would make this article rather technical. But simply put. The concept can be clearly explained through the Ying and Yang.

There's the upward movement which the indice is going to make which is the light that is the ying and then there is the downward movement which the indice is going to make which is the shadow that is the yang.

And there's a point of mutual coexistence between Ying and Yang. They aren't different from each other but are important for the each other's coexistence.

So there is a need for the market to correct every few bull runs. The idea is that when you have the light i.e. the market rising you  will have a shadow i.e. the market falling. 

And it will stabilize at a point where it's not too high and neither too low.

And that is why the markets can never keep going up.

-Doodle

Lesson # 38 : Are businessmen like footballers?

Imagine a football team. There's the goal keeper and then there's the line of defence, the mid fielders, the defenders and the strikers.

Now there's going to be a whole bunch of people on this team. There's going to be people who have a whole lot of skills that others don't posses. There are going to be some that a player himself doesn't have. And then there's going to be one of those star players whose in himself almost perfect. Probably someone like a Messi or a Pele.

Drawing a parallel and looking at the corporate sector as a whole. Imagine each and every businessman like a footballer.

There's going to be the goalkeeper whose the last line of defence. The guy on whom everyone's hope rests and whom everyone depends upon. When you look at the economy this guy is probably going to be the guy or gal running the banks. Be it private or government. Whether it's an SBI (State Bank of India) or an Axis or an ICICI. Like the goalkeepers these are the custodians of cash. 

Then there's a line of defence. Of businessmen who have been in a business for a very long time and like to play it safe. They have diversified over a period of time but they have never let go of their core business or have never really tried to go beyond their so called safe zone. These guys are the old war horses. Examples include Infosys's Nandan Nilekani and Narayan Murthy and Wipro's Azim Premji.

As the ball passes down from here it goes to the mid field. The midfielder controls a greater part of the way the game works and so the mid field is going to be a bunch of companies in the economy that are large. So large that a single malfunction can set the economy in turmoil. The midfielders in the economy are going to be Mukesh Ambani and Anil Ambani with their gems RIL and Reliance respectively. Coupled with Ratan Tata of the Tata group and Kumar Mangalam Birla of the Aditya Birla Group.

There's going to be the two wingers on either side who are going to be the guys who are forever reliable to launch an attack. These are the guys who will take a corner or a free kick. The guy or the company who does this has to have the same impact in the economy. An example would be that of Analjit Singh of Max and Malvinder and Shaivender Singh of Religare.

And finally there's the line of the Strikers. These guys are smart and magical both with their footwork and their technique. Often creating goal scoring opportunities out of nowhere and scoring goals out of not so brilliant balls. These guys are the star performers on the team. And as much as we would like to give it to a corporate. This award goes out to the Enterpreneur. The Big and the Small. He/she who dares to be different and who dares to make a difference. 

And finally there's the referee the decider of the wrong and the right. We'll give this to the RBI who takes all the major decisions and makes all the rules.

The playing stadium are the stock markets where each of these companies are listed.

The audience is the average consumer who must pick a brand. A side which he must remain loyal to.

So are businessmen like footballers? 

Perhaps yes.

- Doodle

Lesson # 37 : Why Money?

Let's imagine this not so hypothetical example. Imagine yourself to be a seven year old kid. Now imagine watching Ben 10 on Cartoon Network. Now imagine getting hooked onto Ben 10 to the extent that you remember every bloody dialogue from every episode there is. And now imagine FunSkool taking out an entire range of Ben 10 toys.

So as a 7 year old kid what are you going to do?

Go and buy those toys outright. Or start crying in front of your parents. Maybe blackmail them into buying those toys for you. Whatever extent you have to stoop to you will just to lay your hands on those Ben 10 toys.

Cut to the point where you have bought it already and have played with it for about a week or so. What happens?

You realize that with all those false promises you made. All that effort you put into crying and forcing your parents to buy this toy it wasn't really worth it. The toy is a huge waste of your time and effort and you feel you are not going to be using it again. You'll  probably use it once or twice in the coming months and then forget it again.

Now imagine this entire cycle happening till the age of let's say 27.

At 14 you will probably discover some fancy gaming device which will cost a bomb and force your parents into buying it.

And the cycle will go on. By the time you are 27 you have been a part of this cycle countless number of times but still you haven't learnt your lesson and so you go ahead and buy a Porsche. And after having driven it around for about a month or two you realize it's fine and all but there's always something better in the market.

So let's say a newer, better and faster version hits the market. All of a sudden that old cycle ends and a new one is going to start.

It's like a high school jock spoilt for choices who infatuates about a girl, dates her for a week or two then dumps her for some other girl who catches his eye.

The question however that I wish to raise is that

If all of the above holds true in every scenario there is. Then why the hell doesn't it apply to money?

Here's why:

Money in itself is the superior most asset that a person can hold. No matter what asset a person may hold there isn't anything more liquid than money.

Secondly, the desire to earn more money comes from the fact that no matter how much a person has it's never quite enough. Because unlike the above examples where a consumer is spoilt for choices the same does not apply to money. Because money in itself is a superior commodity with absolutely no close substitutes.

Thirdly, Money in itself is a means to an end. And this end may or may not be reached. Imagine a person walking on a road not knowing the length of the road. Here the length of the road is the level of wants a person has and the calories a person holds which will give him stamina for the journey is the money he holds.

Finally, It's a psychological thing. Gordon Gekko sums it up rather well

"Greed is good and the number is more"

Gordon Gekko : "Greed is good and the number is more"

- Doodle

Lesson # 36 : The Jigsaw called Opportunity

It's one of those hot days in Gurgoan. At one of the many DLF buildings the employees of various multi nationals are about to take their daily break. The only difference is that they won't be headed towards their Office cafeteria instead they are going to go to the ground floor walk out of their building and go to the local and only chaiwala* in the vicinity.

Why you would ask?

For the simple reason that this local chaiwala who is catering to the big and small and is providing good clean tea is going to provide it for barely 20 rupees. Operating in what someone would barely call space. This chaiwala is making money to the tune of 25 to 30 thousand in a single day.

How you would ask?

It's pretty simple. The office cafeteria's offer anything for around 50 to 100 bucks. Food is even more expensive. The chaiwala is offering the same thing with the same amount of hygiene and probably a better taste for 20 bucks. Which is half the price. Now he doesn't simply sell tea. This guy retails maggi and he retails it for 50 bucks a plate. Profits anyone? The menu items vary from the big to the small. Sandwiches going for 50 to 80 bucks and cold coffee costing anywhere between 45 to 60 bucks.

So why exactly would anyone go there?

Again people tired with their office like to chill out. So they walk down to the ground floor get some fresh air smoke a cigarette or two. Chat with the people around. Have a little walk and are all good and ready to go. Their mental state is much better and they feel they have saved onto a lot of money.

So what's the point of all of this?

It's like this. This dude {He doesn't wish to be named the chai wala} was basically at the right time and at the right place. His overheads are minimal as he doesn't need to pay rent. He pays roughly 10000 a month to the cops which is meagre compared to what he makes. People from nearby buildings don't mind visiting him.

The basic idea is that he was at the right place and at the right time. So basically when an opportunity presents itself you need to be able to take that leap at the right point of time. In the greater scheme of things maybe you are that dude/dudette who is missing from that big jigsaw puzzle!!

*chaiwala = tea seller

- Doodle

Lesson # 35 : Is the clothing space getting overcrowded?

The past week sitting idle at home and waiting for college to start a greater part of my day is spent on the internet and in particular facebook. So surfing the web I glanced upon not one, not two but hundreds of new start ups, online retailers and other stores which are selling clothing.

And the question which popped into my head was that is this space getting overcrowded?

Would the clothing segment like other segments such as retail, banking, automobile get crowded? Would margins of all these companies fall? And would the market be converted into such that no individual seller would be able to make monumental profits in the long run or would the smaller brands faced with extinction simply phase out?

Well here goes nothing. The first thing I found was that retailers. The big brands be it A nike, an Adidas or A Puma are really sweating it out to clear stocks. Adidas has a bigger problem in India thanks to the Reebok scandal. But with sales on all brands with flat 50% off and stores still not as crowded as they used to be it makes me wonder is the world all right? Or have people just gotten smarter or have they just gotten poorer.

Surprisingly there was one store which was so overcrowded that I felt claustrophobic inside that store. It's Inditex's Zara which clearly sizzles out the competition from it's opponents. Somehow people just can't get enough of Zara. And while other stores give flat 50% off Zara's discounts vary from 10 to 35%. And with stock clearing out on a daily basis it's clear that Zara will survive.

But what about the smaller brands. The not so favoured. How would a premium seller such as Color Plus survive? Or how would Marks and spencer who have some of the largest stores in the country survive?

Couple this with consumers slowly shifting to buying clothes and shoes online where there are year long discounts it seems that while the clothing sector may be getting overcrowded it's not dying out. One's loss is another one's gain. So someone is making a sale at the end of the day and earning a hefty profit on it as well. With newer sites such as Jabong, Myntra and others coming up it seems that the concept of a retail store in itself is becoming redundant

Then there's the whole story of the startups. Who with virtually non existential capital are creating holes in the sales of the larger brands. For instance Xtees, T Go, Almater and others are coming up with T-shirts that don't just look great but are way cheaper than the competition. Quality is a whole different ball game. But a Johnny Bravo or Simpsons T shirt for barely 400 bucks is a pretty good deal. At the same time this creates a huge dent in the sales of larger brands. Puma's T-shirts in sale start at around 700 a piece which is nearly twice the cost.

Somehow anyone who wants to start a new business feels that Clothing is the way to go. But clearly it isn't. Imagine the entire market as a huge ocean with a variety of fish some eating grass others eating smaller fish. Now imagine everyone starts eating grass. No one wants to eat other fish. The number of fishes will increase and subsequently the ocean becomes to small for all of them to survive.

The point is that with the bigger conglomerates such as Reliance who started retailing Steve Madden in India and others getting onto the band wagon called Clothing it's only going to get overcrowded. The small will
either stop manufacturing or be absorbed by the larger firms.

Another problem is that if Venture Capitalists start pumping in money like crazy the sector may just develop a huge bubble. With LVMH investing in India there's a huge danger of that. They have deep pockets and wouldn't mind losing a few million. There last investment was in Fab India in May. The future looks like a two way street for the clothing sector and it can go either ways!!

On behalf of Doodle inc
- Udit Sabharwal

Lesson # 34 : Dear Nick you will be fondly remembered...

It was an age of the great and powerful. Warner Brothers had a foothold in India which no one could shake. Cartoon Network was the shit. With programming attracting ad revenue from the big and small. Tie ups with comic brands, cloth manufacturers and god knows what. Cartoon Network was here and it was here to stay.

But as I flipped through the channels one evening all of a sudden I discovered this huge blot on my tv set. It wasn't any blot it was a freaking orange blot and I stayed glued. I stayed glued to my tv set till my bed time that day. Cartoon Network seemed like shit then.

The programmes on Nickelodeon were some of the best. With cartoons ranging from Rugrats to Chalk zone to The Fairly Odd Parents to Hey Arnold to Rocket Power these were shows that brought you to a whole new world.

And then there was the live programming with stuff like Drake and Josh, Global Guts, Legends of the Hidden Temple, Double dare 2000, Kenan and Kel, All that, The Amanda Show, Cousin Skeeter. Basically stuff that would drive you crazy.

Kenan and Kel the show that made us fall in love with orange soda

And apart from this there was the annual Nickelodeon Teen awards broadcast simultaneously from the USA.

Couple this with minimal advertisements and a 24 hour entertainment channel. Yes this was around the same time that Cartoon Network had started 24 hours of programming but most of it was repeat or old telecasts.

Nick seemed to be headed towards becoming the market leader.

But for one fatal incident. That was Viacom separating into a separate entity in 2007. When Viacom India was established.

It dismantled everything that Nick stood for one piece at a time. First converting Nick into an 24 hour Hindi channel. Limiting programming and repeating the same season month after month. Then they did something even more stupid. They went about buying cheaper Japanese cartoons like Ninja Hattori and began broadcasting them in Hindi like crazy. Nick came to be associated with not Spongebob or the Orange that it had stood for but with a crazy eyed blue ninja.

Then all of a sudden all of the original nick programming stopped. Everything from Rugrats to Spongebob was done away with. Spongebob airs occasionally sometimes at 3 in the night.

None of the movies that Nick produces are aired in India neither are the newer television shows or teenage shows.

iCarly one of Nick's most famous shows in the US 

Nick has restarted with English as a language but it sucks more often than not. Who the hell want's to watch Hattori in english anyways? The dude's a retard.


Today Nick loses out to WB once again as Pogo and Cartoon Network have overtaken them. Viacom came up with a new channel called Sonic. It's even worse. The older generation has shifted onto animax the younger to Disney and Cartoon Network. Viacom you are killing  yourself and you are killing us.


In short and these words may come across as rather strongly and if Viacom you are listening

NICKELODEON YOU SUCK

- Doodle

Lesson # 33 : Can Mr. Mallya save his dying Bird?

Mr. Mallya when Kingfisher was the king of good times

Having read a fabulous article in Forbes this week it really got me thinking. Can Kingfisher airlines officially the country's smallest air carrier survive. With both it's wings cut and capital in shortfall coupled with the tremendous pressure from it's investors and lenders can this bird sail through the wild storm it's gotten itself into or it will it just end up a dead bird like that albatross in rhyme of the ancient mariner.

So what's the problem? Well no one sums it up better than Forbes. Click here for the link But here's just a summary

Problem # 1 : There are debts of over 7000 crore to various lenders from National to private banks to various airport authorities across the country to other private investors who want their money back and they want it now.

Problem # 2 : Kingfisher still has over 4500 employees who they cannot fire at this point of time as they will have to compensate them which they cannot afford. Moreover none of these employees can quit because they still need to be paid six months dues and leaving the job will affect their pension funds.

Problem # 3: If Kingfisher sells all it's assets, If Vijay Mallya sells all his assets, If Siddharth Mallya sells all his assets they still can't repay the debt.

Problem # 4 : FDI in aviation for which Mallya has been lobbying isn't been given a green signal for the simple reason that other aviation companies feel that the sick players in the market should be allowed to die if they cannot afford the medicine.

Problem # 5 : No other aviation company has the required effort or money to invest in Kingfisher. The one's that do such as GoAir and Emirates wish to steer away from this sick and nearly dead bird.

So how should Mallya the King of Good Times set his boat sailing again?

The simple answer would be to cut costs. But Kingfisher has already done that significantly. The fact of the matter is that a greater number of employees are a burden to the company. So cutting costs of employees and any other  unused employee would be beneficial. This would mean paying significant amounts but over the course of the next five to ten years the rewards would be enormous. Kingfisher can start a new policy whereby it would lay off employees right now paying their dues and other benefits the ones it can afford and offer it's employees the chance to join the firm back when it re expands it's operations in the near future for the same benefits and the same salary.

Once this cost cutting measure has been undertaken then Kingfisher should get it's planes running. A lot of them need immediate maintenance which Mr. Mallya has ignored for long. Assuming that a greater amount of the fleet is operational Kingfisher should choose to either sell a part of its fleet to pay back it's lenders and keep just a fleet of let's say seven planes initially. Once the capital from the planes comes in it should be used to pay back lenders or the company can also choose to buy back it's shares from the public. The latter being a big gamble which may off in the long run. Once the planes are operational Kingfisher should follow the Go air model of keeping it Simple. The company should operate low cost flights to highly dense cities nationally. It should cease international operations on the whole. Using it's planes it should start flights which need to be at a discounted rate of 10-15% from competitors. These flights should be operational from Delhi to Mumbai or other cities which see dense frequent flyers.

At the same time Kingfisher should also start with cargo services from Delhi to Mumbai or other flights offering air cargo at cheaper rates than competitors. Or it should simply team up with other logistic companies and offer them cheaper air cargo or simply better deals than competitors.

Apart from this Kingfisher should use it's planes for private charter pricing it similarly below the average market rate but at the same time not letting go of providing the world class service.

Once Kingfisher starts to churn out and atleast generate suitable revenue and pay it's employees that is it starts to break even the bird is ready to fly.

Obviously a large number of these propositions seem preposterous and mad on the first read. But it's so crazy that it just might work. And besides what has Kingfisher to lose? Hasn't it lost enough already?

Perhaps one day the bird shall fly again!!

And there's this song perhaps Mr. Mallya would be singing this right now. Click here

-Doodle

Lesson # 32 : Are we really as rich as we think ourselves to be?

Sitting in a world class mall in the capital of India and watching crowds of shoppers max out their credit cards it suddenly hit me. That do these people really have the money to buy the stuff that they are buying. With bills running upto ten grand and starting at anywhere between one to two grand it just seemed so unreal.

One after the other shoppers pulling out credit and debit cards and then using it to buy merchandise which clearly they couldn't afford. So why this great misconception? Well it all starts out with the credit card companies who troll all of us at some point in our lives.

With cash as an easy disposable it is bound to be misused. With great power comes great responsibility spiderman taught us that. Actually Jefferson did but nobody credits him with it. Coming back whenever a person buys a thing - let's say a sweatshirt. A Tommy Hilfiger sweatshirt for instance and he pays for it using his credit card. But he simply does not have the money to afford it. Assuming he has let's say three grand in his wallet. And he has let's say  a lakh to two lakhs in saving he still can't afford it. Here's why.

 Assuming this dude makes fifty thousand a month. Which today is the average package most undergraduate students get. And he pays say ten grand as rent. And another five on phone and travel expenses. Five on groceries and food. He has health insurance and other insurances which run upto another five to eight grand. And then he needs to pay for water and electricity which at 6 to 7 rupees a unit is pricey if anything et al. And then this dude also needs to pay tax. So he saves what probably five otherwise six in a good month. And mind you that's when he's having a good month. And then he decides one fine day to buy a sweatshirt for three grand. Yes there goes his saving down the drain.

But our good friend has yet to realize the power of the credit card. He has three grand in his pocket. But he refuses to use those. Instead he uses his credit card hoping that by the end of the month he will not only have those three grand but another three grand and the not so large interest that he needs to pay. Sadly neither happens and that's where our good friend starts defaulting. But he continues to swipe month after month year after year card after card. And then he defaults. And he defaults big.

Now imagine not just this dude but every single dude and dudette who lack the knowledge about their misdoings doing it one after the other generation after generation and you have a debt crises. One which will be fuelled by the masses and whose weight we as individuals whether culprits in it or not will have to bear.

So come one come all for our default warrants are being signed one after the other. For someone somewhere is swiping his card. Hell you could be the one doing it. Think twice that's all I can say!!

-Doodle

Lesson # 31 : Why Warren Buffet loves Coke!!

We have heard it over the years and seen it in his stock picks over the years too. His reasoning has been rather simple when it comes to buying Coca -Cola's stock but the fact of the matter is that are we sure that Warren Buffet's really buying coke for that very reason?

Warren Buffet's romanticism with coca cola starts way back in 1988 when the company stock traded at a discount which ranged from 24% to 41% with the share price ranging from anywhere between 35$ to 45$. Everyone at Wall Street was of the opinion that Coke trading at an annual growth rate of 18% was bound to fall and that eventually the stock price would break even and that would be the idle time to pick up the stock. However, Warren Buffet a hardcore fan of Benjamin Graham and an ardent follower of the Security Analysis methodology thought otherwise and took the stock rather rashly.

Why? It's because he thought the value on the books was just right. It was trading below the book value giving a better return than the benchmark index. Moreover, Buffet had seen and felt the product himself that he thought of it as an investment too big too fail. A fast food junkie Buffet has forever treasured a Cherry Coke and till date has a mini fridge in his office stocked with varieties of Coke.He had seen Coke do what it does best. Advertise and gather clientèle who weren't going anywhere in the near future. He had seen the tie ups that all the fast food chains had with coke and all the advertisements in the radio, the newspaper and on the television. He estimated the average cost that a coke would cost to produce coupled with the average cost for marketing a coke and estimated that the profits were enormous. The stock would rise eventually. And Buffet thought of Coke as an investment. 

When the stock started rising post his initial investments he continued to add it to his portfolio. Today Berkshire Hathaway is a major shareholder at Coke. And Coke in return is one of Berkshire Hathaway's biggest cash cows. 

Did Buffet make this decision out of sheer randomness or did he actually apply cold logic? 

The fact of the matter is that he did and to such an extent that it knows no control. Because Buffet had seen the rapo that Coke held with the consumers. He had gone through the surveys where an American would always choose Coke over Pepsi or Rc Cola and at the same time he had seen Coke's growth in the Asian and European countries. He saw that Coke could breeze through fall backs simply on the basis of it's other product line up and that coke did not want to steer clear from innovation. And the rest as they say is history.

And for the record Buffet put in 1.07 billion when he started buying Coke. The dudes at wallstreet thought he was crazy. Crazy he was cause three weeks down his Coke stock was more than the entire value of Berkshire Hathaway's assets back then!!

-Doodle

Lesson # 30: Mc Donald's here and now

When a few years ago KFC opened in India it bombed and Indians all over the country formed the opinion that fast food chains can never sell in India.

A few years later a brighter more flamboyant and colorful Ronald Mc Donald filled our tv screens, billboards attracting children and adults like.

With cheap food rates and free toys with the Happy Meal Mc Donald's was an overnight success and other competitors such as Pizza Hut and Dominoes were taken for a ride.

Mc Donald's started out in India and now in 2012 it has come a long way.So how did it happen?

Mc Donald's never targeted the upper middle class or the higher class but anyone and everyone with their happy price menu where you could get burgers or fries or mcpuffs for as low as 20 bucks.

Then Mc Donald's started out by selling India specific burgers such as the Chicken Maharaja Mac or the Mc Aloo tikki burgers.

Adding fuel to the fire they went berserk with advertising of the happy meal. No wonder McDonald's today is the largest distributor of toys in the world.

Moreover, McDonald's set up a restaurant on every spot they could find but weren't stupid to open two restaurants in the same neighbourhood.

Mc Donald's also has one of the most job oriented labour force this is due to one of the best corporate training programmes in the world.

And finally McDonald's is McDonald's because it chose to not act like a foreign brand at all but chose to adapt to our culture and our needs and set up a menu which would force us to draw a smile on our face. Why does Mc Donald's sell in India or anywhere else in the world? Cause they aren't cocky about being McDonald's they are happy to learn, adapt and belong to the country in which they reside!!!

-Doodle

Lesson # 29 : Opportunity Cost and the paradox

There's an economic term called Opportunity Cost which is self explanatory in itself. But just for a quick introduction let's say you need to choose between buying 2 Mc Aloo Tikkis for say 50 vs 1 Mc Veggie for the same amount. The dilemma here is that you need to choose between buying two inferior burgers for the same amount versus buying one superior burger for the same amount. This in the gist of it and is the narrow definition of opportunity cost which you and I apply in our everyday lives without even realizing it.

So the question is that where does the paradox lie? Well for starters let's say that you want to buy an Adidas sweatshirt and it is for around 1000 rupees. And there's this thing in the back of your head which says 'yeah sure I can buy that for 1000 rupees but in a month's time most likely it's going to be going for much less'. And you let go of that shirt for a month. Now post that month you realize the price has still not changed and decide to wait longer and then you forget about it as a whole.

Now about three months later you walk in to the same store and realize that you cannot find that shirt anywhere  . Upon enquiring the salesperson tells you that you missed the 50% discount sale and stocks been cleared. However, you can have a newer version of the shirt which costs 1200. Frustrated you go in for the 1200 shirt.

The point is: 'That which appears to be expensive is not always expensive.' 

Now applying the same principal to a car. Buying a car 10 years from now will be relatively more expensive as compared to now. When we compare inflation relatively goods tend to become expensive in the long run even if there is a brief period of controlled inflation or even deflation. As a result 10 years from now the same 100 rupee note will buy lesser quantity that it can buy today. There may be an year or even two when that 100 rupee note is able to buy more of the same quantity but when we look at the entire picture purchasing power is going to decrease.

Now the argument most people will give is that income will increase at a substantial rate. The problem here is that with economies delving into crisis from which it's going to take decades to come out of. And corporations filing for bankruptcy day in and day out. An ever increasing threat of defaults in the Eurozone, an unstable oil rate and widely fluctuating gold prices. Coupled with the fact that America and other developed and developing countries refuse to tax their Ultra rich and in spite of running deficits that amount to trillions of dollars still wish to increase it.


The future but seems bleak. So do me a favour today. If you see that Adidas shirt going for a 1000 walk in to the store and bargain for a fairer price. And buy it. For 10 years from now who knows what that Adidas shirt is going to cost?


-Doodle

Lesson # 28 : Mutual Funds

Financial advisors of the world will tell you that if there's no better bet than a mutual fund if you don't have the time or the money for investing in equity{stocks}

However, the question remains is it really worth it?. All that money invested in an instrument which barely guarantees any returns yet it just may manage to consume up the entire capital in a few months.

The answer surprisingly is a YES.

Mutual Funds are one of the easiest ways to invest in a market if you are an investor.

An investor always looks at a horizon of 5 to 10 years and then chooses an appropriate fund to invest in. The point being that when you select a fund follow the following procedure :

Check the Parent Company and performance of other funds
Then check the holdings of the Fund in which you plan to put your money in
Then check the total assets under management {The larger the better}
Then check the past performance of the fund and calculate the average year on year return and not average return
Finally check as to how sound the fund manager is and what is the average amount he is paid in commission

Also check in the scheme document if there is an entry or exit load. There's a very low probability of either but why take a chance.

Follow the given steps and there is barely any chance that you will pick the wrong fund.

And finally remember to trust your financial advisor but not blindly.


-Doodle

Lesson # 27 : Monopoly

It's one of the oldest board games in the world and undoubtedly one of the finest. It's been around for ages and has been passed down from one generation to another. The game is none other than Monopoly.

Clear from the word Go monopoly offers individuals a first hand experience on dealing with property transactions to making investments in properties while calculating returns and risks simultaneously. The amount of  brain usage while making decisions in Monopoly matches the usage made while solving complex math problems or reading Literature. There's a heightened sense of response and lessons learnt while playing the game are seldom forgotten.

More often than not the game tests an individual on various levels such as determining on which properties hotels or houses should be built to which properties are worth the money to situations where individuals must choose to take loans from the bank to either repay debt or purchase properties.

The longer the game the more complex it gets and the more sound a person is in real life while making decisions.

It's a blessing in disguise knocking on your doorstep the question is are you going to make the most of it?


-Doodle

Stock Analysis # 1 : Suzlon energy

For the past few months we have been tracking a large number of stocks on the BSE as well as the NSE and have come to conclude that a majority of these stocks are trading at levels that are phenomenally below their actual values and if invested in periodically or at the earliest opportunity would give returns that could make anyone and everyone the next Oracle Of Omaha {Warren Buffet} So here's the first in a series of articles on stocks.

COMPANY : SUZLON ENERGY
PRODUCTS : RENEWABLE ENERGY [ WIND TURBINES]
CURRENT SHARE PRICE : 25.15 as on 5 April 2012 with the Sensex at 17486.02
BOOK VALUE : 38.11

Suzlon Energy stands out as being the 5th largest company in terms of Market Share in the world. Source { Wikipedia and Fortune March 2012}. It stands out as being one of the few companies investing in meaningful renewable energy and is focused on delivering wind energy to consumers.

The reason Suzlon stands out is that it trades at 25.15 currently which is nearly 25% below it's book value. This is the only reason to buy Suzlon till the time that it is at par with it's book value.

The Networth of the company stands at 6794.48 crores as compared to 5604.31 crores in the previous year. Showing a substantial growth of nearly 21%.

Moreover, Suzlon's total income stood at 4840.25 crore while it's total operating expenses were 4312.45 as compared to 3066.78 crores and 3444.85 crores respectively. Clearly indicating a growth in Volumes and a decline in the company's operating expenditure.

Should you go and buy Suzlon?


HELL YEAH



NOTE : Investments in the stock market are governed by a variety of risks and factors. Each and every individual must consult his/her financial advisor before making any suitable investment. Please note that neither the author nor the company take any guarantee or responsibility for the financial advice given.