Month: July 2012

Equity Release: Debt Instrument

Prasad AjinkyaLeave a comment

Just when you think, what will these crazy bankers think of next … and boom comes the latest financial instrument ready to stupefy you … with its sheer ingenuity and innovativeness.

This latest debt instrument I came to know recently from a friend in UK is the equity release. Lets take a case of a country home in the UK which has a bit of mortgage attached and the owner wishes to make some new purchases. The first condition of this instrument is that the owner has to be above 55 years of age and the value of the house needs to be higher than the mortgage value. This difference is called the Equity of the house … now private financial institutions will provide these house owners with a method to slowly sell their house for a part payment on that equity value.

What’s so great about this opportunity is that the house owners are not on the streets trying to sell the house directly. Take for example, this equity release from Age Partnership, the ownership will be transferred only after a long long time … until when the house owner has access to a ready pool of funds. With the minimum age requirement of 55, and the average age in UK rising to 78, this means that the house owner has typically a good 20-25 years access to this pool of funds, which otherwise would only be made accessible post the sale of the house.

Thus, finances which would have opened up very later … and mostly by the inheritors, are now suddenly available to the house owner itself. This is great news for elder citizens who are having a hard time trying to maintain a lifestyle. This instrument clearly benefits both the institution and the individuals … a win-win instrument. I wonder, does this idea seem as good as those CDO’s back in 2008.

PS – The problem of all such financial instruments is the same – lack of regulation. With this, we can be sure to see the same … without any overseeing authority to stop malpractice, rogue institutions will realize the loopholes in the system (or lack of one), and exploit this. Any system without regulation is bound to the same problems. So the CDO statement back there really is not fair, but it’s always a risk to consider!

Undead Deckard Cain

Prasad AjinkyaLeave a comment

I was playing D3 in Hell with my Barbarian, and just finished getting the third sword piece of El’durin. As I saw Deckard Cain die and I exited his cabin, I saw a strange figure huddling between Leah and the entry to the cabin.

It was Deckard Cain!! Very much alive! I have taken a screenshot of this bug –

Undead_Deckard_Cain

My Templar is confused on whether to kill this undead Cain or just be glad that he is back!

48craft.com

Prasad AjinkyaLeave a comment

This is an open letter to all of you.

It’s a bit personal and the subject at hand is very close to my heart. It’s about start-ups and seeing a company slowly bleed its way, somehow so stuck in day to day operations that we cannot immediately stop the bleeding and start the recuperation process.

A friend of mine, Vamsee had quit his campus job post an MBA, and started a company in the e-commerce area. Coming from the culturally different region of Andhra Pradesh (the region is a fusion of 3-4 different cultures, correct me if I am mistaken!), there are a lot of local handicrafts makers in and around this state.

Typically, artisans are local people focused on day to day sales in order to fill their bellies with a days worth of food. They do not have access to larger markets (and certainly do not have access to international markets). The site was created to primarily help these artisans reach out to bigger markets.

That in mind, 48craft was created. You can take a look at this handicrafts site here.

With a lot of work from different professionals, the 48craft was hand-crafted lovingly. As the site’s popularity grew, so did it’s product base. Today within a span of two years, 48craft hosts thousands of products and has to maintain an equally large inventory.

So if you are passionate about start-ups or handicrafts, then head on to 48craft.com and check out some of their cool ethnical stuff.

Europe Debt Crisis and Economics

Prasad AjinkyaLeave a comment

Today I was sitting with the Pristine content team and trying to figure out why are we going to see the biggest financial recession ever. Bigger than the one we faced in the year 2008. Definitely bigger than the Great Depression of 1929 that the United States had faced.

So, what’s the problem with have Debt management in first world countries? Well, a lot of the growth in such countries is fueled by increase in the GDP (which is primarily a factor of how much the citizens can consume). Linked with consumerism is the problem of having a limited income. So most organizations think how do I maximize the share of this limited income?

The correct way is to maximize the pocket share, or the mind share within this limited expendable income that an individual has. Apart from that, there are other ways … ways such as Credit! So do not pay me the entire amount now, pay me in instalments … 30 days free trial (which loosely translates into a 30 day credit period), and so on. Credit cards enable us to do that, loans, overdraft accounts … essentially all these instruments help a consumer to spend MORE. At the end of the day when this expenditure has to be met with payments, either the person defaults (in which case this debt is bad debts!) or the person raises another loan to pay off that loan.

What banks do at the other side is that when they recognize such bad debts, they try to sell such debts as forward cash liabilities to other banks. Based on these you have a new instrument which is called a Credit Derivative .. you will remember the CDO crisis of 2007-2008. The culprit is debt or lack of Debt Management.

The problem stems from the fact that Debt management in the first developed countries was not done in a proper fashion. Typically, countries in Europe such as UK, Germany, etc are so developed that a lot of individuals are running in the negative all the time.

But things are changing, in fact I am informed that the debt management in such countries is now being managed by third party agencies, for example, click here for UK debt management. The good part about having such agencies is that individuals can now de-risk themselves. So much so that the UK government is hoping to lean on the taxpayers to lend the government money to pull themselves out from the Euro-Debt crisis.

Interestingly enough, what can be done to reduce future debt crisis is to start cash utilization and stop unnecessary usage of the credit instruments. A reality check on consumerism also needs to be done, which is threatening to take the economies of most developed countries down. In the short run consumerism is definitely a helpful boost in the arm for the country’s economy, but in the longer run it has to be curbed.

Using Bugzilla

Prasad AjinkyaLeave a comment

At Pristine, the team I am leading has a gargantuan task at hand. We are creating a custom Learning Management System (LMS) in addition with a completely overhauled new website for the international audience. This entire process of planning and detailing the products feature-wise has taken roughly 2 months, but it is well worth it. Continue reading “Using Bugzilla” →

A Study in Pink

Prasad AjinkyaLeave a comment

As a child, I was a fan of Sir Arthur Conan Doyle and his novels. Aside from the Sherlock Holmes set of mysteries, Sir Doyle has also written thousands of short stories … the Black Panther being one of my favourite. Sherlock Holmes as always is a classic. The way in which he explained everything as it was so simple to Dr. Watson made you awestruck at the Science of Deduction that Holmes always provided.

There have been movies and there have been multiple series around Mr. Holmes and Dr. Watson’s crime solving adventures. The latest is BBC’s rendition of the modern Sherlock Holmes and Dr. Watson. What is awesome about this series is that the same adventures have been adapted slightly to adjust correctly to the modern times.

So Dr. Watson is an army doctor who gets shot in the shoulder (not the leg any more!) in Afghanistan! Dr. Watson also is seeing a therapist to discuss his psychosomatic limp (which explains his walking stick!). Holmes still has his set of eccentricities, however UK is a smoking free country these days, and he has to resort to Nicotine patches.

All in all, this series is a hilarious adaptation of Sherlock Holmes and his eternal struggle with James Moriarty. The modern age does not dull the edge of Sherlock’s deduction powers, but now they also have the aid of stuff such as GPS and tracking. If you are a fan of Mr. Holmes, then you definitely have to check out the first episode of this series, A Study in Pink (a different take on A Study in Scarlet).

Image Source: IMDB

Insuring a Close Shave

Prasad AjinkyaLeave a comment

It was raining heavily the other day, and I was stuck in traffic. The road which other-wise would take me home in under ten minutes, was jammed with traffic. The incessant rain combined with braking every single meter was a cocktail for disaster. I was slowly losing my patience and was considering parking the car and walking home getting drenched in the rain.

Let me tell you about traffic rules in such cases … Mumbai is generally a well behaved city in India (if you consider the traffic) … but once monsoon hits, then the rules get flushed the drain and the roads become a battlefield of cuts, swerves and brakes! That day was no different.

I was slowly manoeuvring my 7 year old Wagon-R through the traffic, literally inching my way to my home. At that moment, an idiot chose to cut past me and get in his Honda before my car. In a fit of frustration, I tried to stop his cut by nosing ahead in the traffic and pushed frantically at my horn … HEY YOU ARE BREAKING THE CODE!! The Honda went right ahead and put a dent in my car … a light dent on the nose … had I gone a little ahead, then it would have struck the door!

A small dent on both of our cars was not a big enough matter to come out shouting in the rain. In fact both of us will not even report it to our insurance companies … why? Well because in India, the cost of repairing a small dent is lower than the additional premium payment that I would have to pay. In the developed countries, this exploit is not there, for accident claims UK you can see for yourself, the sheer thoughtfulness that has been put into creating a simple service for accidents claim is an inspiration for insurance companies in India. In India, a lot of processes are paper based, and the thoughts of having a paper-less office are still being dismissed off as impossible. Although the companies in the UK are also still debating the feasibility of the paper-less office, it is already being put in practice in a lot of companies.

The point is, would you go ahead and insure a minor accident, if you knew its going to increase the premium payment? In the developed nations, this approach is far more mature. Will the insurance companies in India think of a new insurance vehicle where close shaves and minor accidents can be covered?