A layman's view of the US SUBPRIME CRISIS

Warren Buffet, the legendary investor, remarked in 2003 that providing reckless housing loans is going to be the biggest weapon of financial mass destruction. It has come true.

The real estate boom, which is now the real estate bubble since it has burst, has led to the biggest financial crisis the world has seen since the Great Depression of the 1930's. One thing is certain. This is not an American problem. It is yet to show its full strength. The avalanche is far from over.

First, lets clarify a few things. What does the term sub-prime mean? What does prime mean? Simply put, prime is the ability of the borrower to repay his loans. Sub prime are those who may not be able to repay their loans.

How do banks usually give loans? They would check if the borrower will be able to repay his loan based on certain criteria and documents like salary slips, bank acounts, collaterals( some assets which can be sold by the bank if you do not repay the loan) and sureties.
Now, let me try to explain what exactly happened in the US Sub-Prime crisis.


Fine. I am really sorry for the pathetic daigram I have drawn. I hope its legible atleast to the point of deciphering what is written.

Where did it all start?

Sub prime loans. The real estate boom started around 2001 and lasted till 2006 when it burst. Everyone wanted to be a part of the party. Banks for their part were ready to lend money to those who were sub prime too. That is, people who didnt have salary slips, bank accounts, sureties or collaterals. However, they wont actually own the house till they pay the money back to the banks. These banks are the housing mortgage banks like Freddie Mac, Fannie Mae and Indy Mac all of which are no more. Why did they take this risk of Sub-prime loans? The biggest reason is that real estate was booming. They could sell the houses if the loans are not paid. The other reasons are they could impose higher interest rates and they had to deal with acute competition.

To get a clear understanding, please look into the diagram that I painfully drew.

After the apparent house owner requests for a loan and the loan is granted, the money is paid to the house developer. Where do these banks get their money from? Here is where the Investments Banks, self-proclaimed Masters of the Universe till weeks before, come into the picture. They provide the money to the mortgage banks like Freddie Mac. Lets know the distinction between normal Banks and Investment Banks. IBs generally do not give out loans to anyone. They give out loans only when the borrowers are big companies or in general, when the borrowers borrow really lots of money. Those who invest in IBs are not assured of returns. They may get higher or lower returns. Its a risky business.

IBs have provided the loans to the mortgage banks which has reached the developer. Now, where do the IBs get their money from? Now come the relatively unknown Debt Funds. The Banks in this scheme of things are Washington Mutual which tanked few days back, Citibank, HSBC, our own ICICI and hundreds of companies all over the world. Thats why I said that this problem is not pertinent to the Americans. This problem was created by the Americans and it is going to affect the whole world. Where do these Debt Funs get their money from? From the common man. These include the EPF(Employee Provident Fund), PPF( Public Provident Fund) etc.

All seems to be fine.

Where did the problem start? There would not been any problems if all the people who borrowed repaid. These Sub-prime borrowers naturally defaulted in their payments. They literally packed their bags and left overnight without repaying the money. Now lets see how prices of commodities increase or decrease. It all depends on the supply-demand ratio. If you have a pen and many people ask for it, you ll sell it to the one who pays most(Supply <>

Now, since the borrowers did not repay their money, these banks tried to auction their houses which further increased the supply lessening the price. So, an house mortgaged for 1 crore could be auctioned or sold for only 10 lacs, a 90% loss. So the mortgage banks could not repay the investment banks who inturn could not repay their debts to the debt funds.

So, first, the mortgage banks fell followed by IBs, Lehmann Brothers, Bear Sterns, Meryll lynch etc. Where does AIG come into the picture? It is the American International Group, the largest insurer in the US, and once the 18th largest company in the world. All these IBs had insured with AIG. So AIG had to compensate a lot of companies with billions of dollars. Overnight, it accrued debts of $60billion, which translates to over 240000 crore Rupees. Feel the magnitude?

Next, the Debt Funds which are also banks have started to full, the most notable being Washington Mutual. Many more companies have invested here and the picture will become clearer and worser in the days to come.

So, who are the people insulated from the crisis? The housing developers and those people like Warren Buffet who quit the scene when they sensed danger.

A lot of mistakes have been committed. Can these banks and their CEOs held responsible? Sadly not. Because that is what limited company means. When there is the word limited in the name of the company, it means that the management cannot be held responsible for their actions.

Thats it. I have tried to tell you as clearly as I can of what little I knew. You are free to comment and criticise. Bye

Temples and Palaces in India

Hi.. Have you ever wondered why there are so many very old temples in South India but no great palaces? When the Kings can construct sturdy and robust temples that have withstood the vagaries of nature, why dont we have great palaces in South India? The few palaces that we have now are not more than 400 years old and they are nowhere as spectacular as the temples.

This is a contrast with North India where we have both temples and palaces. While many temples are ruined most palaces have survived and the palaces are more magnificient than temples.

Why is this so?

I could think of an explanation.

People in the south were more pious and devoted and were willing to sacrifice self for God. Sacrifice was one important facet of their lives. From history, we can presume that they seemed to wait for a chance to sacrifice themselves either for the Kings or God or their family and friends. So they were more interested in using all their knowledge and skills in constructing temples rather than for their own. This applied for the kings too. They lived in modest palaces. For example, consider the Thanjavur Brihadeeswarar Temple. It has the largest Nandi and one of the tallest and biggest Gopurams. It does not cast a shadow and scientists are awestruck at the way a single huge rock stone of several tonnes has been taken to the top of the gopuram. Couldn't Raja Raja Cholan have constructed an equally similar marvel for himself? He didnt because he was more devoted to God.

But in the north, though people were no less pious, they wanted their names to be etched in the annals of history forever. So they constructed extravagant palaces for themselves besides temples.

There can be another explanation too.

We may infer from south Indian history that Kings infact constructed impressive palaces for themselves like their north Indian contemporaries. Where are they now?

When nations conquer each other one of the first things they want is to assert their supremacy over the loser and his nation. So they humiliate him and his assets. Palaces were demolished That may be one of the plausible reasons why there are no palaces found in the south. They didnt touch the temples because the whole of Dravidian India was united by religion. One example of a fantastic palace along with a city demolished is Hampi in Karnataka.

In the north why were the temples demolished? Because the Muslim invaders were more intent on destroying the main uniting factor than the palaces. They used the palaces for themselves and the Indo-Arabic architecture grew out of this confluence.

I beleive I have a given a credible explanation to the issue.

Comments and critics are welcome.

India - A truly Secular Country?

Let me present you arguments on either side of the debate " India is a Secular country"

Yes, India is secular

India has almost all the major religions in the world with all its citizens free to practice any faith he deems appropriate.There are several arguments that can be presented in favour of India being a secular country. I will give just an example.

Prime Minister Manmohan Singh---- Sikh

President Pratibha Patil---- Hindu woman

Former President APJ Abdul Kalam---- Muslim

Vice President Hamid Ansari---- Muslim

Speaker Somnath Chatterjee---- Atheist

Leader of the Ruling Party Sonia Gandhi---- Christian and foreigner by birth

Chief Justice of India---- Dalit

No, India is not Secular

India is the only country in the world where religious vote bank politics has gained the most. Religion and politics are interwoven to such a dangerous extent. India has been notorious for its religious tolerance in many parts of the country. The 1947 riots, Gujarat pogrom, the recent Orissa and Jammu and Kashmir problems are stark reminders of this fact. Many more examples can be given.Each and every citizen in India has faced petty differences in his environment which contrasts with India's Constitution claiming India is a Secular country.

That India has definite religious differences which have led to a whole lot of problems is an undisputable fact. Also undisputable is that India, throughout its history has absorbed each and every faith and prospered through it without eliminating the other faiths. Even after Independence India continues to be so.

So Is India Truly Secular?

Comments are welcome.

The Greatest Indian Sportsperson Ever

Hi everybody.Once I wrote apropos the greatest sportsperson of all time, the logical sequel to it, me being an Indian, is to write about Indian sports. The Greatest Indian Sportsperson. The one thing about Indian Sports is that if I take popularity into account then I would fail, because Indian media has excessively popularised cricket and made cricketers demi-gods.


The other important thing is that we Indians must acknowledge that we hava not produced greats of the calibre of other greats of the world like Pele, Tiger Woods or Lance Amstrong. I say this with due respect to the Indian greats.


Some of the sportspersons I am going to consider are obvious challengers to the throne like Dhyan Chand, Milkha Singh, Viswanathan Anand, Leander Paes and , of course, cricketers. But there are others out there to whom we have failed to give respect like Prakash Padukone, Geet Sethi, Pankaj Advani and Ramanathan Krishnan.


First lets try to find just two cricketers who could be included in our deliberations. Sachin Tendulkar, Kapil Dev, Sunil Gavaskar, Ranjit Singhi are the best of the lot. Let other greats forgive me. From these we can eliminate Ranjit Singhi because he never played for India. Sunil Gavaskar was not a successful captain and found it very difficult to adjust to one-day cricket.So its Sachin and Kapil from cricket.


There area a lot of legends surrounding Dhyan Chand. He was too prolific to be true.Milkha Singh is undoubtedly the greatest Indian athlete ever. He owned the Asian Record for the 400 m and broke the Olympic record along with 3 others in the fiercely contested final in Rome 1960.Yet he was never a World Champion.


Prakash Padukone is the greatest Indian Batminton player. He has won the World cup once and the most coveted All England Badminton Championships which is the sport's equivalent of Wimbledon.


Geet Sethi has been carrying the mantle of Billiards in India for the Ppast 20 years and has now been ably joined by Pankaj Advani. Both are multiple World Champions though Pankaj is yet to win the Professional Title.

Ramanathan Krishnan is the greatest singles Tennis player India has produced. He reached the Wimbledon semifinal twice. Leander Paes has won a Bronze for India at the Olympics and is a multiple Grand Slam winner. Yet they both are not world beaters and did not dominate their game at any point of time.


Coming to the two cricketers, they have been the best . Kapil won the World Cup for India and Sachin is God, almost. Both have been prolific. Yet, I vote for Sachin for his longevity, his records, his game and most importantly his commitment, modesty and behavior on and off the field.


Viswanathan Anand has achieved what no other Indain sportsperson has. He is a World Champion in his sport. Anand has won World Championship twice, World Cup twice, World Rapid four times, 4 Chess Oscars and 1000s of international awards and title. He revolutioniosed Chess in India. But is chess actually a Sport?



So finally, to shrink the competition further, I select Dhyan Chand and Sachin Tendulkar. Sachin holds almost every record in one-day cricket and has one of the best averages in Test cricket. He is the Greatest one day player and contends for the NO.2 spot in Test cricket too, next only to the Don.

Dhyan Chand on the other hand came from a humble background and won the Olympic thrice for India. There have been issues that he has some kind of glue attached to his bat. In 1932, India scored 338 goals in 37 matches, 133 being Dhyan Chand's.Once, Don Bradman was so surprised by the number of goals that he quipped: 'Were they made by a hockey player or a batsman?'. He was known the world over as 'the Hockey Wizard'.


Sachin or Dhyan Chand? While Dhyan Chand has dominated the sport which no one till date has emulated, including Teun de Noojier, Taeke Taekama and Sohail Abbas, Tendulkar has performed extremely well under pressure which no Indian has ever experienced. So?

In my view, Dhyan Chand is the Greatest Indian Sportsperson ever because of the way he dominated the game. While Sachin was found to be vulnerable on certain occasions, the Wizard was not, never.



To learn more about the Wizard , search Wikipedia for Dhyan Chand.



Comments are most welcome.

The Greatest Sportsperson Of All Time-My Verdict

Hi. I am back to really try and figure out the greatest sportsperson of all time. The stars I considered are Michael Phelps, Michael Johnson, Michael Jordon, Michael Schumacher, Jesse Owens, Carl Lewis, Tiger Woods, Roger Federer, Muhammed Ali, Pele And Lance Amstrong.

After deliberations in my previous post, I shortened my list to Michael Jordon, Tiger Woods,
Muhammed Ali, Pele and Lance Amstrong. Now, narrowing further seems difficult but I aim to do exactly that. I go for Pele, for his amazing skills and character, and Lance Amstrong , for his determination.

Pele or Amstrong? "the King" or "The Force"? Pele came from a poor background and was at his peak for a very long period of time. Lance had only his mother to take care of him and had to fight cancer. Both these personalites have impeccable character on and off the field. And considered the best in their sport. Whom to chose?

My verdict is in favour of Lance Amstrong. Lance came back after a deadly cancer for which doctors gave him less than 50% chance of survival. He acheived all these in an energy sapping, mind boggling sport full of hardships. And he was happier when his first child was born than when he won his Tour de France title.

There may be people who feel my verdict is wrong. Before concluding that, I would advise them to read Lance Amstrong 's book 'This is not about the Tour'.

Fine. Meet you soon. Comments are most welcome

The Greatest Sportsperson Of All Time

Hi everybody paying their first visit to my blog. This is my first try at blogging. So bare with the discrepancies that may creep in. 

 

The first topic I am going to write about is something i consider myself familiar with and interested in. Sports. I have been attracted to reading anything and everything about sports and games though i restrain myself from touting aloud my knowledge of which I am proud of, and at the same time , I accept I am blissfully unaware of many amazing things, which I find hard accepting.

Fine. Without much ado, let me start. The Greatest Sportsprson of all Time. There are people who delve into this discussion and there are those who say sportspersons across various eras and games should not be compared and that such comparisons are always aligned to find the most popular sportsperson deviating from the pursuit of the Greatest. However, comparing 
Pele with Maradona is not as compelling and exciting as with Mohammed Ali. 

The stars I consider are Michael Phelps, Michael Johnson, Michael Jordon, Michael Schumacher, Tiger Woods, Muhammed Ali, Jesse Owens, Carl Lewis,  Roger Federer,Pele and last but not the least, Lance Amstrong. Before I go any further, i deeply apologise to other greats left out of my purview because of my ignorance rather than  their not being great. Critics are always welcome. I need constructive criticism to mature.  

All these are one of the greatest in their disciplines but I am looking for someone who is greater than the other greats, someone who worked that extra little that makes the difference. 

Michael Phelps with his 14 Olympic Golds and 2 Bronze medals in just two Games overshawdows almost any other Olympian. You can realise what a monumental thing he has achieved when you compare him with the nearest competitor Carl Lewis who had 9 Golds in 4 games. However he was fortunate to dominate an event with many disciplines and he never beat Ian Thorpe in his pet event. Victory over Thorpe in this Games would have definitely made me more interested. 

Michael Johnson is arguably the greatest quarter miler of all time. He holds that world record and held the 200 m record too for 12 years. You would be astounded by his dominance when you see his world record videos in You tube leaving the others in the field feel like school boys. 

Michael Jordon is undoubtedly the greatest basketball player of all time. The fact that he twice came out of retirement - stars usually fail when the come out of retirement amid huge expectations- and managed to win titles is testamant to his greatness. He is called "His Airness" and Mr.Air. Agian Youtube would help you gauge his power. Watch top 10 of Michael Jordon.

Yet another Michael, no less greater , is Schumacher. F1 fans in parts of the world where it is gradually gaining fame know only Schumacher. Though his greatness is surrounded by controverseries hi is still one of the greatest. Once, he won a race by around 1min 40 secs. Another time he drove more than half of his race with a gearbox stuck in the 5th gear only to win handsomely. Yet another time, he recorded fastest times in almost two third of the total number of laps in wet conditions. Moreover, he won seven titles, unlikely to be emulated in a very long time. Schumacher holds many records in F1 including most drivers' championships, race victories , fastest laps, pole positions, points scored and most victories in a single season.He is the only driver to have an entire season of podium finishes..Great?

Back to another Olympian,James Cleveland Owens or Jesse Owens. He is the first athelete to win 4 Golds in a single Games. His win gains additional importance against the backdrop of Hitler and his grand plans of asserting Aryan supremacy at the Games. His ability and talent was not recognised in the US at that time and that he had to race horses for his leaving is a sad thing.

Next is Carl Lewis, the first person to emulate Qwens' record in athletics and the first to win 4 consecutive golds in a single event. He definiltely is one of the greatest. His longevity certainly adds to his greatness. 

Tiger Woods is the richest sportsperson ever.Though Jack Nichols holds the record for the most number of Grand Slams it is inevitable that Woods would surpass him soon. Jack Nichols acheived is 18th slam at 48. Woods, 32, can be expected to do that in a few years.He works best under pressure and his dominance is unsurpassed in golf.

Muhammed Ali, born Cassius Clay, is the greatest boxer of all time.He was an Olympic Gold medallist and the only boxer to have won the heavyweight title 3 times in a row. thi is great especially  because, in the 100 year old history of the championship every title holder has defeated the previous one every year.He was voted the Sportsperson of the Century by Sports Illustrated and BBC.

Roger Federer is arguably the greatest Tennis player ever.Rod Laver and Pete Sampras dont make the grade because they were not as consistent or as all round players as Federer. Fedex has made 18 Grand slam semis continuously while Pete made three at the most. The loss to Nadal in the greatest match of all time this year at Wimbledon does not diminish his greatness. While Pete won his last Slam 12 years after his first, Federer's longevity remains to be seen.

Lance Amstrong is the greatest cyclist of all time overshadowing other greats like Miguel Indurain.He is great because he won Seven tour de France titles in a row. He is greater because he won the title with the record shortest time and with record longest margin. He is one of the greatest because he did all this after fighting testicuar cancer.

And finally, Edison Arentes Do Nascimento. Confused. He is the greatest footballer of all time , also called Pele.He is known as "THe King of Football" or just "king".Brazilians hero worship Pele. He dedicated his 1000th goal to the nation's poor children. He never went to the lucrative clubs of Europe despite several offers. He is the only footballer to be part of 3 World Cup winning squads. He won his 1st world cup at 17. Want more? He was titled Athlete Of The Century by the International Olympic Committee without appearing in a single Olympics. Dumbfounded?

So who is the Greatest. Still difficult. 

Thats it for now. I would like to get all your thoughts and criticisms before continuibg further. I will be back with my verdict soon.

Bye..