Irony of bond yields

Strange are the ways of financial markets.

When US bond yields drop below 200 basis points, it results in a sell off whereas in case of Eurozone, sell off happens on bond yields crossing 700 basis points.

But both US and Eurozone are suffering from sovereign debt crisis!

So is US dollar, the safe haven worth so much softer yields?

The most popular form of public transport all over India except Mumbai is buses. And these buses are owned by private individuals. This results in buses racing with each other to grab passengers and make money resulting in lots death in the accidents that ensue. Number of deaths due to bus accidents average about two per day – this is the figure only for the small state of Kerala which accounts for just about 3% of India’s population.
If ownership is transferred from private owners to collective ownership, most of the problems can be eliminated. Thus all new buses may be owned by a company formed as detailed below. And existing bus owners may be given the option to sell it to the corporation at a shade above the current realizable value.
Kerala is having a population of about 3.5 Crores. If everyone contributes Rs. 500 each, it will be 5250 Cr. This will buy about 35000 buses assuming a cost of Rs. 15 lakh per bus. On a debt equity ratio of 1:1, total funds can go up to 10500 Crores. With 70000 buses, travel needs will be more than covered.

Min contribution Rs. 100
Max contribution No limit but amount greater than Rs. 500 will be treated as perpetual bond earning FD interest
Dividend Will not be paid. All surpluses will be pooled back to the operations of the company.
Transferability Not transferable
Bus charges 10% discount to shareholders
Voting by shareholders One man One vote

So what is the benefit for shareholders? One is safer travel on the road with a minimum contribution. Second shareholders will have a 10% discount on tickets.
Additional share issue will be only to those who do not hold any shares as far as possible. Any one not owning shares have the option to get shares allotted without addition to share capital- such applicants will be allotted shares by compulsory conversion of perpetual bond portion of others . Thus additional shares will mean lesser interest cost for the company.
Government may be made a shareholder in this set up
Someone more than willing to be a stakeholder will be general insurers: with adverse claims ratio, they will happily contribute a lot of funds.
Who can be the shareholders? For the state of Kerala it shall be all Keralites anywhere in the world and any non Keralites who are resident in Kerala. Share held by these non residents may be bought back by the company when they leave Kerala permanently.

Interest on Savings Deposits

RBI proposal for interest rates on savings deposits will come to effect by next year. The key change is that interest will be calculated on daily balances method whereas currently interest rate is paid on the lowest balance between 10th and last day of the month.

Of course this is a good move beneficial to all those who keep balances in savings accounts and whose balances fluctuate a lot such that they may not be able to make term deposits.

But how will the banks absorb the additional cost? The most obvious way will be to reduce the term deposit interest rates. But this will affect all those who are solely dependent on interest income. Most of these category keep only nil or at most the minimum stipulated balance in savings accounts. For them loss of term deposit interest will be far more than the miniscule interest received from savings account balances.

This can be solved in a way which benefits all:

All savings holders should have an option to specify whether they want interest on savings accounts on daily basis or the present minimum balance basis. Banks can have term deposit interest rates as usual but for those opting for savings account interest rates on daily basis will get term deposit rate minus a certain mark down. Others will get both savings and term deposit interest as being done currently.

Thus cross subsidy can be eliminated so that no one is adversely affected: the bankers, the term deposit holders and those who keep most of the balances in savings accounts.

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Cigarette warnings

Cigarette packs are now having visual and graphic images of the adverse effects of smoking. But the truth is that most of the cigarette sales take place in 1s and 2s. Such buyers never see the images on the pack as they see only the cigarette sticks.

A better way would be to have these images kept visible in the shops which sell the cigarettes so that everyone sees it.


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The classiest form of cricket is Test Cricket. But the problem is that it is not always entertaining. But if you compare the best test matches with the best one dayers or 20/20 cricket, the limited over version pales in comparison.

The best contests between batsmen and bowlers take place in Test Cricket. Imagine a test match with a fall of just about 40 wickets spread over five days. There is nothing to match it. Batsmen are tested in Test matches and bowlers get enough space to exhibit their skills.

But the biggest problem facing test cricket is not the five long days as is commonly presumed but five dull days. As long as the days are exciting, five days are no problem. To change dullness to excitement, more results are required. But this shall be ensured such that the essence of Test Cricket is maintained.

Here is the prescription

The team batting first starts with the usual eleven wickets and if they have wickets left at the end of the first day, only one wicket can be carried over to the second day. In other words on the fall of the first wicket on the second day first innings ends.

Let us see an example. Suppose India at the end of their first day ends with a score of 5 for 298. Then India's first innings ends on the fall of the sixth wicket the second day. Thus India has batted upto the seventh batsman.

Now the opponent starts their second innings and they will be all out on the fall of the sixth wicket. Thus it can be called a limited wickets match but the limit to the wickets cannot be known in advance.

Let us now see the effects of this. The batting team will try to preserve their wickets while the bolwling team will be out to get as many wickets as possible on the very first day since they can bat for that many wickets. So it will be a superb contest between bat and ball.

Suppose the first team is all out on the first day. In this case it has no change from the present Test. Imagine a situation when the bowlers get only one wicket of the team batting first on day one. In such case the second team can bat only upto the fall of two wickets.

This system will ensure a thrilling first innings. So what about the second innings ?

Rules shall be such that if the first innings of both teams get completed at the end or before the close of second day, the second innings shall be played for full ten wickets. Or else the second innings shall also be a limited wicket affair. Here the limit on wickets shall be fixed based on days or overs any other valid criteria.

Please give your valuable feedback at

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Safety and passwords

One of my friends is working in a Bank and is using software called Finacle owned by Infosys Technologies. One day he came to the Bank and after one hour had to leave on some emergency. Finacle logs off the user if he is inactive for a 180 seconds period. With this in mind, he did not log out of the system when he went away.

Then next day he learned that lots of transactions had taken place in his log in while he was away.

Currently all passwords are punched in when you log on to a system and till the next log out, no password prompt is there. The situation discussed above could be avoided if the system prompts for password while a user is logged on. If system asks for password say every five minutes, then unauthorised usage can be reduced to a maximum of five minutes.

If in addition to this an alert is sent to the Data centre on the punching in of wrong password, such instances can be avoided. Those smarter will not punch in the password when prompted while in unauthorised usage and for this also an alert should be sent.

Custom newspapers

Printed newspapers around the world are facing the threat of closure due to dwindling ad revenue and free access to online editions to readers.

Publishing needs out of the box thinking to survive these tough times.

Currently newspapers publish different editions from different places with some changes in content. A better way would be to have separate editions of the same newspaper for different age groups.

Thus you can have a Times of India youth edition and another one for a higher age group. Advertisers are likely to respond positively as they can target the ads with more focus.

Currently one can subscribe only fully to a newspaper. Instead of that imagine you can buy only those pages that you want!

If you are a trader in stocks and you want only the stock quotes and company specific news, why buy the whole newspaper with all the editorial and general news and all?

Newspaper vending machines are in vogue in many parts of the world and with the present technology it is not difficult to have a vending machine which displays the pages of the day's newspaper on a screen. Pages skip past one by one and you can have a glance at the pages and not read them. After having a full view, you can punch in the pages you want and pay for only those. The pages you selected is then printed out to you.

Content specific ads are placed in those pages just like in the Net. This can be tried out in developed countries before thinking about complete closure of centuries old newspapers.


An even more aggressive idea will be to place the pages of all the major newspapers on to the vending machine and a reader can select different pages of different newspapers and get an assorted newspaper. For example, consider a family comprising of a husband interested in stocks and sports, his son pursuing civil service exams, daughter mad about the film world and the house wife interested local news. It may be difficult to get the best writing in all these categories from a single newspaper. Thus from the vending machine everyone can be satisfied.

Let us see the impact of this.

Advertising will be more focussed as said above. And what will happen to the newspaper content? Presently how many newspapers know which page and which section of theirs is most read and most ignored?

With this pre printed newspapers will be substituted with live printing of newspapers. Printing will be shifted to the vending machines. Financial aspect of this will require a more detailed study.

This idea may be worth trying out.