Double or nothing

Investments are subject to market risk….. …So goes the red herring. Do we take the time to understand this?  My guess is, No. The first question that follows is, “how can I double my money quickly”. I do not understand the fetish with doubling the money but this has been a long selling line to attract novice investors. “Sir, your money doubles in 5 years………” most of us don’t pay attention to the rest of the sentence and get stuck to the ringing words of double in 5 years. Many start making plans of how they could purchase that new house, car with the money generated from their investment. So, I ask again, do we actually listen to the red herring?

There is a huge difference between investing and speculating and very often we confuse one with the other. While the former is based on hard facts and financial numbers, the latter is mostly on market sentiments and could be a whipped up euphoria that would soon die down. So a speculative investor plays the short game of whipping up hysteria and realizes the earning by reversing the position before the hysteria dies down. The rest of us “long time investors” who should have relied on numbers before investing lose out money as we cannot time the reversal of position in a speculative market. The novice investor always loses money in the “double or nothing game”. However, there are a few ways a novice investor can double the investment too provided they do the necessary ground work.

1.     Rule of 72:  This is the rule of thumb that helps us rate comparable investment portfolios. The rule is simple – if you divide the ROI (annualized) into 72, you get the number of years it would take for your investment to double. E.g. for a 10% ROI, the investment doubles every 7.2 years (or 7 years). Ideally an investment portfolio is termed decent if it can double in value between 7-9 years. If the time period is over 9, then it’s considered as a “safe investment”- low risk and low yield. If the time period is less than 7, the portfolio is loaded with speculative stocks and is definitely high risk and high return. While neither one is good nor bad, investors should use this rule to know the risk they are taking up. Investment is about being informed and not being caught blind sighted.

2.     Buy on margin: While this is not actually depending on the stock market to double your investment, buying on margin certainly accentuates your earnings. Buying on margin essentially means trading on borrowed money. E.g. If you borrowed money from market (Banks no longer lend money for stock purchase) for say 10% interest and you invest in a portfolio with 14%ROI, you make a cool 4% of the value of the portfolio after paying the margin money and interest. This is money you have earned without investing any money, so out of thin air. However, it’s not advisable to trade entirely on margin; you need to find a proper balance that gets you a good ROI while not exposing you to adverse risk. Good indicator is to trade up to 70% margin and not further. 

3.     Blood bath: In the depression of 1929, Keynes lost ¾th of his investment to the stock market crash but was one of few people to earn back most of his investment. The golden rule he followed was – “Always buy in a blood bath”. There are times, when stock markets crash and people lose large portions of investment portfolio. The best way to double your investment (even if your own portfolio lost value) is to go on buying spree. The amazing thing about a blood bath is that it triggers a selling sentiment and most good stock is offloaded and loses value. However, the stock market quickly corrects itself and the stocks rebound in short term and reach to almost the values they held before the blood bath began. This would ensure you more than double your investment over 2-3 months. The investor needs to have a keen eye for stocks and always go for buy during a blood bath. It’s a risk free way to surely double your investment. Investing in the same stock over long period is not recommended, this is just a means to win back most of your losses in the blood bath.

4.     Retirement funds: In almost every country, there are laws that encourage you to build a retirement nesting. In India, employers are bound by law to match the additional investment made by the employee into Employee provident fund which over and above the minimum required by law. Similar law is present in the United States as well. Even though, you may not realize the benefits immediately, this is the most sure shot way to double your investment from day 1.

I would like to end on a cautious note by saying; the red herring is there for a reason. Never ignore the fine print while investing especially if you are trading using your savings. Wish you all the luck.

So long..

How do we hedge inflation

Inflation is termed as the taxation that we all have to bear. I will not get into the details of inflation and what causes it as that would take a detail explanation and shift focus off the topic at hand. Inflation is paying more for the same services than you were paying for, a month / 6 months / a year ago. If you pay 10% more for the same amount of goods than last year, effectively you have been taxed 10% extra this year by the Government. Hence inflation can also be seen as an unwritten tax. So the question arises, how do we hedge against inflation? How can we protect our savings from losing value?



An obvious advice would be to invest in assets that would appreciate at a rate higher than the rate at which inflation rises so would make your investment inflation proof – in essence hedge against inflation. There are several such investments I would like to comment on 3 specific assets - land / property, gold and treasury bonds. Now each of these assets has positive and negative aspects which make them useful in specific scenarios. I will try and touch upon each of these aspects. Firstly, let me discuss about land/property. This is an asset that never loses value and always appreciates so there is no downside to investing in land. The rate of appreciation is decent from measly 5% to 500% percent depending on the timing and location of investment. A rule of thumb in this regard would the value of property doubles every 3-5 years irrespective of the timing of investment. So this must be a terrific investment? Well, not quite. Land and property is a large investment and not affordable for everyone. If you are among those who cannot directly invest in the property market, try purchasing on margin or purchase a portfolio that invests in land and infrastructure, it is all the same. The only downside of active investment in land/ property would be the lack of liquidity and irrational market behavior. Land/ property is not easily liquefiable – meaning offloading it is a tedious legal process with too many commissions involved which might discourage frequent purchase and sale. However, there is not an asset that appreciates as quickly as land /property.


The next best asset in terms of appreciation would be gold. Gold is the precious metal that has always appreciated in value due to the limited quantity and unquenchable thirst of the buyers. In fact until a few decades ago, the value of a currency was derived by the amount of gold held by the country’s Federal Reserve. Gold / oil securities are still the most valued means of alternative investment in the face of global uncertainty. The uniqueness of gold/ oil securities is that irrespective if the global financial scenario or political scenario the demand for these never flag and hence their value always keeps growing. This is the most ideal investment for parking your money while you are not sure of a long term investment. It gives very high returns but is very volatile as well. The problem gold / oil are that you cannot have it as a long term investment option. Investors use gold to park the funds until the actual avenue opens up for investment. E.g. after the 2011 global debt crisis, investors all around the world pulled out investments from Euro Zone and invested in Gold and oil securities which continued till late 2013.


The last of the options is treasury bills. Treasury bills are the most secure form of investment as they have the sovereign country’s backing. Most of the long term treasury bills provide a decent return with zero risk –unless the sovereign country files for bankruptcy (E.g. Greece) which is a rare phenomenon. Most of these treasury bills are rated by independent rating agencies like Standard & Poor or Moody’s and they are based on the the yield and risk involved with the treasury bills. While US treasury is zero risk and low yield, maybe a Zimbabwe treasury bill is high yield and slightly higher at risk. All said and done, treasury is the least opted investment avenue mainly because it has the least ROI as compared to other investment options even though it is a good hedge against inflation. Investors who are risk averse mostly opt for treasury bills.


So long..

When to retire?

The question is more a factor of your financial status than anything else. Although retirement comes with many spending checks and “living within means”, if you play your cards right it could be the best years of your life. At the offset let me say, waiting for 60 -65 years to retire (legal jurisdictions differ) is a complete no-no. A few people continue working well into their seventies – E.g. Doctors, Actors etc. but that is more a function of your passion rather than a necessity. So, to back to the original question, when should we retire?



There are several factors in play when we answer this question:

1. Where is the money: In our 20s and early 30s there are hardly any responsibilities on us so this is the right time to start saving and start building a retirement fund (over and above the gratuity or social security). We should start a savings deposit account and each month put in some money – could be fixed amount, could vary only thing important is we remind ourselves to add to this fund every month and never withdraw. This works like a piggy bank, you will be surprised how much you would have saved in 20 years. This money can be a major cushion should you decide to retire early. Many of us postpone retirement as we don’t have enough funds to sustain, this fund would let you retire on a time of your choosing.

2. Psychological issues: Several people cannot cope with retirement blues. Some cannot imagine they have nothing to do anymore while the rest simply miss the routine. Mostly, it’s a case of withdrawal syndrome where your mind cannot accept a decision that was made by someone else on your behalf. The best way could be to initiate the decision on your own terms.

3. Hobbies: We must develop a hobby during our younger days. This would be most useful should we plan to retire early and enjoy life. Nobody can bear an entire idle day and this is where your hobbies will keep you engaged while enjoying your free time resting and travelling. Hobbies could be anything like teaching (unless you are a teacher), writing, reading or sports (depending on your health condition) etc. Can’t hurt to have a hobby or two.

4. Social circle: Retiring will set you free from a fixed routine but it’s always best to employ your mind in alternative routines by developing a social circle with whom you could have a good time. It’s better if you have a social group of same age and interests.

5. Switch jobs: One way to retire from your job is to switch careers. Take up an alternative job in a diametrically opposite field ideally which does not add pressure of coping up. Something like book keeping, tossing burgers at local restaurants or librarian. Something that keeps a cash flow but gives your mind the space to enjoy retirement benefits and does not force you to dig into your retirement savings until 60-65 years.


According to me the idea age to retire from your job would be 45 years:

1. If you have not grown in your organization by then, there is little chance you are going to make sudden headway by sticking on.

2. You have put in enough years of work to have a decent enough retirement fund plus social security benefits.

3. In most cases your health is still with you and problems associated with ageing have not yet set in.

4. You can think of picking an alternate career and do a decent job as you still have the zest to work but you are only retiring to enjoy and experience life.

5. For the people with a risk taking appetite, it would be a right time to start your own venture with your savings or by taking a loan as you have enough working years left to pay off the loan.

6. It would also be a right time to take that mortgage for your dream house and allow you to pay it off over the next 15 years.


So in conclusion, there is no right answer to the primary question. You could use the factors listed above to find your own ideal retirement age.


So long…

Can traders make money without manipulating the market?

During a finance lecture, my professor told a class of 120, “Markets are usually fair and reflect true value of an asset and market have a tendency of correcting the over pricing or underpricing over a period of time. The traders however, hope this time lag is large enough that they can make risk free money”. At that point of time the information was merely an observation of a person who theorized the markets and had little or no exposure to actual trading. Over a period of time, after studying the markets closely, I wondered – unless you are Berkshire Hathaway with a knack of identifying potential value stocks and making money over short terms, could a day trader make real money without manipulating the market? (Real money in trading is half a million dollars or more daily) Is it really possible for traders or hedge funds to bet on market fluctuations with reasonable accuracy to make a real net profit? Can any trader hedge large sums of assets, large enough to make real money if she/he knew the outcome was dicey? These are few issues are would like to talk about. Although I am not equipped with data to make a call one way or the other, I could present a case and let the readers make their own judgment.




The logic behind market correcting itself can be seen in the following case study.

The value of an asset can be term in two ways,

1. Intrinsic value – value of the asset determined by its future cash flows discounted to present value

2. Perceived value – market sentiments and overall performance of the sector that rubs off on the asset thereby adding value to it.

The market value of any asset is a function of the above two values. The trade volumes are mostly determined by the perceived value but the initial investment happens only because of the intrinsic value. The gap between the two is the scope for the trader to make money. The moment the intrinsic value catches up to the perceived value, the undue profit on the trade halts. The notion that markets corrects itself is based on the assumption that its takes a short while (from few hours to a day) for the intrinsic value to catch up the perceived value as the undue demand for the stock pushes its price upwards till the two values match and then stabilizes and trades between a narrow margin.


The trader can make risk free profit if she/he can delay this upward surge of stock price by either getting illegal information (insider trading) or by artificially creating a downward trend to delay the surge. In each case, the trader has to use unethical/illegal practice to manage this and make millions by using this window effectively. Left to it, the stock surges up or down to meet its perceived value and it takes on in a million chances to utilize this natural window. However, this window can be artificially created by traders too. Imagine a company has decided to diversify its business and it knows that once the decision is made public; the stock prices will shoot up by 10% its present value. If a trader gets this information before the press release- she/she could buy these stocks at present value and then make instant profit of 10% or more my selling it once the press release is made and information becomes public. This is risk free return and is hence illegal because it comes at the cost of other honest investors who get a lower return. Similarly, traders are known to collaborate with other traders to simultaneously off load large stock of shares to artificially and temporarily lower the price of a share. The window is then used to buy back the same stocks at a lower rate and make risk free profit at the cost of other investors. This usually works best for currency traders.


I cannot however think of any other way a trader can make real money by trading within the realms of ethical trading practices. I may be wrong, there could be a case where traders actually make good calls consistently and work within the natural window of a stock and make real money. I would however like to know a few of them to correct my perception. Until then….


So long..

You're Perfect

Tarun Gidwani

How far would you go to bring joy to your fellow human beings? Some of us do anonymous charity donations, some others take up political causes, some adopt children’s’ educational causes while some others take up volunteer work as teachers etc. Most of us, however, simply pass by the opportunity as we are “busy” with our life. There is an old adage addressing children – “you find time for all the things you like, else you find excuses”. Me thinks, this is true regarding most of us (me included) when we talk about giving back to the society we live in. If push comes to shove, I am happy to write a cheque for a cause but ask me to give my time and efforts for a cause and out comes the list of excuses – work pressure, spending time with family, enjoying sports etc. You know, 24 hours are never enough if you want to contribute to society only after you have satisfied all your other needs. Time needs to be made by cutting into things we love to contribute for a greater cause, a cause, much greater than you and I.

Tarun Gidwani is a 20 something guy and am sure like all other 20 somethings, he has an amazing life filled with friends, colleagues, family (not necessarily in that order) and yet somehow he takes couple of hours every day holding up this board (see pic) for passersby at busy traffic junction to bring a smile on their face. I have been seeing this guy for 2 weeks now and at first I thought this was a message for some female friend who had stipulated him to the task. Call me crazy, but crazier things happen in the real world. One day, I stopped to ask him about the board. He informed me that the he has been doing this for a while now and tries to do this every day for a couple of hours just to make the passersby smile and feel good about themselves. Tarun told me that most people are stressed with their daily routine and are always trying to catch up and achieve that little bit more. He wants to help them relieve stress by reminding each one of them “You are special” – “You’re perfect”, going to such lengths just to give us passersby a reason to smile and for a moment feel good about ourselves. I would have loved to stop and talk to him more about how he came up with this plan and get that message out in any small l way I can. I hope someday, I will have that opportunity to have that chat with him. For now, people passing by Westin Hotel, Starbucks (KP) and FC road – look for this young man holding up this board and make it a point to wave out and smile. After all, he is spending precious time of his life for this very reason. More strength to people like him. Godspeed to you Tarun!

So long….

Keynes - Role of Government in economy

Until John Maynard Keynes came along, the world was spilt vertically between two major economic ideologies; capitalism and communism. Adam Smith (aka the father of modern economics) was the main propounder of capitalism (refer to Wealth of nations) and Karl Marx was the main defender of socialism / communism (refer Das Kapital). The main difference in the thoughts of these two gentlemen was defining the forces at the fore front of an economy. According to Adam Smith, private entrepreneurs were the main force behind job creation and creating meaningful commodities that in turn would create a business cycle of generating revenue through sales; to scaling up the output to meet the demands which in turn generates more employment. This would mean free enterprise is the corner stone of a robust economy and the job of the elected Government is to promote free enterprise by having adequate tax structures that would motivate business rather than impede it. Mr. Smith believed in small Government and a strong stable free enterprise would be best suited to create wealth for nations.


We can think of several developed countries that adopted this free market enterprise style of economy and are doing fairly well for themselves. Karl Marx had contrarian views to Adam Smith and was strong advocate of socialism or communism or Marxism. According to Marx, true wealth of a nation was in its citizen and taking care of this human capital should be the primary focus of the elected Government. The prescription from Marx was that Government should tax the business heavily (sometimes up to 70% of Income) and use the generated revenue to build state run schools / hospitals / social programs which would provide for the citizen at nominal cost and thus help build the human capital. A healthy workforce raring to go would be the ideal indicator of a nation’s wealth. Several powerful nations of the 19th century adopted the Marxist ideology for economy – chief being USSR (erstwhile Russian federation) and People’s Republic of China. The GNP (gross national product) – a generally accepted indicator of how well an economy is performing was slightly higher for countries adopting capitalism while the social indicators like health / nutrition etc. were slightly better for socialist countries. Did we have a winner? Well, not exactly, each one was a prescription for a different illness and both worked very well depending on what target were you trying to achieve.


Socialism was open to abuse by politicians who used tax revenue to fund pet projects and seek votes on them and Capitalism gave the business a free run to hire people based on need and re-trench them when not required. So effectively, the workforce became one of the raw materials for the business. Then we had the work regulations which tried to tie some loose ends so that businesses don’t end up exploiting the workforce. However, since the main focal point was business and not people, capitalism never found much traction in Europe (large parts) and Asia where some or other form of socialism found roots.


Keynes was never formally trained in economics but by far made the biggest contribution to find a middle ground between the extremes of capitalism and communism. Keynes was trained in Mathematics and was an active trader who invested in stocks. He made a lot of money in the 1920s until the great depression – when he lost 3/4th of his earnings only to win back considerable amount by investing in stocks that lost value during the depression but later regained value during the New Deal. Keynes accurately forecast major economic events of the 1920s (except the great depression) and chronicled his experiences in his works. Today, apart from China and Cuba and some smaller countries, almost all economies have adopted Keynesian model of economics. There is no such thing as capitalism anymore and socialism is on its last leg. This is the impact of Keynesian economic model. Keynes concluded from his experiences that capitalism works best only when there is near universal employment. With higher rates of unemployment, the capitalism fails to deliver and simply increases the gulf between the haves and the have not. Hence, Government must play its part in generating demand during an economic downturn to keep the unemployment ratio down and keep the economy healthy despite adverse economic condition.


Government is expected to provide for higher wages and larger number of infrastructure projects to keep the workforce employed during downturns so that it maintains the consumption of goods and the economy does not slide into recession. Due to the peculiar nature of Government borrowings, it can afford to ramp up the spending in the short term despite not having revenues to cover the costs. Private businesses which work on profit basis cannot afford to retain workforce when the economic conditions are bad and it is at this time the Government steps in and provides short term employment. Hence, Government has an important part to play in the GNP of a nation and the exact portion of its contributions would change from time to time based on the domestic/ international economic scenarios. Keynesian economics brought together the good aspects of capitalism and safeguards of socialism (limited way). In the latest instance, major economies are using Keynesian model to overturn the economic recession of 2008 triggered by the subprime mortgage crisis and Greece debt crisis. So far, it seems like Keynesian economics is here to stay.


So long…

The Truman show complex

Recently, I had the opportunity to watch the cult movie – The Truman show. It got me thinking about many events of my own life and how each one of us has at some point or the other succumbed to the Truman show complex – assuming his/ her life is part of a reality show which is being shot at the instruction of a master director. Now, one could go spiritual and say in way each one of our lives is a reality show at some level, but I want to address the megalomaniacs who try and arrange for their life to be a reality show that people could enjoy. According to me, these people suffer from an amazing Truman show complex


Politics and politicians have an embedded people factor associated with them. Every work they take up or every word they say is addressed to a section / sections of people whom they will target for votes. This has been the nature of politics and shall be even in time to come. One must seem like working for your interests even if via a cynical gesture. Then the 24x7 news channels arrived, and politicians and media got into cahoots to con the electorate. This is a cozy win-win relationship that each one complains of but never ends. We know there possibly cannot be enough news worthy items to feed a 24 x7 news monster so obviously the media has to create / manufacture news and politicians are willing to act as a prop to stay in news and be relevant. It could also be a telling comment on the Goldfish like short memory span of the electorate that these people wish to exploit. We as an electorate have a shocking short memory span and unless something is being barked at us all the time by “friendly media” we simply carry wrong information to the voting booths.


With this background, let me steer towards the topic at hand, Truman Show complex. Apparently, having the media run their sound bites in endless loops just does not give our politicians enough TV exposure. Politicians are, at an alarming rate, trying to arrange for media to cover their private moments and portions of their private life to remain in the news. They are vying with celebrities to make a “reality show” of their private life. One can understand why celebrities leak private videos or pictures in unflattering poses – “any publicity is good publicity” right? Remember, when you first watched Big brother or other such reality shows you wondered while rolling your eyes –“Who in their right minds would sign up for such invasion of privacy?”. Over a period of time, we got hooked onto it and reality shows became entertainment. People, nowadays fake laugh, cry, love, hate for the TV and ratings and guess what, we as viewers love it anyways, despite knowing it is violating the basic trust between an audience and the actor. The media has successfully steered us as audience towards being more inquisitive, snoopy and seeking cheap thrills with voyeurism.


Indian politicians, not to be left far behind have embraced this love for voyeurism to keep the electorate enjoying the circus and forget that they don’t have a job at hand or food to fill their stomach. The present Government is a master at this task with the PM having a great track record of avoiding every possible question and instead allowing the media to spin around like an empty bottle and when the bottle stops it points to a rehearsed / pre planned media extravaganza which takes up the news cycle for a few days and we forgot the important questions that need to be asked. Whenever there is a sticky situation developing that might get the PM bad press, the PM steers the media to a circus of personal photos or choreographed media events and the media laps it up lock stock and barrel and forgets to report on the issues pertaining to the people. Consequently, we are all lulled into a slumber with a fake satisfaction of “all is well”. The PM has had this media policy even when he was the CM of a state and the media is well aware of it. They are willful participants in this shenanigan to make a fool of the electorate. The media gets its ad spots and the PM gets his free press coverage without having to ever answer a tough question.


Freedom of speech is tricky, it derived from the ability of media to ask tough questions to the Government on behalf of the governed and be the conscience keeper. With media selling out so cheap, we must be worried of the day when we need to be informed of an impending problem and the media is busy covering PM’s birthday celebrations or one of the many such choreographed media events. As Indians, we are all part of this reality show which is being choreographed by the people at the top and so far everybody is acting to the cue. This all works on a thin edged balance as we saw in the movie “The Truman show”, one actor missing the cue can topple the apple-cart. For the sake of India, I hope this happens sooner than later.


So long…

Management in the times of politics

On 16th of May 2014, India, for the first time in her history elected a full strength right wing Government. The country had seen for the first time since 1984 seen a single party majority in the Parliament and the leader, Narendra Modi was the Prime Minister elect. Modi had earlier governed the state of Gujarat for 12 years and sold his resume to the public, who hungrily lapped it up. The narrative was more or less on the lines of – “I will deliver”. The incumbent Government at that time came up with its counter narration of – “Us, not I”. I want to approach this political choice from a management point of view. I shall not pass my judgments on the subject at hand but would try to flesh out details of each of these approaches.


What does “I will deliver” mean? It means a more power concentrated in the hands of the executive headed by the Prime Minister. In the management paradigm, think of it as a chief executive officer (CEO) who is running the show on his own without taking the board into confidence. There are several organizations that run on this approach and most of them are family owned firms where the powers of owner/ managing director and chief executive are all invested into one person who is calling the shots. While these organizations seem efficient and we all know who is in charge, there could be several pitfalls for these organizations. Firstly, there is not discussion or dissent. The board of directors is only present to rubber stamp the decisions made by the CEO or it will be replaced for a more pliable board. This means there is no debate / discussion about various project proposals at hand and the whims and fancies of an individual rides roughshod over the majority if need be. Consequently, there could be several bad investments made which could have been avoided had proper analysis been done. The board is shortchanging the investor to whom they have a fiduciary responsibility and doing what is best for an individual not necessarily what is best for the organization.


Secondly, in these organizations, there is hardly any proper delegation of work. This means there is no proper ownership of responsibility. While the board takes the decisions collectively, since it is merely doing the bidding of the CEO, it would not be aware of project details or benefits. This makes up a board which is unable to do simple application of mind. This also means, there is absolutely no second rung of leadership developed who could step in during emergency measures and the whole organization is sort of dependent on one individual. Such organizations run fairly well initially but then they become top heavy and stop attracting good talent then slowly degenerate.


The opposite can be said about the other approach. In organizations that have a strong board, the CEO is answerable to the board and is often different from managing director. Project proposals are discussed in the board room thread bare and the CEO has to make revenue projections for the company to help the board vote on these projects and often the best project is implemented. I am not suggesting that CEO would not have her/his favorite, am saying each project is picked on merit rather than whims. Decision making in such organization are comparatively slow and office politics is often high. This makes the CEOs job that much difficult because apart from having a steady hand on the control, she/he has to keep the board in good humor to have a well-oiled decision making body. The CEO cannot afford to have disgruntled board members driving wedges in the spokes of the wheel. These organizations have a strong base and are often more comfortably placed to handle emergency measures.


CEO in an organized company does proper delegation of work because she/he has so many other issues to handle which include people management as well. Consequently, these organizations develop a strong leadership base and each section of the company has a vice president who steers her/ his section. There is a healthy competition within the organization to outperform each other and contribute more to the organization. These organizations grow and diversify easily as they are very organic. The job of the CEO is difficult, sometimes unfairly so but it also ensures only the very best survive. These organizations are not dependent on individual brilliance or stupidity but on a proper system that fixes accountability.


On May 16 2014, India chose the former and chucked the latter because she was yearning for a strong hand to direct her into the future. Will the pulls of politics make the executive to loosen his hold and steer into the direction of flow or will he weather the storm and risk losing the board which looks pretty unhappy within the first 100 days. Time will tell.


So long…..

Bit coins - How it works

How does Bitcoin work? This is a question that often causes confusion. I am making an attempt to post a few facts about bit coins I have picked from few sources for readers' benefit. I do not take any credit for the information presented and the main objective to inform a reader of the basics about bitcoins


The basics for a new user

As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once.


Balances - block chain

The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the block chain are enforced with cryptography.


Transactions - private keys

A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining.


Processing - mining

Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.


Some things you need to know

If you are about to explore Bitcoin, there are a few things you should know. Bitcoin lets you exchange money in a different way than with usual banks. As such, you should take time to inform yourself before using Bitcoin for any serious transaction. Bitcoin should be treated with the same care as your regular wallet, or even more in some cases!


 Securing your wallet

Like in real life, your wallet must be secured. Bitcoin makes it possible to transfer value anywhere in a very easy way and it allows you to be in control of your money. Such great features also come with great security concerns. At the same time, Bitcoin can provide very high levels of security if used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your money. Read more about securing your wallet.


 Bitcoin price is volatile

The price of a bitcoin can unpredictably increase or decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets. Consequently, keeping your savings with Bitcoin is not recommended at this point. Bitcoin should be seen like a high risk asset, and you should never store money that you cannot afford to lose with Bitcoin. If you receive payments with Bitcoin, many service providers can convert them to your local currency.


 Bitcoin payments are irreversible

Any transaction issued with Bitcoin cannot be reversed, they can only be refunded by the person receiving the funds. That means you should take care to do business with people and organizations you know and trust, or who have an established reputation. For their part, businesses need to keep control of the payment requests they are displaying to their customers. Bitcoin can detect typos and usually won't let you send money to an invalid address by mistake. Additional services might exist in the future to provide more choice and protection for the consumer.


Bitcoin is not anonymous

Some effort is required to protect your privacy with Bitcoin. All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address. However, the identity of the user behind an address remains unknown until information is revealed during a purchase or in other circumstances. This is one reason why Bitcoin addresses should only be used once. Always remember that it is your responsibility to adopt good practices in order to protect your privacy. Read more about protecting your privacy.


Instant transactions are less secure

A Bitcoin transaction is usually deployed within a few seconds and begins to be confirmed in the following 10 minutes. During that time, a transaction can be considered authentic but still reversible. Dishonest users could try to cheat. If you can't wait for a confirmation, asking for a small transaction fee or using a detection system for unsafe transactions can increase security. For larger amounts like 1000 US$, it makes sense to wait for 6 confirmations or more. Each confirmation exponentially decreases the risk of a reversed transaction.


Bitcoin is still experimental

Bitcoin is an experimental new currency that is in active development. Although it becomes less experimental as usage grows, you should keep in mind that Bitcoin is a new invention that is exploring ideas that have never been attempted before. As such, its future cannot be predicted by anyone.


Government taxes and regulations

Bitcoin is not an official currency. That said, most jurisdictions still require you to pay income, sales, payroll, and capital gains taxes on anything that has value, including bitcoins. It is your responsibility to ensure that you adhere to tax and other legal or regulatory mandates issued by your government and/or local municipalities.



Economics

Bitcoin has garnered comments and attention from economists and journalists, as well as investors and speculators. Others who mistrust their national currency have seen Bitcoin as a safe haven from inflation and a way to circumvent capital controls. The Bitcoin market currently suffers from volatility, limiting bitcoin utility to act as a currency. This has not prevented their being used as a medium of exchange. Bitcoin is used as a currency, with about 1,000 brick and mortar businesses willing to accept payment in bitcoins as of November 2013and more than 35,000 merchants online.



For more information on the technical side look up bitcoins on www.en.wikipedia.org

So long...

Right to dignity - Euthanasia

The Supreme Court of India (SCOI) has started a fresh discussion on allowing active euthanasia. Ever since, everyone has had a say on the subject. While the doctors are cautiously optimistic regarding the subject, religious bodies have still maintained it as a taboo subject. I have very strong views too and hence I planned to write this blog to share them.


Euthanasia quite literally means “good death”. It signifies that life without dignity is meaning less and while the right to life is necessary equally necessary is the right to good death. The immediate response from religious bodies would be, “How can we support suicide?” Well, it’s not suicide so they might as well reconsider the position. While suicide is a defined as “hurting ones’ own interests”, euthanasia is an individual’s right to have a good death with minimum sufferings. There will be further questions on the possible misuse and on the religious angle of “only God can take the life”. While these may seem valid arguments, they are in fact only used to avoid discussion on the subject. Today, we need to discuss this subject more than ever as we have a historic chance to give true dignity to death as life.


Life as envisioned by God is not the state of not being dead. In fact life meant a person is alive with dignity. Life means being open to possibilities. If you take away the possibilities, it’s a state of death already and the fact that you are breathing does not actually count. If we take away the dignity and force individuals to linger on, we are in fact enforcing cruelty on our fellow beings. When we see an animal badly hurt and in excruciating pain we have enough humanity to call for a Vet who puts it to sleep and takes it out of its misery. We also justify the action of taking a life by stating that it is an act of mercy and God teaches us to be merciful to fellow beings. When a judge condemns a convict to death and the society gives its approval to the decision as “necessary to rid us from the evil”. Have we ever heard anyone say to a judge or a Vet, “God gives life and only he can take it?” When it comes to fellow human beings in pain and suffering who are begging for a release from life, surprisingly the same God teaches us to be cruel; at least that’s what the preachers have us believe. In the name of God, we let our close relatives linger in extreme inhuman pain and suffering.


SCOI has already moved from its earlier position on right to life as enshrined in the constitution. The states had legislated to make suicide illegal and a punishable offense to enforce the “right to life”. SCOI has since struck this down. An attempt to suicide is no longer a legal offense. I do not support suicide on moral and ethical grounds, but I strongly feel that our country should focus more energy and funds to provide help (financial / counseling) to individuals who are driven to the extreme to commit suicide. This could be a way to ensure the “right to life”. The SCOI has also come out in support of passive euthanasia – where doctors (supported by DNR – do not resuscitate form) decide to take a patient off life support systems to enable a peaceful death rather than keeping them alive in vegetative state hooked onto life support. There are countries where individuals make DNR provisions within their will and assign lawyers to enforce the will in case they ever meet that eventuality. The question now arises, why India has not made enough provisions to respect individuals’ right to life as well as right to end life in face of no hope. We still depend on some relative to make that decision for us in case of that eventuality and many a times emotions take a precedence and the patient is forced to linger on life support for years in a vegetative state. To avoid misuse of provisions, every state could have a board of doctors who study the case and decide if there is any hope of medical revival. Individuals must be encouraged to make a living will on the same lines one takes a life insurance. These two inputs could ensure that there is no misuse of the provisions of euthanasia and we could finally move from a passive euthanasia to active euthanasia where doctor will be allowed to inject the patient with serum that ends the life. These injections are usually painless and the patient is put under anesthesia before administering the serum. Imagine how much it would help out fellow human beings who are presently allowed to suffer in vegetative states with no hope just because the rest of us are too stubborn to let them have a dignified end to a life lived in dignified manner.


Let’s vote for right to dignity above all else.


So long…..