market – Page 2 – Pertinent Observations

How do i describe my job?

One of the “problems” with my job, if I can describe this as one, is that it’s tough to explain my job to a layman. There are multiple levels of disconnects here, and multiple “pitfalls”, if I can call them that. So when someone asks me about my work, it gets tough indeed to describe to any degree of accuracy while at the same time being concise, and at the same time talking in Kannada.

I am a quant at a hedge fund.

My work involves coming up with trading strategies, and then developing them to a level where I can have the ultimate fighter – a computer – to trade using these strategies. Then, I will need to figure out how the computer is going to implement these strategies and this part involves some heavy engineering work. And finally I code. Ok now I haven’t been accurately able to describe in one paragraph, writing in English, about my job. How do you expect me to describe it to the layman speaking in Kannada?

Coding is a part of my job, but I’m not a coder.

I deal with financial products – equities and equity derivatives. But I’m strictly not a finance guy – as far as I’m concerned, each security is just a time series. A time series on which I can trade and make money. In fact, apart from my short stint selling interest rates swaps in London, I haven’t really done any finance. My entire view of the markets is based on my idea that a security is just a tradeable time series. I think I should do a separate post on that. Anyways, I’m not strictly a finance guy also.

One of my degrees is an MBA. A PGDM to be precise, from IIMB. But I’m not a manager also. I don’t manage people apart from myself. I’m not sure I’ll find that interesting either – I sometimes think managing is too fighter a job for me.

And so on.

And then, I work for a hedge fund. Most people don’e have a clue what a hedge fund is. I sometimes make an approximation and tell them I work for a mutual fund. And immediately I get bombarded with questions like my opinion on whether the markets will go up or down, and about how long the recession is going to last. And then there are those who start telling their sob stories about their investments in the markets when the Sensex was at 20,000 and about how markets can’t be trusted any more.

Another level of contradiction is that I’m based in Gurgaon. All finance companies are supposed to be in Bombay, right? Surely, given that I’m in Gurgaon, I must be doing some back office kind of work?

Last night my uncle was filling up some arranged marriage exchange registration form for me. And he asked me to describe my job in a short phrase. I immediately came up with “trader” and that got quickly shot down since that would give the image of a lala sitting behind huge weighing scales. Next I tried “financial trader” and “quantitative trader”. No go.

Then I wanted the simple “quant”. My highly stud uncle himself had trouble exactly figuring that out, so fat chance anyone would appreciate that. So out again. I relaxed constraints a bit and said “hedge fund professional”. But most people wouldn’t understand “hedge fund”. “mutual fund” was no go for a written form. “quantitative analyst” was considered too country by my uncle. He then asked me my designation. “Associate” doesn’t mean anything, he said and shot that down too.

Sometimes I wonder if I’ve unnecessarily complicated life for myself by choosing the path that I’ve chosen. If I were working for some software company I could’ve just written “software” over there and all would’ve been fine. The whole world would’ve understood, or at least claimed to have understood. Or even better, if I were living abroad, I wouldn’t have even been required to say that much. I’d’ve been just qualified as a “foreign huduga”, with most people not even caring for which city I was in.

For the record, my listing application records my profession as “financial services professional”, as country as it sounds. This was the only middle ground where my uncle and I didn’t disagree. And in it went. It increasingly looks like I’ll have to put fundaes to Cesares about why the stock markets have gone down in the last one year in order for them to allow their daughters to marry me. I have half a mind to start describing Ito’s lemma the next time someone asks me where the markets are headed. I’ll probably start off describing to them a random walk. And say that it’s a drunkard’s walk. And perhaps use that to change the topic. I think I might need to start practicing this. In Kannada.

I’m a quant at a hedge fund.

Arranged Scissors 4 – Dear Cesare

(this is a collection of stuff I want to collectively say to all Cesares out there. Some of these might be based on stuff that has happened to me. Most of this, however, is imaginary. Nevertheless, I suppose I’ll end up saying some of these things sooner rather than later. Rather, I won’t be able to say a number of these things which is why I’m writing them here.

Cesare is a generalized term to refer to the father of the girl that you are seeing/checking-out/blading/marrying. It was collectively invented by Monkee and Kodhi, and alludes to a former AC Milan and Italy manager)

Dear Cesare,

You know, we are modern people. Yes, my mother is religious and all that but we think horoscope is a fraud. How do we know you haven’t frauded your daughter’s horoscope? Even if you didn’t, I was born through Caesarian section. What if the time of my birth had been timed to make sure I have a good horoscope? Do you still want it? Do you still think it matters?
Your daughter doesn’t look good, but I don’t know how to communicate this to you. Obviously, you won’t like to hear that your daughter is ugly, since that is a comment on the genes that you’ve passed on to her. But given that we’d cleared everything till this round, and are saying “no” now after inspecting the photo, isn’t it clear that we are rejecting based on looks?
Maybe next time I’ll ask you for your daughter’s horoscope along with her photo. Fraud it (horoscope) may be, but you think that is a better reason for rejection than looks. So next time I call you up and tell you “jaataka didn’t fit” you know what I’m talking about. Oh, and one more thing – you need to get the timing perfect. Both the horoscope and the photo should be sent together – else I won’t be able to reject based on horoscope
Every time I say “no” to your daughter, you ask me why. Why should I give you the reason? What if I had met your daughter in a pub (assume she’s a pubgoing, loose and forward woman) and hit on her for 2 days and then ditched her? Would I have to give reasons then? And you don’t take “not good fit” for an answer. There is a good chance you don’t really understand “fit”.
According to you, if I say no, there is something wrong with your daughter. And if she says no, then there is something wrong with me. I suppose you haven’t heard of something called the interaction term right? I suppose you haven’t been taught to add vectors, where there is a cosine term?
Yes, your daughter looks decent enough. She is smart enough. She is nice enough. From what I have understood she cooks just well enough. She earns enough. She is flexible enough. I agree with all of these. Excellent Common Minimum Programme, but I’m afraid that’s not what I’m looking for.
Of course, for the purposes of symmetry, your daughter can also say no to me without having to explain her stand. I’ll completely respect her decision. Being told “no” without being given reasons is not new to me. It’s happened in different markets.
And then you have a problem if I’ve already said “no” to too many women. You think I’m a loose guy, and that I’m in the market only to check out and hit on unsuspecting “hen makkLu”. But isn’t checking out and hitting on the main purpose of this process of finding a partner? Or do you mean that this market is for finding CMPs only, and I need to get out because I’m not looking for one? In any case, it would be good if your daughter were to be suspecting.
During the interview, I’m going to ask your daughter if she is a virgin. If you think she is the type that will be scandalized at such questions, you need not shortlist me.
Remember that this is the most important decision of my life. And that of your daughter’s life. So please don’t make us hurry up and make an uninformed decision on this. As long as both of us are still interested in each other, you should let us be. It takes time for Interest to move to Desire. Till then, don’t force Action.
I understand that you might be scandalized that I’m writing all this on my blog. nODi swamy, naaviruvudu heege (trans: look sir, we are like this wonly). I just hope that you and your daughter don’t really mind this. If you do, then we have a small problem here. Oh and btw, this is one post in what I intend to be a fairly long series on “arranged scissors”. You can find the entire list downstairs.
Just one thing – the tone of this post is siginficantly harsher than what I normally talk like. You are validated if you were to un-shortlist me because of the content of this post. But you are not doing the right thing if you were to un-shortlist me based on the tone. My apologies for that.
I hope that some day I’ll be able to call up Radio Indigo and dedicate a song to you. The song is by Iron Maiden. It is called Bring your daughter to the slaughter.

Thanks and regards,
SKimpy

(yes, that is my name. And if you came here looking for Karthik S’s blog, I assure you that you have come to the right place)

Earlier:

Arranged Scissors 1 – The Common Minimum Programme

Arranged Scissors 2

Arranged Scissors 3 – Due Diligence

Why is Ten Sports sitting on so many rights?

I wanted to stay up last night. I wanted to stay up and watch the WI-Eng match till the very end. Waking up this morning and checking the scorecard, it seems like it was a really good match. And Fidel Edwards seems to have become a last-day-shutdown specialist. This is the second time this series he’s hung on. And he’d done so once before against India at ARG.

There was another reason I wanted to stay up last night. I wanted to watch Liverpool play Real Madrid. I woke up this morning and saw that it was an amazing game, too. Looking through the Guardian Football site (btw, Advani seems to be advertising heavily on that site; it’s a pity he never advertises here on my site) I noticed that Chelski-Juve was also a strong game, despite the result. Another reason I would’ve wanted to stay up last night. For the record, I slept at 12:10. Tea-time in the Test match, and before either of the football games had started.

Ten Sports seems to have bitten off more than it can chew. It seems to own the rights to telecast too many different things. I think I have raised this point once earlier, but it pzzles me as to what Ten Sports is trying to achieve by getting rights to telecast so many things, most of which are happening at the same time. For example, over the last couple of weeks I’ve been unable to watch the first hour of WI-Eng even if I’d wanted to, because it was overlapping with the last hour of SA-Aus, which was being telecast at the same time.

The reason I slept off early last night was because I didn’t have the option to watch what I wanted. All the three games that I’d’ve been reasonably interested in were supposed to be on Ten Sports (Zee Sports doesn’t count since Tata Sky doesn’t offer that), and I realized that I’d be forced to watch what the guys at the Taj Entertainment Network would want me to watch. Denied the option to choose what I wanted to watch, I went to bed.

It puzzles me that Ten Sports isn’t subletting its contracts. Devoid of anything decent to show, I suppose that ESPN or NEO would’ve only been too happy to acquire the rights to telecast last night’s Liv-Real game by paying a fee to Ten Sports. And it would’ve unlocked value at the hands of the remote-holder. Ten Sports need not let go of the rights to show all the games. All they need to do is to sell the “out of money options” – the rights to the game which they won’t be able to telecast anyway.

Now, the problem will be if accounting for all costs, no options are out of money. For example, you know you won’t be able to show Liv-Real. But you think that the loss of brand equity of your channel would exceed the money you’d gain by selling this option to another willing channel. The viewers are the only losers at this game, but I don’t know what can be done. After all, viewers are way too dispersed in order for them to take any kind of action.

Extending this question, what can a sports body do to prevent a bidder from acquiring rights to telecast and then mess up the telecast (or not telecast it at all) ? After all, the sports body is out there to make as much money as possible from the TV rights, and they need to ensure significant investment into broadcasting by the broadcasters, so the “i’ll give rights to only those channels that are in the interest of the people” model won’t work.

One option would be to sell the rights to two channels in each market. But given that broadcast is a natural monopoly, the sports body will not be able to make as much by selling to two bidders as it can by selling to one bidder. Is there any other solution that you can think of? If yes, unleash.

Recession notes

Over the weekend I spoke to a few friends, over phone and GTalk. And enquired about their business. Some interesting insights:

On Saturday, I spoke to this guy who is a banker in the City of London. He says that one major fallout of the global economic crisis is that the financial markets have become highly inefficient.
Knowing that they won’t get bonuses, he says, bankers have no incentive to arbitrage these inefficiencies. Sadly, people refuse to believe that investment bankers perform socially useful and productive work

Yesterday, I was talking to this guy who runs a manufacturing SME. He says that apart from one really bad month (January) when orders fell over 50%, he is doing quite well.
Thanks to the downturn, a few manufacturing shops have shut down in various places in Europe. Now, the erstwhile customers of these erstwhile manufacturing shops are looking towards India for their sourcing. My friend is hopeful of bagging one such contract.
Thanks to the downturn, firms are integrating their manufacturing. For example, a prominent stationery manufacturer has decided to manufacture 100% of its products from its plants in India. My friend has been a long-term supplier to the india plant of this particular manufacturer, and now expects to get more business from them.

Interesting stuff overall.

Arranged Scissors 3 – Due Diligence

One of the most important parts of the arranged marriage process is due diligence. This is done at various levels. First there is the parental due diligence – and the first thing that is done is to check if the counterparty’s parents and other close relatives are financially sound. Then there is a check run on the counterparty’s siblings and cousins – to make sure that moral fibre is of the highest quality. And last but not the least, there is personal DD, which is the most interesting.

Of particular interest is the counterparty’s past affairs. This wasn’t much in the limelight till about 10 years back when there was a case where a girl got her arranged fiance murdered since she wanted to marry her boyfriend. After that, people who had so far been in denial regarding people’s boyfriends and girlfriends woke up to the fact that they needed to check if the other party was single as claimed. Nowadays, people go great lengths in order to check this.

Last month I received a call from my friend who told me that one of his friends was “in the market” and was in the process of checking out an acquaintance of mine. So this friend asked me to do a background check on this acquaintance. And I called up one friend who called up another friend who confirmed that this girl was indeed very “decent” (at least that was the message I got- considering that there were two channels of communication before me, I don’t know what the actual message was) and I propagaed it (I promise I didn’t distort it).

Then, there is this uncle who is well-connected. Ok I’m digressing a bit – this is not about arranged marriage, but since we are on the topic of due diligence, this example deserves merit. So this uncle who is well connected wanted to do a background check on his daughter’s boyfriend. Not knowing any other common link, he did what he knew well – pulled strings. The boy used to work for a fairly large IT company and my uncle managed to get in touch with the boy’s HR director and got confidential character files pulled out in order to confirm that his daughter had indeed chosen a decent guy.

One other reason why due diligence may have in fact become easier is because now people post considerable amount of information online. A combination of orkut, facebook, linked-in, blog and twitter profiles is enough to determine enough about a person’s character, I think. And most people (at least in the market segment that I’m in) will have at least one of these. So all you need to do is to find someone who has access to this person’s orkut/facebook profiles and you are through. In fact, I’m planning to add my facebook, twitter, blog and linkedin links to my email signature when I write “expression of interest”/”expression of contact” mails (more about those mails in another post), thus saving the counterparty valuable time and money she might have otherwise spent on due diligence.

The problem with such widespread due diligence is that you need to keep people who you don’t like in your good books. Becauase due diligence works on a “no second chance” principle. Most people collect data from a number of sources. And if at least one of those sources says “indecent” then jai only. Death only are there for inherently unpopular people like me (i’ve recently discovered that I’m a hard person to like; and it takes people considerable effort to start liking me). The fact that I’ve one time or the other ended up pissing off at least half my extended family makes me wonder if I should exit this market and go back to the old-fashioned way of trying to find someone for myself by myself. That much said, I think I’ve applied enough maska on extended family members who I think are well-connected.

I think if this whole due diligence process gets documented well, then it could make for some interesting social network analysis. How does someone try to find someone who might know you? What is the average number of steps that one needs to follow in order to find someone who knows this counterparty? What kind of people are likely to be more involved in writing due diligence reports – people who are very well connected or the quiet types? Does an increased online presence have any effect on the amount of due diligence that various counterparties do?

I don’t know how one can find good data for this.

Earlier:

Arranged Scissors 1 – The Common Minimum Programme

Arranged Scissors 2

One of the greatest sins in the normal relationship process is tw0-timing. If your statistically significant other figures out that there is yet another other who might also be statistically significant, she is not going to take things lying down. The most likely scenario will be that the yet another other will indeed become statistically siginficant – since the original SSO puts ditch. It might be a stretch but I’ll anyway say that tw0-timing is probably the worst mistake you can commit in the course of a relationship.

The arranged marriage market puts no such constraints. Even if you are ten-timing, people won’t mind. Especially if you are an NRI. The typical NRI process goes like this. Boy lands and is given a “shortlist” – a sheaf of CVs and photos. During the drive home, the shortlist is made shorter. The next day, “interviews” are arranged with each girl in the shorter list, typically at her house. End of the day, after sampling data from various sources, boy picks the one that he thinks will be likely to be most statistically significant in the long term.He takes her out for lunch the next day, puts a ring on her finger the following day and flies off, promising to return in a few months for the wedding. Occasionally, he claims he can’t get leave from his employers for another year and so puts off thaaLi also before he returns to vilayat. Girl can follow him later. For now she’ll follow him on Twitter (sorry, bad PJ).

Local boys don’t have it that lucky. At least, it is unlikely that they ten-time. There are two quirks of the arranged marriage market which pull in opposite directions when it comes to two-timing. On one hand is discretion. You don’t announce that you are “seeing someone” until it’s all fixed and proposal has been made and accepted. Discretion also means that you don’t want to be caught together in public. It also means that you can’t write funny things on each other’s facebook walls. And it obviously rules out PDA – in fact, all forms of DA are strongly discouraged until the contract has been signed. Heck, my cousin was putting DA during her engagement and that led to much gossip and condemnation. So no DA till marriage.

So yeah – one of the “advantages” of this discretion is that it allows you to two-time. What tugs from the other side is the time to decision. Due diligence in the whole process is outsourced, to the bankers. Typically it is finished even before the parties concerned get a chance to explore each other – and in this, this process differs from the typical M&A process. So now that the due diligence has already been done, bankers prefer that the parties reach a decision quickly.

I don’t know how this happened, but the time to decision is fairly short. In olden days, I’m told that the due diligence was the beginning and end of the deal process. All that the parties had to do was sign. Things slowly improved – to showing photos, to being shown glimpses, to being allowed to talk for two minutes. I don’t know where things stand in terms of the general market, but I’ve been trying to insist on a proper blading process to allow enough time for tiki-taka.

Ok here is the grand unification for this post. The time to decision is a function of discretion and ability to two-time. Given the discretion that has normally been practised (i suppose this came about because societies were tightly knit and small and things would become awkward for all parties involved if each expression of interest were made public), the cost of two-timing became quite low. Thus, in order to make sure that the counterparty is not two-timing their kid, parents started demanding that decisions be made early. This cut both ways – the counterparty’s parents also wanted to make sure their kid wasn’t being two-timed. From the point of view of bankers, the short time-to-deal was an absolute win.

From the point of views of the interested parties, all it did was to increase the incentive for Common Minimum Programmes. Time allotted is generally too short to properly check out the counterparty, and you need to prioritise. You want to check for obvious mistakes. In the short time, you want to make sure that the counterparty is not an obvious misfit. Realizing that you will never have that time to figure out propely if a prospective counterparty has those “spikes”, you settle for someone who “clears the basic cutoffs”.

You thus get yourself a common minimum programme spouse.

Earlier in the series:

Arranged Scissors 1 – The Common Minimum Programme

Now that I’m in the arranged marriage market, I’ll probably do a series on that. I think there has been this book that some female has written about it, but I haven’t read it. I periodically plan to write about this market, and its quirks, comparing it to the “normal louvvu market”. I’ll try my best to keep the identities of those I’m interacting with in the market secret – if not for anything else, because there is a good chance that they might be reading this.

A lot of people shudder at the thought of arranged mariage. They think it’s some kind of a failure. They say that it is a compromise. Some of them enter the market only grudgingly. If not anything else, presence in the arranged marriage market is an admission of failure to find a long-term partner without bankers’ support. Some people tend to take that personally. They think that they are failures in life because they had to request their parents to find them a partner in life.

Two years back, my good friend L Balaji (no, not the cricketer) came up with the hypothesis of a “common minimum programme job”, borrowing the phrase that our politicians are most likely to use when they form a coalition government, which is getting increasingly common nowadays. He defines a CMP job as one which “clears all cutoffs, but doesn’t perform spectacularly according to any criterion”. A CMP job offers you decent pay, keeps you in a decent city, gives you a good work-life balance, decent colleagues, etc. But you cannot really expect to get too much kick out of the job. You may not love the job, but it offers you enough to not get pained.

I think the traditional problem with the arranged marriage market is that people assume that people are in the market to find CMP spouses. Someone who looks “decent enough”, is “smart enough”, is “nice enough”, etc. Traditionally it seems like the evaluation in the arranged marriage market is a series of tickoffs – looks good? check. Can talk grammatical English? Check. I good to talk to? Check. And so forth. So what one ends up with is someone who clears all criteria, and not necessarily someone spectacular. You basicallly try to find someone you can share a house with until you are sixty four, and little else. Even that one major cutoff, I think, sometimes is given short shrift.

This boiling down of the market to CMPNess is responsible for the “compromise” label that the arranged marriage market attracts. And amazingly, a lot of people (who are lucky enough to have found someone better than CMP in the market) start talking about how one needs “to adjust”, “to compromise” etc. Definitely not the kind of stuff that the young person fresh into the market would love to hear. In fact, I think these CMP people are what gives arranged marriage a bad name.

Thinking about it, I think the CMP nature of the market doesn’t have much to do with the people who ended up choosing CMPs, or who ended up as CMPs (note that one can be both). It has structural origins. The problem, I think, lies with the structure of the market, and that all the CMP people have simply adapted to this particular market structure.

When you don’t like a set of rules, there are two ways to deal with it, or maybe three (depending upon whether you count like a mathematician or like a social scientist). First is to adapt yourself to the rules, basically to compromise. Then, you can allow the rules to stay in place, and you can work around them. Find loopholes and exploit them. This is what lawyers excel at. The final option is to bend the rules.

In my next post on this topic, I will talk about the structure of the arranged marriage market, and try to explain why it differs from the normal blading model.