Archive | December, 2012

Elephant Valley @ Kodai

30 Dec

2012 has been a year of amazing holidays. We wrapped up the year with yet another lovely holiday at the Elephant Valley Kodaikanal. Hill stations have become commercial trash – but there are still jewels like Destiny Farm (Off  Ooty) and Elephant Valley that still exist.  Situated 20 Km before Kodai (2 Hr drive from Kodai Road)  – its a perfect haven for nature lovers. Set in a valley with a lovely stream flowing thru it ( where Elephants come to drink water in sumer) – its peace & tranquility symbolised.

Elephant Valley Kodaikanal

The resort is a 100 acre property with 20 rooms. The rooms are rustic but efficient & functional (or as my daughter would say “lovely halli place” ).  They are spread across a vast area and some are a good 10 – 15 min walk from the central office / restaurant. So please check this out when booking.

Hot water available in morning and night. No TV , No Intercom , Limited Cell Phone connectivity & no room service . But yet we managed to spend 3 days and the time just flew. A lot of credit for that goes to the fact that we were a group of 3 families and the kids kept themselves busy with horse rides , treks , innovative games and many iPads.

nice plantation

With 100 acres there is a lot of forest to walk around – and the trek is a must do. You can do a 2 hr or even a 6 hr trek. We did a 3 hr Trek and the kids jumped on to ponies – so they were not tired (the Resort has a stable of lovely horses). As you walk around you see Coffee plantations , Pepper carpeting the barks of large trees , sweet lime , goose berry and a variety of exotic fruits trees – all set in lush green canopy. The guide ( 55 year old Madaswamy) was swell as he enthralled us with stories of elephants and bisons that came right inside the resort in summer to drink water.

Team images in forest

The kids love the horse rides – and its priced at just Rs 250 for a one hour trip. That was a big hit with the kids and Captain & Chetak (who the kids renamed Black Beauty) became their best friends

Horse ride

The resort also has a lovely farm where they grow a wide variety of fresh organic fruits & vegetables. Almost all the food prepared at the resort is from the farm produce. Surprisingly its not very cold – last week of Dec the temp was about 15 Degrees Centigrade. The valley effect and cloudy nights helped in keeping the place warm.

Farm

Food at the restaurant is very homely and tasty. Limited in variety but spans both Indian & Continental dishes – Veg & Non veg. Breakfast & Dinner are buffet meals. The service is excellent but being peak season the guys were really overworked. More than 50% of the guests were foreigners – a large % of them French.

Girls Gang

Room rates vary from Rs 3300 – Rs 7200 ( Inclusive of breakfast) . We stayed at the Tectona – the only room with 2 bedrooms . The Tree House is located a distance away and one needs to cross the stream to reach there. The honeymoon suit is again tucked away in wilderness. Food is very reasonably prices – so a 3 night trip inclusive of 2nd AC train fare from Bangalore to Kodai Road , transfer and a 1 day sight seeing trip to Kodaikanal should be in the range of 50K for a family of 4.

Sleepover

On the way back we managed to stop by at the famous Meenakshi temple ( Claimed to be 3500 Years Old) at Madurai. Madurai is 40 km from Kodai Road ( 1 hr drive) – so from Elephant Valley to Madurai is nearly 3 hrs. You can also plan a 2 night stay at Elephant Valley and then do a night stop at the Taj at Madurai. Just remember to book your return tickets from Madurai to Bangalore.

1000 Pillars

Overall a wonderful trip – and what made it memorable was the group of 3 families. Thanks LAN & Rakesh for joining . Lets now look forward to the next trip to Kashmir in April

Team 1

All trip photos can be viewed at the following Flickr Link http://www.flickr.com/photos/vak1969/sets/72157632381025548/with/8324642786/

madurai kodai kanal

Tags: , , , ,

Can we ignore 200M + People ?

18 Dec

News channels yesterday were debating on two key topics – Narendra Modi winning a thumping 3rd term and the sad rape of the college girl in Delhi.

Todays TOI reports that Delhi has more rapes than the other 3 metros put together. Delhi is the capital of the country, every second month a high profile incident like this happens and then it dies down quietly in a few days.

I wonder what would have happened if the rape had happened in Ahmedabad instead of Delhi? The high decibel leaders from UPA would have immediately jumped on to every channel demanding Presidents rule in the state.

Gujarat incidentally is one of the safest places in the country for women and during Navratri its common to see girls out till the early hours of the morning. Women comprising 50% of the population in Gujarat are safe & happy and 40% of Delhi (The male Female Ratio is closer to 60: 40 in Delhi) is afraid to venture out at night.

Garba

Lets now look at some of the Modi bashing points – which keep coming out in every debate. The great thing about Modi is people hate him or love him. And it looks like the majority in Gujarat love him. Here are some arguments I place against the points raised against Modi

1.   The minority is restricted to areas like Juhapura and these places are slums with no water, electricity, sanitation etc.

Bangalore has Shivaji Nagar, Mumbai has Mahim, Kurla & Masjid, Hyderabad has Charminar & Begum Bazar – every city in India has a minority colony. Even the slums in Koramangla do not have water, electricity & sanitation. The Sikhs in Delhi are clustered in a few areas. Why just India – Chinatown exists in SFO, LA & New York. It’s common for minorities to live together.

2.   BJP did not give a seat to any minority community representative. Unless there is representation how does the locality / community improve

Modi wants to win the election with a 2/3rd majority. If there are candidates who could have won on a BJP seat he would have probably considered them. But chances are given the rhetoric of the last 10 years people are now brainwashed and will not vote for BJP even if Modi presents a minority candidate – so why should the BJP lose a seat even before the election has started ?

3.   The Modi story of development is a myth – he is Corrupt?

 The development is there for everyone to see. Industry is rushing in, the Government has been voted to power twice and is all set for a 3rd term. As charges of corruption fly thick & strong against the UPA Government – one has hardly heard any charge of corruption (from a non Congress Source) against Modi.

 4.   The events of 2002 cannot be forgotten and with Modi at the helm the minority can never progress?

Yes 2002 was unpardonable. But people tend to forget the spark that caused the fire. History is replete with wrong doings – the Sikh backlash post Indira Gandhi Assassination, the high handedness and loot of the British and when one reads of the massacre of Ghazni & Ghori it makes even the most moderate persons blood boil. Till when do we keep stoking the fire of anger – maybe we should have asked the Eng cricket team to go back if they did not return the Kohinoor diamond and claim our due share  from Nadir Shah’s descendants in Iran.

6600 Indians die of road accidents every day, thousands more die in the hell called our Govt hospitals every day. We don’t seem to be making an issue of this at all. Yet the media & the opposition keep alive the 2002 riots for their political agenda and for securing their vote banks.

What worries me more is the impact of all this on the educated Muslims. 20% or 200M + is not a minority. There are probably more Muslims in our country than Tamilians or Bengalis. But where are they?

In our apartment complex of 124 flats – Dominated by Hindus, 6 Jains & 1 Sikh families. I am sure this would be the case in the top 100-apartment complex in every large city. Someone as famous as Shabana Azmi recently said that she was finding it difficult to buy an apartment in a central Hindu locality in Mumbai. Check out your child’s school – in a class of 90 across 3 sections you may find 1 – 2 Muslim students. I worked in a large IT company with over 100,000 employees – I don’t recollect interacting with more than 5 Muslims in 13 years. If someone does a count the % of Muslims in India’s top 5 IT companies will be less than 2%.

Check out your Facebook friends and look back on how many people you sent an Id Mubarak greeting ? When was the last time you attended a function at a muslim friends house. This is not how it was 30 years back when we were kids.

Pran

There was a time in the 70’s when Muslims were always the helpful friendly characters in movies – whether it was Pran as Sher Khan in the immortal Zanjeer or Rishi Kapoor as Akbar in Amar Akbar Anthony. Today they are always the bad guys, the Terrorists.

The challenge is not Modi – the challenge is we and our inability to live peacefully with nearly 1/4th of the country. It doesn’t help if the media & politicians keep fanning the fire. And it needs both sides to take a few steps forward – but thats the only way forward.

 

Tags: , , , , , , , , , , , ,

Bequeathing an Inheritance by Leveraging the Power of Compounding

13 Dec

I am worried ever since I wrote my last post. ( How much is enough to Retire?).

You start work at around 22 , the initial 10 years are low salary , long hours hardly any savings. The next 5 – 6 years go in buying a house, paying the loans and finally when you are  40+  & have  a reasonable saving potential – you start thinking of retirement and the Corpus needed to safely hang your boots gets you worried.

What could we have done differently if we were to start all over again ? Can we leverage some of this knowledge to bequeath a princely inheritance for our next generation ? Lets look at an interesting story, which highlights the power of COMPOUNDING. 

This is the  story of a Wise old man and a stingy Sultan. There was a severe draught and the villagers were on the edge of a famine. The Sultan had enough stock of grains in his granary but refused to partake the same. The villagers met the Wise old man and sought his help.

The Wise man presented the Sultan with a fabulously beautiful chessboard, intricately made with carved ivory, rare woods, and precious stones. It was so exquisite the Sultan offered the Wise man whatever price he named.

Beautiful Crystal chess

The Wise man asked for one grain of rice. The Sultan was shocked. The Wise man continued – one grain of rice for the first square on the chessboard; one day later, two grains for the second square; two days later, four grains for the third, and the same simple doubling for the remainder of the 64 squares on the chessboard.

Laughing, the Sultan agreed. “So I am to pay you a few grains of rice for all your wondrous work?” he asked. “It is sufficient for me, Your Majesty,” was his humble reply.

The Sultan directed his Treasurer to award the Wise man and do the needful for the next 64 days. The Wise man received his single grain gratefully on day 1 , and the Sultan forgot about him.

Dutifully, the Wise man showed up at the Treasurer’s office every day to receive his meager award of rice. On the 12th day, he received about two handfuls – 2,048 to be exact – and ignored the Treasurer’s sneer.

The sneer was still there on the 16th day, when he received little more than a single pound of rice. By the 21st day, the sneer was gone, replaced with a curious frown, for the Treasurer had to give the Wise man 35 pounds of rice – over a million grains. By the 24th day, the frown was replaced by worry – for the Wise man received 280 pounds of rice.

Two days later – the 26th – the look was fear and panic, for the Wise man had come for over one thousand pounds of rice. The Treasurer had, days ago, switched from counting in grains to pounds – and now realized that soon the Wise man would be owed all the rice in the entire sultanate.

“This cannot go on,” he told the Wise man. “Tomorrow it will be 2,000 pounds.” “2,200,” the Wise man corrected him. The Treasurer continued. “That means four days from now, the 30th day, it will be almost 18,000 pounds. This must stop.”

“But by the 30th day,” the Wise man objected, “we haven’t even reached the second half of the chessboard.” Then he smiled. “That’s when it gets really interesting.”

So you’ll owe me 2,200 pounds tomorrow, 17,600 pounds in four days, and over 70,000 when we reach half the chessboard in six days – which will be over two billion grains of rice, by the way.

“But, Mr. Treasurer, we’re just getting started. Two billion? That’s nothing. By the 41st day – 15 days from now – you’ll owe me 365,000 more pounds of rice than the 1,000 you owe me today, or over one trillion grains of rice.

By the 51st day – just 25 days from now – you and the Sultan will owe me 379 million pounds of rice That’s over one quadrillion grains of rice.

“By the time we reach the 64th square you and the Sultan will owe me three quadrillion pounds of rice, or 9 quintillion grains – more rice than there has been or ever will be in the world. Not bad starting out with that one single grain you laughed at two months or so before.”

The Treasurer fainted. When he awoke, the Wise man was gone. So he went to explain things to the Sultan – who had him immediately beheaded. Then the Sultan called for the Wise man. “My heart says I should execute you as I did that stupid treasurer,” said the Sultan, “but my head says I should have someone as smart as you to take his place.”

The Wise man accepted so quickly and calmly it was as if this was what he expected all along.     

Lets now apply this to our day to day life and see how we can Bequeath a princely inheritance to our next in Kin. Lets assume your child is 5 years old. Suppose you start a RD of Rs 10,000 / – Month for the next 10 years (lets assume an interest rate of 10%)  – your corpus at the end of 10 years will be about 18 Lac’s. (Child is now 15 Years)

Take this corpus and put it in a FD. Lets assume the same interest rate of 10%  – how much time does it take for the money to double. You can do it by the GP formulae A = P(1+R/100)^n or use a back of the envelope calculator and divide 72 with the interest rate. At 10% interest your investment will double in about 7.2 years ( 72 / 10 the interest rate) lets for simplicity round this up as 8 years.  Child’s Age 23 – Corpus 36 Lac’s

Keep doing this till the child is 55 years old. So in the next 32 years you have 4 cycles to double your Corpus.  36L – 72L – 1.44Cr – 2.88Cr – 5.66Cr.  

Hopefully you will be around to gift her this and see the smile on her face. 

So an investment of 12 Lac’s ( 10K * 12 * 10) spread across 10 years has resulted in a Corpus of 5.6 Crores. Not a bad inheritance and did not take too much of an effort. One may question and say what will be the value of 5.6 Crores 50 years from now ? You can continue the same mantra and start another RD after the 1st one matured or increase the value from 10 K / month to 15 K / month – enough ways to play around to leverage the power of Compounding.

While Equity , Debt Funds , FMP may sound Sexy they are liquid and – a simple RD & FD combination  and some discipline can help you build a lot of wealth by leveraging the power of Compunding. For the same reason a PPF & LIC works similiar miracles – and it does not even have the burden of tax liability.

So leverage the power of compunding and see your Wealth grow in geometric proportions . Enjoy the power of Compounding.

Tags: , , , , ,

How much is Enough to Retire ?

3 Dec

During my brief stint in one of the Big 3 head hunting firms I  met nearly 200 + candidates hunting for a change . There was a common theme cutting across most of them. 80% of them were 40+, bored with their job, felt they were getting a raw deal and that their potential was far higher.  They were all experiencing the impact of the Pyramid Effect after nearly 20 years in the industry.

Once you start talking to them ( and they talk a lot !) more common themes emerge – Should I change Industry, should I start a business (Restaurant & Head hunting firms are top picks!), maybe I left US too early and should have stayed on and finally – How much do you think is a good corpus to retire!

The last question is an interesting one and merits more attention.

Lets look at how life has changed in the last 30 + years.  Rice Rs 4 / Kg –  Rs 40 / Kg (10X) , a Gas Cyliner of Rs 60 is now nearly 600 + (10X) ,  A loaf of Bread that cost 2 Rs is now   Rs 20/- (10X) , Petrol was about Rs 10/L – currently Rs 70/L (7X,  and we thought Petrol had the steepest hike), Bhindi that costed Rs 4/Kg is Now Rs 40/- (10X). Cal – Chennai one way on Indian Airlines was 1K  ( I remember that clearly since that was the first flight a family member took in 1983 to attend my sisters marriage) – Now it varies from 5 – 10K , One USD was = 10 INR and now its 55 ( 5.5X).

Bread

I am not an economist and this may not be very scientific but we can draw an inference that when it comes down to day-to-day expenses the costs have gone up by about 10X in 30 years.

This does not take into account the cost of property. That has grown astronomically – I recollect a relative buying a 5000 sft plot of land with a bungalow in Alwarpet , the heart of Chennai for Rs 1 Lac in 1980. Today that property would cost upwards of 10 Crores ( 1000 X appreciation)

12112012-Consumer-prices-still-high-in-India-equitymaster

The  salary of a Sr executive in a private firm 30 years back was about Rs 5000/- month (Taxes at the highest limit were 90% and the Presidents Salary at 10K / Month was the maximum limit).

So if cost of most items have gone up by 10X – then an corresponding increase in salary to 50K/ month should have been good enough – but that’s not true. Entry-level salaries for engg graduates from Tier 1 institutes are 7 – 8 Lacs / annum and Sr executives with 20 + years are unhappy with 50 Lac packages.

20price1_60

Can you manage a household for 50K a month in Bangalore or BBY or Delhi ? Yes many do – but for people who are my FB or Linked in friends that’s not true. At a very conservative level the monthly expenses for a family of 4 can vary from 1 – 2 Lacs / month. That’s nearly 2 – 4K USD / Month ,

when you look at it that way you realize that not many in the US spend that much every month.

So what has changed? Lets shift gears to the 1st chapter in my class 10 ICSE Economics Book by Khosla & Khosla. The author had beautifully explained two concepts – 1. The difference between Desire & Want (A Desire backed by necessary means and the willingness to partake with the means is a Want) and 2. The concept of Necessity, Comfort & Luxury and how these brackets vary from person to person based on their social strata. 

Lets now take these concepts and see what has changed and then come back to the original question of How much is enough ?

30 Years of economic growth has made Luxuries & Comforts a Necessity . Today a good car, eating out once a week or an annual holiday ( Vs the visit to Grandparents house)  is considered a necessity. Kids Birthday bashes are no longer an evening affair at home. New clothes are no longer events that happen in Diwali or Durga Puja but at every second month or the weekend sale.

It’s a combination of two things –  having tasted blood for the Good Things in life you want more and of course there is peer pressure.  And today we are ready to partake the means to fulfill our wants – even if it means taking a loan and bearing the burden of a monthly EMI.

Hammock

Before we do the math – some questions that bug me

  1. In the next 30 years (say when we are 70) – will the cost of goods be 10X more expensive than today. So should we expect Rice & Bhindi to be Rs 400 / Kg and a gas cylinder at Rs 6000/-
  2. In Countries like the US & UK where per capita income is in excess of $ 35000 (India just crossed the $ 1000 mark) – cost of fruits / vegetables / Petrol is already at par with India. So should we assume that with increasing development the costs will continue to spiral?
  3. Inflation in India which is at ~ 10% needs to come down – Inflation is like rust , will it come down to 2 – 3 % ?  (Which is why I like the RBI Governor who is holding on to pressure from the Finance Ministry and not reducing Interest rates till Inflation climbs down)

Depending on the answers we can arrive at some estimates. One way to look at it is that when you are 70 if you need 10X what you need today – you will probably need 5 Lacs / Month . I am assuming that you are not downsizing and continue to maintain a certain lifestyle that you are accustomed to. Lets also assume that with just husband & wife and lesser needs to impress society that reduces to 2 – 3 Lacs / Month.

At a 10% interest your tax-free income is 7%, to get 2 Lacs / Month or 24 Lacs / Year you need a corpus of  3.5 Crores in a FD. ( Remember if Inflation comes down you will not be getting 10% interest)

With medical costs spiraling and chances of Public Health systems not improving much you need to put away a Corpus to take care of your health in case of something serious. Lets say you put away Rs 1 Crore when you are 50 to multiply over the years so that at 70 that’s maybe 2 – 3 Crore’s + (that may not be sufficient – so ensure that you have good health, exercise regularly , clean diet !!)

You would like to travel and holiday, lets budget another Rs 1 Crore at age 50 to be kept in a Corpus for Holiday & Entertainment & Fun , between the interest and some corpus dilution every year you can manage for the next 20 – 30 with some decent holidays.

So if you are in a position where you have taken care of all your children’s higher education, marriage expenses (at least 1 Crore / Kid assuming they study in India over the next 10 years), have a house that is fully paid off and have no other liabilities then maybe a kitty of 5.5 Crores (That’s 1 Million $) at age 45 – 50 should be good enough to pull you along. This can be a combination of both assets & liquid cash –  rental income for a second house may be a good hedge given the rate at which property prices have risen in the past.

Jackpot

Unless you have a windfall profit from stocks or real estate its difficult for a salaried person to make that money in his 20 – 25 years of career. (In one my future blogs I will share some insights on the power of Compounding – while it may be a bit late for us in our 40’s to leverage this , its a good learning for the future generation )

For all those who are there – enjoy your retirement! For others like me it’s back to the grind for many many more years.

Tags: , , , , ,