[sridharps]

Originally Posted by tsk1979

I never used the word greed in my post. All I said was that the economic Investment Banking etc., is controlled by people from top B schools, so what is taught there must be wrong in some way,
Nothing OT about it, I feel this is the reason for the current economic bubble.

lehmann bros was alright for 150 years. This has happened only recently - because of the miscalculation of some people and greed from the top management.
There is a key difference between technical inventions and running a business. If you come up with a new technical invention like a new microprocessor, you can run hundreds of tests in the lab to make it a perfect product. We all know how many times Thomas Edison failed before he made the electric bulb.(was it a thousand times?).
Running a business is unfortunately practised only in the real world. If you have a new theory or a new idea, the testing ground is the practical arena of business. There is no time to do a lab testing.
That is why enterpreneurship is such a precious gift. And no one gets it right all the time.

[sridharps]

1929 is known as the year of the great depression. Here is a forecast that an investment advisor had made in 1928 on why the crash would happen in 1929. The parallels with the Indian Stock market are eerie:
"During the year 1928, the public has entered the stock mar­ket on the largest scale ever known in history. " - The same is true for India over the past few years. Never before had so many Indians participated in the stock market.
"Foreigners have bought our stocks more than at any time since or prior to the outbreak of the World War" - Unprecedented FII inflow into India over the past 5 years. And now the exit.
"The American public is no longer making safe investments in stocks. They have the gambling fever and are buying everything regardless of price, simply buying on hope that stocks will continue to go up. This is a dangerous situation and has always resulted in a big decline. There will be no exception in this case" - Well, this what a lot of people have done, isn't it?

[nitrous]

Originally Posted by tsk1979

Harward School of Business and Stanford school of business are to be blame. I say so because most bit Investment Bankers come from these institutes. There is something seriously wrong with top Business Schools.
I mean, look at top engineering institutes. you have stuff like google/Touch screens/Microprocessors being designed by the guys from these schools, however top people of Business schools are producing bubbles, scams and Meltdowns.

I guess they try to create a device which will "artificially generate" money when run.
They should rather concentrate on efficiency,IMO.
Greed is the root cause of all. The high tuition fees is considered high "investment" for proportionate returns in the future.

[spadival]

Originally Posted by snaronikar

I will add our IIM's and IIT's too because most of the MNCs like Lehman Bro has hired top performers from IIMs. See where they are now.

Read somewhere that these credit derivative products which is responsible for the current situation, were actually invented by a Cambridge University mathematics graduate. So maybe we should blame the world's mathematicians and the bureaucrats (regulators) who allowed such products in to the market in the first place?

So please spare (a thought for) the poor IIM graduates, who will now have a hard time getting a job for no fault of theirs.

[zaks]

Originally Posted by sridharps

lehmann bros was alright for 150 years. This has happened only recently - because of the miscalculation of some people and greed from the top management.
There is a key difference between technical inventions and running a business. If you come up with a new technical invention like a new microprocessor, you can run hundreds of tests in the lab to make it a perfect product. We all know how many times Thomas Edison failed before he made the electric bulb.(was it a thousand times?).
Running a business is unfortunately practised only in the real world. If you have a new theory or a new idea, the testing ground is the practical arena of business. There is no time to do a lab testing.
That is why enterpreneurship is such a precious gift. And no one gets it right all the time.

Rightly said sridharps and, phamilyman it's a nice example.

The businesses these days are very innovative and have put together an immense array of strategies to generate wealth and this is very much true in the case of countries which have been traditionally capitalistic.
The old days of demand and supply though still true is masked under layers of business techniques and hard to understand by even for policy makers. So, you see that the regulations are trailing the business practices. These practices are neither illegal nor unjustified if done with good business acumen and respect for law and fairness of deals. But profit or more likely prospective profit drives these highly sophisticated dealings and sometimes a crucial flaw gets missed on the way leading to a crumble at the end.

These things are pretty natural for any free trade economy it's only recently that we have started to notice these things because in our country we brought in liberalization only in the late twentieth century and are consequently are exposed to it's rises and falls.

cheers:

[Lalvaz]

I kind of find it funny that everyone marvells when the economy is booming and the same folks are stunned when the economy tanks. Some blame greed, speculation, poor regulation, governments, vested interests, bad bankers etc.... for the fall. Must admit, to hear snaronikar blame IIM's and IIT's was a first for me. Are you for real???

Way I look at it, is that these things are cyclical. Prices go up and prices come down. Take Oil for instance, it keeps going up and keeps going down. Same goes for any other commodity, or stocks, or land prices, or currency exchange rates.
Look at the high low of any of the above mentioned items for a reasonably long time period and you'll find volatility. Its part of life. No one is to blame. Its all a question of demand and supply. Basic economic theory.

While banks did go belly up this time round, and perhaps the bankers do need to take some flak for their imprudent valuations, its a fact that the main reason for their current fate is the crash in US property prices. And its hard to predict which way prices will head.

Lets assume that the price of a house in the US is $ 1 million. This is bought by a customer with a down payment of 10% and bank funding of 90%. Now when the market rises, the same property goes upto 1.5 million. The bank will still need to fund the new buyer. They will again refinance upto 90% of 1.5 million, while the new buyer shells out 10% of 1.5 million. So the banks exposure on the same property rises, purely due to the rise in market price of property. All this is fine till the time the property rises or remains above 1.5 million in value.

Once the price crashes, then the bubble bursts, and who is blamed? The IIM banker??? Now will some enlightened soul tell me his role in this episode?

[Sudipto-S-Team]

Have you guys noticed the list of similar threads below ? . Tyre burst. Honda burst. Windscreen burst.

[phamilyman]

Tsk bhai,

I am using the word greed. The reason for the meltdown is over -leverage, which is driven by greed.

And for your information, the models, and risk analysis for all banks are typically run by mathematics PhDs - would suggest getting your facts right. To assume that engineering graduates are creating institutions while management grads are doing something wrong is callous and myopic at best.

All you are prolly reacting is news items about Bschool placements in i-banks.

That said, here is some concrete info on the corporate dominance (Ha) by MBAs:
Lehman top execs
Richard S. Fuld, Jr. - MBA
Riccardo Banchetti - BA (Eco)
Gerald A. Donini - BA (Eco)
Eric Felder - B.S. with dual concentrations in finance and decision sciences
Scott J. Freidheim - BA MBA
Michael Gelband - BBA MBA
Alex Kirk - BA (Eco) CFA
Hyung S. Lee - BS (Eco)
Stephen M. Lessing - BA MBA
Ian T. Lowitt - BSc (EE), BA (Phil), MSc(eco), MSc (Digital photography)
Herbert H. McDade III - BA MBA
Hugh E. McGee III - BA (systems)
Christian Meissner - BA (History)
Thomas A. Russo - BA MBA
George H. Walker - BA MBA

Any further doubts? 7/15 with MANY more BA!
And frankly, this gem here:

All I said was that the economic Investment Banking etc., is controlled by people from top B schools, so what is taught there must be wrong in some way,

is like saying because CERTAIN drugs (Thalidomide, anyone?) have killed/maimed people, then the biotechnology schools are to blame.

Honestly, that's completely devoid of any semblance of logic. I still think this thread needs to be cleaned up, given the comparatively harmless posts which have been deleted in the past in the name of chatter and OT.

Originally Posted by nitrous

I guess they try to create a device which will "artificially generate" money when run.
They should rather concentrate on efficiency,IMO.
Greed is the root cause of all. The high tuition fees is considered high "investment" for proportionate returns in the future.

Nitrous bhai,

You are mixing pay packages of starting MBAs with unimaginable leverage coupled with lack of fiduciary oversight in banks. Care to link them with a shred of logic?

PS: There are vastly many more MBAs outside investment banking than in other industries - people who "manage" firms including but not limited to efficiency. Again, some logic would help.

[tsk1979]

Hmm so my assumption is wrong.
Its not I Bankers, but greedy people who are responsible

[BaCkSeAtDrIVeR]

Read somewhere that these credit derivative products which is responsible for the current situation, were actually invented by a Cambridge University mathematics graduate. So maybe we should blame the world's mathematicians and the bureaucrats (regulators) who allowed such products in to the market in the first place?

The whole thing can be defined in two words.

1. Refinance.
2. Trading in refinance.

It is 2 which created the problem. Refinance (like re-insurance) is actually good - our own NABARD SIDBI, IDBI and (the former - before it became a bank) ICICI do. Individual takes a loan, bank goes to the refinancing agency with the loan for a refinance; the loan is re-financed; and the bank gives more loans with the re-financed amount.

The concept of "securitisation", introduced in india by SARFARESI Act has not really taken off; so we have escaped. Under this concept, several loans are bunched together and "sold off" - so refinance by another name - and the buyer(s) will trade in these securities. Once the underlying loans went bad, the papers which were being traded became worthless, thus causing the bubble to burst.

[esteem_lover]

Originally Posted by tsk1979

Harward School of Business and Stanford school of business are to be blame. I say so because most bit Investment Bankers come from these institutes. There is something seriously wrong with top Business Schools.
I mean, look at top engineering institutes. you have stuff like google/Touch screens/Microprocessors being designed by the guys from these schools, however top people of Business schools are producing bubbles, scams and Meltdowns.

Surely, you must be joking.

Originally Posted by snaronikar

I will add our IIM's and IIT's too because most of the MNCs like Lehman Bro has hired top performers from IIMs. See where they are now.

And you sir, you are very very hilarious.

[nayakrnr]

Humans being humans never got any better than SHEEPS.

One sheep jumps the fence, and the whole herd follows.

That is what causes economic imbalance. bubbles and bursts.

[zaks]

You can be rest assured that these tactics are not taught in any business school but developed by the real world businesses. In most subjects the real world is far ahead of the things taught in schools.

[sridharps]

Originally Posted by phamilyman

Here is a forward I got, which give some inteersting perspectives on the same:

Fine example. I got to read this at the end of the day and this makes a lot of sense.
And I like the conclusions, which are really insightful.
Good stuff, phamilyman.

[Sudipto-S-Team]

Creation (boom) and destruction (bust) are two sides of the same coin. The Hindu philosophers understood this long ago and even created different gods for these. The Phoenix will rise again.