Will Bank of America (BAC) survive?

In India they have a saying “Weenasha kaalay wiprit buddhi” (विनाश काले विपरीत बुद्धि) meaning when ones time to self annihilate nears the mind starts playing the wrong way. When I think of Bank of America (BAC) I cannot help but be reminded of this old wise saying.

The bank epitomizes the American economy. Of the 300 million Americans nearly 58 million bank with BAC. Such is the might and standing of the bank in American economy that Washington is sweating at the mere thoughts of BAC failure. The American economy survived the Bear and Sterns and FNM and FMC failures through stimulus, but the Federal Reserve cannot see any amount of stimulus that would bail out BAC. Basically the bank has to stand on its feet and recover on its own – which it does not seem very keen on doing.

Today Bank of America announced a $5 fee per month for customers using Debit card. What other genius tactics can you devise to drive away your account holders when Banks like Citi, JPM and credit unions all over the country are offering free debit card services? Last week, Bill Maher referred the bank as “Skank of America” and that’s exactly what all their loyal customers are thinking right now. At a time when the bank needs capital; driving away the customers is going to lay the stone of the great American bank.

15 Minutes will cost you 15% or more

Geico is a legendary Insurance company. Geico have created such a huge impression using their Geco ads that people truly believe that Geico auto insurace is cheap. I was on Geico policy for over four years, but a reality started to dawn upon me. In the 4 years that my car depreciated by 40% my insurance cost actually went up. This on top of the fact that Geico had to pay Zero insurance claims on my behalf.

The one way relationship started to get a bit too much and i decided to show Geico the appropriate finger. My search of Auto insurance lead me to two replaceable candidates - State Farm and Farmers insurance. I ran by my Geico coverage with both the companies and teir bids came out 22% and 25% lower than what i was paying!!!

That says it all. I will advice everyone reading this blog to ditch Geico ASAP. It is a company owned my Warren Buffet. When you are dealing with a guy who is amongst the richest in the world i think we all know who gets a good deal. My objective over the next 1 year is to cost Geico atleast 12 customers - i hope i succeed but there is no way to know. So do leave a comment if your search for auto insurance leads you here and you decide to switch ;)

[Geico should probably change their marketing slogan to my blog title. They really do not save you 15% ]

An analysis of the Fox Republican Debate

This is my first time following of the GOP debates and I am a fan already. I couldn’t imagine that election time rhetoric can be so much entertaining. Here is a breakdown of the performance of all the candidates.

Rick Perry is now a clear winner of the republican debates. He comes out as a string man of conservative values and has an air of presidency about him. Of all the candidates Rick Perry makes sure that he gets across the message that people want to hear. Everybody wants to know that the next president will fix the economy and that is what he exactly tells them. While other candidates focus on undermining Perry or Romney, Perry just ignores them and focuses on the issues. So far he seems the most likely to be nominated.

Mitt Romney was the guy who had the presidential air about him. Now he is just the runner up who is trying to go after Perry and salvage his position. He looses his calm, gets too agitated and starts hackling when confronted with Perry. He used to focus on issues but now his focus is Perry who took his number 1 spot within 1 week of joining the race. Romney is finding this hard to swallow and I won’t be surprised if he falls further behind.

Ron Paul is this crazy guy who says things that no presidential candidate dare say. Things that are considered anti America, calls to withdraw from all wars, let Iran have nuclear weapons but protect the borders. Ron Paul is a thinker, an economist an very educated man, he is the guy America needs to solve the economic issues – and a small percentage of Americans are now realizing that and agreeing with him. He is now the number 3 but his problem is there are just too many people out there who will fall to the jingoism out there.

Michelle Bachman is the crazy woman who keeps dishing out her idiotic one liner “Barack Obama will be a one term president”. She does not focus on issues. Focusing on Perry and his vaccination decision – not going to get her too far. She is loosing the debates and soon she will be out of contention.

Gary Johnson – This guy has a light air feeling. He seems like a guy who can handle pressure with a smile and make everyone smile with him. He doesn’t have presidential air about him but I won’t be surprised if the country falls on a guy who can lighten the mood a bit and buoy everybody along with him. Gary Johnson is the candidate to watch over the next few weeks and most likely to rise to the top and then on slug it out with Rick Perry.

Herman Cain is not going to be nominated and he should have withdrawn by now. He is zero experience with politics and international affairs and would be the wrong candidate.

Newt Gringrich is another candidate who is making too much noise and has too little substance and too mush debt. He should drop out.

Rick Santorum is again too much noise. Empty vessels make all the noise and Santorum is exactly that. By attacking Perry and Romney all he is vying for is few months of fame.

John Huntsman is not even making the noise and no one is paying attention to him. This guy has factories in China and he is a former Obama aide. Why is he even in the race?


This was my take on the Republican race to nominate a candidate. Feel free to leave your comments if you agree or disagree. After all this is a debate!

Why AT&T and T-Mobile should not be allowed to merge

The U.S. justice department is suing AT&T for the proposed merger with T-Mobile. The government fears that the merger of the #2 and #4 wireless carriers will be monopolistic and create pricing pressures on customers. I think that the two should not be allowed to merge, firstly for their own benefit, secondly for the benefit of the cellular industry and lastly for the customers.

If the prices go up for the consumers, people will find other cheap alternatives in Boost mobile or something else. Bur merging of too giant companies will create a behemoth organization which starts affecting the industry as a whole if it runs into trouble. To understand this you don’t have to look beyond 2008. When Lehman Brothers went into bankruptcy it affected the entire financial system and the US and the world economy went into the rut. The government has allowed too many mergers and aided the formation of companies like Lehman, Goldman Sachs, Bank of America, GM …. The list goes on. Same was the case with the Auto industry when GM seemed to crumple the whole auto sector, including suppliers and dealers went into doldrums.

Large organizations are highly inefficient and very clumsy to adapt to changing market needs. Being too powerful they live under the illusion of “too big to fail” and operate very complacently. AT&T is trying to look for a short term solution to its bandwidth problems by buying out T. But what are they going to do when T-mobiles bandwidth runs out too? If AT&T buys T, prices will go up, people will shun their products, existing customers will still congest their network by streaming videos, and they will have nowhere to go. Finally the tax payers will have to bail them out.

The merger should be averted for the good of everybody.

Bad way to sell Chicken

Venkateshwarya Hatcheries, better known as Venkys chicken are sellers of ready to eat chicken – kind of KFC of India. Venkys have been around for a long time and I remember their “One minute, 2 minute, minute chicken – Venkys chicken in minutes” ad that ran in my school days. Like most Indian companies, Venkys seem to have garnered exponential growth as the Indian economy has blossomed.

One reason for this growth seems to be shift in patterns of food habit of Indian households. Traditionally Indian house holds are known for cooking fresh food at least twice a day and eating out was a rare practice. Restaurants were reserved for special occasions. However with the woman taking more financial responsibilities and full time employment there is a shift in trend towards eat out and frozen / ready to eat food culture. Venkys have done well in meeting this demand.

As Venkys ambitions have grown they have ventured into Europe, especially Britain where there is a huge demand for Indian food – Chicken Tikka Masala being the national dish in this country. Here comes the “Bad way to sell Chicken” part. Looking at the popularity of Football in UK it was obvious to use it as a tool to market their products. And Venkys did that. But instead of advertising at football stadiums, putting their names on some jersey or hiring a iconic footballer as brand ambassador – Venkys went ahead and bought the Blackburn Rovers Football club for 41 million pounds.

Is it a god idea for companies to buy football clubs? – Not really. First of all most football clubs in the premiere league and for that reason all over Europe make losses every years. So at some point Venkys will have to bear these losses at some point. Secondly footballing clubs have become a playground for billionaires from Russia, UAE and the US.

These guys have immense passion for the game and are not afraid to pour money into the teams to help them perform better. The clubs are their status symbols and they will pour their hearts in them irrespective of the costs. However, Venkys are approaching this from a business perspective. When the Arab prince bought Manchester City FC he went on spend over 700 million pounds to rebuild the team. On the other hand Venkys promised their fans investment of 5 million pounds.

The firing of a very competent manager in Sam Allardyce and statements such as “Protein is needed for sports, chicken has proteins and hence we are buying the club” suggest that Venkys have limited experience in this field. Moreover Blackburn FC are lying at the bottom of the league and relegation chances are very high. Relegation could be doomsday scenario for both the club and the Ckicken company.

Venkys seems to have embarked on a bad ploy to sell their chicken.

An Analysis of Mr. Ratan Tata’s Vision

Ratan Tata, the chairman of the TATA Group of companies took reins of the group in 1981. As a novice Mr. Tata was doubted by many for his capabilities to take the group forward. It was a monumental task to lead a group so vast that not only represented the indegnious industrialization spirit of India but had a flavor of unwavering patriotism. Over the years Mr. Tata have proved all doubters wrong by his master class handling of the groups affairs. What so noteworthy of the success that he has achieved with the TATA group of companies is the scale of operation of these companies and the shear diversity in which the TATA group operates. Ranging from salt, steel, chemicals to automobiles and high tech industries involving software and telecom the companies have flourished under his leadership. It is amazing that a person could have vision and core competencies in so many business areas that pretty much sum up the economic spectrum. As opposed, other successful Indian companies and leaders, such as Infosys, Reliance have operated in one business area and leveraged their core skills.

The TATA group has gone places under the banner of Ratan Tata. Tata has maintained a strong desire to represent not only the group companies but also the name of the nation in markets across the world. His most notable moves include, Tata Tea buying worlds biggest Tea maker, Teatley, Tata Motors buying Daewoo Motors, Jaguar and Land Rover. Tata Consultancy has offices all across Europe and North America. Prior to Ratan Tata, if the group was a dominant national player, Mr. Tata has expanded its horizons beyond the national borders. This has been his vision for the group. Mr Tatas vision played a key part in transforming Tata Motors from a commercial vehicle manufacturer to a passenger car manufacturer and now a owner of worlds most admired luxury car brands in Jaguar and Land Rover. His vision for the Indica car – A car that would have the space of an Ambassador, maneuverability of a Zen and price of Maruti 800 was truly legendary.

I have absolutely no doubt that his thinking has been absolutely pioneering till date but some of his recent guidance has been questionable. Tata’s vision of a 1 lakh rupee ($2200) car has backfired severely. When I heard of it 4 years ago I was totally amazed – this is not possible – was my first reaction. But, the persistence of Mr Tata, the ingenuity of Tata Motors engineers and help from Chinese manufacturing have made it possible. However the endeavor succeeds only till this point – the vision wasn’t to make a 1 lakh car, it was to sell a 1 lakh car. The Tata Nano has failed miserably in the sales department. Supporter of Ratan Tata will say that the quality problems in the car have caused it to loose sales, but I don’t agree. This is a classic part of wrong market research by Tata marketers in order to please Mr. Tata. They should have realized that the demographics and economic classes in India are changing. The salaries are going up and hence the middle class who drive cars are willing to pay more for some comfort. With this changing demographics the ctarget market for the car becomes the lower class. But with Petrol prices in India higher than most places on earth and the inflation in the similar class, the poor can hardly afford petrol.

It is going to be a huge challenge for Tata to turn around the small car project which is based on economies of scale and and needs to sell at least 100,000 cars a year just to breakeven.

Mr Tata is a pioneer, a legend visionary – he should try and employ the genius at his disposal to turn the Nano project around. If it doesn’t happen he should just bury his ego and let the car project go down for the greater good of Tata Motors.