Sache Dil Se

Sache man se kuchh chaaho toh .

This dialog from DDLJ used to pique me. To achieve or get

something, was a good intention all that was required?

And the road to hell is paved... We all know that. 

Then how come "sache man" is accepted as adequate or good currency for barter?

Some of us use our skills or what we produce as currency for barter. And we think THAT is necessary and sufficient for the barter.

Others think that intentions and feelings are essential for the barter. And that skills or production are secondary and consequent to the intention. 

If one person places his exceptional feelings and intentions while the other person expects something tangible and won't accept anything else, we have an issue. It's like bringing a football to a gunfight. 

Offerings without packaging (emotions and intentions) aren't accepted by feelers. Emotions and feelings without something tangible aren't accepted by thinkers. 

For one sided people, I mean those that can to one end of the spectrum or the other, it's essential to realize that without collateral, emotions (towards feelers) or something tangible (towards thinkers), the other party is going to place little value on the former's offering. 

Freewill Defined

Freewill is proven if a person can be directed to achieve an (actually many) end results over a long period of time. The ability to work backwards from an objective is an indication of freewill. 

But such objective (s) should be contrary to what a person normally believes or follows or is capable of. Hence such objectives would be stressful to any person and will usually not be in sync or even be out of sync with their values.

Someone once defined our values as those that we will continue to follow even if the whole world were against them. 

Hence freewill is the capacity to perform things which are counter to our values over a long period of time. The extent to which we can perform this is the extent of freewill. Or, in a lighter vein is an indication of the extent of our values.

These values are embodied in our S1. For an intro into S1, S2 read https://vbala99.blogspot.com/2017/10/thinking-fast-and-slow-daniel-kahnemann.htm. And as Daniel Kahnemann says, it's very effortful to run counter to our S1.

Aphorisms - Feelers' Fairness

Some people see things in terms of what they did to others, what others did for them and whether both were equal. Other people look at things differently. decide what is appropriate to do for each person and compare what they themselves do with what they had earlier thought wa appropriate. Hence their definition of fairness is : "did I violate my norm?". Not whether they paid for what they got or "Do unto others..." They believe completely in their norm and as long as they behaved in accordance with it or there was a genuine reason (cramps) that allows an exception then they have done no wrong. Whether it's Mr Trump believing he is following his own values (though his values being inconsistent cannot be articulated) or another person following a consistent set of values, often times these values may not be "fair". Fairness is not within the realm of feelers. Whether it's Mr Trump believing he is following his own values (though his values being inconsistent cannot be articulated) or another person following a consistent set of values, often times these values may not be "fair". Fairness is not within the realm of feelers.

Additional Reading

https://vbala99.blogspot.com/2016/05/aphorisms.html

Investing In Death Funds

Recently the NAV of many a debt fund was hit because of exposure to IL&FS.

I was tracking Reliance funds - whether they had exposure to ADAG companies, either in debt funds or in equity. 

Many articles mentioned that Reliance Nippon AMC, despite being part of Anil Ambani group of companies whose shares were falling like Humpty Dumpty and whose liquidity was in crisis, was safe from turmoil related to ADAG.

So it came as a surprise couple of days back w (Apr 30, 2019) Reliance Ultra Short Term Debt fund lost upwards of 1% in a single day. So much for the belief that an AMC is isolated from the vagaries of the group it belongs to.

Most of ADAG stocks have accelerated from midcap to small or micro cap in a relatively short period of time. Now I wonder whether Reliance Small Cap fund would have started to invest in their group stocks. God help investors. 

Gone are the days when debt funds were considered relatively safe. I wonder how they (AMC) decide the specific date when they take a hit or haircut. People who invest on that date are lucky and those who redeem on that day are unlucky. Should the fund get the money back later, the hair (NAV) will grow back later.

With things as they are in the debt market where CRISIL ratings, either of a fund or of the fund's underlying instruments, don't mean much I guess it's safer to invest in equity these days than in debt. Read here about UTI MF losses in debt schemes: https://m.economictimes.com/mf/mf-news/debt-trap-uti-debt-mutual-funds-continue-to-bleed-from-ilfs-blow/articleshow/69154841.cms

One thing I found interesting was that the % hiding in illiquid CP (Commercial Papers), those that are delinquent, increases when redeeme redemptions happen. Because of illiquidity, other liquid papers are sold, causing (a) AUM to decrease and hence (b) illiquid paper % to increase. Thus Tata Corporate Bond fund which earlier had 29%n exposure to DHFL papers dropped by 40% in NAV in a SINGLE DAY when the AMC took a 100% haircut for the scheme. 

Just like balanced funds sometimes have a very high exposure to small cap funds to increase returns, debt funds take exposure to risky (less than AA) papers to increase returns - occasionally resulting in capital loss. Yes even in death funds.

After Dewan Housing, it's now Indiabulls Housing https://www.moneycontrol.com/news/business/personal-finance/how-to-pick-the-right-debt-funds-to-suit-your-goals-timelines-4083321.html

A final thought. Even the Indian Meteorological Dept predicted the severity of Fani cyclone before it hit Indian shores. Is predicting liquidity crises in companies or being alert to embezzlements so difficult? Does the market not offer better people, than those in PWC or Deloitte, to review?

Additional Reading

1. ETimes: 32 mutual fund schemes had exposure to Yes Bank's now downgraded debt papers. Yes Bank's papers now
2. BloombergQuint: Side Pocketing In Indian Funds: Have We Finally Seen A Beginning?. https://www.bloombergquint.com/opinion/side-pocketing-in-indian-funds-have-we-finally-seen-a-beginning
3. https://wap.business-standard.com/live-market/mutual-fund/schemes-comparison?fAction=schemeCompare&fund_house1=3583&category1=27&scheme1=1581&fund_house2=21273&category2=13&scheme2=599&sch1=&sch2=HDFC+Balanced+Fund+%28G%29
4. https://www.business-standard.com/article/markets/amfi-s-mf-categorisation-rejig-pnb-embassy-reit-may-get-large-cap-berth-119061200363_1.html
5. freefincal.com: DHFL Crisis: Did UTI Mutual Fund act in the interest of investors?