Net Neutrality in India

Ever since Airtel launched the ‘Airtel Zero‘ program, there has been a lot of anger against this program by netizens, and the anger is not going unnoticed either. In fact, Flipkart which was one of the partners of the Airtel Zero program not only pulled out of it day before yesterday but said that they will take steps in the future to align themselves with the cause and support Net Neutrality.

If you are not following this issue closely and have largely been following this on the surface you probably think Airtel Zero is a very sinister program, and may be surprised to hear what it actually does.

Airtel Zero is a pack that gives you free data access to certain apps that have a tie up with Airtel. For instance, if Flipkart, Facebook and Twitter were to get into a tie up with Airtel under Airtel Zero – you could potentially get access to these three apps for free. Airtel would charge the apps in order to make the money it is forgoing by letting you use these apps for free.

That piece of info might surprise you because this actually sounds like a good thing for the consumer, and while you thought about the issue you were perhaps imagining some China type controls on Indian internet.

Then, what’s the problem? Why are people up in arms and want to pay more money to Airtel for their data plan?

The problem is that companies like Airtel who connect you to the last mile of the internet have control over what you can see on the internet, and at what speeds, and they have the ability to slow down a particular site in favor of others. While Airtel has very clearly stated that it has no intentions of slowing down other sites, the fear is that it will eventually come to that.

Net Neutrality was debated very hotly towards the end of last year in the US and the key reason for that was the internet service providers there were very close to getting their ways on controlling speeds, and that is a very dangerous thing.

At that time, there was a lot of online agitation against making such changes and I wondered if such a thing could be replicated in India. Therefore I’m very glad to see that Indians have been able to rally together and get corporate and government attention to this cause when the situation is even not that alarming.

Even Mark Zuckerburg had to pay attention and post his thoughts about Internet.org which sort of violates net neutrality, but I think is generally a good thing for the people who use it.

This issue becomes complicated to discuss intelligently because the phrase itself can mean many things, and when you paint it all as negative it does injustice to some of the more positive things that fall under it such as Internet.org.

I think the way to look at Net Neutrality is to keep in mind the underlying spirit of the concept which is that on the internet everyone big or small is the same. You should have access to OneMint the same way that you have access to Economic Times or Moneycontrol. The smaller players shouldn’t be disadvantaged by larger players with deep pockets, and in the case of Airtel Zero that was going to happen because only companies with deep pockets would have been able to strike a deal with them and allow access to their apps for free. I personally feel Internet.org  does no harm to smaller players as far as I can make out and enables people with little resources to access some parts of the internet, and that to me poses no threat to anyone and doesn’t violate net neutrality. I know this position is vehemently opposed by others, but I don’t buy into that myself.

Giving every one access to the internet is important and protecting the interests of a one person startup and getting them the same rights as a million dollar corporation is what this is about in my mind, and what needs to be protected.

Early weekend links – April 9 2015

I read a lot of different interesting things this week so even though I’m traveling tonight, I thought a weekend links post is in order.

First up, a very interesting article and 12 minute video about a certain invasive python species in Florida. Invasive species are a species of animals not native to a particular place, and this article focuses on the Burmese Python which is not native to Florida but is a big menace there now.

I was not surprised to see that the Chinese have invented a hydrogen powered tram and it is apparently doing quite well.

This was a totally new subject for me in the sense that I thought that gene edited babies were still many many decades away, and is mostly the work of fiction, but apparently not.

This can give you a laugh, or annoy and scare you to hell if you have kids who love Mountain Dew, but a man sued Pepsico saying he found a rat inside his Mountain Dew, and Pepsico won the case saying the rat would have disintegrated into a jelly like thing inside the can between the date of manufacture and the date of sale.

Police in Lucknow have procured drones to pepper spray people to control crowds. They are obviously thrilled.

Nice article on the utility of reading philosophy. Why I teach Plato to plumbers?

Finally, something for Game of Thrones fans.

Enjoy your weekend!

Does it make sense to invest in a 401k for a short term?

Mohit left the following comment on the Suggest a Topic page recently:

Mohit Agrawal March 18, 2015 at 8:13 pm [edit]

Hi,

I would love to know your views on investing in 401(k) in USA if a NRI plans to remain in USA short term like 5-7 years. Is it still worth it?
Because the tax you save and employee matching comes down to around 40% benefit. But when you cash out your 401k account when you leave for India you have to pay tax on that amount in USA at around 30% and then 10% is penalty. Is is really worth the hassle to invest in 401(k) in USA? or should I be investing that money in India

First, let’s take a look at what happens when you prematurely withdraw money from your 401k

  1. Negative: You pay 10% of the withdrawal money as penalties because this is a retirement account, and you are supposed to keep money in it till retirement.
  2. Neutral: Pay taxes that you had saved in previous years on the money withdrawn at the time of withdrawal because you didn’t keep your money for as long as you said you would.
  3. Positive: You keep the employer match to your 401k intact as long as there were no vesting rules that were flouted, so this is free money that you still got to keep.

If you think of these three factors, you can look at your own situation, do a rough calculation of how much free money you are getting, how much you will pay in penalty, and then treat the penalty as simply reduction of the free money you get from your employer’s match. In most situations, I would imagine that the employer match will take care of your penalty, so from a numerical standpoint it will make sense to invest in a 401k for even if it is for a short term like five or six years.

Now, the next thing to consider is whether this employer match is a big enough sum that you couldn’t accumulate while investing in India for four or five years, and that’s a tricky question. I believe that the match will still edge out the high interest rates in India, but perhaps not the high equity returns.

The last thing to consider is that when you are withdrawing the money, you will effectively have to pay around half of it in taxes and penalties, and based on your salary, 401k contribution and employer’s match, the money that you get at the end may not be worth the little hassle you go through during the five or six years for investing it.

So, I think whether you invest or not is based on your situation, and how comfortable you are with the idea of a penalty, and paying a big sum as taxes at the end as opposed to extracting whatever benefit you can from this investment.

India v Australia Record at ICC Events

India is going to play Australia in the semi finals of the current world cup on Thursday next week, and I hope that India continues their great form, and beats Australia to reach the final.

India has had great form in the World Cup but terrible form in Australia just prior to the World Cup so you can use either of those performances to back your prediction, and I imagine most people around you are doing exactly that.

I’m using the World Cup performance myself to back up my prediction that India will win, and I was just curious to see how the two teams have performed in general in ICC events.

Australia has done better than India as the table below shows, but India has won a fair a bit too. But if you just consider World Cups, India has won 3 and Australia has won 7 so there Australia is much better.

India v Australia - ICC History

It is going to be a great game, and all the best to the India team!

Has India ever lost with Dhoni not out in the second innings?

As India prepares for their quarter final game with Bangladesh tomorrow, and Sri Lanka got destroyed by South Africa today, it took me back to the memories of the India – Sri Lanka final in the last World Cup, and the last game against Zimbabwe, both of which saw a very key innings from MS Dhoni.

Since, Dhoni seems to have such a fantastic temperament while chasing and in general the feeling with the Indian fans is that as long as Dhoni is there any target can be chased, I was wondering what story the numbers tell.

Keep Calm and Trust MS Dhone

HowStat.com has the record of all the innings that Dhoni has played, his scores, and the times he has been not out in them. From here you can see that there are 66 instances in all ODIs where Dhoni has remained not out. That he has played 260 games and remained not out 66 times at a percentage of 25% is quite remarkable in itself, but it doesn’t give us the answer to our question.

The next step is to actually go through each of these innings and find out which one India played second, and what was the result of that. From there, you see that there are 40 such innings, so most of his not outs have come in the second innings. Here is the result of all such games.

 

Rather remarkable to see that out of these 40 games, India has won 38 times, 1 game was tied, and 1 was lost by India, and the one which India lost was a game against Pakistan where everyone else got out.

You can read this number a few different ways, and I leave it to you to read it the way you want to read it, but it does show that you can truly keep calm and trust MS Dhoni.

Investment options for NRIs in USA

Nritk left the following comment on the Suggest a Topic page a few days ago.

NRITK March 8, 2015 at 5:21 pm [edit]

Hi manshu,
Lot has been written and discussed for resident Indians but very less is been discussed about the Investment options for NRIs in and outside India.
There is adequate information is available for investment in India but nothing is precise for investment options for outside India.
For eg. what about the retirement corpus for the NRI who is not planning to come back to India? What are options for him to invest outside India.
I know you would like to target the majority of your followers but I understand that you are also keeping your eyes open across the world so thought might be good if you can also target small but promising fans of your blogs.

Thanks for consideration and look forward something for NRIs.

Best Regards,
NRITK

If I understand this correctly, then this question really has to be answered in terms of what country do you live in and where can you invest while you’re in that country. Since I’ve lived in the US for a fair bit of time I’ll answer this from the perspective of a NRI in USA; the things that you have to take care of and the places where I used to invest, and you can hopefully draw some parallels from that.

Taxation

The first thing to keep in mind is taxation, and remember that the US is different from all other countries in the sense that they want to tax all  your income outside the US as well. You have to report your income in India, and then pay tax on it in US as well.

Retirement Accounts: 401k

The next thing to consider is a 401k account. A 401k is a retirement account and the best thing about this is that if you put in some money, your employer has to match that amount up to a certain limit, and that means free money for you. This account also has certain tax benefits that you should take advantage of and it has certain restrictions on withdrawing your money that you should be aware of but all in all this is a great option and something you should look into.

Invest in Real Estate

The third thing that comes to mind is real estate. The interest rates are so low and borrowing so easy that it is a no brainer to buy real estate in the US.

India based ETF

ETFs and Index funds are probably the best way to invest in the asset classes you like if you are in the US.

While in US, I liquidated all of my India stocks in order to simplify my tax situation and also focus on investments from one place. I still wanted exposure to Indian stocks, and in my opinion the best way to do that is to buy the India ETF INDY that is listed in the US and available in your brokerage account.

US Based Index Funds or ETFs

The next thing in my portfolio were stocks and index funds that gave you exposure to American equities. Equities are the best long term assets in terms of returns in my opinion so it is essential to have a healthy sized allocation to equities in your portfolio. For a retail investors, the best way to do this is to buy cheap index funds or ETFs that buy you a basket or large caps. The ETF SPY is a good bet for this.

Debt Funds

There needs to be some exposure to debt funds and an ETF that gives you exposure to debt in the US is a good hedge against the eventuality that the stocks market goes down which is likely to happen many times over in your investing career.

Stay away from NRE Fixed Deposits

These are some investing ideas that I could think of when it comes to investing in the US as an NRI. There is one specific thing that I think US based NRIs (who don’t wish to return or use money in India) should avoid investing in and that is opening a fixed deposit in a NRE account.

There are two reasons for this. The first one is that the Rupee has traditionally depreciated against the USD and that means when you covert those Rupees into Dollars you will get less than what you put in there. There has been no change in the economies of these two countries, and I think it is fair to assume that this depreciation is going to continue in the future also.

The second reason is that the interest from this investment is tax free in India but is still taxable in the US and that reduces the potential return from this asset for you. So, in case you are never going to use this money in India, I don’t think there is any benefit of having it invested in these type of fixed debt instruments.

Weekend links – March 14 2015

Let’s start this week with a topic that has been much discussed recently, and I really liked this contrast of how the discourse of rape is in India versus elsewhere in the world. How the west deals with rape?

The current government seems to be active on many fronts, and taking actions where the previous one was sleeping. An interesting piece on how India targets Maoist Jungle Stronghold to Win Mining Riches

Curiosity is as important as intelligence when it comes to your development as a person.

3-D printing has always been of interest to me so to see this really weird 3-D printed brick that can cool your house really made my day. The article has some information on how a similar device was used to cool houses in the olden days and it was quite a good read.

I was recently checking on air ticket prices, and found out that it is cheaper to fly to Bangkok from Hyderabad than it is to go to Assam. Visa hassles are the one thing that deter me from traveling abroad so it was good to get a list of these countries that have visa on arrival for Indians.

Saudi Arabia has become the world’s biggest arms importer, and guesss who they have edged out?

Great, great article on not only how there could be life but more than that on how they were able to detect such a thing in the first place. Why the warm ocean on the moon of this Saturn could be perfect for life?

Enjoy your weekend!

2015 ICC Cricket World Cup – Knockout Probables

As the ICC Cricket World Cup 2015 inches towards the knockout stage, like a lot of other people, I was interested to see who India is likely to play in the quarterfinals, and assuming they win the quarterfinals, who will they play next?

Almost everyone knows that India will play Bangladesh in the quarterfinals next Thursday but when you look at the list of matches that have already been decided that can be slightly confusing.

The best World Cup schedule that I’ve seen is on Cricbuzz and if you look at it right now, you will see that they show that all the Pool A quarter finalists have their venues fixed but no one from Pool B has theirs fixed. This nonplussed me a little because if anything, the position of India as Pool B toppers is secured more solidly than any other team (except New Zealand) in Pool A so how are their venues fixed already?

It is easy to partly deduce that answer as the host having their venues fixed, but what of the rest?

It turns out that in order to facilitate people booking tickets and making travel arrangements, ICC decided the dates and places where the hosts will play their matches were they to reach the quarterfinals. In addition to that, they took the two next highest ODI ranked teams in Pool A (at the time) which were Sri Lanka and England and decided their venue in advance as well. If these two were not to make the quarter finals, then the next two teams would take their places.

This way the date and the venues of the quarterfinalists of Pool A was decided, and then ICC had the usual formula of the number one team of pool A playing the number four team of pool B, and so on.

So, the quarter finals go like this.

  • Quarter-final 1 – A1 v B4
  • Quarter-final 2 – A2 v B3
  • Quarter-final 3 – A3 v B2
  • Quarter-final 4 – A4 v B1

The above list is the one that has been talked about so far and that is the one that confused me a little because if you see the matches already decided then they don’t fit the list above.

Since the actual dates are as follows:

  • Wed 18 March: Sri Lanka vs TBD
  • Thu 19 March: Bangladesh vs TBD
  • Fri 20 March: Australia vs TBD
  • Sat 21st March: New Zealand vs TBD

If you see the two lists above, the New Zealand quarter final is the last one according to date, but according to the first list it is actually Quarter Final 1 since they are A1.

Essentially, this little confusion is what spurred me to write this post because you need to know if QF 1 is the one that’s earliest or the one with A1 v B4 to determine who India meets in the semi final (assumption duly noted).

The answer to my question is fairly obvious: that for the purposes of determining the semi finalists the position in the group and not the calendar dates will be used.

The semi finals will be held as follows:

  • Semi-final 1 – winner QF1 (A1 v B4) v winner QF3 (A3 v B2)
  • Semi-final 2 – winner QF2 (A2 v B3) v winner QF4 (A4 v B1)

Semi Finals: India v Australia?

According to the list above, India will play Semi Final 2 after beating Bangladesh in quarter finals (assumption duly noted again). Winner of QF2 will most likely be Australia after they beat whomever comes in their way. I say whomever comes in their way because Pool B is very close right now, but none of the teams who can come in number 3 look good to beat Australia.

ICC Cricket World Cup 2015 Knockout Probables

Let’s make some assumptions, and see who may come in where in the two groups.

First, the simple pool. Here is what the standings of Pool A will most likely look like.

  1. New Zealand (After beating Bangladesh)
  2. Australia (After beating Scotland)
  3. Sri Lanka
  4. Bangladesh (After losing to NZL)

Now, the hard one, Pool B.

  1. India
  2. South Africa (With a huge win against UAE and a high NRR)
  3. Pakistan (With a moderate win against Ireland)
  4. West Indies (With a win against UAE)

The difference in the NRR (Net Run Rate) between Pakistan and South Africa is so high that it doesn’t look like Pakistan can finish second in Pool B so they will either be third or if they lose to Ireland, fourth or out of the knockout. So in all likelihood, Pakistan, Ireland or West Indies will be third or fourth and it is really unlikely that they go past New Zealand and Australia in the quarter finals.

So then, it comes down to a semi final between Australia and India – are you ready for it?

India’s losses to minnows in World Cup Cricket

As with a lot of people around me, I’m quite absorbed with the ongoing Cricket World Cup and after having little interest in cricket for the better part of the last decade, I’ve been following each game quite closely.

The result today with Bangladesh defeating England means that India will probably play in the second quarter final with Bangladesh on March 19 at the MCG which starts at 9 AM India time.

This made me wonder if India have been upset by smaller teams often in World Cup cricket, and what’s Bangladesh record of beating better teams.

Interestingly enough, India has been beaten once by Bangladesh already in the 2007 World Cup group matches. India scored 191 in that match and Bangladesh scored 192 with 9 balls to spare, and 5 wickets remaining.

Second such instance is India losing to Zimbabwe in the group stage of 1999 World Cup in England. This was actually the opener game for India where Zimbabwe scored 252 runs and won by 3 runs. 

Just a short post with a little bit of trivia that interested me. Hopefully India will sail to the semi finals this time around.

The most important lesson from Buffett’s 50th letter

As the Sensex sailed past 30,000 today I was amazed to note the absence of volatility in the market in the last few years.

The market has marched steadily upwards in the last five years or so and these days are quite reminiscent of the pre 2008 crash market days where you used to meet a lot of people who had never experienced the pain of a market crash in their life, and believed in the inevitability of the market always going up.

I was reminded of this because I read Warren Buffett’s letter to shareholders last Sunday, and although nothing new, he did emphasize the same important things he has been saying for a very long time now.

Here’s a small snippet from the report:

Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments – far riskier investments – than widely-diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions. That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray.

No one is talking about volatility or risk these days because we have not experienced that in the recent past. Whether or not we experience it in the near future is anybody’s guess but the main thing is to have a plan of action when you do experience that volatility, specially with the Nifty P/E around 24 which is at the higher end of the scale.

The important thing is not to mistake the volatility for risk when you are faced with it. If you plan to hold stocks for very long periods of time like a decade or till your retirement then they are very safe options as we have seen over the past 25 years or so since India’s liberalization. We have had a lot of ups and downs, pretty severe recessions, busts, terrible governance, and still the market has been smiling to people who have been patient with it.

That’s the key lesson to remember and although you may not need to put it to use right away, you will need to put it to use sooner or later.