Student Loans Endemic

First things first: In the past few years, no other image has brought me as much joy and mental peace as this one:
student loan screenshot
~~~Closure notice of my student loan account~~~
Ever since my graduation in June 2016, closing the student loan has been - you can say - my singular focus in life! While the loan payments were quite manageable for our household budget, just looking at the sheer size of the debt in 2016 used to nauseate me. 

Leverage

For those who have undergone any form of finance or business courses, leverage is usually one of the first topics that they learn about. In investing terms, leverage basically refers to the act of seeking higher profits by investing borrowed money (source). The courses then go into the detail of adjusting your extra returns with the cost of capital (interest) and the tax benefits you get on the interest paid. Net-net, on paper, it is a brilliant idea to leverage to grow rapidly - IF you have a consistent cash flow. Mind that IF in bold, underlined font. 

Leveraging, or taking out a student loan, for international higher studies course is indeed an interesting option, but considering the current economic conditions, increasing protectionism and volatility in general makes it the second most risky investment you can make in the recent times. First, of course, is investing in crypto-currency! Well, don't even get me started on crypto! 

Recently, I read some of the most beautiful words written about leverage (source)

Body size in biology is like leverage in investing: It accentuates the gains but amplifies the losses. It works well for a while and then backfires spectacularly at the point where the benefits are nice but the losses are lethal

Optionality

Along with increasing the risk, I believe, any form of regular, mandatory payment decreases your optionality. Especially in case of student loans, as your repayment term begins, you are forced to find a paying job, or let go of any start-up ideas that you were pursuing. While one may or may not exercise any optionality, it is always at the back of your head to be in a stable, secure life with cash flows exceeding loan repayments at the bare minimum. 

Having said that...

And, after closing down on the juggernaut sized loans, I can now say that this leveraged trade was one of mybest trades with quite high ROI. Not only I have changed my industry and geography (of the 3 famed traits that define your job: geography/industry/function), but it gave me incredible opportunity to settle down in the city of Paris! AND, that puts us in close proximity of almost the whole of Europe for mini-sojourns

In a nut-shell...

What I am trying to say is leverage is risky! If everything works out - awesome! But in most of the cases, it is taken on by students, in disproportionate amount vs. their own assets, and with no clear visibility on future cash flows. Compound that with volatile geopolitical and protectionist environment of today, it is not a figment of my imagination that student loan debt will be the next burst bubble, similar to that of 2008.

Let's re-learn!

A long time ago in a place far, far away, I used to have an interesting friend. One Friday evening, like any other Friday evening, we were chilling at our regular Theka, when suddenly he made an interesting proposition. Though in a very businesslike but suspiciously hushed tone. Only because I was his close friend, he wanted to introduce me to a business idea, where I just need to invest a small amount. The good part about his plan was that the returns would start flowing in in less than a month. The even better part about his idea was that soon after, I will have to do nothing and the so-called business will run on auto-pilot mode and I would be a sit-at-home millionaire!

investing 101
Photo by Jimi Filipovski on Unsplash
I am very sure that the audience of this blog is smart enough to understand that his business-idea was the infamous Multi-Level Marketing scheme, and of-course that conversation is one of the key reason why the first line of this blog says, ‘I used to have an interesting friend.”

But this post is neither to discuss MLM schemes, nor about old friends. This post is about a simple question that I usually ask anyone giving me an investment idea or as it is better known as 'tip' – if your idea is so commercially viable, why do you want to share your riches with me? Why don’t you mortgage your house and invest in the business? If everything goes well, soon after, by just sitting in your mortgaged house, you will be the proud owner of 100 such (mortgaged?) houses! 

This is probably just one example, and that too a very crude one. But the deeper you dive into the field of investing the more examples you will find of people and even companies misselling and promising (mostly?) unachievable returns. And that’s where my friends, this line of thinking is helpful. If the cost of capital (plus transaction charges) is less than the promised(!) returns, it is probably time to ask some hard questions.

Although, I must warn you, that probably I am from the older generation where people thought about businesses which were profitable or had a break-even point, and did not plan to run on ‘funding’ till someone bought them over. But I digress…

---

A new Journey


In not so distant past, till I decided to quit my full-time job and pursue my MBA, I was quite engaged in investing as well as trading. However, to fund my education, I liquidated almost all my investments, and even spent a couple of years under heavy debt! Yep, the infamous student-loan!

As the loan was paid-off and closed recently, I am re-learning the process of investing, while getting acclimatized with the new realities of the trading world. As I learn, digest, think and process, I will try to jot down some of my thoughts here on this page.

May the bulls (& bears) be always with you... ! 

The one where it snows in Paris

In what should be a non-event for most of the people, it snowed in Paris this week. Oh boy, and it snowed heavily than what I have witnessed in past 4 years in France. And it wouldn't be an overstatement if I say, I have never seen Paris look so beautiful in my life!

View from my balcony

Being born and grown up in harsh, hot weather of Delhi, with blinding-foggy winters, I have had only a few brushes with snow in my life. My first encounter with snow was when I used to work in Romania. That got out of hand, pretty quickly. The whole town was covered in snow for over 3 months! Suffice to say I believe I finished the quota of snow-days for 24 years of my past life in those 3 months! 

The little town I lived in, Timisoara, had a different charm in the snow. Having an apartment and office in close to each other helped me a lot to discover new snow-covered ways through parks, central squares, near rivers and over the bridges - all while walking back and forth from work. Though I didn't realize it at that time, but the sentiment snow evokes in me is something as close as love as one can feel! 

The yearning I had, over the years, to see and feel fresh layers of snow never went down even a notch. To add to it, I don't remember where, but there was a scene in a movie (or a TV series?) where the actor opens his mouth to taste the pure taste of snow, as it falls, made me add that to my bucket list! 

And, I tasted snow! ...as it fell by buckets, in the shape of tiny feathers from the sky! 

I left for work at 5.30am couple of days ago, and it was snowing lightly. Though I hate to get up so early, not to mention venture out of the house at such ungodly hours, but what I felt was surreal that day.  While the world (and the Mrs.) were tucked in their Razais, I was the lone soul walking outside, with an ocean of snow in any direction I saw. Only to be punctuated by some iconic Parisian buildings. I was creating fresh footprints in the freshly laid snow, with no sounds except the one I was making while stepping on the snow clouds! 

To put it briefly, I witnessed and felt pure magic! I can write pages to describe what I felt early morning that day, and still feel that I haven't conveyed my feelings properly. But instead...

... I will take a pause here and wish everyone reading this to feel - every single day of their life - the happiness and magic I felt that day.