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:

~~~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!

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…

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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. 

THE YEAR THAT WAS: 2017

As I sit in the familiar comfort of my Razai with a warm cup of Chai in my hand, I couldn't help but notice that it has been 12 months since I smelled the aroma of a cardamom Chai mixed with Delhi's fog! We say this every year, but didn't 2017 just whiz by faster than we could imagine?

2017 for me can only be defined as the year of big transformations. The year that brought with it momentous changes, of positive nature, in both personal and professional aspects.

Photo by Szűcs László on Unsplash

Professional Updates

After completing my MBA last year, I toughed out 6-odd months in an internship, then 6 more months in a temporary contract (known in French as Contract Duration Determinée or CDD). However, at the beginning of this year, I was finally able to secure a full-time contract (known as Contrat à durée indéterminée, in short CDI) in a leading global firm. 

Having worked in India for the most part of my professional life, all these contract types were very alien concepts for me. In my previous jobs in India, the process flow was as follows - a company hires you (usually from the first contact to final offer, I have never spent over 4 working days), and then you continue working there till you retire, or you leave by giving a 30-60 days notice. The company can also fire you if they don't like your performance by giving you same notice or compensation for the same. 

However, from what I have gathered, it is quite hard for even private companies to eliminate positions or fire employees due to labor protections in France. For all practical intent and purposes - it is deemed nearly impossible unless there is gross misconduct. Hence, large companies usually require you to go through a trial period of internship or a temporary (fixed duration) contract before they can trust you enough to give you a full-time contract. 

While there is protection for employees (which a surprisingly high number of millennials in France seek), this whole process makes employers very cautious while hiring new people, leading to lack of liquidity in the market. Therefore, you will see people sticking around in the same company or companies having to keep the same people around for decades, even if there is a visible mismatch. Plus making it hard for new talent to get hired properly for a job fitting well for their profile rather than in a firm which is willing to give them a CDI. 

However, having decided to have built my career in France, I am adapting to the prevalent system, and happy to report my CDI contract to you guys. 

Personal Updates

This is the big one - After ~2 long years living on our own, while spending Friday and Sunday nights in Eurostar to travel between Paris and London, the wifey has now relocated to Paris! As some people are calling it - The Khannas Reunited! :)

With that, we have now commenced The Grand Tour of Europe! As our weekly shuttles between London-Paris have come to an end, we have decided to spend our travelling budget on visiting a new country every alternate month - or simply 6 or more new countries every year! 

In terms of cities, this year we visited the regular London, Paris, Delhi, and Hyderabad, along with new additions of Prague (Czech Republic), Copenhagen (Denmark), Champagne (France). Ghent (Belgium) and Lille (France).

We also spent a lot of time exploring the streets, museums, and gardens of Paris. On that note, I think we should cover the Parisian expeditions in a separate post. Something similar to Sahil's post on Paris hall of fame! 

Onwards! 

For 2018, instead of making several small resolutions - which almost no one ever keeps - I have decided to do six '30 day challenges'! I first heard about the concept in this Ted Talk and was quite intrigued by it. With several small life improvements and personal projects that I am working on in parallel, I think dedicating a month to each of them would be quite interesting as well as productive!

Keep watching this space for more info! Till then...

Wish you and your family a happy and prosperous New Year 2018!

I should probably write more of these year-end reviews: THE YEAR THAT WAS: 2014

My watch is ended

Keeping up with the Game of Thrones theme, as with most of our conversations these days, I recently used the epic half-liner from previous season “My watch is ended” with my wifey to remind her of:

• The batteries of my watch have died again: even though I have been wearing wrist watches for over 20 years now, I have no idea how long are the batteries of a watch are supposed to last! Empirical evidence suggests anywhere between 6 months and 10 years, depending upon the weather conditions on Mars during that period! 
• Side note: I can never ever wear a watch that needs charging every night! Even though I would love to, but for the foreseeable future I am not going to try any smart watch 

• She got her first French salary (yippie!) and as per the tradition, she needs to buy me a ceremonial gift! 

For the impatient readers, Tl; Dr version of the outcome of that discussion is: after hours of research and keeping in line with my personal preference towards not charging a personal device for as long as humanly possible, we bought this beautiful piece of Fossil Mechanical watch! Just look at the video and appreciate all the intricate machinery slowly humming along inside!

A post shared by abby khanna (@furobiker) on Aug 1, 2017 at 9:01am PDT

For the patient ones, I did some research on types of watches and how to select a good watch. While selecting a watch is a matter of personal taste, I have documented here various types of watches available in the market so that you guys can make more informed decisions in the future: 

Types of Watches: 

Based on the “movement” (a.k.a “calibre” or the basic mechanism driving the watch and the associated functions, also referred to as ‘complications’, such as calendar, multiple time zone features etc.) a watch can be categorized into two basic categories: Quartz movement or Mechanical movement. Various manufacturers implement these movements using their own styles/techniques, but essentially these two kinds of movements are building blocks for all kinds of watches: 

How to find out if the watch is quartz or mechanical: 

Just look at the seconds’ hand! If it is making clear jumps between seconds, it is a quartz watch, if it is making a sweeping motion or several tiny jumps between seconds, it is a mechanical watch. 

Source: https://i0.wp.com/www.precisionwatches.com/wp-content/uploads/2016/05/quartz-vs-mechanical-watch-movement-gif-1.gif?fit=734%2C200&ssl=1

Quartz Movement:

Powered by a battery, watches based on quartz movement are pretty accurate and require much less maintenance than mechanical watches. Just an occasional battery replacement and it is good to go. Typically, quartz watches are much less preferred by watch enthusiasts due to lack of craftsmanship and technology or engineering prowess in designing intricate parts. 

Mechanism: 

Simply put, the battery sends current through a quartz crystal (hence the name quartz movement). The current electrifies the crystal, which in turn vibrates. These vibrations create the movement to drive the watch motor, which in turn drive watch hands. These watches run quite accurately till the time battery is providing ample current to the crystal. As the battery starts running out of juice, you will notice that the watch has started losing time. 

Mechanical Movement: 

Powered by a wound spring, most of the luxury watches run on mechanical movement. In a lot of mechanical watches (for example in the video above), there is a provision to witness and appreciate the intricate components, working together in a tightly woven configuration to power the watch. Several super-luxury watches still have hand-crafted intricate parts, designed for a snug fit and supposed to work fine for decades. 

Mechanism: 

Mechanical movement watches store energy in a wound spring. The spring transfers energy to gears and sometimes other springs to provide regulated power to the watch hands. I am assuming your next question would be: From where does the wound spring gets its energy from? Good question! 

Types of mechanical watches: 

Manual: Remember the typical watch our grandparents wore? They were rotating the crown on the side of the watch to wind up the spring. The energy is stored in the spring and is typically enough for ~24-hour period. Though some of the newer watches may store enough energy for ~2-day period. 

Automatic: Automatic watches also have the option of rotating the crown to wind up the spring. However, they also have a metallic weight (called rotor), which is free to move when the body of the watch moves. So, when you walk or move your wrist, the metallic rotor moves, winding the spring. Hence, when you wear it daily, there is no need to wind up the spring, as it gets automatically wind up when you walk or move your hands. 

... and 

Well, that was a brief overview of different types of watches. Personally, mechanical watches interest me more, especially where the mechanism is visible through the front glass. If you are interested in the engineering behind watches you can also look at how basic gearing works in such watches and how different manufacturers add complexities (in simple terms – features) to their respective products.

Let me know if you found this brief note useful! 

Getting back to writing

Last week, I was out for a formal dinner with some colleagues. Amid regular getting-to-know questions, one that stood out to me was “What do you do outside of the office?” Even though I am busy from the moment I wake up, to the time when I finally switch off my phone and sleep, I realized that day that since past couple of years, I have not worked on any of my specific hobbies or a personal project!

Side note: Apparently, playing games on X-box or assembling so many pieces of furniture for your new house that one can easily qualify any carpentering exams does not count. 

I started remembering the things I liked and the side projects I worked on during me pre-MBA life in India. Travelling – it is something I do to relax, not as a personal project. Reading – sure, but the number of books I have read in 2017 stands at 3. Writing – the last time I wrote on this blog was over 12 months ago! Coding – I have quit more times than I have started! Running – Although, I increased my stamina to go up to 12kms in one go, I have not been regular in the last 7-8 weeks. 

The same night, I went out to buy a mop to clean up the spider-webs from this blog. Currently, I am going through quite an exciting period in my life, and if I properly get down to jotting some nice experiences, I can fill up a few hundred pages! So, why not! 

When I started this blog page a few years ago, I decided that everything I write here should be either:

Something I am knowledgeable about

About a year and a half ago, I switched careers – from a procurement advisory function, I have moved full time to an energy management and automation firm. This is a completely new industry for me, and I am picking up new things daily. I have a lot of stuff in my head to write about – renewable energy (especially solar) and its impacts on the grid, building management systems with the focus on energy efficiency, automation and digitization of the manufacturing industry, 3D printing to name a broad few topics.

Every time I pick up a notepad (yes, I am old school when it comes to writing) to write about these topics, I feel quite underwhelmed with the things I know vs. the things there are actually worth knowing about the topics I am going to write about. If you look at the chart below, I am currently hovering over the valley of despair!

Dunning Kruger Effect

Something I am learning about

The target at the very top of my mind is my slow progress on learning the French language. I am doing ok in reading newspaper level French, however, when it comes to speaking and more importantly listening to French, I fall flat on my face. There is nothing worth writing on this topic, but just leaving it here as a casual reminder to self. 

The other thing I am learning is nuggets of history about the things I like and the things I am discovering. Just in the past quarter, I have learnt about the The Ashes Cup while touring The Lord's stadium in London, the fine art of making scotch while touring The Glenlivet distillery in Scotland, life of Pablo Picasso and the depiction of his state of mind through his paintings in Musée national Picasso (Picasso museum) in Paris, among tens of other things. 

Wait, these all sound pretty solid ideas to pen down what I learnt, remembered and then augment with external research! 

Alright, back to work now! Till we meet again next week!

Hello from the other side

June 10, 2016

End of the formal education. A lifelong quest for knowledge continues.

Bonus links: Every year, HEC Paris releases a fun video at the end of the graduation ceremony. This year's video was HEC Creed! Have a look! Though, 2014 graduation day video is my favorite - HEC in the world of TV shows!