Lehman Brothers Bankrupt - Why and how it happened.

As a prospective MBA student and one really keen on investment banking - Lehman Brothers is a big name to me. It is the same with many prospective and current MBA students across top B-Schools all over the world - IIMs, ISB, Wharton, Harvard and what not? A glimpse at Wharton's MBA placement statistics for 2007 shows that Lehman recruited 18 grads. It could be around the same number of students placed across other top B-Schools here in USA. And the doomsday came on 15th September. Lehman filed for Chapter 11 Bankruptcy. This is what it posted on its website at midnight of the 14th.

"Lehman Brothers Holdings Inc. Announces It Intends to File Chapter 11 Bankruptcy Petition; No Other Lehman Brothers' U.S. Subsidiaries or Affiliates, Including Its Broker-Dealer and Investment Management Subsidiaries, Are Included in the Filing."

It is indeed a red letter day in USA's corporate history. A 158-year old company has filed for a bankruptcy and wrecked Wall Street and rattled the global finance system. Also rubbing salt to the finance industry's wound, is Merrill Lynch's demise (read as acquisition) by Bank of America. Two majors down on a day. But what actually happened at Lehman? This is my two cents on the issue.

"Know when to stop before you begin" goes the saying. Lehman got this messed up. Investment banking was always about high-stake bets and huge borrowings but it also demands high level of strategy. It is believed that Lehman borrowed too much money and invested it in 'very high' risk domains, namely real estate. Success in IB is proportional to the ability of that company to take risks. But there is thin line that separates risk from imprudence or over-confidence. More so when we speak of real-estate investments in this economy. Clearly Dick Fuld, Lehman's CEO got his priorities and numbers wrong. 

But as the credit crunch worsened, Lehman's leverage - borrowings relative to capital - continued to grow. This is in contrast to other major IBs. One instance of Lehman's miscalculated investment is its leveraged buyout of Archstone, a big apartment developer. Lehman paid $22.2 billion for this transaction (in partnership with Tishman Speyer) in Oct 2007. By then, real estate woes have already begun. But how prudent is that investment? Lehman's shares have lost 94% of their value since the beginning of this year due to its exposure to subprime debt crisis.

And on 15th of September came the bang. The filing shows that Lehman is closing its doors with more than $600 billion of debt. The bank has total debts of $613 billion against total assets of $639 billion. Its filing with the Bankruptcy Court of the Southern District of New York shows that Lehman had more than 100,000 creditors. The move into bankruptcy came after last-minute talks with Barclays PLC  and Bank of America faltered Sunday, leaving few options for the 158-year-old firm.

Many of us know that Lehman is actually a 14 year company with a 158-year name. That is because it was acquired by American Express in 1984 and spun-off in 1994 as a standalone company. Sadly, over the last week or so, Lehman was like a bug dying on your windscreen: you want to focus on the road but are compelled to watch the stricken insect’s last moments.

Good-bye Lehman.

A paradise called Ventura!

What was supposed to be a business trip turned out to be an immensely relieving and refreshing personal trip as well. My conference at in Ventura, CA gave us some wonderful moments to cherish and even better weather to relish. 

There are very few things that I am a captive of. Nature is foremost amongst them. And nature in any form of water – lakes, rivers, seas or oceans, enthralls me the most. My hotel was on the pacific coastline. My room overlooked Pacific Ocean. What more can I ask. I spent hours effortlessly watching the waves splash the coast. Whenever I had a break in my conference, I was back in my balcony watching nature at its best. 

For someone from Phoenix which has an average summer daytime temperature of 110F, 70F on the coastline is a dream come true. Throw in a resort-type atmosphere, a laid back but interesting conference and paid trip into the mix and the outcome is very satisfying. It is not an overstatement that this is the best personal trip I’ve had. I did not attend the casual dinners that were included by my conference sponsor. All the 4 days, I had my dinner out with my wife, after we spent hours on the beach sand. I could see the ocean meeting the sky at the end of horizon on all the three directions and it was a treat to watch.

 Sometimes, I tried preparing for the conference and the presentation that I was supposed to deliver  by sitting on the balcony deck that faces the ocean front and all that I ended up doing was watching the endless magical waves. I strongly recommend Ventura and its surroundings as a very good vacation spot. I see myself visiting Ventura often in the coming days, thanks to US Air.

Federer reigns.

As expected (and as I hoped), Federer won US Open and with that created record of sorts. He is the first player in the history of tennis to win five successive titles at two different grand slam events (Wimbledon & US Open). 6-2 7-5 6-2 showed how stark the difference was between Federer and Murray, a first-time grand slam finalist. Federer started the match with an ace and from then it is history.

There is something I always believe is true about Roger Federer. He is the best tennis player ever. I admired Borg, Sampras, Agassi but none so much as I did Federer. That is because of his versatility. His all-court mastery coupled with extraordinary athleticism and determination puts him way across the rest (excluding Rafael Nadal, who is not very far off). But Nadal has lots to prove and achieve to even be compared with Federer. He has a long way to go and the more tougher part is remain consistent as Federer to be considered as a great player. Federer was stung by mononucleosis which affected the way he played over the last couple of months but it is a great time to come back and prove your fans and detractors wrong. Isn't it?
All said and done, I still do not like Federer winning in straight sets. I like to see someone (Nadal for instance) stretch Federer into 5-sets like in this year's Wimbledon final. And then I like to see Federer win. That extracts the best tennis from Federer. Some of his shots under pressure are a treat to the eye. The angles that his cross-courts create are mind-boggling. That is what I yearn to see from Federer - high quality tennis and not 6-0 6-0 6-0 domination stuff.

A thing of beauty is a joy forever. And so is Federer's tennis.

Purchasing a Car.

My research into economics and efficiencies of various cars finally culminated on Aug 15, 2008 and I chose Honda Civic LX Sedan amongst nearly a dozen similar cars. Though it is slightly more expensive than the nearest rival, Toyota Corolla, Civic's more urbane interior more specifically its digital dashboard tilted my decision in going for the Civic. People like me who find it tough to keep an eye on speed will love this feature. Speaking of my speed, incidentally I happened to cruise at 40 mph in a 15 mph school zone in my DMV driving license test. Luckily, I got my license on that day with a minor warning as other aspects of my driving that day were perfect.

Coming back to the dashboard, I love the digital speedometer that helps me keep track of my speed continuously. I strongly recommend a Civic for someone who has a similar problem. Moreover it is highly fuel efficient with 25/36 mpg, a boon in this economy. Another very good feature in Civic is its overall handling. The car is compact yet spacious and easy to drive. Throw in Honda's historical resale value and high security standards and you can get the best bang for your buck. Initially I had concerns over Civic's style but as I saw it as a prospective car of mine and delved a bit further into its details, I started to like the styling. For a comprehensive review (US News) on Honda Civic click here.

Toyota Corolla isn't far behind though. 2009 version is far stylized than its predecessor. In fuel economy it has the best figures in the segment with 26/35 with many consumers reporting 27-28 in city. Corolla doesn't seem to have any significant cons but has most of the features on a basic level. For someone who isn't concerned about styling/handling as much as fuel economy Corolla is apt. Corolla is overshadowed by its sibling Prius, which is way more fuel efficient albeit lacking in power. US News' review on Corolla can be found here.

I also compiled a list of vital stats of compact cars and it can be accessed here. I spent nearly a month in finalizing my choice. Test driving the cars that I short-listed was the crucial factor that enabled me take a decision. My order of factors in determining the car to purchase were suitability (through test driving), price, fuel economy and security. I hope you find this helpful to decide the car of your choice.

Federecession

Roger Federer, synonymous to perfection in tennis, is in a recession and this is obvious. 2 grand slam finals, 1 grand slam semi-final, 2 ATP titles and 47-12 singles record in 2008 is great for mortals but not so for Federer. What's more disconcerning is the way he is losing. It is one thing to lose to Rafael Nadal, who by the way is on cruise control, and is totally different and dismaying to lose to Simons and Blakes of the world. But the writing is clear that Federer is not in command of his game (I wouldn't use 'no longer' yet). The beating at Wimbledon was more than what the scoreboard read. It inflicted a greater damage on his confidence and mindset. Nadal grabbed Wimbledon's keys from Federer's closet, ofcourse when the latter was watching.

For someone familiar with Federer's game, there is one aspect in his game that looks to be strikingly unfamiliar. His volleying. Federer is one of the unique players who is equally strong in serve-and-volley and baseline styles. All-court mastery is his forte and that enables him to chip in classy backhand crosscourts and equally poised shots at angles that others can merely dream of. But after Roland Garros 6-0 whipping and more so after Wimbledon's epic five-setter Nadal has managed to breach into Federer's confidence, a territory untouched for about 5 years. He was thus brought down from his pedastal and looks like a pale shadow of himself ever since.

Agreed, every champion has to fall and change in guard is inevitable. But tennis is not yet ready for a change in guard. I was revetted to my screen when Federer conquered Pete Sampras, another favorite of mine, in 2001 Wimbledon. I was so craving for Sampras to hold and it was deja-vu in 2008. This time it was Federer who was hanging. Hats-off to Rafael Nadal. One great quality in Nadal is his never-say-die spirit. There were moments in Nadal-Federer encounters where Nadal looked lost. Other players gave up. But, what sets Nadal apart is that he simply never gave up and in turn, forced Federer to give up. These matches were huge tests of persistence and mental strength in addition to skill. But as the saying goes, will is greater than skill. Ultimately, both of them bring great tennis to fans and what else do we want.

I personally hope Federer rediscovers his touch and brings back his magic to US Open. Last week he lost his World #1 ranking (which he held for a record 237 weeks) and I hope this ranking doesn't topple further. Since beginning of 2004 (till early 2008) he has compiled a match record of 315-24 => 92.9% win percentage which shows how indelible his stamp was on the tennis circuit. This menancing record has started to liquidate. Though it is only Nadal (in top 10) who has a better one-on-one record against Federer others are fancying their chances against the wounded tiger. I am eagerly waiting in anticipation to see how strong Federer's resilience is. And I am pretty sure he is not a rabbit caught in headlights.

Vamos Rafa..... !!!!

When is a tennis match called a classic? It is when you cannot decide whom to applaud the most - the winner or the loser. And yesterday's Wimbledon's final between Roger Federer and Rafael Nadal is right up there as an all-time classic.

I have never had such a dilemma as to whom I wish should win. Deep in my heart, I am always a die-hard Roger fan. His class and composure cannot be matched. Period. But, back in 2005 when Nadal outclassed Federer in Roland Garros semi-final, I had a feeling that Nadal will be the one who can constantly challenge and outshine Federer in years to come. My feeling fortified in their subsequent clashes - Miami, Monte Carlo and Roland Garros again. Check out this link that highlights Federer-Nadal rivalry. But when Nadal demolished Federer 6-1 6-3 6-0 in the 2008 edition of French Open, I was shocked. 6-0 against Federer, no matter what surface, is truly remarkable and exceptional. The last time Federer lost a set 6-0 was in 1999 when he was 18 and was a non-entity.

Then the big thing happened. But, many saw it coming. Bjorn Borg was one. He tipped Nadal to win 2008 Wimbledon. I believed that after 2008 French Open final. I did not want Federer to lose, especially at SW19 where he won 5 Wimbledon titles in a row. But the way Nadal played, I did not want him to lose either. Had Federer won a 6th consecutive title, he would have been the first to do so in 122 years of Wimbledon history. But destiny had other ideas. Federer's 65 grass-court victory run (40 of them at Wimbledon) finally ended. And a new run has begun. I won't term it as change of guard. Not yet. But definitely phenomenal. Beating Federer on grass, in Wimbledon, in 5 sets is phenomenal. Nadal is now on a 24-match grass-court victory streak and has won French Open and Wimbledon back to back. How many times can he repeat it?

The Federer-Nadal rivalry has only beefed up with this match. Nadal is now 545 points shy of Federer's 6600 ATP points as World No. 1. With only US Open left this year, Nadal has a very good chance to dethrone Federer (again). I don't think I will see such a match again, where every point was fiercely competed and every stroke elegantly matched. I am also happy that Federer has true competition now and that will extract the best tennis out of him. And what is more blissful than watching Federer on the flow. But if Federer is an paint brush, Nadal is a sledge hammer. If Federer is an alpine craftsman, Nadal is a gladiator. And that adds beauty to their rivalry. I look forward to many more such encounters. And before I sign off, here is congratulating Rafael Nadal for his magnificient 6-4 6-4 6-7(5) 6-7(8), 9-7 Wimbledon victory. He was leading 5-2 in the third set. From Federer perspective, only solace is - How would 6-4 6-4 6-2 have been?

Vamos Rafa........

Best of CAT (Common Admission Test) - 1

After a relatively refreshing hibernation, I am back to my web log to write a simple terse article, which is the beginning of a series of such articles that deal with some of the best CAT puzzles I encountered. Computational Mathematics - a domain that I am wildly passionate about, is trying to solve these puzzles in both theory and programming. I will start off with a very simple CAT problem that I encountered sometime back. It was rather interesting and deals with Number Theory, which is one of my favorite areas in Mathematics. I transitioned this logic in C++ and it was truly a good exercise.

It is to determine number of zeros in a given number's factorial. Determining the number of zeros in say, 10! is pretty straightforward. But to determine number of zeros in 100! for example is unwieldly - especially from an examination point of view.

Question: What are the number of zeros in 100!

Solution: To determine number of 0's, it is equivalent to determine how many 10's make up the number. For that 10 = 2 x 5 and (2,5) are co-prime. Hence the number of 10's in number N can be determined by N/5 + N/5^2 + N/5^3+ ..... + N/5^n, as long as N/5^n > 1. '^' stands for exponential operator.

=> 100/5 + 100/5^2
=> 20 + 4 = 24.

Answer: 24

I built this into C++ and the code is intuitive.



Click on this code image to enlarge. Also, edit your headers/libs as necessary.

I will keep posting similar problems (especially from CAT) and I believe this would be mutually beneficial.