Monday, November 28, 2011


Stiff competition on the streets among consumers has leaded every business to sales its products under various non festive promotional offers. So many brands and so many choices has lead consumers to choose from a wide variety of choices whereas companies has to face tough competition on the streets to sale their products. Online shopping has also been introduced in those places where it was not imagined once upon a time. Every company has kept no stone unturned for reaching to the doorstep of consumer in order to increase its sale. Business managers sit long hours to develop and find strategies which will push up their bonuses next year and year on year. We find market survey being conducted by companies to find their product values and consumer preferences and choices from time to time. This has helped companies to cut back on less demanded products and to develop new products matching with the consumer demand.

In an recent note it is being observed and practiced by many companies the application of mystery shopping. Now this stands to be an unique proposition in the product market. Mystery shopping is method through which the business owners evaluate the worth of the products or services offered by them. This shopping proposition is being applied in every consumer enjoyed product segments. From retail stores, caf├ęs, shops, hotels, banks, mobile stores or any other business providing product or services mystery shopping is being adopted.
In Mystery shopping a person who acts as a mystery shopper visits a store, survey the product or service they offer, analyze the quality of services provided, their way of dealing with the customer and provides all this information to the company. It helps the management to identify how the practical process of selling is improving the companies product value and its revenue too. This new mechanism has been applied since even despite of giving non festive offers product sales has not picked up for the respective companies dealing in that product segment.

Infact non festive offers are not the real players behind a product sale. Much of the game responsibility lies on the retail outlets or the departmental store and their managers who deal with them. The companies place a checking system on the employees or the departmental stores behind recommendation of products to the consumers. In most cases its being observed that sales people have less knowledge about an new product which finally leads to drop in sales or hindrance behind the growth of the new born product baby.

The query of the consumers is being left unanswered leading to drop out of the product by the consumer. This is way behind the market survey process. This is one of the most advanced mechanisms which help the company to identify its loops and design its strategies from the traditional process of offers. Companies are shifting their focus from prices sensitivity zone to value zone where special orientation and new product launches knowledge’s are being shared with the sales guys. Detail product features are being shared with retail outlets and departmental store fellows since they are the ones who play the main game behind a product success.

Mystery shopping stands to be one of the effective ways of external control system which is a part of the Auditors professions. Management comes to know from these type of external standards the loopholes in the system. Today the profession of Audit is no longer restricted to internal system. We are equally identifying external audit measures for growth of an business.

Saturday, November 26, 2011


The world is facing the tremors of financial time bombs which are getting blasted from time to time. Europe has covered every country, states, town’s news papers and, TV channels and other media resources left on the globe with their ongoing crisis. Economists around the world are on the debate that does the world is coming to an end in 2012 through the economic disasters or will continue its fragile growth. I have no bets placed on this topic since I am not yet matured enough to comment on this topic. But all I can say is that till December 2012 we have to live and my job role is to write and depict to all of you the path till dead line of 2012.

We are almost come to the end of 2011 with one month left to celebrate Happy New Year. World has witnessed interest imbalances and the student of financial end economic subjects got live examples to understand how interest rates at Low end and Hind end affects every nation. We saw developed nations kept their interest rates to Zero with various strategies to grow inflation. Whereas Emerging economies witnessed the heat of Inflation rays and high interest rate cost. Interest rates and inflation has turned out to be the main problem of every economy. Western economies wanted to have inflation numbers to grow whereas as countries like India & china took measures to cut off inflation.
Interest Rates Asian Economies Excluding India & China Graph
In between all these the currency war also jumped up with yen getting depreciated against dollar. Indian also witnessed the same problem of depreciation against dollar. Fiscal measures of cooling inflation have spooked currency war. We have seen every economy in emerging nations has increased their interest rates at the beginning of 2011 to cool off inflation devil. Now when the slow down is affecting growth engines of the economy interest rates are coming down. Thailand’s Q3 GDP data show that the economy was struggling even before the flood situation worsened in late October. Thailand’s central bank will opt to cut its policy rate next week. Other central banks, including in Malaysia and Singapore, are also likely to loosen soon. It is expected that the Monetary Authority of Singapore (MAS) will loosen its policy settings in April. Philippines is also going to cut interest rates. While the big dragon China is also in the wings to cut down its interest rates since its economic growth has slowed. In the below image I have depicted only the South east Asian Economies since India and China are often read. We need to dig further to find the individual rates of inflation and interest rates which will reflect the whole economic condition of emerging economies.
Inflation Graph

Commodity prices remained on the higher side backed by global uncertainties of natural calamities. The recent flood situation in Thailand has erupted serious problems for the steel sector. The bulk commodity, the raw material for steel and one of the most important global natural resources markets IRON ORE, has leapt 27% in three weeks. Thailand is the largest supplier of the raw material and due to its flood the mines have been shut and in many cases the production has been slashed by beyond 50%. At the same time steel production and other linked products like automobile and others have also slashed their production.

Japanese steelmakers in particular have started shutting down some production. For example, Nippon Steel, Japan’s largest steelmaker, last week reduced its guidance for steel production to 15.25m tones for the October-March period, down 6 per cent from last year. This has also created markets for the greedy market players to hike prices internationally and take opportunity of the time. As metal remain one of the prime contributors to the emerging economies GDP growth, hence we wait for more down turn in inflation rates in the emerging economies and also interest rates are going to climb down. The bugle of interest rates to climb down has already blown. In 2012 we will find growth from low interest rates as GDP decline has started affected growth emerging economies. We need to find what developed nations do regarding inflation.

Where the MONEY & RISK Flows?

Their was a time when diversification was the prime strategy to alleviate risk. Diversification now stands to be safest bet for investors and a worst game for the financial market players. Diversification has resulted loss in pooling of funds for one single particular segment of financial products. Earlier Stock market was the alone place where all the funds used to get invested. Later on it shifted to fixed deposit offered by banks and by corporate. After this the era of Mutual funds came up where the book of diversification got released. From their journey went to other financial products with the theme of diversification. Distribution of risk is the bottom line of diversification. Rather than placing all the eggs in one basket distribution of the eggs in different basket is the main line of investments in financial markets in today’s world.

Today we have various types of financial avenues through which pone can do his investment planning’s. When mutual funds came into the streets of financial investments diversification was taught to the investors. It was made in order to increase the awareness among investors that through diversification risk can be mitigated and investors can get healthy return over the time.

In a recent study it has been found that today investors are moving away (in fact moved away) from direct equity investment. We find investment in Gold ETF which got an welcome fund inflow. The assets of gold exchange-traded funds in India, the world's largest consumer of the yellow metal, surged nearly three times at the end of October from a year earlier due to strong investment demand and rising prices.

Total assets of gold ETFs jumped to 90.90 billion rupees ($1.8 billion) as at Oct. 31 from 30.97 billion rupees a year earlier, showed data from the Association of Mutual Funds in India. In term of return we find in the one year time frame, all the Gold ETFs schemes have generated a return in the range of 32.62% to 33.76%..With unexpected fluctuations in the market, investors are always keen to park their portfolios in safe havens. Hence, Gold ETFs turn out to be a good investment option for investors to hedge their assets against the uncertain global market scenario. Where as at the end of October, spot gold prices in India were up about 38% (Return from investment in 1 year) at Rs.27,350 per 10 grams from Rs19,840 /10 grams last year.

Small savings has plunged by 66% where as insurance premiums by 15% in volume terms. Diversification of funds has resulted less flow of capital towards equity market. Today we find so many options neither of doing investments that no single product is able to have a monopolistic affects neither on the investors nor of that product itself. But there is one area where investors are still not well educated that is related to Risk management in financial investments. High inflation has compelled investors of various ages to go beyond the danger lines of risk. Over leveraged deals have been executed and still being continued.

Inflation has forced senior citizens to go for high levels of equity investments which is quite opposite of the principal of risk management in investment. Investment in equity should be based upon the age level of an individual. If some one age is 30 then the thumb rule of investment will be 30% in debt and 70% (30 age-100) should be in equity. But with the rising inflation making living cost to go up by many times has forced senior citizens of the age of 60 and also other within the age of 45-55 to do 100% investment in equity. Small savings schemes have failed to beat the hit of inflation over the returns being generated by them. Living till the age of 60 will be very soon a burden if proper financial planning and risk mitigation and management in early ages of life is not being adopted. For this we need quality financial planners and advisors on the streets. Unfortunately what we get now is simply Agents or advisors who are blood hound dogs. SEBI very recently is going to change the qualification for becoming financial advisors & planners. Hence no fools can become advisors for the sake of commission.

Diversification has made every financial product to be competitive and become oligopolistic rather than becoming monopolistic. We are yet to see how the new breed of financial advisors will educate investors for risk mitigation and management.

In my next article I will depict the story of Option strategies for doing Investments.

West Bengal Education needs a Relook.

It’s a welcome approach by the new West Bengal government to bring a sea change in the state education system after stained marks of exam paper leak out and it quality of education of West Bengal during the era of the old government. After a long time the West Bengal is making radical changes in its education system. Its new policies of educational development brought in the state will be acting as a boost to the youth of West Bengal. But their have been couple of places where the new policy seems to be failing while making a comparison with regard to quality.

I have some couple of reading which will depict that the state students will become less competitive in coming years when compared with other states.

Lottery system of admission is not at all a good initiative. Students should be asked to sit for an preliminary exam to so that the students don’t face any problem while catching up with the education at his own class. If all the students get admission on the basis of lottery then many good quality students may not get the chance of admission in quality schools. West Bengal government should schedule marks to which every school will have to admit students based upon the merit of the students. If say a student fails to get admission due to marks schedule then he will get chance from another school. Moreover if the a common exam system is being made then if a student say Mr. A gets admission test in School XYZ and fails to get admission in that school the same candidate can use the same exam mark sheet for other school. Hence making a uniform exam system for the students. Over here I am not raising any matter related to cast, political party or any such issue. Now the examination being taken by School XYZ will be same and at a fixed duration and at a fixed question (same question just like Common test).This will result that students will not have to read and prepare for multiple schools. One exam and one result & acceptance by any school depending upon the marks schedule. The marks schedule will be provided and graded by the West Bengal Education system. This modification of the policy is only for the quality of education.

Another place where the West Bengal Education new policy will fail in terms of quality is No pass No fail. Where it seems good but if students fail to achieve a certain threshold marks limit then education will be of no use and we will block the future of West Bengal. This will result to less competitiveness of students compared to other states. Students will face tough situations since they will take this for granted that even if I Fail I will get promoted to next class.

Conversion of marking system from grade to marks is another place where I find students will face tough times. In fact I can for see that students suicide rates will pick up in West Bengal through its new policy initiatives. We find students committing suicide in many states due to pressure of marks and intensive pressure of competitiveness in marks. Hence conversion of marks system of West Bengal from Grade to marks will spook problems for the West Bengal.

I find the above area needs to have a relook since we are not going to make frequent changes in the West Bengal Education system in coming days. West Bengal should focus for education with quality and as well as for every one. What the new policy suggests is lack of quality generation in coming days resulting students from West Bengal to be less competitive. The ministers of West Bengal and Shri.Mamta Banerjee needs to have re-look towards the ‘New Education’ policy of West Bengal. Policies should be designed keep the most worst to happen in future in mind.

Quality of Syllabus should be focused so that the students become more competitive from the initial days. Now quality doesn’t means here too much syllabus and too many books. Education has turned to be a business and also a tough challenge for the students. Shri.Mamta Banerjee should keep in mind that every policy should lead to quality improvement and not just a revolution.

Technology and Production Series1

The primitive old two prime factors of production (labor and nature) have taken a loud change with the blessings of technology.

Modernization of the industry was made to increase the productivity. Productivity not only of the quantity being produced but quality of product & labor force. But the prime reason for modernization and introduction of technology was to improve the quality of human labor has just turned opposite for the intended purpose. Standing in front of 2012 and starring back to the world it can be well seen that neither the problems of production was solved neither human labor quality has improved. Quality of products has improved by wide height backed by extensive use of upgraded technology applied and improved day after day. But the intended purpose for the application of technology for human labor improvement has ditoriated.

We have replaced heavy machines with chips and those chaps are cheaper that you don’t count while throwing them away instantly. Chips have replaced human labor force and also reduced the quality. Technology has now replaced the thought of doing production with less manpower or no human labor. Industrial revolution has forgotten the prime economic theory that is to improve the quality of production and society (which is the producer and consumer) should benefit and upgrade the human labor.

Economic situation of any country cannot grow without the growth of human labor and society. Technology up gradation has violated the rules of nature and now we are counting the punishment. This has happened due to conceiving the principle that Technology is the replacement of human labor. Technology will reduce manpower requirement and will enhance the productivity and process of production. My question stands that did Technology every tried to keep humans as the first person for the development.

I am not claiming that technology up gradation is bad and against mankind but its innovations have rules out the thought of human labor resulting growth of unemployment across the world. I am not discussing any thing related to any specific country I am talking on the global front. Did we ever thought that every day unemployment is increasing and politicians and industrialist all are finding hard to absorb the increasing manpower as well as absorbing the replaced manpower. What we will keep for the 3rd generation in this earth.

Technology was able to replace human man power due to treating the latter as an income generating force and not as a capital. Now a question will come how labor can be income and capital. Income is the product being generated and used from rigorous cycling and capital is a preserved and applied with cautious planning. I am not against of Technology. What I mean to express here that technology should be used to increase the productivity of every aspect of manufacturing and not to eliminate the main factors of production. Chips have replaced place of storage and has increased the speed of manufacturing. If any one ask what is the size of knowledge it might sound like a Lunatic question. Knowledge cannot be measured. Technology has replaced this thought line. Knowledge has taken the form of Chips resulting minuscule size of knowledge.

Today we are all scouting for coal and oil blocks. In fact we have been doing this and consuming too for the past 2 centuries. Energy demand is growing 3 times more than the birth of single child on the earth every moment. So we the increase in demand we are in quest of coal and oil reserves under the earth. Do we ever gave any thought that due to geographic reasons if all the coal and oil blocks come to an end suddenly then how we will run our earth. No need to think as long as we get. We are using these blocks of oil and coal as an income and not as a capital.

Technology has taught us that treat nature as an income and not as a capital. You exploit nature and make golden goose but one time the goose will not fetch any price since no one will be their to buy them. We must understand that the recent huge crisis of Unemployment being faced by the world is just in the initial days of the biggest crisis waiting to come. It may come soon may be in the next decade but its is bound to come. We need to solve the problem of manufacturing. Technology has made us believed that the problems of manufacturing has been resolved but it has just began the journey of end of nature.

Tuesday, November 1, 2011

China the Question of Necessity and Not Choices.

All set to go with the EFSF proposal of surviving the Euro banks and economy. But the biggest question within the proposal is who will buy the bonds and how the process will be executed. Europe need bond buyers and its domestic natives don’t have money to buy them hence its needs global buyers. Russia, Brazil and India are against purchasing ESFS bonds. Hence these countries have washed their hands from any burden of buying the bonds.
Japan has made promise of buying the bonds of EFSF giving relief to Klaus Regling, head of the European Financial Stability Facility. Japan till date has purchased around 20% of the debt issued by the continent's bailout fund. China is one of the best friends of Europe in terms of investments. The depth of the friendship is so strong that Europe will issue bonds in Chinese currency. China will invest in EFSF bond buying since china is an leading exporter of Europe and its recent slow down of economic growth will force china to head for investments making rooms for its own shipments.

Its not a Choice but Necessity
Persistent turmoil in US and Europe has slowed the economic growth engine of china. The country's exports grew 17.1 percent year-on-year (all figures on a YoY basis unless otherwise specified) in September, easing significantly from the 24.5 percent growth in August and 20.4 percent in July. In the first nine months, exports to the US rose 14.7 percent, down from 15.1 percent in the first eight months, while exports to the European Union grew 17.4 percent after rising 18.5 percent in the first eight months.
At home China is facing slowdown from domestic demand end. Manufacturing schedules and new plants are getting slowed up in China due to fall in export. This is very much visible form the import segment where it is found that imports of mechanical and electrical products and high-tech products also experienced some growth deceleration, from 18.9 percent and 16 percent in the first half of the year to 16.3 percent and 13.7 percent in the first nine months.

In order to keep the new factory orders to increase china needs to keep European economy alive and for that it needs to invest in EFSF bonds. China has already holds one-third of its total foreign currency reserves in euros. Further the recent turmoil situation of Europe will enable china to expand its investment in Southern and Central Europe. At the same time Europe will be looking for a healthy export market from China under the tag Made in Europe.

Europe is looking for cooperation on issues such as business licensing and legal transparency from china in order to promote and expand its Made in Europe goods. To me its stands out to be the best deal the two nations can work upon since Dollar and US economy both will be under pressure from the Chinese and Euro relationship. China will scout for infrastructure and transportation projects in Europe through the bond purchase avenue resulting economic growth for the former economy. Moreover Germany remains the heart of China in whole Europe in terms of export.

Last but not the least the success of the Cannes meeting and the forthcoming summit of Europe and China will depend on whether EU will be able to keep its promises made in Brussels recently. Moreover china needs the backup hand of euro for making Renminbi the trading currency in the near future. At the same time one should bear in mind that China alone will not be the savior of Europe crisis. The whole in the ;pocket is so deep that China will not take so much risks in name of diversifications of its huge foreign exchange reserves around &3.2 trillion.


Shock Absorber to begin:
World market is happy with the recent funding mechanisms declared and agreed for the troubled European economies. Banks have been asked to absorb 50% of the pains of trouble assets. Another part of the funding will be provided by EFSF which will create a set of special-purpose vehicles financed by other investors, including sovereign-wealth funds & funds being raised via bonds. Together, these schemes are supposed to extend the value of the EFSF to €1 trillion ($1.4 trillion) or more. But this might look like an easy way out but in real terms it’s a tough game and more of expectation rather than granted game to win ahead

EFSF is betting on big game since it’s predict that banks will be free enough to dispose their assets and abide the road map of the rescue plan. ESFS depends partly on France for its rating as France finances the rescue fund and any rating below AAA of France will damage the EFSF ratings too making its bond programme to face stiff difficulties. The EFSF will issue bonds which will be backed by the credit ratings of the 17-member nations of the euro zone hence bonds credit worthiness will depend on these nations fragile credit ratings.

Who buys At what?
Selling the assets will be tough for banks as supply of assets are more and purchasers will go for optimum level of bargaining. Troubled banks across Europe have already started sell of to meet earlier regulatory requirements and funding issues. Franco-Belgian bank Dexia SA recently sold its Belgian unit to the country's government for EUR4 billion, is selling its Turkish unit DenizBank. Societe Generale SA and French rival BNP Paribas SA are both looking to sell their large aviation-financing businesses, and U.K. banks Royal Bank of Scotland Group and Lloyds Banking Group PLC are continuing to sell both non-core assets and non-performing loan portfolios, including packages of real-estate, aviation and shipping loans. So many assets are stock piled for disposition and buyers are aggressively bargaining to buy them out.

Banks are getting value for its assets around 50% to 70% of its original value due to extensive bargaining. Asian banks are already keeping an eagle eye on non-central assets being sold by European banks--for example, South Korean government-owned KDB Financial Group is in talks to buy HSBC Holdings PLC's Korean retail business, and Australia's QBE Insurance Group Ltd. and Japanese insurer MSIG are among potential buyers of the bank's Asia-based general insurance businesses.

No Lending No Growth
Moreover the banks have decided that they will eliminate dividends, retention of earnings & reductions in loans. But all these measures will fail miserably since few of the banks are on profitable ladders hence ruling out the factor of dividends and retained earnings. Reduction of loans is going to create double impact less support to GDP growth via loans and secondly banks don’t have enough position in their balance sheet extend loans further. Along with this we should be clear to understand that GDP growth of Europe will be less and consumption will take a major hit affecting US, India and other Asian economies.

Focus lies at 9%
Moreover the banks have been asked to maintain that by the end of June 2012, banks are expected to establish a core-capital ratio of 9%. Banks are already focusing on meeting the limit of 9% rather than focusing on how to deal with the 50% absorption of debt pile. Implementation of Basel III norms will create further pressure on the lending to the European economy EU leaders already are pressing banks to restrain payments to employees and shareholders until they meet the capital target. Well this will further accelerate the slow down process of the European economy since banks will be lending Zero to the economy resulting negative growth for Europe. Hence we should not expect any numbers of growths from Europe. And even if we get any number it should be taken for cooked numbers derived from political amour. There is no relief from pains only consolation and regret is yet to begin. What every one is trying and dreaming to do is that wipe out all the pains and start playing the old game in anew fashion. Borrow and live without knowing who pays.

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