Wednesday, December 23, 2015

RATIONALES BEHIND FED IN MARCH …THREAT OF SOVEREIGN WEALTH IS HIGH

We are neither palmist nor we are astrologers. Being an economist we are just figuring the probable road map for the upcoming events. US FED interest rate hike was a discounted affair soon the focus shifted towards the long term interest rate hikes. I am not astrologer but an economist driven on data and statistical movement where its being envisaged that US might hikes its 2nd interest rates during March 2016. There are many factors which will support the rate hike.

As gasoline prices and crude prices are lowest in the decade time frame middle class Americans get enough liquidity in savings in this winter season and further as Christmas and new Year both are around the corner healthy consumption is bound to happen which will get reflected during the Jan –Feb 2016 consumer index data. 2ndly the US lift of export ban from crud will lead to huge inflow of capital for the starving companies which will get reflected in the business index and also on the investment index. It might be very small but that small is big for US. Moving further the Core PCE inflation, which is widely taken into consideration by U.S is forecasted to be around 1.5-1.7% through 2016 which is well aligned to what Fed policy makers expect. Further strong dollar would make import cheaper which goes for more consumption to happen in the winter season. Inflation is not going to pick up so easily which US FED knows as commodity prices are low hence more focus will be on consumption and less on inflation targets. Hence those keeping bet that inflation will not go up hence interest rates will also not go up –better throw off this theory.


The biggest concern the global economy will have is the devaluation of currencies to keep their own markets of export to be cheap compared to dollar. This will act as compass for the global economy for the direction of the movement of capital outflows and inflows.  In between US economy will have to go for further interest rate hikes as the crude market has plummeted significantly and this has resulted many crude export economies to cut down on budgets and also redeem the Sovereign Wealth Funds and overseas bonds which are being held by them. US interest rate hike is going to be a cushion for not redeeming it. US have to go for another round of interest rate hike as they have to stop the redemption of sovereign wealth funds and bonds redemption. . As of March 2015, it is estimated at $7.3 trillion, of which $4.2 trillion are oil and gas related. While there are large differences across sovereign wealth funds, available information on their asset allocation points to a significant share in equities and bonds.  Sovereign investments are so big that massive liquidation might happen at any point of time if the crude exporting countries thinks that to keep consumption expenditure in the same lines as its use to be when the crude was $80 per barrel. 

This will create massive outflow of capital across the globe. Further its being expected that as US gets into an open fight with crude exporting countries in terms of prices a sudden blow might come to the global financial and bond market at point of time. 2016 is going to be cold war.

Thursday, December 17, 2015

US CRUDE EXPORT...TO US FED...TO FLIGHT OF CAPITAL 2016


Several topics to discuss and I don’t know from here to start. I am in fix whether to start from being an economist or being an Economic Journalist.  I don’t want to start on with US Fed rate hike rather I have something more important thing to share. After 4 decades , US has finally, partially, approved Export of Crude oil. This will save the US junk bond markets and also the US oil companies. We all know that over the last couple of series of articles I have been covering about the deep problem for the US oil companies as Fracking technology lead to stupendous oversupply of crude for the US markets. The prices are so low that oil producing companies are bleeding and filing for chapter 11 for bankruptcy code. The Republican leaders in the US congress have accepted the same and now the Democrats are awaited to approve and both houses the and senate have to pass and them US President have to sign it into law. US oil producers were extensively lobbying the congress to lift the ban on oil export.

Lifting of the ban would create stupendous inflow of capital as US will fight to close the monopoly of Russia and Middle East price control. Further US economy will start creating jobs as more investments and an oil company comes into play. The biggest things to watch will be the price war across the globe since US have enough stock piles and the world is running short of storage. But price war would lead to more problems as price competiveness would lead to more problems for the producers creating a ripple effect on the US oil industry.
Now coming to the US fed rate hike. Yellen was under pressure from the both political parties as the ruling party of US is more concerned to show the Americans that US economy is all health and hearty. Whereas the other opposition party is more focused to prove that image of the economic growth is false and US is still struggling.   Markets might have discounted the factor of rate hike but the biggest question is that is the market trying to hide some bigger problem which is yet to be known by the global economy. Countries like Brazil, Turkey and South Africa would be under intense problem due to the rate hike as they have negligible foreign reserves and more debt on their economy.

Well these will take time to shape up. But the immediate threat I could find in 2016 share buy back scheme is going to go for a big hit in 2016. US corporate have been taking zero interest cost funds and invested the same in buying back their won share which lead Dow Jones to create new highs. U.S. companies spent $516.7 billion buying their own shares in the first nine months of this year. Slow down of the Chinese economy followed with crash in commodity  sector will add more fuel to the declining profits of the US companies. As zero interest rate are gone US companies will be cautious in terms of borrowing. In between US Banks are also playing safe since they have hiked the lenders rate of interest whereas they did not hike the depositor’s rate of interest.

 In between those who have been thinking that massive outflow of capital will happen once US Fed rate hike happens well be cautious and don’t take rest. FED is clear that if economy is in good shape then rates will go up.  Current gas prices and crude prices are so low that consumption of goods and services numbers will be healthy in this winter. Hence coming quarters numbers will be good. Further as economic numbers tends to be good outflow of capital will happen in due course due to fear factor more than the real rate hike. Dollar credit to non banks outside the US came around $9.8 trillion at the end of the 2nd quarter and around $3.3 trillion came to emerging markets according to BIS. Further as US economy in 2016 will gradually prepare for rate hike then the unwinding of capital will happen. As I told earlier US economy is heading for election and hence unwinding of capital is bound to happen and also proving the economy is stable is more required.

US don’t have any more strength to bear high interest cost on its bonds which they are paying to the countries like china. It has no option but to improve its economy even by shadowing numbers. Export of crude will be beneficial for US as well as for countries like India who are importers.  If crude prices drops further only problem is for the players and dealers of the commodity and not for those who consume it. 2016 will be roller coaster year.

Monday, December 14, 2015

BOND PANIC ....MIGHT SPILL TO EMERGING MARKETS

US interest rates might move in whatever direction but the prime concern which I might is that the global investors are on the verge of losing their safe investments and this would be worst than equity carnage witnessed during 2008. My deep concern is about the investors who thought those bonds are the safest investments options. Global Mutual Fund companies are witnessing   a massive problem of redemption as investors are cautiously taking out their hard earned money from all investment products. The problem is with the fund managers who are selling the high quality debt paper/bonds to pay the redemption as the low risk high yield papers are defaulting and there are no buyers for the same. The biggest part will be that investors faith on investments will be shaken and many of asset management will have no alternative but to lock in the redemption process as the situation turns into disaster.

The most crucial part is  that the low rating high yield  bonds earlier used to belong to oil segment but now with commodity base companies coming into a recession phase, bonds from these segments are also witnessing massive problems. Very recently Standard & Poor's Ratings Service recently warning that a stunning 50% of energy junk bonds are "distressed," meaning they are at risk of default. Well the tentative number is about $180 billion of debt is distressed. This is the highest level since the end of the Great Recession and much of it is in energy companies. The fall of the commodity prices have created a massive volume of distressed bonds.  
According to S&P around 72% of the bonds in the metals, mining and steel industry are now distressed. The problem of massive defaults and at the same time pressure of redemption is forcing the fund managers to sell the high quality bonds. There are no takers of these distressed bonds. I will not be surprised to find that if there is lock in terms of redemption and few fund houses going for a wild toss. Liquidity crisis is going to spill over across the globe since other overseas investments will be liquidated and also fund of fund investments where complex products have been introduced will be heading for redemption which will spook massive sell off.

Those who are thinking that emerging markets are not going to be so much affected one advice recheck what you have to say. Corporate debt in emerging markets had more than quadrupled in the decade to 2014. The 15 biggest emerging-market bond funds attracted a combined $65.7 billion in net inflows between 2009 and 2014. Institutional investments are the first to press the button of redemption as cost of borrowing will increase in US hence booking profits is the key game. Problem is with the high quality bonds also as their prices are also falling and few of them are getting good prices as the carnage has began. I am pretty cautious on the movement of the debt market  and the spillover of the fire of  high yield high risk bonds to emerging economies.

Sunday, December 13, 2015

CHINA IS NOT THE PROBLEM...ITS AN OPPORTUNITY

In continuation to my previous series of China is not the Problem… we find strings of green shoot of growth for the economy within its own circle of operation. Many companies will be making billions from the Chinese economy where the rest of the 99% will be busy with its slow down stories. Yes china have being focusing aggressively on its consumption driven economy from the old attire of Manufacturing based economy or export driven economy.  Unlike my previous version where I told very clearly that china is no longer the dumping ground of goods. China is focusing towards its consumption and its well proved when we dig inside of the same.
  • ·    Apple’s China sales increased 99% year over year last quarter, to $12.5 billion.
  • ·         Nike’s shoe sales are growing faster in China than anywhere else.
  • ·         Honeywell is supplying plane parts to meet boom times in Chinese consumer travel;
  • ·         The Number of Chinese tourists traveling abroad is projected to rise from 116 million in 2014 to 242 million in 2024, says researcher CEIC Data.
 When a economy shifts from manufacturing to service based and consumption based economy it means that it’s going to strengthen   its own core business empires. A best example is semiconductors where China consumes 40% of worldwide chips . Well its now spending $20 billion a year to build its own industry. Like this Chinese government is asking its private investments in healthcare segment to grow and take up the huge pile of responsibility from state owned enterprises to their own end. This leads to growth of investments and creation of jobs and consumption of better quality health services. Service- and consumer-oriented sectors make up half of China’s GDP, compared with 80% in the U.S. Recently we heard that Chinese economy is struggling with real estate. Well their might not be big boom but small bangs are their. Chinese residential sales jumped in 2015, driving prices higher and inventories lower across 35 cities.

Then why the world is crying over the Chinese slowdown economy and signing the song of significant GDP growth decline. Well many researcher across the globe will point to an data to show that US has less stake in Chinese markets. It accounts for only 2% of S&P 500 revenue in Chinese markets but their some big giants who will loose significant position in the near term. American producers of copper, aluminum, iron ore, and steel are very badly stroked followed with China’s focus on home grown technology could hurt big suppliers to business like Cisco, Microsoft, and IBM.

As I shared earlier that china economy is going to get billions for few companies here are few of them Disney is opening a theme park in Shanghai in 2016, whereas Sun-Power is building Chinese solar plants for Apple. And General Motors’ profitable trucks and SUVs are becoming big sellers in China. Chinese companies are printing money as brands are becoming global like Alibaba, Xiaomi smartphone. There is no slowdown in china it’s a just a shift power from one hand to another. The growth remains the same. Fools are those who expect a continuous growth in the salary by 50% each year.

Tuesday, December 8, 2015

NEW TECHNOLOGY AND IRAN GOING TO CHANGE OIL MARKET

The competition of crude production is expected to intensify in the coming 2016 as new technology changes the landscape of the crude production in America. When the world is thinking that US crude oil producing companies were suffering lossess from getting oil from wells and the cost of operation of old oil wells are problem and high capital intensive matters then just be cautious about taking any decision about the same. Plasma pulse technology is just one of several new approaches to get oil out of old wells. There’s still a ton of oil left in wells, reservoirs that have already been drilled. And that are thought to have been depleted. Re-fracking is another way to get the oil flowing again. Other methods include injecting hydrochloric acid or carbon dioxide down old wells to get more oil out. Most of those techniques can be far less expensive than drilling a new well, which is good news for drilling companies trying to make a profit with oil now at about $40 dollars a barrel. This clearly shows that technology is reducing cost of production and also new wells are not required when we can get the oil from the old oil wells at a much lower cost compared to new oil wells being drilled and explored. According to the U.S. Department of Energy, many old oil wells still have as much as 60 to 90 percent of their oil left in them. The government estimates there’s as much as 63 billion barrels of such oil in the U.S. that could be recovered from old wells, enough to supply the country with all the oil it needs for nearly a decade.
Factors which pin point that US is in a better position in terms of low crude is very clearly evident from the below mentioned data where we find that consumption is picking up and also prices are giving a leeway for higher consumption.

·         US are going to be strong challenger for Russia and for Middle East oil producing countries. Also terrorist funding is also linked with oil prices hence it will be a prudent decision to keep this commodity form rising.
·         U.S. crude oil and lease condensate proved reserves increased by 9% to 39.9 billion barrels, and natural gas proved reserves increased by 10% to 389 trillion cubic feet in 2014, 
·         Texas had the largest increase in proved reserves of crude oil and lease condensate, representing 60% of the nation's total net increase in 2014.

·         This increase was driven by development of tight oil plays (e.g., Wolfcamp, Bone Spring) in the Permian Basin and the Eagle Ford Shale play. North Dakota had the second-largest increase, 362 million barrels, which came mostly from the Bakken tight oil play in the Williston Basin.
·         Proved natural gas reserves were added onshore in the Lower 48 states in several of the nation's shale formations, particularly the Marcellus Shale play in Pennsylvania and West Virginia, the Eagle Ford Shale play in Texas, the Woodford Shale play in Oklahoma, and the Utica Shale play in Ohio.

IRAN THE SAVER OF US OIL GIANTS
We all know the story of Iran crude production which will begin in 2016. But do we know the type of contracts they are entering into lift up the production facilities. Iran Instead of getting a share in the production, Iran will pay them a fee for each barrel they pump; that gives them protection from falling prices.All contracts are being entered where high-technology based oil production facilities  to reanimate its dormant oil field. Iran is going to be the lowest cost of production of crude since finding new wells is going to be very capital extensive. Oil majors have canceled tens of billions in oil projects in Canada, the Arctic Ocean and other places deemed too costly. Hence Iran is going to change the lanscape. Further with this new technology in place in the hand of US oil giants getting oil from old wells would be more profitable for them compared to finding new wells. The International Energy Agency estimates it costs $20 to $31 a barrel to pump oil from Iran's giant onshore fields, compared with $59 to $90 a barrel for U.S. shale oil and $95 to $114 a barrel for Canadian oil sands. US companies will find it safe for investments in ran as currently Thirty-seven North American oil producers have filed for Chapter 11 bankruptcy protection this year, including 16 in Texas. According to the Atlantic Council's Global Energy Center tapping into new ones west of the Karun River could add up to 700,000 barrels of crude after sanctions are lifted, and about 1 million by 2017 to 2018. Hence to survive Iran is going to be  best land for getting returns on low capital investmnets and save their oil bonds.  Where the oil prices will be heading is now matter of debate and no one can guess the real levels.

Monday, December 7, 2015

China is not the Problem....

Over the past couple of months china has been on the top ladder of the global economy and everyone seems to blame the economy for its huge capacity build-up which has turned to be detrimental for the global economic growth. Every one blames that the global economy will face slow down in 2016 due to Chinese economy growing for a wild toss. Commodity prices have come down and also consumption demand is slowing down in china. In a recent data around $550 billion in the year 2015 till date have flown out of china and their treasuries are depleting fast.  

Well the story have been presented with an fear sign where as the reality is that China is buying properties and other asset in other countries. The global economic slowdown created during 2008 has lead to an significant opportunity for investments in overseas assets by china as they are available at cheap price. Further china is getting more long term gain from its diversification of its reserves.  I find that Chinese economic slowdown has become a pain for the world economy as they were busy in dumping their capacities. If an economy becomes cautious in terms of its utilization of its savings and reserves is that a problem. If Chinese investors don’t invest in bonds and treasuries and invest in Indian real estate and business is that slow down. Chinese economy is the 2nd largest economy and a growth rate of 6.5+ will be sufficient enough compared to US and Europe struggling with 2% GDP growth.

If commodity prices have come down it doesn’t means china is facing slow down. You cant expect the whole world to produce and china alone to buy. The problem is with those capital market giants who are having the pain of not printing billions out of million through commodity investments. Countries like India are enjoying the low commodity prices. It’s strange that today as gas-online prices and oil process are low Americans are saving a lot and consuming a lot. US have understood very clearly that low oil prices is that path to prosperity as it leads to consumption which further leads to manufacturing growth which leads to GDP and taxation and employment growth. Well this also clears the expectation of the crude prices climbing to $ 70 or $80 per barrel. The oil war is open and US will not get for any cut down of its production and low prices leads to US recovery.  

In the coming months china might give some short term jitter as its getting ready for cutting down carbon emission and hence many factories might come to a halt or might be merged. This will create demand for capital goods as well as utilization of capital investments which will lead to a significant growth opportunity for china as well as for the global economy. At the same time good things takes time and hence it will be done over a gradual space of time.  We are all blaming china as US companies are struggling with getting profitability number on their balance sheet.  The country who steps into the shoes of cutting down carbon emission would find radical changes in its resource utilization and exploitation of resources too. This is bound to create problem for its economic growth as well as for the ancillary economies linked with that country.


The real problem is that china is not going aggressive anymore with its own stock piles of resources. Rather it is focused towards deploying its resources in other countries like Africa. The proof of the pudding is that US companies like Cummins Inc., for example, said demand for excavators in China fell 34% in the second quarter. Many of them might say that US companies have small stake in china then just tell me why you people are busy in creating a negative environment for the Chinese economy. The emerging economies are well placed and they are going good with their conservative approach.  Indian among all these remains to be the most beneficial economy which is well reflected through its CAD coming down from 5% to 1% within 3 years time frame.

Monday, November 16, 2015

WHAT STORED IN 2016 FOR GLOBAL EQUITY AND ECONOMY

 
 Another 48 days left for 2016 to begin and hence its an high time that we should prepare ourselves for couple of very strong ride to be witnessed in the equity and global macro.  2016 will be a power pact year where we will witness some very string economies going for elections. US will have its Presidential election followed with Taiwan going for the same. Europe will be knocking the doors for Referendum followed with Russian banks going for a wild toss. Among all these China will be coming up with its 5 years plan which will be decide the fate of the Emerging economies growth. US interest rate hike have been discounted now, provided it goes for some bold hike in rate percentage. Europe Referendum would be very crucial since the current case of Syria and its refugee policy might harm the Euro countries.  Further Mr. Alex will require vote support for cutting down spending and increasing taxes which will be another trauma for the global equity and economy. Europe will give lot of intense pressure on the nerves since we have seen the situation of Greece and hence the recent policy of Europe regarding Syrian refugees might create problem in getting majority support.

Russian banks will create panic since the country will enter into the 2nd year of its recession and Russia will try its best to have a war so that crude prices increase in the near term giving massive relief to its oil based economy. Crude  will be under pressure and the most interesting part will be to watch out how OPEC and Middle east will play its dice since the global economy is running short of storage and these fellows have no inclination to reduce production. China will design very aggressively its 5 years plans since it will try it’s hard to get the GDP back to 7% or 7.5% and hence its economic policies will also decide the fate for the flow of global currency. US Presidential election will decide the fate for the socio economic cots burdens and also this will be a key factor for Indian Pharma Industry who is heavily dependent on the same.


In between china’s currency might come up in the basket of IMF and also petro–yuan might come up as china is aggressively buying crude and creating huge storage reserves hence the dollar rule might get shock.  Brazil is under huge Debt to GDP ratio and hence little growth could be expected form the economy. Indian economy is based on reform policies and its GST rollout will decide the fate of the country followed with Land Acquisition bill. India might be sweet spot to invest but delay in reforms could be a huge set back. Low commodity prices and crude prices are a boon for the emerging economies but the recent slowdown of the Chinese economy has created massive hole within the profitability pocket of US companies followed with many other countries.  Declining US shipments is being ignored and all are focused towards rate hike. US is still a coming of the recession and its not in expansion phase.   US interest rate hike will lead more countries to go ahead for interest rate cut down so that inflow of capital and investments keeps its momentum. 

There is utter confusion regarding both the things. Among all these few industries will be making billions through the US and Taiwan election. The media and social media marketing companies’ share values are just going to jump by many folds.  Currency war has already began and we will witness few more currencies are made cheap for doing exports.  Syria war might be a big topic for the global economy and many countries will come together since war will be short term relief for the global commodity market. Business strategies will change based on the policy frame work and currency polices being adopted. Emerging economies asset bubbles are just bursting and we have witnessed the same in 2015 but a major part of it is left out since Banks are yet to take the hit in their books once the accounting year comes to an end.On an overall basis it could be said that all these events will keep the global equity markets under high volatility followed with high growth phases which will take time to take shape. Those who are investing should invest for long and should book profit periodically since too much long trade in equities can take you into massive losses.

Sunday, November 15, 2015

COST MANAGEMENT TURN AROUND A FORTUNE 500 COMPANY.

After a long time I am going to share another turnaround story of a Fortune 500 company which was taken over by an Indian company and through efficient cost management the company was turnaround from a loss making to strong profitable company. I couldn’t find any other topic to cover while writing my 392nd research article over the past 6 years. In the recent past the profession has beaten miserably from all angles it lost its sheen which it used to carry a decade ago. But it regained and kept its fight alive till date. One of the biggest boons this profession has passed to several industries is that it saved them from getting depleted from the global industrial landscape. Cost reduction is an unstoppable process of critical cost examination, analysis and challenge of standards. This case study is a very well known and it clearly reflects about the turn around it has witnessed currently. I am surprised that Indian industries are taking cost accountants and cost records as hindrance to the path of growth of their companies. I will not be getting into number games since the case study itself is open to anyone I just brought it in front of those who think that they are losing hope on the profession.

Coming back to the Fortune 500 Company, that company was making loss before going to be brought by an Indian giant.  The number of losses and the profit figures speaks a lot about the cost management tools being taken and adopted by the company to make the turn around. The company was draining around $12.6 billion a year before it went for sale. The company  focused on design, technology, innovation, efficient strategic cost management , improving the supply chain verticals and making them into profit centers using activity based costing and high quality standards where error were eliminated lead to the stupendous turnaround for the company. Through site by site measurement and reporting of performance the company .The growth of the company is supported by a disciplined financial plan involving tight cost controls and targeted investments. The cost savings aspect has been taken into every small inches of the organization. For example in order to reduce of electricity they have built solar energy based plants where electricity cost would be eliminated or rather reduced to negligible levels. The company changed its landscape of cost control and now its rolling very strongly towards its new innovative expansion and growth plans in its production facility.

 It improvised its Life cycle costing strategies and built a culture of data-sharing standard to improve car development within its product lifecycle management (PLM) system. Yes the industry to which the company belonged was Automobile Company. The growth of the company is supported by a disciplined financial plan involving tight cost controls and targeted investments. Efficient cost management has been the bible of the company. The common uses its cost management strategies efficiently and judiciously to drive long term profitability. Currently the company has taken The project, called Leap 4.5, will entail building more models on similar core skeletons, overhauling the carmaker's supply chains and slowing down or halting the recruitment process, although there are no plans for redundancies. Further through this innovative COST MANAGEMENT STRATEGY  the company plans for costs of meeting emissions standards, which will lead  to save cost to the tune  3 billion pound-a-year which will be used by the company for capital spending budget on research and development and building new plant. Hence its proves that efficient cost managements leads to efficient cost and investments allocation keeping the long term sustainability strategies of the company. Efficient sales strategies were mixed with investment strategies where cost management was strategically taken forward.

Well the company is Jaguar Land Rover (JLR) which have been taken over by the TATA in 2008 after suffering a decade of losses in 2008. Extensive analytics and market research have been adopted by the company to drive  target costing application in terms of its decision making. Data analytics helped the company to drive efficient pricing strategies for its methodologies for dynamically pricing its large range of parts and accessories in the face of growing competition from independent aftermarket suppliers. The company adopted life cycle costing and target costing as bible within its operational activities where it achieved  new generation of efficient vehicles, Efficient supply chain management and researching new types of natural fibers that could reduce the weight and life cycle impact of vehicle components compared to plastic.  Its cost management senses were so strong that it adopted the same theory in investment activities even for investing for raw material to new hybrid engines spare part purchase. Jaguar Land Rover’s recent product offensive is the result of significant investment by the manufacturer. In the last five years it has invested over £10 billion, while tripling its annual engineering spend in just six years. 

All these were implemented by TATA Motors. TATA motors need no introduction about its cost management strategies.  The most important part of Jagura land Rover is a key eye opener to the Indian industries that thinks and ignores that cost reports, rules and cost management audits of no use. If you don’t know how to use knowledge it doesn’t mean that it doesn’t have value. This sounds and fits well for Indian industrialist. 

The current competition increases the demand of better cost management strategies and adoption of cost accounting rules and regulations within the system. The cost audit reports were never focused towards government alone. Industries failed to adopt and read the report hence it became useless. We cost accounting and costing methods are going to be the key factors which will drive the investments and corporate profitability growth in the long term. Big data analytic helped Jagura to design its costing modules and derive stupendous growth. Then why the same cant be adopted by the Indian industries.


Thursday, November 12, 2015

YUAN VERY SOON IN IMF BASKET...WIN WIN FOR GLOBAL ECONOMY

We might be on the verge of witnessing another historic moment in our life when IMF would be adding up Yuan as the reserve currency.  It might happen now or may be later but there is no doubt about not being included in the IMF basket. In the recent past it have been witnessed that the usage of renminbi has expanded by 21-fold since 2010, and the currency has appreciated by 25 percent against the US dollar over the past 10 years. Further according to the international bankers its being expected that hat 28 percent of the international trade to be denominated in RMB by the year 2020. 

The renminbi recently made it to the list of top five most used currencies, leaving behind the Australian and Canadian dollars. Chine government has taken all steps to get their currency to be cleaned from all sort of dirt so that it becomes crystal clear to understand for the global economy. But why did China being such an conservative county came forward to clean the currency and make it in all term possible for the IMF to get suited according to its wishes. The Chinese spent almost $30 billion on U.S. homes in the year ending last March. They are shifting their asset base and also building assets in other countries getting stronger macroeconomic hold. Well that might look like a very positive approach for countries like Europe and US where inventories are getting sold and economic indicators are running smoothly. But over the long term China will get better hold of these economies in terms of macro as well as in terms of its macroeconomic assets. Well that’s long term threat which might not be visible now. Lets get back to the prime topic where we find that china has a cap on foreign currency transfers by individuals to only $50,000 a year. So how Chinese are buying properties in Europe and US?  Some 800 billion yuan ($125 billion) left China through underground banks in the April-October period, citing an estimate by the People’s Bank of China.

Hence its better to make Yuan the reserve currency and also IMF would be more inclined to include the same so that the $3.5 trillion of reserves the china has can be utilized. Further china also knows that historically the U.S. dollar has appreciated by more than 50 percent against the yen over the last three years, but the volume of Japanese exports has not changed significantly.  Hence the same could be true for china in the near term. Hence getting into IMF basket is going to be a win- win proposition for IMF as well as for China.  Overseas investments new product designing and a huge growth of financial inflow would increase in the coming days once Chinese currency is included in the IMF basket. Fund managers and CIO would come up with innovative products to lure the investment appetite and resulting more equity and debt participation and alternative investments opportunities

The initial journey would be slow but the long term history which is about to be created speaks a different language. One part of the global economy is thinking that Chinese reserves inflows are good where as the other one thinks that they are getting hold of the macro economic factors of the developed economies. The war is heading from domination of currency to domination of macroeconomic factors. Further IMF might consider it now or might take some more time to include Yuan as the reserve currency but it will happen with no doubt over it.

FDI APPROVALS ...OPPORTUNITY FOR COST ACCOUNTANTS BUT ARE WE?????

Wish you every one A HAPPY AND PROSPEROUS DIWALI. We and the profession have been demanding many things over the last decade particularly in the recent session we have demanding GST and Companies law etc. I am not here to give sermons neither I am training any cost accountants. I am provoking the thoughts within our fraternity and the line of the action we should adopt quickly to enhance our Abilities.  I know many of my friends might not like the article but truth is just like SUN. The biggest question that have been chasing simultaneously and invisibly is that how much the professional’s who are in the corporate sector are capable to move ahead with the new things which will come up in the economy. We are simply getting happy with couple of stock audit opportunities where as the profession has a bigger role to play within Indian economy.  In the similar ways today after the new central government have come up a host of new policy initiatives and the biggest question at the moment is that is the working professionals of Cost Accountants are prepared and did the Institute its veteran have taken adequate steps to train and bridge the gap of working in a competitive fashion in the new areas of changes.   Never otherwise the professional who have passed should not have been getting so low packages and we should not have been getting low recognition. The biggest growth opportunity which is going to come over the next few years will be the recent FDI gates which have been opened up for inflow of capital and technology to build Indian economy for the 10% GDP growth.  According to the recent policy initiatives taken by the Indian Government where Foreign Investment Promotion Board (FIPB) to clear proposals up to Rs 5,000 crore from Rs 3,000 crore earlier. This will open up the gates of inflow of capital within the economy. Hence efficient utilization of resources and strategic cost management and enterprise value creation would be the key factors behind the growth and establishment opportunities. Cost Accountants need to be well prepared for such things where they can compete with other professionals and not profession.

Real estate sector which is one of the biggest sectors of Indian construction industry accounting for 80% has got lot of relief for stupendous growth in the coming days. For instance, area restriction (20,000 sq m) and minimum capitalization requirement of $5 million to be brought in within six months of commencement of business have been removed. Further, foreign investors can exit and repatriate investments before a project is completed, but with a lock-in of three years. My point is that how many cost accountants are well trained to join the industry for efficient valuation management which will be the key factor behind the success of the industry.
Media and entertainment industry have been growing like anything over the last 5 years or 1o years. The foreign direct investment (FDI) inflows in the information and broadcasting (I&B) sector (including print media) in the period April 2000 – June 2015 stood at US$ 4,050.58 million, as per data released by Department of Industrial Policy and Promotion (DIPP).   Now FDI limits have been hiked in teleports (uplinking hubs), DTH (direct-to-home) and cable networks to 100 per cent with government approval required beyond 49 per cent. Further, news and current affairs TV channels and FM radio companies can now bring in up to 49 per cent FDI under the government route compared with 26 per cent earlier. For non-news and down-linking of TV channels, 100 per cent FDI has been permitted under the automatic route. Hence cost accountants and cost management demand will be high but the question is that how much the institute and its senior segment is ready to train and groom the working segments of the profession.

Banking industry is going to get huge inflow of capital particularly the private banks and hence asset quality management is going to be key factor where cost accountants would find demand. The government has allow full fungibility in foreign direct investment (FDI) and foreign institutional investment (FII) in Indian private banks will give these lenders good flexibility to raise capita Please don’t be happy with getting couple of stock audits of banking industry.From M&A ,target costing, efficient risk management  system, corporate value creation to quality production process all are the areas of cost accountants and we are just sleeping over them. We need to move and act fast to get the same applied within these opportunities to flourish the profession.

In the retail space the government has relaxed the business opportunities and inflow of capital into the system. The Indian retail industry in the single-brand segment has received Foreign Direct Investment (FDI) equity inflows totaling US$ 275.4 million during April 2000–May 2015, according to the Department of Industrial Policies and Promotion (DIPP).How many cost accountants are prepared to tap into the industry and create growth opportunities for the industry?  The industry will require better simulation better management strategies to optimize profitability so that foreign inflow of capital can come within the industry.  The point is very clear that before we keep on asking only one area of operation we should focus on the other areas which are being given as an opportunity. But why we are quite ignorant about the same. The reason behind that we cost accountants never bothered about the ample opportunities given at large. We want always special powers where as working professional development is a complete different aspect altogether.

What I am tarrying to say is that what the economy is giving as opportunity, how much we cost accountants and its veterans are prepared for the same and rather running at the back of GST and all those things how much value working professionals could add to the economy would indirectly lead to the growth of the profession.  Focus where the profession grows, don’t forget that even if GST and other bills we get position we will never get exclusivity since the economy is larger and practicing members are less. Hence work for the working professionals and develop their opportunities.Did you ever think that once make in India become active India will require huge amount of expertise in cost management and process for improving the profitability though efficient cost accounting techniques.
But we are having very low numbers of passing students compared to other professions.  Job market is internationally down but what we have has long term VISION to cater the Indian economic growth is more important. The time and long term demand is that we need more final qualified cost accountants.

Thursday, October 22, 2015

START SAVINGS CLASSES FROM 6TH STANDARD SCHOOL


Declining Savings rate is a big problem for the world economy since economic growth slows down due to lack of consumption which results low production which further spills over to unemployment. At the end of the road we meet income and wealth inequalities.   This has been the vicious cycle through which we have been going through over the last 7 years from 2008 onwards. Imbalances of savings rate create a vicious cycle over the family and its next generation. . A June survey of 1,015 adults from America Saves, a Consumer Federation of America campaign to promote savings, also affirms that Americans are falling behind with their savings rate. The largest decline was among respondents with household incomes under $25,000.US economy has been highly expressive in its practical application of the theory of Borrow and Spend. We know the dire consequences of the same. Now we need to get into the practice of savings since we have passed a wrong message to the youth as well as to the young generation.  High levels of savings save not only a family but the global economy too.We need to teach the young generation about savings. We need classes in schools for teaching the same.
We have taught them the luxury of life through borrowed living and now we are teaching them pains of the same.  We need child education on savings rates across the globe so that a child in his 5th or 6th standard could get an clear idea about savings rate and also the nightmares of borrowed living. I often find that school children’s are being involved into education of investment planning etc but more than investments I find teaching them about savings is more important. We need to pass the knowledge and experience of bail outs and its dire consequences. We need to train them just like military soldiers so that they are capable enough to face and avoid the hardships of the borrowing game theory. We need to teach these students in class 5 and 6 onwards that life is not a bed of roses. We need to keep in mind that this young generation is tomorrow’s future for the economy of an country or of the globe. Hence we need them to be well trained in these areas where savings and crisis practical details are made public to them. We need a strong young generation and not a weak back bone less society. We need strong mentality based economy which can only take birth when we don’t hide the real life stories from our children’s and teach them form early age about the mistakes we have done or seen over the last decade.

Investment education is being given so that financial product penetration happens more and families become more cautious towards investments and its growth opportunities. But do we ever think that teaching them about savings habit and creating a culture of no borrowed living is the urgent requirement of the time. Child education of savings and living within the means and more on birth of financial crisis should be part of the curriculum.  We need these types of classes so that we can breed a new generation of entrepreneurs or employees who can manage and run the business more firmly taking calculative risk. In order to prevent any global economic crisis and social imbalances we need the young generation well acquainted about the benefits of savings and having high levels of savings. We need classes for teaching the benefits of savings.

Tuesday, October 13, 2015

US BONDS ARE SIGNALLING A COLLAPSE OF COPRORATE

US bond markets are under pressure and the symptoms form the same are not very attractive and rather they are creating pressure on the global economic crisis which might come ahead. I am not promoting any negativisms but don’t forget that if we have taken the reports of IMF and other economist about the U.S housing market collapse of 2006 then we should have avoided the recession. The global economic slowdown and slow down of China is creating a major impact on the cash flows of the US companies. Credit-rating firms are downgrading more U.S. companies than at any other time since the financial crisis, and measures of debt relative to cash flow are rising. Investors have become cautious and many companies may not be able to pay back as profits are coming down.  On the other hand investors are now demanding more yield to have corporate bonds relative to benchmark U.S. Treasury securities. 

One will be shocked to find out that in August and September, Moody’s Investors Service issued 108 credit-rating downgrades for U.S. non-financial companies, compared with just 40 upgrades. Standard & Poor’s Ratings Services downgraded U.S. companies 297 times in the first nine months of the year, the most downgrades since 2009, compared with just 172 upgrades. One of the key triggers for the growth of US bond crisis is that they have borrowed heavily to attract buy back of shares resulting massive slippages. The mismatch of bond prices in US between rated and low rated have become narrow which reflects that there is a presence of strong problem in the system. Big U.S. companies with global footprints, like Caterpillar Inc.,Monsanto Co. and Hewlett-Packard Co., have all announced layoffs in recent weeks. Analysts and investors say a strong U.S. dollar compared with currencies in other countries will hurt some U.S. companies’ revenues in the coming months.


US corporate particularly the oil industry is just simply using its reserves of cash flow to pay back debts. This means that over the long term their will cut down in expansion plans since cash reserves are getting depleted. Many other industries who have taken massive debts and raised corporate bond are now using their cash reserves to pay back debt since they are facing the problem of corporate debt being cut down. The percentage of cash flow dedicated to making debt payments ballooned to 83 percent in the second quarter, up from less than 45 percent in the first quarter of 2012. Long term investment will get slower and also capex expenditures are going to be cut down. A slow down and skeptical approach envisaged in the long term in the US economy will create pressure on the export markets of the developing economies. I would rather say that this slow down will be more powerful than the recession. Capitals will go for a toss in the near term.

GLOBAL REAL ESTATE JUST WAITING FOR CRISIS


The global real estate market is going to slow down in the coming 2016 as prices are just 7% away from the historic highs of 2008 pre Lehman Brother’s collapse. I have highlighted the story f this slowdown in my previous article on December 2014 http://www.ianalysis.co.in/2014/12/real-estate-bubbleburst-to-be.html. Commercial property prices in major U.S. markets, as measured by Moody’s and Real Capital Analytics, have exceeded their previous peak by more than 30%.China has already set the tone for its slowdown as it has already exhausted its over capacity of production and now its dwelling with Ghost City. Prices in US are just 7% away and UK homes are only able to sell somehow. The biggest factor to be watched out is that slowdown in new construction has already began hence demand of steel, cement and other ancillary industries are getting cooled off. This is a big threat for the global economy. Luxury real estate segment is also cooling off which means buyers are thinking that a collapse will begin soon. At the same time stamp duty hike in London has created a negative effect on the real estate market.

Now the biggest question is that how long freebies can fetch bread and butter for an industry like real estate. How and where the government will hike the taxes to fill up its pocket. Being an economist I find that we are trying to run the economy at the cost of freebies. Unless there is any sop provided by the Government or by the Central Banks industries don’t run. Well this is going to be the key factor behind the global economic slowdown when the central government across the globe will not be able to bear the cost of freebies. Further we are creating more income and wealth inequalities through freebies. Yes  the more freebies are given the more the taxes going to increase disproportionately and create a economic problem for the society. This is one of the key areas which is being ignored. Now just calculate that China’s local governments have financed a vast array of extravagant construction projects via a $1.7 trillion “subprime” credit bubble, of which $540 billion is likely to be from bad debt, according to Moody’s. This bad debt will hit the society and further more freebies will be added to grow the industry and again creating more income and wealth inequalities among the society through taxes.  Times come when freebies don’t work and again the central banks inject liquidity. Real estate prices in many Chinese cities have been falling continuously for at least seven months, despite several rounds of quantitative easing and various policy measures designed to boost the market. According to the National Bureau of Statistics, total property sales in China fell by 7.6 per cent in 2014. New land purchases by developers fell by 31.7 per cent year-on-year.


We need economic policies which will push up growth but not at the cost of the society or through creating income and wealth inequalities created through taxation levels. When ground policies don’t work we create freebies. Just like RBI was asked to do by the government but will that bring growth when Indian corporate are export dependent. They are yet to recognize that domestic market is an opportunity rather than a ground of exploitation. Now apart form construction slowdown job market which is highly linked with global real estate market is also set for a slowdown. Foreign buyers who were seeking diversification have stopped as global economic slowdown has struck and we are very much skeptical about what is going to happen in the near future. Remember that last time I depicted that foreign buyers are more compared to domestic buyers of the industry. According to a National Realtors Association survey, the Chinese spent $22 billion on U.S. housing in 12 months through March 2014 — 72% more than they spent the year before. The problem is not with FDI investments coming into US economy but the change of strategies adopted by business where constructions were desgined to meet the Chinese culture rather than looking forward for the affordable house for the US citizens. Hence the slowdown is bound to happen and we will witness a global crisis of the industry borne by the society and economies across the globe. We Are just heading for an massive global crisis in the real estate market which will trigger surprisingly one fine morning.

Sunday, October 4, 2015

Digital India….Or Toilets which one???

My article is not criticism neither it’s against of any policy but a thought where we need to draw the attention of the society. We are currently focusing on Digital India and on data business for the young generation. It’s true that today the young generation particularly the ones from village or from Tier 3 cities have smart phones. Hence private business of telecom industry is bound to grow and hence Digital India is being though to exploit and capitalize on the same. We are focusing on increasing the GDP of India but are we focusing on the factors which slow down the GDP growth. Sorry capitalist are not bothered about that part.  Do you ever think that India leads the world in open defecation. At least 636 million Indians lack toilets, according to the latest census data, a crisis that contributes to disease, childhood malnutrition, loss of economic output and, as highlighted recently, violence against women.  Yes we don’t have basic amenities in place but we are trying to get FDI investments in exploitation of common people.

The image above speaks of million thinks silently hence it also provokes the thought that why capitalist can’t invest in toilets in these rural places.  Now please don’t raise the voice that government has allotted separate funds for building toilets. Well the budget was also during the last 10 years but did the money reach the proper place. Hence, when capitalism is the God then its better to pray for the God rather trying to become a monk. Look at your neighbors and their stories of turnaround.  India could also learn valuable lessons from poorer neighbors such as Bangladesh, which has cut rates of open defecation from 19% to 3% in just two years by decentralizing sanitation programmes. Those who are thinking that our prime minister is already in the process of solving this issue well for them I would like to accentuate their attention that recently used her scholarship funds to build a toilet. If government funds allotted previously have been used then today we should not have faced the problem. In the 11th Five-Year Plan (2007-11), the flagship Total Sanitation Campaign (TSC) has been allocated $4 billion in 593 districts for rural toilets.  even locally-implemented toilet and hygiene interventions could have saved $32.6 billion, equivalent to 3.9% of GDP annually; a potential gain of $29 per capita.

We talking about smart cities developments and creating a new class of Aerotroplois but did you ever think that Indian Women and girls often have no other option than to venture out — often at night and alone — to relieve themselves. At a time when the government of India talks about Smart Cities, Digital India and ‘selfies with daughters’, statistics indicate that 60 per cent of all houses without toilets in the world are in India. The funniest part is that Global economy knows about the Indian inabilities and hence they are skeptical regarding taking a giant leap. Even the CSR activities have failed to resolve the issue of sanitation in India. Since capitalist focus on growing capital but not developing the society. We don’t find debate on social media about building toilets neither we find any private advertisements asking people to build toilets.

 The story does not end here. The shocking part is that schools also don’t have proper sanitation facilities. Recently I was travelling to Rajasthan and I found a strange story which pushes back the gilrd students from coming to school. During their menstruation adolescent girls have to  skip school for five to six days every month. In India, only 58.82% schools have separate toilets for girls. Some schools have only one single toilet, which is most often unclean. Single toilets increase the risk of not only disease transmission, but also sexual harassment.  These sexual harassments are not known to us since often they are killed within the voices. So do we need Digital India or do we need to eliminate the basic amenities problems then only we can find proper society. I don’t deny that we don’t need developments we don’t need smart cities etc but are we bridging the gap of rural India with urban. Yes we are doing it in another way where the rural migration is happening more creating pressure on the urban society from angles and rural India remains in dark.  We celebrate 2nd October, 15th August ,26th January but are we really valuing these dates.  We are focusing too much from overseas where as domestic issues creates lot of potentiality for capitalist to play its game. Can any one tell me why Bill gates Foundation have to give money to India when our Industrial Giants are capable enough? Does anyone has any answere to this?

Thursday, October 1, 2015

COST ACCOUNTANTS GEAR UP FOR THE NEW SUPPLY CHAIN MANAGEMENT DESIGN

Cost Accountants have been following the heard of traditional areas of cost accounting areas. We need to get into the global platform but for that we need to have the hunger of quest.  My today’s research is on one of the strongest areas where demand is increasing and we are less competitive in this segment. Cost of production can be highly affected if improper supply chain management is developed. Cost Accountants play a pivotal role in designing the structure. Today big data analytics could easily help to lower the cost of supply chain management and also idle time of goods lying after manufacturing. I will be presenting the research in several parts so that readers don’t get confused and it can be taken up in an easy way.  

The global supply chain has changed dramatically and the cost of operation for the same has also come down significantly but what we have ignored is warehouse cost which is just escalating as land prices are going up. We are discussing about Global International levels of storage facilities where goods are being parked to supply to European countries or Middle East or Asian countries. The time has gone when goods needs to come from direct factory to the vendor. Now goods are produced and parked at different locations and when there is a order the same is being matched with the storage and supplied to the different places. Hence what is the demand of the time is efficient deployment of cost accounting tools through which one could be utilized to increase the efficiency in designing the new automation process of the supply chain management.

Simulation models are being used to design the new model of supply chain management where manpower cost is being reduced and robotics are being used in the warehouses. The point to noticed is that manual operation of warehouses are too high hence automated ware house storage facilities and supplies are being designed to the factory gate. This reduces much cost compared to the manual operations.  Online sales has grown stupendously hence global supply chain management also needs to catch up with the same.

Currently its being found that online sales are not only happening through desktop or computers but through smart phones. Those who don’t have computers in remote places, they use smart phones to shop online.   In my recent research I have found that across the globe countries like Brazil is the highest ranking country worldwide in terms of retail sales that are influenced by mobile devices, citing 40% of eCommerce site traffic coming from mobile devices. Other markets show a growing mobility trend, especially China (75% smartphone ownership, 46% purchase via smartphone) and India (72% smartphone ownership, 40% purchase via smartphone).

Now cost accountants needs to come ahead to design the platform of warehouses and supply chain management. We cost accountants needs to understand that Cost reduction is among the most cited objectives in supply chain management. Additionally, if costs are to be reduced, companies increasingly turn their attention to their supply chain partners, so both suppliers and customers reach out for new frontiers of competitiveness and profitability.

 In this increasing dynamic consumer minds supply chain management needs target costing approach where the profitability and price of the product don’t become uncompetitive. Yes this is a key area which is often ignored Target base costing would help to do cost trade offs which will enable the industry top grow. One of the modern ways of this trade off is that creating “Ware-House wells” in every country in such a way that supply chain management don’t become a burden on the cost of production. The mantra is well clear that the successful companies will be those whose supply chains are more cost-effective than those of their competitors.

Wednesday, September 30, 2015

RBI GAME IS OVER What Next???

Management science theories are changing like a anything post 2008. Today I find that companies or manufacturing don’t need capital as live blood. They need consumers or rather demand. Creating demand has been the biggest and toughest task for every economy across the globe and the central banks across the globe played all its game to get the same. But the strangest part is that people are more connected sand more knowledgeable and they are more skeptical regarding consumption.  They don’t want to get into the trap of exploitation of resources. RBI game is over and now what next to be taken in consideration is the quest.These are short term strategies to growth but not sustainable economic growth models. Just today China goes for another bold step and I fear that this might be the beginning of a cold war between the developed and emerging economies with China. As I discussed in my previous article that the different economies are fighting over drawing capital inflows. Interest rates have been lowered in some countries in anticipation of US FED rate hike. Hence cost of operation has come down in many economies and also cost of borrowing. Now the only factor which will decide the fate of the economies is the demand which will come from consumers across all industries. The recent step of China throws this competition where it has halved sales tax on small cars to revive growth in the world's biggest auto mobile market. It’s not alone china who is in the game of lowering taxes and spooking demand of manufacturing and consumption. Countries like Japan, Russia, Brazil, Korea, and Australia have been going at steady fast speed to cut down on taxes across various segments to spook growth within their economies. On the other hand Central Bank interest rates have also been reduced by various countries to spook consumption growth. But the surprising fact which will come up later is that today’s investors are well informed about the global economy. They know the pains and death of temptation of borrowed death. Today’s investors are more concerned about protecting wealth rather than going for doubling the same.

India practically has done delay in its Make In India theory. Today every country is trying to offer freebies to attract investments. India has one big advantage which they need to work upon is low cost of living, young population and low cost of production. But the biggest risk India might face is that it is being taken as a consumption market rather than a production hub.  We are standing at a key juncture and every time we ask RBI to lower interest rates. Well don’t you think we are getting into the game of borrowed based consumption? Just think over that in the historic recession when govt pumped billion in the system jobs and demand spooked up but no this time it did not work. The reason behind investors or consumers is more cautious than the historical ones.Today you forced RBI to go for rate cut,but what after this? 

Mere interest rates cut down will not be of much help. We are looking for demand and hence we need prices to come down which would lead to more surplus in hand for buying something more. When the behaviour of the people has changed towards consumption then these strategies will not work. India needs demand where manufacturing gets its live blood. Inflow of capital has become cheap now since there are more sources and less demand. Every country wants a pie of global export and its country to be an exporting country. Well that’s not possible hence focus on domestic markets and strategies your policies accordingly. Government of India should think deeply on the same. Just think that despite of rate cut people are reluctant to borrow and spend,in that case whats your next step.You need demand not capital neither you need short term growth strategies.

Monday, September 28, 2015

INDIA GOES SHOPPING AND WORLD IS ALSO LOOKING FOR SHOPPING

Our Prime Minister have went for shopping an being an Indian we are proud for the same. But my article is not to be taken for criticism but for a thought to be provoked in the minds of my readers. If all investments flows comes to India from the Silicon Valley then don’t you think that US investments in its own country would come down which will lead to cut down on jobs as all jobs will be coming to India. Unemployment in US will start increasing which will lead to slow down for the Indian manufactures as export would come down due to no job -no consumptions atmosphere.   Now lest get into some more further question where investments comes but what about the local state level corruptions since Big Giants will be managed by Central Govt but what about the ancillaries. Indian political structure itself is confusing since development is required but the Name on the same should be of the ruling party only. If I am opposition forget to dream about investments coming to India. Indian legal system is also weak where the number of crimes is increasing and one should take it more seriously that a crime on a Indian fellow and on an FDI fellow will have different ramifications from the same CRIME. Now we want FDI and PPP model investments. Existing PPP have been a nightmare the only question is that why to change the constitution of India where a fixed PPP model is enrolled without any change irrespective of any government ruling the centre.

What I am trying to say is that in this 3rd industrial revolution world every economy knows that in order to develop we need investments. The developed economy needs money at home so that they can start growing their inflation and consumption demand whereas the developing economies  needs investments to keep growing their economies. The world population is increasing and financial crisis like 2008 and stock market crash like in china are increasing the burden on the different government across the globe to keep ahead in the race of investments. On the other hand Fund Managers across the globe are busy in attracting inflow into financial and commodity based products.  Now the interesting part is that the war is in between Fund Managers and Corporate Investment strategies since both are fighting to attract investments and show that financial investments would draw more gains compared to investments in PPP or any P- project based investments. The funniest part is that governments across the globe have failed to generate healthy returns in PPP projects (Particularly India) where as Fund Managers through speculative investments calls made their clients money grow by double.


One part of the world needs inflation and consumption to pick up, another part of the world needs PPP investments to grow and another part of world needs Fund Mangers salaries to jump. The biggest question is where to go where my investments don’t lose.   Governments need to come actively in a positive environment which also includes opposition to carry on such massive investments being drawn by our Prime Minister.  Further, focus on domestic investments and their pains of stories of not getting the platform of developing entrepreneurship. Indian entrepreneurs have more into Silicon Valley since they could not find India to be conducive enough to make their dreams come true. Hence India still has more entrepreneurs more than Silicon Valley to grow Indian economy. From Upanishad I will quote one meaning of an text. Blind Follows the Blind and remains ignorant.

Sunday, September 20, 2015

A Story of Cost Accountant Recognition

Before you all start hearing my story I would like to say that I am a cost accountants residing in an Ties 3 city of India and currently unemployed and driving auto rickshaw to feed my family. I am ashamed to do the same work but i have to feed my mother and younger brother who have sacrificed a lost for me becoming a cost accountant. I am just sharing one of the real life pains which often remains unheard. I am coming from a middle class family where education is the prime factor behind success of life. Since we cannot adopt the path of illegal life since time and generation thinking is changing. My dad was an auto driver and my mother used to work in a nursing home as sister taking care of patients. We were two brothers and I am the elder one. My dad and mother both valued education with a high esteem and they did everything and took huge pain to get us educated in proper school and college. Their only dream was that what sufferings they did for us they don’t want for their grand children. The family earning was not up to the mark of making us Doctor or Engineer. Having full stomach meal was a difficult proposition. After doing my graduation in commerce and got a part time job of maintaining book keeping. 
My younger brother did not went for much studies and opted for driving an auto to support me and my family for their dreams to come true. In between I came to know about the course of Cost Accountancy. With much pain and much more problem at home I got the money for admission and registration for the course. I did not have the money to buy so many books and also neither could afford a teacher who will act as a guide for teaching me. I spend much of the time in library. In between my dad passed away due to malnutrition and excessive suffering thorough out his life.  His dream of getting his son highly educated remained in dark when he passed away. My mother was strong she kept the hope of light alive. My younger brother also added fuel to the file of ray of hope. The time of my father’s death was tough as I was just going to sit for my exam over the next two days for my intermediate. I thought that my exam fee which was heard earned money would go for a wild toss as I was not in mental condition to sit for my exam. My biggest moral support was my father’s soul which kept whispering that sit for the exam and pay tribute by passing the same to me. That will give my father soul much peace rather than doing the Hindu rituals. 
With much pain in mind and heart I went for the exam and cleared them with good marks. I remember that during that time many of my library friends informed me that after qualifying intermediate I will get a job of Rs 5000. This was another strong factor for me to pass out my exam since I wanted my younger brother to finish his studies which he left off due to my dreams. But when I went to the outside world every one said that unless I qualify for my finals I will not get a job. More over I am fresher hence zero work experience leads to lot of humiliation in this professional world. Still I managed to get a job of Rs 3000 working as an assistant to the auditor. During my tenure I realized very avidly that being cost accountant has wide scope but less recognized. This is one of the biggest problems of this profession. 
But with much determination I moved ahead with finals and cleared the same. I passed my exam in 2011 and till date my salary is only Rs 10000 pm. Unlike other profession this profession has wide scope but the reorganization and acceptance is a very big blow to the aspirants like us. In my latest interaction with members of the cost accountancy profession I released that I am fortunate to get a job of Rs 10000. Huge numbers of students are unemployed and also practicing opportunity is less for the newly passed students in the profession. Most practicing members are coming from the age bracket of 45 to 55.  Moreover in my office humiliation of being a cost accountant is huge when a newly employed Chartered Accountant gets a starting package of 6 lacs in that case a Cost Accountants takes years to reach to that CTC. 
Can anyone tell me that what is the value of burning of such midnight oil and taking so much pain to become cost accountant? Student who are in the Tier 2 or 3cities have more problems in their wings to fly. They are paid little attention from the chapters end and more focus only on the Ties 1 cities where the regional councils are present. The middle class segment of the society cannot afford to got for an MBA which cost 5 to 6 lacs average hence they opt for Chartered Accountancy. Now we all know that Chartered Accountancy is difficult to pass and more expensive compare to Cost Accountancy. Now this huge middle class segment of the society which enrolls for Cost accountancy has to struggle for jobs and career growth. I have found many teachers and senior council members speaking about orientation and presentation skill but is the job market recognize cost accountants and also for how many years and how many council members we will await to see the turn around. Frustration of lack of recognition and quick promotion of being chartered Accountants keeps many of my friends under intense pressure.

 Pressure of family pressure of being getting recognized kills us. Recognition of cost accountants is so bleak in India that we prefer to move in overseas markets like Dubai, Bangaladesh etc. But how many are fortunate enough to get such contacts and opportunities. The mass of fresher are struggling and only conducting one campus placement is not sufficient. The question is of recognition and your slow and lazy action has created pains for these families who are trying hard to come forward from the dark nights if their families. By the way I lost my job last month as a the company found chartered accountants are more better and competitive in terms of Cost Accountants. I got this job through campus placement arranged by the institute  
Recognition and acceptance is the key for any profession to develop. You don’t needs research like NASA scientist neither you need to arrange grand invitation for campus placements- all you needs is let the emblem of the profession get respect. You need to get into the root of the problem but we are only focusing on those areas where we are losing our ground. 

Friday, September 11, 2015

Illiterate governments...Speculation...FED Interest rate Hike

I am not God to predict that whether interest rates would increase in US economy but the symptoms of the disease could well spell out the probability of the disease which is going to come up. Illiterate governments across the globe have taken Stock Market as the barometer for economic prosperity.  Government have turned every economy as an gambling place just like the stock market  In India we are currently doing the same thing where we are trying to control RBI policies and decision makings and also exploit them for investments where growth is negligible or stagnant over the past several years.  They think only interest rate cut down will bring growth.Everything has a time and one should act accordingly.
In continuation to my previous articles its well clear that US treasuries are on the biggest risk. US might smartly kill Russian economy but fighting with the dragon might be a tough job. If US hike its interest rates then the biggest boon will go to the US economy. Further as US Presidential election is about to begin and just 1 year 2 months are left , 80% of the investments held by 20% of the US  Ultra Special HNI then obviously funds needs to come out from the pockets of the emerging economies. 

Through various routes US corporate took the advantage of zero interest rates and parked the money in overseas or emerging markets bond. Currency depreciation mixed with volatility gave long term gains to these bonds investments. This also proves that US corporate were doing fewer investments in manufacturing and also less towards wage hikes for the US economy. This is also the reason why wages and per capita wage growth was slow and part time jobs were preferred more.  Further as Presidential election comes ahead every US political party will ask its private corporate supporters to invest money in infrastructure, healthcare facilities and all those where Presidential election contest.

There are couples of surprising things to follow where US treasuries have now become one of the sweet pots for investments by many scholar people across the globe.  A former Yale University math whiz has been buying tens of billions of dollars of U.S.  The below graph will speak a lot about the current trend of the US treasury buyers.
As an economist I find that US should go for increasing its interest rates since the consequences of not going for interest rate hikes would be more damaging in the long term
1.       Asset bubbles would start picking up
2.       Speculative valuations will spook asset prices where a huge gap between expected performance and returns would create mass bubble
3.       Loss of huge capital for the common people across the globe since herd philosophy of investments is followed and hence speculation will kill them
4.       Income and wealth inequalities will widen up as more risk taking appetite will grow followed with speculation
5.       Reverse inflow of capital will lead to significant delay in planning strategies of investments when funds will dry up.
The above 5 points are going to be a massive problem for the economic growth of the world in the long term. The biggest boon of interest rates hike would be that common investors across the globe and the various asset classes will find their feet touching the land and moving accordingly rather than flying in speculative air.

Well Interest rates have to hike at any point of time its inevitable but my only concern is that income and wealth inequalities are widening up and social cost of destruction is increasing. Loss of capital ultimately affects the long term growth of the society. It results to significant growth of taxes across the globe to meet the ends of losses. Banks and  NBFC and other financial institutions invest through different routes to exploit asset classes and finally they land up with losses which hit backs the economy of any country by double or triple times. The economic cost of loss is significant when speculative asset prices goes for wild toss. We should be prepared for these type of losses in the near future as greed and illiterate governments across the globe has taken Stock Market as the barometer for economic prosperity. Rather than designing policies for investments these governments should look for developing the society and the people within the system. They have turned the economy into a gambling zone like the stock market.Common investor have juts become a pawn.

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