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.

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