Wednesday, November 30, 2016

I FEAR EUROPEAN UNION MORE THAN TRUMP

 I don’t fear Trump Policies I fear Europe breaking up.Next year Europe will be doldrums and many states will exit the EU. Thanks to the existing ruling politicians who approved the policy of  refugees being given  shelter to the syrian refugees. They created the birth of social imbalances within the society and after with repeated Blasts in many member states its well clear that Anti Muslim climate will be utilized for the upcoming elections. We witnessed  Brexit and over the next decade many exits will be prominent.  In 2017 we will witness many elections and many referendum. In March, the Netherlands will hold parliamentary elections in which the anti-Islam Freedom Party is set for a tight race against the incumbent center-right government. 

Later, France’s National Front also has a chance at  victory in the presidential election. In Germany, which will have a federal election early in the second half of 2017, the Alternative for Germany (AfD), a new anti-immigration and anti-Islam party, is likely to win its ­ seats in the national parliament. Netherlands, the Freedom are going to be big impact creator for the upcoming elections.

The leading hard-right parties in Germany, France, Austria and the Netherlands are explicitly anti-Islam. Immigration policies are bound to affect global economy as terrorism and refugees have created havoc problem which is impossible for any states and any politicians to measure. Trump anti-Muslim and immigration based winning streak has created a huge confidence among the EU and other Global politicians to fight and win in the coming elections.

The problem of refugees has created massive problem for the GDP growth of the EU member states. In Turkey  the scale is staggering. 2.75 million Syrians are registered in Turkey, around 3.5 per cent of the population.  They are now going to depot each day around 3000 refugees to EU. There is no end of the war which was expected and now the sudden spike in refugees increases the social cost too for the struggling austerity based economies.

A quick number glance over the growth  of refugees will clear the doubts. In 2015, over 1.3 million people requested asylum in EU, representing more than double  the number of applicants in 2014. During the first quarter of 2016, the number of persons seeking asylum from non-EU countries in the EU reached 287.100. Since 2012, donor governments and aid organisations have spent around $15 billion on looking after ever increasing numbers of Syrian refugees.  About 10 per cent of that has been contributed by the UK. Overall, Britain is by far the biggest European donor to Syrian refugees in the Middle East. I hope now you got more clarity why Brexit is good for them. Europe costs at least ten times as much as in countries neighboring Syria.  Whereas a budget of $3,000 per refugee in Jordan would provide not just basic food and water but also education and opportunity, this will cost over $30,000 per refugee in Germany or Austria. Individual nations have also compelled  divert funds  outside of their aid programs to assuage the cost of hosting refugees,

Social imbalances ,I have covered this many times and now again I repeat that EU as an whole is getting into deeper problems. Prostitution is creating new historic highs and with girls and boys are being trafficked into the sex trade. In camps and shelters across the region, increasing numbers of girls are being forced into early marriages – some as young as 12 years old.

Immigration and unemployment have been recognized as a strong relation and very soon over the next decade many countries will become stringent in terms of immigration. They might lack skilled manpower but over the next decade they will fill in the gaps. Developing economies will face hurdles of immigration  and its high time to think about the same from now. Currency war will open up and saving the euro will be big challenge.


Budgets of the EU are swelling and they are in deep problem. This is the reason why I am fearful of EU rather than Trump.

Sunday, November 27, 2016

US ECONOMY TO SLOWDOWN IN 2017

China is going strong and For Mr. Trump its being found that that he does not have enough strength to affect any bilateral trade pacts with China. Chinese economy is value providers to the National Income of US and a strong growth provider of US GDP. On the other hand being economist I find that Trump policies might create more opportunity in an indirect way for the Chinese economy. Trump policies of cancellation of trade pacts and other restrictive policies will only slowdown the GDP growth of US economy in 2017. Even if corporate tax rates are cut down and people are thrown out of the country it all going to affect US economic growth and GDP slowdown. US doesn’t not have quality manpower and most important that if US cuts down tax rate below 35% for foreign money lying outside of US by US corporate would create little affects. Real estate business and manufacturing business have different buyers and demand creators. Mr. Trump is confused what its seems since no one will shift its business of manufacturing from Asia to US. Remember that cheap cost of production cannot be replaced with tax sops.  A government is created for 5 years but a business for 50 years. US companies have changed their production base so as to control the economies and enjoy taxation and cost benefits followed with a wide consumer market.  If US economy cuts down trade pacts and gets into restrictive trade polices then it will cost only US economy.  It’s not a real estate business.
But before we get into that story I find some important opportunities for the Chinese economy on which they are working well.The same story is applicable for all those countries based on whom US economy gets it GDP growth.

London was not the Financial capital of the world but now its seems over the next decade it will be the financial capital developed by the Asian and Emerging countries.  Brexit will be boon for the Chinese investors as their statistics reveals the same. We all know that Brexit will lead to significant cut down in Banking job and opportunities. Four of the country’s biggest banks this month agreed to finance the first stage of a £1.7 billion ($2.1 billion) transformation of an old East End dock into a hub for Asian businesses. This is nothing new. From 2010 we have witnessed that china have been aggressively partnering with various countries of EU for JV of business development, port and infrastructure development. China is one of the biggest buyers of European properties and sliding property prices after Brexit has lead to an amplified opportunity for the Chinese investors. Chinese money is also flowing into      

Residential real estate. Shanghai-based Greenland Holdings is developing Spire London, set to be Europe’s tallest residential building upon completion in 2020. This means that these construction works are also going to add demand and growth for the GDP of London.

Analyst are concerned about falling rental in the city and over supply would create fall in demand well as an economist I find it that decline in price is an opportunity for the Chinese buyers to buy the same since they are looking for long term gains from the London  as well as with other EU countries.  Over the current situation the topping of Italy’s  Referendum and if there is an exit followed with France in the long term more opportunities of trade will come up for china which is being also taken into the long term planning  of Chinese investments.

If we look at China’s investments in US we find that as of August 2016, the U.S. has already drawn $13 billion in real estate investment commitments from China. Over the last decade Between January 2005 and June 2016 the US received over $125 billion in large Chinese investments, excluding bonds. Between 2010 and 2015, Chinese buyers spent at least $93 billion on residential real estate, $17.1 billion on commercial real estate, including office towers and hotels, and nearly $208 billion of mortgage-backed securities.

Its well clear that people like Trump might come up with restrictive polices but when other countries are your neighbors living next door, the risk of stringent policies creates huge problem for the economy.  Just imagine if tomorrow China exits all its assets from US then what will be the condition of different asset class of US. China have been clever to develop these strategies since real estate have been a core part of infrastructure for the US and European markets. Any sell off will create huge panic and slowdown in construction activity since China is the demand driver and also the growth creator for these economies. Trump policies against china will create massive slowdown for the US economy and its investments since exit of china will plunge the economy and please remember that US people don’t have funds to invest in property now hence from where US will get its contribution of construction growth into US GDP growth. At the same time Chinese students, tourist is visiting more in US and Europe now. Hence they need cuisine and places of china in these foreign countries. Hence Chinese investments in restaurants, hotels are increasing. The number of international students at U.S. colleges and universities has hit a record high. Its being estimated that these international students add 35 billion annually to the American economy. Together with the U.S. Department of State, the IIE releases a report every year on the number of international students in the U.S. The 2016 Open Doors report says about 1,044,000 international students attended American colleges and universities last year. The annual rate of increase is 7.1% among foreign students coming to the United States. International students come from more than 200 countries and, according to the NAFSA report, contributed about US$32.8 billion into the US economy in 2015-16 and supported more than 400,000 jobs. 

The mathematics is simple-chine investors bring cash converted into Dollar or Pound. They spend the money at Chinese hotels and restaurants and the same is being routed back into their own country. Any unforeseen circumstances in geo-polices will not affect china in terms of its foreign holdings.


Recently we have heard that Trump will be developing Walls across different states. Well in my point of view the more walls are being created the more opportunity China and other countries will get tin developing new trade pacts and policies of investments. Hence Trump will create many separate states where foreign nationals will come up to explore the hidden treasures of these states.

Wednesday, November 9, 2016

DETOXIFICATION OF INDIAN ECONOMY WILL COST TOO


Well Modi played his card and now the equity valuation gap with price will narrow down and more realistic price movements will come into play. By scrapping 500 and 1000 notes currency the black money of the business has evaporated suddenly. As an economist I find that Indian economy will find some short term jitters but on a larger scale valuations will come under much clarity.Circulation of black money by converting it through fake invoices and other tax evasion process has finally vaporized.  Finally India finds its income inequality bridged up. The huge gap will now narrow down as the currency is no longer in use and stacked cash in houses are of no use to get them converted into white. Modi have converted profits into real numbers for day to day living. Its being found that detoxification of Indian economy have been executed. Even the black money a routed through Mauritius comes an end as RBI will not convert the currency as the holding of black money is in cash format.

Real estate launches and pre-launches will dry out has hardly a 500 or 1000 currency notes are of any use. Further buyers will stay away from market as they will expect price correction which is bound to happen as  huge black money is no longer in circulation. Bank developers will find soon two ways1) either to cut down prices significantly and get more inventory of ready to move in sold and 2) File for Bankruptcy and get into NPA. Ready to move in properties will find significant growth in sales once prices comes down buy those who are going to get delivered in next  3 to 5 years have gone for a wild toss.

Lets come to another picture where ancillaries industries linked with Real estate like cement, steel and other materials will also feel the heat. One side consumption will come down and on the other hand these companies will also not have any money to run their organization. In simple terms the profits which you show in books are now the real numbers. No more chance of any malpractices currently as the cash component is no longer of any use. This vicious cycle will affect all industries which will get into real picture was the upcoming quarter results and annual numbers comes into play. The income disparity across the society has been suddenly being made into a middle class segment. Indian infrastructure will also face similar hurdles of capital flow as you all know that while construction of an simple road how many politicians and corporate middle men take their cut and how the poor quality of road construction happens. Now all these foul plays have no place and now companies will have to work on real numbers as they cant convert their black money into white through false invoices etc. Real prices of real estate will now be registered in legal documents and stamp papers and no more cash holdings.

The biggest boon is the income inequality which has been reduced significantly as black money was the key factor behind the same. Valuations of living life will be now at par with everyone. Banks NPA will go up and also corporate earnings will be hit as the back money conversion is over. Its  a Master  Stroke by Modi. But their will be pains as some correction will be witnessed in the near future as the money through hawala and other sources come to an end. Even the black money in Swiss bank and also the fund routed through Mauritius comes an  end as RBI will not convert the currency. Further Indian elections and opposition of the current government and state government elections also comes under clear play as bribery segment of this festival is no longer usable as currency notes are 500 and 1000. Money which are stashed in bank locker are also of no use.

Monday, November 7, 2016

DEVELOPING ECO-SYSTEM ALONG WITH INNOVATION


Disruptions of industries through innovation have become now an old business model practiced by entrepreneurs. Today each day is an innovation day and what we find is that death of million innovations as the eco-system for the same is not developed. Well this might put the reader’s brains in thought mode but the point is often innovations fights and dies due to lack of eco system. Now let be brief you about what you mean by eco-system in innovation.  For example HD tv too a huge time to come up despite the system was ready to show HD quality. But the eco-system of HD quality production was absent which the made the innovation longer and difficult to absorb.  So if HD screen as well as HD quality of production both same together then the speed of getting returns from the innovation should have been faster.   So failure of innovation as it’s unable to generate cash flow is due to improper development of the eco-system.    Often in organization we find failures to adopt into new policies and strategies are due to lack of development of the eco-system. Another example will make it clearer. You don’t have much Hybrid car charging points but you have plenty of electric cars. This has made the success story of Hybrid cars slower. So the product innovation has come but due to lack of eco-system the industry struggles to get the success from the innovation.  
The next generation innovation needs to keep in mind that developing the eco-system is a part of the innovation and if that part is not taken care then be ready to lose your innovation within the billion dreams. Old industry becomes a hurdle for the maturity and growth of the industry. Every innovation should have 3 questions tagged to it:
·         Execution Risk Involved
·         Co-innovation risk
·         Adaption chain risk
Execution risk is always their but one needs to identify the market and its ancillaries connected with the innovation and the changes it would bring within the same. Innovation when taken without consideration of eco-system can turn out to be a highly risk matter. One needs to identify that the present problems in the eco-system and then removing the same using the innovation. Judging the level of innovation the existing system can bring is highly required to be measured. If your innovation is  a threatening incumbent then you need to measure the hurdles the present eco-system will present to it and in that case you need to strengthen you performance levels to take the innovation to the next level.
Improving the innovation is good but focus should be given improving the eco-system since without that full potential success of the innovation will not reach its desired goal. Innovation soften fight in the market and the fight is not with old technology or system or product, its always with the eco-system which will support the success of the innovation. Its well clear that innovation often dies to lack of proper eco-system. This is also being termed as that innovation is ahead of time. Well nothing is ahead of time the only mistake which is being done is too much focus on the product innovation and less on the system where its going to be applied. The tricky part of innovation to get success is fit right into the shoes of old technology so as the benefits of the innovation start generating its value. This is one of the easiest way of saving a unwanted death of innovation. Now debate will come where everyone will say that innovation replaces old ones then how can it be dependent on the old one. Well eco-system development needs to capture this area so that delay in getting values form the innovation is not extended.
Recently I find that innovation and new industries are being introduced by the entrepreneurs where a prolonged time frame is involved in getting those revolutions.  I find large and mid size organization should form a group of innovation and R&D where cost of the industry is saved and profitability is being achieved to multiple times. Many Indian companies have entered into developed economies through strategic partnership or through complete buyout and then have created new products for the industries. This have been a one way process of creating new values for changing the traditional course of the industry but there is a short coming to the same. Time factor plays a big role. Now say for example based on the current economic condition across the globe if a set of foreign and emerging economies company comes together and creates value proposition for the industry revolution.  No waste of time , no wait for opportunity encashment and driving value from such conglomerates.
Even many old industries can come together an create improvisation either in value chain process or product encashment where the eco-system is being changed which will also derive growth for these individual companies.  We are discussing about eco-system development which will give shape to the innovation of every company in all angles. If the success of HDTV was the demand if time then companies should have come together with production houses and its ancillaries to produce their qualities matching the innovation product.
This is not sharing of confidential data but enhancing the future of product innovation eco-system for the long term success of the future innovation. Most of the innovations are dependent on eco-system development and this area has been ignored. This is the key reason behind death of much successful innovation. One cannot time the market of innovation but we can build conducive environment to develop the success rate of innovation. This theory of innovation is applicable not only in product but also in process in an organization. Often new plans and policies fail as we did not focus on the eco-system of implementing the same.


Tuesday, November 1, 2016

CEO'S THOUGHT IN 2017

Global economy is no doubts is very much in doldrums and it high time for the CEO’s to think over and plan for 2017 in terms of market penetration, exploring new opportunities ,introduction of new products and developing sales and business strategy. But wait I find the current thought of lines are getting changed as most of the focus of the CEO’s are towards geo-political tensions and war fares, declining export market, imposition of business and trade practices and upcoming elections and their outcomes just like Brexit. Cost management is less of a thought and more focus is towards driving the business growth in the snail pace of growth. Cutting down cost and reducing fixed overhead days are over. Technology and virtual business operation have already eliminated the same, we are here to find what problems lies ahead.

Penetration into new markets is always a dream opportunity but the ongoing war tension and threat of blast and reduced the appetite for the same. The basic securities of employees are at stake which also intensifies the labour law related liabilities arising out of the same. Data protection is another big threat and tension for the CEO’s and management across the globe. Business losses arising from the same is hardly bearable.  Companies have failed brilliantly in terms of management of risk and data protection.  Intricate products data leakage have resulted barriers for further new business opportunities.   Political elections have always being an threat for business as new industries gets created and old industries comes to an dead end. But current political threat creates massive changeover of business as well as of cash flow generation across the industry. The current and also the long term business planning are under intense threat which also triggers the thought line of changing place of operation but huge inflow into existing business is a great burden in terms of pulling out.

Banks have become stringent and inflow of capital for business growth is now under intense pressure as banks are simply refusing. Procurement of capital has become expensive and particularly cumbersome for the SME segment. Terrorist attacks have become a nightmare for smooth functioning of an organization. Employees are scared and insurance burden is just paddling the wheel cumulative growth. Brexit and Syrian refugee have both been a prominent problem for the companies has social imbalances gets into the system.
Climate change and rules regarding the same have become more expensive proposition for business planning as huge investments needs to be executed over  a period of time to reduce carbon emission. This is a quite herculean task based upon the current economic problems and financial crisis. Whether the business revenues climb or not one has to invest in reducing carbon emission.  This is a going to be a big problem as many companies might have to cut down on various areas of growth investments into the just abiding the rules and regulations of climate change.

CEO’s are finding tough time to find growth driven markets as everyone is conscious about savings rather than spending. This has lead to an extensive data mining and data related product designing but what I find is that beyond product designing its more towards how consumers will behave when they economy is in cautious mode. Yes this is key factor which is hard to derive, but the key to growth and survival. Upcoming days for the markets are tough and it reduces the strengthen and courage of making any bold action in these times of global economic slowdown.

TIME BOMB OF GLOBAL SLOWDOWN ....2017

The global markets are already under intense pressure due to geo political reason and further due to the upcoming sea of problem which will hit the global markets. I find more slow down to come up for exporting countries and less demand from Middle East and European countries. Well these two countries make a good % of export for any economy. Middle problem is due to the low crude prices but now the heat of the low crude prices will hit the global exports. Middle East particularly Saudi Arabia is aggressively going ahead for cut down in its spending. Government ministers have been entitled for a 20% pay cut where as for junior employee’s bonuses and slashing paid holidays.  Further New foreign national hiring’s being capped so as to increase hiring of local people.   Taxation policies are also being implemented by the government which will further reduce the consumption thrust and more prune towards savings. The problem will amplify more as Saudi nationals are more educated in terms of Oil rather than on any other subject which will help them to balance their economy on an immediate basis. This is one of the biggest threat for transition economy and the latest example being China. So, most of the government facilities are being cut down which means more of savings and less of consumption and less demand for export. Please note that 70% of the of the Saudi Nationals are currently employed by Government and hence this austerity measures reduces significantly consumption appetite.
 
Europe is already under the threat of Brexit and also the upcoming elections in 2017 across many member states. Most of the problem is that referendum is being called to exit EU which is a big threat for the global trade and investments. German presidential election, , French presidential election, 2,French legislative election, ,German parliamentary election, ,the Netherlands general election, ,Norwegian parliamentary election,  are the few of the elections will keep enough pressure on the global economy. Any country getting out from the EU will be big blow to the global economy. Further I fear and confident that Big Banks of EU might grow for toss which will add fuel to the global economic growth and will trigger safe assets flights. Already the bad loan numbers are increasing and banks are more stringent to lend and hence hardly any circulation of capital will happen which is highly required for economic growth to happen.

Now US elections are also on the wings and Mr. Trumph winning will create enough panic and problem for the global economy, trade and flow of investments based on the statements of the candidate.  Another factor which will keep the global markets under pressure is the lack of any positive news as earnings seasons are going to over in the few days and more pressure will be on the upcoming new policies being announced by the US government after the new President comes into picture. If Trumph wins global markets will be under pressure but I fear that more pains will come from algorithm trading points where complex trading methods have been adopted which remains under quite darkness. Currently everyone is focusing on US Fed rate hike well I am more concerned about upcoming trade and investment policies which will affect many economies.

Financial analyst have also created a mess up where as commodity prices reduced profitability increased despite of negligible growth in sales/ revenue. Now as prices are climbing but sales are declining the realty of growth is hardly visible. There is big gap which have been created through improved EBIDTA margins and PAT Margins but now the same is going to be narrowed. The real picture for slow and weak export will come up as sales growth will hardly happen.  


Social benefits will be reduced significantly over the coming decade across the globe as government are bankrupt and bear inflation based living is also a problem for the government. Governments have created a problem through leveraged and toxic deals which has pushed the burden of living at retirement on the old aged people. This will spook more problems within the societies.

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