Thursday, July 25, 2019

Lack of Leaders for the Upcoming Recession if ANY

After a decade from the 2008 recession, the only difference in the global economy is lack of leadership within the political parties across the globe and this keeps me awake in the night. From the US to the UK every country has a political risk and mass protest has become a routine affair.  

 Leadership is at risk in every country now. Instability has become a nightmare. The piling up of debt seems to be never-ending the story now and it has already become a balloon. Emerging economies are going to be the worst hit but more than that I fear about the lack of leadership to manage and handle the same. The 2008 recession was faced and managed by a hard group of leaders from all segments across the globe. Do we really have them now?

The global debt has swelled up and the way trade war is going ahead if a recession comes in no government or political party will have the ammunition save the global economy.

The trade war is reducing interest rates and taxes to support growth. In simple words, growth is being pushed by lower income for the Government across the globe. Corporate debts are swelling up to face the heat of trade war and this is the place of intense risk for the global economy.

A country like china who is the prime target of Trade war has got a swollen up Debt pile. Chinese firms accounted for 42% of all corporate bonds issued in EMs this year The combined debts of 30 large Developing Economies rose to 216.4% of GDP in March, from 212.4% a year earlier, sending it to $69.1 trillion in dollar terms.  Chinese firms accounted for 42% of all corporate bonds issued in EMs this year.

Margins are falling and revenues have already plummeted. Corporate debt obligations are becoming a nightmare currently. Global Debt Hits $246 Trillion, 320% Of GDP, As Developing Debt Hits All-Time High.

1.      Debt by sector, Q1 2019 (as % of GDP):
2.      Households: 59.8%
3.      Non-financial corporates: 91.4%
4.      Gov't: 87.2%
5.      Financial corporates: 80.8%

Collateralised Debt game has been played extensively by all the banks. The list as follows:
Key Players in this Collateralized Debt Obligation market are:–

  • Citigroup                                                                           
  • Credit Suisse
  • Morgan Stanley
  • J.P. Morgan
  • Wells Fargo
  • Bank of America
  • BNP Paribas
  • Natixis
  • Goldman Sachs
  • GreensLedge
  • Deutsche Bank
  • Barclays
  • Jefferies
  • MUFG
  • RBC Capital
  • UBS

US economy is entering into an election phase and without any election, it is well clear that Mr Donald Trump will be the President.  So the trade war and debt pile up story and lower interest rates will keep playing its game since Mr. Trump is backed by the US capitalist to create a bubble of the explosion.

He is strongly supported by capitalist and business-centric minds. Those who will propose taxing the super-rich and going for tax cuts for the middle class and lower-earning group of people there will be a significant risk for those politicians to ruin their political life. The vote will go to the ones who will support in making the super-rich to become richer and making wealth transfer tax free and further making consumer suffer from more consumption cost.

The economic numbers will be cooked to portray a robust economic growth but in real terms, it has weakened the fundamental of the US economy post-recession. If a recession comes I find the biggest threat which the global economy faces is the lack of leadership to control and manage the US  has filled up the pockets of the corporate US by lowering taxes and negligible investments in the economy. Buyback of shares stood at $800 billion. Corporations were spending too much of their free cash flow. 
This means that the benefits of the Tax cut and low-interest rates benefit are not passing into investing assets to create long term economic growth. 

The growing debt and falling revenues and growth are going to end at one point and that point is going to be the beginning of Recession.

Wednesday, July 24, 2019


Climate Change based economic growth is an opportunity for the GDP growth of many economies. Closing down the traditional models and building new energy-efficient models help to create economic demand for goods and services. The further improves employment and improves per capita income of an economy. Efficient cost management and utilization of resources under climate change help an economy to grow in a paradigm in the long run. In these articles, we will present in phased manner various segments which will draw the attention towards the road of achieving India’s dream of Rs .5 trillion economies.

The battle for climate change is between the economies which are focusing to become a developed economy and developing the economy. The responsibility weight is more on the developing economies to move faster towards green energy.

Coal the based economy is highly inefficient cost burden on an economy. When traditional economic modes are replaced with energy-efficient one's employment and GDP growth through ancillary industries growth justifies the long term growth of an economy.

The world the fastest-growing economy is aggressively moving in term of green energy based GDP. According to the Energy Information Administration, natural gas is displacing coal and comprises about 62% of all-new generation. Wind and solar made up 21% and 16%, respectively, all in 2018. And coal is falling to its lowest use in decades, expected to be 24% of electricity production in 2019.
But a country like India is focusing on coal-based consumption model and is expanding the coalfields is a sudden shock for the global economy. India and all those countries where GDP growth is going to pick up the demand for clean energy is going to be highly in demand. Coal-based power supply will only create more pollution for the country.

The dream of Rs. 5 trillion economies of India cannot be achieved without clean energy. Green energy is going to be one of the key contributors to this 5 trillion economy. The traditional model of energy supply will not create faster growth.

 Deforestation and coal-based models of energy supply will create the only devastation for the economy. In recent data, it has been found that Captive coal mines produced 25.1 million tonnes of the fuel in FY19. This is 55% higher than FY-18 numbers. Further Auction of new coal mines is going to happen soon. If a climate reacts opposite to the normal mode then framing and other segments of the economy will be impacted. Coal Mines and deforestation are already played the damage game on climate. Agri outputs will be impacted severely in the coming years if brakes are not placed on coal mines and deforestation.  Unless the government comes up with rules for a reduction in mining, focus towards green energy will not build rapidly.

We are not investing properly in green energy-based models. The TAXATION benefits need to be introduced in several layers of the economy so that renewable and green energy-based models are adopted and consumed.

The adoption of 5G in the country will spook the demand for energy significantly. The power consumption will take a new direction as faster internet will open up many technological business models replacing traditional models. At the same time without green-based energy models, climate change will spook inflation in the long term.

Many countries particularly Islamic countries are investing in Green Energy segment. In Malaysia, the world’s very first corporate green sukuk worth 250mn ringgit ($61mn) was issued by Tadau Energy in early 2017 to co-finance large-scale solar construction. Indonesia became the first country in the world to issue $1.25bn of sovereign green Sukuk in 2018 and another one in two tranches at a total value of $2bn in February 2019. Islamic finance will be considered as one of the primary financing strategies for green energy projects, in particular in the GCC, Jordan, Egypt, Malaysia, Indonesia and Pakistan. 

 Green energy-based audit practices need to be formed where taxation benefits will be properly passed out to the corporate. Taxation benefit for corporate will shift the focus from traditional power consumption mode to power-saving mode. Taxation benefit will be given after a successful audit have been done. Once the auditing standards for taxation benefit are framed for green energy the focus towards power saving and energy efficiency models will grow.

The auditing standards need to be designed and upgraded so that proper measurement of the implementation of GREEN ENERGY is accessible and the same benefit is passed to the company.

The benefit should be for a decade so as to change the society completely into green energy.  Green energy is going to be a huge contributor to the GDP.

Saturday, May 25, 2019

Mutual Fund Distributors on the Verge of Death Series 2

How many times one IFA have to face rough words of his client? It was not a mistake being IFA, it sold the product and then the client suffered loss.  When IFA started the business he was told look into the Offer document to check the objective of investments. Now does IFA need to become a portfolio analyst before recommending any product? An IFA cannot get back to school to study now. Falling revenues and loosing clients have now become now inevitable.

The revenues have fallen and IFA’s are already in problem with the current mess created by the AMC. To whom I shall write or address to get a solution to my matter. The client wanted returns and we gave them products. But managing the products and generating a return from them is the work of the AMC and their professionals. Then why I should lose the client. What explanation should I give being an IFA for the fiasco in debt products? The current scenario will push these clients towards Bank FD  and will never attract Mutual Funds to them. 

If an IFA  go to AMFI then indirectly he will file the complaint to those who about AMC and the irony is that he will submit the complaint to the AMC Heads about themselves only. AMFI is run by the AMC people and by the IFA community.  Why does the AMFI need AMC people to represent to the government why can’t the AMFI be headed by the IFA community?

The financial market is under a critical phase.  Mutual funds are no longer Sahi hai. Last 1 year we all faced the burn of IL&FS, ZEE and then few NBFC stock problems. Long back we faced Amtek Auto problem and few more which I don’t remember.

The performance of FMP has also been impacted.  Credit Risk-based papers are best suited for well-defined products under the category. The strangest part is that Liquid Funds which should have a maturity of 90 days to 180 days in terms of papers being invested how they get into negative return phase. This is because those risk-based papers were held in those Liquid Fund product portfolios. The most surprising part is that same risk-based paper has been included in every category of Debt Mutual fund.  How can this be allowed? Why did not SEBI interfere into the portfolio being managed by the Debt Mutual fund category?

The debt fund is collapsing due to the inbuilt structure of products where the papers itself are no longer plain vanilla products.  When the unlisted firms in the Zee group which borrowed money, pledged the shares in listed group companies as collateral. When these companies defaulted happened, and some creditors sold the pledged shares, the share price crashed. So creditors could not recover the full value of their outstanding loans.

We all know that DSP, ICICI, Reliance and few more AMC brings a huge number of FMPs. Now in order to generate a return from these FMP ones needs debt papers and lack of papers brings the Fund management team to look for poorly rated papers under the Name of Risk-Based Debt paper.

The ZEE group story will occur with many more companies as on when their times come.  Debt Mutual Funds are on the tip of Iceberg. The Fund managers and AMC greed of beating the players within the circle and generating superior returns have created this mess.  

The biggest problem as on date is that the NBFC sector is reeling and hence many ancillary industries will suffer. This will impact the debt instruments floated by them as they have commitments to payback and this is where Debt Mutual Funds faces problems.

Well, we currently don’t know how much-leveraged debt holdings are there in the debt mutual fund space. But if any IFA loses any clients who will take the blame and who will compensate?

Coming back to the question where an IFA will complain.

INDIAN NBFC Non Core Sale & New Draft rules are Difficult

Non-Core Assets & Liquidity is going to keep the Indian economy under problem.  The new regulations for NBFC are going to be a tough job. They will not find the high liquid assets (HQLA) component to maintaining the Liquidity Coverage Ratio (LCR). Most of the AMC have complicated assets involved within their system. These assets are long term nature and less of short term nature. 

They have to cut down on bad assets and in many cases might have to take hit on the books. Remember where Banks faced problem-related to lending that is the place where NBFC penetrated and hence the quality of checks were ignored in most cases and linnet policies and measures were followed.  These investments will pose the biggest risk. For example, one Housing Finance company gives loans to Mumbai real estate segment where OC is not available.  In other words where banks reject to give loan them.

Most of the NBFC has ventured into non-core business as a part of diversification and this is the place where exiting those businesses will be challenging.  Around Rs.15000 cr to Rs.20000cr non-core asset is being held by these NBFCs. Promoters of most of the NBFC have pledged deals which take this number too high. Most of the NBFC shifted from the core business to enhance returns from investments. These investments length and non-disclosure in proper terms are the real problems behind the industry. RBI is very clear that it wants these NBFC to get back on the track by selling noncore assets and this is the reason why RBI does not want to inject liquidity.

Starting April 2020, NBFCs will have to maintain a minimum of 60% of LCR as highly liquid assets which will be increased in a calibrated manner to 100% by April 2024. Well 1-year time frame for 60 % itself is going to be a problem since most of the NBFC books size is so big that to have liquid assets component to maintain the Liquidity Coverage Ratio (LCR) is going to be a nightmare.

But I find that this step will be another failure since the existing the asset-liability management (ALM) have not been followed and only when the crisis of the IL&FS came to limelight the trigger of ALM checking came into the picture.

All the NBFC have intricate intra-group fund transfers and have been involved in the diversification of funding. The AAA ratings are just junk of paper rating and have now worth when the collapse of the Financial Company happens. The ratings have no value during the PRE 2008 the financial crisis and even after 11 years they still in the same place. For a common investor, the risk of investments is calculated based on the rating of the paper. If the same rating is just junk then where does the investor stand at that time? This is the most common situation for an investor.

The biggest challenge and where the government will have negligible scope to play is injecting liquidity. NBFC plays a pivotal role in terms of the consumption economy within India. The rural market consumption will slow down which will impact the manufacturing industry and also long term investments. Trade and business are already facing the heat of Trade war which is impacting the exports.   

Low banking penetration in the last couple of years have given immense growth to NBFC and the same NBFC don’t have liquidity then that will impact growth.  Consumer durable and non-durable both will be impacted. Auto industry and all those industries which are linked to borrowed consumption will face major setbacks.

NBFC needs funding or rather make Banks free up its arms to lend and increase the retail lending arm so that the economy keeps going. The only aggressive approach by the Banks till full confidence is built on the NBFC side will help Indian GDP to grow.

Who will buy the Noncore assets of NBFC? Selling them will not be easy.

Tuesday, May 14, 2019

Crude price to Remain Low & Trump will win 2020

Why the Sanctions on IRAN is so important and why the US wants to have a monopoly in crude supply and kill the shareholding of the OPEC is a trillion dollar question?  At the same time being an economist I find that till 2020 and may be beyond the same crude will remain low despite any war etc. I have also tried to figure out that Mr Donald will win the 2nd term also in 2020. 

Now let’s get back to the 1st part of the thesis so as to prove the final one.  OPEC will have negligible scope to control or inflate the prices. Crude prices will remain low despite any political unrest or oil supply problems. Well, it has less to do with Donald Trump and more with the political owners who own the crude market. Climate change is bound to get hammered when political involvement is on the Oil companies’ stock prices escalation.

Mr. Trump has also millions of dollars directly invested in the fossil fuel industry. The FOSSIL FUEL based company’s stock price escalation in the last couple of years reveals how much net worth has grown for the political members associated with the same. Net income for the 43 U.S. oil producers summed up to a total $28 billion in 2018, which is a five-year high. Based on net income, 2018 became one of the most profitable years since 2013.

The return on equity by the companies in the US has been quite phenomenal.

The crude money plays a pivotal role in the upcoming US election in 2020. Below is the list of the contribution made by the US oil Giants in the Presidential election where both the segments Democrats and Republican both have held over the contribution made by this industry. 

Well, the same contribution with renewed new figures will come up soon in 2020. This is the prime reason why the US will play a monopolistic game towards controlling the price of crude and not letting OPEC have its share increase. The various countries which were crude suppliers are now in deep trouble giving immense space to the US to play its cards.

A a quick look at the contribution made by the OIL Giants towards US Politics:
·        Amount the fossil fuel industry spent during the 113th Congress (2013 & 2014) on contributions to Congress’ campaigns: $42,373,561
·        Oil, Gas, and Coal lobbying total 2013:  $156,776,386
·        Oil, Gas, and Coal lobbying total 2014 : $151,437,335
·        TOTAL amount spent by Big Oil, Gas, and Coal in 113th Congress: $350,587,282 ($350 million and change)

These numbers speak and support why crude prices will be lower and why OPEC and other countries will keep losing their shares and US will keep gaining its muscles. US banking industry is longer in those Golden days as compared to Pre 2008 era. Hence the flow of capital is now coming from Oil Giants.

Now a big question in everyone’s mind is that will Donald get a 2nd term. Well, he is bound to get it. He has been able to keep crude prices low and hence Americans have been pretty okay to pay bills. The industrialist lobby is happy with the scrapping of climate change and giving more subsidies to these oil companies.  Yes subsidy the indirect tax payer’s money going to the pockets of the oil Giants.

The basis of the argument that Mr Donald will win the 2020 elections also is based on much the favourable decision was given in favour of the oil giants. He is going to be funded by them only.

  1.          Withdrawal of the United States from the landmark Paris Agreement,
  2.          Repealed President Barack Obama's carbon-cutting Clean Power Plan
  3.          Rolled back mining restrictions
  4.         Reduction in Outer Continental Shelf royalties
  5.         Rollbacks of Obama era fracking and methane emissions rules.
  6.         Ignored government climate reports
  7.      Repeal of the Obama administration's ban on offshore oil and gas drilling in U.S. coastal waters.

      The above few changes by Mr Trump gives a clear indication that he is going to be backed by the Oil Giants in 2020 to print money for the next term for these people. Well for crude importing countries its joyful time or rather era as crude prices remain much below the level of $100/barrel.

Well What was lost in the 2008 crisis by the BIG Giants of the American economy I find  10 times have been earned by them in the last decade.

Sunday, May 12, 2019

Mutual Fund Distributor Many Suggestion ...But None Works Easier

This month the brokerage came much less as compared to my previous months. Around 20% to 25% decline, I witnessed in my trail income.  Well I am speaking about the trail AUM income on historical AUM. AMC is not bothered about us. They have reduced the brokerage more compared to the reduction in TER. The sharing ratio from the AMC has come down significantly for distributors. The biggest problem is for those clients where I have to pay a certain part of the trail for the high ticket size business which I pool. If I don’t pay clients then they will drive their AUM towards Direct Schemes. The competition in buying a business is too high and too challenging. 

The challenge is significantly high for a newcomer to this industry. In the last 5 years, many people from AMC left the job and started their own shop. Well, the lucrative nature of the industry made them earn more compared to their jobs and also as the trail show was good building the AUM an enjoying the fruits for the long term.   The current falling brokerage on Historical AUM turns out to be a nightmare for IFA.

Falling earning raises the biggest question about my Fixed Cost burden which is to be managed every month despite any size of AUM I have. Someone is required to service the clients and other miscellaneous cost related to the office.  

Someone suggested that to have new products in my kitty like Insurance and Fixed Deposit. Well, I have set up this business and we all know that after months of effort the 1st deal gets to happen.  Getting into new products and selling them takes time. Further, all IFA will be joining the same segment of selling insurance and the challenge will be the same in buying a business. Every client knows about the earning of an Insurance selling agent and hence buying business comes into play.  All clients are mainly covered by dozens of life insurance products by LIC hence where do I stand.

 Retaining the existing clients and earning out of them is tough with falling margins. This is the place of stagnation of my business. Understanding equity and selling the same through Mutual Fund was easier and well-educated work.   Clients will invest but servicing the same through online alone is not sufficient. Many or rather most of the clients want me to visit them. How do I manage that cost? Now please don’t tell me to do skype calling and video calling. Indian mindset of investor is that and IFAN might have many names but at the end, he is an Agent.

On the other day someone senior from the Financial Distribution industry advised focussing on HNI client segment. But HNI clients are not so easily available and even if they are few HNI clients the biggest challenge with them is to “Retain” them under the threat of Direct Schemes availability.   

Someone further told be set up an office in B-30 zone and focus on client acquisition. Well, suddenly how I can shift and procure clients in B-30. Getting a channel to penetrate for a Midsize IFA or a small size IFA is a herculean task. Having a local presence is one of the important requirements of growing business in any area. B-30 and T-30 are just definitions by the regulator but the reality is that one needs to have a huge backup of the network to build this business. For a large size IFA the challenge will be fixed cost burden to set and then generate revenue from those location.

HNI client’s community moves together. When one HNI adopts new things the same is being spread as wildfire across other HNI. Hence that segment of the business is a challenge.

Insurance is a new subject domain and hence adopting the same and understanding the products, claims related issues and how to convince clients to buy becomes a major challenge. Insurance is a commitment for the long term.

Investor procurement support from the AMC has dried down. Getting new clients is a difficult task. Well for me one client is new but for the Regulator, he is an old client.  The new of set rules have created new problem for making clients.

 Earlier their used to be marketing support form AMC but now suddenly these things have changed where no support is being given. The whole cost of marketing has now come upon the shoulders of the IFA.

This month trail brokerage reflected that I need to cut down the cost but my biggest worry is that how do I survive in the long term?

Monday, May 6, 2019


In one side the TER is coming down and simultaneously the brokerage is also coming down. How will I run my family?  In continuation to my previous article on Mutual Fund Distributors are on the Verge of Death it is being found that the Push of change of industry towards advisory does not have much to pay or earn for the distribution fraternity. The industry wants to move towards financial advisory and charge fee from the client. But when multiple free advice is available why the client will pay fee to me.

Now  did any one bothers to ask the client that does he really want a fee-paying financial advisor? It’s not about the quality of advice being given by the advisor but the willingness of the client to pay the fee.  This is the mother of the issue of the new changing industry.

The Mutual Fund Advisory business is a big hurdle in India. The mindset of the investor is the big hurdle. Financial advice or rather a tip is required by every client but when it comes to paying for the same the number of count of people seeking the same come down. Many financial advisors will take great effort to  get proper financial planning designed for their clients but when it comes to paying the fee the client may pay you for the 1st year some charges but may not turn up in the 2nd year.

The freebased advice is the biggest hurdle and lack of proper minimum guarantee of the advisory fee is the biggest factor where the financial advisory is not being taken up seriously by the client. The Indian client mindset is that a Broker remains a broker and why I should pay him a fee when he earns a commission.

Direct schemes have changed the landscape of investors investing. But the advice of the financial advisor in developing a proper asset allocation and financial planning are few of the key things required for wealth creation.

There is no proper online or any other way where the client can be charged after the 1st year. Leaving execution, giving only advice and getting documented the same down not give proper shape to the financial advisory.

The financial distribution industry is facing a bigger threat from the AMC segment which is clearly indicating that it is not bothered from where the money comes to them-Direct or through a distributor. The recent case of “NIL EXIT LOAD” by an AMC for shifting of Investments from Regular to Direct schemes provokes investors that you don’t need any financial advisor.  The best scheme names are available in the public domain and hence long term wealth can be created by investing within those freely available scheme names.

 If the equity market gets double from today then, obviously the best performing funds as on date will perform in the long term as well. Well, there are a number of schemes which have given stupendous return over the past 15 to 20 years.  

The 2nd most important question is what does a retail client will pay the advisory fee or HNI. Why a retail client who has a portfolio of Rs 10 lacs pay a fee to you. Well there are many clients who have an investment portfolio of less than Rs10 lacs. What a financial advisor will charge these clients.

Online direct scheme facility is already there and hence why I need an advisor. Well, the truth is that everyone is not my client. Now those who used to be my client under the retail ticket size, are no longer clients under the financial advisory model.

How I will run my family?

Tuesday, April 30, 2019

Mutual Fund Distributors are on the Verge of Death

The Mutual Fund distributors are the biggest risk currently. The Rs 25lakh cr industry will double in the next 5 years but the distributors will number will come down to 1/3rd from the current numbers. Old assets and new assets in both segment brokerages have been reduced significantly which is a threat to the survival of the community. 

AMC and clients will both remain advantageous from the new reduced brokerage structure but the ones who helped to build this the industry will be out of the market soon. The question is no longer restricted to which AMC has chopped the hands of the distributors but the final result that the bugle of death for the distributors have been blown.

The dramatic cut down of the brokerage raises a significant question about the long term outlook of the AMCs towards the distributors.

By cutting down brokerage and keeping around 50% to 80% of TER the industry has been able to reduce the outflow of the brokerage being paid to the distributors.  The CIO, CFO, CEO, Fund Manager and even the National Sales Head of the AMC gets a significant amount of remuneration but nothing has been chopped at their end. The below list itself speaks for the same.

The salary figures are old and the new ones will be high and this has grown also in the current year. How the AMC does is able to pay such high salaries to the CIO and CEO and Fund Managers? Why these salaries are not being reduced? Well, the distributor is killed for the sake of these people through the reduction of brokerage.

The industry leaders think that as the size of the industry is significantly high and clients are being acquired through a digital medium the so-called distributors are no longer required in this industry. The mutual fund has been one of the bread and butter products for the 10000+ distributors. SEBI in its circular has asked to cut down TER but the way it has been reduced by the AMC that it turns out to be a question mark of survival for the whole distributor fraternity.

The significant rate cut down by the AMC has zero impact on the AMC itself. Rather they are keeping 50% to 80% of the TER with themselves.

Its, time for the Distributors community to raise voice about the disastrous revenue structure created by the AMC. The 2nd generation of the distributor community is reluctant to run the business.  The way the brokerage on old assets is being reduced that client servicing is now impossible.

Many AMC has come with zero exit load strategy for the transfer of investments from Regular to Direct. Well, what do the AMC leaders want to communicate that we are no longer required?

Brokers will stop the MF business soon.  The industry sales will be impacted for the short term and the larger impact will come when future inflows will get dried due to the wrong decision in a scheme selected by the investor.

Distributors should come together to fight against these malpractices and inferior brokerage structure decision taken by these AMC. It finally proves that those who wanted the distributors to be eliminated, finally their true face are now out.

Friday, April 19, 2019

U.K 2nd Referendum will Happen Soon...Verdict is Clear

The Brexit deadline has been extended till 31st October 2019. A second referendum is being thought over where around 30 to MPs’s don’t want to have the second referendum and on the other side around 80 MP’s wants to have the 2nd referendum.  The chances of the 2nd referendum and the result of the same seem to be very clear. The deadlock situation can only be eliminated through people vote and through 2nd referendum. The people of the UK may not go for Brexit. It is not 2016 but 2019. Theresa May might come to an end of her position soon. The cost of Exit was not calculated in the 1st Referendum which currently has been figured very well. This calculation is the key to decide the verdict.

If the second referendum happens the Vote will be not to leave EU. Yes, the time has changed from 2016 to till now. UK will vote to stay within the EU. The citizens have already felt the heat of leaving the EU. From 2016 to 2019 things have changed dramatically where every citizen knows the dire consequences they have witnessed and will witness further once the UK exit the EU.

The chances of the 2nd referendum are high and that cannot be ignored. The citizens are already facing the heat where analysis from a Research company, it has been found on an average household has paid £550 more since 2016.   According to the report it has been found that at least £15bn more have been spent on the household consumption items by the UK people. For example, the price of filter coffee has risen by 10 per cent, the cost of bananas has increased by the same amount and a glass of wine bought in a pub or restaurant has gone up by 8 per cent. Well, the cost of energy bills increasing by an average of £75 a year.

Coming to the corporate segment of the UK, companies have already burnt their fingers with escalated cost on machine and transportation to the tune of with £4.4bn out of the £15bn.

Citizens living in other EU states will be under severe pressure once the Brexit happens. In France, till now Income Checks are not there on the UK people living in that city. But soon income checks will come into place.

France has a rule where it states that if one is  single then  must earn at least €559.74 a month, a figure that increases to €958.237 if they have a child. In the case of couples, one must earn €839.62 as a household or €1007.55 in case you have a child. Pensioners must have an income of €868.20 if they are single or €1,347.88 if they are in a couple. In the future, these numbers will increase. Currently, the French government doesn’t check these numbers but once the Brexit kicks in these checks will make life miserable.

Further the burden of exit liability in monetary terms will make life difficult post Brexit.  The EU pension is one of the biggest liability and the EU does not have provisions in advance. They follow the rule of Pay as you Go. Hence when the UK will exit EU the liability of pension at that point of time including the currency impact will have a significant burden.

Already we have witnessed that most of the jobs have shifted out of London due to Border arrangement and free movement regulatory fears. This will have a significant impact on the cost of living for UK people in the long term.

The the job market of UK is in a miserable state of condition. Job vacancies in London’s finance industry have halved in two years. Recruitment agencies state that the number of jobs available in the city’s financial services industry and the number of finance professionals seeking new jobs have each fallen by more than half in the past two years.

According to the report by the Department of Finance and the Economic and Social Research Institute (ESRI)  ano Brexit deal would cost 80,000 jobs to the Irish economy.

Its time to hear the demand of citizens of U.K. The citizens of UK will decide the fate of Brexit now. Situation has changed from 2016 to 2019. I repeat what I told at the beginning, the cost of Exit was not calculated in the 1st Referendum which currently have been figured very well.

Sunday, March 17, 2019


Do you have any idea how many investors and how much is parked with I&LFS. Why should I be bothered to think about them? I got my audit fee. Audit report and its comments are just like the Holy Bible and holy sermons respectively for an investor across the globe.  But are auditors able to keep up with the expectation? How much we can trust the auditors of the company and their reports. What about the reports and its trustworthiness. 

PwC fined £5m over Connaught audit, EY Tech Data audit fine £1.8m, PwC Merrill Lynch $1m fine, Tyco Scandal 2002,Enron Scandal, Healthsouth Scandal 2003 ,Freddie Mac Scandal 2003, AIG Scandal 2005, Bernie Madoff Scandal (2008), LEHMAN BROTHERS SCANDAL (2008),Satyam Scandal 2009,I&LFS. Well, these are few of the renowned names but what about those where the name did not come in front and investors just burnt the fingers.

Now please don’t jump up on to defame any particular professional bodies. Defaming one professional body and creating it as hype to win the council member position and then escalate to the topmost position of a professional body is a foolish and old act. Well, those who defamed another profession please check their firm's name in any Chit Fund scam etc. You will be surprised may be shocked but the truth is on the MCA website. Hence stop defaming and look into the broader issues.  These things have impacted society and made investors either to commit suicide in the worst case. It's not about Chartered Accountants or Cost Accountants. It’s about only auditors and its community. Don’t create a caste system.

Investors are simply burning their hands and all auditors are just busy with number game. The small signature of the auditor is of high value for the investor community and for all those who invest their hard earned money. Do we really need auditors and their signature? We can just bribe the auditors and pay them a fee to cook numbers and place their signature just by affirming that the business is very good and the books of accounts and business reflect a true and fair view of the organization.

Please don’t raise the voice related to corporate governance. The responsibility of corporate governance does not lie with corporates, but with the auditors who are real drivers behind the same. Corporate governance is only strengthened when auditor of all professional bodies are together. Defaming one professional body and treating it as hype to win the council member position and then escalate to the topmost position of a professional body is a foolish and old act. We have seen these defamation matters much but in the end, the investors or the minority shareholders are suffering. They have lost millions and billions due to this defamed strategy adopted by the council members.

Always remember that when professional bodies start defamation of other professional bodies corrupt corporates and lobbyists take advantage of the same.  When all professional bodies unite to fight against these corrupt practices then only social responsibility is met by the auditors.

 This is not about blaming one professional body. The body has nothing to do. Auditors are universal and hence they are not to be separated just like caste system. Auditors carry a high social responsibility. Even if you still try to segregate between any particular bodies then I would like to say that everybody and its members somehow of the other are part of audit failures at various point of time.

Still, if someone wants to pinpoint any particular professional body then please get in West Bengal and figure out how many firms of such bodies have signed various documents of such Chit Fund Companies. Those who are pinpointing fingers at another profession please get into the MCA website and one can get the name of the Chit Funds audited by various bodies from 2005 to 2011 period.

Many god names and surprises will come up when one will dig into the auditor’s report and various document signatures by these members of the auditing professional bodies.

Yes, the very signature made people totally beggar at the end of the day. The Auditors signature is of high value. Investors across the globe get into audit report to get an idea about the business and its state of affair. The trust the auditor's comments and reports just like a Holy Bible.

Well, I am not talking only for the Indian auditors but for the whole profession, by whatever name you might call them.

 Every book, every meeting, every seminars/workshop, every member, every council just failed in the different times despite spending millions and billions for developing the auditors and uplifting the auditing standards.

The auditors did not fail but they made every investor, every minority shareholders and over and above the professionals like Cost Accountant or Chartered Accountants. Every year millions of funds are being spent on organizing event by Cost Accountants and Chartered Accountants regarding strengthening the Auditor Standards.

Well we all know that Facebook Platform is being flooded with images of such events and Council Members and Presidents are taking snaps but is there any real benefit which the society draws from such events. If auditing standards have been uplifted and improvised then how did the Sharada SCAM happened which also required auditors signature? There are many Accountant firms who were auditors of these Chit Fund companies.

What action has been taken against those auditors and auditing firms who have signed those documents who affirmed that the companies are doing true and fair business? Well, many of these firms auditors were or now in the current council members.  Yes, don’t be shocked. Money from one pocket goes to another and that is what we call flow of fund within the economy.

Do these auditing firms or council members or other members have any idea about the value of their signature and the billion club trust built on that signature?

Auditors are forgetting that their report has a social responsibility. It might be easy for any council member to give sermons to 500 people about auditing standards when his own firm is engaged or have signed chit funds audited reports or any other documents.

Time has come to refuse clients where malpractices are being practised by these professional bodies. When all professional bodies unite to fight against these corrupt practices and refuse to sign or do the audit of these companies then will have no option but to follow the true and fair view of the accounting and corporate governance path.

Sunday, February 17, 2019

Why SIP are getting Discontinued?

As economic analyst and financial advisor as well as client I find that now day’s products are not miss-sold but the underline concept of investment pitch is not very clearly understood by the financial advisors or IFA. There is thin line of difference between lumsum and SIP and diversification of risk.  Selling of financial products is gone now. It’s the time of selling or rather designing the strategy of investment in some place.

In the month of December 2018, the industry has added just 1.87 lakh net new SIP accounts, shows a recent AMFI report. Compared to April 2018, the net SIPs declined by 61% to fall to 1.87 lakh in December 2018 from 4.81 lakh in April 2018. Even if we compare to November, the net SIP registrations fell by 39% in December.

The point is we need to know why these situations come up and where the advice of SIP or STP went wrong?

One should know that SIP/STP and lumsum has different objective for investments and they both cannot be replaced. Well advisors have done this replacement in 2015-2017 and hence we are now we are burning the finger through SIP cancellation.  

Now the biggest task for IFA is that he has to now convince the client where the investment strategy did went wrong. The run up of the market in 2017 was not taken properly for advising doing lumsum investments. SIP is not meant for every market and Rebalancing is an art which cannot be ignore.  Diversification of assets and risk does not mean every time every investments have to be SIP or STP.
Analyzing the financial requirement and objective of investments is the key for financial advisory. Even for a distributor or IFA one needs to know the thin line of difference between the timing of ASIP/STP and Lumsum investments.

When markets fall one should do lumsum based on the objective of investments. SIP or STP is for long term game where a specified goal which needs to be achieved in the next 10 or 15 years, SIP plays its game. But where the investment is just for making quick gain and in those markets where we get rally like 2017 one should explain clearly the investor about the risk. Before one jumps into rough SIP one should be clear that only risk diversification of lumsum investment into SIP may not be the sole objective of investment by the client.

We hardly ask the question to the client about the objective of investments.  We pitch the clients that markets are strong and it has huge growth hence start your investments. The client looks through the market numbers and takes the decision of investing in Equity MF by redeeming his FD investments under the objective of getting 12% return (which is higher than FD rate of interest of (8% to 9%). 

This simple math’s behind the clients mind instigates him to do investments and the distributors just simply adds a value proposition tip of diversification and gets the investments in STP or SIP format. This is the place where the mistake of investments happens and after 2 or 3 years  the client simply stops the investments.

Re balancing, well it’s not redemption but a different concept of protecting the gains form one investment and creating wealth for the client. This has not been done in the last couple of years. Ignorance is the mother of all evil. One needs to check in that when a desired objective is achieved one should re-balance the investments. 

But the mistake while starting the investment was that we were not clear from the client side as well as from our side about the objective of investments. Understanding the purpose of investment saves us from loss of client and his money.

Wednesday, February 13, 2019


The government wants to have two Kids but I am happy with one only. Having two Kids is just like tow EMI of high-value amounts and that too will keep increasing and not a floating rate. Growing up one child is a costly affair. Economist around the world might have been busy with the market and economic research but the cost of growing up a kid is more of economic importance. The child is a commodity.

Different countries have different cost of growing up kids. Education has become a business.  One child is enough for parents and they don’t dream of having the 2nd one. China is a country where its parents pray to have only one child. In fact, the demand and industry size of contraceptives has grown by leaps and bounds.

The rising cost of education, quality of nutritious food, health check and medical treatment cost and having a good career has become a costly affair. This is an organized market where the child is the product and rest all are the by-products.

 The climate of China forces to have higher medical cost and checkups followed with imported food items since the water of China is also polluted with toxics.

Coming to the population front China's population growth slowed in 2018 with 15.23 million live births, a decline of 2 million from the year before, according to the National Bureau of Statistics. According to a 2017 study it has been found that more than 50% of families have no intention of having a second child. Further, 240 million Chinese families are over the age of 60 in 2017. This rate is just going to grow.

Until the 1990s, most people in China used public education, which was free or had a minimal cost. Medical cost is a nightmare in China. It has one of the world’s highest corruptions in the medical segment where doctors are bribed for taking care of kids.

According to world health organizations,on 60+ aged populations in china will soar to 90% to 240 million by 2020. Parents in china have to face significant problems of raising kids and government support is not enough to feed the little ones.

India is no less far from the rising cost of education. Schools don’t teach as much as they have to go to a coaching class where they pay hefty money to get educated. In a research study by the National Sample Survey Office (NSSO) reported that between 2008 and 2014, the average annual private expenditure for general education (primary level to post graduation and above) has shot up by a staggering 175% to Rs6,788 per student. During the same period, the annual cost of professional and technical education has increased by 96% to Rs62,841 per student.

Private coaching education industry is one of the most lucrative and never plummeting business models. Private coaching accounted for 15% of the average total expenditure on general education. As many as 35% of students across the country have to undergo for coaching classes in the junior levels and this number increases to 60% during the higher standards.

The point is an education for a child  is now a commodity and it is high demand and will continue till the end of the civilization. Schools and teachers and coaching centers are all interlinked in this game. Many politicians have also deployed a significant amount of investments in developing the network and making significant revenue from these sources.

In another survey, its has been found that Indian parents say they contribute ₹ 3,61,975, on an average, towards higher education. The entire spend is about ₹ 7,77,654 for the university programme, including bills and lifestyle costs. From tuition fees and accommodation to laptops and textbooks, parents’ spending on their children’s university education includes various costs. Of the total funding, 75% goes towards tuition fees. 

Parents or the child takes education loan which is another by product of education cost.Well, education is a big cost and having two kids is just like having TWO EMI running simultaneously with a long term commitment.

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