Social Economics

November 13, 2015

I received this as an E-mail. Copy pasted and hence do not claim that it’s my own work. Blog readers are free to learn their own lessons from this post.

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class. That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer.

The professor then said, “OK, we will have an experiment in this class on Obama’s plan”. All grades will be averaged and everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little had studied even less and the ones who studied hard decided they wanted a free ride too so they studied little.

The second test average was a D! No one was happy. When the 3rd test rolled around, the average was an F.

As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

These are possibly the 5 best sentences you’ll ever read and all applicable to this experiment:

1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.

2. What one person receives without working for, another person must work for without receiving.

3. The government cannot give to anybody anything that the government does not first take from somebody else.

4. You cannot multiply wealth by dividing it!

5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.


Asking right questions

November 9, 2015

Many readers of this blog are aware of PV Subramanyam. He writes a blog http://www.subramoney.com Many a times, he has asked to readers on asking right questions  to the advisers or planners or agents or sellers of financial products. Why does he say so?

My dear friends, personal finance is also about asking the right questions. Below is an old joke. Please read and understand it.

Two men went into the church and questioned to father.

Man 1 – Father, I’m drinking my glass of wine and suddenly, there is a desire within me to remember God, to pray him. Should I do it?

Father’s Ans. – My dear Son, God can be remembered any time. Please feel free to do so.

Man 2 – Father, I’m praying to God, remembering him and suddenly there is a desire within me to have a glass of wine. Should I do it?

Father’s Ans. – How dare you to do it? When you are in prayer, you should only remember God and nothing else.

Joke is over. Can you people get the point, this joke is about? Both the men were doing the same thing. Mixing drinking and prayer. Yet the answers to both were different.

Now go out and search for right questions within you, so that next time you get the right answers.


Saurashtra Darshan

November 7, 2015

The back ground:- I’m in Gujarat for last 12Y and wife is here for 11Y. Till date, we never went to visit any part of Gujarat. Wife was firing all sorts of missiles on me for not going and visiting in all these 11 years gone by. Luckily, this year, 1 week vacation in Kids’ school on account of Navratri and Dushehra gave a window to plan the things and move on. We zeroed on for Saurashtra Area of Gujarat.

Planning the trip:-  Consult my office colleagues, took help of GOOGLE and some ready made help was available on www.team-bhp.com. As I’m in Ahmedabad, following options were there, before me for the journey part.

Option 1- Ahmadabad to Dwarka (by train) – Porbandar – Somnath – Gir –  Diu (By road)  – Somnath to Ahmadabad (by train)

Option 2 – Ahmadabad – Dwarka – Porbandar – Somnath – Gir – Diu – Ahmadabad (all by road)

Option 2 was chosen as all of us were interested to take the first hand experience of the ROADs of Gujarat.

After selecting the path of our journey, we decided to not pre book any hotel as we were going in a relatively off season. Originally we planned our departure on 18th Oct 2015 early morning, straight to Dwarka from Ahmadabad but keeping the distance in mind, at last minute, changes were made and final planning was as below.

Ahmadabad – Jamnagar (night halt on 17th  Oct) – Narara marine nature park – Dwarka – Porbandar – Somnath – Gir – Diu – Ahmadabad.

It’s 16th October 2015, We went for shopping of snacks and other things for Kids. Petrol tank was filled to the brim. Tyre pressure was checked and Bags were packed and Now we are ready to take off.

Day Zero – 17th October 2015:-  It’s 14.45PM time in my clock I’m just back from my Morning shift job to home and helping my better half for that last minute packing. Now it’s 15.45PM and all 5 of us, me, wife, two kids and Gajini, are excited and moving on the trip. Here comes the first PICTURE from Odometer.

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Took the Rajkot highway through the Ring road near to my home and after a continuous driving of 3.15 hours, it’s 7.00PM time, some 25 KMs away from Rajkot and we took a pit stop for fresh up and coffee for me and my better half, some ice creams for Kids and a good amount of rest of 30 min for Gajini.

After that pit stop, all 5 of us are charged now and with the help of few good traffic cops and Samaritans, were able to reach Rajkot-Jamnagar Bypass road. Voila, we are on Jamnagar road and passing by the Rajkot Cricket stadium. Heavy Police arrangement and stadium is glowing in full lights at the night. Kids enjoyed the scene and we are running fast.

It’s 9.00PM and we are in Jamnagar. Searched a bit and finally reached to the Hotel Deep Palace in Teen Batti area. Nice Hotel. Check in formalities are over and we are now in our room. Completed the dinner. Family demanded some cool stuff. Arranged the locally made Casata ice cream from Shri Ram Dairy ice cream. Nice yummy taste. A wide variety of Ice Cream is available . Family is now in rest mode and I’m discussing with Hotel staff for next day visit to Narara. I thank dear Suresh Ahaan from FB group AIFW for arranging the phone number of guide but some how, the fellow, did not pick my phone and now the hotel staff is arranging another one for me. It’s 10.30PM in the night, the guide came with another guide in tow and now we were handed over to the new fellow Mr. Ankur. I was ordered to be ready by 8-8.30AM in the morning for timely visit during low tide in Narara. It’s 11PM and now it’s the comfort of bed for me finally. Good night. Gajini is also happy to take REST. Total distance covered 322 Km. ‘Gazini’ specially liked the Rajkot – Jamnagar Highway in the night.

Day One – 18th October 2015:- It’s 6AM, I’m making things fast for each and every one. 7.30AM, each one of us is ready and wife dear is demanding some local hot and fresh breakfast. Order fulfilled and finally at 8AM, called the guide and he assured us to be ready in 10-15 min. Check out was done. Guide arrived and 8.30AM, Gajini, me and family are on road now. Guide is on his bike to park on highway. Reached that point and now guide is also with us.

Vroom… Vrom… We are on Jamnagar – Dwarka highway. There goes the world famous Reliance Refinery on our left side. There goes GSFC DAP plant on our Right. Now we are approaching Essar Refinery at Vadinar. It’s also time to fill the petrol tank. Done the same. It’s a right turn and now we are heading to Narara. 4KMs away from Narara, it’s last shop offering mineral water bottles and confectioneries. Guide advised us to purchase the same and we followed the advice. It’s 9.45AM and finally we are at Narara marine nature park, forest office. A permit is required for entry into the park – cost 500 Rs. For the group, camera charges 200 Rs. Extra. Total Rs. 700 Money paid and receipt of the same is received. It’s 10.15AM and we are now on our feet to sea shore. Possibly it’s the only marine nature park in India, where you can watch the following in their natural habitat away from the impact of HUMANs. Let the pictures do the talking.

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Daughter refused to walk down and hence she was continuously on my shoulders. After facing the harsh SUN for more than 1.30 Hours, even SON is now not interested and we are just pulling ourselves to the forest office for a shed and water. 12.30PM and finally we are back to forest office. A tiring yet satisfying experience. Back to Jamnagar – Dwarka Highway. Dropped the Guide on the junction point and paid him his fee of 1000 Rs. Now we are moving towards Dwarka. Now starts the problem. All are feeling hungry but not a decent eatery is coming on the way. Some how stopped on a petrol pump not for fuel but for a OK looking dhaba kind thing. Ordered kathiyawadi dishes, ringan to bhartho (Brinjal Bhartha), fulawar no shak (Cauliflower curry), Bataka nu shak (Potato cury), rotli (Gujarati chapatti) and Bajra no rotlo for food. Me and wife finished it. It was not what the kids prefer, hence some light snacks for them and we are back on road. Khambaliya is gone and now we are getting the view of Wind turbines. It’s indication we are approaching Dwarka.

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It’s more and more Wind turbines and at last we are at Dwarka. The first hotel in the way – Hotel Krishna Inn and we are checking in. Time to take some rest as it’s 3.00PM. After a good amount of rest, all are now ready to have some food. Searched for a decent restaurant and landed into Charmi. Good one with a nice food, liked by all of us. Now we are back to hotel and after confirming the route, walking down to the DWARKADHEESH temple. A 10 min walk and we are at the temple. We are stopped at the security checking gate by the personnel there. Deposited the Camera, Mobile, Keys to the clock room. And now it’s darshan of Dwarkadheesh. Crowd is there inside the temple, still there is a calmness in the atmosphere. The temple is very old, yet we can imagine the past glory from the carvings on walls, pillars the over all structure.

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After spending around 1 hour in the temple, now it’s time for some shopping from the nearby shops. Now we are back in the hotel and it’s time to say good night for a satisfying day. Total distance covered 182 Km.

Day Two – 19th October 2015:-  It’s 7AM in the morning, all 4 of us are now getting ready to move on. It’s 8.30AM and finally we are checking out. Just at Nageshwar Temple cross road, hot and tasty breakfast of fresh Khaman and Palak (Spinach) Gota. Finally at 9.00AM, we are now moving to the Nageshwar temple – 19KM away from Dwarka, It’s one of the 12 Jyotirling. 9.30AM, we are at the Nageshwar temple. Paid the parking fee and straight to Temple. Again camera, mobiles, belts are not allowed. Not much crowd and peaceful darshan. The main attraction of this temple for my kids is below in the pictures.

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Now we are moving towards Gopi Talav. Reached there, paid the parking fee and going in. Kids and wife are delighted to see the floating stone of Ram setu fame in a temple.

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Visited the Talav (pond) and now coming back. Time to drink some Coconut water. Now we are going to Okha Jetty for the final destination of Bet Dwarka in Dwarka region. On the way, crossed the Mithapur plant of Tata Chemicals for Soda Ash and other products.

While entering Okha, a lot of fishermen are busy in drying. Guess what? It’s FISH. A very hard pungent smell was there. Noticed only when the door was opened to ask for direction to Okha Jetty. We are at Jetty now. Boat ride and finally at Bet Dwarka. Visited the temple. We are late by few minutes and Priest pulled the curtains. Now we are waiting for 20 minute. 11.30 AM, now Dwarkadheesh is available for darshan. Temple restoration and repairing work is going on. Finally back to boating point, in between water bottle for all of us and ice creams as it’s a HARSH Sun on our heads.

Boatman is not ready to move till the boat is filled to brim. At last we are back to Okha Jetty and going back. Now it’s OKHA – Dwarka – Porbandar. More and more Wind turbines and finally we are in Porbandar. Asked for directions and in the market we find the way to Kirti Mandir. But before that, it’s time 2.30PM and a restaurant visit is necessary. Done it and finally we are at Kirti Mandir. Can not describe in words the calmness we felt there. Son is stunned with the historic photographs and facts mentioned there. It’s a great experience.

Now we are leaving to Somnath. Google and few good people’s help and we are on the coastal highway towards Somnath from inside the bylanes of Porbandar city. 1 Hour journey and we are at famous Madhavpur beach. A stop of 10-15 min. Wife and Son collected a lot of shells and now we are on our way. Crossed the Chorwad (birthplace of Dhirubhai Ambani). Except one Toran Gate, no major sign of Reliance or Dhirubhai’s legacy. Sunlight is fading fast and we are not in a mood to explore Chorwad. Crossed it and took a fuel stop at a petrol pump. Interestingly it’s raining Coconuts all around. It’s 7PM and finally we are in Somnath.

Checked in Lilavati Guest house’s Suite, run by Temple trust. A grand suite room with ample space and at a nominal cost of Rs. 1500 Per night. Took bath and now we are going straight to Temple. Once again it’s time to deposit, Camera, mobile, keys. Finally we are in the temple. Not much crowd and peaceful darshan of Shivling of Somnath. Got the opportunity to view Jalabhishek in the night. Pots after pots of water are poured in on the Shivling and what a delightful experience it’s it. No words for it to describe. It’s time to come out and rush to the nearest Restaurant for dinner. Ringan no Bhartho, Stuffed Masala Bhindi and Rotli for the adults. Veg. Hakka Noodles for prince of family and plain dosa for the princess.

Now we are back in the room and it’s time to say good bye but before that a change in plans. We are not going to Gir in the morning. Wife wants the evening time to be spent at the beach of Diu and hence tomorrow morning we ‘ll be going to Diu. Total distance covered 304 Km.

Day Three – 20th October 2015:-  Wife dear is not happy with the night only darshan, so we are getting ready for morning darshan and specially the sea around the temple. 8.00AM and we are checking out and moving to temple. After the morning abhishek and sringar, the Shivling was looking very attractive. Alas. Cameras and pictures are not allowed. We are checking the Sea now, at the back of Temple. Time is to move out now but before that a Kesar Coconut drink for both of us and plain for Son. It’s 9.15AM and finally we are moving from Somnath to Diu. Once again it’s coastal highway. Somnath – Mangrol – Kodinar – Diu. It’s 11.00AM and we are finally in Diu. Reached the Pani Kotha Boating Point and checked in Hotel Relax Inn. Good hotel with a very good off season rate of Rs. 1500 Per night. Calm and clean Arabian sea is visible along with the Diu-Ghoghol Bridge from the Balcony.

Lunch time – done it in hotel Restaurant itself, located on the road just outside the hotel. Back in the room and after a bit of inquiry, we are now moving towards Fort. Inside the fort and after watching the old Guns and buildings, I can remember those old lines from a couplet –

Khandhar bata rahe hain Imarat buland thi.

A part of Fort is converted into sub division jail and hence out of bound but still it’s a large area to visit. Sun is shining with it’s full glory. We are now out of Fort. Time to drink the fresh juice of Sugar cane. Now we are going to the Church. An architect example of mixture of different styles.

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From Church to Diu Museum, Jalandhar Beach, sunset point, Chakratirth beach and finally we are at Naida caves. Let the pictures do the talking for these caves.

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It’s 3PM and we are back into hotel for rest. After a good sleep, all of us are ready to go to Nagoa beach. The beach is clean but the water is not. It’s blackish and some what muddy. I opted out, Son and wife are still going in. After a while, the princess also wants to join the party and she is in the party with mommy and brother. Son wants to take the jet ski ride. Rs. 400 and here he goes for the same. A thrilling experience. It’s getting dark now and we are coming out. Few kid rides are available and the prince and princess are enjoying all of these. Now we are moving back to Hotel. After bath, it’s time to walk a bit and to go for the dinner on a beachside open restaurant. Regular stuff was ordered. Nothing special to write about. After the food, we are now in the Pani Kotha boating point area, Ice creams in hands and the cool sea breeze is blowing softly.

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Finally we are back into hotel. Now is the time to plan for GIR. Two route options,

Option 1 – Diu – Kodinar – Prachi – Talala – Sasan (This means, returning and travelling back on last day’s route till Prachi on Coastal Highway)

Option 2 – Diu – Una – Khapat – Talala – Sasan (this means, going straight into GIR forest in patches)

I decided for option 2, for the thrill and adventure of Jungle driving. Total distance covered in the day. 106 Km.

Day Four – 21st October 2015:-    It’s 7.00AM and we are getting ready. It’s 8.30AM and we are checking out finally and straight onto Diu-Una road. Diu is not a DRY (Alcohal)  area but Gujarat is. The police men are asking for checking at the entry check post in Gujarat. No issue for me being Teetotaler. With the help of few good people on the way as well as google map, finally at 10.45AMwe are at SINH SADAN in SASAN, the forest office, from where the permits for Jungle safari are issued.

Anti Climax:- We are getting shocks after shocks. Here goes the list.

  1. No room available in the Govt. guest house.
  2. The morning Safari of 5AM and 9AM are already over and now only 3PM safari can be booked. That’s with only 23 permits in que (if I’m successful to sit within those lucky 23).
  3. There is no guarantee of meeting with the KING – the Asiatic lion, in that evening safari.
  4. Devaliya safari (12Km away from Sasan), in GIR Interpretation zone is over now for the morning at 11AM and we can not join even there. For evening it’s available.
  5. For boarding, we need to check into nearby lodges and guest houses.

It’s already 11AM and I’m telling the situation to my dear wife. The home minister ordered – Leave the Safari for some other day in future, we are leaving for Ahmadabad. But before that, it’s time to fill our empty tanks (stomachs). Just in front of the main gate of Sinh Sadan, a restaurant is offering Hot and crispy Aaloo (Potato) ka Parantha and Methi (Fenugreek) ka thepla. It’s parantha for me and son, thepla for the ladies of the family. In comes the Curd, the Lasan (Garlic) ni chatni and Mirch no athanu (Chilly pickle). A typical kathiawadi Brunch, we Munch. It’s 11.30AM and now we are leaving Sasan with a heavy heart and hope to come back some other day.

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Now it’s a long drive. Sasan – Junagarh – Jetpur – Gondal – Rajkot – Ahmedabad.

Few Kms before Jetpur, the 4 lane toll road is there and Gajini is liking it again. A pit stop for fuel after crossing Rajkot and finally it’s home, sweet home in Ahmadabad at 5.45PM in the evening. Except that Post Rajkot pit stop for around 10 min, we did not take any stops and Gajini did not created any fuss. Handled all the workload superbly. Distance covered in the day 481 Km. Total distance covered in the trip from Home to home, 1395Km. Here comes the trip ending odometer Picture.

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Now are you people eager to know about Gajini? My dear friends, here is our Gajini, Amazingly Indian.

Our Honda Amaze. Returned from the heavy workload and resting in the garage after taking a bath.

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Why RBI is not printing more money to pay off all the loan of World Bank and IMF?

June 12, 2014

This post is not my work. It’s Copy-pasted from Quora. The original Post is here.

A very simple and ordinary question (actually this question is far more serious than it looks in first glance) was asked. Here is the question-

Question – Reserve Bank of India (RBI): Why can’t Indian government pay world bank loan by just printing money?

RBI can print as much money as it wants. Why can’t it print enough money to pay off all the loan that has to be paid to World Bank?
And here starts the answer given by Mr. Akshat Agarwal.
Answer – Let us say you are a farmer and you have mango plantation (keeping in line with the season’s favorite  :P). You do hard labor and work day and night and grow 100 kg mangoes every year.

Now, one cannot live his life eating only mangoes, And since mango is a good seasonal fruit, good for health, and not to mention utterly delicious, there would be others who’d happily trade their farm products, say wheat, for some of your mangoes. Realizing this, you decide to exchange your mangoes for other products. You tell about it to your friend who has wheat farms. Incidentally, he happens to be a mango lover like me and together you develop a rate of exchange, with mutual understanding of course in this example, say, 5 kg mangoes for 10 kg of wheat. You give him 10 kg mangoes and get 20 kg wheat for your family, which you assume should suffice for 6 months. You do the same thing with your other friends as well in exchange for pulses, rice, vegetables etc.

Now, past 6 months comes winter, and your supplies have started to diminish. Moreover, you do not have any mangoes to offer in exchange for wheat and other commodities. But without the commodities you wont survive for next six months. Now what should, or rather, what could you trade in exchange for wheat?

You find a solution. You go to your best friend who trusts you a lot, and you promise to give him 5 kg of mangoes next summer for 10 kg of wheat right now. He thinks about it for a while. There are of course things to be concerned here. What if you refuse to give him mangoes later? What if the mangoes you give him aren’t good quality? What if next year is a drought and there are no mangoes?

Let us say for the sake of simplicity here that your friend here thinks about it but on goodwill and years of friendship, he trusts you and agrees. Similarly, you go to your other friends, gain their confidence and promise them some mangoes next summer for providing you with supplies right now. Now, what you have done here is that you have developed a trading system wherein you trade items and commodities for other items and commodities. And the trading currency is none other than the “items and commodities“.

But now, since you are trading with so many different people at different time, it is getting difficult for you to keep track of how much mangoes you owe to whom. So what you do is that you start handing over promissory notes to the people you trade with, with your sign on it and the amount of mangoes you owe them. So next summer, whenever you have mangoes harvested, people come to you, show you the promissory note with your sign on it, and take the mangoes.

But there is a problem with this system: you are promising X kg of mangoes which you have not harvested yet, i.e., which do not exist. Similarly you would have supplied mangoes to someone for a certain commodity he’ll have in future but doesn’t have it now. And then there is always a risk factor, i.e., next year maybe a dry one and you may not have enough mangoes to trade.

Realizing this, you are worried now. You need a damage control. You consult this with your trusted friend and ask him how to avoid possible damage. Now this friend of yours is quite a trader himself and has traveled many cities and traded with many people. He tells you not to worry about it and that he’ll let you on a little secret. He explains it to you how people will need mango no matter what: after all it is a seasonal fruit and very delicious. Now if there is less growth of mangoes next year, then he can ask to negotiate exchange rates in his favor, i.e., more commodities for same amount of mangoes. Simply put, due to scarcity, his mangoes will become costly.

You get it a little bit, but you are still confused. You wonder how will you negotiate rates when you do not know how much mangoes you are going to harvest next year; how can you negotiate when there is uncertainty? Your friend smiles, and tells you that you can. He suggests you to issue only a certain value of promissory notes, lets say  1000, and then do the trading with these notes after declaring their new meaning to the traders. These 1000 notes will represent 100% of your harvest, no mater how much you harvest. So if there is a guy with your promissory notes valuing to 100, he”ll have 10% of your harvest next summer, no matter how much you harvest. He can also decide to not exchange it for mangoes next year when there is a drought, and wait for next to next year hoping for more amount of mangoes then. Lets call your promissory notes as Mango Currency (MC)

All goes good and the mangoes, being good quality and sweeter than its competitors, are valued more. People want to buy mangoes from you even if they have to pay more. This means the value of MC gets more, only a few people can afford it. The very lower class, who wants to eat mangoes but cannot get hold of MC due to its high value is suffering. This also causes you loss in business since people are now holding MC instead of trading it for mangoes since the value is increasing. Since mangoes are not being traded, they are rotting in the collecting compound with very less people to buy them, causing you huge loss. You now need to keep the value of MC in check so that people do not hold up to it.

You go to your friend again and consult him on how to keep value of MC in check. He tells you to simply issue more promissory notes. Since the total sum of promissory notes is equal to 100 % of your harvest, if you issue 1000 more promissory notes in addition to the initial 1000 that you’ve had, the value of MC would be halved. 100 MC that was 10% of the harvest would now only be 5% of your harvest. (This is also how RBI keeps the value of Rupee under check, else Economic activity of country would go down)

Now you have developed a good trade system and also know how to keep the value of MC under check by regulating the supply of promissory notes. Now you decide to expand your business. You go to your best friend who deals in wheat and has currency WC (Wheat Currency). He is already doing very good in business and has surplus money. You tell him about your plans to expand our business and your requirement of more money for expansion purpose. He listens to you and agrees to lend you some money at certain interest rate: he already has enough money and extra money sitting at home isn’t earning him anything, so lending it to you for certain interest seems a good deal.

You borrow 500 WC from him. Now WC is quite strong in market. So much that 500 WC costs around 1000 MC (how much % of wheat harvest it represents doesn’t matter).

Now, you use up all the WC for expansion but suffer heavy losses. All the WC went down into the drain. You bought some stuff from it and have it still, but it is not bringing you any revenue and nobody is ready to buy it back. You are now left with only a few MC (remember, your currency is also floating in the market; you have maybe 1200 MC at hand). To pay back 500 WC, you need 1000 MC. But if you give 1000 MC right now, your remaining business will not be able to sustain itself with only 200 MC at disposal and you’ll eventually end up bankrupt.

You now think about possible way out. You plan to issue 2000 MC more, exchange 1000 MC for WC and return the loan. But if you issue more MC, the value of MC will be halved. Moreover, you can not think of cheating because the value of various currencies is now checked by Association of Auditors and you need to report any more printing of currency to them before it can be floated in the market, and all the currencies are numbered to keep the authenticity in check

Basically, you are now left with only one option: to try to get your act together and grow your business back to what it was, and then further more to get enough MC with sufficient value, to be able to return the loan amount.

Now in the above scenario, lets replace you with our country India, and replace mangoes you harvest with the economic activity that takes place in country; and replace your promissory notes, valuing to 100% of your harvest, to 100% of the economic activity in the country.

Now, back to your questionWhat happens when RBI prints more money to pay off bank loans? You should be able to guess it. More the money printed, lesser the value of currency. Money flowing in the country is nothing but standardized promissory notes issued by RBI. They are equivalent to the total economic activity of the country. If the economic activity does not increase in proportion to the money printed by RBI, the value of Indian Rupee will go down.

And obviously, value of MC will go down with respect to promissory notes issued by other people for other commodities. So when value of Rupee goes down, it does w.r.t other currencies, USD being one of them.

Its not difficult to guess that loans provided by World Bank are in USD. If money is printed to pay off the loan, value of Rupee goes down, which means you need more Indian Rupee to buy USD. As you can see, you can not repay the loan unless youactually have the money, over and above what you ‘ll need to run the country.

So my dear blog readers, What’s your take on this answer? Please update me with your comments.

 


What should be my first stock ?

June 10, 2014

What an Idea sirji. I congrats dear Krishna Kishore A for this post. It’s high time the people who are asking to open a demat account to earn some quick bucks from share trading should read and learn from this post.

Tyro Investor

Last Sunday, I met a friend and the conversation went some thing like this.

Friend: Krishna, last year when I asked you to suggest one good fund as my First equity mutual fund, you suggested me to go with balance fund and chosen HDFC Prudence. It is performing amazingly well. I am sitting on a return of nearly 29%. Thanks for it.

Me: Welcome. But actually, the major chunk of your credit must go to Modi mania, another major portion to Prasanth Jain’s conviction and only a decimal fraction of it should come to me.

Friend: Now I want to come to direct equities. Can you suggest me one good stock to buy right now ?

Me: NO. Believe me, this is the best suggestion I can give you (at least for now).

Friend: If we have a direct answer for Equity Mutual fund like newbies must start SIP in…

View original post 1,082 more words


Post Retirement Planning

May 11, 2014

The Idea of this post came from here. Dear Viren Phansalkar requested for a post on Post Retirement Planning. A lot of articles have been written on pre retirement planning. How one should invest, where to invest, when to start, when to stop, when to switch for a wonderful retirement. All this stuff is concentrated on how to prepare your cake to eat in your post retirement life. But not much info is there on how to deploy the corpus post retirement to earn return as well as income so that corpus can sustain the expenses till death which is going to be some 25-40 years away in post retirement life.

Few good posts are available with important calculators on dear Pattabiraman’s frrefincal.com Here are 2 such posts.

http://freefincal.com/the-retirement-bucket-strategy-simulator/

&

http://freefincal.com/income-ladder-calculator/

Few days back we also have a detailed group discussion in our FB group for a case study on post retirement planning. There can be multiple ways to deploy ones money for consumption in post retirement life. But the important thing is, the corpus should outlived the investor and spouse. In case the corpus deplete well before the actual death of investor (including spouse’s death), the deployment of money was not proper we can say.

Now problem in post retirement planning is complex due to 2 things.

1. Inflation

2. Risk Tolerance

1. Inflation – it’s the single biggest enemy to any retirement portfolio in post retired life. Can any one of us imagine the impact of inflation in just 10Y time frame on a person from age 60 to 70? Most of you ‘ll quickly put a basic figure like 5-6-7-8-9 or 10% for retail level inflation. Is it the only inflation? Certainly not. The biggest impact of inflation ‘lll come in the form of healthcare cost. Interestingly this may anywhere from 15 to 25% and even more if health condition is not good. People may say that health insurance may take care off such inflation. Really? Try to read the queries on various forums where people want to purchase health insurance either for their own or for parents. Most of the time, the covers are either not available for the required sum assured or come with a hefty prem.

2. Risk Tolerance – When we are in job, we can bear few bad years of loss on our portfolio as we have both (time as well as resources – fresh money) to counter these loss. Once we set our feet in sunset years, neither we have enough time on our hand nor the resources – fresh money to overcome such loss on portfolio. This situation severely restricts the portfolio creation and deployment. So in a sense our risk tolerance level comes down to a very low point. This low risk tolerance may not allow to deploy more money in growth assets as safety of capital is prime importance here.

A very  generic and crude solution is to split the whole corpus in following manner (what dear Pattu called bucketing).

1. 1 year equal expenses in SB account

2. Next 2 years equal expenses in FDs and liquid funds

3. Year 4 to 10 years’ expenses in FDs, short term funds and Arbitrage funds.

4. Year 10-20 years’ expenses in instruments at 3 above as well  as add some Eq. to provide growth here.

5. Year 20+ years’ expenses in instruments + higher allocation in Eq.

I repeat the above solution is very generic in nature and the things should be done as per each individual’s own situation.

 

Please feel free to share your views in comments below.


One Sentence Investing Rules

March 28, 2014

Dear Reader of my blog. this post is dedicated to dear Deepak R. Khemani who posted all these rules in our FB group. The below rules are not my work. I have simply copy pasted.
Please read each one, its a long list but worth reading,
Its a US finance post replace dollar with rupee.
1. Dollar-cost average for your entire life and you’ll beat almost everyone who doesn’t.

2. Only invest in products and companies you can explain to a six-year old.

3. Every five to seven years, people forget that recessions occur every five to seven years.

4. You’re twice as biased as you think you are (four times if you disagree with that statement).

5. Read more books and fewer articles.

6. Read more history and fewer forecasts.

7. It’s strange that you go to the doctor once a year, but check your investments once a day.

8. Be careful when reading about how stupid investors can be and not realize you’re reading about yourself.

9. Your circle of competence is probably 90% smaller than you think it is.

10. You’re only diversified when some of your investments perform worse than others.

11. Big risks will always be disregarded; small risks always blown out of proportion.

12. Check your brokerage account as infrequently as it takes to prevent rash decisions.

13. When in doubt, choose the investment with the lowest fee.

14. Emotional intelligence is more important than book intelligence.

15. The more you learn about the economy, the more you realize you have no idea what’s going on.

16. Start saving for college before your kid is born, and start saving for your retirement before you graduate college. You’ll feel silly when you start and like a genius when you finish.

17. The most powerful way to grow your money is learning to live with less, since you have complete control over it.

18. Singer Rihanna nearly went broke and fired her financial advisor, who described her situation well: “Was it really necessary to tell her that if you spend money on things, you will end up with the things and not the money?”

19. You have no obligation to have an opinion about anything.

20. You have a strict obligation to not have an opinion about things you don’t understand.

21. No one attending private school should be on student loans. Most should utilize community and state schools, which provide just as good an education for a fraction of the price.

22. You shouldn’t feel strongly about any investment you haven’t spent at least a week thinking about.

23. Holding 60% of your assets in stocks and 40% in bonds isn’t perfect for everyone; but I can think of a thousand worse strategies.

24. Respect the role luck has played on some of your role models.

25. Don’t take out $100,000 in student loans for anything other than medical school (if that).

26. Change your mind as often as the facts change.

27. Ignore people who refuse to change theirs when the facts change.

28. Read last year’s market predictions and you’ll never again take this year’s predictions seriously.

29. Warren Buffett’s folksy talk misleads people into thinking that what he’s accomplished is easy. It’s not.

30. Sleep on every investment decision for a week, then run it by a trusted friend before acting.

31. Two things you can do to make yourself a better investor are increase the amount of time you’re investing for and the humility you put into your ideas.

32. Just as you should dress appropriately for your age, you should spend appropriately for your income, and not a penny more.

33. Warren Buffett has the best explanation of dumb risk-taking: “To make money they didn’t have and didn’t need, they risked what they did have and did need. And that’s foolish. It is just plain foolish.”

34. You can probably afford not to be a great investor — you probably can’t afford to be a bad one.

35. You’re twice as gullible as you think you are.

36. Learn more from your bad investments than your good ones.

37. Judge investors by the quality of their arguments, not the performance of their last trade.

38. You can realistically afford probably half the home the mortgage broker approves you for.

39. Teach your kids about money before they’re old enough to earn their own.

40. Admit when you are wrong.

41. Imagine how much stuff you’d have to make up if you were forced to talk 24/7. Remember this when watching financial news on TV.

42. There is, and always will be, more money to be made providing investment advice than receiving it.

43. Assume the worst, hope for the best, accept reality.

44. Save for your own retirement; assume Social Security and private pensions won’t be around (even though they probably will).

45. Annuities: A product mixing the complexity of high finance with the sales tactics of used-car salesman has an entirely predictable outcome.

46. The correlation between confidence and future regret is incredibly high.

47. During the last 100 years, there have been more 10% market pullbacks than Christmases. Everyone knows Christmas will come; think of volatility the same way.

48. Don’t attempt to keep up with the Joneses without realizing the Joneses aren’t any happier than you are.

49. Predictions, opinions, and forecasts should be discounted by the number of times the person making them is on TV each week.

50. Not taking advantage of an employer match on your 401(k) is no different than declining a raise.

51. Don’t let Washington sway your investment decisions. Congress has been a dysfunctional swamp of disappointment since 1789, and stocks have done well ever since.

52. To quote Larry Summers: “A good rule of thumb for many things in life holds that things take longer to happen than you think they will, and then happen faster than you thought they could.”

53. Another Larry Summers gem: “THERE ARE IDIOTS. Look around.”

54. “Invest in what you know” is dangerously simplified.

55. Quit day trading, and donate your money to charity instead. Same financial result for you, and a better outcome for society.

56. Most people’s biggest expense is interest, which comes from living beyond your means, and buying things they think will impress others, which comes from insecurity. Avoid these two and you’ll grow richer than most of your peers.

57. Reaching for yield to increase your income is often like sticking your hands in a fire to warm them up — good in theory, disastrous in practice.

58. Your devotion to a political party or economic philosophy is directly proportional to your tendency to think irrationally about how politics affects your investments.

59. Most people need a financial advisor, but everyone needs a financial counselor, or someone to talk them off the ledge before making a dumb decision.

60. There’s a strong negative correlation between flaunting money and being rich.

61. Investors were probably better informed 20 years ago when there was 90% less financial news.